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Home My WebLink AboutAgenda Packet - Finance & Human Resources Committee - 11/04/2024FINANCE & HUMAN RESOURCES COMMITTEE NOVEMBER 4, 2024 East Valley Water District was formed in 1954 and provides water and wastewater services to 108,000 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 David E. Smith Governing Board Member Ronald L. Coats Governing Board Member Finance & Human Resources Committee Meeting (Rescheduled from 11/12/2024) November 04, 2024 1:30 PM 31111 Greenspot Road, Highland, CA 92346 www.eastvalley.org 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. In order to comply with legal requirements for posting of agenda, only those items filed with the District Clerk by 12:00 p.m. on Wednesday prior to the following Wednesday meeting not requiring departmental investigation, will be considered by the Board of Directors. 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. APPROVAL OF CONSENT CALENDAR All matters listed under the Consent Calendar are considered by the Board of Directors to be routine and will be enacted in one motion. There will be no discussion of these items prior to the time the board considers the motion unless members of the board, the administrative staff, or the public request specific items to be discussed and/or removed from the Consent Calendar. 1.Approve the February 27, 2024 Finance & Human Resources Committee Meeting Minutes 2.Approve the July 9, 2024 Finance & Human Resources Committee Meeting Minutes INFORMATIONAL ITEMS 3.Review the Draft Annual Comprehensive Financial Report for Fiscal Year 202324 4.Review Capacity Fee Study REPORTS 5.Finance Activities 6.Human Resource Activities ADJOURN FINANCE & HUMAN RESOURCES COMMITTEENOVEMBER 4, 2024East Valley Water District was formed in 1954 and provides water and wastewater services to108,000 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 David E. Smith Governing Board Member Ronald L. Coats Governing Board Member Finance & Human Resources Committee Meeting (Rescheduled from 11/12/2024) November 04, 2024 1:30 PM 31111 Greenspot Road, Highland, CA 92346 www.eastvalley.org 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. In order to comply with legal requirements for posting of agenda, only those items filed with the District Clerk by 12:00 p.m. on Wednesday prior to the following Wednesday meeting not requiring departmental investigation, will be considered by the Board of Directors. 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. APPROVAL OF CONSENT CALENDAR All matters listed under the Consent Calendar are considered by the Board of Directors to be routine and will be enacted in one motion. There will be no discussion of these items prior to the time the board considers the motion unless members of the board, the administrative staff, or the public request specific items to be discussed and/or removed from the Consent Calendar. 1.Approve the February 27, 2024 Finance & Human Resources Committee Meeting Minutes 2.Approve the July 9, 2024 Finance & Human Resources Committee Meeting Minutes INFORMATIONAL ITEMS 3.Review the Draft Annual Comprehensive Financial Report for Fiscal Year 202324 4.Review Capacity Fee Study REPORTS 5.Finance Activities 6.Human Resource Activities ADJOURN FINANCE & HUMAN RESOURCES COMMITTEENOVEMBER 4, 2024East Valley Water District was formed in 1954 and provides water and wastewater services to108,000 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 MEMBERSDavid E. SmithGoverning Board Member Ronald L. CoatsGoverning Board MemberFinance & Human Resources Committee Meeting (Rescheduled from11/12/2024)November 04, 2024 1:30 PM31111 Greenspot Road, Highland, CA 92346www.eastvalley.orgPLEASE 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 orderto participate in the above agendized public meeting should be directed to the District Clerkat (909) 8854900 at least 72 hours prior to said meeting. In order to comply with legal requirements for posting of agenda, only those items filed with the District Clerk by 12:00 p.m. on Wednesday prior to the following Wednesday meeting not requiring departmental investigation, will be considered by the Board of Directors. 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. APPROVAL OF CONSENT CALENDAR All matters listed under the Consent Calendar are considered by the Board of Directors to be routine and will be enacted in one motion. There will be no discussion of these items prior to the time the board considers the motion unless members of the board, the administrative staff, or the public request specific items to be discussed and/or removed from the Consent Calendar. 1.Approve the February 27, 2024 Finance & Human Resources Committee Meeting Minutes 2.Approve the July 9, 2024 Finance & Human Resources Committee Meeting Minutes INFORMATIONAL ITEMS 3.Review the Draft Annual Comprehensive Financial Report for Fiscal Year 202324 4.Review Capacity Fee Study REPORTS 5.Finance Activities 6.Human Resource Activities ADJOURN Agenda Item #1 November 4, 20241 Meeting Date: November 4, 2024 Agenda Item #1 Consent Item 1 2 2 8 Regular Meeting TO: Committee Members FROM: Chief Financial Officer SUBJECT: Approve the February 27, 2024 Finance & Human Resources Committee Meeting Minutes RECOMMENDATION That the Finance & Human Resources Committee approve the February 27, 2024 meeting minutes. AGENCY GOALS AND OBJECTIVES II - Maintain a Commitment To Sustainability, Transparency, and Accountability B. Utilize Effective Communication Methods FISCAL IMPACT There is no fiscal impact associated with this agenda item. Respectfully submitted: ________________ Brian Tompkins Chief Financial Officer ATTACHMENTS February 27, 2024 Minutes Page 1 of 2 Minutes 2/27/24 cmk 5 1 8 Draft pending approval EAST VALLEY WATER DISTRICT February 27, 2024 FINANCE & HUMAN RESOURCES COMMITTEE MEETING MINUTES Ms. Koide called the meeting to order at 2:00 p.m. and Director Coats led the flag salute. PRESENT: Directors: Coats, Smith ABSENT: None STAFF: Michael Moore, General Manager/CEO; Brian Tompkins, Chief Financial Officer; Rudy Guerrero, Finance Supervisor; Mark Hokanson, Accountant; Christi Koide, Business Services Coordinator GUEST(s): Members of the public PUBLIC COMMENTS The Business Services Coordinator declared the public participation section of the meeting open at 2:01 p.m. There being no written or verbal comments, the public participation section was closed. INFORMATIONAL ITEMS COST-OF-SERVICE AND RATE DESIGN WORKSHOP The Chief Financial Officer gave a brief presentation of the cost components for the District’s rate structure. He also reviewed all changes to customer classes as a result of the Sterling Natural Resource Center going online. Mr. Habib Isaac with IB Consulting gave a presentation on the Cost-of-Service and Rate Design for Water, Collections, and Reclamation. He also explained both scenarios of when debt is and is not included in the proposed customer rates, and impacts to all three Enterprise Funds. Information only, no action required. REPORTS Page 2 of 2 Minutes 2/27/24 cmk 5 1 8 FINANCE ACTIVITIES Nothing to report. HUMAN RESOURCE ACTIVITIES Nothing to report. ADJOURN The meeting adjourned at 4:33 p.m. Ronald L. Coats David E. Smith Governing Board Member Governing Board Member Agenda Item #2 November 4, 20241 Meeting Date: November 4, 2024 Agenda Item #2 Consent Item 1 2 2 9 Regular Meeting TO: Committee Members FROM: Chief Financial Officer SUBJECT: Approve the July 9, 2024 Finance & Human Resources Committee Meeting Minutes RECOMMENDATION That the Finance & Human Resources Committee approve the July 9, 2024 meeting minutes. AGENCY GOALS AND OBJECTIVES II - Maintain a Commitment To Sustainability, Transparency, and Accountability B. Utilize Effective Communication Methods FISCAL IMPACT There is no fiscal impact associated with this agenda item. Respectfully submitted: ________________ Brian Tompkins Chief Financial Officer ATTACHMENTS July 9, 2024 Minutes Page 1 of 3 Minutes 7/9/24 cmk 1 8 7 2 Draft pending approval EAST VALLEY WATER DISTRICT July 9, 2024 FINANCE & HUMAN RESOURCES COMMITTEE MEETING MINUTES Ms. Koide called the meeting to order at 1:31 p.m. and Director Coats led the flag salute. PRESENT: Directors: Coats, Smith ABSENT: None STAFF: Brian Tompkins, Chief Financial Officer; Kerrie Bryan, Director of Administrative Services; Mark Hokanson, Accountant; Christi Koide, Business Services Coordinator GUEST(s): Members of the public PUBLIC COMMENTS The Business Services Coordinator declared the public participation section of the meeting open at 1:32 p.m. There being no written or verbal comments, the public participation section was closed. APPROVAL OF CONSENT CALENDAR 1. Approve the September 11, 2023 Finance & Human Resources Committee Meeting Minutes 2. Approve the October 10, 2023 Finance & Human Resources Committee Meeting Minutes 3. Approve the November 14, 2023 Finance & Human Resources Committee Meeting Minutes 4. Approve the February 13, 2024 Finance & Human Resources Committee Meeting Minutes A motion was made by Director Smith, seconded by Director Coats, that the Committee approve the Consent Calendar as submitted. The motion carried by the following: Ayes: Smith, Coats Noes: None Absent: None Page 2 of 3 Minutes 7/9/24 cmk 1 8 7 2 INFORMATIONAL ITEMS REVIEW LETTER REGARDING AUDITOR RESPONSIBILITIES AND PLANNING DOCUMENT FROM ROGERS, ANDERSON, MALODY & SCOTT, LLP (RAMS) FOR PREPARATION OF THE DISTRICT’S FY 2023-24 AUDIT The Chief Financial Officer stated that the purpose of presenting this item to the Committee and Governing Board is essential for establishing a line of communication between the Auditors and Governing Board without facilitation from staff. Mr. Scott Manno gave a brief overview of upcoming pronouncements for fiscal years 2024, 2025, and 2026. He reviewed the Audit’s scope, deliverables, and discussed audit responsibilities for governance, management, and the auditing firm. Mr. Scott Manno noted that RAMS typically prepare 95% of financial statements for their clients and commended District staff for preparing them in-house. Information only, no action required. WORKPLACE VIOLENCE PREVENTION PROGRAM The Director of Administrative Services stated that due to Senate Bill 553, California employers are required to develop and implement a Workplace Violence Prevention Plan. She presented the new Policy and discussed the procedures that are detailed in the Policy. Additionally, she reviewed the Violent Incident Log and stated that all employees will receive training of the Workplace Violence Prevention Plan. Information only, no action required. REPORTS FINANCE ACTIVITIES The Chief Financial Officer reported that San Bernardino Valley Municipal Water District will be billed for 2,540 AF of recycled water that flowed into the Weaver Basins in accordance with the Local Resource Incentive Program. He also gave an update on implementation of a transaction fee for District customers that pay by credit card. HUMAN RESOURCE ACTIVITIES The Director of Administrative Services gave a brief update on staffing, recruitment, and the student summer internship program. Page 3 of 3 Minutes 7/9/24 cmk 1 8 7 2 ADJOURN The meeting adjourned at 2:32 p.m. Ronald L. Coats David E. Smith Governing Board Member Governing Board Member Agenda Item #3 November 4, 20241 Meeting Date: November 4, 2024 Agenda Item #3 Informational Item 1 2 2 3 Regular Meeting TO: Committee Members FROM: Chief Financial Officer SUBJECT: Review the Draft Annual Comprehensive Financial Report for Fiscal Year 2023-24 RECOMMENDATION That the Finance & Human Resources Committee recommend that the Board of Directors approve the attached Draft Annual Comprehensive Financial Report for Fiscal Year 2023-24. BACKGROUND / ANALYSIS Each year, the District contracts with an external audit firm to conduct an annual audit of the District’s books and records for the current fiscal year in compliance with California Water Code §30540(b)(2). The audit is both an industry best practice and a requirement of the State Controller Minimum Audit Requirements for California Special Districts. On July 9, 2024, the audit partner from RAMS met with the District’s Finance and Human Resources Committee to review the auditing services to be provided during the audit for fiscal year ended June 30, 2024.In addition, RAMS described the procedures that were to be used to perform their audit in accordance with generally accepted auditing standards (GAAS). Once 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; and •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. Agenda Item #3 November 4, 20242 Meeting Date: November 4, 2024 Agenda Item #3 Informational Item 1 2 2 3 Attached is a draft of the 2023-24 Annual Comprehensive Financial Report (Annual Report) for the Committee’s review. The Annual Report includes the District’s annual financial statements with accompanying note disclosures, management discussion and analysis, and statistical information compiled by staff. The 2023-24 Annual Report will receive an unmodified opinion from RAMS. An unmodified opinion indicates the financial data of the District is presented fairly. RAMS conducted an audit in accordance with auditing standards generally accepted in the United States of America and guidelines established by the California State Controller for Special Districts. 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. On July 10, 2024 GFOA notified staff that the 2022-23 Annual Report was awarded the GFOA award for the 12th consecutive year. AGENCY GOALS AND OBJECTIVES II - Maintain a Commitment To Sustainability, Transparency, and Accountability A. Practice Transparent and Accountable Fiscal Management FISCAL IMPACT There is no fiscal impact associated with this agenda item. Respectfully submitted: ________________ Brian Tompkins Chief Financial Officer ATTACHMENTS 1. RAMS Presentation 2. Draft Annual Report 2024 3. Internal Controls Report 4. Audit Report 5. SAS 114 NOVEMBER 4, 2024 East Valley Water District Annual Audit Fiscal year ended June 30, 2024 Responsibilities of Auditor 2 Audit District’s financial statements in accordance with US Generally Accepted Auditing Standards, Government Auditing Standards and the State Controllers Minimum Audit Requirements for Special Districts Plan the audit to express an opinion as to whether managements financial statements are fairly presented, in all material respects, in accordance with generally accepted accounting principles (GAAP) o Provide reasonable assurance, not absolute Audit process 3 Interim audit procedures: o Reviewed internal controls over financial reporting for the following areas (inquiries, inspect documents, etc.): §Billing and cash receipts §Cash and investments §Information technology §Financial closing and reporting §Capital assets and long-term debt o Performed internal control testing over the following areas, as needed: §Cash disbursements §Purchasing and contracts §Payroll §Common controls over multiple areas (reconciliations, journal entries, etc.) Audit process (continued) 4 Year-end audit procedures (audit of numbers): o Conducted detailed audit of financial records o Inquire, inspect, and examine (and confirm as applicable) evidence about balances, transactions and events o Performed analytical procedures (review and evaluate significant variances and/or unusual transactions) o Performed data analytics over disbursements o Benford’s Law, check sequence, Holiday/weekend, etc. o Review ACFR and evaluate for compliance with GAAP and GFOA COA guidelines Audit process (continued) 5 Significant changes from prior year: o There were no significant changes in financial reporting from the prior year. o No significant new accounting policies were adopted during the year. Completing the process 6 Independent Auditor’s Report o Unmodified opinion expressed ●Report on internal control over financial reporting and on compliance and other matters based on an audit of financial statements performed in accordance with Government Auditing Standards o Audit not designed to express an opinion on internal control o No significant deficiencies or material weaknesses reported o No matters of noncompliance reported Completing the process (continued) 7 SAS 114 letter to those charges with governance o No uncorrected misstatements reported o No material audit adjustments o No difficulties working with the District o No disagreements with management Conclusion ●Questions? 8 i ii iii Annual Comprehensive Financial Report Fiscal Year Ended June 30, 2024 East Valley Water District Prepared by: Finance Department 31111 Greenspot Road Highland, CA 92346 Annual Comprehensive Financial Report Fiscal Year Ended June 30, 2024 Table of Contents 1 Page No. Introductory Section Letter of Transmittal ......................................................................................................... 5-8 Organizational Structure ...................................................................................................... 9 Principal Officials ............................................................................................................... 10 GFOA Certificate .............................................................................................................. 11 Financial Section Independent Auditors’ Report ....................................................................................... 13-16 Management’s Discussion and Analysis .......................................................................... 17-31 Basic Financial Statements Statement of Net Position .......................................................................................... 33-34 Statement of Revenues, Expenses, and Changes in Net Position ................................... 35-36 Statement of Cash Flows ........................................................................................... 37-38 Statement of Fiduciary Net Position ................................................................................. 39 Notes to the Basic Financial Statements ...................................................................... 40-70 Required Supplementary Information Schedule of District’s Proportionate Share of the Net Pension Liability ................................ 73 Schedule of District’s Contributions .................................................................................. 74 Schedule of Changes in the Net OPEB Liability ............................................................ 75-76 Schedule of OPEB Healthcare Contributions ..................................................................... 77 Notes to the Required Supplementary Information ........................................................... 78 Supplementary Information History and Organization ................................................................................................. 82 Combining Schedule of Net Position ............................................................................ 83-84 Combining Schedule of Revenues, Expenses, and Changes in Net Position .................... 85-87 Combining Schedule of Cash Flows ............................................................................. 89-90 Annual Comprehensive Financial Report Fiscal Year Ended June 30, 2024 Table of Contents 2 Page No. Statistical Information Section Financial Trends Changes in Net Position by Component – Last Ten Fiscal Years .................................... 95-96 Operating Revenue by Source – Last Ten Fiscal Years ...................................................... 97 Water Operating Expenses – Last Ten Fiscal Years ........................................................... 98 Wastewater Operating Expenses – Last Ten Fiscal Years................................................... 99 Water Reclamation Operating Expenses – Last Ten Fiscal Years ...................................... 100 100Revenue Capacity Water Sales and Production – Last Ten Fiscal Years ........................................................ 101 Revenue Rates for Water – Last Ten Fiscal Years ..................................................... 103-104 Revenue Rates for Wastewater – Last Ten Fiscal Years ............................................. 105-106 Active Services by Type – Last Ten Fiscal Years .............................................................. 107 Principal Customers – Current Fiscal Year and Nine Years Ago ........................................ 108 Debt Capacity Ratio of Outstanding Debt – Last Ten Fiscal Years .......................................................... 109 Debt Service Coverage – Last Ten Fiscal Years ............................................................... 110 Demographic Information Demographic and Economic Statistics – Last Ten Calendar / Fiscal Years ......................... 111 Operating Information Full-Time Equivalent Employees by Department – Last Ten Fiscal Years ........................... 112 Operating and Capacity Indicators for Water and Wastewater – Last Ten Fiscal Years ...... 113 Other Information Capacity Charge Funds .............................................................................................. 115-118 3 4 5 October 28, 2024 To the Board of Directors and Customers of East Valley Water District, We are pleased to submit the Annual Comprehensive Financial Report (Annual Report) for East Valley Water District for the year ended June 30, 2024. 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 November 2024, 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 108,000 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, 2024, the District had 21,780 water connections and 19,859 wastewater connections. Water Supply and Reliability The District’s water supply for the year ended June 30, 2024 includes groundwater (76.7 percent), surface water (3.9 percent), and imported water (19.3 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. 6 Local Economy East Valley Water District is located within San Bernardino County in a metropolitan area referred to as the “Inland Empire”. Since 2015, the District’s population has grown by more than 6 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 Indian Bingo & Casino, City of Highland, and San Manuel Mission Indians forming the list of top five users. In 2024, the average household income within the District’s service area was $56,514, approximately 22% 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 $68,105, approximately 21% 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 (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. 76.7% 3.9% 19.3% Water Supply Sources Groundwater Surface Water Imported 7 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 adopts 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 the State Revolving Fund. The District received a credit rating of AA- from Standard and Poor’s and Fitch when the Revenue Bonds were issued in September 2020. Fitch affirmed this rating as the result of a review conducted in June 2024. 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 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 Rogers, Anderson, Malody & Scott, LLP from San Bernardino, 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 Annual Comprehensive Financial Report for the fiscal year ended June 30, 2023. This was the 12th 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 Annual Comprehensive 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 Annual Comprehensive Financial Report continues to meet the Certificate of Achievement Program requirements, and we are submitting it to the GFOA to determine its eligibility for another certificate. 8 Acknowledgements Preparation of this report was accomplished by the 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, Michael Moore General Manager/CEO Brian W. Tompkins Chief Financial Officer EAST VALLEY WATER DISTRICT Organizational Structure Year Ended June 30, 2024 9 EAST VALLEY WATER DISTRICT Principal Officials Year Ended June 30, 2024 10 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, 2024 Name Title Elected / Appointed Current Term James Morales, Jr. Chairman of the Board Elected 2022 - 2026 Ronald L. Coats Vice-Chairman of the Board Elected 2022 - 2026 David E. Smith Governing Board Member Elected 2020 - 2024 Ronald L. Coats Governing Board Member Elected 2022 - 2026 Chris Carrillo Governing Board Member Elected 2020 - 2024 Contact Information East Valley Water District Michael Moore, 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, 2023 11 12 EAST VALLEY WATER DISTRICT Independent Auditor’s Report Year Ended June 30, 2024 13 EAST VALLEY WATER DISTRICT Independent Auditor’s Report Year Ended June 30, 2024 14 EAST VALLEY WATER DISTRICT Independent Auditor’s Report Year Ended June 30, 2024 15 EAST VALLEY WATER DISTRICT Independent Auditor’s Report Year Ended June 30, 2024 16 EAST VALLEY WATER DISTRICT Management’s Discussion and Analysis Year Ended June 30, 2024 17 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 and a newly commissioned reclamation plant known as the Sterling Natural Resource Center (SNRC) for treatment of residential and commercial wastewater. 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 Governmental Accounting Standards Board (GASB). The following financial statements for the year ended June 30, 2024 (2023 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 (FY). 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. Fiduciary fund statements provide information about the fiduciary relationships, also known as custodial funds of the District, in which the District acts solely as a trustee or custodian for the benefit of others, to whom the resources in question belong. The fund is used to account for receipts and disbursements associated with Community Facilities District (CFD), which are administered by, but are not the liability of the District. Summary Financial Information and Analysis Financial Condition During the year ended June 30, 2024, the District’s total assets and deferred outflows increased by $10.5 million, to $395.6 million. The increase was the net result of a decrease to Current assets and an increase to Capital assets. EAST VALLEY WATER DISTRICT Management’s Discussion and Analysis Year Ended June 30, 2024 18 Current assets decreased $4.1 million (9%) to $41.3 million. While the decrease is a net between increases and decreases of the various Current asset line items, one of the most notable changes is the $10 million shift to longer term Investments. With the completion of the very large reclamation plant project, the District had the opportunity to lock in higher yields over a longer term by expanding its portfolio of U.S. Treasury and Agency securities. Also significant was the $13.0 million decrease in Due From Other Governments, which recognizes outstanding reimbursement claims from the State Revolving Fund for loan eligible construction activity on the Sterling Natural Resource Center (SNRC). The receipt of some of the amounts included in the beginning balance, as well as reclassifying $7.8 million to restricted, contributed to the decrease in this balance. The reclassification to restricted earmarks this amount of cash to be received from the State for the debt service reserve required by the State Funding Agreement. Utility Accounts Receivable balances grew 2.7% to $6.1 million during FY 2023-24. Rate increases, which became effective in January 2024 could reasonably have resulted in a higher receivable balance at year end, however the District’s continued participation in the Low-Income Household Water Assistance Program (LIHWAP) which supplies federal funds to pay customer account balances if they are eligible, assisted customers with severely overdue balances through December 2023 when the program ended. Almost $40 thousand in LIHWAP funding was received and applied to customer balances between July and December 2023. Inventory balances increased 9.0% to $1.06 million during FY 2023-24, due simply to rising costs of materials. Restricted Asset balances increased from $12.4 to $23.0 million. The increase is the result of completion of the SNRC reclamation facility, and a requirement in the State Funding Agreement that the District set aside a restricted debt service reserve equal to one year’s debt service, approximately $7.8 million. 2024 2023 Current Assets 41.3$ 45.4$ Restricted Assets 23.0 12.4 Other Assets 0.3 0.3 Capital Assets - Net 322.0 319.7 Total Assets 386.6 377.8 Total Deferred Outflow of Resources 9.1 7.3 Current Liabilities 19.9 26.4 Non-Current Liabilities 228.4 207.9 Total Liabilities 248.3 234.3 Total Deferred Inflows of Resources 2.2 3.0 Net Position Net Investment in Capital Assets 112.1 112.9 Restricted 13.3 10.8 Unrestricted 19.8 24.1 Total Net Position 145.2$ 147.8$ Capital Assets increased by $2.3 million during FY 2023-24. For purposes of the table above, Capital Assets includes construction in progress (CIP), utility plant in service and related accumulated depreciation. Changes in Capital Assets included additions of $9.8 million, an annual depreciation charge of $7.6 million and an annual and expensing of capital projects totaling $0.2 million. Capital expenditures during the year were primarily Construction in Progress on the SNRC, and assets retired were completely depreciated with no remaining book value and so their retirement had no effect on the balance of fixed assets. A more detailed description of capital spending is in the Capital Assets EAST VALLEY WATER DISTRICT Management’s Discussion and Analysis Year Ended June 30, 2024 19 section of this analysis, and a more detailed schedule showing the changes to fixed assets during the fiscal year is included in Note 4 of the financial statements. 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. Investment earnings of 5.8% on pension plan assets during the plan year ended June 2023, compared to actuarial assumptions that the assets would earn 6.8%, led to an increase in Deferred Outflows- Pensions for 2023-24 of $1.0 million. This amount was accompanied by an increase in Deferred Outflows related to Other Post Employment Benefits (OPEB) of $0.8 million. While Current assets decreased during the year, current liabilities also decreased by $6.5 million in FY 2023-24. This decrease is the result of partially paying the $12.0 million retention withheld during construction of the SNRC, and reclassifying the balance to accounts payable. The end of project construction also signaled the commencement of debt service on the SNRC construction loan, and accordingly, the amount payable within 12 months of $4.4 million on that loan has contributed to the increase of the Current Portion of Long-Term Debt by $3.6 million compared to the prior year. Other factors contributing to the change in current liabilities were a $2.1 million increase in accounts payable and accrued payroll, and a $0.2 million drop in the current portion of compensated absences. These decreases in the Current asset and Current liability balances explained above resulted in a slight improvement to the District’s current ratio from 1.7:1 to 2.1:1. Non-Current Liabilities increased $20.5 to $228.4 million. The large increase was the result of significant activity, most of it related to the SNRC. Following are the factors contributing to the increase in Non-Current Liabilities:  $19.7 million increase in SNRC State Revolving Fund loan due to final construction project invoices and capitalization of interest accumulated on State loan drawdowns during the SNRC construction.  $(0.9) million in advanced principal payments to extinguish a loan.  $(6.2) million for the current portion of Long-Term Debt amounts reclassified as Current Liabilities.  $0.4 million increase in Compensated Absences and Other Post-Employment Benefit obligations calculated in accordance with GASB statement 75 (retiree medical).  $1.1 million increase in unfunded pension benefit obligations due to earnings on pension plan assets not meeting earnings targets (5.8% versus 6.8%) for the year ended June 2023, the date of the valuation on which current obligations are calculated.  $6.3 million increase due to the accrual of a settlement obligation to the City of San Bernardino, payable $700 thousand per year for 10 years beginning in 2023-24. 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 settlement obligation payable to the City of San Bernardino was part of a critical agreement releasing the District from a 1957 wastewater treatment Joint Powers Authority and facilitating the Local Agency Formation Commission’s (LAFCO) granting of wastewater treatment authority to the District, and ultimately allowing the District’s water reclamation plant project (SNRC) to proceed. The total settlement cost has been expensed as a EAST VALLEY WATER DISTRICT Management’s Discussion and Analysis Year Ended June 30, 2024 20 special item, and the obligation is being paid by the Water and Wastewater funds, which were the funds in existence when the obligation was incurred. The District’s total Net Position was $145.2 million at the end of FY 2023-24, a $2.7 million decrease compared to the end of the previous fiscal year. Of the $145.2 million Net Position balance, $112.0 million is categorized as Net Investment in Capital Assets, $13.3 million is Restricted for Capital Expansion Projects, and $19.8 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 $9.3 million and $32.4 million over five- and ten-year periods, respectively. Results of Operations and Changes in Net Position Water Operations The District’s water enterprise fund continued to feel the strain from suppressed water sales and rising costs. Water sales for FY 2023-24 increased 2.6% to $17.5 million, the result of a rate adjustment effective January 2024, and a slight increase in water demand by customers from 15,341 acre-feet in 2022-23, to 15,420 acre-feet. This level of water usage was well below projections, and historical averages, and aligned with usage in the previous year, during which California experienced historic levels of snowfall and rain during the winter of 2023. Locally, the District’s weather station in Highland, California recorded 18.1 inches of rain from July 2023 to June 2024, compared to 24.03 inches recorded in 2022-23, and 10.4 inches in 2021-22, when California was struggling through a drought. The following tallies total rainfall and average daily high temperatures for each month during FY 2023-24 that were recorded by the District’s weather station: 07/23 08/23 09/23 10/23 11/23 12/23 01/24 02/24 03/24 04/24 05/24 06/24 0.87” 1.94” 1.00” 0.95” 0.62” 0.00” 1.24” 8.55” 2.30” 0.63” 0.00” 0.00” 99.1° 95.1° 84.9° 84.6° 75.0° 70.0° 65.1° 62.4° 65.1° 73.5° 76.8° 89.7° Following is the same information for FY 2021-22. In that year, rainfall was about 57% of the rainfall in 2023-24. The average daily high temperature was higher in each of the winter and spring months (January through June) and as a result, water usage by customers was 17% higher: 07/21 08/21 09/21 10/21 11/21 12/21 01/22 02/22 03/22 04/22 05/22 06/22 0.50” 0.00” 0.00” 0.73” 0.22” 5.09” 0.89” 0.33” 1.13” 0.78” 0.22” 0.49” 97.1° 94.4° 91.1° 78.8° 80.3° 63.2° 69.2° 71.1° 74.6° 77.2° 81.0° 93.4° Potable water sales of $17.5 million fell short of 2023-24 revised projections of $17.7 million. Projections are based on historical usage, and follow a predictable pattern, but again, higher than average rainfall throughout the winter months, and a hurricane in August, suppressed demand for water, especially water used for irrigation. Sales through irrigation meters increased by 3% after falling 21% in the previous year, while residential usage decreased by just EAST VALLEY WATER DISTRICT Management’s Discussion and Analysis Year Ended June 30, 2024 21 0.3%. Usage by commercial/business customers had the most significant decline in usage at 8%, after having fallen 5% in the previous year. Total water produced by the District during the year was 16,273 acre-feet, with the difference between water produced and water sold of 853 acre-feet (5.2%) being the result of District flushing programs, water use at District facilities, and system leaks. The District, like all California water agencies, participates in an annual water audit to identify and work to mitigate unidentified water losses from the District’s water distribution system. The other major water operating revenue collected by the District is Water System, or Meter Charge revenue. Meter Charge revenue grew by 3.2% to $10.1 million for FY 2023-24. The increase was due to a 3% rate increase that became effective in February of 2024, and to a lesser extent, new development. The District added approximately 20 new customers during the FY but received development impact fees for 153 Equivalent Dwelling Units (EDUs) for future development. $0 $5 $10 $15 $20 $25 $30 $35 2020 2021 2022 2023 2024 Mi l l i o n s Water Operating Revenue versus Expenses Revenue Expenses Water Operating expenses decreased 0.4% to $26.5 million for FY 2023-24. The decrease occurred despite a general increase in costs overall for two reasons. First, was the low customer demand for water, as described above, and how that effected costs directly tied to water production – particularly energy. Lower need for energy to produce water, combined with a spike in energy costs during the previous year, 2022-23, when Edison issued some substantial ‘catch-up’ bills resulting from billing errors, caused power costs to drop $713 thousand in FY 2023- 24. Aside from the anomalies in the last two years, the rising cost of energy has had a significant impact on water operations for several years. 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. EAST VALLEY WATER DISTRICT Management’s Discussion and Analysis Year Ended June 30, 2024 22 Another reason for the drop in water operating expenses is related to the migration of several water production and field service workers to the new reclamation department. As these employees took jobs at the new SNRC water recycling facility, the time needed to backfill their positions led to lower labor costs in water operation. Other year-over-year variations in water operating costs are outlined below:  Purchased water costs increased as the District had to utilize more State Water Project, rather than Santa Ana River water, due to hurricane Hilary which passed through the region in August of 2023. That unusually powerful storm caused major flooding in local mountains, taking out bridges and roads, and a flume used by Edison to redirect river flows, coming out of the mountains, for hydroelectric power generation. Water in the flume bypassed an earthen dam, keeping it pristine, so that after its use for power generation, the District could divert it to its surface water treatment plant and then distribute it to customers. With the flume gone, and water behind the dam being very poor quality, the District had the choice of purchasing State Water Project or pumping groundwater. Wastewater Collection Operations Wastewater Collection operating revenues consists of System 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. A rate adjustment implemented in January 2024 was primarily responsible for a 7.3% increase in System charge revenue to $6.1 million for 2023-24. 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 FY 2023-24, Other Operating Revenue dropped significantly as fees related to infill development slowed due to rising interest rates. Wastewater Collection pipeline maintenance costs include video logging the condition of pipelines from the inside; utilizing a camera mounted on a robotic crawler; contracting for the repair of cracks in the pipelines noted on videos; and jetting pipelines with a Vactor to dislodge buildups of fats, oil and grease (FOG) before they can cause backups and spills. The collection system is entirely gravity flow, requiring no pumps and associated facilities. In FY 2023-24, wastewater collection maintenance costs increased by 5.3% compared to the prior year. This change is the effect of Cost of Living Adjustments (COLA) on salaries and benefits costs’, and an increase in contract services as the District contracted for the installation of sensors on manhole covers to help alert the District of rising wastewater levels and potential blockages. EAST VALLEY WATER DISTRICT Management’s Discussion and Analysis Year Ended June 30, 2024 23 $0 $1 $2 $3 $4 $5 $6 $7 2020 2021 2022 2023 2024 Mi l l i o n s Wastewater Collections Operating Revenue versus Expenses Revenue Expenses Water Reclamation Operations The District entered FY 2023-24 expecting to commission its new Sterling Natural Resource Center (SNRC) water reclamation plant in early November 2023, and to ramp up to full operations by the end of the fiscal year. Revenues and expenses were budgeted accordingly. However, delays in completing construction on the recycled water pipeline, which delivers recycled water from the reclamation plant to groundwater recharge basins, delayed the commencement of plant operations for two months. This would lead to revenues falling short of projection, while the cost of having wastewater treated by an outside agency to exceed expectations. In January 2024, the District finally began a phased approach of redirecting wastewater flows to the SNRC, where the wastewater was treated and recycled water delivered to the recharge basins. By the end of March 2024, all District wastewater flows were being directed to the SNRC, and connections leading to the City of San Bernardino treatment plant were sealed off. The final step to full operations was the commencement of two digesters, that produced energy for on-site use from sludge and other waste materials. The digesters were producing gas and some energy by the end of June, but revenue from waste hauler tipping fees (explained below) and energy production to reduce reliance on power from Edison, did not materialize during FY 2023-24 as expected. Water Reclamation operating revenue consists primarily of wastewater treatment charges. The District has been collecting these charges since approximately 1957, but since the District now treats its own wastewater flows (since March 2024), the District no longer remits monthly payments to the City of San Bernardino Water Department (City) for treatment services. Treatment charges for FY 2023-24, which were based on rates established by the District in May 2021, were $10.7 million. This is a 6.3% increase over prior year revenue of $10.1 million, which is due primarily to a rate adjustment that went into effect on January 1, 2024. The second revenue stream in Reclamation is for the production and delivery of recycled water, which the District has reported as a type of Water Sales in the accompanying financial statements. The recharge basins where recycled water is delivered are owned by the San Bernardino Valley Municipal Water District (San Bernardino Valley), with which the District has an agreement under its Local Resource Investment Program (LRIP) to recharge all recycled water produced by the SNRC. In exchange the District receives a contribution from San Bernardino Valley of $173 per acre foot of water recharged. During FY 2023-24 the District recharged 2,540.18 acre-feet of recycled EAST VALLEY WATER DISTRICT Management’s Discussion and Analysis Year Ended June 30, 2024 24 water to earn a LRIP contribution of $439,451. This amount exceeded projections of $332,000 due to the quick cutover of flows to the SNRC, even though completion of the recycled water pipeline was delayed by two months. As mentioned above, a third Reclamation revenue stream will be tipping fees charged to food waste haulers who choose to discharge their waste at the SNRC. The waste will be added to sludge generated by plant treatment operations, converted to gas by anaerobic digesters, and then converted to energy for use in powering plant operations. Though the District anticipated generating approximately $0.5 million in tipping fees during FY 2023- 24, the digesters had not been fully commissioned by the end of the fiscal year and therefore no tipping fee revenue was realized. The graph below depicts the District’s revenue and expenses related to wastewater treatment and reclamation. Through FY 2024 the District used the City rates to bill its customers and then remit payment to the City at the end of each month. Under this relationship, treatment revenue collected was exactly equal to treatment fees paid to the City. In May 2022, the District established and implemented its own rates and began hiring operators and covering startup costs for commencement of operations at the SNRC. The District’s Wastewater Treatment rates were adopted with three phases. Phases 1 and 2 were implemented in May 2022 and January 2023, respectively, with phase 3 scheduled for implementation in January 2024. The District’s rate structure consists of fixed monthly charges for all residential customers, and for non-residential customers, a combination of fixed and variable charges, which are assessed based on water usage. For the year ended June 2024, Water Reclamation revenue was $11.2 million, compared to $10.1 million in the previous fiscal year. The increase was substantially due to the rate adjustment that became effective in prior year. $6 $7 $8 $9 $10 $11 $12 $13 2020 2021 2022 2023 2024 Mi l l i o n s Water Reclamation Operating Revenue versus Expenses Revenue Expenses Operating expenses recorded by the Reclamation fund (before depreciation) in FY 2023-24, the year in which it commenced operations, were $11.0 million compared to projections of $11.3 million. The two-month delay in commencing treatment operations resulted in the District having to pay the City an additional two months for treatment services, but at the same time energy costs, and material and supplies costs were lower due to delays. Salaries and benefits of $1.44 million, which were incurred for the entire year, exceeded budget by 14.5% due to unexpected overtime costs as staff worked to address issues such as clogged screens, odors, and leaking seals that arose during start-up. EAST VALLEY WATER DISTRICT Management’s Discussion and Analysis Year Ended June 30, 2024 25 Upon completion of construction, the cost of the new plant was allocated to approximately 200 components (facilities and equipment) and capitalized, with useful lives ranging from 5 to 50 years. Most of the components had ‘placed in service’ dates that recorded depreciation for between one and four months for the year. In total, $1.05 million in depreciation was recorded for the SNRC for FY 2023-24. Reclamation operating expenses of $12.1 million, including depreciation, exceeded operating revenue of $11.2 million by $0.9 million. This result was without any revenue or energy savings contributions from the digesters, which were significant reasons for their addition to the project. The digesters should be fully operational early in FY 2024-25 and be able to contribute in both ways to the operating results of the Reclamation fund. Shared Customer Account & Administrative Costs Costs related to Customer Accounts are generated by the Customer Service and Meter Services departments. The burden for funding these costs is allocated between the Water and Wastewater Collection funds at roughly a 70%- 30% split; the Water Reclamation fund does not currently share in these costs and will not until the fund is more established and revenues are able to cover costs sufficiently. Customer account costs increased 6.0% in FY 2023-24 to $2,392,357. While there were nominal cost increases in many cost categories, including a 5% COLA negotiated with staff for the fiscal year, two costs had extraordinary increases as explained below:  The cost for printing and delivery of final notices to customers increased 12% to $304 thousand as the number of defaults and notices needed increased. State assistance programs to help with water bills, that were initiated during or shortly after the COVID pandemic, all ended by December 2023.  Banking services, which include credit card processing fees, increased 42% due to extremely excessive increases that were being implemented by one of the District’s primary processors. The District demanded that the fees be revised and has negotiated fees that are in line with industry standards. General and Administrative (G&A) costs decreased 3.4% to $12.8 million from $13.2 million in the previous fiscal year. These are G&A cost totals after posting significant negative expense adjustments related to Salaries and Benefits. Prior to the adjustments, cost totals for G&A were $14.6 million and $14.0 million in the current and prior years, respectively. The negative expense adjustments were the result of adjustments to Net Pension, and Other Post Employment Benefit (OPEB) obligations in accordance with GASB statements 68 and 75. The amounts of expense adjustments were ($1.8) million and ($0.8) million for fiscal years 2023-24, and 2022-23, respectively. Aside from these adjustments, the following factors affected some of the largest G&A cost line items: 1. Salaries & Benefits increased $0.2 million to $5.5 million, compared to $6.8 million incurred in the previous year. This increase is due to a 5% COLA negotiated with staff for FY 2023-24, that would have had a larger effect on G&A expenses, but a member of the Engineering team, whose salary was reported in G&A, was hired to fill the new Reclamation Manager position in the Reclamation department, where his salary is now reported in Treatment operations. The vacant position in Engineering has not been backfilled. 2. Contract Services in G&A decreased 13.8% to $3.3 million. There are two reasons for this, first as explained for salaries above, some contracts that were being reported as G&A have now been more appropriately reported under Reclamation Treatment operations. In addition, the District is actively bidding long-term EAST VALLEY WATER DISTRICT Management’s Discussion and Analysis Year Ended June 30, 2024 26 contracts and considering technology solutions where labor intensive contracts had been in place, to enhance efficiencies and cost savings. 3. Insurance costs continued to climb, by 53.0% to $1.8 million in FY 2023-24. The primary reason for the increase is removal of the water reclamation plant from the contractor’s insurance to the District’s insurance, upon completion of the SNRC. Non-Operating Activities The District’s non-operating revenue of $1.3 million includes investment income of $1.27 million (including unrealized gains/losses), and miscellaneous income of $39 thousand. Investment income is earned on the District’s portfolio of U.S. Treasury and Agency Bonds and deposits with the Local Agency Investment Fund (LAIF). During FY 2023-24, investment income rose 230% over the prior year’s earnings of $265 thousand. The increase was due, in part, to the District actively pursuing higher yields by moving an additional $10 million in cash reserves out of the liquid LAIF account and into direct purchase of U.S. and U.S. backed securities, which were offering rates of between 4.5% and 5.5%. An increasing interest rate paid by LAIF, from 3.15% to 4.55%, also helped boost the District’s investment earnings. Non-Operating expense includes interest paid on Long-Term Debt, which fell from $869 thousand in the prior year, to $790 thousand in FY 2023-24. The payoff of two loans during the year, one on its original payoff date, and one two years premature, contributed to the decrease in interest expense. Capital Contributions and Special Item Contributions received during FY 2023-24 included $2.6 million in developer capacity fees, across all funds, for approximately 156 EDUs (equivalent dwelling units). These fees represent ‘moderate’ continued development activity from the prior year when fees were received for 113 EDUs. Development is a mixture of both commercial and residential construction, mostly for Tract developments. Planning for Accessory Dwelling Units (ADUs) has slowed significantly due to high interest rates. The District recorded a one-time charge of $7 million as a settlement obligation payable to the City of San Bernardino. This was part of a critical agreement that released the District from a 1957 wastewater treatment Joint Powers Authority and facilitated the Local Agency Formation Commission’s (LAFCO) granting of wastewater treatment authority to the District, ultimately allowing the District’s water reclamation plant project (SNRC) to proceed. Further details are provided in Note 14 to the financial statements. EAST VALLEY WATER DISTRICT Management’s Discussion and Analysis Year Ended June 30, 2024 27 East Valley Water District Changes in Net Position (in millions) 2024 2023 2022 Water Sales 17.9$ 17.0$ 18.5$ System Charges 16.2 15.5 14.0 Treatment Charges 10.7 10.1 9.8 Other Operating Rev 1.1 1.2 0.8 Supply & Pumping (5.0) (4.9) (4.3) Distribution / Collection (4.8) (5.1) (4.2) Treatment (12.0) (10.8) (10.1) Customer Accounts (2.4) (2.2) (1.7) General & Administrative (12.8) (13.2) (13.9) Depreciation (7.6) (6.3) (6.4) Non-Operating Revenues 1.3 0.4 1.3 Interest Expense (0.8) (0.9) (1.6) Income Before Contributions & Special Item 1.8 0.8 2.2 Developer Contributions 2.6 1.8 2.7 Grant Funds Contributed - 0.1 0.1 Special Item - Settlement Obligation (7.0) - - Change in Net Position (2.6) 2.7 5.0 Beginning Net Position, as Previously Reported 147.8 145.1 140.1 Ending Net Position 145.2$ 147.8$ 145.1 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, 2024 is $112.0 million, a decrease of $0.9 million compared to June 30, 2023. The decrease is the net result of the acquisition or construction of Capital assets for $9.7 million, offset by a $3.0 million increase in outstanding debt (includes associated deferred inflows/outflows), and depreciation of $7.6 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. During FY 2023-24 the District received $2.6 million in capacity fees while no restricted funds were used to fund current projects. A summary of the accumulation and use of these funds is presented as ‘Other Information’ in this document. The District is developing plans to use water impact fees for a new well and use wastewater treatment impact fees for an additional train of treatment membranes. EAST VALLEY WATER DISTRICT Management’s Discussion and Analysis Year Ended June 30, 2024 28 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 $4.3 million to $19.8 million in FY 2023-24. Capital Assets The District spent approximately $9.8 million for expansion or replacement of property, plant, and equipment during FY 2023-24. These amounts are reflected in Utility Plant, or as additions to Construction in Progress, in the accompanying financial statements. Placed in Service During FY 2023-24, District staff, consultants, and contractors completed work on the following:  Completed construction of the Granulated Activated Carbon treatment process and installation of replacing the final train of filter membranes at the surface water treatment plant.  Rehabilitated the well at Plant 120 which had been out of service for almost ten years.  Replaced and upsized to 6”, approximately 900’ of water main in Valaria Drive, Darren Place, and Tiffani Place with District crews.  Completed construction on a $191.5 million water reclamation plant, known as the Sterling Natural Resource Center (SNRC), capable of recycling 6.0 million gallons of wastewater each day.  Installed approximately 6,500 feet of interceptor pipeline, ranging in size from 18” to 48”, to redirect wastewater flows to the newly commissioned SNRC.  Completed two groundwater monitoring wells. Utility Plant in Service – June 30th (in millions) Department 2024 2023 Water Source of Supply 21.4$ 19.8$ Pumping 15.3 15.2 Transmission & Distribution 102.7 102.2 Treatment 33.5 29.3 Wastewater Collection Lines 39.4 27.9 Reclamation Plant 176.0 - General Plant & Equipment 44.7 32.6 Total 433.0$ 227.0$ EAST VALLEY WATER DISTRICT Management’s Discussion and Analysis Year Ended June 30, 2024 29 Construction in Progress (CIP) Construction in Progress decreased $196.2 million to $491 thousand (see Note 4) during FY 2023-24 as the District placed in service the largest facility it has ever built or acquired, the SNRC water reclamation plant. During the year, $3.9 million in cost was added to CIP, $200 million was removed as the SNRC and 8 other projects were capitalized and placed in service, and another $168 thousand related to several small projects was expensed, leaving a balance at June 30, 2024 of $491 thousand. Approximately 30 projects, most related to new development, remain in progress at year end. 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 Five-Year Capital Improvement Plan includes the following projects:  Rehabilitate and extend the useful lives of aging water storage tanks.  Replace aging water distribution pipelines that require frequent repair and are suspected of causing system water losses.  Drill and equip three new wells to meet the demands of new development, and to replace the capacity of three existing wells taken out of service due to their proximity to recycled water recharge basins.  Partner with developers to increase the capacity of new storage tanks they plan to build to serve their projects. The District has been awarded 10% match funding under the State’s Prepare California Match Program for a $6.8 million project to complete seismic retrofits on several water storage tanks. A FEMA Hazard Mitigation Grant Program (HMGP) grant has been awarded for the design phase (Phase 1) of the project and should facilitate an award for the construction phase (Phase 2) once the design is completed. The District has also been awarded Phase 1 FEMA funding of over $1.1 million for design of a significant water main replacement project. Once design is complete, the District will work to finalize Phase 2 funding to cover up to $40 million in replacement of pipelines which qualify for hazard mitigation assistance. Future Capital Improvements - Wastewater The District maintains a list of recommended wastewater main replacements/rehabilitations based on assessments of pipeline conditions noted during video logging of the collection system. Pipelines assessed at the highest risk of structural failure are prioritized on the District’s Five-Year Capital Improvement Plan (CIP). The District will also update its Wastewater Collection System Master Plan during FY 2024-25 to identify undersized main 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. Pipelines identified in the District’s Wastewater Collection System Master Plan will be built into models developed for an update to the District’s capacity fees. EAST VALLEY WATER DISTRICT Management’s Discussion and Analysis Year Ended June 30, 2024 30 Future Capital Improvements - Reclamation The SNRC has realized higher than expected influent flows during the first six months of treatment operations which, if they continue, will cause the District to install a fifth train of treatment membranes much sooner than anticipated. The four trains currently installed were intended to support an operating plan where three are in service while the fourth is offline for cleaning or maintenance. Current flow patterns can sometimes require that all four trains be available for filtering, so addition of the fifth train to help ensure the District can take a train offline for maintenance may be required. Underground facilities were all oversized to support addition of the fifth train, so just the treatment train itself will be required at an estimated cost of $8.5 million. Long Term Debt / Credit The District’s long-term debt consists of Revenue Bonds and loans from the California State Water Resources Control Board State Revolving Fund. Loans from U.S. Bank and San Bernardino Valley were paid off during FY 2023-24. Outstanding balances as of June 30, 2024 were as follows: Revenue Bonds 2020A Refunding Bonds 14,060,000$ 2020B Refunding Bonds 12,780,000 SWRCB Loans AVAD Construction 43,954 EFAD Construction 247,307 Plant 134 Construction 4,901,374 SNRC Construction 175,478,305 Total 207,510,940$ The funding agreement with the State Water Resources Control Board for the SNRC construction consists of a $168.3 million loan at 1.8% and a $6.7 million grant. Upon project completion, interest accrued on District draws against the loan during construction, totaling $7.2 million, was added to the loan balance for a total loan balance of $175.5 million. The State Water Resources Control Board considered the project complete in December 2023, and according to terms of the State Funding Agreement, the first payment on the loan is due one year after completion. Therefore, annual payments of approximately $7.6 million will commence at the end of December 2024. All scheduled debt payments for FY 2023-24 were paid timely. See Note 5 to the accompanying financial statement notes for further discussion about Long-Term Debt. EAST VALLEY WATER DISTRICT Management’s Discussion and Analysis Year Ended June 30, 2024 31 $0 $50 $100 $150 $200 $250 2020 2021 2022 2023 2024 Mi l l i o n s Outstanding Long-Term Debt June 30th 2020B Bonds 2020A Bonds SBVMWD Loan US Bank Loan SRF Loans-Other SRF Loan-SNRC Standard & Poor’s and Fitch rated the District’s 2020 Series A and B Revenue Bonds at AA- at the time of issuance. Fitch affirmed this rating after a review of the District’s financial plans in June 2024. Dun & Bradstreet (D&B), based on audited financial statements and creditor input, also rated the District. The rating given by D&B is currently 5A1 accompanied by a financial condition assessment of ‘strong’, which is no change from previous years. Rate Increases On May 15, 2024, the District adopted rate adjustments for all three of the District’s enterprise activities, to be implemented in three phases. Wastewater Collection and Reclamation rate adjustment phases will become effective on July 1 of the next three years, and water rate adjustments will become effective on January 1 of the next three years. Additional information about the District’s water and wastewater rates can be found on the District’s website at www.eastvalley.org. Contacting the District’s Financial Management This financial report is designed to give our customers/ratepayers, creditors, and investors a general overview of the District’s finances, and to demonstrate the District’s accountability for money it receives, and stewardship over facilities it maintains. If you have questions about this report, or need additional information, contact the District’s Finance Department at 31111 Greenspot Road, Highland, California 92346, or call (909) 381-6463. 32 EAST VALLEY WATER DISTRICT Statement of Net Position June 30, 2024 The accompanying notes are an integral part of this statement. 33 For Comparative Purposes Only 2024 2023 ASSETS Current Assets: Cash and Cash Equivalents 8,197,155$ 10,465,911$ Investments 15,304,169 5,329,245 Accounts Receivable, Net 6,107,689 5,940,839 Interest Receivable 341,051 73,545 Other Receivables 1,959,106 1,847,810 Due from Other Governments 7,553,848 20,552,300 Inventory 1,061,891 974,820 Prepaid Expenses 775,440 256,800 Total Current Assets 41,300,349 45,441,270 Non-Current Assets: Restricted Cash and Cash Equivalents 15,207,521 12,357,894 Restricted Due from Other Governments 7,800,000 - Assessments Receivable 246,083 263,478 Capital Assets not being Depreciated 7,574,139 203,751,889 Capital Assets, Net 314,384,669 115,951,753 Total Non-Current Assets 345,212,412 332,325,014 Total Assets 386,512,761 377,766,284 DEFERRED OUTFLOWS OF RESOURCES Deferred Charge on Refunding 812,441 854,647 Deferred Outflows - Pensions 6,318,359 5,317,071 Deferred Outflows - OPEB 2,004,127 1,184,326 Total Deferred Outflows Of Resources 9,134,927 7,356,044 Total Assets and Deferred Outflows of Resources 395,647,688$ 385,122,328$ (Continued) EAST VALLEY WATER DISTRICT Statement of Net Position - Continued June 30, 2024 The accompanying notes are an integral part of this statement. 34 For Comparative Purposes Only 2024 2023 LIABILITIES Current Liabilities: Accounts Payable and Accrued Expenses 10,449,146$ 8,423,138$ Accrued Payroll and Benefits 944,585 825,377 Customer Service Deposits 1,439,016 1,403,962 Construction Advances and Retentions 140,317 12,142,565 Accrued Interest Payable 228,360 263,778 Current Portion of Compensated Absences 432,702 652,177 Current Portion of Long-Term Debt 6,183,942 2,555,654 Due to Other Governments 76,452 135,523 Total Current Liabilities 19,894,520 26,402,174 Non-Current Liabilities: Compensated Absences, Less Current Portion 1,108,524 775,590 Net Pension Liability 14,902,033 13,855,136 Net OPEB Liability 2,067,180 1,986,360 Long-Term Debt, Less Current Portion 203,977,262 191,256,816 Due to Other Governments 6,300,000 - Total Non-Current Liabilities 228,354,999 207,873,902 Total Liabilities 248,249,519 234,276,076 DEFERRED INFLOWS OF RESOURCES Deferred Inflows - Refunding 1,076,449 1,128,796 Deferred Inflows - Pensions 543,111 1,600,501 Deferred Inflows - OPEB 550,043 326,072 Total Deferred Inflows Of Resources 2,169,603 3,055,369 Total Liabilities and Deferred Inflows Of Resources 250,419,122 237,331,445 NET POSITION Net Investment in Capital Assets 112,073,604 112,909,956 Restricted for: Future Capital Expansion Projects 13,314,565 10,761,677 Unrestricted 19,840,397 24,119,250 Total Net Position 145,228,566$ 147,790,883$ EAST VALLEY WATER DISTRICT Statement of Revenues, Expenses, and Changes in Net Position Year Ended June 30, 2024 The accompanying notes are an integral part of this statement. 35 For Comparative Purposes Only 2024 2023 OPERATING REVENUES Water Sales 17,900,515$ 17,004,576$ Wastewater Treatment Charges 10,746,724 10,108,850 System Charges 16,222,435 15,483,115 Other Charges 1,060,541 1,213,471 Total Operating Revenues 45,930,215 43,810,012 OPERATING EXPENSES Water Department: Source of Supply 4,079,366 3,890,634 Pumping 883,731 1,003,038 Treatment 1,592,368 1,212,646 Transmission and Distribution 4,012,276 4,311,606 Customer Accounts 1,757,943 1,653,739 Total Water Department 12,325,684 12,071,663 Wastewater Department: Wastewater Collection 792,350 752,489 Customer Accounts 634,414 604,006 Total Wastewater Department 1,426,764 1,356,495 Reclamation Department: Treatment 10,411,256 9,601,461 Total Reclamation Department 10,411,256 9,601,461 Administrative and General 12,776,969 13,221,140 Operating Expenses Before Depreciation 36,940,673 36,250,759 Depreciation 7,624,666 6,264,377 Total Operating Expenses 44,565,339 42,515,136 Operating Income 1,364,876$ 1,294,876$ (Continued) EAST VALLEY WATER DISTRICT Statement of Revenues, Expenses, and Changes in Net Position - Continued Year Ended June 30, 2024 The accompanying notes are an integral part of this statement. 36 For Comparative Purposes Only 2024 2023 NON-OPERATING REVENUES (EXPENSES) Investment Income 1,136,502$ 352,273$ Gain on Disposal - 30,134 Other Income 39,064 49,404 Interest Expense (789,683) (869,397) Unrealized Investment Gain 130,536 - Unrealized Investment Losses - (87,280) Total Non-Operating Revenues (Expenses) 516,419 (524,866) Income Before Contributions 1,881,295 770,010 CONTRIBUTIONS Capacity Charges 2,556,388 1,860,020 Operating Grants - 62,032 Total Contributions 2,556,388 1,922,052 SPECIAL ITEM Settlement Obligation - Wastewater Treatment Authority Disassociation (7,000,000) - CHANGE IN NET POSITION (2,562,317) 2,692,062 TOTAL NET POSITION, BEGINNING 147,790,883 145,098,821 TOTAL NET POSITION, ENDING 145,228,566$ 147,790,883$ EAST VALLEY WATER DISTRICT Statement of Cash Flows Year Ended June 30, 2024 The accompanying notes are an integral part of this statement. 37 For Comparative Purposes Only 2024 2023 CASH FLOWS FROM OPERATING ACTIVITIES Cash Received from Customers 45,687,123$ 45,004,610$ Cash Payments for Employees Services (13,812,566) (12,286,780) Cash Payments to Suppliers (22,969,278) (21,332,407) Cash to/(from) Other Sources 39,064 49,404 Net Cash Provided by Operating Activities 8,944,343 11,434,827 CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES Reimbursements Received 6,579,416 3,103,376 Grant Funds Received - 62,032 Proceeds from Sale of Capital Assets - 40,093 Developer Fees Received 2,556,388 1,860,020 Assessments Received 131,891 93,827 Proceeds/Draws from SRF Loan 8,813,935 2,705,185 Due (From) To Water Fund (2,655,077) - Due (From) To Reclamation Fund 5,661,647 - Due (From) To Other Agencies (623,548) - Principal Paid on Capital Debt (3,242,553) (2,336,691) Interest Paid on Capital Debt (998,343) (1,024,807) Acquisition of Capital Assets (15,497,342) (14,771,878) Net Cash Provided (Used) by Capital and Related Financing Activites 726,414 (10,268,843) CASH FLOWS FROM INVESTING ACTIVITIES Interest Received from Investments 743,713 224,214 Acquisition of Investments (11,398,599) (1,139,837) Proceeds from Sale of Investments 1,565,000 299,203 Net Cash Provided (Used) by Investing Activities (9,089,886) (616,420) Net Increase (Decrease) in Cash and Cash Equivalents 580,871 549,564 Cash and Equivalents, Beginning of Year 22,823,805 22,274,241 Cash and Equivalents, End of Year 23,404,676$ 22,823,805$ RECONCILIATION TO STATEMENT OF NET POSITION Cash and Cash Equivalents 8,197,155$ 10,465,911$ Restricted Cash and Cash Equivalents 15,207,521 12,357,894 Total Cash and Cash Equivalents 23,404,676$ 22,823,805$ (Continued) EAST VALLEY WATER DISTRICT Statement of Cash Flows - Continued Year Ended June 30, 2024 The accompanying notes are an integral part of this statement. 38 For Comparative Purposes Only 2024 2023 Reconciliation of Operating Income to Net Cash Provided by Operating Activities Operating Income 1,364,876$ 1,294,874$ Adjustments to Reconcile Operating Income to Net Cash Provided by Operating Activities: Depreciation 7,624,666 6,264,377 Miscellaneous Income/(Expense) 39,064 49,404 CIP Projects Expensed 168,183 18,656 Change in Assets and Liabilities: (Increase) Decrease in Accounts Receivable (166,850) 1,412,339 (Increase) Decrease in Inventory (87,071) (30,281) (Increase) Decrease in Prepaids (518,642) 13,697 (Increase) in Deferred Outflows of Resources - Pensions (1,821,089) (3,682,347) Increase (Decrease) in Accounts Payable 1,890,483 3,274,023 Increase (Decrease) in Accrued Salaries and Benefits 119,209 52,612 Increase (Decrease) in Compensated Absences 113,459 140,139 Increase (Decrease) in Net Pension Liability 1,046,897 7,197,447 Increase in Net OPEB Liability 80,819 124,485 Decrease in Deferred Inflows of Resources (833,419) (4,477,032) Increase (Decrease) in Customer Deposits (111,296) (231,483) Increase (Decrease) in Developer Deposits 35,054 13,917 Total Cash Provided by Operating Activities 8,944,343$ 11,434,827$ NON-CASH INVESTING, CAPITAL, AND NON-CAPITAL FINANCING ACTIVITIES: Fair Value Adjustments to Investments 130,536$ 300,746$ Receivable Offset by Debt 8,616,385$ 13,349,674$ -$ 1,953,751$ Capital Assets Acquired by Assuming Liabilities, Including Retainage Payable EAST VALLEY WATER DISTRICT Statement of Fiduciary Net Position June 30, 2024 The accompanying notes are an integral part of this statement. 39 Custodial Funds ASSETS Current Assets: Due from Other Governments 76,662$ Restricted Cash and Cash Equivalents 3,773,219 Property Taxes and Assessment Receivable 5,590,375 Total Assets 9,440,256 LIABILITIES Current Liabilities: Accounts Payable and Accrued Expenses 5,854,503$ Customer Deposits, Retentions and Advances 3,585,753 Total Liabilities 9,440,256 NET POSITION Restricted for CFDs - Total Net Position -$ EAST VALLEY WATER DISTRICT Notes to the Basic Financial Statements Year Ended June 30, 2024 40 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, 2024, the District owned 7,147 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, 2024 41 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 District NFWC Eliminations Total Statement of Net Position Current Assets 41,288,277$ 12,072$ -$ 41,300,349$ Capital Assets 321,418,733 2,606,306 (2,066,231) 321,958,808 Other Assets 23,112,511 141,093 - 23,253,604 Deferred Outflows 9,134,927 - 9,134,927 Total Assets & Deferred Outflows 394,954,448 2,759,471 (2,066,231) 395,647,688 Current Liabilities 19,853,193 41,327 - 19,894,520 Long-Term Liabilities 228,354,999 - - 228,354,999 Deferred Inflows 2,169,603 - - 2,169,603 Total Liabilities & Deferred Inflows 250,377,795 41,327 - 250,419,122 Net Investment in Capital Assets 105,199,386 2,640,449 (2,066,231) 105,773,604 Restricted Net Position 13,236,870 77,695 - 13,314,565 Unrestricted Net Position 26,140,397 - 26,140,397 Total Net Position 144,576,653$ 2,718,144$ (2,066,231)$ 145,228,566$ Statement of Changes in Net Position Sales and Services 44,869,674$ -$ -$ 44,869,674$ Other Operating Revenue 1,060,541 - 1,060,541 Operating Expenses 36,772,841 167,832 - 36,940,673 Depreciation 7,568,829 55,837 - 7,624,666 Operating Income 1,588,545 (223,669) - 1,364,876 Net Non-Operating Revenue (Expenses)401,923 114,496 - 516,419 Capital Contributions 2,556,388 - - 2,556,388 Special Items (7,000,000) - - (7,000,000) Change in Net Position (2,453,144) (109,173) - (2,562,317) Beginning Net Position 147,029,797 2,827,317 (2,066,231) 147,790,883 Ending Net Position 144,576,653$ 2,718,144$ (2,066,231)$ 145,228,566$ Net Cash from Operating Activities 9,076,282$ (131,939)$ -$ 8,944,343$ Net Cash from Capital and Related Financing Activities 610,527 115,887 - 726,414 Net Cash from Investing Activities (9,089,886) - (9,089,886) Beginning Cash and Equivalents 22,666,660 157,145 - 22,823,805 Ending Cash & Equivalents 23,263,583$ 141,093$ -$ 23,404,676$ 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. EAST VALLEY WATER DISTRICT Notes to the Basic Financial Statements Year Ended June 30, 2024 42 1) REPORTING ENTITY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued Accordingly, revenues are recognized when they are earned, and expenses are recorded when the liability is incurred. Fiduciary fund financial statements include a statement of fiduciary net position. The District has one type of fiduciary fund presented: a custodial fund, which is used to account for Community Facilities District assessments, debt issuances, the financing of eligible public facilities, and debt service. All of the assets in this fund are matched by a liability to parties on whose behalf they are held. Accordingly, there is no balance for Net Position, and no Statement of Changes in Net Position. The custodial funds are used to report resources held by the District in a purely custodial capacity, which involves only the receipt, temporary investment and remittance of fiduciary resources to individuals, private organizations or other governments. Custodial funds use the economic resource measurement focus. 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 actual or estimated 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, 2024 43 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 assets 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 assets 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 three items which qualify for reporting in this category: Deferred Inflows related to Pensions, Deferred Inflows related to OPEB, and Deferred Inflows related to Bond Refinancing. 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, 2024 44 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, wastewater collection, and water reclamation 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, deferred outflows of resources and deferred inflows of resources related to pensions, and pension expense, information about the fiduciary net position of the Plan and additions to/deductions from the Plan’s fiduciary net position have been determined on the same basis. For this purpose, benefit payments (including refunds of employee contributions) are recognized when currently due and payable in accordance with the benefit terms. Investments are reported at fair value. GASB 68 requires that the reported results must pertain to liability and asset information within certain defined timeframes. For this report, the following timeframes are used. Valuation Date June 30, 2022 Measurement Date June 30, 2023 Measurement Period July 1, 2022 to June 30, 2023 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. EAST VALLEY WATER DISTRICT Notes to the Basic Financial Statements Year Ended June 30, 2024 45 1) REPORTING ENTITY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued 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. 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. 101 Compensated Absences Updates the recognition and measurement guidance for compensated absences by aligning the recognition and measurement guidance under a unified model and by amending certain previously required disclosures. The statement is effective for fiscal years beginning after December 15, 2023. Statement No. 102 Certain Risk Disclosures Governments must disclose vulnerabilities related to significant concentrations or constraints that impact their financial stability. Concentrations refer to a lack of diversity in resource flows, while constraints are limitations on resource acquisition or spending. If these factors pose substantial risks, governments must disclose the nature of the risk, related events, and any actions taken to mitigate it in their financial statements. The statement is effective for fiscal years beginning after June 15, 2024. Statement No. 103 Financial Reporting Model Improvements Provides guidelines for the accounting and reporting of derivative instruments in governmental entities, focusing on their recognition, measurement, and disclosure. It distinguishes between hedging and investment derivatives, requiring different reporting for each, with all derivatives measured at fair value. The standard also mandates evaluating hedging effectiveness and requires detailed disclosures to enhance financial transparency. The statement is effective for fiscal years beginning after June 15, 2025. EAST VALLEY WATER DISTRICT Notes to the Basic Financial Statements Year Ended June 30, 2024 46 2) CASH AND INVESTMENTS Cash and Investments as of June 30, 2024 are classified in the accompanying financial statements as follows: Table 2-1 Cash and Cash Equivalents 8,197,155$ Restricted Cash and Cash Equivalents 15,207,521 Investments 15,304,169 Total 38,708,845$ Cash and investments as of June 30, 2024 consist of the following: Table 2-2 Cash on Hand 9,000$ Deposits with Financial Institutions 3,367,263 Money Market Accounts with Financial Institutions 683,021 Investments with Local Agency Investment Fund 19,345,392 Investment in Debt Securities 15,304,169 Total 38,708,845$ 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 Authorized Limit Required Rating Municipal Securities including EVWD Issues 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 Placement Service Deposits 5 years 30% None Money Market Mutual Funds and Mutual Funds 5 years 15% 2 - AAA Collateralized Bank Deposits 5 years None None Commercial Papers 270 days 5% A Medium Term Notes 5 years 30% AA Local Government Investment Pools N/A 25% AA Local Agency Investment Fund (LAIF) N/A None None At June 30, 2024, 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. EAST VALLEY WATER DISTRICT Notes to the Basic Financial Statements Year Ended June 30, 2024 47 2) CASH AND INVESTMENTS - Continued 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, 2024, the District had the following investments and maturities: Table 2-4 Investment Type Fair Value Average Maturity Fannie Mae 498,570$ 2.74 years Freddie Mac 1,042,049 2.05 years Federal Home Loan Bank 7,863,711 1.57 years Federal Farm Credit Bank 583,176 1.49 years US Treasury 5,018,274 1.48 years Tenn Valley Authority 298,389 0.21 years LAIF 19,345,392 N/A Money Market Mutual Funds 683,021 N/A 35,332,582$ Disclosures Relating to Credit Risk Generally, credit risk is the risk that the 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 498,570$ N/A -$ 498,570$ -$ Freddie Mac 1,042,049 N/A - 1,042,049 - Federal Home Loan Bank 7,863,711 N/A - 7,863,711 - Federal Farm Credit Bank 583,176 - 583,176 - US Treasury 5,018,274 N/A 5,018,274 - - Tenn Valley Authority 298,389 N/A - 298,389 - LAIF 19,345,392 N/A - - 19,345,392 Money Market Mutual Funds 683,021 N/A - 683,021 - 35,332,582$ 5,018,274$ 10,968,916$ 19,345,392$ EAST VALLEY WATER DISTRICT Notes to the Basic Financial Statements Year Ended June 30, 2024 48 2) CASH AND INVESTMENTS - Continued 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. The District has the following recurring fair value measurements as of June 30, 2024: 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 498,570$ -$ -$ 498,570$ Freddie Mac 1,042,049 - - 1,042,049 Federal Home Loan Bank 7,863,711 - - 7,863,711 Federal Farm Credit Bank 583,176 - - 583,176 US Treasury 5,018,274 - - 5,018,274 Tenn Valley Authority 298,389 - - 298,389 Total Investments Measured at Fair Value 15,304,169$ -$ -$ 15,304,169$ Investments Measured at Amortized Cost LAIF 19,345,392 Money Market Mutual Funds 683,021 Total Investments 35,332,582$ 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, 2024, 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. EAST VALLEY WATER DISTRICT Notes to the Basic Financial Statements Year Ended June 30, 2024 49 2) CASH AND INVESTMENTS - Continued 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. As of June 30, 2024, the District had $2,422,821 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, 2024, the carrying amount (at amortized cost) of the pool was $178,914,245,370 and the estimated fair value of the pool was $178,255,132,764. LAIF is regulated by the California Government Code under the oversight of the Treasurers of California. The District's proportionate share of the fair value (as determined by LAIF) as of June 30, 2023, was $19,345,392. 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. Currently LAIF does not have an investment rating. LAIF has a minimum $5,000 transaction amount in increments of $1,000 with a maximum of 15 transactions (combination of deposits and withdrawals) per month. LAIF requires a one-day prior notice for deposits and withdrawals of $10 million or more. 3) RESTRICTED CASH AND CASH EQUIVALENTS Restricted cash and cash equivalents at June 30, 2024 are restricted as follows: Table 3-1 Held for Debt Service 3,912,101$ Capacity Fees from Developers 9,606,710 Customer Deposits 1,438,112 Construction Advances 109,500 North Fork Water Company 141,098 Total 15,207,521$ EAST VALLEY WATER DISTRICT Notes to the Basic Financial Statements Year Ended June 30, 2024 50 4) CAPITAL ASSETS A summary of changes in capital assets for the year ended June 30, 2024 is as follows: Table 4-1 Beginning of End of Year Additions Deletions Adjustments Year Water Fund Non-Depreciable Assets Land and Easements 3,651,696$ -$ -$ -$ 3,651,696$ Water Rights 732,835 - - - 732,835 Construction in Progress 16,322,519 178,247 (16,159,664) - 341,102 Total Non-Depreciable Assets 20,707,050 178,247 (16,159,664) - 4,725,633 Depreciable Assets Source of Supply 19,814,229 1,569,534 - - 21,383,763 Pumping Plant 15,245,780 74,922 - - 15,320,702 Treatment Plant 29,348,773 4,195,133 - - 33,543,906 Transmission and Distribution Plant 102,198,997 525,620 - - 102,724,617 General Plant 22,561,909 11,774,603 (24,168) - 34,312,344 Total Depreciable Assets 189,169,688 18,139,812 (24,168) - 207,285,332 Accumulated Depreciation Source of Supply (9,770,671) (672,834) - - (10,443,505) Pumping Plant (8,494,490) (490,186) - - (8,984,676) Treatment Plant (14,485,771) (759,109) - - (15,244,880) Transmission and Distribution Plant (47,766,844) (2,529,737) - - (50,296,581) General Plant (9,697,208) (1,195,863) 24,168 - (10,868,903) Total Accumulated Depreciation (90,214,984) (5,647,729) 24,168 - (95,838,545) Water Fund Capital Assets, Net 119,661,754 12,670,330 (16,159,664) - 116,172,420 Wastewater Fund Non-Depreciable Assets Land and Easements 2,698,706 - - - 2,698,706 Construction in Progress 14,813,261 735,301 (15,398,762) - 149,800 Total Non-Depreciable Assets 17,511,967 735,301 (15,398,762) - 2,848,506 Depreciable Assets Wastewater Collection Plant 27,872,913 11,546,444 - - 39,419,357 General Plant 9,953,747 265,296 (14,620) - 10,204,423 Total Depreciable Assets 37,826,660 11,811,740 (14,620) - 49,623,780 Accumulated Depreciation Wastewater Collection Plant (16,428,368) (532,539) - - (16,960,907) General Plant (4,401,245) (391,713) 14,620 - (4,778,338) Total Accumulated Depreciation (20,829,613) (924,252) 14,620 - (21,739,245) Wastewater Fund Capital Assets, Net 34,509,014 11,622,789 (15,398,762) - 30,733,041 Water Reclamation Fund Non-Depreciable Assets Construction in Progress 165,532,873 1,319,042 (166,851,915) - - Total Non-Depreciable Assets 165,532,873 1,319,042 (166,851,915) - - Depreciable Assets Reclamation Plant - 175,990,516 - - 175,990,516 General Plant - 115,515 - - 115,515 Total Depreciable Assets - 176,106,031 - - 176,106,031 Accumulated Depreciation Reclamation Plant - (1,048,372) - - (1,048,372) General Plant - (4,312) - - (4,312) Total Accumulated Depreciation - (1,052,684) - - (1,052,684) Water Reclamation Fund Capital Assets 165,532,873 176,372,389 (166,851,915) - - Total Capital Assets, Net 319,703,641$ 200,665,508$ (198,410,341)$ -$ 321,958,808$ EAST VALLEY WATER DISTRICT Notes to the Basic Financial Statements Year Ended June 30, 2024 51 5) LONG-TERM DEBT The schedule below summarizes changes in long-term debt during the year ended June 30, 2024: Table 5-1 Beginning of Year Additions Retirements/ Payments End of Year Current Portion Long-Term Portion Direct Placement: 2020A Refunding Bonds 15,050,000$ -$ (990,000)$ 14,060,000$ 1,030,000$ 13,030,000$ 2020A Unamortized Premium 2,813,365 - (163,101) 2,650,264 163,101 2,487,163 2020B Refunding Bonds 13,060,000 - (280,000) 12,780,000 275,000 12,505,000 Subtotal Direct Placement 30,923,365 - (1,433,101) 29,490,264 1,468,101 28,022,163 Direct Borrowing: U.S. Bank Lease Purchase 444,375$ -$ (444,375)$ -$ -$ -$ SBVMWD Loan 1,275,000 - (1,275,000) - - - DWR Contracts: AVAD Construction 50,716 - (6,762) 43,954 6,762 37,192 Plant 134 Construction 5,134,773 - (233,399) 4,901,374 233,399 4,667,975 EFAD Construction 260,323 - (13,016) 247,307 13,016 234,291 SNRC 155,723,918 19,754,387 - 175,478,305 4,462,664 171,015,641 Subtotal Direct Borrowing 162,889,105 19,754,387 (1,972,552) 180,670,939 4,715,841 175,955,098 Total 193,812,470$ 19,754,387$ (3,405,653)$ 210,161,203$ 6,183,942$ 203,977,261$ 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. 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 EAST VALLEY WATER DISTRICT Notes to the Basic Financial Statements Year Ended June 30, 2024 52 5) LONG-TERM DEBT - Continued 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 had 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 was $3,998,560 with an interest rate of 2.38%. Semi-annual payments are $226,398, to commence in September 2014 through March 2024. As of June 30th, 2024, the District fully paid off its outstanding debt related to US Bank Lease Purchase, with no remaining obligations under the debt agreement. 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 0.75% at June 30, 2022. Debt service payments are to be made annually on February 1st over ten years. As of June 30th, 2024, the District fully paid off its outstanding debt related to City Creek Turnout and Plant 134 Hydroelectric Station Loan, with no remaining obligations under the debt agreement. 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 EAST VALLEY WATER DISTRICT Notes to the Basic Financial Statements Year Ended June 30, 2024 53 5) LONG-TERM DEBT - Continued 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. 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 with the State Water Resources Control Board for the construction of a 6 million gallon per day (mgd) water recycling plant known as the Sterling Natural Resource Center (SNRC). The initial agreement plus two amendments provides $175 million for the plant’s construction and includes a $6.7 million grant and a low interest (1.8%) loan for the balance of $168.3 million. During fiscal year 2023-24 the District completed construction on the SNRC, and all reimbursement requests totaling $175 million had been submitted to the state as required by the SWRCB funding agreement. At June 30, 2024, approximately $15.4 million of reimbursement requests were outstanding and are included in a receivable Due From Other Governments in the accompanying financial statements. As the SWRCB has not paid out all the loan funds, a final 30-year amortization schedule for the loan has not been produced. However, the first payment on the loan is due by the end of December 2024, so providing a repayment schedule for purposes of District financial reporting is essential. Accordingly, the District has produced a schedule based on the maximum loan amount of $168.3 million, plus construction period interest of $7.2 million accrued on loan draws that were taken during construction for a total amortizable balance of $175.5 million. This amount amortized over 30 years at an interest rate of 1.8% results in an annual payment of $7.6 million. EAST VALLEY WATER DISTRICT Notes to the Basic Financial Statements Year Ended June 30, 2024 54 5) LONG-TERM DEBT - Continued The District has pledged available water and wastewater revenue for the repayment of the loan, including the following new revenue streams:  Wastewater treatment charges (previously paid to the City of San Bernardino);  Sale of electrical energy produced by plant digesters (beyond energy used on site);  Local Resource Investment Program fees for recycled water delivered for groundwater recharge; and  Tipping fees from waste haulers. The aggregate debt service requirements to maturity for long-term debt as of June 30, 2024 are as follows (excludes unamortized premiums/discounts): Table 5-2 Year Ending June 30, Principal Interest Total 2025 6,020,841$ 4,044,047$ 10,064,888$ 2026 5,746,169 3,920,718 9,666,887 2027 5,867,943 3,805,237 9,673,180 2028 5,986,189 3,685,875 9,672,064 2029 6,105,933 3,562,542 9,668,475 2030-2034 32,466,523 15,838,016 48,304,539 2035-2039 35,940,843 12,367,079 48,307,922 2040-2044 39,962,426 8,553,537 48,515,963 2045-2049 33,282,036 5,057,732 38,339,768 2050-5054 36,132,037 1,974,332 38,106,369 207,510,940$ 62,809,115$ 270,320,055$ 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, 2024, net water revenues represented 323% of the annual water debt service and net wastewater revenues represented 770% of the annual wastewater debt service. EAST VALLEY WATER DISTRICT Notes to the Basic Financial Statements Year Ended June 30, 2024 55 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 702,543$ 685,482$ (588,030)$ 799,995$ 296,818$ 503,177$ Accrued Sick Leave 725,224 401,308 (385,301) 741,231 135,884 605,347 Total 1,427,767$ 1,086,790$ (973,331)$ 1,541,226$ 432,702$ 1,108,524$ 7) NET INVESTMENT IN CAPITAL ASSETS Net Investment in capital assets at June 30, 2024 consisted of the following: Table 7-1 Non-Depreciable Capital Assets 7,574,139$ Depreciable Capital Assets 433,015,143 Accumulated Depreciation (118,630,474) North Fork Water Company 540,008 Loans Payable (180,670,940) Bonds Payable (29,490,264) Deferred Inflows (1,076,449) Deferred Ouflows 812,441 Total 112,073,604$ 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 Public Agency Cost- Sharing Multiple-Employer Defined Benefit Pension Plan (Plan or PERF C) administered by the California Public Employees’ Retirement System (CalPERS.) The Plan consists of a miscellaneous pool and a safety pool (also referred to as “risk pools”), which are comprised of individual employer miscellaneous and safety rate plans, respectively. Plan assets may be used to pay benefits for any employer rate plan of the safety and miscellaneous pools. Accordingly, rate plans within the safety or miscellaneous pools are not separate plans under generally accepted accounting principles. Individual employers may sponsor more than one rate plan in the miscellaneous or safety risk pools. The District participates in two rate plans (two miscellaneous). Benefit provisions under the Plan are established by State statute and District’s resolution. CalPERS issues publicly available reports that include a full description of the pension plan regarding benefit provisions, assumptions and membership information that can be found on the CalPERS’ website, at www.calpers.ca.gov. EAST VALLEY WATER DISTRICT Notes to the Basic Financial Statements Year Ended June 30, 2024 56 8) DEFINED BENEFIT PENSION PLAN (PERS) - Continued Benefits Provided CalPERS provides service retirement and disability benefits, annual cost of living adjustments and death benefits to plan members, who must be public employees and beneficiaries. Benefits are based on years of credited service, equal to one year of full-time employment. Members with five years of total service are eligible to retire at age 50 with statutorily reduced benefits. All members are eligible for non-duty disability benefits after 10 years of service. The death benefit is one of the following: the Basic Death Benefit, the 1957 Survivor Benefit, or the Optional Settlement 2 W Death Benefit. The cost-of-living adjustments for each plan are applied as specified by the Public Employees’ Retirement Law. The Plan operates under the provisions of the California Public Employees’ Retirement Law (PERL), the California Public Employees’ Pension Reform Act of 2013 (PEPRA), and the regulations, procedures and policies adopted by the CalPERS Board of Administration. The Plan’s authority to establish and amend the benefit terms are set by the PERL and PEPRA, and may be amended by the California state legislature and in some cases require approval by the CalPERS Board. The Plans’ provisions and benefits in effect at June 30, 2024, 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%8.0% Required Employer Contribution Rates 15.46%7.75% 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, 2024 57 8) DEFINED BENEFIT PENSION PLAN (PERS) - Continued For the year ended June 30, 2024, the contributions recognized as part of pension expense for the Plans were as follows: Table 8-2 Miscellaneous Contributions - Employer $ 2,047,342 B) Pension Liabilities, Pension Expenses, and Deferred Outflows/Inflows of Resources Related to Pensions As of June 30, 2024, 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 $ 14,902,033 The District’s net pension liability for the Plan is measured as the total pension liability, less the pension plan’s fiduciary net position. The net pension liability of the Plan is measured as of June 30, 2023, using an annual actuarial valuation as of June 30, 2022 rolled forward to June 30, 2023 using standard update procedures. A summary of principal assumptions and methods used to determine the net pension liability is as follows: Table 8-4 Proportion - June 30, 2023 0.29610% Proportion - June 30, 2024 0.29802% Change - Increase (Decrease)0.00192% Miscellaneous Amortization of Deferred Outflows and Deferred Inflows of Resources Under GASB 68, gains and losses related to changes in total pension liability and fiduciary net position are recognized in pension expense systematically over time. The first amortized amounts are recognized in pension expense for the year the gain or loss occurs. The remaining amounts are categorized as deferred outflows and deferred inflows of resources related to pensions and are to be recognized in future pension expense. EAST VALLEY WATER DISTRICT Notes to the Basic Financial Statements Year Ended June 30, 2024 58 8) DEFINED BENEFIT PENSION PLAN (PERS) - Continued The amortization period differs depending on the source of the gain or loss: Net difference between projected and actual earnings on pension plan investments 5-year straight-line amortization All other amounts Straight-line amortization over the expected average remaining service lives (EARSL) of all members that are provided with benefits (active, inactive, and retired) as of the beginning of the measurement period The expected average remaining service lifetime (EARSL) is calculated by dividing the total future service years by the total number of plan participants (active, inactive, and retired) in the Public Agency Cost- Sharing Multiple-Employer Plan (PERF C). The EARSL for PERF C for the measurement period ending June 30, 2023 is 3.8 years, which was obtained by dividing the total service years of 600,538 (the sum of remaining service lifetimes of the active employees) by 160,073 (the total number of participants: active, inactive, and retired) in PERF C. Inactive employees and retirees have remaining service lifetimes equal to 0. Total future service is based on the members' probability of decrementing due to an event other than receiving a cash refund. For the year ended June 30, 2024, the District recognized pension credit of $109,943. At June 30, 2024, 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 $ 761,276 118,092$ Changes in Assumptions 899,703 - Net differences between projected and actual earnings on plan investments 2,412,773 - Change in employer's proportion 63,510 331,226 Difference between the employer's contributions and the employer's proportionate share of contributions 133,755 93,793 Pension contributions subsequent to measurement date 2,047,342 - Total $ 6,318,359 $ 543,111 EAST VALLEY WATER DISTRICT Notes to the Basic Financial Statements Year Ended June 30, 2024 59 8) DEFINED BENEFIT PENSION PLAN (PERS) - Continued Contributions subsequent to the measurement date of $2,047,342 reported with deferred outflows of resources will be recognized as a reduction of the net pension liability in the year ended June 30, 2025. 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 2025 $ 1,056,536 2026 733,142 2027 1,868,995 2028 69,232 $ 3,727,905 Actuarial Methods and Assumptions Used to Determine Total Pension Liability The collective total pension liability for the June 30, 2023 measurement period was determined by an actuarial valuation as of June 30, 2022, with updated procedures used to roll forward the total pension liability to June 30, 2023. The collective total pension liability was based on the following assumptions: Table 8-7 Miscellaneous Valuation Date June 30, 2022 Measurement Date June 30, 2023 Entry Age Normal in accordance with the requirements of GASB Fair Value of Assets 6.90% 2.30% Varies by Entry Age and Service Derived using CalPERS' membership data for all Funds The lesser of contract COLA or 2.30% until Purchasing Power Protection Allowance floor on purchasing power applies, 2.30% thereafter (1)The mortality table used was developed based on CalPERS’ specific data. The probabilities of mortality are based on the 2021 CalPERS Experience Study for the period from 2001 to 2019. Pre-retirement and Post-retirement mortality rates include generational mortality improvement using 80% of Scale MP-2020 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 November 2021 that can be found on the CalPERS website. Mortality Rate Table (1) Post Retirement Benefit Increase Actuarial Cost Method Asset Valuation Method Actuarial Assumptions: Discount Rate Inflation Salary Increases EAST VALLEY WATER DISTRICT Notes to the Basic Financial Statements Year Ended June 30, 2024 60 8) DEFINED BENEFIT PENSION PLAN (PERS) - Continued Change of Assumptions There were no assumption changes in 2023. Effective with the June 30, 2021 valuation date (June 30, 2022 measurement date), the accounting discount rate was reduced from 7.15% to 6.90%. In determining the long-term expected rate of return, CalPERS took into account long-term market return expectations as well as the expected pension fund cash flows. In addition, demographic assumptions and the price inflation assumption were changed in accordance with the 2021 CalPERS Experience Study and Review of Actuarial Assumptions. The accounting discount rate was 7.15% for measurement dates June 30, 2017 through June 30, 2021, 7.65% for measurement dates June 30, 2015 through June 30, 2016, and 7.50% for measurement date June 30, 2014. Discount Rate The discount rate used to measure the total pension liability for PERF C was 6.90%. The projection of cash flows used to determine the discount rate assumed that contributions from plan members will be made at the current member contribution rates and that contributions from employers will be made at statutorily required rates, actuarially determined. Based on those assumptions, the Plan’s fiduciary net position was projected to be available to make all projected future benefit payments of current plan members. Therefore, the long-term expected rate of return on plan investments was applied to all periods of projected benefit payments to determine the total pension liability. Subsequent Events There were no subsequent events that would materially affect the results presented in this disclosure. Long-Term Expected Rate of Return 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 took into account both short-term and long- term market return expectations. Using historical returns of all of the funds’ asset classes, expected compound (geometric) returns were calculated over the next 20 years using a building-block approach. The expected rate of return was then adjusted to account for assumed administrative expenses of 10 Basis points. EAST VALLEY WATER DISTRICT Notes to the Basic Financial Statements Year Ended June 30, 2024 61 8) DEFINED BENEFIT PENSION PLAN (PERS) - Continued The table below reflects the long-term expected real rate of return by asset class. Table 8-8 Asset Class Assumed Asset Allocation Real Return (1)(2) Global Equity - cap weighted 30.0% 4.54% Global Equity - non-cap-weighted 12.0% 3.84% Private Equity 13.0% 7.28% Treasury 5.0% 0.27% Mortgage-backed securities 5.0% 0.50% Investment grade corporates 10.0% 1.56% High Yield 5.0% 2.27% Emerging market debt 5.0% 2.48% Private debt 5.0% 3.57% Real Assets 15.0% 3.21% Leverage -5.0% -0.59% Total 100.0% (1) An expected inflation of 2.30% used for this period (2) Figures are based on the 2021 Asset Liability Management Study 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 5.90% Net Pension Liability $ 22,897,538 Current Discount Rate 6.90% Net Pension Liability $ 14,902,033 1% Increase 7.90% Net Pension Liability $ 8,321,046 EAST VALLEY WATER DISTRICT Notes to the Basic Financial Statements Year Ended June 30, 2024 62 8) DEFINED BENEFIT PENSION PLAN (PERS) - Continued D) Pension Plan Fiduciary Net Position Information about the pension plan’s assets, deferred outflows of resources, liabilities, deferred inflows of resources, and fiduciary net position are presented in CalPERS’ audited financial statements, which are publicly available reports that can be obtained at CalPERS’ website, at www.calpers.ca.gov. The plan’s fiduciary net position and additions to/deductions from the plan’s fiduciary net position have been determined on the same basis used by the pension plan, which is the economic resources measurement focus and the accrual basis of accounting. Benefits and refunds are recognized when due and payable in accordance with the terms of the plan. Investments are reported at fair value. E) Payable to the Pension Plan At June 30, 2024, the District reported a payable of $0 for the outstanding number of contributions to the pension plan required for the year ended June 30, 2024. 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, 2024, 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, 2024 63 10) RISK MANAGEMENT - Continued At June 30, 2024, 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 Omissions Liability 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 Member $ 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, 2024 64 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, 2024, 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 2,067,180$ 2,004,127$ 550,043$ 373,315$ 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 an Annual Comprehensive 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 as of June 30, 2024, the date of the latest actuarial valuation: Table 11-2 Participant Type 27 0 Active employees 75 102 Number of Participants Inactive participants currently receiving benefits Inactive participants entitled to but not yet receiving benefit Total 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, 2024 65 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 $850 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, 2023, the District paid $558,324 to the plan including the implicit rate subsidy. The District contributed $332,001 including the implicit rate subsidy for retiree health benefits to the Trust during the fiscal year ended June 30, 2024. Net OPEB Liability The table herein shows the components of the net OPEB liability of the District: Table 11-3 Balance June 30, 2024 Total OPEB Liability $ 4,036,052 Plan Fiduciary Net Position (1,968,872) District's Net OPEB Liability (Asset) $ 2,067,180 Investments As described above, at June 30, 2024, 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, 2024, 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 662,002$ -$ Differences between expected and actuarial experience in 916,961 138,584 Changes of assumptions 272,117 411,459 Differences between projected and actual earnings on OPEB plan investments 153,047 - Total 2,004,127$ 550,043$ 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. Contributions submitted subsequent to the measurement date will be recognized in the following fiscal year. The EARSL for the OPEB plan for EAST VALLEY WATER DISTRICT Notes to the Basic Financial Statements Year Ended June 30, 2024 66 11) POST-EMPLOYMENT HEALTHCARE BENEFITS - Continued June 30, 2024 is five years. The year of amortization is recognized in OPEB expense for the year the gain or loss occurs. The 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. Deferred inflows and outflows will be amortized as follow: Table 11-5 Year Ending June 30, Amount 2025 $ 125,691 2026 121,837 2027 148,326 2028 91,453 2029 83,564 Thereafter 221,211 $ 792,082 Actuarial Methods and Assumptions The District’s net OPEB liability was measured as of June 30, 2023, and the total OPEB liability used to calculate the net OPEB liability was determined by an actuarial valuation as of June 30, 2023. 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, 2023, using the actuarial assumptions shown herein, applied to all periods included in the measurement, unless otherwise specified. Table 11-6 Actuarial Methods and Assumptions Valuation Date June 30, 2023 Measurement Date June 30, 2023 Salary Increases 2.80% Investment Rate of Return 5.50% Health Care Trend Rate 8% HMO / 8% PPO Mortality rates were based upon the rates under the CalPERS pensions plan updated to reflect the most recent experience study. EAST VALLEY WATER DISTRICT Notes to the Basic Financial Statements Year Ended June 30, 2024 67 11) POST-EMPLOYMENT HEALTHCARE BENEFITS - Continued 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, 2023 are shown herein: Table 11-7 Asset Class Global Equity 34% N/A Fixed Income 41% N/A Treasury Inflation - Protected Securities 5% N/A Commodities 3% N/A Real Estate Investment Trusts 17% N/A Total 100% 5.50% Target Allocation L/T Expected Gross ROR The discount rate used to measure the total OPEB liability was 5.5 percent. The discount rate assumes the District continues to fully fund 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. Changes in the Net OPEB Liability Table 11-8 Total OPEB Liability (a) Plan Fiduciary Net Position (b) Net OPEB Liability (Asset) (a) Balances at June 30, 2023 $ 3,567,214 $ 1,580,854 $ 1,986,360 Changes for the year: Service Cost 145,701 - 145,701 Interest 198,070 - 198,070 Differences between expected and actual experience 644,957 - 644,957 Employer Contributions - 558,324 (558,324) Net Investment Income - 56,506 (56,506) Change of assumptions (293,567) - (293,567) Benefit Payments (226,323) (226,323) - Administrative Expenses - (489) 489 Other Expenses - - - Net Changes 468,838 388,018 80,820 Balances at June 30, 2024 $ 4,036,052 $ 1,968,872 $ 2,067,180 Increase (Decrease) EAST VALLEY WATER DISTRICT Notes to the Basic Financial Statements Year Ended June 30, 2024 68 11) POST-EMPLOYMENT HEALTHCARE BENEFITS - Continued The following presents the District’s net OPEB liability calculated using the discount rate of 5.5 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 (4.5 percent) or 1-percentage-point higher (6.5 percent) than the current rate: Table 11-9 Discount Rate Net OPEB Liability (Asset) 2,457,412$ 2,067,180$ 1,727,579$ 1% Decrease (4.50%) Current Discount Rate (5.50%) 1% Increase (6.50%) The following presents the District’s net OPEB liability calculated using the current healthcare cost trend rate of 8.0 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 (7.0 percent) or 1-percentage-point higher (9.0 percent) than the current rate: Table 11-10 Healthcare Trend Rate Net OPEB Liability (Asset) 1% Decrease (7% HMO/7% PPO Decreasing to 3.50% HMO/3.50% PPO)1,642,082$ Current Healthcare Cost Trend Rates (8% HMO/8% PPO Decreasing to 4.50% HMO/4.50% PPO)2,067,180$ 1% Increase (9% HMO/9% PPO Decreasing to 5.50% HMO/5.50% PPO)2,578,002$ OPEB Expense For the year ended June 30, 2024, the District recognized OPEB expense of $373,315 and recorded deferred outflows of resources of $2,004,127 for contributions made during fiscal year 2024 after the measurement date. The deferred outflows will be recognized in OPEB expense for the period ending June 30, 2025. The District recorded $550,043 of deferred inflows of resources resulting from the differences between projected and actual earnings on OPEB plan investments for the period ending June 30, 2023. The deferred inflows of resources will be amortized and recognized in OPEB expense over three remaining periods ending June 30, 2027. EAST VALLEY WATER DISTRICT Notes to the Basic Financial Statements Year Ended June 30, 2024 69 12) CONSTRUCTION AND OTHER SIGNIFICANT COMMITMENTS The District has five significant active construction project commitments as of June 30, 2024. The following contracts are related to infrastructure upgrades and the recycled water facility. Table 12-1 Contractual Commitments Spent to Date Remaining Commitment Reservoir Seismic Retrofit Project Ph. 1 24,821$ 487,550$ Plant 129 Well Development 36,816$ 238,184$ SNRC Laboratory Services 114,067$ 185,933$ Water Main Seismic Retrofit 475,254$ 708,746$ Design-Build Services of additional water storage in the District's Canal Pressure Zone 316,029$ 423,199$ 13)DEBT WITHOUT DISTRICT COMMITMENT The District authorized the formation of CFD 2021-1 Mediterra Project for purpose of the issuance of bonds under improvement acts of the State of California to finance eligible public facilities to serve residential, and/or mixed- use developments. Bonds issued by the CFD’s are secured by annual special tax levies or liens placed on properties within each CFD. The District are not liable for repayment and the District, acting as an agent on behalf of the CFD, is only responsible for levying and collecting the special tax assessments, forwarding the collections to the bond trustee on behalf of bondholders, and initiating foreclosure proceedings on faulted special tax payments when necessary. The bonds issued by the CFD are limited obligations and are payable solely from special tax assessments, specific bond reserves, and the proceeds from property foreclosures. Since these debts do not constitute an obligation of the District and the District is not obligated to make payments on the bonds, the CFD Bonds (whose terms are disclosed in Note 5) are not reported as long-term liabilities in the accompanying District financial statements. The activities related to the District Bond reserves, special assessment tax collection, remittance to the bond trustee, repayment of District Bonds and use of new bond proceeds for developer capital projects for infrastructure, are reported as a custodial fund As of June 30, 2024, debt without District commitment is as follows: Balance June 30, 2024 2023 Special Tax Bonds, IA No. 1 - 30 years 5,720,000$ EAST VALLEY WATER DISTRICT Notes to the Basic Financial Statements Year Ended June 30, 2024 70 14)DEBT WITHOUT DISTRICT COMMITMENT During fiscal year 2023-24, the District recorded a settlement obligation of $7 million as part of an agreement with the City of San Bernardino. This settlement, a critical component in releasing the District from a 1957 wastewater treatment Joint Powers Authority (JPA), was necessary to facilitate the Local Agency Formation Commission’s (LAFCO) granting of wastewater treatment authority to the District. This release enabled the District to move forward with its water reclamation plant project, the Sterling Natural Resource Center (SNRC). The settlement obligation is payable in annual installments of $700,000 per year for 10 years, beginning in fiscal year 2023-24. The entire settlement obligation has been accrued and expensed as a special item in fiscal year 2023-24. The Water and Wastewater funds, which were the funds in existence when the obligation was incurred, are being charged for the settlement payments. The settlement expense is reflected as a one-time charge of $7 million in the accompanying financial statements. 71 72 East Valley Water District Schedule of District’s Proportionate Share of the Net Pension Liability Year Ended June 30, 2024 Last Ten Years The accompanying notes to required supplementary information are an integral part of this schedule. 73 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 proportionate share of the net pension liability associated with the District. 2024 2023 2022 2021 2020 Proportion of the Net Pension Liability 0.119452% 0.119950% 0.123102% 0.113169% 0.115205% Proportionate Share of the Net Pension Liability $ 14,902,033 $ 13,855,136 $ 6,657,689 $ 12,313,294 $ 11,805,140 Covered Payroll $ 7,393,654 $ 6,565,118 $ 6,197,060 $ 5,888,338 $ 5,658,626 Proportionate Share of the Net Pension Liability as Percentage of Covered Payroll 201.55% 211.04% 107.43% 209.11% 208.62% Plan's Fiduciary Net Position $ 44,216,314 $ 41,301,132 $ 44,006,462 $ 36,172,219 $ 34,016,773 Plan's Fiduciary Net Position as a Percentage of the Total Pension Liability 74.79% 74.88% 86.86% 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% East Valley Water District Schedule of District’s Contributions Year Ended June 30, 2024 Last Ten Years The accompanying notes to required supplementary information are an integral part of this schedule. 74 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. 2024 2023 2022 2021 2020 Contractually Required Contribution (Actuarially Determined)2,047,342$ 1,976,052$ 1,938,185$ 1,900,734$ 1,798,495$ Contributions in Relation to the Actuarially Determined Contributions 2,047,342$ 1,976,052$ 1,938,185$ 1,900,734$ 1,798,495$ Contribution Deficiency (Excess)-$ -$ -$ -$ -$ Covered Payroll $ 7,750,618 $ 7,393,654 $ 6,565,118 $ 6,197,060 $ 5,888,338 Contributions as a Percentage of Covered Payroll 26.42% 26.73% 29.52% 30.67% 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% East Valley Water District Schedule of Changes in the Net OPEB Liability Year Ended June 30, 2024 Last Ten Years* The accompanying notes to required supplementary information are an integral part of this schedule. 75 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 2024 2023 Service Cost 145,701$ 118,145$ Interest 198,070 213,973 Differences bewteen exptected and actual experience 644,957 (173,230) Changes of assumptions (293,567) 340,147 Benefit Payments, including refunds of member contributions (226,323) (207,859) Net Change in Total OPEB Liability 468,838 291,176 Total OPEB Liability - Beginning 3,567,214 3,276,038 Total OPEB Liability - Ending (a)4,036,052$ 3,567,214$ Plan Fiduciary Net Position 2024 2023 Contributions - Employer 558,324$ 556,222$ Net Investment Income 56,506 (181,313) Benefit Payments (226,323) (207,859) Administrative Expense (489) (359) Other Expense - - Net Change in Plan Fiduciary Net Position 388,018$ 166,691$ Plan Fiduciary Net Position - Beginning 1,580,854 1,414,163 Plan Fiduciary Net Position - Ending (b)1,968,872$ 1,580,854$ Net OPEB Liability (Asset) - Ending (a) - (b)2,067,180$ 1,986,360$ Plan Fiduciary Net Position as a Percentage of the Total OPEB Liability 48.78% 44.32% Covered Payroll 6,007,798$ 5,847,005$ Net OPEB Liability (Asset) as a Percentage of Covered-Employee Payroll 34.41% 33.97% (Continued) Note: Fiscal year 2018 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, 2024 - Continued Last Ten Years The accompanying notes to required supplementary information are an integral part of this schedule. 76 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 2022 2021 2020 2019 2018 Service Cost 122,441$ 122,428$ 106,297$ 103,452$ 97,138$ Interest 199,913 189,204 174,233 166,826 160,043 Differences bewteen exptected and actual experience 278,335 75,893 192,265 - - Changes of assumptions (163,361) - (65,796) - - Benefit Payments, including refunds of member contributions (225,321) (220,316) (168,787) (149,550) (168,724) Net Change in Total OPEB Liability 212,007 167,209 238,212 120,728 88,457 Total OPEB Liability - Beginning 3,064,031 2,896,822 2,658,610 2,537,882 2,449,425 Total OPEB Liability - Ending (a)3,276,038$ 3,064,031$ 2,896,822$ 2,658,610$ 2,537,882$ Plan Fiduciary Net Position 2022 2021 2020 2019 2018 Contributions - Employer 412,106$ 405,008$ 278,539$ 149,548$ 218,724$ Net Investment Income 204,887 38,644 48,769 37,365 36,877 Benefit Payments (225,321) (220,316) (168,787) (149,548) (168,724) Administrative Expense - - (330) - (261) Other Expense (563) (427) (240) (683) - Net Change in Plan Fiduciary Net Position 391,109$ 222,909$ 157,951$ 36,682$ 86,616$ Plan Fiduciary Net Position - Beginning 1,023,054 800,145 642,194 605,512 518,896 Plan Fiduciary Net Position - Ending (b)1,414,163$ 1,023,054$ 800,145$ 642,194$ 605,512$ Net OPEB Liability (Asset) - Ending (a) - (b)1,861,875$ 2,040,977$ 2,096,677$ 2,016,416$ 1,932,370$ Plan Fiduciary Net Position as a Percentage of the Total OPEB Liability 43.17% 33.39% 27.62% 24.16% 23.86% Covered Payroll 5,902,604$ 5,744,627$ 5,495,000$ 5,495,000$ 5,220,250$ Net OPEB Liability (Asset) as a Percentage of Covered-Employee Payroll 31.54% 35.53% 38.16% 36.70% 37.02% Note: Fiscal year 2018 was the first year of implementation, therefore only seven years are shown. East Valley Water District Schedule of OPEB Healthcare Contributions Year Ended June 30, 2024 Last Ten Years* The accompanying notes to required supplementary information are an integral part of this schedule. 77 Schedule of OPEB Healthcare 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 2024 2023 Actuarially Determined Contribution (ADC)662,002$ 332,001$ Contributions in Relation to the ADC (558,324) (556,222) Contribution Deficiency (Excess) 103,678$ (224,221)$ District's Covered Payroll 6,536,459$ 6,007,798$ Contributions as a Percentage of Covered-Employee Payroll 10.13% 5.53% OPEB Contributions 2022 2021 2020 2019 2018 Actuarially Determined Contribution (ADC)348,363$ 350,024$ 362,533$ 285,551$ 144,415$ Contributions in Relation to the ADC (412,106) (405,008) (278,539) (149,548) (218,724) Contribution Deficiency (Excess) (63,743)$ (54,984)$ 83,994$ 136,003$ (74,309)$ District's Covered Payroll 5,847,005$ 5,902,604$ 5,744,627$ 5,495,000$ 5,495,000$ Contributions as a Percentage of Covered-Employee Payroll 5.96% 5.93% 6.31% 5.20% 2.63% Note: Fiscal year 2018 was the first year of implementation, therefore only six years are shown. East Valley Water District Notes to the Required Supplementary Information Purpose of Schedules Year Ended June 30, 2024 78 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. 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 OPEB 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. Pertinent valuation dates and methods and assumptions used to determine the OPEB liability and required contributions are as follows: Measurement Date June 30, 2023 Valuation Date June 30, 2023 Methods and Assumptions Used to Determine Contribution Rates: Actuarial Cost Method Entry Age Normal Amortization Method Level Percentage of Payroll Remaining Amortization Period 14 years Assets Valuation Method 5 Year Salary Increases 2.8% Annually Plus Merit Increases Based on 2021 Experience Study Investement Rate of Return 5.50% 79 80 81 East Valley Water District History and Organization Year Ended June 30, 2024 82 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 for 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 James Morales, Jr. Chairman of the Board Ronald L. Coats Vice-Chairman of the Board David E. Smith Governing Board Member Ronald L. Coats Governing Board Member Chris Carrillo Governing Board Member East Valley Water District James Morales, Jr.President Ronald L. Coats Vice-President Michael Moore Secretary/Executive Director Brian W. Tompkins Director of Finance East Valley Water District Financing Authority Management Michael Moore 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, 2024 83 Water Wastewater Water Reclamation Eliminations Total ASSETS Current Assets: Cash and Cash Equivalents 1,784,281$ 783,879$ 5,628,995$ -$ 8,197,155$ Investments 13,162,655 2,141,514 - - 15,304,169 Accounts Receivable, Net 5,089,642 351,017 667,030 - 6,107,689 Interest Receivable 106,595 212,102 22,354 - 341,051 Other Receivables 1,959,106 - - - 1,959,106 Due From Other Fund 12,526,922 2,257,875 - (14,784,797) - Due from Other Governments - - 7,553,848 - 7,553,848 Inventory 1,055,170 6,721 - - 1,061,891 Prepaid Expenses 733,428 42,012 - - 775,440 Total Current Assets 36,417,799 5,795,120 13,872,227 (14,784,797) 41,300,349 Non-Current Assets: Restricted Cash and Cash Equivalents 7,817,138 3,760,224 3,630,159 - 15,207,521 Restricted Due from Other Governments - - 7,800,000 - 7,800,000 Assessments Receivable 246,083 - - - 246,083 Capital Assets not being Depreciated 4,725,633 2,848,506 - - 7,574,139 Capital Assets, Net (Note 4) 111,446,787 27,884,535 175,053,347 - 314,384,669 Total Non-Current Assets 124,235,641 34,493,265 186,483,506 - 345,212,412 Total Assets 160,653,440 40,288,385 200,355,733 (14,784,797) 386,512,761 DEFERRED OUTFLOWS OF RESOURCES Deferred Charge on Refunding 553,094 259,347 - - 812,441 Deferred Outflows - Pensions 4,422,851 1,895,508 - - 6,318,359 Deferred Outflows - OPEB 1,402,889 601,238 - - 2,004,127 Total Deferred Outflows 6,378,834 2,756,093 - - 9,134,927 Total Assets and Deferred Outflows of Resources 167,032,274$ 43,044,478$ 200,355,733$ (14,784,797)$ 395,647,688$ (Continued) East Valley Water District Combining Schedule of Net Position – Continued June 30, 2024 84 Water Wastewater Water Reclamation Eliminations Total LIABILITIES Current Liabilities: Accounts Payable and Accrued Expenses 10,144,621$ 107,606$ 196,919$ -$ 10,449,146$ Accrued Payroll and Benefits 669,610 169,937 105,038 - 944,585 Customer Service Deposits 1,439,016 - - - 1,439,016 Construction Advances and Retentions 136,817 3,500 - - 140,317 Accrued Interest Payable 203,649 24,711 - - 228,360 Current Portion of Compensated Absences 305,527 91,983 35,192 - 432,702 Current Portion of Long-Term Debt 1,546,278 175,000 4,462,664 - 6,183,942 Due To Other Fund - - 14,784,797 (14,784,797) - Due To Other Governments 76,452 - - - 76,452 Total Current Liabilities 14,521,970 572,737 19,584,610 (14,784,797) 19,894,520 Non-Current Liabilities: Compensated Absences, Less Current Portion 720,652 228,680 159,192 - 1,108,524 Net Pension Liability 10,431,423 4,470,610 - - 14,902,033 Net OPEB Liability 1,447,026 620,154 - - 2,067,180 Long-Term Debt, Less Current Portion 28,931,619 4,030,000 171,015,643 - 203,977,262 Due To Other Governments 4,410,000 1,890,000 - - 6,300,000 Total Non-Current Liabilities 45,940,720 11,239,444 171,174,835 - 228,354,999 Total Liabilities 60,462,690 11,812,181 190,759,445 (14,784,797) 248,249,519 DEFERRED INFLOWS OF RESOURCES Deferred Inflows - Refunding 1,076,449 - - - 1,076,449 Deferred Inflows - Pensions 380,178 162,933 - - 543,111 Deferred Inflows - OPEB 385,030 165,013 - - 550,043 Total Deferred Inflows 1,841,657 327,946 - - 2,169,603 Total Liabilities and Deferred Inflows of Resources 62,304,347 12,140,127 190,759,445 (14,784,797) 250,419,122 NET POSITION Net Investment in Capital Assets 85,711,174 26,362,430 - - 112,073,604 Restricted for: Future Capital Expansion Projects 5,927,682 3,756,724 3,630,159 - 13,314,565 Unrestricted 13,089,071 785,197 5,966,129 - 19,840,397 Total Net Position 104,727,927$ 30,904,351$ 9,596,288$ -$ 145,228,566$ East Valley Water District Combining Schedule of Revenues, Expenses, and Changes in Net Position Year Ended June 30, 2024 85 Water Wastewater Water Reclamation Eliminations Total OPERATING REVENUE Water Sales 17,461,064$ -$ 439,451$ -$ 17,900,515$ Wastewater Treatment Charges - - 10,746,724 - 10,746,724 System Charges 10,149,281 6,073,154 - - 16,222,435 Other Revenue 998,210 62,331 - - 1,060,541 Total Operating Revenue 28,608,555 6,135,485 11,186,175 - 45,930,215 OPERATING EXPENSES Source of Supply: Salary & Benefits 545,958 - - - 545,958 Contract Services 247,051 - - - 247,051 Utilities 2,007,023 - - - 2,007,023 Insurance 5,370 - - - 5,370 Materials & Supplies 46,081 - - - 46,081 Purchased Water 786,922 - - - 786,922 Water Assessments 286,053 - - - 286,053 Chemicals 130,988 - - - 130,988 Professional Development 185 - - 185 Taxes 23,735 - - - 23,735 Total Source of Supply 4,079,366 - - - 4,079,366 Pumping: Salary & Benefits 183,776 - - - 183,776 Contract Services 38,773 - - - 38,773 Utilities 644,245 - - - 644,245 Materials & Supplies 16,937 - - - 16,937 Total Pumping 883,731 - - - 883,731 Treatment: Salary & Benefits 511,638 - 1,441,357 - 1,952,995 Contract Services 567,629 - 7,359,999 - 7,927,628 Utilities 212,419 - 1,328,879 - 1,541,298 Materials & Supplies 82,088 - 83,931 - 166,019 Legal Services - - - - - Chemicals 218,594 - 180,377 - 398,971 Memberships & Dues - - 3,952 - 3,952 Tools - - 7,973 - 7,973 Printing & Publishing - - - - - Professional Development - - 4,788 - 4,788 Total Treatment 1,592,368 - 10,411,256 - 12,003,624 Transmission & Distribution: Salary & Benefits 2,635,539 - - - 2,635,539 Contract Services 591,111 - - - 591,111 Materials & Supplies 719,956 - - - 719,956 Chemicals 13,900 - - - 13,900 Permits - - - - - Tools 51,770 - - - 51,770 Total Transmission & Distribution 4,012,276$ -$ -$ -$ 4,012,276$ (Continued) East Valley Water District Combining Schedule of Revenues, Expenses, and Changes in Net Position - Continued Year Ended June 30, 2024 86 Water Wastewater Water Reclamation Eliminations Total OPERATING EXPENSES - Continued Wastewater Collection: Salary & Benefits -$ 541,055$ -$ -$ 541,055$ Contract Services - 209,913 - - 209,913 Materials & Supplies - 34,721 - - 34,721 Tools - 6,661 - - 6,661 Total Wastewater Collection - 792,350 - - 792,350 Customer Accounts: Salary & Benefits 920,792 284,533 - - 1,205,325 Contract Services 689,123 293,000 - - 982,123 Utilities 4,854 - - - 4,854 Materials & Supplies 1,589 45 - - 1,634 General Office Supplies 10,391 636 - - 11,027 Printing & Publishing 5,891 2,525 - - 8,416 Postage 123,707 53,017 - - 176,724 Professional Development 1,596 658 - - 2,254 Total Customer Accounts 1,757,943 634,414 - - 2,392,357 General & Administrative: Salary & Benefits 3,392,950 2,073,195 - - 5,466,145 Contract Services 2,385,595 883,292 - - 3,268,887 Conservation Rebates 23,133 - - - 23,133 Utilities 502,315 98,772 - - 601,087 Insurance 947,757 233,482 604,450 - 1,785,689 Materials & Supplies 679,801 159,721 - - 839,522 General Office Supplies 13,245 8,590 - - 21,835 Legal Services 103,620 44,319 - - 147,939 Permits 85,037 21,228 - - 106,265 Memberships & Dues 93,383 34,066 - - 127,449 Tools 23,923 4,347 - - 28,270 Printing & Publishing 87,781 40,615 - - 128,396 Professional Development 159,120 50,695 - - 209,815 Rents & Leases 15,770 6,767 - - 22,537 Total General & Administrative 8,513,430 3,659,089 604,450 - 12,776,969 OPERATING EXPENSES BEFORE DEPRECIATION 20,839,114 5,085,853 11,015,706 - 36,940,673 Depreciation 5,647,729 924,253 1,052,684 - 7,624,666 Total Operating Expenses 26,486,843 6,010,106 12,068,390 - 44,565,339 OPERATING INCOME (LOSS)2,121,712$ 125,379$ (882,215)$ -$ 1,364,876$ (Continued) East Valley Water District Combining Schedule of Revenues, Expenses, and Changes in Net Position - Continued Year Ended June 30, 2024 87 Water Wastewater Water Reclamation Eliminations Total NON-OPERATING REVENUES Investment Income 616,071$ 414,212$ 106,219$ -$ 1,136,502$ Unrealized Investment Gain 103,802 26,734 - 130,536 Other Income 39,064 - - - 39,064 Total Non-Operating Revenues 758,937 440,946 106,219 - 1,306,102 NON-OPERATING EXPENSES Interest Expense 677,936 111,747 - - 789,683 Other Non-Operating Expenses - - - - Total Non-Operating Expenses 677,936 111,747 - - 789,683 INCOME BEFORE CONTRIBUTIONS 2,202,713 454,578 (775,996) - 1,881,295 CONTRIBUTIONS: Capacity Charges 1,322,408 612,343 621,637 - 2,556,388 Total Contributions 1,322,408 612,343 621,637 - 2,556,388 SPECIAL ITEM: Settlement Obligation - Wastewater Treatment Authority Disassociation (4,900,000) (2,100,000) - - (7,000,000) CHANGE IN NET POSITION (1,374,879) (1,033,079) (154,359) - (2,562,317) TOTAL NET POSITION, BEGINNING 106,102,806 31,937,430 9,750,647 - 147,790,883 TOTAL NET POSITION, ENDING 104,727,927$ 30,904,351$ 9,596,288$ -$ 145,228,566$ 88 East Valley Water District Combining Schedule of Cash Flows Year Ended June 30, 2024 89 Water Wastewater Water Reclamation Eliminations Total CASH FLOWS FROM OPERATING ACTIVITIES Cash Received from Customers 28,523,629$ 6,095,940$ 11,067,554$ -$ 45,687,123$ Cash Payments for Employees Services (9,847,820) (2,566,387) (1,398,359) - (13,812,566) Cash Payments to Suppliers (11,304,249) (2,275,819) (9,389,210) - (22,969,278) Misc Income / (Expense) 39,064 - - - 39,064 Net Cash Provided by Operating Activities 7,410,624 1,253,734 279,985 - 8,944,343 CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES Assessments Received 131,891 - - - 131,891 Developer Fees Received 1,322,408 612,343 621,637 - 2,556,388 Reimbursements Received - - 6,579,416 - 6,579,416 Proceeds/Draws from SRF Loan - - 8,813,935 - 8,813,935 Due (From) To Water Fund (5,429,180) (2,655,077) 5,429,180 - (2,655,077) Due (From) To Reclamation Fund 5,661,647 5,655,612 (5,655,612) - 5,661,647 Principal Paid on Capital Debt (3,067,553) (175,000) - - (3,242,553) Interest Paid on Capital Debt (900,069) (98,274) - - (998,343) Due (From) To Other Agencies (413,548) (210,000) (623,548) Acquisition of Capital Assets (1,858,321) (4,008,968) (9,630,053) - (15,497,342) Net Cash Used for Capital and Related Financing Activities (4,552,725) (879,364) 6,158,503 - 726,414 CASH FLOWS FROM INVESTING ACTIVITIES Interest Received from Investments 507,750 152,098 83,865 - 743,713 Acquisition of Investment Securities (9,903,449) (1,495,150) - - (11,398,599) Proceeds from Sales of Investments 115,000 1,450,000 - - 1,565,000 Net Cash Provided (Used) by Investing Activities (9,280,699) 106,948 83,865 - (9,089,886) Net (Decrease) Increase in Cash and Cash Equivalents (6,422,800) 481,318 6,522,353 - 580,871 Cash and Equivalents: Beginning of Year 16,024,219 4,062,785 2,736,801 - 22,823,805 End of Year 9,601,419$ 4,544,103$ 9,259,154$ -$ 23,404,676$ RECONCILIATION TO STATEMENT OF NET POSITION Cash and Cash Equivalents 1,784,281$ 783,879$ 5,628,995$ -$ 8,197,155$ Restricted Cash and Cash Equivalents 7,817,138 3,760,224 3,630,159 - 15,207,521 Total Cash and Cash Equivalents 9,601,419$ 4,544,103$ 9,259,154$ -$ 23,404,676$ (Continued) East Valley Water District Combining Schedule of Cash Flows - Continued Year Ended June 30, 2024 90 Water Wastewater Water Reclamation Eliminations Total Reconciliation of Operating Income (Loss) to Net Cash Provided by Operating Activities Operating Income (Loss) 2,121,712$ 125,379$ (882,215)$ -$ 1,364,876$ Adjustments to Reconcile Operating Income (Loss) to Net Cash Provided by Operating Activities: Depreciation 5,647,729 924,253 1,052,684 - 7,624,666 Miscellaneous Income/(Expense) 39,064 - - - 39,064 CIP Projects Expensed 160,787 7,396 - - 168,183 Change in Assets and Liabilities: Customer Receivables (8,684) (39,545) (118,621) - (166,850) Inventory (87,071) - - - (87,071) Prepaids (508,708) (9,934) - - (518,642) Deferred Outflow of Resources (870,918) (950,171) - - (1,821,089) Accounts Payable - Supplier 1,791,555 (86,211) 185,139 - 1,890,483 Salaries & Benefits Payable 92,821 (4,662) 31,050 - 119,209 Compensated absences 46,040 55,471 11,948 - 113,459 Net Pension Liability (169,571) 1,216,468 - - 1,046,897 Net OPEB Liability 56,573 24,246 - - 80,819 Deferred Inflows of Resources (824,463) (8,956) - - (833,419) Other Receivables (111,296) - - - (111,296) Customer / Developer Deposits 35,054 - - - 35,054 Total Cash Provided by Operating Activities 7,410,624$ 1,253,734$ 279,985$ -$ 8,944,343$ NON-CASH INVESTING, CAPITAL, AND NON-CAPITAL FINANCING ACTIVITIES: Fair Value Adjustments to Investments 65,149$ 65,387$ -$ -$ 130,536$ -$ -$ 8,616,385$ -$ 8,616,385$ Receivable Offset by Debt 91 92 Annual Comprehensive Financial Report Fiscal Year Ended June 30, 2024 Table of Contents 93 Page No. Statistical Information Section Financial Trends ................................................................................................. 95-100 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 .................................... 95-96 Operating Revenue by Source – Last Ten Fiscal Years ...................................................... 97 Water Operating Expenses – Last Ten Fiscal Years ........................................................... 98 Wastewater Operating Expenses – Last Ten Fiscal Years................................................... 99 Water Reclamation Operating Expenses – Last Ten Fiscal Years ...................................... 100 Revenue Capacity ............................................................................................. 101-108 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 ........................................................ 101 Revenue Rates for Water – Last Ten Fiscal Years ..................................................... 103-104 Revenue Rates for Wastewater – Last Ten Fiscal Years ............................................. 105-106 Active Services by Type – Last Ten Fiscal Years .............................................................. 107 Principal Customers – Current Fiscal Year and Nine Years Ago ........................................ 108 Debt Capacity .................................................................................................. 109-110 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 .......................................................... 109 Debt Service Coverage – Last Ten Fiscal Years ............................................................... 110 Annual Comprehensive Financial Report Fiscal Year Ended June 30, 2024 Table of Contents 94 Page No. Statistical Information Section - Continued Demographic Information ....................................................................................... 111 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 ......................... 111 Operating Information .................................................................................... 112-113 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 ........................... 112 Operating and Capacity Indicators for Water and Wastewater – Last Ten Fiscal Years ...... 113 EAST VALLEY WATER DISTRICT Changes in Net Position by Component Last Ten Fiscal Years 95 Year ended June 30, 2015 2016 2017 2018 2019 Change In Net Position Operating Revenue 30,743,445$ 33,024,082$ 37,448,549$ 40,291,125$ 39,309,298$ Operating Expenses 29,146,339 32,655,921 32,299,587 35,980,099 35,898,073 Operating Income (Loss) 1,597,106 368,161 5,148,962 4,311,026 3,411,225 Non-Operating Revenue (Expenses) Investment Income 100,830 146,874 69,237 221,359 571,549 Other Income 800,278 830,806 401,323 258,560 307,247 Interest Expense (1,980,062) (1,843,440) (1,776,684) (1,777,852) (1,684,986) Other Expense - - - - - Gain (Loss) on Disposal of Assets - - - - 705,285 Total Non-Operating Revenue (Expenses) (1,078,954) (865,760) (1,306,124) (1,297,933) (100,905) Special Item Abandoned Projects (2,413,478) - (1,615,241) - - Hazard Mitigation - - - (155,177) - Settlement Obligation - - - - - Capital Contributions 596,940 732,642 2,446,118 523,918 611,673 Change in Net Position (1,298,386) 235,043 4,673,715 3,537,011 3,921,993 Prior Period Adjustment (7,956,231) - - - - Cumulative Effect of Change in Accounting Principles - - - (1,711,803) - Net Position - Beginning 122,069,494 112,814,877 113,049,920 117,723,635 119,393,666 Net Position - Ending 112,814,877$ 113,049,920$ 117,723,635$ 119,548,843$ 123,315,659$ Net Position By Component Net Investment in Capital Assets 98,091,685$ 103,222,160$ 104,659,796$ 103,210,762$ 95,468,735$ Restricted 2,322,238 2,276,695 2,847,924 3,334,940 3,460,835 Unrestricted 12,400,954 7,551,065 10,215,915 12,847,964 24,386,089 112,814,877$ 113,049,920$ 117,723,635$ 119,393,666$ 123,315,659$ (Continued) SOURCE: East Valley Water District - Finance Department EAST VALLEY WATER DISTRICT Changes in Net Position by Component - Continued Last Ten Fiscal Years 96 Year ended June 30, 2020 2021 2022 2023 2024 Change In Net Position Operating Revenue 39,812,912$ 42,236,814$ 43,093,615$ 43,810,012$ 45,930,215$ Operating Expenses 36,249,650 36,496,064 40,578,341 42,515,136 44,565,339 Operating Income (Loss) 3,563,262 5,740,750 2,515,274 1,294,876 1,364,876 Non Operating Revenue (Expenses) Investment Income 524,675 167,499 165,989 352,273 1,136,502 Other Income 121,983 43,744 (269,768) (37,876) 169,600 Interest Expense (1,579,104) (1,387,113) (1,295,223) (869,397) (789,683) Other Expense - - - - - Gain (Loss) on Disposal of Assets - (1,236,600) 1,042,562 30,134 - Total Non-Operating Revenue (Expenses) (932,446) (2,412,470) (356,440) (524,866) 516,419 Special Item Abandoned Projects - - - - - Hazard Mitigation - - - - - Settlement Obligation - - - - (7,000,000) Capital Contributions 9,961,522 877,185 2,826,525 1,922,052 2,556,388 Change in Net Position 12,592,338 4,205,465 4,985,359 2,692,062 (2,562,317) Prior Period Adjustment - - - - - Cumulative Effect of Change in Accounting Principles - - - - - Net Position - Beginning 123,315,659 135,907,997 140,113,462 145,098,821 147,790,883 Net Position - Ending 135,907,997$ 140,113,462$ 145,098,821$ 147,790,883$ 145,228,566$ Net Position By Component Net Investment in Capital Assets 106,708,555$ 114,767,362$ 117,079,071$ 112,909,956$ 112,073,604$ Restricted 6,659,487 6,435,505 9,076,014 10,761,677 13,314,565 Unrestricted 22,539,955 18,910,595 18,943,736 24,119,250 19,840,397 135,907,997$ 140,113,462$ 145,098,821$ 147,790,883$ 145,228,566$ SOURCE: East Valley Water District - Finance Department EAST VALLEY WATER DISTRICT Operating Revenue by Source Last Ten Fiscal Years 97 Wastewater Wastewater Total Year Ended Water Meter System Treatment Other Operating June 30, Sales Charges Charges Charges Charges Revenue 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 2022 18,472,876 9,192,297 4,828,526 9,764,357 835,559 43,093,615 2023 17,004,576 9,831,561 5,651,554 10,108,850 1,213,471 43,810,012 2024 17,900,515 10,149,281 6,073,154 10,746,724 1,060,541 45,930,215 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 $50,000,000 Other Charges Wastewater Treatement Charges Wastewater System Charges Meter Charges Water Sales EAST VALLEY WATER DISTRICT Water Operating Expenses Last Ten Fiscal Years 98 Transmission Customer Accts,Total Year Ended Source of Water & General, & Water Oper June 30, Supply Pumping Treatment Distribution Admin Expenses 2015 3,025,714$ 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 2022 3,515,262 756,843 1,045,730 3,563,328 12,534,090 21,415,253 2023 3,890,634 1,003,038 1,212,646 4,311,606 10,744,909 21,162,833 2024 4,079,366 883,731 1,592,368 4,012,276 10,271,373 20,839,114 SOURCES: East Valley Water District - Customer Service, Finance, and Operations Departments $0 $5,000,000 $10,000,000 $15,000,000 $20,000,000 $25,000,000 Source of Supply Pumping Water Treatment Transmission & Distribution Customer Accts, General, & Admin EAST VALLEY WATER DISTRICT Wastewater Operating Expenses Last Ten Fiscal Years 99 Customer Accts, Total Year Ended Wastewater General, & Wastewater Oper June 30, Collections Admin Expenses 2015 448,399$ 3,356,250$ 3,804,649$ 2016 407,913 2,752,779 3,160,692 2017 425,944 2,510,920 2,936,864 2018 753,000 3,367,091 4,120,091 2019 700,507 3,309,983 4,010,490 2020 767,448 2,922,949 3,690,397 2021 722,680 3,140,650 3,863,330 2022 587,128 3,113,309 3,700,437 2023 752,489 4,048,730 4,801,219 2024 792,350 4,293,503 5,085,853 SOURCES: East Valley Water District - Customer Service and Finance Departments $0 $1,000,000 $2,000,000 $3,000,000 $4,000,000 $5,000,000 $6,000,000 Wastewater Collections Customer Accts, General, & Admin EAST VALLEY WATER DISTRICT Water Reclamation Operating Expenses Last Ten Fiscal Years 100 Customer Accts, Total Year Ended Wastewater General, & Water Recl Oper June 30, Treatment Admin Expenses 2015 6,907,828$ -$ 6,907,828$ 2016 7,302,389 - 7,302,389 2017 8,128,030 - 8,128,030 2018 8,697,671 - 8,697,671 2019 8,592,950 - 8,592,950 2020 8,496,012 - 8,496,012 2021 8,456,508 - 8,456,508 2022 9,084,061 - 9,084,061 2023 9,601,461 685,246 10,286,707 2024 10,411,256 604,450 11,015,706 SOURCES: East Valley Water District - Customer Service and Finance Departments $0 $2,000,000 $4,000,000 $6,000,000 $8,000,000 $10,000,000 $12,000,000 Wastewater Treatment Customer Accts, General, & Admin EAST VALLEY WATER DISTRICT Water Sales and Production Last Ten Fiscal Years 101 Year Ended Water Sales Water Produced June 30, (Acre Feet) (Acre Feet) 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 18,429 18,784 2022 17,998 18,789 2023 15,341 16,408 2024 15,420 16,273 SOURCES: East Valley Water District - Finance and Operations Departments 0 2,000 4,000 6,000 8,000 10,000 12,000 14,000 16,000 18,000 20,000 Water Produced Water Sales 102 EAST VALLEY WATER DISTRICT Revenue Rates for Water Last Ten Fiscal Years 103 Water Consumption Rates Year ended June 30, 2015(1)2016 2017 2018 2019 Tier 1-$1.45 Tier 1-$1.45 Tier 1-$1.63 Tier 1-$1.73 Tier 1-$1.73 Tier 2-$2.07 Tier 2-$2.07 Tier 2-$2.32 Tier 2-$2.46 Tier 2-$2.46 Tier 3-$2.89 Tier 3-$2.89 Tier 3-$3.24 Tier 3-$3.44 Tier 3-$3.44 Water Monthly System Charges Year ended June 30, 2015 2016 2017 2018 2019 20.96$ 20.96$ 23.06$ 23.06$ 23.06$ 26.61 26.61 29.27 29.27 29.27 37.92 37.92 41.71 41.71 41.71 66.19 66.19 72.81 72.81 72.81 100.12 100.12 110.13 110.13 110.13 207.54 207.54 228.30 228.30 228.30 365.85 365.85 402.44 402.44 402.44 744.67 744.67 819.14 819.14 819.14 1,366.62 1,366.62 1,503.28 1,503.28 1,503.28 (Continued) NOTES: HCF = Hundred Cubic Feet = 748 gallons (1)On June 1, 2015 the District adopted Water Budget Based Rates. (2)On January 1, 2020 the District adopted New Water Rates. (3)On January 1, 2022 the District adopted New Water Rates. SOURCE: East Valley Water District - Water and Wastewater Rate Resolutions 2 8 3 4 6 5/8 3/4 1 Meter Size Charge per HCF (inches) 1 1/2 EAST VALLEY WATER DISTRICT Revenue Rates for Water - Continued Last Ten Fiscal Years 104 Water Consumption Rates Year ended June 30, 2020(2)2021 2022(3)2023 2024 Tier 1-$1.83 Tier 1-$1.83 Tier 1-$1.98 Tier 1-$2.04 Tier 1-$2.11 Tier 2-$2.61 Tier 2-$2.61 Tier 2-$2.54 Tier 2-$2.62 Tier 2-$2.70 Tier 3-$3.64 Tier 3-$3.64 Tier 3-$3.93 Tier 3-$4.05 Tier 3-$4.18 Water Monthly System Charges Year ended June 30, 2020 2021 2022(3)2023 2024 23.06$ 23.06$ 24.01$ 24.74$ 25.49$ 29.27 29.27 30.85 31.78 32.74 41.71 41.71 44.52 45.86 47.24 72.81 72.81 78.69 81.06 83.50 110.13 110.13 119.70 123.30 127.00 228.30 228.30 229.05 235.93 243.01 402.44 402.44 352.07 362.64 373.52 819.14 819.14 693.79 714.61 736.05 1,503.28 1,503.28 1,923.98 1,981.70 2,041.16 2,041.16 2,041.16 NOTES: HCF = Hundred Cubic Feet = 748 gallons (1)On June 1, 2015 the District adopted Water Budget Based Rates. (2)On January 1, 2020 the District adopted New Water Rates. (3)On January 1, 2022 the District adopted New Water Rates. SOURCE: East Valley Water District - Water and Wastewater Rate Resolutions 8 3 4 6 2 1 1/2 5/8 3/4 1 10 12 Charge per HCF Meter Size (inches) EAST VALLEY WATER DISTRICT Revenue Rates for Wastewater Last Ten Fiscal Years 105 Wastewater Maintenance Charges Year ended June 30, 2015(1)2016 2017 2018 2019 Single-Family Residential (1 to 3 units) Flat Monthly Charge (per unit) 15.36$ 15.36$ 15.36$ 15.36$ 15.36$ Multi-Family Residential (4 or more units) Flat Monthly Charge (per unit) 15.36$ 15.36$ 15.36 N/A N/A Commercial Non-Residential Flat Monthly Charge3.90 3.90 3.90 3.90 3.90 plus, Charge per HCF 0.55 0.55 0.55 0.55 0.55 Wastewater Treatment Charges Year ended June 30, 2015(1)2016 2017 2018 2019 Residential (Flat Monthly Charge) Flat Monthly Charge Residential (1 unit) 18.50$ 19.18$ 20.85$ 21.55$ 21.55$ Residential (2 units) N/A N/A N/A N/A N/A Residential (3 units) N/A N/A N/A N/A N/A Multi-Family (2 units) 37.00 38.37 41.72 43.10 43.10 Multi-Family (3 units) 55.50 57.55 62.58 64.64 64.64 Multi-Family (4 or more units) N/A N/A N/A N/A N/A Commercial Multi-Family (4+ units) 2.40 1.71 1.90 1.97 1.97 Non-Residential 2.40 3.18 3.42 3.52 3.52 plus, Charge per HCF: Multi-Family (4+ units) 1.25 1.36 1.48 1.53 1.53 Retail 2.10 2.28 2.47 2.55 2.55 Restaurants/Lounges 2.70 2.93 3.18 3.28 3.28 Schools/Churches 1.10 1.19 1.29 1.33 1.33 Governments/Municipal 1.50 1.63 1.77 1.83 1.83 Laundromats 1.50 1.63 1.77 1.83 1.83 Dry Cleaners 2.10 2.28 2.47 2.55 2.55 Convalescent Homes 1.35 1.46 1.58 1.63 1.63 Auto Repair/Svc Stations 1.30 1.41 1.53 1.58 1.58 Car Wash 1.30 1.41 1.53 1.58 1.58 Patton State Hospital N/A N/A N/A N/A N/A Hotels 2.70 2.93 3.18 3.28 3.28 Ofc Bldgs/Motels 1.50 1.63 1.77 1.83 1.83 Supermarkets 2.70 2.93 3.18 3.28 3.28 NOTES:(Continued) HCF = Hundred Cubic Feet = 748 gallons (1)On June 1, 2015 the District adopted Water Budget Based Rates. (2) SOURCE: East Valley Water District - Water and Wastewater Rate Resolutions Starting in May 2022, the District transitioned from rates established by the City of San Bernardino to rates adopted as the result of a wastewater Cost of Service Analysis for the District's Sterling Natural Resource Center Water Reclamation Plant. EAST VALLEY WATER DISTRICT Revenue Rates for Wastewater - Continued Last Ten Fiscal Years 106 Wastewater Maintenance Charges Year ended June 30, 2020 2021 2022(2)2023 2024 Single-Family Residential (1 to 3 units) Flat Monthly Charge (per unit) 15.36$ 15.36$ 14.25$ 15.25$ 16.32$ Multi-Family Residential (4 or more units) Flat Monthly Charge (per unit) N/A N/A 13.46 14.41 15.42 Commercial Non-Residential Flat Monthly Charge3.90 3.90 10.33 11.06 11.84 plus, Charge per HCF 0.55 0.55 - - - Wastewater Treatment Charges Year ended June 30, 2020 2021 2022(2)2023 2024 Residential (Flat Monthly Charge) Flat Monthly Charge Residential (1 unit) 21.55$ 21.55$ 23.37$ 25.01$ 26.77$ Residential (2 units) N/A N/A 23.37 25.01 26.77 Residential (3 units) N/A N/A 23.37 25.01 26.77 Multi-Family (2 units) 43.10 43.10 20.86 22.33 23.90 Multi-Family (3 units) 64.64 64.64 20.86 22.33 23.90 Multi-Family (4 or more units) N/A N/A 20.86 22.33 23.90 Commercial Multi-Family (4+ units) 1.97 1.97 N/A N/A N/A Non-Residential 3.52 3.52 10.83 11.59 12.41 plus, Charge per HCF: Multi-Family (4+ units) 1.53 1.53 N/A N/A N/A Retail 2.55 2.55 1.31 1.41 1.52 Restaurants/Lounges 3.28 3.28 1.31 4.16 4.46 Schools/Churches 1.33 1.33 1.31 1.41 1.52 Governments/Municipal 1.83 1.83 1.31 1.41 1.52 Laundromats 1.83 1.83 1.99 2.14 2.30 Dry Cleaners 2.55 2.55 1.99 2.14 2.30 Convalescent Homes 1.63 1.63 1.99 2.14 2.30 Auto Repair/Svc Stations 1.58 1.58 1.99 2.14 2.30 Car Wash 1.58 1.58 1.99 1.41 1.52 Patton State Hospital N/A N/A 2.36 2.53 2.72 Hotels 3.28 3.28 3.88 4.16 4.46 Ofc Bldgs/Motels 1.83 1.83 3.88 1.41 1.52 Supermarkets 3.28 3.28 1.31 4.16 4.46 NOTES: HCF = Hundred Cubic Feet = 748 gallons (1)On June 1, 2015 the District adopted Water Budget Based Rates. (2) SOURCE: East Valley Water District - Water and Wastewater Rate Resolutions Starting in May 2022, the District transitioned from rates established by the City of San Bernardino to rates adopted as the result of a wastewater Cost of Service Analysis for the District's Sterling Natural Resource Center Water Reclamation Plant. EAST VALLEY WATER DISTRICT Active Services by Type Last Ten Fiscal Years 107 Year Ended Residential Multi-Family Total June 30, (1 to 3 units) (4+ units) Commercial Irrigation Fire Svcs Service 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 2022 19,853 463 988 275 255 21,834 2023 19,876 474 715 354 260 21,679 2024 19,966 479 710 360 265 21,780 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 108 Water Percentage Water Percentage Consumed of Total Consumed of Total Customer (AF) Rank (%) (AF) Rank (%) San Bernardino City Unified School District 603 1 3.71% 556 1 2.69% Patton State Hospital 354 2 2.18% 414 2 2.00% San Manuel Indian Bingo & Casino 324 3 1.99% 201 6 0.97% City of Highland 271 4 1.67% 295 4 1.43% San Manuel Band of Mission Indians 217 5 1.33% 268 5 1.30% East Highlands Ranch 155 6 0.95% 299 3 1.45% Amusement Industry 144 7 0.88% - - 0.00% Valencia Lea Mobile Home Park 107 8 0.66% 127 8 0.61% Village Lakes Homeowners Association 105 9 0.65% - - 0.00% Victoria Village Apartments 97 10 0.60% 108 9 0.52% Stubblefield Mobile Home Parks & Offices - 140 7 0.68% Woodman Realty Inc. 106 10 0.51% Total - Top 10 2,377 14.62% 2,514 12.16% Total - Water Produced 16,273 100.00% 20,665 100.00% SOURCES: East Valley Water District - Customer Service and IT Departments 20152024 EAST VALLEY WATER DISTRICT Ratio of Outstanding Debt Last Ten Fiscal Years 109 Fiscal Year Revenue Bonds DWR Loans Capital Lease and Loan Certificates of Participation Installment Note Outstanding Debt $ Per Capita As a Share of Personal Income 2015 40,930,000$ 7,071,964$ 3,671,849$ -$ -$ $ 51,673,813 $ 508 1.44% 2016 39,615,000 6,818,565 3,299,108 - - 49,732,673 476 1.31% 2017 38,235,000 6,565,166 7,278,478 - - 52,078,644 510 1.37% 2018 36,800,000 6,721,695 6,392,308 - - 49,914,003 489 1.27% 2019 35,300,000 31,947,551 5,131,238 - - 72,378,789 710 1.73% 2020 33,720,000 69,565,404 4,295,104 - - 107,580,508 1,044 2.27% 2021 33,261,998 132,399,838 3,449,724 - - 169,111,561 1,642 3.31% 2022 32,288,904 145,368,048 2,582,889 - - 180,239,841 1,750 3.55% 2023 30,923,365 161,169,730 1,719,375 - - 193,812,470 1,864 * 2024 29,490,264 180,670,939 - - - 210,161,203 1,946 * NOTE: * This data was not developed in the format required for this fiscal year. SOURCE: East Valley Water District - Finance Department $0 $25,000,000 $50,000,000 $75,000,000 $100,000,000 $125,000,000 $150,000,000 $175,000,000 $200,000,000 Revenue Bonds DWR Loans Capital Lease and Loan Certificates of Participation Installment Note EAST VALLEY WATER DISTRICT Debt Service Coverage Last Ten Fiscal Years 110 Water Department Gross Operating Net Available Revenue(1)Expenses(2)Revenue Principal(3)Interest Total 20,662,750$ 12,915,690$ 7,747,060$ 1,546,490$ 1,813,348$ 3,359,838$ 2.31 22,543,107 15,048,582 7,494,525 1,851,139 1,718,658 3,569,797 2.10 25,257,709 14,717,219 10,540,490 1,926,956 1,653,322 3,580,278 2.94 27,537,072 16,134,461 11,402,611 2,479,570 1,584,820 4,064,390 2.81 27,071,082 16,614,399 10,456,683 2,904,466 1,593,181 4,497,647 2.32 27,466,707 17,487,780 9,978,927 2,564,310 1,456,842 4,021,152 2.48 29,738,333 17,638,854 12,099,479 4,703,778 1,104,438 5,808,216 2.08 30,465,196 21,415,253 9,049,943 2,100,233 957,953 3,058,186 2.96 29,330,516 21,162,833 8,167,683 2,141,913 917,000 3,058,913 2.67 30,689,900 20,839,114 9,850,786 2,197,774 885,675 3,083,449 3.19 Wastewater Department Gross Operating Net Available Revenue(1)Expenses(2)Revenue Principal Interest Total 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 2022 16,697,201 12,784,498 3,912,703 170,000 100,145 270,145 14.48 2023 6,274,931 4,801,219 1,473,712 175,000 99,316 274,316 5.37 2024 7,188,774 5,085,853 2,102,921 175,000 98,274 273,274 7.70 NOTES: (1) (2)Operating expenses, less depreciation, for the utility fund. (3)Excludes Debt Service for Assessment Districts' Arroyo Verde and Eastwood Farms. SOURCE: East Valley Water District - Finance Department 2024 Coverage 2015 2016 2017 2018 2019 2020 2023 Year Ended June 30, Debt Service 2021 2022 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, EAST VALLEY WATER DISTRICT Demographics and Economic Statistics Last Ten Calendar / Fiscal Years 111 County of San Bernardino Personal Personal Income Income District Unemployment Population (thousands Per Capita Population(3)(4)Rate(1)(3)(2)+of dollars)(2)+(dollars)(2)+ 2015 101,733 7.2%2,110,852 74,258,677$ 35,179$ 2016 104,457 6.0%2,126,539 77,453,102 36,422 2017 102,208 5.5%2,144,961 80,031,472 37,311 2018 102,000 4.5%2,160,049 83,514,331 38,663 2019 102,000 4.0%2,170,992 89,182,422 41,079 2020 103,000 6.5%2,183,239 100,359,889 45,968 2021 103,000 9.3%2,192,882 108,700,135 49,570 2022 104,000 5.4%2,193,656 108,081,645 49,270 2023 104,000 4.2%*** 2024 108,000 5.0%*** NOTES: + This data was revised in 2023(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. (4)East Valley Water District - Finance Department June 30, Year Ended EAST VALLEY WATER DISTRICT Full-Time Equivalent Employees by Department Last Ten Fiscal Years 112 District Engineering &Water Administration Maintenance Operations Reclamation(1)Total 27.5 28.5 11 0 67* 27 28 13 0 68* 27 29 12 0 68* 26.5 29 13 0 68.5* 27.5 32 11 0 70.5* 26 30 11 0 67 25 30 11 0 66 26 30 11 9 76 26 30 11 9 76 26 28 11 8 73 NOTES: * Includes Part-Time Employees (PTEs) (1)Water Reclamation program started in FY 2021-22 SOURCES: East Valley Water District - Finance and Human Resources Departments Year Ended June 30, 2020 2021 2024 2018 2015 2016 2017 2019 2022 2023 0 10 20 30 40 50 60 70 80 District Administration Engineering & Maintenance Operations Water Reclamation EAST VALLEY WATER DISTRICT Operating and Capacity Indicators for Water and Wastewater Last Ten Fiscal Years 113 Annual Average Miles of Number of Production Production Water Main Fire Hydrants (MG) (MGD) 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 2022 300 3,043 6,122 17 2023 300 3,048 5,347 15 2024 300 3,078 5,303 15 Annual Daily Miles of Service Sewerage Sewerage Wastewater Connections (MG) (MGD) 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 19,686 2,220.61 6.08 2022 220 19,766 2,448.97 6.71 2023 220 19,831 2,138.63 5.86 2024 230 19,859 2,121.03 5.81 SOURCE: East Valley Water District - Engineering and Finance Departments Water System Wastewater System Year Ended June 30, Year Ended June 30, 114 EAST VALLEY WATER DISTRICT Capacity Charge Funds Year Ended June 30, 2024 115 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 annually 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 facilities and to help ensure the wastewater collection system can contain additional wastewater flows from new customers. Water Reclamation Capacity Fee Fund. This fund collects fees for the expansion of the Sterling Natural Resource Center to treat the flows generated by new development. EAST VALLEY WATER DISTRICT Capacity Charge Funds Year Ended June 30, 2024 116 A summary of changes in Water Fund Capacity Fees collected for the year ended June 30, 2024 is as follows: Beginning of End of Categories Year Contributions UsageYear Storage 359,751$ $ 138,325 $ - $ 498,076 Treatment 874,057 42,372 - 916,429 Supply 525,663 62,873 - 588,536 Trans & Distribution 1,777,825 570,680 - 2,348,505 General 214,894 37,510 - 252,404 East Treatment Plant 775,389 470,648 - 1,246,037 4,527,579$ 1,322,408$ -$ 5,849,987$ A summary of Projects Funded by Capacity Fees for the year ended June 30, 2024: Categories CIP Project* FY 2023-24 Expended % Funded by Capacity Total Capacity Fees Usage Storage -$ 0% -$ Treatment Supply Trans & Distribution General New Treatment Plant -$ -$ Note: * The District did not have any CIP projects utilizing Capacity Fee funds for the year ended June 30, 2024. EAST VALLEY WATER DISTRICT Capacity Charge Funds Year Ended June 30, 2024 117 A summary of changes in Wastewater Fund Capacity Fees collected for the year ended June 30, 2024 is as follows: Beginning of End of Categories Year Contributions UsageYear Collection $ 1,978,498 $ 217,240 $ - $ 2,195,738 General 304,138 31,621 - 335,759 Greenspot Main 575,557 242,755 - 818,312 5th Street Main 228,737 96,484 - 325,221 Lynwood Main 57,451 24,243 - 81,694 3,144,381$ 612,343$ -$ 3,756,724$ A summary Project Funded by Capacity Fees for the year ended June 30, 2024: Categories CIP Project FY 2023-24 Expended % Funded by Capacity Total Capacity Fees Usage Collection -$ 0% -$ Transmission - Recharge - Operations - -$ -$ EAST VALLEY WATER DISTRICT Capacity Charge Funds Year Ended June 30, 2024 118 A summary of changes in Water Reclamation Fund Capacity Fees collected for the year ended June 30, 2024 is as follows: Beginning of End of Categories Year Contributions UsageYear Treatment 3,008,522$ $ 621,637 $ - 3,630,159$ 3,008,522$ 621,637$ -$ 3,630,159$ A summary Project Funded by Capacity Fees for the year ended June 30, 2024: Categories CIP Project FY 2023-24 Expended % Funded by Capacity Total Capacity Fees Usage Treatment -$ 0% -$ -$ -$ -1- REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS Independent Auditor’s Report To the Honorable Board of Directors East Valley Water District We have audited, in accordance with the auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards issued by the Comptroller General of the United States (Government Auditing Standards), the financial statements of the East Valley Water District (the entity) as of and for the year ended June 30, 2024, and the related notes to the financial statements, which collectively comprise the entity’s basic financial statements, and have issued our report thereon dated October 28, 2024. Report on Internal Control over Financial Reporting In planning and performing our audit of the financial statements, we considered the entity’s internal control over financial reporting (internal control) as a basis for designing procedures that are appropriate in the circumstances for the purpose of expressing our opinions on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Accordingly, we do not express an opinion on the effectiveness of the entity’s internal control. A deficiency in internal control exists when the design or operation of a control does not allow management or employees in the normal course of performing their assigned functions, to prevent, or detect and correct, misstatements on a timely basis. A material weakness is a deficiency, or a combination of deficiencies, in internal control, such that there is a reasonable possibility that a material misstatement of the entity’s financial statements will not be prevented, or detected and corrected, on a timely basis. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance. -2- Our consideration of internal control was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control that might be material weaknesses or significant deficiencies. Given these limitations, during our audit we did not identify any deficiencies in internal control that we consider to be material weaknesses. However, material weaknesses or significant deficiencies may exist that were not identified. Report on Compliance and Other Matters As part of obtaining reasonable assurance about whether the entity’s financial statements are free from material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements, noncompliance with which could have a direct and material effect on the financial statements. However, providing an opinion on compliance with those provisions was not an objective of our audit and, accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards. Purpose of this Report The purpose of this report is solely to describe the scope of our testing of internal control and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the entity’s internal control or on compliance. This report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the entity’s internal control and compliance. Accordingly, this communication is not suitable for any other purpose. San Bernardino, California October 28, 2024 Independent Auditor’s Report Board of Directors East Valley Water District Report on the Audit of the Financial Statements Opinion We have audited the financial statements of East Valley Water District (the District), as of and for the year ended June 30, 2024, and the related notes to the financial statements, which collectively comprise the District’s basic financial statements as listed in the table of contents. In our opinion, the accompanying financial statements referred to above present fairly, in all material respects, the financial position of the District, as of June 30, 2024, and the changes in financial position, and cash flows thereof for the year then ended in accordance with accounting principles generally accepted in the United States of America. Basis for Opinion We conducted our audit in accordance with auditing standards generally accepted in the United States of America (GAAS) and the standards applicable to financial audits contained in Government Auditing Standards issued by the Comptroller General of the United States (Government Auditing Standards). Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Statements section of our report. We are required to be independent of District and to meet our other ethical responsibilities, in accordance with the relevant ethical requirements relating to our audit. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Other Matter Report on Summarized Comparative Information We have previously audited the District’s 2023 financial statements, and we expressed an unmodified opinion on the respective financial statements in our report dated October 11, 2023. In our opinion, the summarized comparative information presented herein as of and for the year ended June 30, 2023, is consistent, in all material respects, with the audited financial statements from which it has been derived. Responsibilities of Management for the Financial Statements Management is responsible for the preparation and fair presentation of the financial statements in accordance with accounting principles generally accepted in the United States of America, and for the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the financial statements, management is required to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the District’s ability to continue as a going concern for twelve months beyond the financial statement date, including any currently known information that may raise substantial doubt shortly thereafter. Auditor’s Responsibilities for the Audit of the Financial Statements Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance but is not absolute assurance and therefore is not a guarantee that an audit conducted in accordance with GAAS and Government Auditing Standards will always detect a material misstatement when it exists. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Misstatements are considered material if there is a substantial likelihood that, individually or in the aggregate, they would influence the judgment made by a reasonable user based on the financial statements. In performing an audit in accordance with GAAS and Government Auditing Standards, we:  Exercise professional judgment and maintain professional skepticism throughout the audit.  Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, and design and perform audit procedures responsive to those risks. Such procedures include examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.  Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the District’s internal control. Accordingly, no such opinion is expressed.  Evaluate the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluate the overall presentation of the financial statements.  Conclude whether, in our judgment, there are conditions or events, considered in the aggregate, that raise substantial doubt about the District’s ability to continue as a going concern for a reasonable period of time. We are required to communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit, significant audit findings, and certain internal control–related matters that we identified during the audit. Required Supplementary Information Accounting principles generally accepted in the United States of America require that the management’s discussion and analysis and required supplementary information, as listed in the table of contents, be presented to supplement the basic financial statements. Such information is the responsibility of management and, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with GAAS, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management’s responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. Supplementary Information Our audit was conducted for the purpose of forming an opinion on the financial statements that collectively comprise the District’s basic financial statements. The supplementary information is presented for purposes of additional analysis and are not a required part of the basic financial statements. Such information is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the basic financial statements. The information has been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with GAAS. In our opinion, the accompanying supplementary information is fairly stated, in all material respects, in relation to the basic financial statements as a whole. Other Information Management is responsible for the other information included in the annual comprehensive financial report (ACFR). The other information comprises the introductory and statistical sections but does not include the basic financial statements and our auditor's report thereon. Our opinion on the basic financial statements do not cover the other information, and we do not express an opinion or any form of assurance thereon. In connection with our audit of the basic financial statements, our responsibility is to read the other information and consider whether a material inconsistency exists between the other information and the basic financial statements, or the other information otherwise appears to be materially misstated. If, based on the work performed, we conclude that an uncorrected material misstatement of the other information exists, we are required to describe it in our report. Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated October 28, 2024 on our consideration of the District’s internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is solely to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the District’s internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering District’s internal control over financial reporting and compliance. San Bernardino, CA October 28, 2024 -1- October 28, 2024 Board of Directors East Valley Water District Highland, California We have audited the financial statements of the East Valley Water District (the entity) as of and for the year ended June 30, 2024, and have issued our report thereon dated October 28, 2024. Professional standards require that we advise you of the following matters relating to our audit. Our Responsibility in Relation to the Financial Statement Audit As communicated in our engagement letter dated April 9, 2024, our responsibility, as described by professional standards, is to form and express opinions about whether the financial statements that have been prepared by management with your oversight are presented fairly, in all material respects, in accordance with accounting principles generally accepted in the United States of America. Our audit of the financial statements does not relieve you or management of your respective responsibilities. Our responsibility, as prescribed by professional standards, is to plan and perform our audit to obtain reasonable, rather than absolute, assurance about whether the financial statements are free of material misstatement. An audit of financial statements includes consideration of the system of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control over financial reporting. Accordingly, as part of our audit, we considered the system of internal control of the entity solely for the purpose of determining our audit procedures and not to provide any assurance concerning such internal control. We are also responsible for communicating significant matters related to the audit that are, in our professional judgment, relevant to your responsibilities in overseeing the financial reporting process. However, we are not required to design procedures for the purpose of identifying other matters to communicate to you. Planned Scope and Timing of the Audit We conducted our audit consistent with the planned scope and timing we previously communicated to you. -2- Compliance with All Ethics Requirements Regarding Independence The engagement team, others in our firm, as appropriate, and our firm have complied with all relevant ethical requirements regarding independence. Significant Risks Identified We have identified the possibility of the following significant risks: Management's override of internal controls over financial reporting – Management override of internal controls is the intervention by management in handling financial information and making decisions contrary to internal control policy. Revenue recognition – Revenue recognition is a generally accepted accounting principle that refers to the conditions under which an entity can recognize a transaction as revenue. Auditing standards indicate that recognizing revenue is a presumed fraud risk and usually classified as a significant risk in most audits. These significant risks are presumptive in most audits and merit attention by the auditors due to the direct impact over financial reporting and internal control processes. Although identified as significant risks, we noted no matters of management override of controls or deviations from generally accepted accounting principles which caused us to modify our audit procedures or any related matters which are required to be communicated to those charged with governance due to these identified risks. Qualitative Aspects of the Entity’s Significant Accounting Practices Significant Accounting Policies Management has the responsibility to select and use appropriate accounting policies. A summary of the significant accounting policies adopted by the entity is included in Note 1 to the financial statements. There have been no initial selection of accounting policies or their application during 2024. No matters have come to our attention that would require us, under professional standards, to inform you about (1) the methods used to account for significant unusual transactions and (2) the effect of significant accounting policies in controversial or emerging areas for which there is a lack of authoritative guidance or consensus. Significant Accounting Estimates and Related Disclosures Accounting estimates and related disclosures are an integral part of the financial statements prepared by management and are based on management’s current judgments. Those judgments are normally based on 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 markedly from management’s current judgments. The most sensitive accounting estimates affecting the entity’s financial statements are: Management’s estimate of the net pension liability and related deferred inflows and outflows of resources are based on actuarial reports by independent actuaries. We evaluated the key factors and assumptions used to develop the estimate in determining that it is reasonable in relation to the basic financial statements taken as a whole and in relation to the applicable opinion units. -3- Management’s estimate of the liability for other post-employment benefits (OPEB) and related deferred inflows and outflows of resources are based on actuarial reports provided by independent actuaries. We evaluated the key factors and assumptions used to develop the estimate in determining that it is reasonable in relation to the basic financial statements taken as a whole and in relation to the applicable opinion units. Management’s estimate of the fair value of investments is based on information provided by financial institutions. We evaluated the key factors and assumptions used to develop the fair value of investments and determined that it is reasonable in relation to the basic financial statements taken as a whole. Management’s estimate of depreciation expense is based on the useful lives of acquired assets. We evaluated the key factors and assumptions used to develop depreciation expense in determining that it is reasonable in relation to the financial statements taken as a whole. Financial Statement Disclosures Certain financial statement disclosures involve significant judgment and are particularly sensitive because of their significance to financial statement users. The most sensitive disclosures affecting the entity’s financial statements relate to: The disclosure of fair value of investments in the basic financial statements represents amounts susceptible to market fluctuations. The disclosure of capital assets (and related accumulated depreciation) in the basic financial statements is based on historical information which could differ from actual useful lives of each capitalized item. The disclosure of net pension liability and related deferred inflows and outflows of resources in the basic financial statements is based on actuarial assumptions. Actual future liabilities and actuarial deferred inflows and outflows may vary from disclosed estimates. The disclosures of the other post-employment benefits (OPEB) liability and related deferred inflows and outflows of resources in the basic financial statements is based on actuarial assumptions. Actual future liabilities and actuarial deferred inflows and outflows may vary from disclosed estimates. The disclosure of leases and subscription liabilities, right-to-use assets, and asset amortization in the basic financial statements is based on certain terms and assumptions in the agreements which could differ from actual amounts. Significant Difficulties Encountered during the Audit We encountered no significant difficulties in dealing with management relating to the performance of the audit. Uncorrected and Corrected Misstatements For purposes of this communication, professional standards require us to accumulate all known and likely misstatements identified during the audit, other than those that we believe are trivial, and communicate them to the appropriate level of management. Further, professional standards require us to also communicate the effect of uncorrected misstatements related to prior periods on the relevant classes of transactions, account balances or disclosures, and the financial statements as a whole and each applicable opinion unit. There were no uncorrected misstatements noted. -4- In addition, professional standards require us to communicate to you all material, corrected misstatements that were brought to the attention of management as a result of our audit procedures. There were no such misstatements. Disagreements with Management For purposes of this letter, professional standards define a disagreement with management as a matter, whether or not resolved to our satisfaction, concerning a financial accounting, reporting, or auditing matter, which could be significant to the entity’s financial statements or the auditor’s report. No such disagreements arose during the course of the audit. Representations Requested from Management We have requested certain written representations from management, which are included in the attached letter dated October 28, 2024. Management’s Consultations with Other Accountants In some cases, management may decide to consult with other accountants about auditing and accounting matters. Management informed us that, and to our knowledge, there were no consultations with other accountants regarding auditing and accounting matters. Other Significant Matters, Findings, or Issues In the normal course of our professional association with the entity, we generally discuss a variety of matters, including the application of accounting principles and auditing standards, significant events or transactions that occurred during the year, operating and regulatory conditions affecting the entity, and operational plans and strategies that may affect the risks of material misstatement. None of the matters discussed resulted in a condition to our retention as the entity’s auditors. Other Information Included in Annual Reports Pursuant to professional standards, our responsibility as auditors for other information, whether financial or nonfinancial, included in the entity’s annual reports, does not extend beyond the information identified in the audit report, and we are not required to perform any procedures to corroborate such other information. However, in accordance with such standards, we have: Applied certain limited procedures to the Management’s Discussion and Analysis, the Budgetary Comparison Schedules, the Schedule of the Plan’s Proportionate Share of the Plan’s Net Pension Liability and Related Ratios, the Schedule of Plan’s Contributions, the Schedule of Changes in the Net OPEB Liability and Related Ratios, and the Schedule of OPEB Plan Contributions which are required supplementary information (RSI) that supplements the basic financial statements. Our procedures consisted of inquiries of management regarding the methods of preparing the information and comparing the information for consistency with management’s responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We did not audit the RSI and do not express an opinion or provide any assurance on the RSI. We were not engaged to report on introductory and statistical sections, which accompany the financial statements but are not RSI. We did not audit or perform other procedures on this other information and we do not express an opinion or provide any assurance on it. -5- Our responsibility also includes communicating to you any information which we believe is a material misstatement of fact. Nothing came to our attention that caused us to believe that such information, or its manner of presentation, is materially inconsistent with the information, or manner of its presentation, appearing in the financial statements. This report is intended solely for the information and use of the Board of Directors and management of the entity and is not intended to be and should not be used by anyone other than these specified parties. Very truly yours, Agenda Item #4 November 4, 20241 Meeting Date: November 4, 2024 Agenda Item #4 Informational Item 1 8 7 7 Regular Meeting TO: Committee Members FROM: Chief Financial Officer SUBJECT: Review Capacity Fee Study RECOMMENDATION This agenda item is for informational purposes only, no action is required. BACKGROUND / ANALYSIS The District is regulated to only collect rates and fees to cover the actual cost of water and wastewater service. The rates and fees are regularly evaluated to ensure they are accurate and fairly collect the required revenue to provide water and wastewater service. Fees are one-time costs incurred by various customer classes for specific purposes. One of the fees the District collects is the water and wastewater capacity fee. A water utility capacity fee, sometimes referred to as an impact fee or connection fee, is a one-time charge assessed by the District when a new connection is made to the water and wastewater system. This fee covers the cost of infrastructure needed to supply water to the new user without impacting existing customers. The purpose of the fee is to fund expansions or upgrades to the water supply, treatment facilities, storage, and distribution systems to meet the increased demand from additional connections. The capacity fees shift the cost burden of expanding capacity to new developments rather than existing customers. It is a one-time fee paid to the District prior to obtaining water and wastewater service. The capacity fees are changed annually to adjust for inflationary cost effects on construction cost. The District annually adjusts the fees based on the Construction Cost Index (CCI). However, the CCI has not adequately reflected the rising construction cost in the water/wastewater industry over the past several years. Recent engineering cost estimates for reservoir and well projects have shown that the District’s current water capacity fees fall short in collecting from development their share of the cost of new facilities. The District has completed an evaluation of the capacity fees to determine if they are collecting the fair share of cost from new customers. The District retained IB Consulting (IBC) to perform a Capacity Fee Study in accordance with industry standards and State regulations. The Capacity Fee Study utilizes two industry standard methodologies for developing Agenda Item #4 November 4, 20242 Meeting Date: November 4, 2024 Agenda Item #4 Informational Item 1 8 7 7 Capacity Fees, which are the Incremental/Marginal Cost and the Buy-In methods. The Buy-In method recognizes that the District has already made investments in infrastructure that have the capacity to facilitate growth and asks new development to repay the District for those investments. The Incremental Cost method asks new development to pay for certain capacity projects included in Master Plans and the District’s Capital Improvement Program. The results of the study presented in the report show a significant change in assumptions since the last comprehensive study in 2019, causing proposed water fees to increase, and wastewater fees to decrease. The main reasons for these changes are explained below: •The rising cost of water facilities continues to outpace the annual adjustments to District fees based on the Construction Cost Index. In the current study, the cost of water storage and new water supply wells are more than twice the cost of assumptions made in the 2019 study. •Wastewater fees are lower for a couple of reasons, 1) the need to upsize certain sewer mains in the 2019 report is not identified as an immediate need in the current report because of the impact of conservation on sewer flows, and 2) the District has financed a larger portion of the Sterling Natural Resource Center creating a lower buy-in component for new customers/development. The Capacity Fee Study recommends an increase of $3,502 per equivalent dwelling unit for water and a decrease of $2,528 per equivalent dwelling unit (EDU) for wastewater. An equivalent dwelling unit is based on a typical single-family house. Developments that require larger meters pay a proportional higher cost based upon the flow rate of larger meters. Although the proposed change in total capacity fees is relatively small ($974/EDU), it allows the appropriate fees to be collected more accurately for the specific water and wastewater funds accordingly. The Public Hearing is scheduled for November 13, 2024 and public notices about the capacity fee updates under consideration were posted in locally circulated newspapers both 14 and 7 days in advance of the scheduled hearing. In addition, the Capacity Fee Study has been made available for public inspection at least 10 days prior to the hearing. Agenda Item #4 November 4, 20243 Meeting Date: November 4, 2024 Agenda Item #4 Informational Item 1 8 7 7 AGENCY GOALS AND OBJECTIVES IV - Promote Planning, Maintenance and Preservation of District Resources B. Enhance Planning Efforts that Respond to Future Demands C. Dedicate Efforts Toward System Maintenance and Modernization FISCAL IMPACT There is no fiscal impact associated with this agenda item. Respectfully submitted: ________________ Brian Tompkins Chief Financial Officer ATTACHMENTS 1. Presentation-IB Consulting 2. 2024 Capacity Fee Study East Valley Water District Capacity Fees October 2024 Agenda Board Meeting Project Objectives1 2 3 4 5 Capacity Fee Background Water Utility Wastewater Utility Proposed Capacity Fee Summary 2 Project Objectives Study Goals Update Capacity Fees To Reflect Today’s Costs Capture Existing Facilities and New Growth-Related Projects Ensure Fair Share Allocation Of Facility Costs To Growth Maintain Compliance With Prop. 26 Prepare a Comprehensive Report Main Objectives 4 Capacity Fees Background Capacity Fees Purpose of fees 6  One-time capital charges against new development to fund facilities needed to accommodate growth “Growth pays for growth”  Existing customers should not be burdened with facility requirements for future customers  Generates equity through a fair share allocation of system facility costs between existing customers and growth Capacity Fee Methodology Buy-in Component 7 •Water = Cost per gallon of capacity is applied to demand in gallons for one Meter Equivalent (ME) •Wastewater = Cost per gallon of capacity is applied to demand of flow in gallons for one Equivalent Dwelling Unit (EDU) Value of Existing System Current Asset Value (RCLD) Capital Reserves Outstanding Debt Total Demand Buy-In ($) New Connection DemandX Capacity Fee Methodology Incremental Component 8 •Water = Cost per gallon of capacity is applied to demand in gallons for one Meter Equivalent (ME) •Wastewater = Cost per gallon of capacity is applied to demand of flow in gallons for one Equivalent Dwelling Unit (EDU) Value of Expansion Percentage of Cost Related to Growth Total Additional Capacity Buy-In ($) List of Project costs New Connection DemandX Capacity Fee Methodology Hybrid 9  Includes Buy-In Component + Incremental Component Buy-In + Incremental Buy-In Total Cost Incremental Total Cost Total Capacity (Existing + New) Total Capacity Fee ($) New Connection DemandX Buy-In Component System Valuation Options Book Value Original cost of construction / acquisition of facilities Replacement Cost Book value brought forward to todays dollars through indexing Market Value Based on Engineer estimate or valuation analysis Replacement Cost Less Depreciation System Valuation 12  Replacement costs of system recognizes current cost in today’s dollars  Accounting for depreciation recognizes years in service of various assets New development is not buying into a new system  Result: Replacement Cost Less Depreciation (RCLD) 2024 $50 Yrs. $ 50 - 100 Yrs. $ 30 Yrs. $ Asset Value Adjustments Work -in-Progress, Capital Reserves, and Debt 13 Other Considerations impacting total asset value:  Capital Related Reserves: Reserves that provide funding for future capital repair and replacement  These capital related reserves are added to the asset value  Debt Obligations: Remaining principal is a liability of each utility  Outstanding principal is subtracted from the asset value  Debt or portion of debt secured by capacity fees is not subtracted For Wastewater, Net Present Value of future interest payments are included Water Capacity Fees Water Utility System RCLD 2024 Asset Listing 15 Buy-In Asset Unit Rates Replacement Cost Less Depreciation 16 Water Capital-Related Reserves 17 Capital-Related Reserves FY 2025 Beginning Reserve Balances Water Debt Obligations FY 2025 Outstanding Principal 18 Debt Obligations FY 2025 Total Outstanding Principal Water Outstanding Principal Description Value ($)Include ? Included Water Outstanding Principal 2020A Bonds $14,060,000 Yes ($14,060,000) 2020B Bonds $8,575,000 Yes ($8,575,000) Eastwood Farms $247,305 No $0 Arroyo Verde $50,716 No $0 SRF Plant 134 $5,134,777 Yes ($5,134,777) Total Water Outstanding Principal $28,067,798 ($27,769,777) Water Reserves and DebtAdjustments to Asset Value 19 Valuation Adjustments Adjustments Value ($)Allocation Basis Existing MEs $ per ME [A][B] (+) Water Capital-Related Reserves $4,520,580 Meter Equivalent (ME)29,474 $153.37 (-) Water Outstanding Principal ($27,769,777)Meter Equivalent (ME)29,474 ($942.17) Water System Buy -In Summary Infrastructure plus Adjustments 20 System Buy-In Components Description $ / ME Water Infrastructure $6,852 (+) Water Capital-Related Reserves $153 (-) Water Outstanding Principal ($942) System Buy-in per ME $6,063 New Water Projects – Growth-Related Project Cost and Capacity 21 Incremental-Cost Components Capital Projects Include?Projected Cost Allocation Basis Existing MEs $ per ME [A][B][ C][F]=DxE Canal 3 Reservoir Yes $17,717,280 Reservoir Capacity 3,000,000 $3,597 New Wells Yes $10,000,000 New Well Capacity 2,880,000 $2,115 Total $5,712 Proposed Water Capacity Fee per ME 22 2024 Capacity Fees Proposed Water Capacity Fee ($/ME) Capacity Fee Components Total ($ per ME) System Buy-In Component Water Infrastructure $6,852 (+) Water Capital-Related Reserves $153 (-) Water Outstanding Principal ($942) System Buy-in per ME $6,063 Incremental Component Canal 3 Reservoir $3,597 New Wells $2,115 Total $5,712 Total Proposed Water Capacity Fee $11,775 Proposed Water Capacity Fee Schedule 23 By Meter Size Proposed Water Capacity Fee by Meter Size Meter Size Capacity (gpm) Capacity Ratio Proposed Capacity Fee [A][B] = A÷30 [C] =$11,775 x B 3/4"30 1.00 $11,775 1"50 1.67 $19,625 2"160 5.33 $62,800 3"500 16.67 $196,250 6"2000 66.67 $785,000 8"4000 133.33 $1,570,000 10"6500 216.67 $2,551,250 Wastewater Capacity Fees Wastewater Utility System RCLD 2024 Asset Listing 25 Buy-In Asset Unit Rates Replacement Cost Less Depreciation 26 Buy-In Asset Unit Rate Asset Category RCLD (2024 $)Allocation Basis Units of Service Unit Rate Conversion Factor $ per EDU [A][B][ C] [D] = A÷C [E][F]=DxE Collection Plant $22,117,158 Existing EDU 29,500 $749.73 1 $750 General $7,358,591 Existing EDU 29,500 $249.44 1 $249 Land $2,976,309 Existing EDU 29,500 $100.89 1 $101 Treatment $180,684,888 SNRC Operating Capacity 6,400,000 $28.23 245 $6,917 $213,136,946 $8,017 Wastewater Capital-Related Reserves 27 Capital-Related Reserves FY 2025 Beginning Reserve Balances Wastewater Debt Obligations FY 2025 Outstanding Principal 28 Debt Obligations FY 2025 Total Outstanding Principal The Principal portion secured by capacity fees is not considered since new connections have not yet paid its share of the facility cost Wastewater NPV of Interest 29 Wastewater NPV of Outstanding Interest Description Total Interest NPV of Interest SNRC - Growth (25%)$11,636,877 $10,188,418 Net Present Value of Interest FY 2025 Total Outstanding Interest and NPV Wastewater Reserves and DebtAdjustments to Asset Value 30 Valuation Adjustments Adjustments Value ($)Allocation Basis Units of Service Unit Rate Conversion Factor $ per EDU [A][B][ C] [D] = A÷C [E][F]=DxE Reserves (+) Capital Replacement Fund $7,500,000 Existing EDU 29,500 $254.24 1 $254 (-) Capacity Fee Fund ($7,320,860)Existing EDU 29,500 ($248.16)1 ($248) (+) Debt Service Reserve - Growth $1,875,000 SNRC Operating Capacity - (Growth)1,600,000 $1.17 245 $287 Outstanding Principal and Interest (-) Wastewater Outstanding Principal ($123,607,163)SNRC Operating Capacity 6,400,000 ($19.31)245 ($4,732) (+) Wastewater NPV of Outstanding Interest $10,188,418 SNRC Operating Capacity - (Growth)1,600,000 $6.37 245 $1,560 Wastewater System Buy -In Summary Infrastructure plus Adjustments 31 System Buy-In Components Description $ per EDU Wastewater Infrastructure $8,017 (+) Capital Replacement Fund $254 (-) Capacity Fee Fund ($248) (+) Debt Service Reserve - Growth $287 (-) Wastewater Outstanding Principal ($4,732) (+) Wastewater NPV of Outstanding Interest $1,560 System Buy-in per EDU $5,138 New Water Projects – Growth-Related Project Cost and Capacity 32 Incremental-Cost Components Capital Projects Projected Cost Allocation Basis Units of Service Unit Rate Conversion Factor $ per EDU [A][B][ C] [D] = A÷C [E][F]=DxE 5th Chamber for SNRC $8,800,000 5th Chamber Ops Capacity 1,600,000 $5.50 245 $1,348 Proposed Wastewater Capacity Fee per EDU 33 2024 Wastewater Capacity Fees Proposed Capacity Fee Summary 34 2024 Capacity Fees Proposed Wastewater Capacity Fee Component Proposed Capacity Fee Per EDU $6,486 Thank You Andrea Boehling IB Consulting Principal | Managing Partner Phone: 615-870-9371 | Email: aboehling@IBConsultingInc.com 35 Habib Isaac IB Consulting Principal | Managing Partner Phone: 951-595-9354 | Email: hisaac@IBConsultingInc.com IB Consulting, LLC 31938 Temecula Parkway, Suite A #350 Temecula, CA. 92592 November 13, 2024 Public Hearing Capacity Fee Study East Valley Water District – Capacity Fee Study Page | 2 TABLE OF CONTENTS Executive Summary ............................................................................................................................ 4 Overview ............................................................................................................................................. 5 Capacity Fee Methodology .................................................................................................................. 6 Capacity Fee Analysis - Water ............................................................................................................ 9 Updated Water Capacity Fees .......................................................................................................... 15 Capacity Fee Analysis - Wastewater ................................................................................................. 17 Updated Wastewater Capacity Fees ................................................................................................. 23 Appendix A – Water Asset Listing ..................................................................................................... 24 Appendix B – Wastewater Asset Listing ............................................................................................ 25 Appendix C – Debt Schedules ........................................................................................................... 26 TABLES Table 1 – Water Asset Summary ....................................................................................................... 10 Table 2 – Water Capital-Related Reserves ....................................................................................... 10 Table 3 – Water Outstanding Principal .............................................................................................. 11 Table 4 – Water Asset Value Adjustments ........................................................................................ 11 Table 5 – Existing Water System ....................................................................................................... 12 Table 6 – Water Asset Unit Rate ($ per ME)...................................................................................... 12 Table 7 – Water Adjustments ($ per ME) ........................................................................................... 13 Table 8 – Water Buy-In Calculation ($ per ME) ................................................................................. 13 Table 9 – Water Incremental Costs ................................................................................................... 13 Table 10 – Water Incremental-Cost Component ($ per ME) .............................................................. 14 Table 11 – Water Capacity Fee Summary ......................................................................................... 15 Table 12 – Proposed Water Capacity Fee ......................................................................................... 16 Table 13 – Wastewater Asset Summary ............................................................................................ 17 Table 14 – Wastewater Capital-Related Reserves ............................................................................ 18 Table 15 – Wastewater Outstanding Principal ................................................................................... 18 Table 16 – Wastewater NPV of Outstanding Interest ......................................................................... 19 Table 17 – Wastewater Asset Value Adjustments ............................................................................. 19 Table 18 – Existing Wastewater System ........................................................................................... 20 Table 19 – Wastewater Asset Unit Rate ($ per EDU) ........................................................................ 20 Table 20 – Wastewater Adjustments ($ per EDU) ............................................................................. 21 Table 21 – Wastewater Buy-In Calculation ($ per EDU) .................................................................... 21 Table 22 – Wastewater Incremental Costs ........................................................................................ 21 Table 23 – Wastewater Incremental-Cost Component ($ per EDU) ................................................... 22 Table 24 – Wastewater Capacity Fee Summary ................................................................................ 23 Table 25 – Water Debt Schedules FY 2024 to FY 2034 ..................................................................... 26 Table 26 – Water Debt Schedules FY 2035 to FY 2046 ..................................................................... 26 East Valley Water District – Capacity Fee Study Page | 3 Table 27 – Wastewater Debt Schedules FY 2024 to FY 2034 ........................................................... 27 Table 28 – Wastewater Debt Schedules FY 2035 to FY 2046 ........................................................... 27 Table 29 – Wastewater Debt Schedules FY 2047 to FY 2053 ........................................................... 28 FIGURES Figure 1 – Capacity Fee Analysis ........................................................................................................ 6 Figure 2 – Buy-In Component ............................................................................................................. 7 Figure 3 – Formula for Incremental-Cost Approach ............................................................................. 8 East Valley Water District – Capacity Fee Study Page | 4 Executive Summary East Valley Water (District) engaged IB Consulting to update its capacity fees. This Capacity Fee Study Report (Report) describes the approach, methodology, and technical analysis used to derive updated capacity fees per California State Government Code, Section 66013 (GC 66013). GC 66013 allows an agency to charge the estimated reasonable infrastructure cost to serve a new connection for which the charge is imposed. The existing water capacity fee is $8,273 for a 3/4” water meter, with larger meters paying more for the additional capacity/demand they place on the Water Utility. The existing wastewater capacity fee is $9,014 for one Equivalent Dwelling Unit (1 EDU)1, reflecting the wastewater facility design requirements of 245 daily gallons of flow. Based on our analysis, the updated water capacity fee is $11,775 for a 3/4” potable meter and the updated wastewater capacity fee is $6,486 per EDU. The updated fees recover each new connection’s proportionate share of facility costs. Annual Capacity Fee Adjustment IB Consulting recommends adjusting the capacity fee annually to keep pace with inflation by applying the Engineering News-Record Construction Cost Index (ENR). The District should also review its capacity charges every five years, in conjunction with its master plan updates, to capture any significant changes and ensure capacity fees remain equitable. 1 1 EDU = 245 gallons of flow per day East Valley Water District – Capacity Fee Study Page | 5 Overview District Background Located in the Inland Empire of San Bernardino County (County), the District comprises the entire City of Highland, portions of the City of San Bernardino, and unincorporated areas of the County. The District spans almost 18,000 acres and currently serves a population of around 107,000 through 21,471 meters. Water sources include groundwater, surface water through North Fork water rights, and State Water Project (SWP). All surface water and SWP are treated at Plant 134. The District provides wastewater collection and treatment to the service area through 213 miles of pipeline, 4,400 manholes, 7 siphons, and 5 diversion structures. The collection system historically conveyed wastewater flows to the City of San Bernardino but has recently transitioned to conveying wastewater flows to the District’s new Sterling Natural Resource Center (SNRC). As part of the District’s financial plan and rate update, the capacity fees are being reviewed and updated to ensure new system users or existing users requiring increased system capacity pay their fair share of the costs associated with the water and wastewater facilities required to serve them. Capacity Fee A "Capacity Fee" is defined as a charge for public facilities in existence when a charge is imposed or for new facilities to be constructed in the future that benefit the person or property being charged. Capacity fees ensure new development or existing users requiring increased system capacity pay their fair share of the costs associated with the facilities. Based on the requirements of GC 66013, capacity fees must be based on the "reasonable cost" to accommodate additional demand from new development or the expansion of existing connections. In addition, Proposition 26 amended the State Constitution in 2010, which redefined a "tax" as any levy, charge, or exaction of any kind imposed by a local government. However, there were seven exemptions within Proposition 26, including cost-based charges imposed for providing a service (i.e., capacity fees) so long as such fees do not exceed the cost of providing the service. Therefore, the study summarized in this Report connects the costs of facilities, the capacity of the water, recycled water, and wastewater systems, the increased capacity gained from any expansions, and the updated proposed fees in compliance with the Proposition 26 exemption. Government Code section 66016.6 requires that, Prior to levying a new fee or capacity charge, the District evaluate the amount of the fee or capacity charge. The evaluation shall include evidence to support that the fee or capacity charge does not exceed the estimated reasonable cost of providing service, in accordance with Section 66013. This Report meets the requirements of Government Code section 66016.6. East Valley Water District – Capacity Fee Study Page | 6 Capacity Fee Methodology There are four primary steps in calculating capacity fees: (1) determine the cost of facilities and assets recoverable through capacity fees, (2) incorporate any credits or adjustments to apply towards the total infrastructure costs such as grants, existing debt obligations, unspent debt proceeds, and available funding through previously collected capacity fees, (3) identify demand or capacity related to the facilities and define the baseline requirements for a connection or equivalent dwelling unit based on planning documents, and (4) apportion the net infrastructure costs equitably to various types of connections based on the demand placed on the utility system. Figure 1 – Capacity Fee Analysis In addition to the four steps above, there are two primary approaches for calculating capacity fees: the "Buy- In Method" and "Incremental-Cost Method." Selecting the best method depends on the unique circumstances of the utility, existing facilities funded in advance of development, current and future capacity planned to be built in the system, available funding, whether future facilities will be debt-financed, expected future growth, and access to up-to-date planning documents/master plans. Careful consideration may be required to allocate costs between existing and new customers and ensure no duplication of costs. Buy-In Method The basis of the Buy-In Method is to pay for existing facilities funded in advance of growth. This approach ensures new development and expanded connections buy into the utility system’s existing facilities. The Buy- In method eliminates any potential funding of existing system deficiencies as the District's current asset inventory only reflects improvements to the system today. Once the system value is determined, dividing the total value by the total demand derives the buy-in cost per Meter Equivalent (ME2) for water and per EDU for wastewater. Demand is commonly used for system design 2 Meter Equivalent represents the average demand of a typical single-family residence within the District, equal to 609 gallons per day, as reflected within the District’s most recent Master Plan (Section 3-10). This average daily demand is East Valley Water District – Capacity Fee Study Page | 7 Value of Existing System and planning. It is a primary driver for the system's current configuration and how it expands in the future. For the wastewater utility, demand is measured in gallons per day (gpd) for the SNRC treatment plant capacity and a cost per gallon of capacity is derived. The cost per gallon is multiplied by the daily flow represented by one EDU (the District utilizes 245 gallons per day for facility design) to determine the amount per EDU. Assignment of EDUs to a developing parcel will vary based on land use type and projected wastewater flows and strength loadings. Figure 2 shows the framework for calculating the amount related to the buy-in component. Figure 2 – Buy-In Component Incremental-Cost Method The Incremental-Cost Method is based on the principle that new development should pay for improvements required to connect them to the system, including the need for any additional capacity and/or expansions. This approach is typically used when specific capital improvements are identified within planning documents and required for growth. Projects associated with routine repair & replacement and Master Plan improvements required to address existing deficiencies are excluded. Also, specific projects within the Master Plan may benefit existing and new development. In these instances, new development only pays its proportionate share based on the demand or capacity taken from these projects. Under the Incremental-Cost Method, growth- related capital improvements are allocated to new development based on their capacity requirements. For each utility, demand is measured in gpd and a cost per gallon of capacity is derived. For the water utility, the cost per gallon is multiplied by the average daily demand of a single-family residence, equal to 609 gallons per day, which is equated to the baseline demand of an ME. For the wastewater system, the cost per gallon is multiplied by the daily flow represented by one EDU to determine the amount per EDU. Figure 3 shows the framework for calculating capacity fees using the incremental cost component. assigned to the base 3/4” meter. Larger-sized meters are assigned additional MEs based on the gallons per minute (gpm) for flow when compared to the 3/4" meter at 30 gpm. Current Asset Value Capital Reserves Outstanding Debt Net Present Value of Interst Total Demand (MEs or EDUs) Buy-In Cost ($/ME or $/EDU) East Valley Water District – Capacity Fee Study Page | 8 Figure 3 – Formula for Incremental-Cost Approach Hybrid Method When there is a buy-in component and incremental-cost component used to update capacity fees, the approach is commonly referred to as the Hybrid Method. The Hybrid Approach is utilized when the existing system has available capacity and/or is substantially built while specific capital improvements within planning documents are clearly identified and solely needed to serve new development. For this study, the updated water and wastewater capacity fees are based on the Hybrid Method . Growth-Related Capital Improvement Incremental Increase in Capacity (gpd) Incremental-Cost ($/ME or $/EDU) East Valley Water District – Capacity Fee Study Page | 9 Capacity Fee Analysis - Water Step 1 – Asset Valuation (RCLD Asset Value) The first step in determining the capacity fee using the Buy-In Approach is to determine the value of the existing system. System assets may be valued in a few different ways. Options include using: (1) the original cost of the improvements (OC), (2) original cost less depreciation of system assets to account for the time improvements are in service (OCLD), (3) replacement cost of the improvements by bringing the original cost into today's dollars (RC), (4) replacement cost less depreciation which brings both the original cost and the accumulated depreciation value into today's dollars (RCLD), and (5) a physical inventory and appraisal of the system and plant components in terms of their replacement cost valuation. The most accurate valuation would be a physical inventory and appraisal; however, this approach is often very difficult and cost-prohibitive since a significant portion of the assets are located underground. The most common valuation technique is RCLD. Using RCLD generates a reasonable approximation of the system value based on today's cost of the improvements. This study utilizes the RCLD method of valuing the system. RCLD valuation is the most equitable and reasonable approach since it considers the time value of money and factors in the remaining useful life of each asset. To accomplish this, the District provided fixed asset records containing the original cost of each asset. Replacement costs were estimated by bringing forward the original costs to today's dollars to reflect the estimated cost if a similar asset were constructed today. The original cost of each asset was indexed by the annual percentage change of the 20-cities CCI, published by the Engineering News-Record. For 2024, the CCI value is 13,358. Accumulated depreciation was also indexed to maintain consistency with 2024 dollars. Subtracting the accumulated depreciation from the replacement cost yields the updated RCLD and reflects service standards in 2024 dollars. Table 1 summarizes the water assets by category and shows the original cost, accumulated depreciation, replacement cost in 2024 dollars, accumulated depreciation in 2024 dollars, and assets adjusted for the 2024 depreciation (RCLD). Land values were not depreciated, and the replacement value is estimated by increasing the original acquisition costs by a 2% inflation limit in-line with Proposition 13 constraints on assessed values. Water Rights were also not depreciated because the water rights are owned in perpetuity by the District. A detailed listing of water assets can be found in Appendix A. East Valley Water District – Capacity Fee Study Page | 10 Table 1 – Water Asset Summary Step 2 - Asset Adjustments It is also important to identify any adjustments to the RCLD total asset value. Special consideration may be required when assets are acquired through debt financing, contributed by developers, and grant funding. For this study, the adjustments impacting the asset valuation are separated into three components: Capital Reserves: Includes reserves that provide funding for system improvements, which increases the asset values of the corresponding category. It is reasonable and appropriate to include the balance of the capital-related reserves because they have been built-up over time by existing rate customers and will be used to repair or replace aging infrastructure, thereby contributing to the value of the system’s assets. Capital reserves will increase the system's value as the cash equivalents are available for capital spending. However, previously collected capacity fees that have not yet been spent are applied as a credit towards the system asset value. Table 2 identifies the FY 2025 beginning reserve balances for the District. Table 2 – Water Capital-Related Reserves Outstanding Principal: Remaining outstanding principal payments of existing bonds and loans Water Asset Summary Asset Categories Original Cost Accumulated Depreciation Replacement Cost (2024 $) Accumulated Depreciation (2024 $) RCLD (2024 $) [A] [B] [C] [D] [E] = C-D General $19,724,349 $4,667,560 $26,653,423 $6,842,407 $19,811,016 Hydrants $61,702 $18,293 $112,182 $35,720 $76,462 Land $3,651,695 $0 $5,085,592 $0 $5,085,592 Meters $82,951 $23,636 $140,878 $41,663 $99,215 Pumping Facilities $15,245,781 $5,491,752 $34,284,229 $18,319,650 $15,964,579 Storage $21,532,022 $7,584,042 $48,433,503 $22,937,676 $25,495,827 Transporation and Distribution $70,987,217 $29,754,087 $191,712,233 $115,908,235 $75,803,998 Treatment Plant $33,081,924 $7,486,040 $52,211,190 $14,353,729 $37,857,461 Existing Water Rights $2,143,455 $0 $3,056,508 $0 $3,056,508 Wells $16,943,605 $5,678,650 $32,922,858 $14,249,375 $18,673,483 Total Assets $183,454,703 $60,704,060 $394,612,596 $192,688,455 $201,924,141 Water Capital-Related Reserves Description Included Water Capital- Related Reserves (+) Capital Replacement Fund $10,314,000 (-) Capacity Fee Fund ($5,793,420) Total Water Capital-Related Reserves $4,520,580 East Valley Water District – Capacity Fee Study Page | 11 Table 3 identifies the amount of outstanding principal remaining on the water system's existing debt, with FY 2025 as the starting point. Detailed water debt schedules can be found in Appendix C. Table 3 – Water Outstanding Principal The asset adjustments from Table 2 and Table 3 are summarized in Table 4 to show the total asset adjustments. Table 4 – Water Asset Value Adjustments Step 3 – System Demand/Capacity For water, existing demand is reflected by total Meter Equivalents (MEs), where 1 ME represents the average demand of a typical single-family residence within the District, equal to 609 gallons per day. This average daily demand is assigned to the base 3/4” meter. Total MEs were determined by multiplying the number of existing meters in the water system by the Capacity Ratio. The Capacity Ratio represents the potential flow through each meter size compared to the flow through a 3/4” meter to establish parity between meter sizes. Table 5 summarizes the total MEs in the water system. Water Outstanding Principal Description Included Water Outstanding Principal 2020A Bonds ($14,060,000) 2020B Bonds ($8,575,000) SRF Plant 134 ($5,134,777) Total Water Outstanding Principal ($27,769,777) Valuation Adjustments Adjustments Value ($) (+) Water Capital-Related Reserves $4,520,580 (-) Water Outstanding Principal ($27,769,777) Total Adjustments ($23,249,197) East Valley Water District – Capacity Fee Study Page | 12 Table 5 – Existing Water System Step 4 – Buy-In Component Calculations The previous steps identified water assets (infrastructure), capital-related reserves, outstanding debt principal, and system capacity. The buy-in component can be determined by deriving the cost per ME of the water assets and adjustments. The net RCLD asset value (Total System Value) of the water system is divided by the total MEs to derive the asset unit rate, as shown in Table 6. Table 6 – Water Asset Unit Rate ($ per ME) Water System Information Meter Size Capacity Ratio Existing Meters Meter Equivalent (ME) [A] [B] [C] = AxB 5/8" 0.67 3,479 2,319 3/4" 1.00 13,066 13,066 1" 1.67 4,235 7,058 1 1/2" 3.33 276 920 2" 5.33 302 1,611 3" 16.67 63 1,050 4" 41.67 22 917 6" 66.67 12 800 8" 133.33 13 1,733 Units of Service 21,468 29,474 Buy-In Asset Unit Rate Asset Category RCLD (2024 $) Allocation Basis Units of Service $ per ME [A] [B] [C] = A÷B General $19,811,016 Meter Equivalent (ME)29,474 $672 Hydrants $76,462 Meter Equivalent (ME)29,474 $3 Land $5,085,592 Meter Equivalent (ME)29,474 $173 Meters $99,215 Meter Equivalent (ME)29,474 $3 Pumping Facilities $15,964,579 Meter Equivalent (ME)29,474 $542 Storage $25,495,827 Meter Equivalent (ME)29,474 $865 Transporation and Distribution $75,803,998 Meter Equivalent (ME)29,474 $2,572 Treatment Plant $37,857,461 Meter Equivalent (ME)29,474 $1,284 Existing Water Rights $3,056,508 Meter Equivalent (ME)29,474 $104 Wells $18,673,483 Meter Equivalent (ME)29,474 $634 $201,924,141 $6,852 East Valley Water District – Capacity Fee Study Page | 13 Table 7 summarizes the adjustments for capital-related reserves and outstanding principal with the associated cost per ME. Table 7 – Water Adjustments ($ per ME) Table 8 summarizes the total buy-in amount per ME rounded to the nearest dollar. Table 8 – Water Buy-In Calculation ($ per ME) Step 5: Incremental Costs The capacity fee includes planned capital projects required to accommodate new development based on the most recent Master Plans. These projects include a new reservoir and two new wells, as shown in Table 9. Table 9 – Water Incremental Costs Valuation Adjustments Adjustments Value ($) Allocation Basis Units of Service $ per ME [A] [B] [C] = A÷B (+) Water Capital-Related Reserves $4,520,580 Meter Equivalent (ME)29,474 $153 (-) Water Outstanding Principal ($27,769,777) Meter Equivalent (ME)29,474 ($942) Total Adjustments ($23,249,197) ($789) System Buy-In Components Description $ / ME Water Infrastructure $6,852 (+) Water Capital-Related Reserves $153 (-) Water Outstanding Principal ($942) System Buy-in per ME $6,063 Incremental Costs Capital Projects Projected Cost Canal 3 Reservoir $17,717,280 New Wells $10,000,000 Total $27,717,280 East Valley Water District – Capacity Fee Study Page | 14 Step 6: Incremental-Cost Component Calculations The incremental costs are associated with constructing additional capacity to serve new development. Therefore, the project cost of each asset category is spread over the additional capacity added to the water system in gpd. Table 10 summarizes the cost per gallon of incremental capital projects and the associated cost per ME. Table 10 – Water Incremental-Cost Component ($ per ME) Incremental-Cost Components Capital Projects Projected Cost Allocation Basis Units of Service Unit Rate Conversion Factor $ per ME [A] [B] [C] [D] = A÷C [E] [F]=DxE Canal 3 Reservoir $17,717,280 Reservoir Capacity 3,000,000 $5.91 609 $3,597 New Wells $10,000,000 2024 New Wells 2,880,000 $3.47 609 $2,115 Total $5,712 East Valley Water District – Capacity Fee Study Page | 15 Updated Water Capacity Fees Table 11 summarizes the updated water capacity fee per ME by combining the buy-in and the incremental- cost component. Table 11 – Water Capacity Fee Summary Table 12 summarizes the updated water capacity fee by meter size, with the 3/4” meter set as the base ME. Capacity fees for new connections increase as the size of the meter increases based on the additional capacity taken of the system. Proposed Water Capacity Fee ($/ME) Capacity Fee Components Total ($ per ME) System Buy-In Component Water Infrastructure $6,852 (+) Water Capital-Related Reserves $153 (-) Water Outstanding Principal ($942) System Buy-in per ME $6,063 Incremental Component Canal 3 Reservoir $3,597 New Wells $2,115 Total $5,712 Total Proposed Water Capacity Fee $11,775 East Valley Water District – Capacity Fee Study Page | 16 Table 12 – Proposed Water Capacity Fee Annual Capacity Fee Adjustment In conjunction with adopting the updated water capacity fees, IB Consulting recommends adjusting the capacity fee annually to keep pace with inflation by applying the Engineering News Record Construction Cost Index (ENR). The District should also review its capacity charges every five years, in conjunction with its master plan updates, to capture any significant changes and ensure capacity fees remain equitable. Proposed Water Capacity Fee by Meter Size Meter Size Capacity (gpm) Capacity Ratio Proposed Capacity Fee [A][B] = A÷30 [C] =$11,775xB 3/4" 30 1.00 $11,775 1" 50 1.67 $19,625 1 1/2" 100 3.33 $39,250 2" 160 5.33 $62,800 3" 500 16.67 $196,250 4" 1250 41.67 $490,625 6" 2000 66.67 $785,000 8" 4000 133.33 $1,570,000 10" 6500 216.67 $2,551,250 12" 8000 266.67 $3,140,000 East Valley Water District – Capacity Fee Study Page | 17 Capacity Fee Analysis - Wastewater Step 1 – Asset Valuation (RCLD Asset Value) This study utilizes the RCLD method of valuing the system. RCLD valuation is the most equitable and reasonable approach since it considers the time value of money and factors in the remaining useful life of each asset. To accomplish this, the District provided fixed asset records containing the original cost of each asset. Replacement costs were estimated by bringing forward the original costs to today's dollars to reflect the estimated cost if a similar asset were constructed today. The original cost of each asset was indexed by the annual percentage change of the 20-cities CCI, published by the Engineering News-Record. For 2024, the CCI value is 13,358. Accumulated depreciation was also indexed to maintain consistency with 2024 dollars. Subtracting the accumulated depreciation from the replacement cost yields the updated RCLD and reflects service standards in 2024 dollars. Table 13 summarizes the wastewater assets by category and shows the original cost, accumulated depreciation, replacement cost in 2024 dollars, accumulated depreciation in 2024 dollars, and assets adjusted for the 2024 depreciation (RCLD). Land values were not depreciated, and the replacement value is estimated by increasing the original acquisition costs by a 2% inflation limit in-line with Proposition 13 constraints on assessed values. The new SNRC was recently constructed and started accepting wastewater flows in the second quarter of 2024. A detailed listing of wastewater assets can be found in Appendix B. Table 13 – Wastewater Asset Summary Step 2 - Asset Adjustments It is also important to identify any adjustments to the RCLD total asset value. Special consideration may be required when assets are acquired through debt financing, contributed by developers, and grant funding. For this study, the adjustments impacting the asset valuation are separated into three components: Capital Reserves: Includes reserves that provide funding for system improvements, which increases the asset values of the corresponding category. It is reasonable and appropriate to include the balance of the capital related reserves because they have been built-up over time by existing rate customers and will be used to repair or replace aging infrastructure, thereby contributing to the value of the system. Capital reserves Wastewater Asset Summary Asset Categories OC Accumulated Depreciation Replacement Cost (2024 $) Accumulated Depreciation (2024 $) RCLD (2024 $) [A] [B] [C] [D] [E] = C-D Collection Plant $27,872,913 $16,428,368 $127,853,552 $105,736,394 $22,117,158 General $9,033,538 $3,481,760 $12,602,296 $5,243,705 $7,358,591 Land $2,698,706 $0 $2,976,309 $0 $2,976,309 Treatment $180,684,888 $0 $180,684,888 $0 $180,684,888 Total Assets $220,290,046 $19,910,128 $324,117,044 $110,980,099 $213,136,946 East Valley Water District – Capacity Fee Study Page | 18 will increase the system's value as the cash equivalents are available for capital spending. However, previously collected capacity fees that have not yet been spent are applied as a credit towards the system asset value. Table 14 identifies the FY 2025 beginning reserve balances for the District. Table 14 – Wastewater Capital-Related Reserves Outstanding Principal: Remaining outstanding principal payments of existing bonds and loans Table 15 identifies the amount of outstanding principal remaining for the existing debt for the wastewater system, with FY 2025 as the starting point. Detailed wastewater debt schedules can be found in Appendix C Table 15 – Wastewater Outstanding Principal Outstanding Interest: The SNRC included debt financing as a funding source. The SNRC has a capacity of 8 MGD with 6 MGD operating capacity and 2 MGD associated with accommodating future growth. Therefore, 75% of the debt is secured by rates and 25% of the debt is funded by capacity fees. The 25% of debt secured by capacity fees must account for the future interest payments that must be paid through maturity. Outstanding Interest associated with the SNRC financing requires an additional step to derive the Net Present Value (NPV) of all future interest payments. The capacity fees are pledged to cover 25% of all future interest payments; however, interest is amortized over multiple years. Paying the total amount of future interest payments in advance, before the interest is incurred, would overcharge new connections. Therefore, the NPV of interest is calculated using a discount factor equal to the average yield since 2000 of the Treasury Securities at a 3-Year Constant Maturity (Treasury Securities), equal to 2.282%. Treasury Securities are a safe and conservative return on investment for public agency investments. The NPV calculation discounts the future interest payments by 2.282%, compounded annually. Wastewater Capital-Related Reserves Description Included Wastewater Capital-Related Reserves (+) Capital Replacement Fund $7,500,000 (-) Capacity Fee Fund ($7,320,860) (+) Debt Service Reserve - Growth $1,875,000 Total Wastewater Capital-Related Reserves $2,054,140 Wastewater Outstanding Principal Description Included Wastewater Outstanding Principal 2020B Bonds ($4,205,000) SNRC - Rates (75%) ($119,402,163) Total Wastewater Outstanding Principal ($123,607,163) East Valley Water District – Capacity Fee Study Page | 19 Table 16 shows the amount of outstanding interest and the net present value of the outstanding interest using the 2.282% discount factor for the 25% of the SNRC financing. Table 16 – Wastewater NPV of Outstanding Interest The asset adjustments from Table 14 through Table 16 are summarized in Table 17 to show the total asset adjustments. Table 17 – Wastewater Asset Value Adjustments Wastewater NPV of Outstanding Interest Description Total Interest Included Wastewater NPV of Outstanding Interest 2020B Bonds $1,210,550 $0 SNRC - Rates (75%) $34,910,630 $0 SNRC - Growth (25%) $11,636,877 $10,188,418 Total Wastewater NPV of Outstanding Interest $47,758,056 $10,188,418 Valuation Adjustments Adjustments Value ($) Reserves (+) Capital Replacement Fund $7,500,000 (-) Capacity Fee Fund ($7,320,860) (+) Debt Service Reserve - Growth $1,875,000 Outstanding Principal and Interest (-) Wastewater Outstanding Principal ($123,607,163) (+) Wastewater NPV of Outstanding Interest $10,188,418 Total Adjustments ($111,364,605) East Valley Water District – Capacity Fee Study Page | 20 Step 3 – System Demand/Capacity For wastewater, existing demand is reflected by total Equivalent Dwelling Units (EDUs), reflecting the wastewater facility design requirements of 245 daily gallons of flow. The total design capacity of the wastewater treatment plants does not necessarily reflect the safe operating capacity. Once the plant capacity is close to 80% of total capacity, additional upgrades or expansions are required. Therefore, when deriving capacity-related unit rates, the operating capacity is used. Table 18 summarizes the units of service for the wastewater system. Table 18 – Existing Wastewater System Step 4 – Buy-In Component Calculations The previous steps identified wastewater assets (infrastructure), capital-related reserves, outstanding debt principal, net present value of outstanding interest, and system capacity. The buy-in component can be determined by deriving the cost per EDU of the wastewater assets and adjustments. The net RCLD asset value (Total System Value) of the wastewater system is divided by the total EDUs to derive the asset unit rate, as shown in Table 19. Table 19 – Wastewater Asset Unit Rate ($ per EDU) Wastewater System Information Units of Service Existing EDU (EDU) 29,500 SNRC Operating Capacity (gpd) 6,400,000 SNRC Operating Capacity - (Growth) (gpd) 1,600,000 5th Chamber Ops Capacity (gpd) 1,600,000 Buy-In Asset Unit Rate Asset Category RCLD (2024 $) Allocation Basis Units of Service Unit Rate Conversion Factor $ per EDU [A] [B] [C] [D] = A÷C [E] [F]=DxE Collection Plant $22,117,158 Existing EDU 29,500 $749.73 1 $750 General $7,358,591 Existing EDU 29,500 $249.44 1 $249 Land $2,976,309 Existing EDU 29,500 $100.89 1 $101 Treatment $180,684,888 SNRC Operating Capacity 6,400,000 $28.23 245 $6,917 $213,136,946 $8,017 East Valley Water District – Capacity Fee Study Page | 21 Table 20 summarizes the adjustments for capital-related reserves, outstanding principal, and the net present value of outstanding interest with the associated cost per EDU. Table 20 – Wastewater Adjustments ($ per EDU) Table 21 summarizes the total buy-in amount per EDU rounded to the nearest dollar. Table 21 – Wastewater Buy-In Calculation ($ per EDU) Step 5: Incremental Costs The capacity fee includes planned capital projects for the SNRC. These projects include a fifth chamber for the SNRC treatment plant, as shown in Table 22. The new chamber will add an additional 1.6 MGD of capacity. Table 22 – Wastewater Incremental Costs Valuation Adjustments Adjustments Value ($) Allocation Basis Units of Service Unit Rate Conversion Factor $ per EDU [A] [B] [C] [D] = A÷C [E] [F]=DxE Reserves (+) Capital Replacement Fund $7,500,000 Existing EDU 29,500 $254.24 1 $254 (-) Capacity Fee Fund ($7,320,860) Existing EDU 29,500 ($248.16) 1 ($248) (+) Debt Service Reserve - Growth $1,875,000 SNRC Operating Capacity - (Growth)1,600,000 $1.17 245 $287 Outstanding Principal and Interest (-) Wastewater Outstanding Principal ($123,607,163) SNRC Operating Capacity 6,400,000 ($19.31) 245 ($4,732) (+) Wastewater NPV of Outstanding Interest $10,188,418 SNRC Operating Capacity - (Growth)1,600,000 $6.37 245 $1,560 Total Adjustments ($111,364,605) ($2,879) Incremental-Cost Capital Projects Projected Cost 5th Chamber for SNRC $8,800,000 Total Incremental Component $8,800,000 East Valley Water District – Capacity Fee Study Page | 22 Step 6: Incremental-Cost Component Calculations The incremental costs are associated with constructing additional capacity. Therefore, the project cost is spread over the additional capacity added to the wastewater system in gpd. Table 23 summarizes the cost per gallon of incremental capital projects and the associated cost per EDU. Table 23 – Wastewater Incremental-Cost Component ($ per EDU) Incremental-Cost Components Capital Projects Projected Cost Allocation Basis Units of Service Unit Rate Conversion Factor $ per EDU [A] [B] [C] [D] = A÷C [E] [F]=DxE 5th Chamber for SNRC $8,800,000 5th Chamber Ops Capacity 1,600,000 $5.50 245 $1,348 Total Incremental Component $1,348 East Valley Water District – Capacity Fee Study Page | 23 Updated Wastewater Capacity Fees Table 24 summarizes the updated wastewater capacity fee per EDU by combining the buy-in and the incremental-cost component. Table 24 – Wastewater Capacity Fee Summary Annual Capacity Fee Adjustment In conjunction with adopting the updated wastewater capacity fees, IB Consulting recommends adjusting the capacity fee annually to keep pace with inflation by applying the Engineering News Record Construction Cost Index (ENR). The District should also review its capacity charges every five years, in conjunction with its master plan updates, to capture any significant changes and ensure capacity fees remain equitable. East Valley Water District – Capacity Fee Study Page | 24 Appendix A – Water Asset Listing This Page Intentionally Left Blank East Valley Water District – Capacity Fee Study Page | 25 Appendix B – Wastewater Asset Listing This Page Intentionally Left Blank East Valley Water District – Capacity Fee Study Page | 26 Appendix C – Debt Schedules Table 25 – Water Debt Schedules FY 2024 to FY 2034 Table 26 – Water Debt Schedules FY 2035 to FY 2046 Financial Information Water Outstanding Debt FY 2024 FY 2025 FY 2026 FY 2027 FY 2028 FY 2029 FY 2030 FY 2031 FY 2032 FY 2033 FY 2034 2020A Bonds Principal $990,000 $1,030,000 $575,000 $605,000 $635,000 $665,000 $700,000 $735,000 $770,000 $805,000 $835,000 Interest $615,600 $565,100 $524,975 $495,475 $464,475 $431,975 $397,850 $361,975 $324,350 $289,000 $256,200 Subtotal 2020A Bonds $1,605,600 $1,595,100 $1,099,975 $1,100,475 $1,099,475 $1,096,975 $1,097,850 $1,096,975 $1,094,350 $1,094,000 $1,091,200 2020B Bonds Principal $105,000 $100,000 $200,000 $205,000 $210,000 $215,000 $215,000 $215,000 $230,000 $230,000 $235,000 Interest $224,087 $223,341 $221,996 $219,754 $217,014 $213,716 $209,889 $205,847 $201,380 $196,424 $191,121 Subtotal 2020B Bonds $329,087 $323,341 $421,996 $424,754 $427,014 $428,716 $424,889 $420,847 $431,380 $426,424 $426,121 US Bank Loan Principal $444,375 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 Interest $7,987 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 Subtotal US Bank Loan $452,363 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 Eastwood Farms Principal $13,016 $13,016 $13,016 $13,016 $13,016 $13,016 $13,016 $13,016 $13,016 $13,016 $13,016 Interest $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 Subtotal Eastwood Farms $13,016 $13,016 $13,016 $13,016 $13,016 $13,016 $13,016 $13,016 $13,016 $13,016 $13,016 Arroyo Verde Principal $6,762 $6,762 $6,762 $6,762 $6,762 $6,762 $6,762 $6,762 $3,382 $0 $0 Interest $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 Subtotal Arroyo Verde $6,762 $6,762 $6,762 $6,762 $6,762 $6,762 $6,762 $6,762 $3,382 $0 $0 SRF Plant 134 Principal $233,399 $233,399 $233,399 $233,399 $233,399 $233,399 $233,399 $233,399 $233,399 $233,399 $233,399 Interest $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 Subtotal SRF Plant 134 $233,399 $233,399 $233,399 $233,399 $233,399 $233,399 $233,399 $233,399 $233,399 $233,399 $233,399 Financial Information Water Outstanding Debt FY 2035 FY 2036 FY 2037 FY 2038 FY 2039 FY 2040 FY 2041 FY 2042 FY 2043 FY 2044 FY 2045 FY 2046 2020A Bonds Principal $865,000 $900,000 $925,000 $960,000 $985,000 $1,015,000 $1,055,000 $0 $0 $0 $0 $0 Interest $222,200 $186,900 $155,025 $126,750 $97,575 $62,500 $21,100 $0 $0 $0 $0 $0 Subtotal 2020A Bonds $1,087,200 $1,086,900 $1,080,025 $1,086,750 $1,082,575 $1,077,500 $1,076,100 $0 $0 $0 $0 $0 2020B Bonds Principal $255,000 $250,000 $270,000 $275,000 $280,000 $295,000 $310,000 $1,410,000 $1,450,000 $1,725,000 $0 $0 Interest $185,349 $179,277 $172,284 $164,300 $156,169 $147,745 $138,882 $113,684 $71,785 $25,271 $0 $0 Subtotal 2020B Bonds $440,349 $429,277 $442,284 $439,300 $436,169 $442,745 $448,882 $1,523,684 $1,521,785 $1,750,271 $0 $0 US Bank Loan Principal $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 Interest $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 Subtotal US Bank Loan $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 Eastwood Farms Principal $13,016 $13,016 $13,016 $13,016 $13,016 $13,016 $13,016 $13,016 $13,017 $0 $0 $0 Interest $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 Subtotal Eastwood Farms $13,016 $13,016 $13,016 $13,016 $13,016 $13,016 $13,016 $13,016 $13,017 $0 $0 $0 Arroyo Verde Principal $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 Interest $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 Subtotal Arroyo Verde $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 SRF Plant 134 Principal $233,399 $233,399 $233,399 $233,399 $233,399 $233,399 $233,399 $233,399 $233,399 $233,399 $233,399 $233,398 Interest $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 Subtotal SRF Plant 134 $233,399 $233,399 $233,399 $233,399 $233,399 $233,399 $233,399 $233,399 $233,399 $233,399 $233,399 $233,398 East Valley Water District – Capacity Fee Study Page | 27 Table 27 – Wastewater Debt Schedules FY 2024 to FY 2034 Table 28 – Wastewater Debt Schedules FY 2035 to FY 2046 Financial Information Wastewater Oustanding Debt FY 2024 FY 2025 FY 2026 FY 2027 FY 2028 FY 2029 FY 2030 FY 2031 FY 2032 FY 2033 FY 2034 2020B Bonds Principal $175,000 $175,000 $175,000 $180,000 $180,000 $180,000 $185,000 $190,000 $190,000 $200,000 $200,000 Interest $98,274 $96,997 $95,466 $93,500 $91,124 $88,334 $85,084 $81,558 $77,749 $73,543 $68,983 Subtotal 2020B Bonds $273,274 $271,997 $270,466 $273,500 $271,124 $268,334 $270,084 $271,558 $267,749 $273,543 $268,983 SNRC - Rates (75%) Principal $3,121,778 $3,171,892 $3,228,986 $3,287,108 $3,346,276 $3,406,509 $3,467,826 $3,530,247 $3,593,791 $3,658,479 $3,724,332 Interest $2,199,353 $2,149,239 $2,092,145 $2,034,023 $1,974,855 $1,914,622 $1,853,305 $1,790,884 $1,727,340 $1,662,652 $1,596,799 Subtotal SNRC - Rates (75%) $5,321,131 $5,321,131 $5,321,131 $5,321,131 $5,321,131 $5,321,131 $5,321,131 $5,321,131 $5,321,131 $5,321,131 $5,321,131 SNRC - Growth (25%) Principal $1,040,593 $1,057,297 $1,076,329 $1,095,703 $1,115,425 $1,135,503 $1,155,942 $1,176,749 $1,197,930 $1,219,493 $1,241,444 Interest $733,118 $716,413 $697,382 $678,008 $658,285 $638,207 $617,768 $596,961 $575,780 $554,217 $532,266 Subtotal SNRC - Growth (25%) $1,773,710 $1,773,710 $1,773,710 $1,773,710 $1,773,710 $1,773,710 $1,773,710 $1,773,710 $1,773,710 $1,773,710 $1,773,710 Water Fund 20 Loan - Rates (75%) Principal $0 $0 $0 $0 $281,250 $281,250 $281,250 $281,250 $281,250 $281,250 $281,250 Interest $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 Subtotal Water Fund 20 Loan - Rates (75%)$0 $0 $0 $0 $281,250 $281,250 $281,250 $281,250 $281,250 $281,250 $281,250 Water Fund 20 Loan - Growth (25%) Principal $0 $0 $0 $0 $93,750 $93,750 $93,750 $93,750 $93,750 $93,750 $93,750 Interest $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 Subtotal Water Fund 20 Loan - Growth (25%)$0 $0 $0 $0 $93,750 $93,750 $93,750 $93,750 $93,750 $93,750 $93,750 Financial Information Wastewater Oustanding Debt FY 2035 FY 2036 FY 2037 FY 2038 FY 2039 FY 2040 FY 2041 FY 2042 FY 2043 FY 2044 FY 2045 FY 2046 2020B Bonds Principal $205,000 $215,000 $220,000 $225,000 $230,000 $235,000 $240,000 $250,000 $260,000 $270,000 $0 $0 Interest $64,213 $59,161 $53,326 $46,807 $40,141 $33,329 $26,370 $19,192 $11,720 $3,956 $0 $0 Subtotal 2020B Bonds $269,213 $274,161 $273,326 $271,807 $270,141 $268,329 $266,370 $269,192 $271,720 $273,956 $0 $0 SNRC - Rates (75%) Principal $3,791,370 $3,859,614 $3,929,088 $3,999,811 $4,071,808 $4,145,100 $4,219,712 $4,295,667 $4,372,989 $4,451,703 $4,531,833 $4,613,406 Interest $1,529,761 $1,461,516 $1,392,043 $1,321,320 $1,249,323 $1,176,031 $1,101,419 $1,025,464 $948,142 $869,428 $789,297 $707,724 Subtotal SNRC - Rates (75%) $5,321,131 $5,321,131 $5,321,131 $5,321,131 $5,321,131 $5,321,131 $5,321,131 $5,321,131 $5,321,131 $5,321,131 $5,321,131 $5,321,131 SNRC - Growth (25%) Principal $1,263,790 $1,286,538 $1,309,696 $1,333,270 $1,357,269 $1,381,700 $1,406,571 $1,431,889 $1,457,663 $1,483,901 $1,510,611 $1,537,802 Interest $509,920 $487,172 $464,014 $440,440 $416,441 $392,010 $367,140 $341,821 $316,047 $289,809 $263,099 $235,908 Subtotal SNRC - Growth (25%) $1,773,710 $1,773,710 $1,773,710 $1,773,710 $1,773,710 $1,773,710 $1,773,710 $1,773,710 $1,773,710 $1,773,710 $1,773,710 $1,773,710 Water Fund 20 Loan - Rates (75%) Principal $281,250 $281,250 $281,250 $281,250 $281,250 $281,250 $281,250 $281,250 $281,250 $281,250 $281,250 $281,250 Interest $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 Subtotal Water Fund 20 Loan - Rates (75%)$281,250 $281,250 $281,250 $281,250 $281,250 $281,250 $281,250 $281,250 $281,250 $281,250 $281,250 $281,250 Water Fund 20 Loan - Growth (25%) Principal $93,750 $93,750 $93,750 $93,750 $93,750 $93,750 $93,750 $93,750 $93,750 $93,750 $93,750 $93,750 Interest $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 Subtotal Water Fund 20 Loan - Growth (25%)$93,750 $93,750 $93,750 $93,750 $93,750 $93,750 $93,750 $93,750 $93,750 $93,750 $93,750 $93,750 East Valley Water District – Capacity Fee Study Page | 28 Table 29 – Wastewater Debt Schedules FY 2047 to FY 2053 Financial Information Wastewater Oustanding Debt FY 2047 FY 2048 FY 2049 FY 2050 FY 2051 FY 2052 FY 2053 2020B Bonds Principal $0 $0 $0 $0 $0 $0 $0 Interest $0 $0 $0 $0 $0 $0 $0 Subtotal 2020B Bonds $0 $0 $0 $0 $0 $0 $0 SNRC - Rates (75%) Principal $4,696,448 $4,780,984 $4,867,041 $4,954,648 $5,043,832 $5,134,621 $5,227,044 Interest $624,683 $540,147 $454,089 $366,483 $277,299 $186,510 $94,087 Subtotal SNRC - Rates (75%) $5,321,131 $5,321,131 $5,321,131 $5,321,131 $5,321,131 $5,321,131 $5,321,131 SNRC - Growth (25%) Principal $1,565,483 $1,593,661 $1,622,347 $1,651,549 $1,681,277 $1,711,540 $1,742,348 Interest $208,228 $180,049 $151,363 $122,161 $92,433 $62,170 $31,362 Subtotal SNRC - Growth (25%) $1,773,710 $1,773,710 $1,773,710 $1,773,710 $1,773,710 $1,773,710 $1,773,710 Water Fund 20 Loan - Rates (75%) Principal $281,250 $0 $0 $0 $0 $0 $0 Interest $0 $0 $0 $0 $0 $0 $0 Subtotal Water Fund 20 Loan - Rates (75%)$281,250 $0 $0 $0 $0 $0 $0 Water Fund 20 Loan - Growth (25%) Principal $93,750 $0 $0 $0 $0 $0 $0 Interest $0 $0 $0 $0 $0 $0 $0 Subtotal Water Fund 20 Loan - Growth (25%)$93,750 $0 $0 $0 $0 $0 $0