HomeMy WebLinkAbout2011-10-24 - Finance-Accounting Committee Meeting Agenda Packet
Yorba Linda
Water District
AGENDA
YORBA LINDA WATER DISTRICT
FINANCE-ACCOUNTING COMMITTEE MEETING
Monday, October 24, 2011, 4:00 PM
1717 E Miraloma Ave, Placentia CA 92870
COMMITTEE STAFF
Director Ric Collett, Chair Ken Vecchiarelli, General Manager
Director Robert R. Kiley Stephen Parker, Finance Director
1. PUBLIC COMMENTS
Any individual wishing to address the committee is requested to identify themselves and state the matter on
which they wish to comment. If the matter is on this agenda, the committee Chair will recognize the individual for
their comment when the item is considered. No action will be taken on matters not listed on this agenda.
Comments are limited to matters of public interest and matters within the jurisdiction of the Water District.
Comments are limited to five minutes.
2. ACTION CALENDAR
This portion of the agenda is for items where staff presentations and committee discussions are needed prior to
formal committee action.
2.1. Submission of 2011 Audit Reports
Recommendation: That the Committee recommend the Board of Directors receive
and file the FY 2010/11 Comprehensive Annual Financial Report, the Report on
Internal Control and the Communication to Those In Governance Letter.
2.2. Investment Report through September 2011
Recommendation: That the Committee recommend the Board of Directors approve
the Investment Report for the Period Ending September 30, 2011.
3. DISCUSSION ITEMS
This portion of the agenda is for matters such as technical presentations, drafts of proposed policies, or similar
items for which staff is seeking the advice and counsel of the Committee members. This portion of the agenda
may also include items for information only.
3.1. September 2011 Budget to Actual Results
3.2. Status of Strategic Plan Initiatives
3.3. Future Agenda Items and Staff Tasks
4. ADJOURNMENT
4.1. The next meeting of the Finance-Accounting Committee will be held on November 28,
2011 at 4:00 p.m.
Items Distributed to the Committee Less Than 72 Hours Prior to the Meeting
Pursuant to Government Code section 54957.5, non-exempt public records that relate to open session agenda items
and are distributed to a majority of the Committee less than seventy-two (72) hours prior to the meeting will be available
for public inspection in the lobby of the District's business office located at 1717 E. Miraloma Avenue, Placentia, CA
92870, during regular business hours. When practical, these public records will also be made available on the District's
internet website accessible at http://www.ylwd.com/.
Accommodations for the Disabled
Any person may make a request for a disability-related modification or accommodation needed for that person to be
able to participate in the public meeting by telephoning the Executive Secretary at 714-701-3020, or writing to Yorba
Linda Water District, P.O. Box 309, Yorba Linda, CA 92885-0309. Requests must specify the nature of the disability and
the type of accommodation requested. A telephone number or other contact information should be included so the
District staff may discuss appropriate arrangements. Persons requesting a disability-related accommodation should
make the request with adequate time before the meeting for the District to provide the requested accommodation.
ITEM NO. 2.1
AGENDA REPORT
Meeting Date: October 24, 2011 Budgeted: N/A
To: Finance-Accounting Committee
Funding Source: N/A
From: Ken Vecchiarelli, General
Manager
Presented By: Stephen Parker, Finance Dept: Finance
Manager
Reviewed by Legal: N/A
Prepared By: Stephen Parker, Finance CEQA Compliance: N/A
Manager
Subject: Submission of 2011 Audit Reports
STAFF RECOMMENDATION:
That the Committee recommend the Board of Directors receive and file the FY 2010/11
Comprehensive Annual Financial Report, the Report on Internal Control and the Communication to
Those In Governance Letter.
DISCUSSION:
Staff is pleased to present the Finance-Accounting Committee with Yorba Linda Water District's
Comprehensive Annual Financial Report (CAFR) for the fiscal year ending June 30, 2011. Staff will
submit the report for a Certificate in Achievement for Excellence in Financial Reporting award from
the Government Finance Officers Association. Staff is hopeful that this year's report wil merit this
level of recognition, just as last years' CAFR did in receiving the award.
White Nelson Diehl Evans LLP (previous Diehl Evans & Company, LLP), the District's external
auditors, have completed their audit of the Yorba Linda Water District for the fiscal year ending June
30, 2011, and have rendered an unqualified (clean) opinion in the attached Comprehensive Annual
Financial Report. They identified in the attached Report on Internal Control, four internal control
findings that rose to the level of a significant deficiency, and have included management's response
to those comments. Lastly, they have reported required disclosures to the Finance-Accounting
Committee in the Communication To Those In Governance.
ATTACHMENTS:
Name: Description: T Ype:
YLWD CAFR FY 2010-11.pdf FY 10/11 Comprehensive Annual Financial Report Backup Material
6.30.11 Report on Internal Control.pdf FY 10/11 Report on Internal Control Backup Material
6.30.11_Communication _to Those in Governance.pdf FY 10/11 Communication to Those In Governance Backup Material
Yorba Linda
Water District
tir ~r _i f~ l a A~ 'AYft~
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Comprehensive
Annual Financial ti
Report Y'
1 7.1
FY 2010/11
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1717 East Miraloma Avenue ■ Placentia ■ CAi4ornia■ 92870
www.ylwd.com ■ 714-701-3000
Our Mission
"Yorba Linda Water District will provide reliable, high quality water and sewer
services in an environmentally responsible manner ant the most economical cost
to our customers."
Our Vision
"Yorba Linda Water District will become the premier self-sufficient source for
reliable water, sewer and related services in the communities it serves."
YORBA LINDA WATER DISTRICT
of Yorba Linda, California
Comprehensive Annual Financial Report
.
WITH REPORT ON AUDIT BY
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
FOR THE YEAR ENDED JUNE 30, 2011
Prepared by:
Finance Department - Accounting Section
and
Cindy Botts, Management Analyst
YORBA LINDA WATER DISTRICT
TABLE OF CONTENTS
For the year ended June 30, 2011
Page
Number
INTRODUCTORY SECTION:
Letter of Transmittal i
Board of Directors and Executive Staff xiii
Organization Chart xiv
District Boundaries xv
Certificate of Achievement for Excellence in Financial Reporting xvi
FINANCIAL SECTION:
Independent Auditors' Report 1
Management's Discussion and Analysis
(Required Supplementary Information) 3
Basic Financial Statements: 11
Combined Statements of Net Assets 12
Combined Statements of Revenues, Expenses
and Changes in Net Assets 14
Combined Statements of Cash Flows 15
Notes to Basic Financial Statements 17
Required Supplementary Information: 41
Other Post-Employment Benefit Plan - Schedule
of Funding Progress 42
Supplementary Information: 43
Combining Schedule of Net Assets 44
Combining Schedule of Revenues, Expenses and
Changes in Net Assets 46
Combining Schedule of Cash Flows 47
Schedule of Operating Expenses by Cost Center and
Nature of Expenses for Water and Sewer 49
Schedule of Capital Assets 50
YORBA LINDA WATER DISTRICT
TABLE OF CONTENTS
(CONTINUED)
For the year ended June 30, 2011
Page
Number
STATISTICAL SECTION: 51
Description of Statistical Section 53
Financial Trends:
Changes in Net Assets 54
Revenue Capacity:
Number of Connections 56
Ten Largest Customers 57
Debt Capacity:
Ratio of Outstanding Debt 58
Debt Coverage 59
Demographic and Economic Information:
Demographics 60
Ten Largest Employers 61
Operating Information:
Number of Employees 62
Operating and Capacity Indicators 63
INTRODUCTORY SECTION
Yorba Linda
Water District
October 27, 2011
Members of the Board of Directors
Yorba Linda Water District
Introduction
It is our pleasure to submit Yorba Linda Water District's Comprehensive Annual Financial
Report (CAFR) for the fiscal year ending June 30, 2011. This report was prepared pursuant to the
guidelines set forth by the Governmental Accounting Standards Board (GASB).
District staff prepared this financial report in conjunction with an unqualified opinion issued by
the independent audit firm White Nelson Diehl Evans LLP. The independent auditor's report is
located at the front of the financial section of this document. Management's discussion and
analysis (MD&A) immediately follows the independent auditor's report and provides a narrative
introduction, overview and analysis of the basic financial statements. MD&A complements this
letter of transmittal and should be read in conjunction with it.
This report consists of management's representations concerning the finances of Yorba Linda
Water District. Consequently, management assumes full responsibility for the completeness and
reliability of the information presented in this report. To provide a reasonable basis for making
these representations, the District has established a comprehensive internal control framework
that is designed both to protect the District's assets from loss, theft or misuse, and to compile
sufficient reliable information for the preparation of the District's financial statements in
conformity with generally accepted accounting principles (GAAP). Because the cost of internal
control should not outweigh their benefits, the District's comprehensive framework of internal
controls has been designed to provide reasonable, rather than absolute, assurance that the
financial statements will be free from material misstatement. Management asserts that to the best
of our knowledge and belief this financial report is complete and reliable in all material aspects.
The Government Finance Officers Association of the United States and Canada (GFOA)
awarded a Certificate of Achievement for Excellence in Financial Reporting to the Yorba Linda
Water District for its comprehensive annual financial report for the fiscal year ended
June 30, 2010. In order to be awarded a Certificate of Achievement, a government must publish
an easily readable and efficiently organized comprehensive annual financial report. This report
must satisfy both generally accepted accounting principles and applicable legal requirements.
i
A Certificate of Achievement is valid for a period of one year only. We believe that our current
comprehensive annual financial report continues to meet the Certificate of Achievement Program
requirements and we are submitting it to the GFOA to determine its eligibility for certificate
again this year.
District Structure and Leadership
The Yorba Linda Water District is an independent special district, which operates under the
authority of Division 12 of the California Water Code. The Yorba Linda Water District has
provided water and sewer services to the residents of the City of Yorba Linda, portions of
Placentia, Brea, Anaheim, and nearby unincorporated areas since 1959, the year it was formed to
take over the assets and water service responsibilities of the Yorba Linda Water Company, a
mutual formed in 1909. The District is governed by a five-member Board of Directors, elected at
large from within the District's service area. The General Manager administers the day-to-day
operations of the District in accordance with policies and procedures established by the Board of
Directors. The Yorba Linda Water District employs a full-time staff of 76 employees. The
District's Board of Directors meets on the second and fourth Thursday of each month. Meetings
are publicly noticed and citizens are encouraged to attend.
The District provides water, sewer or a combination of both services to residents and businesses
within its service area, which includes approximately 14,475 acres of land comprising 22.6
square miles. The District serves a population of approximately 75,000 and currently provides
water service through approximately 23,850 residential, commercial, and light industrial
connections.
District Services
Residential customers make up approximately 92% of the District's customer base and consume
approximately 72% of the water provided annually by the District. The District obtains about
half of its water supply from the Metropolitan Water District (MWD) through the Municipal
Water District of Orange County (MWDOC) and the other half from groundwater wells within
the area. In FY 2010/11 the District provided 19,280 acre-feet of water to its customers.
The District's service area is known for having larger than average residential lots and a network
of horse trails spanning over 100 miles in length. In 2005, CNN ranked the City of Yorba Linda
as 21" among the best places in the United States to live. Similarly, in an article by CNN Money,
the City of Yorba Linda was listed as one of the most affluent cities in the United States, as well
as the highest median income in Orange County, as reported by 2000 Census data, based on
towns between 65,000 and 250,000 in population.
ii
Economic Condition and Outlook
The District's administrative offices are located in the City of Placentia in Orange County. The
economic outlook for the area is one of very slow growth, which is projected to continue
through 2012 because of the ongoing financial crisis and the somewhat distressed housing
market.
California's water supply continues to be a concern due to projected population increases,
cyclical drought conditions, and environmental and regulatory restrictions that threaten the
State's water supply and conveyance system through the Sacramento-San Joaquin Delta. These
concerns have increased focus on the need for conservation as well as more efficient irrigation
methods and systems. Within the District's boundaries, population growth is expected to increase
only minimally in the next 5-10 years, as more than 50% of the current households have children
under the age of 18 who are not expected to add to this growth via newborns. Additionally, the
District's area is primarily "built out", and an influx of residents from outside the area is
expected to remain fairly low. The State of California, however, is expected to grow by
20 million people over the next 40 years.
In March 2011, the Governor declared an end to a nearly four-year statewide drought. The
State's mandate of twenty percent water use reduction by the year 2020 ("20 by 2020"),
instituted in 2008 as part of the previous administration's actions to address the water shortage
remains in effect.
Simultaneously with the rising cost of import water, the District was also limited in the amount
of water it was able to provide to its customers without paying significant penalties in fiscal
years 2009-2010 and 2010-2011. A water allocation was placed on the District by MWDOC as a
result of MWD policies that amounted to a 10% reduction of water usage on the District's
average water use for calendar years 2004-2006. Failure to remain within this allocation would
have resulted in substantial financial penalties. While allocations were anticipated, the District
implemented a conservation ordinance effective July 1, 2009 restricting non-essential water use
and curtailing excessive water use.
Just prior to the close of the fiscal year 2010-2011, the Board of Directors voted to move from its
conservation ordinance Stage 2: Moderate Water Shortage Condition to No Stage, based upon
the State's declaration of the conclusion of the drought and MWDOC's decision to conclude
water use allocations to its member agencies. As the District's emphasis is now on water use
efficiency, the Permanent Restrictions identified in the ordinance will remain in effect.
As of the end of the fiscal year 2010-2011, the ordinance has proven to be successful with
District customers reducing water usage by an overwhelming 18%. With this trend, the District is
optimistic water usage will remain within allocation, penalties will be avoided and the District
will reach the State's "20 by 2020" mandate.
in
Historical Water Use
Year Annual Water Purchased Percent Chauc
acre-feet
FY 2006/07 25,656.5 N/A
FY 2007/08 24,635.5 -4.0%
FY 2008/09 23,416.8 -4.9%
FY 2009/10 20,162.2 -13.9%
FY 2010/11 19,279.9 -4.4%
Water Conservation Programs
The District has implemented conservation management practices since the late 1980's. District
staff participates in community events and distributes informational materials to encourage water
conservation. Through a partnership program with MWDOC, the District offers the following
conservation programs offering rebates for purchase and installation of:
Weather-based Irrigation Landscape Controllers
Rotating Irrigation Nozzles
High Efficiency Clothes Washers
In addition to these programs, the District also implemented a Water Conservation Ordinance on
July 1, 2009. The ordinance focuses on water use efficiency through the prohibition of wastcfill
practices and the establishment of water conservation stages. During fiscal year 2010/11, the
District remained at a Stage 2: Moderate Water Shortage Condition, in sync with MWD's water
shortage stage.
Water Conservation Stages
ModerateWater Shortage
111Stage 2 Reduce usage by 10%-20%
Stage 3 Severe Water Shortage
Reduce usage by 20-35%
Critical Water Shortage
Stage Reduce usage more than 35%
iv
Mission/Vision Statement and Major Initiatives
The activities of the Board and staff of the District are driven by its Mission Statement: "Yorba
Linda Water District will provide reliable, high quality water and sewer services in an
environmentally responsible manner, while maintaining an economical cost and unparalleled
customer service to our community", and its Vision Statement: "Yorba Linda Water District will
become the leading, innovative and efficient source for high quality reliable services." The
Mission and Vision Statements dictate the following five core values of the District.
1. Integrity- We demonstrate integrity every day by practicing the highest ethical standards
and by ensuring that our actions follow our words.
2. Accountability- We acknowledge that both the Board and the staff of the District are
accountable to the public that we serve, as well as to each other.
3. Responsibility- We take full responsibility for our actions- both our successes and our
opportunities for growth. We maintain a commitment of courtesy, assessment and
resolution with all customer concerns.
4. Transparency - We promote a culture where we actively listen to our customers and
communicate openly about our policies, processes and plans for the future.
5. Teamwork - Success centers on all departments working together and sharing
information and resources to achieve common goals. We are dedicated to ensuring that
every voice of the District, from the Board to each individual employee is treated with
dignity and respect, and that differences are valued and individual abilities and
contributions are recognized.
Major Accomplishments during FY 2010/11
Previously, the Board of Directors approved the FY 2007-2012 five-year capital improvement
plan totaling 557.7 million. These projects were identified for funding with the 2003 and 2008
Series Certificates of Participation (Revenue Bonds), in combination with annexation fiords and
other reserves held by the District. These projects are completed or underway as of the
preparation of this report.
For fiscal years 2011 through 2015, staff identified projects totaling 537.4 million. Included in
that amount, S4.3 million was spent or forecasted for spending through the end of FY 2010/11.
The remaining 533.0 million is therefore proposed for consideration by the Board for capital
improvement projects/capital replacement projects (CIP/CRP) that will extend through
FY 2014/15. 511.8 million of the 533.1 million is projected for spending in the upcoming
FY 2011/12 budget. Funding is available for the FY 2011/12 and FY 2012/13 projects with
existing and forecasted capital reserve fiords. Beyond that, additional fiends may be required to
complete the entire CIP list. This will depend on bid results and actual costs to complete the
approved projects.
In FY 2009/10, the Board of Directors approved a Five-Year Capital Improvement Program for
2009 to 2014 with a combined total of 544.4M. Of that amount, an estimated S18AM was spent
during FY 2010/11 for projects in planning, design and construction. Those projects included
the following:
v
Highland Reservoir
The new S 10.9M Highland Reservoir, in use as of July 2010, provides six million gallons of
potable water storage and was fully completed by September 2010. The buried, reinforced
concrete reservoir serves the most southerly part of the District and is designed with provisions
for expansion to nine million gallons. The new reservoir, considered to be the hub of water
storage for the District's groundwater transmission facilities, replaced the Highland Reservoir,
originally constructed in 1911.
I .
l I _
G
mow- `.4q _ -
- vo~
(Highland Reservoir During Construction)
Hidden Hills Reservoir Project
Located at the top of Hidden Hills Road, this S6.1M project now provides more efficient
operation in the District's highest pressure zones within the Hidden Hills area. The project
included construction of a two million gallon buried concrete reservoir and improvements to the
Santiago Booster Pump Station. It was fully complete in September 2010.
Vista del Verde Valve Replacement
This project is a result of needed improvements to a developer-installed system. While adequate
to provide water to the surrounding residential community, the system installed was not up to the
high standard that the District prefers, leading to difficulty with maintenance. The project
replaced twenty-two valves, over the course of two phases, and was complete in May 2011, at a
cost of 5440,000.
vi
Highland Booster Pump Station Replacement
The Highland Booster Pump Station Replacement project will allow the District to reliably pump
up to 18,000 gallons per minute of water from the adjacent 6 million gallon Highland Reservoir
to customers in the largest pressure zone served by the District and up to the Lakeview
Reservoir. A feasibility study was completed in early 2009 and the project design plans were
completed in June 2010. Construction of the S7M project began in October 2010 and will be
completed in early 2012.
District Well Projects
The District's water demand averages between 22,000 and 24,000 acre-feet per year. Of that
total, approximately half is pumped from the groundwater basin and the remainder is imported
water purchased through MWDOC. The cost of groundwater, including the cost of pumping, is
about half the cost of imported water. As such, the District is working to ensure it can pump its
full allotment of groundwater. To do so, it must frilly utilize its existing wells, optimize their
capacity, and construct new wells when necessary. In this regard, the CIP includes various well
projects, including the following:
• Wells 1, 5 and 12 Upgrade Project
The District refurbished Wells 1, 5 and 12 located on the grounds of the District
headquarters. These wells have a combined capacity of approximately 5,000 gallons per
minute. These wells were originally drilled between 1934 and 1950 and were refiirbished
to increase combined capacity and useful service life. Refurbishment results in more
reliable groundwater production, enabling the District to reduce the use of more
expensive imported water.
• Well 20 Project
This project includes construction of a new groundwater production well near existing
Well 11, located at the southerly end of Richfield Road. Well 11 was drilled in 1934 and
was relined in the 1990's, but has recently become less productive due to age and wear.
Well 20, at a cost of approximately S2M, provides nearly 2,000 gallons per minute of
groundwater production. It will improve the District's capability to produce its full
allotment of groundwater in place of the more expensive imported water. Construction is
scheduled for completion by summer 2012.
• South and West Well Project
Work has been initiated, investigating potential well sites south and west of the District's
existing Richfield Wellfield. If findings are positive, drilling of Well No. 21 is planned
for FY 11/12, along with design of above-grade facilities, at an estimated cost of S1
million. Planned for FY 12/13 is construction of Well No. 21 and a transmission
pipeline, at an estimated cost of S2 million. Proposed for FY 13/14 and 14/15 is
acquisition of two additional wells sites, well drilling and construction, pipelines and
appurtenances, at an estimated cost of approximately S5 million. It is anticipated that the
project will include three wells to replace and augment existing wells, and to increase the
District's groundwater pumping capacity, at a total project cost of approximately S8
million.
vii
Additional major accomplishments in FY 2010/11 include:
Sewer Master Plan
The District completed a Sewer Master Plan in February 2011, at a cost of approximately
5260,000. The plan updated the prior plan (completed in 1969) and identifies existing sewer
facilities; developed and calibrated a hydraulic computer model; provided flow monitoring;
identified existing system deficiencies; forecasted deficiencies that may develop with future
build out; and provided recommendations for future improvements, repairs and replacements.
Technological Advancements
From FY 2008/09 to the present, the District has continued to implement a series of
technological improvements including hardware and software system integrations. By ensuring
that the District remains current with technology improvements, efficiency gains have been
achieved, which include centralizing key information, reducing or eliminating inefficient,
redundant manual processes, and updating software to industry standards.
One of the largest advancements is the implementation of a new financial software package,
which will allow for a streamlined, computerized and centralized approach to the general ledger,
accounts payable, inventory, purchase orders, payroll, project accounting, bank reconciliation
and budgeting processes. A new and advanced Utility Billing software system has also been
implemented, with access to customer history and consumption information, which also offers
improved integration with online bill pay, backflow device maintenance and tracking, and
integration with the District's Geographical Information System (GIS).
Final tasks in the implementation of the District's digital information database and analytical
geographical information system (GIS) containing the water and sewer infrastructure, parcel and
street information linked to the customer service and operational database systems, began in
FY 2010/11. Phase 2 work will begin integration of applications such as CMMS, the hydraulic
model, valve-exercising program and hydrant-flushing program. Full completion of the project
is anticipated for FY 2012/13.
Future Years
Amidst the national economic turmoil and the California state budget crisis, our region continues
to face water supply issues due to extended drought seasons, as well as judicial, environmental
and regulatory restrictions. First and foremost, we continue to monitor the State's budget
shortfall and potential shift of our property tax revenues. Secondly, with water conservation and
reduced water sales, our ability to maintain a high level of services while holding costs down,
has been seriously challenged.
viii
Water Rate & Increases
In FY 2010/11, YLWD charged a uniform commodity rate of S2.52 per unit and a monthly fixed
charge of S11.73 for all sizes of meters. One unit of water equals 748 gallons, equating one
gallon of water to approximately 50.0034 (one third of a cent). At an average of 30 units of water
per month (approximately 22,500 gallons), a typical YLWD customer would pay about S87 on
the average for their monthly water bill. YLWD also provided wastewater service to
approximately two-thirds of the District's customer base in FY 2010/11, at an additional charge
of 55.50 per month. The District signed an agreement with the City of Yorba Linda in April 2011
to transfer the remaining one-third of wastewater service customers to the District, effective
July 1, 2011.
In FY 2011/12, Yorba Linda Water District faces many challenges related to water supply and
demand. The District's water supply is currently derived from both groundwater and import
water, approximately 50% from each source. Both import and groundwater prices have
dramatically increased over the past three fiscal years. In January 2009, import water prices
increased by 14.1% and another 19.7% in September 2009. Effective January 1, 2011, import
water costs increased again by 7.5% and are scheduled to increase by an additional 7.5% in
January 2012. These most recent increases alone have translated to over S2M in additional costs
in FY 2009/10. As a result, the District implemented a 41% water rate increase, beginning
September 2009, as well as a pass-through increase on the monthly service charge in
August 2010 to cover the 2011 and 2012 import water cost increases.
With the intent to develop a rate structure to support conservation and equitability among
customers, the District developed a Request for Proposals to conduct a Cost of Service Analysis
and Alternative Water Rate Feasibility Study in November 2009. This study will address the
impacts of implementing a tiered water conservation rate structure and/or a budget-based water
rate structure for customers of the District. It is the District's goal for the study to be completed
and approved by the Board of Directors in early 2012, with potential for implementation if the
Board decides to move forward with a different rate structure, beginning July 1, 2012.
Annexation Initiative
While 75% of the District's service boundary is within the territory of the Orange County Water
District (OCWD), the agency responsible for managing the groundwater basin, District Staff and
the Board will pursue annexation of the remaining 25%. The advantage of 100% annexation is a
substantial cost savings in the water the District produces from the groundwater basin. Currently,
the OCWD groundwater basin has a pumping limitation of 65% of each agency's annual
demands, which is applicable to all Orange County water agencies that are completely annexed
within OCWD. Since only 75% the District's boundaries are within OCWD, this equates to a
48% pumping limitation. The remaining water is supplied through the more costly import water.
It is estimated that the District would reduce its water costs by over S LOM per year if the entire
area is annexed into OCWD.
ix
Enhanced Outreach & Communications
The District continues to enhance its communications with and presence within the community.
Within the FY 2010/11 Budget, the District funded a Public Information Officer position. This
position develops additional public information and supports water conservation programs with
the overall goal of developing a more transparent image of the District to the community.
Additionally, it is the District's intent to develop a short-term and long-term public information
master plan.
The District's Citizens Advisory Committee, who serve as ambassadors to the community meet
with District staff on a monthly basis to discuss and provide recon- nendations on various
pending District issues. The committee has been actively involved with issues such as the water
rate increase, the water conservation ordinance, continuing conservation outreach, public
information, and various other matters as they arise. In November 2010, three Citizens Advisory
Committee members ran for, and won election to seats on the District Board of Directors.
Future Technological Advancements
Future technological advancements include the incorporation of a Computerized Maintenance &
Management System (CMMS), which will automate and track all field work orders and provide
actual costs to perform work order related functions. An Automated Purchase Requisitioning
System, which would provide better workflow and approvals for purchasing items, as well has
have direct integration with the new financial software.
Internal Control Structure
District management is responsible for the establishment and maintenance of the internal control
structure that ensures the assets of the District are protected from loss, theft or misuse. The
internal control structure also ensures adequate accounting data is compiled to allow for the
preparation of financial statements in conformity with generally accepted accounting principles.
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 Board of Directors adopts an operating and capital budget every year. The budget
authorizes and provides the basis for reporting and control of financial operations and
accountability for the District's enterprise operations and capital projects. The budget and
reporting treatment applied to the District is consistent with the accrual basis of accounting and
the financial statement basis.
x
Cash and Investment Management
In order of priority, the District's objectives when investing, reinvesting, purchasing, acquiring,
selling and managing public funds are as follows:
1. Safety: Safety of principal is the foremost objective of the investment program.
Investments made by the District are undertaken in a manner that seeks to ensure the
preservation of capital in the overall portfolio. To attain this objective, diversification is
required to prevent any potential loss on any individual security or depository from
exceeding the income generated from the remainder of the portfolio.
2. Liquidity: The investment portfolio will remain sufficiently liquid to enable the District to
meet all operating requirements that might be reasonably anticipated.
3. Return on Investments: The investment portfolio shall be designed with the objective of
attaining a market rate of return throughout budgetary and economic cycles, taking into
account the investment risk constraints and the cash flow characteristics of the portfolio.
Audit and Financial Reporting
State Law and Bond covenants require the District to obtain an annual audit of its financial
statements by an independent certified public accountant. The accounting firm of White Nelson
Diehl Evans LLP has conducted the audit of the District's financial statements. Their
unqualified (clean) Independent Auditor's Report appears in the Financial Section.
Other References
More information is contained in the Management's Discussion and Analysis and the Notes to
the Basic Financial Statements found in the Financial Section of the report.
Acknowledgements
Preparation of this report was accomplished by the combined efforts of District staff. We
appreciate the dedicated efforts and professionalism that these staff members contribute to the
District. We would also like to thank the members of the Board of Directors and especially the
Finance-Accounting Committee members for their continued support in planning and
implementation of the Yorba Linda Water District's fiscal policies.
Respectfully submitted,
Kenneth R. Vecchiarclli Stephen Parker
General Manager Finance Director
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X11
Board of Directors & Executive Staff
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Michael J. Beverage, President Phil Hawkins, Vice-President
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Gary T. Melton Robert R. Kiley Ric Collet
Director Director Director
Lee Cory Kenneth R. Vecchiarelli Steven R. Conklin
Operations Manager General Manager Engineering Manager
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Art Vega Gina Knight Stephen Parker
Interim IT Manager HR & Risk Manager Finance Manager
X111
Yorba Linda Board of
Water District Directors
General
Manager
Engineering Assist. GM/IT
Manager D
Executive irector
Secretary I
G.I.S. Info. Systems S.C.A.D.A.
Engineering Project Water Quality Administrator Administrator Administrator
Secretary Engineer Engineer
Info. Systems
Sr. Construction WQ Technclanij Technician 1/11 Instrumentation
Project Eng. Technician Inspector 1/11 Technician
Engineer J 3 FTE I FTE Management
Analyst
Construction
Inspector I
Operations
HR & Risk Finance Manager Manager
Director
Sr. Accountant Customer Svc. Personnel Sr. Fleet Operations W Maint. Chief Plant
Supervisor Storekeeper Technician Mechanic Assistant Su rinte dent 0
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Customer Srv. Mechanic Sr. Maintananc
Accounting 11/111 1 Facilities Sr. Plant
Rep. 1/11/111 Meter Services Dist. Operator
Assistant 1/11 4 FTE Lead 2 FrE 4 F1 maintenance Operator
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Operator
Meter Reader Maintanance Dist. Maintanance Plant 1/11 Operator [if Operator 11 Worker I If
Organization Chart 4 FTE 4 FTE 7 FTEJ TE 3 FTE
FY 2010-11
Total: 76.5 positions budgeted Job Classification Legend
AV Management Part-Time Supervisory/Confidential Bargaining Unit
DISTRICT BOUNDARIES
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XV
Certificate of
Achievement
for Excellence
In Financial
Reporting
Presented to
®rba Linda Water District
California
For its Comprehensive Annual
Financial Report
for the Fiscal Year Ended
June 30, 2010
A Certificate of Achievement for Excellence in Financial
Reporting is presented by the Government Finance Officers
Association of the United States and Canada to
government units and public employee retirement
systems whose comprehensive annual financial
reports (CAFRs) achieve the highest
standards in government accounting
and financial reporting.
~k`R~~N Gf ilf'~~~i~ A ,
2 /UNITED STATE5%. ~
AND E€nnt:;
C,kWA • ° f ` President
Executive Director
xvi
FINANCIAL SECTION
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INDEPENDENT AUDITORS' REPORT
Board of Directors
Yorba Linda Water District
Placentia, California
We have audited the basic financial statements of the Yorba Linda Water District (the District) as of
and for the year ended June 30, 2011 as listed in the table of contents. These basic financial statements
are the responsibility of the District's management. Our responsibility is to express an opinion on
these basic financial statements based on our audit. The prior year partial comparative information has
been derived from the financial statements of the District for the year ended June 30, 2010 and in our
report dated September 15, 2010, we expressed an unqualified opinion on these financial statements.
We conducted our audit in accordance with 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, and the State Controller's Minimum
Audit Requirements for California Special Districts. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes consideration 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 District's internal control over financial reporting.
Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit also includes assessing
the accounting principles used and significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that our audit provides a reasonable basis for
our opinion.
In our opinion, the basic financial statements referred to above present fairly, in all material respects,
the financial position of Yorba Linda Water District as of June 30, 2011 and the results of its changes in
financial position and cash flows for the year then ended in conformity with accounting principles
generally accepted in the United States of America, as well as the accounting systems prescribed by the
State Controller's Office and State regulations governing Special Districts.
-1-
5 Corporate Park, SUite 100, Irvine, CA 92606-5165 • Tel: 949-399-0600 • Fax: 949-399-0610
Officer located in Orarl(,e 1/11d ,S°an Diego Counties
In accordance with Government Auditing Standards, we have also issued our report dated
October 18, 2011 on our consideration of the District's internal control over financial reporting and our
tests of its compliance with certain provisions of laws, regulations, contracts, grant agreements and
other matters. The purpose of that report is 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
internal control over financial reporting or on compliance. That report is an integral part of an audit
performed in accordance with Government Auditing Standards and should be considered in assessing
the results of our audit.
Accounting principles generally accepted in the United States of America require that the
management's discussion and analysis and other post-employment benefit plan - schedule of funding
progress, as identified in the accompanying table of contents, be presented to supplement the basic
financial statements. Such information, although not a part of the basic financial statements, is
required by the Governmental Accounting Standards Board, who considers it to be an essential part of
financial reporting for placing the basic financial statements in an appropriate operational, economic,
or historical context. We have applied certain limited procedures to the required supplementary
information in accordance with auditing standards generally accepted in the United States of America,
which consisted of inquiries of management about the methods of preparing the information and
comparing the information for consistency with management's responses to our inquiries, the basic
financial statements, and other knowledge we obtained during the 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 on them.
Our audit was made for the purpose of forming an opinion on the basic financial statements taken as a
whole. The supplementary information listed in the table of contents is presented for purposes of
additional analysis and is not a required part of the basic financial statements of the District. 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 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 of the District
or to the financial statements themselves, and other additional procedures in accordance with auditing
standards generally accepted in the United States of America. In our opinion, the information is fairly
stated in all material respects in relation to the basic financial statements taken as a whole.
Our audit was conducted for the purpose of forming an opinion on the District's basic financial
statements taken as a whole. The Introductory Section and Statistical Section are presented for
purposes of additional analysis and are not a required part of the basic financial statements. The
Introductory Section and Statistical Section have not been subjected to the auditing procedures applied
in the audit of the basic financial statements and, accordingly, we do not express an opinion or provide
any assurance on them.
n1e.l..s - utl V .s L. UD
October 18, 2011
Irvine, California
-2-
YORBA LINDA WATER DISTRICT
MANGEMENT'S DISCUSSION AND ANAL YSIS
For the Year Ended June 30, 2011
The following Management's Discussion and Analysis ("MD&A") of activities and financial
performance of the Yorba Linda Water District ("District") provides an introduction to the financial
statements of the District for the fiscal year ended June 30, 2011. We encourage readers to consider the
information presented here in conjunction with the transmittal letter in the Introductory Section and
with the basic financial statements and related notes, which follow this section.
Financial Highlights
• The District's unrestricted net assets increased by S3.1 million, or a 40% reduction of the
negative unrestricted net assets.
• During the year the District's revenues were S27.3 million, up 3.7%.
• During the year, expenses were S28.7 million, up 4.7%.
Required Financial Statements
This annual report consists of a series of financial statements. The Statement of Net Assets, Statement
of Revenues, Expenses and Changes in Net Assets and Statement of Cash Flows provide information
about the activities and performance of the District using accounting methods similar to those used by
private sector companies.
The District's statements consist of two funds; the Water Fund and the Sewer Fund. The District's
records are maintained on an enterprise basis, as it is the intent of the Board of Directors that the costs
of providing water and sewer to the customer of the District are financed primarily through user
charges.
The Statement of Net Assets includes all of the District's investments in resources (assets) and the
obligations to creditors (liabilities). It also provides the basis for computing a rate of return, evaluating
the capital structure of the District and assessing the liquidity and financial flexibility of the District.
All of the current year's revenue and expenses are accounted for in the Statement of Revenues,
Expenses and Changes in Net Assets. This statement measures the success of the District's operations
over the past year and can be used to determine if the District has successfully recovered all of its costs
through its rates and other charges. This statement can also be used to evaluate profitability and credit
worthiness. The final required financial statement is the Statement of Cash Flows, which provides
information about the District's cash receipts and cash payments during the reporting period. The
Statement of Cash Flows reports cash receipts, cash payments and net changes in cash resulting from
operations, investing, non-capital financing, and capital and related financing activities and provides
answers to such questions as where did cash come from, what was cash used for, and what was the
change in cash balance during the reporting period.
See independent auditors' report.
-3-
YORBA LINDA WATER DISTRICT
MANGEMENT'S DISCUSSION AND ANAL YSIS
(CONTINUED)
For the Year Ended June 30, 2011
Financial Analysis of the District
One of the most important questions asked about the District's finances is, "Is the District better off or
worse off as a result of this year's activities?" The Statement of Net Assets and the Statement of
Revenues, Expenses and Changes in Net Assets report information about the District in a way that
helps answer this question. These statements include all assets and liabilities using the accrual basis of
accounting, which is similar to the accounting used by most private sector companies. All of the
current year's revenues and expenses are taken into account regardless of when the cash is received or
paid.
These two statements report the District's net assets and changes in them. You can think of the
District's net assets (the difference between assets and liabilities), as one way to measure the District's
financial health, or financial position. Over time, increases or decreases in the District's net assets are
one indicator of whether its financial health is improving or deteriorating. However, one will need to
consider other non-financial factors such as changes in economic conditions, population growth,
zoning and new or changed government legislation, such as changes in Federal and State water quality
standards.
Notes to the Basic Financial Statements
The notes provide additional information that is essential to a full understanding of the data provided in
the basic financial statements. The notes to the basic financial statements can be found on pages 17
through 40.
See independent auditors' report.
-4-
YORBA LINDA WATER DISTRICT
MANGEMENT'S DISCUSSION AND ANAL YSIS
(CONTINUED)
For the Year Ended June 30, 2011
Statement of Net Assets
Condensed Statements of Net Assets
2011 2010 Change
Assets:
Current unrestricted assets S 15,494,580 S 13,259,954 S 2,234,626
Current restricted assets 20,894,118 26,908,949 (6,014,831)
Other assets 755,728 785,655 (29,927)
Capital assets, net 181,633,788 180,322,149 1,311,639
Total Assets 218,778,214 221,276,707 (2,498,493)
Liabilities:
Liabilities payable from unrestricted current assets 5,586,615 6,627,839 (1,041,224)
Liabilities payable from restricted assets 1,373,171 1,346,440 26,731
Non-current liabilities 57,582,753 58,324,858 (742,105)
Total Liabilities 64,542,539 66,299,137 (1,756,598)
Net Assets:
Invested in capital assets, net of related debt 146,235,362 146,877,122 (641,760)
Restricted for capital projects 12,620,256 15,797,432 (3,177,176)
Unrestricted (4,619,943) (7,696,984) 3,077,041
Total Net Assets S 154,235,675 S 154,977,570 S (741,895)
As noted earlier, net assets may serve over time as a useful indicator of a government's financial
position. In the case of the District, assets of the District exceeded liabilities by S154.2 million and
5155.0 million as of June 30, 2011 and 2010, respectively.
By far the largest portion of the District's net assets (95% and 95% as of June 30, 2011 and 2010,
respectively) reflects the District's investment in capital assets (net of accumulated depreciation) less
any related debt used to acquire those assets that is still outstanding. The District uses these capital
assets to provide services to customers within the District's service area; consequently, these assets are
not available for future spending.
For the year ended June 30, 2011, the District showed a negative balance in its unrestricted net assets
of S4.6 million, which indicates that there aren't any reserves to be utilized in future years, as was the
same with the negative balance of S7.7 million for the year ended June 30, 2010.
See independent auditors' report.
-5-
YORBA LINDA WATER DISTRICT
MANGEMENT'S DISCUSSION AND ANAL YSIS
(CONTINUED)
For the Year Ended June 30, 2011
Statement of Revenues, Expenses and Changes in Net Assets
Condensed Statements of Revenues, Expenses and Changes in Net Assets
2011 2010 Change
Revenues:
Operating revenues:
Water sales S 22,686,251 S 21,806,164 S 880,087
Sewer revenue 1,274,579 1,275,980 (1,401)
Other operating revenues 1,035,545 1,102,143 (66,598)
Total operating revenues 24,996,375 24,184,287 812,088
Nonoperating revenues:
Investment income 274,152 244,857 29,295
Property taxes 1,258,769 1,269,441 (10,672)
Other nonoperating revenues 739,062 589,201 149,861
Total nonoperaring revenues 2,271,983 2,103,499 168,484
Total Revenues 27,268,358 26,287,786 980,572
Expenses:
Operating expenses:
Variable water costs 11,268,306 10,688,318 579,988
Personnel services 6,902,995 6,677,757 225,238
Supplies and services 3,686,333 3,576,147 110,186
Depreciation 5,279,860 5,153,891 125,969
Total operating expenses 27,137,494 26,096,113 1,041,381
Nonoperating expenses:
Interest expense 1,172,503 1,170,498 2,005
Other nonoperating expenses 406,575 151,300 255,275
Total nonoperaring expenses 1,579,078 1,321,798 257,280
Total Expenses 28,716,572 27,417,911 1,298,661
Net loss before capital contributions (1,448,214) (1,130,125) (318,089)
Capital contributions 706,316 6,278,135 (5,571,819)
Change in net assets (741,898) 5,148,010 (5,889,908)
Net assets, beginning of year, as restated 154,977,570 149,829,560 5,148,010
Net assets, end of year S 154,235,672 S 154,977,570 S (741,898)
See independent auditors' report.
-6-
YORBA LINDA WATER DISTRICT
MANGEMENT'S DISCUSSION AND ANAL YSIS
(CONTINUED)
For the Year Ended June 30, 2011
Statement of Revenues, Expenses and Changes in Net Assets (Continued)
The statement of revenues, expenses and changes of net assets shows how the District's net assets
changed during the fiscal years. In the case of the District, net assets decreased by S742 thousand and
increased by S5.1 million for the fiscal years ended June 30, 2011 and 2010, respectively.
A closer examination of the sources of changes in net assets reveals that:
In 2011, the District's total revenues increased by 5981 thousand, primarily due to an increase in water
sales of 5880 thousand from recognizing a full year with higher rates as a result of a large rate increase
that went into effect in September 2009. In addition, total expenses increased by S1.3 million
primarily due to water rates rising which caused an increase in variable water costs (5580 thousand
increase) and other non-operating expense increasing S255 thousand as a result of closing projects that
had accumulated in CIP and determining they should be expensed.
In 2010, the District's total revenues increased by S2.1 million, primarily due to an increase operating
revenues of S2.7 million from increased water revenue from a large rate increase that went into effect
in September 2009. Also, non-operating revenues decreased by 5600 thousand primarily due to lower
interest rates. In addition, total expenses increased by only S100 thousand despite a S LO million
increase in depreciation expense, due to an 18% reduction in water usage by conserving customers and
cuts made by District staff in the supplies and service area.
See independent auditors' report.
-7-
YORBA LINDA WATER DISTRICT
MANGEMENT'S DISCUSSION AND ANAL YSIS
(CONTINUED)
For the Year Ended June 30, 2011
Capital Assets
Changes in capital asset amounts for 2011 were as follows:
Balance Transfers/ Balance
2010 Additions Deletions 2011
Capital assets:
Capital assets, not being depreciated S 24,014,834 5 6,125,312 S (24,916,758) S 5,223,388
Capital assets, being depreciated 206,988,160 25,498,796 (254,120) 232,232,836
Less accumulated depreciation (50,680,845) (5,279,860) 138,269 (55,822,436)
Total capital assets, net S180,322,149 S 26,344,248 S (25,032,609) 5181,633,788
Changes in capital asset amounts for 2010 were as follows:
Balance Transfers/ Balance
2009 Additions Deletions 2010
Capital assets:
Capital assets, not being depreciated S 12,298,890 S 14,082,190 S (2,366,246) 5 24,014,834
Capital assets, being depreciated 198,268,513 8,854,536 (134,889) 206,988,160
Less accLunulated depreciation (45,655,616) (5,153,891) 128,662 (50,680,845)
Total capital assets, net 5164,911,787 S 17,782,835 S (2,372,473) 5180,322,149
At the end of fiscal year 2011 and 2010, the District's investment in capital assets amounted to
S 181.6 million and S 180.3 million, respectively (net of accumulated depreciation). This investment in
capital assets includes land, transmission and distribution systems, reservoirs, tanks, pumps, buildings
and structures, equipment, vehicles and construction-in-process, etc. Major capital assets additions
during the year included upgrades to the District's transmission and distribution system, most notably
the complete replacement of Highland Reservoir and bringing Hidden Hills Reservoir online.
Additional information regarding capital assets can be found in note 4 in Notes to Basic Financial
Statements.
See independent auditors' report.
-8-
YORBA LINDA WATER DISTRICT
MANGEMENT'S DISCUSSION AND ANAL YSIS
(CONTINUED)
For the Year Ended June 30, 2011
Long-Term Liabilities
Changes in long-term debt amounts for the year ended June 30, 2011 were as follows:
Balance Balance
2010 Additions Reductions 2011
2003 Revenue Certificates of Participation S 9,425,000 S - S (225,000) S 9,200,000
2008 Revenue Certificates of Participation 34,035,000 - (630,000) 33,405,000
Subtotal 43,460,000 - (855,000) 42,605,000
Add (Less):
Discount (125,851) - 5,433 (120,418)
Premium 730,955 - (26,420) 704,535
Total Certificates of Participation 44,065,104 - (875,987) 43,189,117
Compensated absences 1,050,888 518,006 (561,701) 1,007,193
Other post-employment liability 236,483 189,147 (303,565) 122,065
Total S 45,352,475 S 707,153 S (1,741,253) S 44,318,375
Changes in long-term debt amounts for the year ended June 30, 2010 were as follows:
Balance Balance
2009 Additions Reductions 2010
2003 Revenue Certificates of Participation S 9,645,000 S - S (220,000) S 9,425,000
2008 Revenue Certificates of Participation 34,640,000 - (605,000) 34,035,000
Subtotal 44,285,000 - (825,000) 43,460,000
Add (Less):
Discount (131,283) - 5,432 (125,851)
Premium 757,375 - (26,420) 730,955
Total Certificates of Participation 44,911,092 - (845,988) 44,065,104
Compensated absences 1,101,916 552,599 (603,627) 1,050,888
Other post-employment liability 120,774 224,018 (108,309) 236,483
Total S 46,133,782 S 776,617 S (1,557,924) S 45,352,475
Additional information regarding long-term liabilities can be found in note 5 in Notes to Basic
Financial Statements.
See independent auditors' report.
-9-
YORBA LINDA WATER DISTRICT
MANGEMENT'S DISCUSSION AND ANAL YSIS
(CONTINUED)
For the Year Ended June 30, 2011
Requests for Information
This financial report is designed to provide the District's finding sources, customers, stakeholders and
other interested parties with an overview of the District's financial operations and financial condition.
Should the reader have questions regarding the information included in this report or wish to request
additional financial information, please contact the District at 1717 E. Miraloma Avenue, Placentia,
California 92807 or the Finance Department at (714) 701-3040.
See independent auditors' report.
-10-
BASIC FINANCIAL STATEMENTS
- II -
YORBA LINDA WATER DISTRICT
COMBINED STATEMENTS OF NET ASSETS
June 30, 2011
(With prior year data for comparison only)
ASSETS 2011 2010
CURRENT ASSETS:
UNRESTRICTED ASSETS:
Cash and cash equivalents $ 11,235,015 $ 8,686,564
Accounts receivable - water and sewer services 3,642,035 3,923,554
Accounts receivable - property taxes 114,949 120,976
Accrued interest receivable 22,049 22,248
Prepaid expenses and deposits 246,919 273,024
Inventory 233,613 233,588
TOTAL UNRESTRICTED ASSETS 15,494,580 13,259,954
RESTRICTED ASSETS:
Cash and cash equivalents 18,750,493 26,907,082
Investments 2,143,130 -
Accrued interest receivable 495 1,867
TOTAL RESTRICTED ASSETS 20,894,118 26,908,949
TOTAL CURRENT ASSETS 36,388,698 40,168,903
NONCURRENT ASSETS:
Bond issuance costs 755,728 785,655
Capital assets (Note 4):
Non-depreciable 5,223,388 24,014,834
Depreciable, net of accumulated depreciation 176,410,400 156,307,315
TOTAL NONCURRENT ASSETS 182,389,516 181,107,804
TOTAL ASSETS 218,778,214 221,276,707
See independent auditors' report and notes to basic financial statements. (Continued)
-12-
YORBA LINDA WATER DISTRICT
COMBINED STATEMENTS OF NET ASSETS
(CONTINUED)
Junc 30, 2011
(With prior year data for comparison only)
LIABILITIES 2011 2010
CURRENT LIABILITIES:
PAYABLE FROM UNRESTRICTED CURRENT ASSETS:
Accounts payable $ 4,506,830 $ 5,536,848
Accrued expenses 130,306 125,727
Compensated absences payable (Note 5) 251,798 261722
Customer and construction deposits 281,156 221,940
Deferred revenue 416,525 480,602
TOTAL PAYABLE FROM UNRESTRICTED CURRENT ASSETS 5,586,615 6,627,839
PAYABLE FROM RESTRICTED ASSETS:
Accrued interest payable 483,171 491,440
Certificates of Participation - current portion (Note 5) 890,000 855,000
TOTAL PAYABLE FROM RESTRICTED ASSETS 1,373,171 1,346,440
TOTAL CURRENT LIABILITIES 6,959,786 7,974,279
LONG-TERM LIABILITIES (LESS CURRENT PORTION):
Deferred annexation revenue 14,406,176 14,090,105
Compensated absences (Note 5) 755,395 788,166
Other post-employment benefit (OPEB) liability (Notes 5 and 6) 122,065 236,483
Certificates of Participation (Note 5) 42,299,117 43,210,104
TOTAL LONG-TERM LIABILITIES (LESS CURRENT PORTION) 57,582,753 58,324,858
TOTAL LIABILITIES 64,542,539 66,299,137
NET ASSETS:
Invested in capital assets, net of related debt (Note 8) 146,235,362 146,877,122
Restricted for capital projects 12,620,256 15,797,432
Unrestricted (4,619,943) (7,696,984)
TOTAL NET ASSETS $ 154,235,675 $ 154,977,570
See independent auditors' report and notes to basic financial statements.
-13-
YORBA LINDA WATER DISTRICT
COMBINED STATEMENTS OF REVENUES, EXPENSES
AND CHANGES IN NET ASSETS
For the year ended June 30, 2011
(With prior year data for comparison only)
2011 2010
OPERATING REVENUES:
Water sales $ 22,686,251 $ 21,806,164
Sewer revenues 1,274,579 1,275,980
Other operating revenues 1,035,545 1,102,143
TOTAL OPERATING REVENUES 24,996,375 24,184287
OPERATING EXPENSES:
Variable water costs 11,268,306 10,688,318
Personnel services 6,902,995 6,677,757
Supplies and services 3,686,333 3,576,147
Depreciation 5,279,860 5,153,891
TOTAL OPERATING EXPENSES 27,137,494 26,096,113
OPERATING LOSS (2,141,119) (1,911,826)
NONOPERATING REVENUES (EXPENSES):
Property taxes 1,258,769 1,269,441
Investment income 274,152 244,857
Interest expense (1,172,503) (1,170,498)
Other nonopcrating revenues 739,062 589201
Other nonopcrating expenses (406,575) (151,300)
TOTAL NONOPERATING REVENUES (EXPENSES) 692,905 781,701
NET LOSS BEFORE CAPITAL CONTRIBUTIONS (1,448,214) (1,130,125)
CAPITAL CONTRIBUTIONS 706,319 6,278,135
CHANGES IN NET ASSETS (741,895) 5,148,010
NET ASSETS - BEGINNING OF YEAR, AS RESTATED 154,977,570 149,829,560
NET ASSETS - END OF YEAR $ 154,235,675 $ 154,977,570
See independent auditors' report and notes to basic financial statements.
-14-
YORBA LINDA WATER DISTRICT
COMBINED STATEMENTS OF CASH FLOWS
For the year ended June 30, 2011
(With prior year data for comparison only)
2011 2010
CASH FLOWS FROM OPERATING ACTIVITIES:
Cash received from customers $ 25,257,632 $ 22,783,879
Cash payments to employees for salaries and wages (7,056,529) (6,661,928)
Cash payments to suppliers of goods and services (15,879,098) (14,101,632)
Other revenue 245,050 156,025
Other expenses (263,781) (115,942)
NET CASH PROVIDED BY OPERATING ACTIVITIES 2,303,274 2,060,402
CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES:
Proceeds from property taxes and assessments 1,265,653 1,173,205
NET CASH PROVIDED BY NONCAPITAL
FINANCING ACTIVITIES 1,265,653 1,173,205
CASH FLOWS FROM CAPITAL AND RELATED
FINANCING ACTIVITIES:
Property taxes received for debt service - 4,443
Proceeds from annexation fees and capital contributions 1,022,579 113,312
Acquisition and construction of capital assets (5,599,745) (13,505,308)
Proceeds from sales of capital assets 13,678 4,063
Principal paid on long-term liability (855,000) (825,000)
Interest paid on long-term liability (1,961,047) (1,991,711)
NET CASH USED BY CAPITAL AND
RELATED FINANCING ACTIVITIES (7,379,535) (16,200,201)
CASH FLOWS FROM INVESTING ACTIVITIES:
Salc/purchase of investments, net (2,073,253) 12,671,946
Interest and investment earnings 275,723 258,176
NET CASH PROVIDED (USED)
BY INVESTING ACTIVITIES (1,797,530) 12,930,122
NET DECREASE IN CASH AND CASH EQUIVALENTS (5,608,138) (36,472)
CASH AND CASH EQUIVALENTS - BEGINNING OF YEAR 35,593,646 35,630,118
CASH AND CASH EQUIVALENTS - END OF YEAR $ 29,985,508 $ 35,593,646
See independent auditors' report and notes to basic financial statements. (Continued)
- 15 -
YORBA LINDA WATER DISTRICT
COMBINED STATEMENTS OF CASH FLOWS
(CONTINUED)
For the year ended June 30, 2011
(With prior year data for comparison only)
2011 2010
RECONCILIATION OF OPERATING LOSS TO NET
CASH PROVIDED BY OPERATING ACTIVITIES:
Operating loss $ (2,141,119) $ (1,911,826)
Adjustments to reconcile operating loss to
net cash provided by operating activities:
Depreciation 5,279,860 5,153,891
Other revenues 244,850 156,025
Other expenses (263,781) (115,942)
Changes in operating assets and liabilities:
(Increase) decrease in assets:
Accounts receivable 281,520 (1,358,795)
Inventory (25) 49,111
Prepaid expenses and deposits 26,105 71,637
Increase (decrease) in liabilities:
Accounts payable and accrued expenses (1,030,018) (21,294)
Accrued salaries and wages 4,579 (48,852)
Accrued other post-employment benefits (OPEB) liability (114,418) 115,709
Accrued compensated absences (43,695) (51,028)
Customer and construction deposits 59,216 21,766
Total adjustments 4,444,193 3,972,228
NET CASH PROVIDED BY OPERATING ACTIVITIES $ 2,303,074 $ 2,060,402
CASH AND CASH EQUIVALENTS -
FINANCIAL STATEMENT CLASSIFICATION:
Unrestricted $ 11,235,015 $ 8,686,564
Restricted 18,750,493 26,907,082
TOTAL CASH AND CASH EQUIVALENTS -
FINANCIAL STATEMENT CLASSIFICATION $ 29,985,508 $ 35,593,646
NONCASH INVESTING, CAPITAL AND
RELATED FINANCING ACTIVITIES:
Amortization related to long-tern debt $ 20,988 $ 20,988
Capital contributions $ 706,319 $ 6,278,135
See independent auditors' report and notes to basic financial statements.
-16-
NOTES TO BASIC FINANCIAL STATEMENTS
-17-
YORBA LINDA WATER DISTRICT
NOTES TO BASIC FINANCIAL STATEMENTS
June 30, 2011
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
a. Organization and Description of the Reporting Entity:
The Yorba Linda Water District (the District) is an independent special district established
in 1959, which operates under the authority of Division 12 of the California Water Code for the
purpose of providing water and sewer services to the properties within the District. The
District is governed by a five member board of Directors elected by the voters in the area to
four-year terms. The District provides two services which include Water and Sewer. Water is
provided to the entire service area. Sewer is provided to about two-thirds of the service area.
The District's service area includes Yorba Linda and portions of Placentia, Anaheim, Brea, and
areas of unincorporated Orange County. The District provides water and sewer service to
approximately 81,893 residents.
The criteria used in determining the scope of the reporting entity are based on the provisions of
GASB Statement 14. The District is the primary government unit. Component units are those
entities which are financially accountable to the primary government, either because the
District appoints a voting majority or the component unit's board, or because the component
unit will provide a financial benefit or impose a financial burden on the District.
The District's reporting entity includes the Yorba Linda Water District Public Financing
Corporation, a California nonprofit public benefit corporation, formed in July 2003 for the
purpose of providing assistance to the District and other public agencies in the State of
California of which the District is a member, or is otherwise engaged with in the financing,
refinancing, acquiring, constructing and rehabilitating of facilities, land and equipment, in the
sale or leasing of facilities, land and equipment for the use, benefit and enjoyment of the public
served by such agencies and any other purpose incidental thereto). Although the District and
the Public Facilities Corporation are legally separate entities, the District's Board of Directors
is financially responsible for the Public Financing Corporation and, therefore, the
accompanying financial statements include the accounts and records of the Public Financing
Corporation using the blending method as required by accounting principles generally accepted
in the United States of America. There are no separate financial statements for the Public
Financing Corporation.
b. Basic Financial Statements:
The basic financial statements are comprised of the Combined Statements of Net Assets, the
Combined Statements of Revenues, Expenses and Changes in Net Assets, the Statements of
Cash Flows and the notes to the basic financial statements.
See independent auditors' report.
-18-
YORBA LINDA WATER DISTRICT
NOTES TO BASIC FINANCIAL STATEMENTS
(CONTINUED)
June 30, 2011
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED):
c. Basis of Presentation:
The accounts of the District are an enterprise fund. An enterprise fund is a Proprietary type
fund used to account for operations (a) that are financed and operated in a manner similar to
private business enterprises - where the intent of the governing body is that the costs (expenses,
including depreciation) of providing goods or services to the general public on a continuing
basis be financed or recovered primarily through user charges; or (b) where the governing body
has decided that periodic determination of revenues earned, expenses incurred, and/or net
income is appropriate for capital maintenance, public policy, management control,
accountability or other purposes.
d. Measurement Focus and Basis of Accounting:
Measurement focus is a tern used to describe "which" transactions are recorded within the
various financial statements. Basis of accounting refers to "when" transactions are recorded
regardless of the measurement focus applied. The accompanying financial statements are
reported using the economic resources measurement focus, and the accrual basis of accounting.
Under the economic measurement focus all assets and liabilities (whether current or
noncurrent) associated with these activities are included on the Statement of Net Assets. The
Statement of Revenues, Expenses and Changes in Net Assets present increases (revenues) and
decreases (expenses) in total net assets. Under the accrual basis of accounting, revenues are
recorded when earned and expenses are recorded when a liability is incurred, regardless of the
timing of related cash flows.
e. Net Assets:
In the Statement of Net Assets, net assets are classified in the following categories:
• Invested in capital assets, net of related debt - This amount consists of capital assets net of
accumulated depreciation and reduced by outstanding debt that is attributed to the
acquisition, construction, or improvement of the assets.
• Restricted net assets - This amount is restricted by external creditors, grantors, contributors,
or laws or regulations of other governments.
• Unrestricted net assets - This amount is all net assets that do not meet the definition of
"invested in capital assets, net of related debt" or "restricted net assets".
When both restricted and unrestricted resources are available for use, the District may use
restricted resources or unrestricted resources based on the Board's discretion.
See independent auditors' report.
-19-
YORBA LINDA WATER DISTRICT
NOTES TO BASIC FINANCIAL STATEMENTS
(CONTINUED)
June 30, 2011
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED):
f. Operating Revenues and Expenses:
Operating revenues, such as charges for services (water sales and sewer service charges) result
from exchange transactions associated with the principal activity of the District. Nonoperating
revenues, such as property taxes and assessments, and investment income, result from
nonexchange transactions or ancillary activities in which the District receives value without
directly giving equal value in exchange.
Operating expenses include the cost of sales and services, administrative expenses and
depreciation on capital assets. All expenses not meeting this definition are reported as
nonoperating expenses.
g. Cash and Cash Equivalents:
The District considers all highly liquid investments with a maturity of three months or less at
the time of purchase to be cash equivalents.
h. Investments and Investment Policy:
The District has adopted an investment policy directing the District's General Manager or
Finance Director to invest, reinvest, sell or exchange securities.
Investments are stated at fair value which represents the quoted or stated market value.
Changes in fair value that occur during a fiscal year are recognized as investment income
reported for that fiscal year. Investment income includes interest earnings, changes in fair
value, and any gains or losses realized upon the liquidation or sale of investments.
i. Accounts Receivable:
The District extends credit to customers in the normal course of operations. Management has
evaluated the accounts and believes they are all collectible. Management evaluates all
accounts receivable and if it is determined that they are uncollectible they are written off as a
bad debt expense. A charge of S20,263 and S41,612 were made to bad debt expense for the
fiscal years ended June 30, 2011 and 2010, respectively.
See independent auditors' report.
-20-
YORBA LINDA WATER DISTRICT
NOTES TO BASIC FINANCIAL STATEMENTS
(CONTINUED)
June 30, 2011
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED):
j. Property Taxes and Assessments:
The Orange County Assessor's Office assesses all real and personal property within the County
each year. The Orange County Tax Collector's Office bills and collects the District's share of
property taxes and assessments. The Orange County Treasurer's Office remits current and
delinquent property tax collections to the District throughout the year. Property taxes in
California are levied in accordance with Article XIIIA of the State Constitution at 1% of
countywide assessed valuations. This levy is allocated pursuant to state law to the appropriate
units of local governments.
Property taxes receivable at year-end are related to property taxes collected by the Orange
County Tax Collector which have not been credited to the District's cash balance as of June 30.
The property tax calendar is as follows:
Lien Date: January 1
Levy Date: July 1
Due Dates: First Installment - November 1
Second Installment - March 1
Collection Dates: First Installment - December 10
Second Installment - April 10
k. Prepaid Expenses:
Certain payments to vendors reflects costs or deposits applicable to future accounting periods
and are recorded as prepaid items in the basic financial statements.
L Inventory:
Inventory consists primarily of materials and supplies used in the construction and
maintenance of the water and sewer systems and are stated at cost using the average-cost
method on a first in, first out basis.
in. Capital Assets:
Capital assets acquired and/or constructed are capitalized at historical cost. District policy has
set the capitalization threshold for reporting capital assets at 55,000. Contributed assets are
recorded at estimated fair market value at the date of contribution. Upon retirement or other
disposition of capital assets, the cost and related accumulated depreciation are removed from
the respective balances and any gains or losses are recognized.
See independent auditors' report.
-21-
YORBA LINDA WATER DISTRICT
NOTES TO BASIC FINANCIAL STATEMENTS
(CONTINUED)
June 30, 2011
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED):
in. Capital Assets (Continued):
Depreciation is recorded on the straight-line basis over the estimated useful lives of the assets
as follows:
Source of Supply 30 to 75 years
Pumping Plant 20 to 40 years
Water Treatment Plant 12 to 40 years
Sewer Plant 5 to 60 years
Transmission and Distribution Plant 10 to 40 years
General Plant 3 to 40 years
n. Bond Issuance Costs:
Bond issuance costs are amortized on a straight-line methodology based on the estimated term
of the related bond debt. Bond issuance costs were 5755,728 and 5785,655 net of accumulated
amortization of S 142,056 and S 112,130 at June 30, 2011 and 2010, respectively.
o. Interest Expense:
The District incurs interest charges on the Certificates of Participation. Interest expense of
5753,855 and 5787,038 has been capitalized as an addition to the cost of construction for the
years ended June 30, 2011 and 2010, respectively.
p. Compensated Absences:
The District's policy is to permit employees to accumulate earned vacation and sick leave. The
liability for vested vacation and sick leave is recorded as an expense when earned. Employees
may carry forward up to one and one-half years of earned vacation days and an unlimited
number of sick leave days.
Upon termination or retirement, permanent employees are entitled to receive compensation at
their current base salary for all unused vacation leave except for those employees that have not
completed the probationary period.
Permanent employees that retire in accordance with the Public Employee's Retirement System
qualifications are entitled to receive cash compensation at their current base salary for
three-eighths of all unused sick leave and the remaining five-eighths of the unused sick leave is
contributed to the employee's PERS account. The District has accrued 100% of the unused
sick leave as a liability as it expects most employees to meet the PERS requirements when
retiring or leaving the District.
See independent auditors' report.
-22-
YORBA LINDA WATER DISTRICT
NOTES TO BASIC FINANCIAL STATEMENTS
(CONTINUED)
June 30, 2011
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED):
q. Deferred Credits:
Deferred credits represent customer refunds that have not been cashed and are reported as part
of deferred revenue.
r. Construction Advances and Deposits:
Construction deposits are collected by the District to cover the cost of construction projects
within the District. Funds in excess of project costs are refunded to the customer.
s. Construction Bonding Deposits:
The District's policy is to maintain certain bonding requirements for water and sewer
construction projects performed within District boundaries to ensure the proper completion of
the project. Deposited amounts are refunded upon final approval of the project.
t. Prepaid Connection Fees:
Connection fees are collected by the District to cover the cost of service connections within the
District. Funds in excess of connection costs are refunded to the customer. These amounts are
reported as part of deferred revenues.
u. Deferred Annexation Revenue:
The District collects a fee from newly annexed developments for all residential and
commercial properties. This fee is in-lieu of the District's share of the 1% property tax revenue
which the District no longer received post-Proposition 13. The fee is a present worth value
required to generate a forty year revenue stream equivalent to the lost property tax revenue. It
is calculated based on the fair market value estimate of the improved property at the time the
fee is collected and based on the current rate of return on the District's investments. The
deposit balance accrues interest and provides a source of operational revenue for the District.
This deferred revenue source may be used for capital facilities in the future if approved by the
Board.
v. Water and Sewer Sales:
The District recognizes water and sewer service charges based on cycle billings rendered to the
customers each month.
See independent auditors' report.
-23-
YORBA LINDA WATER DISTRICT
NOTES TO BASIC FINANCIAL STATEMENTS
(CONTINUED)
June 30, 2011
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED):
w. Capital Contributions:
Capital contributions represent cash and capital asset additions contributed to the District by
property owners or real estate developers desiring services that require capital expenditures or
capacity commitment.
x. Budgetary Policies:
The District adopts annual nonappropriated budget for planning, control and evaluation
purposes. Budgetary control and evaluation are affected by comparisons of actual revenues
and expenses with planned revenues and expenses for the period. Encumbrance accounting is
not used to account for commitments related to unperformed contracts for construction and
services.
y. Use of Estimates:
The financial statements are prepared in conformity with accounting principles generally
accepted in the United States of America and, accordingly, include amounts that are based on
management's best estimates and judgments. Accordingly, actual results could differ from the
estimates.
z. Prior Year Data:
Selected information regarding the prior year has been included in the accompanying financial
statements. This information has been included for comparison purposes only and does not
represent a complete presentation in accordance with generally accepted accounting principles.
Accordingly, such information should be read in conjunction with the District's prior year
financial statements, from which this selected financial data was derived.
See independent auditors' report.
-24-
YORBA LINDA WATER DISTRICT
NOTES TO BASIC FINANCIAL STATEMENTS
(CONTINUED)
June 30, 2011
2. CASH AND INVESTMENTS:
Cash and Investments:
Cash and investments as of June 30, 2011 are reported in the accompanying combining schedule of
net assets as follows:
Water Sewer Total
Unrestricted Current Assets:
Cash and cash equivalents S 9,240,812 S 1,994,203 S 11,235,015
Restricted Assets:
Cash and cash equivalents 18,750,493 - 18,750,493
Investments 2,143,130 - 2,143,130
Total Cash and Investments S 30,134,435 S 1,994,203 S 32,128,638
Cash and investments as of June 30, 2011 consisted of the following:
Water Sewer Total
Cash on hand S 1,200 S - S 1,200
Deposits with financial institutions 708,637 252,563 961,200
Escrow deposits 109,737 - 109,737
Investments 29,314,861 1,741,640 31,056,501
Total Cash and Investments S 30,134,435 S 1,994,203 S 32,128,638
See independent auditors' report.
- 25 -
YORBA LINDA WATER DISTRICT
NOTES TO BASIC FINANCIAL STATEMENTS
(CONTINUED)
June 30, 2011
2. CASH AND INVESTMENTS (CONTINUED):
Investments Authorized by the California Government Code and the District's Investment
Policy:
The table below identifies the investment types that are authorized for the District by the California
Government Code (or the District's investment policy, where more restrictive). The table also
identifies certain provisions of the California Government Code (or the District's investment
policy, where more restrictive) that address interest rate risk, credit risk, and concentration of credit
risk.
This table does not address investments of debt proceeds held by bond trustees that are governed
by the provisions of debt agreements of the District, rather than the general provisions of the
California Government Code or the District's investment policy.
Maximum Maximum
Maximum Percentage Investment
Authorized Investment Type Maturity of Portfolio * in One Issuer
Bank or Savings and Loans 5 years None None
Local Agency Investment Fund (LAIF) N/A None S 10 million
Orange County Commingled Investment Pool N/A None S 10 million
California Asset Management Program N/A None None
United States Treasury Bills, Notes
and Bonds 5 years None None
United States Government Sponsored
Agency Securities 5 years 50% None
Corporate Bonds 5 years 30% None
Bankers Acceptances 180 days 10% None
Commercial Paper 270 days 25% None
Ca1TRUST Investment Pool N/A N/A S10 million
Money Market Funds N/A 20% None
* Excluding amounts held by bond trustee that are not subject to California Government Code
restrictions.
At June 30, 2011, the District's investment in CalTRUST of 523,265,811 exceeded the limit of
S 10 million authorized by the investment policy
N/A - Not Applicable
See independent auditors' report.
-26-
YORBA LINDA WATER DISTRICT
NOTES TO BASIC FINANCIAL STATEMENTS
(CONTINUED)
June 30, 2011
2. CASH AND INVESTMENTS (CONTINUED):
Investments Authorized by Debt Agreements:
Investments of debt proceeds held by bond trustees are governed by provisions of the debt
agreements, rather than the general provisions of the California Government Code or the District's
investment policy. The table below identifies the investment types that are authorized for
investments held by bond trustees. The table also identifies certain provisions of these debt
agreements that address interest rate risk and concentration of risk.
Maximum Maximum
Maximum Percentage Investment
Authorized Investment Type Maturity Allowed in One Issuer
Cash None None None
United States Treasury Bills, Notes
and Bonds None None None
United States Treasury Obligations None None None
Resolution Funding Corp. (REFCORP) None None None
Prefunded Municipal Bonds None None None
United States Government Sponsored
Agency Securities None None None
Commercial Paper None None None
Money Market Funds None None None
Certificates of Deposits None None None
Guaranteed Investment Contracts None None None
Bankers Acceptance 1 year None None
Repurchase Agreements 30 days None None
Local Agency Investment Fund None None None
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 manages its
exposure to interest rate risk is by purchasing a combination of shorter term and longer term
investments and by timing cash flows from maturities so that a portion of the portfolio is maturing
or coming close to maturity as necessary to provide the cash flow and liquidity needed for
operations.
See independent auditors' report.
-27-
YORBA LINDA WATER DISTRICT
NOTES TO BASIC FINANCIAL STATEMENTS
(CONTINUED)
June 30, 2011
2. CASH AND INVESTMENTS (CONTINUED):
Disclosures Relating to Interest Rate Risk (Continued):
Information about the sensitivity of the fair values of the District's investments (including
investments held by bond trustee) to market interest rate fluctuations is provided by the following
table that shows the distribution of the District's investments by maturity as of June 30, 2011.
Remaining
Maturity
(in Months)
12 Months
Investment Type or Less
Ca1TRUST Investment Pool S 23,265,811
Held by bond trustee:
United States Government Sponsored
Agency Securities 2,143,129
Money market funds 5,647,561
S 31,056,501
Disclosures Relating to Credit Risk:
Generally, credit risk is the risk that an issuer of an investment will not fulfill its obligation to the
holder of the investment. This is measured by the assignment of a rating by a nationally
recognized statistical rating organization. Presented in the following table are the minimum rating
required by (where applicable) the California Government Code, the District's investment policy,
or debt agreements, and the actual Standard and Poor's credit rating as of June 30, 2011 for each
investment type.
Minimum
Legal Not
Investment Type Ratin4 Total Rated AAA AAI
CalTRUST Investment Pool N/A S 23,265,811 S 20,771,146 S - S 2,494,665
Held by bond trustee:
United States Government
Sponsored Agency Securities N/A 2,143,129 - 2,143,129 -
Money market funds A 5,647,561 5,647,561 - -
S 31.056.501 S 26,418.707 S 2.143.129 S 2,494.665
Subsequent to June 30, 2011, Standard and Poor's reduced the rating of the United States
Government Sponsored Agency Securities from AAA to AA+.
See independent auditors' report.
-28-
YORBA LINDA WATER DISTRICT
NOTES TO BASIC FINANCIAL STATEMENTS
(CONTINUED)
June 30, 2011
2. CASH AND INVESTMENTS (CONTINUED):
Concentration of Credit Risk:
The investment policy of the District contains no limitations on the amount that can be invested in
any one issuer beyond that stipulated by the California Government Code.
Custodial Credit Risk:
Custodial credit risk for deposits is the risk that, in the event of the failure of a depository financial
institution, the District 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, the District will not be able to recover the value of its investment or collateral
securities that are in the possession of another party. With respect to investments, custodial credit
risk generally applies only to direct investments in marketable securities. Custodial credit risk does
not apply to a local government's indirect investment in securities through the use of mutual funds
or government investment pools (such as LAIF).
The California Government Code and the District's investment policy do not contain legal or
policy requirements that would limit the exposure to custodial credit risk for deposits or
investments, other than the following provision for deposits: The California Government Code
requires that a financial institution secure deposits made by state or local governmental units by
pledging securities in an undivided collateral pool held by a depository regulated under state law
(unless so waived by the governmental unit). The market value of the pledged securities in the
collateral pool must equal at least 110% of the total amount deposited by the public agencies.
California law also allows financial institutions to secure District deposits by pledging first trust
deed mortgage notes having a value of 150% of the secured public deposits. The District had
deposits with bank balances of 51,273,849 as of June 30, 2011. Of the bank balances, up to
S677,874 are federally insured and the remaining balance is collateralized in accordance with the
Code; however, the collateralized securities are not held in the District's name.
See independent auditors' report.
-29-
YORBA LINDA WATER DISTRICT
NOTES TO BASIC FINANCIAL STATEMENTS
(CONTINUED)
June 30, 2011
2. CASH AND INVESTMENTS (CONTINUED):
Investment in Ca1TRUST Investment Pool:
Ca1TRUST is a Joint Powers Agency Authority created by local public agencies to provide a
convenient method for local public agencies to pool their assets for investment purposes.
Ca1TRUST is governed by a Board of Trustees made up of experienced local agency treasurers and
investment officers. The Board sets overall policies for the program and selects and supervises the
activities of the investment manager and other agents. CalTRUST maintains and administers four
pooled accounts within the program: Money Market, Short-Term, Medium-Term and Long-Tenn.
The Money Market account permits daily transactions, with same-day liquidity (provided
redemption requests are received by 1:00 p.m. Pacific time), with no limit on the amount of funds
that may be invested. The Short-Term account permits an unlimited number of transactions per
month (with prior day notice), with no limit on the amount of funds that may be invested. The
Medium- and Long-Term accounts permit investments, withdrawals and transfers once per month,
with five days advance notice. All CalTRUST accounts comply with the limits and restrictions
placed on local agency investments by the California Government Code. Ca1TRUST imposes a
S250,000 minimum investment; however, there is no maximum limit. The fair value of the
District's investment in this pool is reported in the accompanying financial statements at amounts
based upon the District's percentage interest of the fair value provided by CalTRUST for the
Ca1TRUST accounts (in relation to the amortized cost of that portfolio). The balance available for
withdrawal is based on the accounting records maintained by CalTRUST.
3. RESTRICTED ASSETS:
Restricted assets were provided by, and are to be used for the following as of June 30, 2011
and 2010:
Source Use 2011 2010
Custodial receipts Custodial costs S 109,737 S 1,282,379
Bond proceeds, taxes, Construction of capital
assessments and interest assets expansion 20,784,381 25,626,570
S 20,894,118 S 26,908,949
See independent auditors' report.
-30-
YORBA LINDA WATER DISTRICT
NOTES TO BASIC FINANCIAL STATEMENTS
(CONTINUED)
June 30, 2011
4. CAPITAL ASSETS:
Changes in capital assets for the year ended June 30, 2011 is as follows:
Balance Balance
Rme 30, 2010 Additions Deletions June 30, 2011
Capital assets, not being depreciated:
Land, mineral and water rights S 347,490 S - S - S 347,490
Construction in progress 23,667,344 6,125,312 (24,916,758) 4,875,898
Total capital assets, not
being depreciated 24,014,834 6,125,312 (24,916,758) 5,223,388
Capital assets, being depreciated:
Source of supply 5,721,883 309,114 (4,116) 6,026,881
Pumping plant 16,867,820 801,219 (6,500) 17,662,539
Water treatment plant 2,623,881 123,924 - 2,747,805
Transmission and distribution plant 163,291,245 22,496,269 (146,433) 185,641,081
General plant 18,483,331 1,768,270 (97,071) 20,154,530
Total capital assets,
being depreciated 206,988,160 25,498,796 (254,120) 232,232,836
Less accumulated depreciation for:
Source of supply (1,517,665) (137,465) 4,116 (1,651,014)
Pumping plant (3,814,769) (605,508) 5,193 (4,415,084)
Water treatment plant (816,366) (125,857) - (942,223)
Transmission and distribution plant (39,266,907) (3,598,042) 31,889 (42,835,060)
General plant (5,265,138) (812,988) 97,071 (5,981,055)
Total accumulated depreciation (50,680,845) (5,279,860) 138,269 (55,822,436)
Total capital assets,
being depreciated, net 156,307,315 20,218,936 (115,851) 176,410,400
Total capital assets, net S 180.322.149 S 26.344.248 S(25.032.609) S 181.633.788
Depreciation expense for the depreciable capital assets was 55,279,860 in 2011.
The District has been involved in various construction projects throughout the year. The balance of
construction in progress at June 30, 2011 is 54,875,898.
See independent auditors' report.
-31-
YORBA LINDA WATER DISTRICT
NOTES TO BASIC FINANCIAL STATEMENTS
(CONTINUED)
June 30, 2011
5. LONG-TERM LIABILITIES:
Changes in long-term liabilities for the year ended June 30, 2011 were as follows:
Beginning Ending Due Within
Balance Additions Reductions Balance One Year
Certificates of Participation:
2003 Revenue Certificates
of Participation S 9,425,000 S - S (225,000) S 9,200,000 S 235,000
2008 Revemie Certificates
of Participation 34,035,000 - (630,000) 33,405,000 655,000
Subtotal 43,460,000 - (855,000) 42,605,000 890,000
Add (Less):
Discount (125,851) - 5,433 (120,418) -
Prelnlnnl 730,955 - (26,420) 704,535 -
Total Certificates
of Participation 44,065,104 - (875,987) 43,189,117 890,000
Compensated absences 1,050,888 518,006 (561,701) 1,007,193 251,798
Other post-employment
liability 236,483 189,147 (303,565) 122,065 -
Total S 45.352.475 S 707.153 S (1.741.253) S 44.318.375 S 1.141.798
2003 Revenue Certificates of Participation:
In August 2003, the Public Financing Corporation issued S 10,645,000 2003 Revenue Certificates
of Participation for the purpose of financing the Highland Reservoir Renovation and
Richfield-Phase 3 Renovation Project. The Certificates bear interest ranging from 2% to 5%,
payable semiannually on April 1 and October 1, commencing April 1, 2004. The Term Certificates
of 52,295,000 are due on October 1, 2028 and the Term Certificates of 52,930,000 are due on
October 1, 2033.
A surety bond for S679,137 was issued by Financial Guaranty Insurance Company (FGIC). FGIC
is not rated by Moody's Investors' Service, Standard & Poor's or Fitch Investors' Service. At
June 30, 2011 the 2003 Certificates outstanding balance was 59,200,000.
The Certificates are obligations of the Corporation payable solely from payments received from
the District pursuant to the Installment Purchase Agreement, by and between the District and the
Corporation. The Installment Purchase Agreement requires the District to fix, prescribe and collect
rates and charges for the water service which will be at least sufficient to yield during each fiscal
year net revenues equal to 110% of the debt service for such fiscal year. For fiscal year 2011, the
net revenues equal to 183% of the debt service.
See independent auditors' report.
-32-
YORBA LINDA WATER DISTRICT
NOTES TO BASIC FINANCIAL STATEMENTS
(CONTINUED)
June 30, 2011
5. LONG-TERM LIABILITIES (CONTINUED):
2003 Revenue Certificates of Participation (Continued):
The annual debt service requirements for the 2003 Revenue Certificates of Participation
outstanding at June 30, 2011 are as follows:
Year Ending Principal Interest Total
2012 S 235,000 S 437,382 S 672,382
2013 245,000 428,076 673,076
2014 255,000 418,076 673,076
2015 265,000 407,411 672,411
2016 275,000 395,934 670,934
2017 - 2021 1,570,000 1,778,900 3,348,900
2022 - 2026 1,980,000 1,350,750 3,330,750
2027 - 2031 2,530,000 789,500 3,319,500
2032 - 2034 1,845,000 141,375 1,986,375
Subtotal 9,200,000 6,147,404 15,347,404
Less: Discount (120,418) - (120,418)
Total S 9,079,582 S 6,147,404 S 15,226,986
2008 Revenue Certificates of Participation:
In February 2008, the District issued 534,995,000 2008 Revenue Certificates of Participation for
the purpose of financing the 2008 Capital Improvement Projects. The Certificates bear interest
ranging from 4% to 5%, payable semiannually on April 1 and October 1, commencing
October 1, 2008. The Term Certificates of S10,885,000 are due on October 1, 2038. The legal
reserve requirement is 52,147,096. At June 30, 2011 the reserve fund had a balance of 52,145,021.
At June 30, 2011 the 2008 Certificates outstanding balance was 533,405,000.
The Certificates are obligations of the Corporation payable solely from payments received from
the District pursuant to the Installment Purchase Agreement, by and between the District and the
Corporation. The Installment Purchase Agreement requires the District to fix, prescribe and collect
rates and charges for the water service which will be at least sufficient to yield during each fiscal
year net revenues equal to 110% of the debt service for such fiscal year. For fiscal year 2011, the
net revenues equal to 183% of the debt service.
See independent auditors' report.
-33-
YORBA LINDA WATER DISTRICT
NOTES TO BASIC FINANCIAL STATEMENTS
(CONTINUED)
June 30, 2011
5. LONG-TERM LIABILITIES (CONTINUED):
2008 Revenue Certificates of Participation (Continued):
The annual debt service requirements for the 2008 Revenue Certificates of Participation
outstanding at June 30, 2011 are as follows:
Year Ending Principal Interest Total
2012 S 655,000 S 1,477,796 S 2,132,796
2013 680,000 1,451,096 2,131,096
2014 705,000 1,423,396 2,128,396
2015 735,000 1,394,596 2,129,596
2016 765,000 1,364,596 2,129,596
2017 - 2021 4,305,000 6,329,580 10,634,580
2022 - 2026 5,245,000 5,374,122 10,619,122
2027 - 2031 6,435,000 4,136,313 10,571,313
2032 - 2036 8,040,000 2,487,363 10,527,363
2037 - 2039 5,840,000 447,250 6,287,250
Subtotal 33,405,000 25,886,108 59,291,108
Add: Premium 704,535 - 704,535
Total S 34,109.535 S 25,886,108 S 59,995,643
Compensated Absences:
Compensated absences are comprised of unpaid vacation leave, sick leave and compensating time
off which are accrued as earned. (See Note lp).
6. OTHER POST EMPLOYMENT BENEFITS (OPEB):
a. Plan Description:
The District, through a single employer defined benefit plan, provides post-employment health
care benefits. Specifically, the District provides health (medical, dental and vision) insurance
for its retired employees and directors, their dependent spouses (if married and covered on the
District's plan at time of retirement), or survivors in accordance with Board resolutions.
Medical coverage is provided for retired employees who are age 50 or over and who have a
minimum of 5 years service with the District. The District pays 100% of the premium for the
retiree and two-thirds of the premium amount for eligible dependents accrued at a rate of one
year for every three years of service. Two-thirds of the premium amount of medical coverage
is provided for the surviving spouse of retired employees for the remaining vested period. The
plan does not provide a publicly available financial report.
See independent auditors' report.
-34-
YORBA LINDA WATER DISTRICT
NOTES TO BASIC FINANCIAL STATEMENTS
(CONTINUED)
June 30, 2011
6. OTHER POST EMPLOYMENT BENEFITS (OPEB) (CONTINUED):
b. Funding Policy:
The contribution requirements of plan members and the District are established and may be
amended by the District, District's Board of Directors, and/or the employee associations.
Currently, contributions are not required from plan members. The District is currently funding
this OPEB obligation on a pay-as-you-go basis. For the year ended June 30, 2011, the District
paid S140,747 in health care costs for its retirees and their covered dependents and made a
contribution of 5162,818.
c. Annual OPEB Cost and Net OPEB Obligation:
The District's annual OPEB cost (expense) is calculated based on the annual required
contribution of the employer (ARC), an amount actuarially determined in accordance with
parameters of GASB Statement 45. The ARC represents a level of funding that, if paid on an
ongoing basis, is projected to cover normal cost each year and to amortize any unfunded
liabilities of the plan over a period not to exceed thirty years.
The following table shows the components of the District's annual OPEB cost for the year, the
amount actually contributed to the plan, and changes in the District's net OPEB obligation to
the Retiree Health Plan:
Annual required contribution S 177,323
Interest on net OPEB obligation 11,824
Adjustment to annual required contribution -
Annual OPEB cost (expense) 189,147
Actual contributions made (303,565)
Decrease in net OPEB obligation (114,418)
Net OPEB Obligation - beginning of year 236,483
Net OPEB Obligation - end of year S 122,065
The District's annual OPEB cost, the percentage of annual OPEB cost contributed to the plan,
and the net OPEB obligation for the years ended June 30, 2011, 2010 and 2009 were as
follows:
Percentage
Fiscal Annual of Annual Net
Year OPEB OPEB Costs OPEB
Ended Cost Contributed Obligation
6/30/09 S 217,979 44.64% S 120,774
6/30/10 224,018 48.35% 236,483
6/30/11 189,147 160.49% 122,065
See independent auditors' report.
-35-
YORBA LINDA WATER DISTRICT
NOTES TO BASIC FINANCIAL STATEMENTS
(CONTINUED)
June 30, 2011
6. OTHER POST EMPLOYMENT BENEFITS (OPEB) (CONTINUED):
d. Funded Status and Funding Progress:
As of March 1, 2011, the most recent actuarial valuation date, the plan was zero percent
funded. The actuarial accrued liability for benefits was S1,594,667, and the actuarial value of
assets was zero, resulting in an unfunded actuarial accrued liability (UAAL) of 51,594,667.
The covered payroll (annual payroll of active employees covered by the plan) was 55,044,860
and the ratio of the UAAL to the covered payroll was 31.61%.
Actuarial valuations of an ongoing plan involve estimates of the value of reported amounts and
assumptions about the probability of occurrence of events far into the future. Examples include
assumptions about rates of employee turnover, retirement, mortality, as well as economic
assumptions regarding claim costs per retiree, healthcare inflation and interest rates. Amounts
determined regarding the funded status of the plan and the annual required contributions of the
employer are subject to continual revision as actual results are compared with past expectations
and new estimates are made about the future. The schedule of funding progress, presented as
required supplementary information following the notes to the financial statements, presents
multi-year trend information about whether the actuarial value of plan assets is increasing or
decreasing over time relative to the actuarial accrued liabilities for benefits.
e. Actuarial Methods and Assumptions:
Projections of benefits for financial reporting purposes are based on the substantive plan (the
plan as understood by the employer and the plan members) and include the types of benefits
provided at the time of each valuation and the historical pattern of sharing of benefit costs
between the employer and plan members to that point. The actuarial methods and assumptions
used include techniques that are designed to reduce the effects of short-term volatility in
actuarial accrued liabilities and the actuarial value of assets, consistent with the long-term
perspective of the calculations. In the March 1, 2011 actuarial investment valuation, the entry
age normal cost method was used. The actuarial assumptions included an inflation rate of 3.0%
per annum, an investment return of 7.6% per annum, a projected salary increase of 3.0% per
annum and a health inflation rate of 4.0% per annum. The District is using the level
percentage of payroll method to allocate amortization cost by year and a closed 30 year period
for the initial unfunded actuarial accrued liability.
See independent auditors' report.
-36-
YORBA LINDA WATER DISTRICT
NOTES TO BASIC FINANCIAL STATEMENTS
(CONTINUED)
June 30, 2011
7. DEFINED BENEFIT PENSION PLAN:
a. Plan Description:
The District participates in the 2.0% at 55 Risk Pool of the California Employees Retirement
System (CalPERS), a cost sharing multiple-employer defined benefit pension plan. CalPERS
provides retirement and disability benefits, annual cost-of-living adjustments, and death
benefits to plan members and beneficiaries. CalPERS acts as a common investment and
administrative agent for participating public entities within the State of California. Benefit
provisions and all other requirements are established by State statute and District ordinance.
Copies of CalPERS' annual financial report may be obtained from their Executive Office
located at, 400 P Street, Sacramento, CA 95814.
b. Funding Policy:
The contribution rate for plan members in the CalPERS 2.0% at 55 Risk Pool Retirement Plan
is 7% of their annual covered salary. The District makes these contributions required of
District employees on their behalf and for their account. Also, the District is required to
contribute the actuarially determined remaining amounts necessary to fund the benefits for its
members. The required employer contribution rates for fiscal year 2011, 2010 and 2009 were
10.461%, 10.062% and 9.886%, respectively. The contribution requirements of the plan
members are established by State statute, and the employer contribution rate is established and
may be amended by CalPERS. For fiscal years 2011, 2010 and 2009 the District's annual
employer's contributions were 5527,743, 5492,476 and S482,987, respectively, for CalPERS
and was equal to the District's required and actual contributions for each year.
8. NET ASSETS INVESTED IN CAPITAL ASSETS, NET OF RELATED DEBT AND ESTRICTED
NET ASSETS:
The balance of net investment in capital assets consisted of the following as of June 30, 2011
and 2010:
2011 2010
Capital assets, net of accumulated depreciation S 181,633,788 S 180,322,149
Certificates of participation - current (890,000) (855,000)
Certificates of participation - long-term (42,299,117) (43,210,104)
Unspent debt proceeds 7,790,691 10,620,077
Net assets invested in capital assets,
net of related debt S 146,235362 S 146,877,122
See independent auditors' report.
-37-
YORBA LINDA WATER DISTRICT
NOTES TO BASIC FINANCIAL STATEMENTS
(CONTINUED)
June 30, 2011
9. RISK MANAGEMENT:
The District is exposed to various risks of loss related to torts, theft of, damage to and destruction
of assets, errors and omissions, injuries to employees and natural disasters. In an effort to manage
its risk exposure, the District is a member of the Association of California Water Agencies Joint
Powers Insurance Authority (the Authority).
The Authority is a risk-pooling self-insurance authority, created under provisions of California
Government Code Sections 6500 et. seq. 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.
At June 30, 2011, as a member of the Authority, the District participated in the insurance programs
as follows:
• General and auto liability, public officials and employee's error and omissions: Total risk
financing self-insurance limits of S1,000,000, combined single limit at S1,000,000 per
occurrence. The Authority purchases additional excess coverage layers: S59 million for
general, auto and public officials liability, which increases the limits on the insurance
coverage noted above.
• Employee dishonesty coverage up to 5100,000 per loss includes public employee
dishonesty, forgery or alteration and theft, disappearance and destruction coverages, subject
to a S 1,000 deductible per occurrence.
• Property loss is paid at the replacement cost for property on file, if replaced within two
years after the loss, otherwise paid on an actual cash value basis. The District's
Retrospective Allocation Point (deductible) is 525,000 per occurrence. The Authority is
self-insured for the first 550,000, and purchases excess coverage up to 5100 million, subject
to a S1,000 deductible, except for a 5500 deductible on vehicles.
• Boiler and machinery coverage for the replacement cost up to S 100 million per occurrence,
subject to various deductibles depending on the type of equipment.
• Workers' compensation insurance up to California statutory limits for all work related
injuries/illnesses covered by California law.
Settled claims have not exceeded any of the coverage amounts in any of the last three fiscal years
and there were no reductions in the District's insurance coverage during the years ended 2011,
2010 and 2009. Liabilities are recorded when it is probable that a loss has been incurred and the
amount of the loss can be reasonably estimated net of the respective insurance coverage.
Liabilities include an amount for claims that have been incurred but not reported (IBNR). There
were no IBNR claims payable as of June 30, 2011, 2010 and 2009.
See independent auditors' report.
-38-
YORBA LINDA WATER DISTRICT
NOTES TO BASIC FINANCIAL STATEMENTS
(CONTINUED)
June 30, 2011
10. COMMITMENTS AND CONTINGENCIES:
Construction Contracts:
The District has a variety of agreements with private parties relating to the installation,
improvement or modification of water facilities and distribution systems within its service area.
The financing of such construction contracts is being provided primarily from the District's
replacement reserves and advances for construction. The District has committed to approximately
S6,302,697 of open construction contracts as of June 30, 2011.
Construction contracts include:
Total Construction Balance
Approved Costs to
Project Name Contract to Date Complete
Elk Mountain site improvement S 19,000 S 16,000 S 3,000
Well No. 20 96,335 67,081 29,254
Well No. 20 179,467 18,420 161,047
Highland BPS upgrade 800,253 655,000 145,253
Highland BPS upgrade 4,525,800 1,097,375 3,428,425
YL Blvd Booster Station 423,000 143,000 280,000
Computerized maintenance and management system 248,626 195,526 53,100
South and West well project 34,180 - 34,180
Ohio Street/Oriente Drive pipeline replacement 174,880 146,292 28,588
Ohio Street/Oriente Drive pipeline replacement 1,389,089 - 1,389,089
Ohio Street/Oriente Drive pipeline replacement 43,798 - 43,798
2010 pipeline replacement project 238,771 99,808 138,963
2010 pipeline replacement project 568,000 - 568,000
S 8,741.199 S 2,438.502 S 6,302.697
Litigation:
In November 2008, a series of wildfires, known as the Freeway Complex Fires, spread across the
communities of Corona, Chino Hills, Yorba Linda, Anaheim Hills, and Brea in Orange and
Riverside Counties. The fires also spread to Diamond Bar in Los Angeles County. The fires
burned about 30,305 acres, destroyed about 200 structures, and forced the evacuations of about
7,000 homes. There are claims being asserted against the District by homeowners and others
damaged by the fires. As a member of ACWA JPIA (see Note 9), these claims are currently being
handled by the JPIA's legal counsel. The District's management believes the ultimate outcome of
these claims will not exceed the District's insurance coverage amounts.
See independent auditors' report.
-39-
YORBA LINDA WATER DISTRICT
NOTES TO BASIC FINANCIAL STATEMENTS
(CONTINUED)
June 30, 2011
11. PROPOSITION IA BORROWINGS BY THE STATE OF CALIFORNIA:
Under the provisions of Proposition IA and as part of the 2009-2010 budget package passed by the
California state legislature on July 28, 2009, the State of California borrowed 8% of the amount of
property tax revenue, including those property taxes associated with the in-lieu motor vehicle
license fee, the triple flip in the lieu sales tax, and supplemental property tax, apportioned to cities,
counties and special districts (excluding redevelopment agencies). The state is required to repay
this borrowing plus interest by June 30, 2013. After repayment of this initial borrowing, the
California legislature may consider only one additional borrowing within a ten-year period. The
amount of this borrowing pertaining to the District was S 102,192.
The borrowing by the State of California was recognized as a receivable in the accompanying
financial statements. It is reported as part of accounts receivable - property taxes.
12. PRE-ANNEXATION AGREEMENT:
In June 2008, the District entered into a pre-annexation agreement with Placentia Yorba Linda
Unified School District (PYLUSD) whereby the District intends to provide access to water and
sewer service to the PYLUSD for the benefit of a property that PYLUSD wishes to develop for
public high school use. Per the agreement, PYLUSD agreed to fund additional District reservoir
improvements equal to the cost of constructing additional 450,000 gallons of reservoir storage.
The cost for the additional water storage was estimated to be approximately S1.50 per gallon,
resulting in a total approximate cost of S675,000. PYLUSD paid the District 532,500 within
30 days of execution of the agreement. The remaining balance is payable over a nine-year period
at an annual interest rate of 4%. Annual payments of 581,704, which include principal and interest,
started in the fiscal year ended June 30, 2010. The remaining outstanding balance at June 30, 2011
was S490,395. As of June 30, 2011 the District reservoir improvements are still in progress. The
District has not yet completed its obligation in its entirety and has not earned the rights to the entire
amount. Therefore, the outstanding balance is not recorded in the District's books.
13. RESTATEMENT OF NET ASSETS:
Net assets at July 1, 2010 were restated by 5410,247 from 5154,567,323 to 5154,977,570 to
reclassify service fees for existing trunk lines received in prior years from a deposit liability to
revenues.
14. SUBSEQUENT EVENT:
Effective July 1, 2011, all assets, liabilities, contractual rights and obligations, and any other real or
personal property or other interest whatsoever of the City of Yorba Linda related to the Sewer
Collection Facilities was transferred to the District. In exchange, the District agreed to assume the
obligation and responsibility to provide sewer service and maintenance to the East Yorba Linda
Area.
See independent auditors' report.
-40-
REQUIRED SUPPLEMENTARY INFORMATION
OTHER POST-EMPLOYMENT BENEFIT PLAN
SCHEDULE OF FUNDING PROGRESS
-41-
YORBA LINDA WATER DISTRICT
REQUIRED SUPPLEMENTARY INFORMATION
For the year ended June 30, 2011
OTHER POST-EMPLOYMENT BENEFIT PLAN
SCHEDULE OF FUNDING PROGRESS
Retiree Health Plan
Unfunded
Actuarial Actuarial UAAL as a
Accrued Actuarial Value Accrued Annual Percentage
Actuarial Liability of Assets Liability Funded Covered of Covered
Valuation (AAL) (AVA) (UAAL) Ratio Payroll Payroll
Date (a) (b) (a) - (b) (b)/(a) (c) [(a)-(b)]/(c)
06/01/09 S 1,740,127 S - S 1,740,127 0.00% S 4,983,653 34.92%
03101111 S 1,594,667 S - S 1,594,667 0.00% S 5,044,860 31.61%
See independent auditors' report and notes to basic financial statements.
-42-
SUPPLEMENTARY INFORMATION
-43-
YORBA LINDA WATER DISTRICT
COMBINING SCHEDULE OF NET ASSETS
Junc 30, 2011
ASSETS Water Sewer Totals
CURRENT ASSETS:
UNRESTRICTED ASSETS:
Cash and cash cquivalcnts $ 9,240,812 $ 1,994,203 $ 11,235,015
Accounts rcccivable - water and sewer services 3,458,899 183,136 3,642,035
Accounts rcccivable - property taxes 114,091 858 114,949
Accrued intcrestrcccivablc 20,269 1,780 22,049
Prcpaid cxpcnscs and deposits 246,919 - 246,919
Inventory 233,613 233,613
TOTAL UNRESTRICTED ASSETS 13,314,603 2,179,977 15,494,580
RESTRICTED ASSETS:
Cash and cash cquivalcnts 18,750,493 - 18,750,493
Investment 2,143,130 2,143,130
Accrued intcrest rcccivablc 495 495
TOTAL RESTRICTED ASSETS 20,894,118 - 20,894,118
TOTAL CURRENT ASSETS 34,208,721 2,179,977 36,388,698
NONCURRENT ASSETS:
Bond issuance costs 755,728 - 755,728
Capital assets:
Non-depreciable 4,993,359 230,029 5,223,388
Dcpreciablc, nct of accumulated depreciation 152,656,383 23,754,017 176,410,400
TOTAL NONCURRENT ASSETS 158,405,470 23,984,046 182,389,516
TOTAL ASSETS 192,614,191 26,164,023 218,778,214
Scc independent auditors' report.
-44-
YORBA LINDA WATER DISTRICT
COMBINING SCHEDULE OF NET ASSETS
(CONTINUED)
June 30, 2011
LIABILITIES Water Sewer Totals
CURRENT LIABILITIES:
PAYABLE FROM UNRESTRICTED CURRENT ASSETS:
Accounts payable $ 4,382,882 $ 123,948 $ 4,506,830
Accrued expenses 115,056 15,250 130,306
Compensated absences 234,543 17255 251,798
Customer and construction deposits 226,534 54,622 281,156
Deferred revenue 416,525 - 416,525
TOTAL PAYABLE FROM
UNRESTRICTED CURRENT ASSETS 5,375,540 211,075 5,586,615
PAYABLE FROM RESTRICTED ASSETS:
Accrued interest payable 483,171 - 483,171
Certificates of Participation - current portion 890,000 890,000
TOTAL PAYABLE FROM RESTRICTED ASSETS 1,373,171 - 1,373,171
TOTAL CURRENT LIABILITIES 6,748,711 211,075 6,959,786
LONG-TERM LIABILITIES (LESS CURRENT PORTION):
Deferred annexation revenue 14,406,176 - 14,406,176
Compensated absences 703,630 51,765 755,395
Other post-employment benefit (OPEB) liability 111,255 10,810 122,065
Certificates of Participation 42,299, t 17 - 42,299,117
TOTAL LONG-TERM
LIABILITIES (LESS CURRENT PORTION) 57,520,178 62,575 57,582,753
TOTAL LIABILITIES 64,268,889 273,650 64,542,539
NET ASSETS:
Invested in capital assets, net of related debt 122,251,316 23,984,046 146,235,362
Restricted for capital projects 12,620,256 - 12,620,256
Unrestricted (6,526,270) 1,906,327 (4,619,943)
TOTAL NET ASSETS $ 128,345302 $ 25,890,373 $ 154,235,675
See independent auditors' report.
-45-
YORBA LINDA WATER DISTRICT
COMBINING SCHEDULE OF REVENUES, EXPENSES
AND CHANGES IN NET ASSETS
For the year ended Junc 30, 2011
Water Sewer Totals
OPERATING REVENUES:
Watcr sales $ 22,686,251 $ - $ 22,686,251
Scwcr revenues - 1,274,579 1,274,579
Othcr operating rcvcnucs 981,471 54,074 1,035,545
TOTAL OPERATING REVENUES 23,667,722 1,328,653 24,996,375
OPERATING EXPENSES:
Variable water costs 11,267,615 691 11,268,306
Personnel serviccs 6,114,939 788,056 6,902,995
Supplies and services 3,160,419 525,914 3,686,333
Depreciation and amortization 4,669,579 610,281 5,279,860
TOTAL OPERATING EXPENSES 25,212,552 1,924,942 27,137,494
OPERATING LOSS (1,544,830) (596,289) (2,141,119)
NONOPERATING REVENUES (EXPENSES):
Property taxes 1,258,769 - 1,258,769
Invcst rent income 252,522 21,630 274,152
Interest cxpcnsc (1,171,439) (1,064) (1,172,503)
Othcr nonopcrating rcvcnucs 732,638 6,424 739,062
Other nonopcrating expenses (291,195) (115,380) (406,575)
TOTAL NONOPERATING
REVENUES (EXPENSES) 781,295 (88,390) 692,905
NET LOSS BEFORE
CAPITAL CONTRIBUTIONS (763,535) (684,679) (1,448,214)
CAPITAL CONTRIBUTIONS 364,564 341,755 706,319
CHANGES IN NET ASSETS (398,971) (342,924) (741,895)
NET ASSETS - BEGINNING OF YEAR,
AS RESTATED 128,744,273 26,233,297 154,977,570
NET ASSETS - END OF YEAR $ 128,345,302 $ 25,890,373 $ 154,235,675
Scc independent auditors' report.
-46-
YORBA LINDA WATER DISTRICT
COMBINING SCHEDULE OF CASH FLOWS
For the year ended June 30, 2011
Water Sewer Totals
CASH FLOWS FROM OPERATING ACTIVITIES:
Cash received from customers $ 23,932,171 $ 1,325,461 $ 25,257,632
Cash payments to employees for salaries and wages (6,346,307) (710,222) (7,056,529)
Cash payments to suppliers of goods and services (15,487,283) (391,815) (15,879,098)
Other revenue 244,850 200 245,050
Other expenses (148,850) (114,931) (263,781)
NET CASH PROVIDED BY OPERATING ACTIVITIES 2,194,581 108,693 2,303,274
CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES:
Proceeds from property taxes and assessments 1,265,653 - 1,265,653
NET CASH PROVIDED (USED) BY
NONCAPITAL FINANCING ACTIVITIES 1,265,653 - 1,265,653
CASH FLOWS FROM CAPITAL AND RELATED
FINANCING ACTIVITIES:
Proceeds from annexation fees and capital contributions 751,715 270,864 1,022,579
Acquisition and construction of capital assets (5,351,531) (248,214) (5,599,745)
Proceeds from sales of capital assets 13,678 - 13,678
Principal paid on long-term liability (855,000) (855,000)
Interest paid on long-term liability (1,959,983) (1,064) (1,961,047)
NET CASH PROVIDED (USED) BY CAPITAL
AND RELATED FINANCING ACTIVITIES (7,401,121) 21,586 (7,379,535)
CASH FLOWS FROM INVESTING ACTIVITIES:
Sale/purchase of investments, net (2,079,477) 6,224 (2,073,253)
Interest and investment earnings 253,876 21,847 275,723
NET CASH PROVIDED (USED)
BY INVESTING ACTIVITIES (1,825,601) 28,071 (1,797,530)
NET INCREASE (DECREASE) IN
CASH AND CASH EQUIVALENTS (5,766,488) 158,350 (5,608,138)
CASH AND CASH EQUIVALENTS - BEGINNING OF YEAR 33,757,793 1,835,853 35,593,646
CASH AND CASH EQUIVALENTS - END OF YEAR $ 27,991,305 $ 1,994,203 $ 29,985,508
See independent auditors' report. (Continued)
-47-
YORBA LINDA WATER DISTRICT
COMBINING SCHEDULE OF CASH FLOWS
(CONTINUED)
For the year ended June 30, 2011
Water Sewer Totals
RECONCILIATION OF OPERATING LOSS TO NET
CASH PROVIDED BY OPERATING ACTIVITIES:
Operating loss $ (1,544,830) $ (596,289) $ (2,141,119)
Adjustments to reconcile operating loss to
net cash provided by operating activities:
Depreciation 4,669,579 610,281 5,279,860
Other revenues 244,850 200 245,050
Other expenses (148,850) (114,931) (263,781)
Changes in operating assets and liabilities:
(Increase) decrease in assets:
Accounts receivable 283,368 (1,848) 281,520
Inventory (25) - (25)
Prepaid expenses and other deposits 28,169 (2,064) 26,105
Increase (decrease) in liabilities:
Accounts payable and accrued expenses (1,164,977) 134,959 (1,030,018)
Accrued salaries and wages (10,671) 15,250 4,579
Accrued other post-employment benefits (OPEB) liability (103,945) (10,473) (114,418)
Accrued compensated absences (112,715) 69,020 (43,695)
Customer and other deposits 54,628 4,588 59,216
Total adjustments 3,739,411 704,982 4,444,393
NET CASH PROVIDED BY OPERATING ACTIVITIES $ 2,194,581 $ 108,693 $ 2,303,274
CASH AND CASH EQUIVALENTS -
FINANCIAL STATEMENT CLASSIFICATION:
Unrestricted $ 9,240,812 $ 1,994,203 $ 11,235,015
Restricted 18,750,493 - 18,750,493
TOTAL CASH AND CASH EQUIVALENTS -
FINANCIAL STATEMENT CLASSIFICATION $ 27,991,305 $ 1,994,203 $ 29,985,508
NONCASH INVESTING, CAPITAL AND
RELATED FINANCING ACTIVITIES:
Amortization related to long-tens debt $ 20,988 $ - $ 20,988
Capital contributions $ 364,564 $ 341,755 $ 706,319
See independent auditors' report.
- 48 -
YORBA LINDA WATER DISTRICT
SCHEDULE OF OPERATING EXPENSES BY COST CENTER
AND NATURE OF EXPENSES FOR WATER AND SEWER
For the year ended Junc 30, 2011
Water Sewer Totals
OPERATING EXPENSES:
Variable Water Costs:
Imported water $ 7,734,559 $ $ 7,734,559
OCWD replenishment assessment 2,212,161 - 2,212,161
Fucl and power/pumping 787,444 691 788,135
MWD connection charge 533,451 - 533,451
Total Variablc Watcr Costs 11,267,615 691 11,268,306
Pcrsonncl Services:
Unit salarics 4,422,739 541,270 4,964,009
Fringc benefits 1,635,800 242,425 1,878,225
Director's fees 56,400 4,361 60,761
Total Pcrsonncl Services 6,114,939 788,056 6,902,995
Supplies and Services:
Board elections 32,485 3,213 35,698
Conununications 246,115 24,672 270,787
Contractual services 718,383 63,169 781,552
Data processing 118,175 11,688 129,863
District activities 13,478 1333 14,811
Ducs and memberships 26,899 2,933 29,832
Fccs and permits 57,982 5,911 63,893
Insurance 201,974 19,975 221,949
Maintenance 237,689 42,419 280,108
Matcrials 432,441 20,890 453,331
Noncapital cquipnncnt 87,296 22,534 109,830
Office expense 25,485 2,525 28,010
Professional services 557,721 224,786 781507
Training 20,976 3,293 24,269
Travcl and conferences 19,417 1,949 21,366
Uncollcctiblc accounts 18,919 1,344 20,263
Utilities 83,603 8,250 91,853
Vehicle cxpcnsc 261,381 65,030 326,411
Total Supplics and Services 3,160,419 525,914 3,686,333
TOTAL OPERATING EXPENSES $ 20,542,973 $ 1,314,661 $ 21,857,634
Scc independent auditors' report.
-49-
YORBA LINDA WATER DISTRICT
SCHEDULE OF CAPITAL ASSETS
For the year ended June 30, 2011
Water Sewer Totals
Land, Mineral and Water Rights:
Land $ 138,629 $ $ 138,629
Water rights 86,300 86,300
Mineral rights 63,650 63,650
Land rights and casements 385 58,526 58,911
Total Land, Mineral and Water Rights 288,964 58,526 347,490
Source of Supply:
Wells 5,460,513 - 5,460,513
MWD connection 564,368 2,000 566,368
Total Source of Supply 6,024,881 2,000 6,026,881
Pumping Plant:
Structures and improvements 9,529,805 - 9,529,805
Equipment 7,857,374 275,360 8,132,734
Total Pumping Plant 17,387,179 275,360 17,662,539
Water Treatment Plant:
Structures and improvements 1,473,626 - 1,473,626
Equipment 1,274,179 - 1,274,179
Total Water Treatment Plant 2,747,805 - 2,747,805
Transmission and Distribution Plant:
Mains 68,811,395 28,250,714 97,062,109
Reservoirs and tanks 61,484,568 - 61,484,568
Service and meter installation 5,447,665 2,389,115 7,836,780
Fire hydrants 6,252,285 - 6,252,285
Meters 8,738,693 8,738,693
Fire mains 717,746 717,746
Structures and improvements 2,195,750 2,195,750
Control system 1,353,150 - 1,353,150
Total Transmission and Distribution Plant 155,001,252 30,639,829 185,641,081
General Plant:
Structures and improvements 13,403,182 - 13,403,182
Transportation equipment 1,532,041 979,744 2,511,785
Power operated equipment 549,710 - 549,710
Communication equipment 565,557 - 565,557
Computer equipment 1,608,857 205,242 1,814,099
Office furniture 1,188,942 - 1,188,942
Tools, shops and garage equipment 67,716 67,716
Other 4,650 4,650
Store equipment 48,889 - 48,889
Total General Plant 18,969,544 1,184,986 20,154,530
Construction in Progress 4,704,395 171,503 4,875,898
Total Capital Assets $ 205,124,020 $ 32,332,204 $ 237,456,224
See independent auditors' report.
-50-
STATISTICAL SECTION
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-52-
YORBA LINDA WATER DISTRICT
DESCRIPTION OF STATISTICAL SECTION CONTENTS
June 30, 2011
This part of the District's comprehensive annual financial report presents detailed information as a
context for understanding what the information in the financial statements and the note disclosures say
about the government's overall financial health.
Contents: Pages
Financial Trends these schedules contain trend information to help the reader
understand how the District's financial performance and well-being have
changed over time. 54
Revenue Capacity these schedules contain information to help the reader
assess the District's most significant local revenue source, the water sales. 56
Debt Capacity 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. 58
Demographic and Economic Information these schedules offer demographic
and economic indicators to help the reader understand the environment within
which the District's financial activities take place. 60
Operating Information these schedules contain service and infrastructure data
to help the reader understand how the information in the District's financial
report relates to the services the District provides and the activities it
performs. 62
- 53 -
Yorba Linda Water District
Changes in Net Assets
Last Ten Fiscal Years
Fiscal Year
Changes in Net Assets: 2011 2010 2009 2008
Operating Rcvcnucs
Watcr Salcs $ 22,686,251 $ 21,806,164 $ 19,626,738 $ 19,470,109
Scwcr Rcvcnucs 1,274,579 1,275,980 1,259,723 1247,907
Othcr Operating Rcvcnucs 1,035,545 1,102,143 439,302 380,175
Operating Expenses
Variable Watcr Costs 11,268,306 10,688318 10,859,328 10,516,507
Personnel Services 6,902,995 6,677,757 6,498,959 5,751,384
Supplies and Sciviccs 3,686,333 3,576,147 4,151,058 4,361,512
Depreciation 5,279,860 5,153,891 4,167,958 3,571726
Operating Loss (2,141,119) (1,911,826) (4,351,540) (3,103,938)
Nonopcrating Revenues (Expenses)
Property Taxes 1,258,769 1,269,441 1,283,521 1,263,656
Invcstmcntlncomc 274,152 244,857 689,108 1,508,193
IntcrestExpcnsc (1,172,503) (1,170,498) (1,469,925) (824,387)
Other Nonopcrating Rcvcnucs 739,062 589,201 479,911 270,429
Other Nonopcrating Expenses (406,575) (151,300) (177,553) (133,604)
Total Nonopcrating
Rcvcnucs (Expenses) 692,905 781,701 805,062 2,084,287
Nct Income (Loss) Before
Capital Contributions (1,448,214) (1,130,125) (3,546,478) (1,019,651)
Capital Contributions 706,319 6,278,135 4,363,527 4,100,051
Changes in Net Assets $ (741,895) $ 5,148,010 $ 817,049 $ 3,080,400
Net Assets by Component:
Invested in Capital Assets,
Net of Related Dcbt $ 146,235,362 $ 146,877,122 $ 141,514,024 $ 139,677,663
Restricted 12,620,256 15,797,432 14,063,802 14,523,549
Unrestricted (4,619,943) (7,696,984) (6,158,513) (4,898,647)
Total Net Assets $ 154,235,675 $ 154,977,570 $ 149,419,313 $ 149,301565
Sourcc: YLWD Audited Financial Statements (Continued)
-54-
Fiscal Year
2007 2006 2005 2004 2003 2002
$ 18,944,233 $ 17,017,275 $ 14,533,021 $ 14,138,952 $ 12,128,715 $ 12,080,445
806,897 778,275 750,771 763,528 545,119 525,188
393,285 382,917 427,430 385,241 177,966 174,572
10,703,037 8,930,535 7,920,218 8,405,858 7,510,409 7,018,095
5,276,878 4,635,464 4,294,020 3,903,396 3,304,878 2,874,817
3,395,303 2,877,288 2,699,842 2,345,991 2,111,993 1,762,580
3,445,868 2,923,288 2,578,420 2,498,265 2305,286 2,073348
(2,676,671) (1,188,108) (1,781,278) (1,865,789) (2,380,766) (948,635)
1,186,441 335,075 252,663 1,005,859 3,304,314 3,247,591
2,180,067 1,425,663 638,235 342,554 549,093 914,100
(468,087) (472,163) (565,581) (484,895) (214,842) (291,352)
455,067 534,385 416,778 642,358 155,814 277,198
(138,501) (336,649) (179,526) (296,528) (282,039) (311,231)
3,214,987 1,486,311 562,569 1,209,348 3,512,340 3,836,306
538,316 298,203 (1,218,709) (656,441) 1,131,574 2,887,671
6,913,095 26,026,524 6,701,629 2,184,681 11,419,097 1,884,633
$ 7,451,411 $ 26,324,727 $ 5,482,920 $ 1,528,240 $ 12,550,671 $ 4,772,304
$ 121,317,296 $ 106,376,683 $ 84,000,773 $ 74,338,841 $ 80,268,884 $ 67,026,121
23,089,201 22,274,814 23,196,485 25,140,038 16,774,957 16,593,197
1,815,668 10,119,257 5,248,769 7,484,228 8,391,026 9,264,878
$ 146,222,165 $ 138,770,754 $ 112,446,027 $ 106,963,107 $ 105,434,867 $ 92,884,196
-55-
Yorba Linda Water District
Number of Connections
Last Ten Fiscal Years
Single Family Multi-Family Commercial/ Direct Rate
Fiscal Year Residential Residential Industrial Irrigation (Billing Unit)
2002 19,915 234 1,056 809 $ 1.13
2003 20,383 225 1,050 840 1.33
2004 20,914 225 849 829 1.33
2005 20,773 217 842 803 1.48
2006 21,300 217 847 838 1.57
2007 21,451 228 792 868 1.57
2008 21,580 228 840 857 1.79
2009 21,672 228 831 855 2.52
2010 21,846 228 837 877 2.52
2011 21,701 231 833 879 2.52
NOTE: x $1.48 was approved January 1, 2005
25,000
20,000 -
15,000 ■ Irrigation
Industrial
10,000 ■ Residential
a Residential
5,000
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Source: YLWD Billing System
-56-
Yorba Linda Water District
Ten Largest Customers
Current and Nine Years Ago
FY 2011
Customer Name Business Type Annual Revenues % of Total
1 City of Yorba Linda Government $ 1,614,372.24 6.46%
2 Placentia Yorba Linda USD Government 289,091.80 1.16%
3 Yorba Linda Villages Homeowner's Assoc. 106,003.75 0.42%
4 Rancho Dominqucz Assoc. Homeowner's Assoc. 99,386.63 0.40%
5 Archstone Apts Apartment Complex 91,111.13 0.36%
6 Cal Water Manufacturer 88,672.44 0.35%
7 Tac West Manufacturer 81,067.98 0.32%
8 Placentia Linda Hospital Hospital 72,837.61 0.29%
9 Advanced Management Apartment Complex 68,314.20 0.27%
10 St Francis of Assisi Private School 66344.50 0.27%
$ 1577,202.28 10.31%
FY 2002
Customer Name Business Type Annual Revenues % of Total
1 City of Yorba Linda Government $ 1,915,251.67 14.99%
2 Saba Petroleum Manufacturer 175,921.20 1.38%
3 Tac West Inc Manufacturer 98,367.66 0.77%
4 St Francis of Assissi Private School 97,005.47 0.76%
5 Shigcmi Muranaka Nursery Retail 78,760.00 0.62%
7 Placentia Unified School Government 31,609.61 0.25%
6 Sunset Tropicals Nursery Retail 30,968.79 0.24%
8 Costco Warehouse Retail 30,308.28 0.24%
9 Lxccll Circuits Manufacturer 27,839.87 0.22%
10 YL Country Club Private Club 25,743.78 0.20%
$ 2,511,776.33 19.65%
Sources: City of Yorba Linda CAFR
YLWD Billing Department
-57-
Yorba Linda Water District
Ratio of Outstanding Debt
Last Ten Fiscal Years
Total
General Certificates As a Share of
Fiscal Obligation of Per Per Personal
Year Bonds OCWD Loan Participation Debt Connection Capita Income
2002 $ 5,741169 $ 171,048 $ - $ 5,913,217 $ 267 $ 72 0.10%
2003 3,671,446 149,061 - 3,820,507 170 46 0.05%
2004 1,590,000 - 10,384,239 11,974,239 525 142 0.16%
2005 - 10,000,078 10,000,078 441 119 0.13%
2006 - - 9,873,717 9,873,717 426 115 0.12%
2007 - - 10,540,139 10,540,139 451 122 0.12%
2008 - - 45,502,080 45,502,080 1,932 522 0.50%
2009 - - 44,911,092 44,911,092 1,900 513 0.44%
2010 - - 44,065,104 44,065,104 1,848 499 0.44%
2011 - - 43,189,117 43,189,117 1,827 494 0.46%
Composition of Debt
$50,000,000
$40,000,000
Participation
$30,000,000 - -
$20,000,000 - - - ■ OCWD Loan
$10,000,000 - - -
® Bonds
61
Debt per Connection
$2,500
$2,000
$1,500
$1,000
$500
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Sourcc: YLWD Audited Financial Statements
- 58 -
Yorba Linda Water District
Debt Coverage
Last Ten Fiscal Years
Debt Service
Fiscal Operating & Net Coverage
Year Revenues Maint. Costs Revenues Principal Interest Total Ratio
2002 $ 16,568 $ 11,759 $ 4,809 $ 2,086 $ 305 $ 2,391 2.01
2003 16215 12,873 3,342 2,172 229 2,401 1.39
2004 16,471 14,428 2,043 2,263 148 2,411 0.85
2005 16,178 14,230 1,948 1,760 299 2,059 0.95
2006 19,563 16,009 3,554 200 473 673 5.28
2007 23,036 18,703 4,333 205 469 674 6.43
2008 22,822 19,829 2,993 210 919 1,129 2.65
2009 22,514 20,604 1,910 570 2,051 2,621 0.73
2010 24,417 19,928 4,489 825 1,951 2,776 1.62
2011 25,912 20,845 5,067 855 1,915 2,770 1.83
NOTE: Excludes dcprcciation and debt service payments
Source: YLWD Auditcd Financial Statements
-59-
Yorba Linda Water District
Demographics
Last Ten Fiscal Years
YLWD
Personal Income
Year Population City of YL Population Personal Income per Capita
2002 70,566 61,362 $ 5,081,187,350 $ 71006
2003 72,080 62,678 6,025,361,496 83,593
2004 73,663 64,055 6,435,285,575 87,361
2005 75,189 65,382 6,699,301,248 89,099
2006 76,817 66,797 7,150,485,256 93,085
2007 78,090 67,904 7,623,582,080 97,626
2008 78,559 68,312 8,179,815,504 104,123
2009 80,209 69,747 9,465,109,914 118,006
2010 81,893 71,211 9,224,696,122 112,643
2011 83,613 72,707 8,990,388,841 107,524
County of Orange
Personal Income
Year Population Unemployment Rate Personal Income per Capita
2002 2,940,743 5.0% $ 111,750,294 $ 38,001
2003 1983,731 5.0% 117,722,484 39,455
2004 3,019,889 4.8% 125,670,056 41,614
2005 3,047,054 4.3% 133,031,819 43,659
2006 3,072,336 3.2% 143,949,044 46,853
2007 3,098,121 3.9% 151,039,900 48,752
2008 3,121,251 5.2% 155,459,600 49,807
2009 3,139,017 9.0% 155,459,600 49,525
2010 3,158,479 9.8% 151,510,926 47,970
2011 3,178,061 9.0% 147,662,549 46,463
NOTE: Based on City of Yorba Linda population, plus an additional 15%
of estimated population for customers outside of the City
x As of August 2011
Sources: City of Yorba Linda CAFR
County of Orangc CAFR
Statc of California, Employment Dcvclopmcnt Dcpartmcnt
Statc of California, Dcpartmcnt of Finance
YLWD Billing System
-60-
Yorba Linda Water District
Ten Largest Employers
Current and Five Years Ago
2008* 2006+
% of Total % of Total
Employer ^ Employees Labor Force L Employees Labor Force
Viasys Respiratory Care, Inc. 389 1.19 % 359 1.02 %
Nobel Biocare USA, Inc. 328 0.93 % 323 0.92 %
Costco Wholesale Corp. 276 0.78 % 204 0.58 %
City of Yorba Linda 194 0.55 % 180 0.51 %
Vons 165 0.47 % 167 0.48 %
Kohl's Inc. 158 0.45 % 145 0.41 %
Best Buy 129 0.37 % 135 0.38 %
Sunrise Retirement Homes 126 0.36 % 120 0.34 %
Office Solutions 92 0.26 % 98 0.28 %
Cobra Engineering 80 0.23 % 0 0.00 %
Total 1,937 5.6 % 1,731 4.9 %
NOTES: * Most current available data
+ Oldest available data
The Placentia- Yorba Linda Unified School District has 2,500 employees and
serves the entire communities of Yorba Linda and Placentia, and also serves
parts of the Cities of Brea, Anaheim and Fullerton. YLWD cannot provide the
number of employees working within the boundaries of Yorba Linda.
Source: City of Yorba Linda CAFR
-61-
Yorba Linda Water District
Number of Employees
Last Ten Fiscal Years
Full Time Equivalent Employees by Department
Department
Fiscal Human
Year Administration Engineering Finance Resources IT Operations Total
2002 2.0 10.0 10.0 1.0 1.0 29.0 53.0
2003 2.0 11.0 10.0 1.0 2.0 29.0 55.0
2004 3.0 12.0 10.0 1.0 2.0 32.0 60.0
2005 3.0 13.0 11.0 1.0 3.0 31.0 62.0
2006 4.0 14.0 13.0 3.0 3.0 28.0 65.0
2007 4.0 13.0 15.0 3.0 3.0 32.0 70.0
2008 4.0 13.0 16.0 3.0 6.0 32.0 74.0
2009 4.0 13.0 16.0 3.0 6.0 33.0 75.0
2010 4.5 12.0 15.0 3.0 6.5 35.0 76.0
2011 4.5 12.0 15.0 3.0 7.0 35.0 76.5
80.0
70.0
60.0
Operations
50.0
IT
40.0 ■ Resources
Finance
30.0 ■ Engineering
20.0
10.0
0.0
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
NOTE: * Numbcr of employees in each department arc authorized and funded positions.
Sourcc: YLWD Human Resources Department
-62-
Yorba Linda Water District
Operating and Capacity Indicators
Last Ten Fiscal Years
Fiscal Miles of Water Yearly Water Average
Year Mains Installed* Production (MG) Production (MGD)
2002 4.81 7,548 20.7
2003 0.78 7,927 21.7
2004 3.64 7,863 21.5
2005 3.64 7,042 19.3
2006 2.52 7,505 20.6
2007 9.72 8,360 22.9
2008 9.72 8,027 22.0
2009 9.72 7,590 20.8
2010 9.72 6,569 18.0
2011 2.00 6,282 17.2
Fiscal Number of Number of Number of
Year Booster Pumps Reserviors Field Service Calls
2002 9 9 1,535
2003 11 10 1,727
2004 11 10 1,833
2005 11 10 1,460
2006 11 10 1,484
2007 12 11 1,565
2008 12 11 1,943
2009 12 11 1,674
2010 12 13 1,640
2011 12 13 1,924
MG - Millions of Gallons
MGD - Millions of Gallons pcr Day
NOTE: * Milcs of Water Main estimated
Sources: YLWD Asset Management Plan 2010
YLWD Operations Department
-63-
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-64-
IV
' '
INDEPENDENT AUDITORS' 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
The Board of Directors
Yorba Linda Water District
Placentia, California
We have audited the basic financial statements of the Yorba Linda Water District (the District) as of
and for the year ended June 30, 2011, and have issued our report thereon dated October 18, 2011. We
conducted our audit in accordance with 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.
Internal Control Over Financial Reporting
In planning and performing our audit, we considered the District's internal control over financial
reporting as a basis for designing our auditing procedures for the purpose of expressing our opinion on
the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the
District's internal control over financial reporting. Accordingly, we do not express an opinion on the
effectiveness of the District's internal control over financial reporting.
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 District's financial statements will not be prevented, or detected and corrected on a
timely basis.
Our consideration of internal control over financial reporting was for the limited purpose described in
the first paragraph of this section and was not designed to identify all deficiencies in internal control
over financial reporting that might be deficiencies, significant deficiencies or material weaknesses. We
did not identify any deficiencies in internal control over financial reporting that we consider to be
material weaknesses, as defined above. However, we identified certain deficiencies in internal control
over financial reporting, described below, that we consider to be significant deficiencies in internal
control over financial reporting. 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.
-I-
5 Corporate Park, SL[ite 100, Irvine, CA 92606-5165 • TA 949-399-0600 • Fax: 949-399-0610
Officer located in Orarl(,e 1/11d ,S°an Diego Counties
Compliance with Investment Policy
Auditors' Comment and Recommendation:
The District's investment policy sets limits on how much can be invested in certain types of
investments. During our review of investment policy, we noted that investments in Ca1TRUST
exceeded the limit set forth in the District's investment policy. The District is not in compliance with
its policy. We recommend that the District establish procedures that would ensure adherence to the
District's investment policy.
Management's Response
The District agrees with the comment and will revise the investment policy accordingly.
Posting of Rejected Customer Payments
Auditors' Comment and Recommendation:
During our testing of cash receipts, we noted three customer payments that were rejected by the bank
due to insufficient funds in October 2010. The general ledger was not corrected for these rejected
items until July 2011. These items remained reconciling items in the bank reconciliations during this
period. An important element of internal controls over cash is the reconciliation process to identify
differences between the bank and the general ledger and resolve differences timely. When differences
are not properly identified, the bank reconciliation is not complete and can result in misappropriation
of assets. We recommend that variances be investigated and District takes necessary actions in a timely
manner.
Management's Response
The District agrees with the comment and has changed its policy to address reconciling items in the
bank reconciliation process on a more timely basis.
Accounts Receivable
Auditors' Comment and Recommendation:
During our testing of accounts receivable, we noted that the schedule for unbilled water receivable did
not agree to the general ledger balance due to a Journal entry for last year's accrual that was not
properly reversed. We recommend that District establish procedures that will ensure general account
balances are reconciled to subsidiary schedules.
Management's Response
The District agrees with the comment and will begin reconciling account balances to subsidiary
schedules on a quarterly basis to ensure this does not happen during the annual accrual process.
-2-
Communication between Departments
Auditors' Comment and Recommendation:
During our review of trust accounts for contractors' retentions, we noted that the general ledger
balance of one the trust accounts did not agree with the bank statement. Per further review, we noted
that the retention amount was released during the year. Also, we noted that current year additions
included assets contributed by developers to the District in prior years. This information was not
communicated to the finance department in a timely manner which caused the general ledger balance
to be inaccurate. We recommend that the District establish proper communication procedures between
the finance department and other departments to ensure that accurate information is timely forwarded
to the finance department for financial reporting purposes.
Management's Response
The District agrees with the comment and the importance of sharing information between departments
has been emphasized.
Compliance and Other Matters
As part of obtaining reasonable assurance about whether the District's financial statements are free of
material misstatements, 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 determination of financial statement amounts. 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.
This report is intended solely for the information and use of the Yorba Linda Water District Directors
and management of the Yorba Linda Water District and is not intended to be and should not be used by
anyone other than these specific parties.
wk;-& NELS-n-- DLCQ Evers Lu'-)
October 18, 2011
Irvine, California
-3-
IV
' '
Board of Directors
Yorba Linda Water District
Placentia, California
We have audited the financial statements of the Yorba Linda Water District for the year ended
June 30, 2011, and have issued our report thereon dated October 18, 2011. Professional standards
require that we provide you with information about our responsibilities under generally accepted
auditing standards, as well as certain information related to the planned scope and timing of our audit.
We have communicated such information in our engagement letter dated June 13, 2011 and during our
planning meeting on August 8, 2011. Professional standards also require that we communicate to you
the following information related to our audit.
Significant Audit Findings:
Qualitative Aspects of Accounting Practices
Management is responsible for the selection and use of appropriate accounting policies. The
significant accounting policies used by the Yorba Linda Water District are described in Note 1 to the
financial statements. No new accounting policies were adopted and the application of existing
accounting policies was not changed during the year ended June 30, 2011. We noted no transactions
entered into by the Yorba. Linda Water District during the year for which there is a lack of authoritative
guidance or consensus. All significant transactions have been recognized in the financial statements in
the proper period.
Accounting estimates are an integral part of the financial statements prepared by management and are
based on management's knowledge and experience about past and current events and assumptions
about future events. Certain accounting estimates are particularly sensitive because of their
significance to the financial statements and because of the possibility that future events affecting them
may differ significantly from those expected.
-1-
5 Corporate Park, SUitc 100, lrvinc, CA 92606-5165 • TA 949-399-0600 • Fax: 949-399-0610
Officer located in Orarl(,e 1/11d ,S°an Diego COGlntie.r
Significant Audit Findings (Continued):
Qualitative Aspects of Accounting Practices (Continued):
The most sensitive estimates affecting the financial statements were:
a. Management's estimate that an allowance for doubtful accounts was not necessary.
b. Management's estimate of the fair market value of investments which is based on market
values provided by outside sources.
c. The estimated useful lives of capital assets for depreciation purposes which are based on
industry standards.
d. The annual required contribution for the District's Other Post-Employment Benefits was
prepared by an outside consultant.
We evaluated the key factors and assumptions used to develop these estimates in determining that they
were reasonable in relation to the financial statements taken as a whole.
Certain financial statement disclosures are particularly sensitive because of their significance to
financial statement users. The most sensitive disclosure affecting the financial statements was reported
in Note 6 to the financial statements regarding the annual required contribution and the actuarial
liability for the District's Other Post-Employment Benefits.
Difficulties Encountered in Performim the Audit
We encountered no significant difficulties in dealing with management in performing and completing
our audit.
Corrected and Uncorrected Misstatements
Professional standards require us to accumulate all known and likely misstatements identified during
the audit, other than those that are trivial, and communicate them to the appropriate level of
management. Management has corrected all such misstatements. The following material misstatements
detected as a result of audit procedures were corrected by management:
a. An adjusting journal entry was required to remove the liability and cash associated with a
retention that was paid out during the fiscal year.
b. An increase of capitalized interest was required for costs allocated to capital projects
completed during the fiscal year.
c. A deposit liability balance was decreased to recognize capital contributed in prior years and
net assets were restated as of July 1, 2010.
d. The accounts receivable was decreased to correct errors on calculation for unbilled water
and sewer receivables.
-2-
Disa-reements with Management
For purposes of this letter, professional standards define a disagreement with management as a
financial accounting, reporting, or auditing matter, whether or not resolved to our satisfaction, that
could be significant to the financial statements or the auditors' report. We are pleased to report that no
such disagreements arose during the course of our audit.
Management Representations
We have requested certain representations from management that are included in the management
representation letter dated October 18, 2011.
Management Consultations with Other Independent Accountants
In some cases, management may decide to consult with other accountants about auditing and
accounting matters, similar to obtaining a "second opinion" on certain situations. If a consultation
involves application of an accounting principle to the Yorba Linda Water District's financial
statements or a determination of the type of auditor's opinion that may be expressed on those
statements, our professional standards require the consulting accountant to check with us to determine
that the consultant has all the relevant facts. To our knowledge, there were no such consultations with
other accountants.
Other Audit Findings or issues
We generally discuss a variety of matters, including the application of accounting principles and
auditing standards, with management each year prior to retention as the Yorba Linda Water District's
auditors. However, these discussions occurred in the normal course of our professional relationship
and our responses were not a condition to our retention.
Other Information in Documents Containing Audited Financial Statements
With respect to the supplementary information accompanying the financial statements, we made
certain inquiries of management and evaluated the form, content, and methods of preparing the
information to determine that the information complies with accounting principles generally accepted
in the United States of America, the method of preparing it has not changed from the prior period, and
the information is appropriate and complete in relation to our audit of the financial statements. We
compared and reconciled the supplementary information to the underlying accounting records used to
prepare the financial statements or to the financial statements themselves.
This information is intended solely for the use of the Board of Directors and management of the Yorba
Linda Water District and is not intended to be and should not be used by anyone other than these
specified parties.
NEL-V ML
October 18, 2011
Irvine, California
-3-
ITEM NO. 2.2
AGENDA REPORT
Meeting Date: October 24, 2011 Budgeted: N/A
To: Finance-Accounting Committee
Funding Source: N/A
From: Ken Vecchiarelli, General
Manager
Presented By: Stephen Parker, Finance Dept: Finance
Manager
Reviewed by Legal: N/A
Prepared By: Delia Lugo, Senior Accountant CEQA Compliance: N/A
Subject: Investment Report through September 2011
SUMMARY:
Government Code Section 53607, et, seq., requires the person delegated to invest funds to make a
quarterly report of the investments to the legislative body.
STAFF RECOMMENDATION:
That the Committee recommend the Board of Directors approve the Investment Report for the
Period Ending September 30, 2011.
DISCUSSION:
Staff is submitting the September 2011 Monthly Investment Report for the Committee's review. The
Investment Portfolio Report presents the market value and percent yield for all the District
investments by institution. The Investment Report Summary includes budget and actual interest and
average term portfolio information as well as market value broken out by reserves categories. The
total yield for the month ending September 2011 increased to 1.08%. Though the yield for funds
invested in the Wells Fargo Money Market drastically decreased from 0.16% to .05%, the impact on
the overall investment portfolio was minimal as a result of the yield in CalTrust's Medium Term fund
increasing from 1.26% to 1.31%, and the District spending down a significant amount of the 2008
COP Revenue Bonds, which earn a very small interest rate.
The overall decrease in the investment balance from the previous month is $3,324,000. A couple of
the larger balance changes include a decrease in the Reserve for Debt Service fund of $1,340,000
due to the September 30, 2011 Debt Service principal and interest payment in the amount of
$1,855,000 and a decrease of $1,698,000 in the 2008 COP Revenue Bond due to spending on CIP
projects (the Highland Booster Pump Station Upgrade was allocated $1,194,000 of this total).
Another item to note is that the Sewer Capital Projects fund increased by $314,000; $264,000 of
that increase was received from the City of Yorba Linda in conjunction with the completed transfer
of City sewers to YLWD.
PRIOR RELEVANT BOARD ACTION(S):
Monthly Investment Reports are presented to the Finance-Accounting Committee on a regular
basis. Quarterly Investment Reports are presented to the Board of Directors. The Investment
Reports for the months ended July 31, 2011 and August 31, 2011 were received and filed by the
Finance-Accounting Committee on September 26, 2011. The Investment Report for the quarter
ended June 30, 2011 was received and filed by the Board of Directors on August 11, 2011.
ATTACHMENTS:
Invst Rpt 9-11.xlsx September 2011 Investment Report Backup Material
Invst_Agenda _Backup - Sept 2011.xlsx Agenda Backup Backup Material
Yorba Linda Water District
Investment Portfolio Report
September 30, 2011
Market % Percent
Value Cost of Total Institution Yield
Checking Account:
$ 1,308,603 $ 1,308,603 Wells Fargo Bank
$ 1,308,603 $ 1,308,603 4.64% Total 0.00%
Money Market Accounts:
$ 847,393 $ 847,393 Wells Fargo Money Market 0.05%
2,754,064 2,754,064 US Bank (2008 Revenue Bond) 0.10%
1,927 1,927 US Bank (2008 Bond Reserve) 0.10%
$ 3,603,384 $ 3,603,384 12.78% Total 0.09%
Federal Home Loan Bank:
$ 2,158,358 $ 2,144,397 US Bank (2008 Bond Reserve) 1.35%
$ 2,158,358 $ 2,144,397 7.66% 1.35%
Pooled Investment Accounts:
$ 1,846,000 $ 1,846,000 Local Agency Investment Fund 0.38%
358 358 Ca1TRUST Short Term 0.54%
19,278,307 18,889,908 Ca1TRUST Medium Term 1.31%
$ 21,124,665 $ 20,736,266 74.93% 1.23%
$ 28,195,010 $ 27,792,651 100% Total Investments 1.08%
Per Government Code requirements, the Investment Report is in compliance with the Yorba
Linda Water District's Investment Policy, and there are adequate funds available to meet
budgeted and actual expenditures for the next six months.
Delia Lugo, Senior Accountant
9/30/11
Investment Summary Report
Below is a chart summarizing the yields as well as terms and maturities for the month of September 2011:
Avg. Portfolio Avg. Portfolio # of
Month Yield Without Yield With Days to
of 2010 CalTRUST CalTRUST Maturity
September 0.51% 1.08% 495
Below is are charts comparing operating fund interest for current and prior fiscal years.
Actual Interest 9/30/2010 9/30/2011
Monthly - September $ 22,196 $ 23,178
Year-to-Date $ 46,099 $ 48,083
Budget 2010/2011 2011/2012
Interest Budget, September YTD $ 39,000 $ 47,500
Interest Budget, Annual $ 156,000 $ 190,000
Interest earned on investments is recorded in the fund that owns the investment.
Investment Summary Comparison Between Current and Previous Month
The distribution of investments in the portfolio both in dollars and as a percentage of the total portfolio by funds
is as follows:
August 2011 % Alloc September 201' % Alloc
Fund Description Balance 8/31/2011 Balance 9/30/2011
Water Operating Reserve $ 2,226,248 7.15% $ 1,103,450 4.10%
Water Emergency Reserve 1,003,134 3.22% 1,000,991 3.72%
Water Capital Project Reserve 17,989,548 57.81% 17,656,325 65.69%
Water Reserve for Debt Service 1,339,814 4.30% 0 0.00%
COP Revenue Bond 2008 - Reserve 2,167,899 6.96% 2,160,285 8.03%
COP Revenue Bond 2008 4,452,264 14.30% 2,754,064 10.24%
Sewer Operating 118,775 0.38% 67,883 0.25%
Sewer Emergency Reserve 1,002,242 3.22% 1,000,344 3.72%
Sewer Capital Project Reserve 829,235 2.66% 1,143,065 4.25%
$ 31,129,159 100.00% $ 26,886,407 100.00%
Wells Fargo Bank Checking
Water Operating 360,445 1,307,761
Sewer Operating 29,302 842
389,747 1,308,603
Totals $ 31,518,906 $ 28,195,010
ITEM NO. 3.1
AGENDA REPORT
Meeting Date: October 24, 2011 Budgeted: N/A
To: Finance-Accounting Committee
Funding Source: N/A
From: Ken Vecchiarelli, General
Manager
Presented By: Stephen Parker, Finance Dept: Finance
Manager
Reviewed by Legal: N/A
Prepared By: Stephen Parker, Finance CEQA Compliance: N/A
Manager
Subject: Summary of January Workshop Discussion
SUMMARY:
Staff has worked with Raftelis Financial Consultants for 1 1/2 years on the Cost of Service and
Water Rate Study and the Sewer Financial Model. The results of that work will be presented to the
entire Board at a workshop in January 2012. The Finance-Accounting Committee asked for a
summary of the information that would be presented at that workshop. The information provided
today is a high-level summary of what will be presented at the January 2012 workshop.
DISCUSSION:
At the January workshop, staff and Raftelis Financial Consultants will:
. Summarize water and sewer model capability
. Discuss sewer fund's projected needs
. Discuss sewer rate issues (Prop 218)
. Explain how CIP drives the water rate
. Discuss water fund's projected needs
. Identify water rate options including: status quo; adjusting commodity rate structure; adjusting
the fixed rate structure; and combining options
. Discuss customer effect of various rate options
PRIOR RELEVANT BOARD ACTION(S):
On March 11, 2010, the Board of Directors authorized the General Manager to execute a
Professional Services Agreement with Raftelis Financial Consultants in the amount of $77,005 to
conduct a Cost of Service and Water Rate Study. On June 23, 2011, the Board of Directors
approved an amendment in the amount of $10,000 to the existing Professional Services Agreement
with Raftelis Financial Consultants to add a deliverable of a Sewer Financial Model.
ITEM NO. 3.2
AGENDA REPORT
Meeting Date: October 24, 2011 Budgeted: N/A
To: Finance-Accounting Committee
Funding Source: N/A
From: Ken Vecchiarelli, General
Manager
Presented By: Stephen Parker, Finance Dept: Finance
Manager
Reviewed by Legal: N/A
Prepared By: Delia Lugo, Senior Accountant CEQA Compliance: N/A
Subject: September 2011 Budget to Actual Results
DISCUSSION:
Attached are the District's budget to actual summary results for the Water Fund, Sewer Fund and a
combined statement for both funds pertaining to the reporting month of September 2011.
For the month of September 2011, the District water revenue is trending slightly below expectations
due to lower water consumption from cooler than normal summer temperatures.
Water operating revenue is 29.7% of annual budget, which is lower by approximately 3.8% from the
historical trend for the first quarter of the fiscal year.
Other Operating Revenue is 45% of annual budget for the month of September. This is primarily
due to the activity that was reported in the prior months in relation to the Vista Del Verde project.
Variable water costs as a percentage of budget are higher than operating revenues as a result of
purchasing more import water prior to Metropolitan Water District of Southern California's 7.5% rate
increase, which takes effect on January 1, 2012.The majority of the water funds' individual supplies
and services expenses are trending below or on budget, with the exception of Dues and
Memberships and Insurance, which are higher because of timing differences.
In the month of September Sewer Other Operating Revenue is well over budget due to the Vista del
Verde Project as reported in prior months.
Sewer Other Non-Operating revenue is also well over budget, primarily due to receiving $264,000
from the City of Yorba Linda for the sewer transfer.
The sewer fund's supplies and services expenses are trending below or on budget, with the
exception of Professional Services, which are slightly higher due to Locke Ranch annexation fees
that were not budgeted and Non-Capital Equipment, which is higher as a result of a larger
percentage of their purchases in this area being completed earlier in the year.
One final item to note is that YLWD has recorded the fair market value of the City of YL sewers in
capital assets in our sewer fund. The value, recorded at more than $17 million, is recorded on the
income statement as contributed capital.
ATTACHMENTS:
Name: Description: Type:
September 2011 Combined.xls September 2011 Consolidated Statement Backup Material
September 2011 Water.xls September 2011 Water Statement Backup Material
September _2011_Sewer.xls September 2011 Sewer Statement Backup Material
Yorba Linda Water District
Summary Financial Report
Water & Sewer Funds
For Three Months Ending September 30, 2011
Original YTD YTD YTD
Budget Actual Under(Over) % of
FY 2012 FY 2012 Budget Budget
Revenue (Operating):
Water Revenue (Residential) $17,904,893 $5,025,312 $12,879,581 28.07%
Water Revenue (Commercial & Fire Det.) 1,726,651 556,408 1,170,243 32.22%
Water Revenue (Landscape/Irrigation) 3,757,058 1,422,287 2,334,771 37.86%
Water Revenue (Service Charge) 3,406,392 840,580 2,565,812 24.68%
Sewer Charge Revenue 1,548,550 364,074 1,184,476 23.51%
Locke Ranch Assessments 159,862 491 159,371 0.31%
Other Operating Revenue 754,361 391,358 363,003 51.88%
Total Operating Revenue: 29,257,767 8,600,510 20,657,257 29.40%
Revenue (Non-Operating):
Interest 190,000 48,083 141,917 25.31%
Property Tax 1,232,000 45,107 1,186,893 3.66%
Other Non-Operating Revenue 499,369 383,524 115,845 76.80%
Total Non-Operating Revenue: 1,921,369 476,714 1,444,655 24.81%
Total Revenue 31,179,136 9,077,224 22,101,912 29.11%
Expenses (Operating):
Variable Water Costs (G.W., Import & Power) 13,671,538 4,667,323 9,004,215 34.14%
Salary Related Expenses 7,941,303 1,667,062 6,274,241 20.99%
Supplies & Services 4,020,832 910,562 3,388,537 22.65%
Total Operating Expenses 25,633,673 7,244,947 18,666,993 28.26%
Expenses (Non-Operating):
Interest on Long Term Debt 1,906,426 476,565 1,429,861 25.00%
Other Expense 123,193 8,841 114,352 7.18%
Total Non-Operating Expenses: 2,029,619 485,406 1,544,213 23.92%
Total Expenses 27,663,292 7,730,353 20,211,206 27.94%
Net Income (Loss) Before Capital Contributions 3,515,844 1,346,871 1,890,706 38.31%
Contributed Capital - 17,061,427 (17,061,427) 0.00%
Net Income (Loss) Before Depreciation 3,515,844 18,408,298 (14,892,454) 523.58%
Depreciation & Amortization 5,561,699 1,608,276 3,953,423 28.92%
Total Net Income (Loss) ($2,045,855) $16,800,022 ($18,845,877) -821.17%
Capital - Direct Labor - (95,912) 95,912 0.00%
Yorba Linda Water District
Water Fund
For Three Months Ending September 30, 2011
Original Sept YTD YTD YTD
Budget Actual Actual Under(Over) % of
FY 2012 FY 2012 FY 2012 Budget Budget
Revenue (Operating):
Water Revenue (Residential) $17,904,893 $1,980,485 $5,025,312 $12,879,581 28.07%
Water Revenue (Commercial & Fire Det.) 1,726,651 218,846 556,408 1,170,243 32.22%
Water Revenue (Landscape/Irrigation) 3,757,058 570,004 1,422,287 2,334,771 37.86%
Water Revenue (Service Charge) 3,406,392 280,624 840,580 2,565,812 24.68%
Other Operating Revenue 697,360 55,370 310,446 386,914 44.52%
Total Operating Revenue: 27,492,354 3,105,329 8,155,033 19,337,321 29.66%
Revenue (Non-Operating):
Interest 170,000 21,369 44,373 125,627 26.10%
Property Tax 1,232,000 40,960 45,107 1,186,893 3.66%
Other Non-Operating Revenue 495,394 (9,645) 124,081 371,313 25.05%
Total Non-Operating Revenue: 1,897,394 52,684 213,561 1,683,833 11.26%
Total Revenue 29,389,748 3,158,013 8,368,594 21,021,154 28.47%
Expenses (Operating):
Variable Water Costs (G.W., Import & Power) 13,671,538 1,531,333 4,667,323 9,004,215 34.14%
Salary Related Expenses 6,953,531 698,091 1,459,149 5,494,382 22.24%
Supplies & Services:
Communications 366,513 23,885 52,396 314,117 14.30%
Contractual Services 527,485 29,574 90,170 437,315 17.09%
Data Processing 119,645 1,786 13,279 106,366 11.10%
Dues & Memberships 55,682 451 24,997 30,685 44.89%
Fees & Permits 136,504 14,638 24,293 112,211 17.80%
Insurance 221,526 - 179,798 41,728 81.16%
Materials 352,642 30,093 90,186 262,456 25.57%
District Activities, Emp Recognition 20,757 601 2,381 18,376 11.47%
Maintenance 368,603 39,370 59,110 309,493 16.04%
Non-Capital Equipment 79,221 2,576 12,808 66,413 16.17%
Office Expense 45,714 4,372 9,887 35,827 21.63%
Professional Services 766,431 64,062 154,529 611,902 20.16%
Training 48,625 3,524 9,849 38,776 20.26%
Travel & Conferences 49,649 1,345 4,182 45,467 8.42%
Uncollectible Accounts 35,340 42 432 34,908 1.22%
Utilities 113,925 8,674 22,846 91,079 20.05%
Vehicle Equipment 278,209 19,783 60,559 217,650 21.77%
Supplies & Services Sub-Total 3,586,471 244,776 811,702 2,774,769 22.63%
Total Operating Expenses 24,211,540 2,474,200 6,938,174 17,273,366 28.66%
Expenses (Non-Operating):
Interest on Long Term Debt 1,906,426 158,855 476,565 1,429,861 25.00%
Other Expense 117,193 2,947 8,841 108,352 7.54%
Total Non-Operating Expenses: 2,023,619 161,802 485,406 1,538,213 23.99%
Total Expenses 26,235,159 2,636,002 7,423,580 18,811,579 28.30%
Net Income (Loss) Before Capital Contributions 3,154,589 522,011 945,014 2,209,575 29.96%
Capital Contributions - 16,537 16,537 (16,537) 0.00%
Net Income (Loss) Before Depreciation 3,154,589 538,548 961,551 2,193,038 30.48%
Depreciation & Amortization 4,628,999 445,589 1,339,117 3,289,882 28.93%
Total Net Income (Loss) ($1,474,410) $92,959 ($377,566) ($1,096,844) 25.61%
Capital - Direct Labor - (33,788) (87,558) 87,558 -
Yorba Linda Water District
Sewer Fund
For Three Months Ending September 30, 2011
Original Sept YTD YTD YTD
Budget Actual Actual Under(Over) % of
FY 2012 FY 2012 FY 2012 Budget Budget
Revenue (Operating):
Sewer Charge Revenue $1,548,550 $134,676 $364,074 $1,184,476 23.51%
Locke Ranch Assessments 159,862 197 491 159,371 0.31%
Other Operating Revenue 57,001 3,932 80,912 (23,911) 141.95%
Total Operating Revenue: 1,765,413 138,805 445,477 1,319,936 25.23%
Revenue (Non-Operating):
Interest 20,000 1,808 3,710 16,290 18.55%
Other Non-Operating Revenue 3,975 252,326 259,443 (255,468) 6526.87%
Total Non-Operating Revenue: 23,975 254,134 263,153 (239,178) 1097.61%
Total Revenue 1,789,388 392,939 708,630 1,080,758 39.60%
Expenses (Operating):
Salary Related Expenses 987,772 99,281 207,913 779,859 21.89%
Supplies & Services:
Communications 30,587 1,802 4,975 25,612 16.27%
Contractual Services 40,135 2,282 7,027 33,108 17.51%
Data Processing 9,005 134 999 8,006 11.09%
Dues & Memberships 4,505 34 1,875 2,630 41.62%
Fees & Permits 14,066 1,492 1,811 12,255 12.88%
Insurance 16,674 - 13,533 3,141 81.16%
Materials 35,703 353 6,118 29,585 17.14%
District Activities, Emp Recognition 1,562 45 175 1,387 11.20%
Maintenance 74,267 15,176 17,006 57,261 22.90%
Non-Capital Equipment 18,799 259 5,750 13,049 30.59%
Office Expense 3,411 329 744 2,667 21.81%
Professional Services 75,769 6,029 24,161 51,608 31.89%
Training 5,100 530 1,293 3,807 25.35%
Travel & Conferences 4,202 101 371 3,831 8.83%
Uncollectible Accounts 2,660 3 14 2,646 0.53%
Utilities 9,575 703 1,840 7,735 19.22%
Vehicle Equipment 78,341 4,286 11,168 67,173 14.26%
Supplies & Services Sub-Total 424,361 33,558 98,860 325,501 23.30%
Total Operating Expenses 1,412,133 132,839 306,773 1,105,360 21.72%
Expenses (Non-Operating):
Other Expense 6,000 - - 6,000 0.00%
Total Non-Operating Expenses: 6,000 - - 6,000 0.00%
Total Expenses 1,418,133 132,839 306,773 1,111,360 21.63%
Net Income (Loss) Before Capital Contributions 371,255 260,100 401,857 (30,602) 108.24%
Contributed Capital - 17,044,530 17,044,890 (17,044,890) 0.00%
Net Income (Loss) Before Depreciation 371,255 17,304,630 17,446,747 (17,075,492) 4699.40%
Depreciation & Amortization 932,700 107,431 269,159 663,541 28.86%
Total Net Income (Loss) ($561,445) $17,197,199 $17,177,588 ($17,739,033) -3059.53%
Capital - Direct Labor (440) (8,354) 8,354
ITEM NO. 3.3
AGENDA REPORT
Meeting Date: October 24, 2011 Budgeted: N/A
To: Finance-Accounting Committee
Funding Source: N/A
From: Ken Vecchiarelli, General
Manager
Presented By: Stephen Parker, Finance Dept: Finance
Manager
Reviewed by Legal: N/A
Prepared By: Stephen Parker, Finance CEQA Compliance: N/A
Manager
Subject: Status of Strategic Plan Initiatives
DISCUSSION:
Attached are the strategies identified in the 2011-2013 Strategic Plan that relate to Fiscal
Responsibility, which are overseen by the Finance-Accounting Committee. Included is an update on
each strategy relating to Fiscal Responsibility.
PRIOR RELEVANT BOARD ACTION(S):
On June 9, 2011 the Board adopted the 2011-2013 Strategic Plan.
ATTACHMENTS:
Name: Description: Type:
Strategic Plan Tracking- FA.xlsx Strategic Plan Tracking - FA Backup Material
Strategic Plan Initiatives Status Report
Finance-Accounting Committee
Strategies Start Date Completion Lead Party Oct 2011 Progress
Date
FR 1: Maintain Fiduciary Res onsibilit
Prepare a High Level
Annual Budget
Document and Completed Budget June 2011. Submitted budget for CSMFO and
Comprehensive Annual GFOA award September 2011. CAFR submitted to the FAC and
FR 1-13 Financial Report and Feb-11 Jun-11 Finance Director
Board in October 2011. Staff will submit for the GFOA award in
Compete for Recognition
by the Government November 2011.
Finance Officers
Association
Revise the Water and
Sewer Rules and General Preliminary review of fee schedule completed. A number of revisions
FR 1-C Regulation and Evaluate Feb- 11 Dec- 11 Manager/ to the water and sewer rules and regs are completed and pending
Fee Schedules Regularly internal reviews. Plan to finalize in November for submission in
for Proper Cost of Service Finance Director December.
Coverage
FR 2: Increase Reserve Funding
Annual Review
Implement an Approach of CIP Finance Forward projection of reserve balances will be completed along with
FR 2-C to Ensure Reserves are Apr-11 Financial Director/Board future financial projections. The District's reserve needs will be
Needs Included
Responsibly Funded in Budget of Directors updated for FY 2012/ 13 with this new data.
Preparation
FR 3: Identif and Develop Additional Revenue Options
Review Opportunities to
Earn "Cash Back" on Staff has submitted a vendor match list to nine banks, and
FR 3-13 Operating Expense Jan-11 On-going Finance Director interviewed with seven of them. Staff is planning to make a
through Commercial recommendation to the FAC in November.
Credit Card Accounts
Manage Cash Flow to Delia Lugo, Senior Accountant reviews the cash balances and needs
FR 3-C Maximize Investment On-going On-going Finance Director daily. Mutliple times a month, excess cash is transferred to
Income investments to earn interest until the next check register.
FR 4: Provide a Rate Structure that Promotes Water Use Efficiency
Complete the Cost of Finance Staff met with Raftelis and finalized the recommendations that will be
FR 4-A Service and Water Rates Mar-10 Mar-12 Director/Board presented to the Board at the January 2012 workshop. A
preliminary discussion of the workshop items was included in the
Study of Directors
October Finance-Accounting Committee meeting.
Evaluate Equitable Rate Board of The Board will be given information on multiple rate structure
FR 4-13 Structures that Promote Oct- 11 M ar- 12 Directors/ options in January 2012 with which they can give staff direction as to
Conservation and General what rate structure they believe would best promote conservation
Efficiency Manager and efficiency.
Completed
FR 1-A Develop a Comprehensive Feb- 11 Oct- 11 Finance Director 5-year financial plan included in budget. Water and sewer financial
Multi-Year Financial Plan models should be available by January 2012.
FR 1-D Evaluate and Revise the Nov- 10 Mar- 11 Finance Director Completed March 2011. Consider changing allocation methodology
Sewer Fund Allocation in conjunction with FY 2012/13 budget process.
Maintain Commitment to Include in
FR 1-E Strong Debt Services Sept-09 Rate Quarterly Board of Quarterly review of debt service ratios will continue as well as
Ratio Increase Financial Directors integrating the ratio into forward financial projections.
Review
Review the Reserve Policy Finance
Completed review/revision of reserve policy in June 2011. Will
FR 2-A and Funding Levels Apr-11 Jul-11 Director/Board
review again in conjunction with the 2012/ 13 Budget process.
Annually of Directors