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HomeMy WebLinkAbout11-08-2017 Administration Committee Agenda Orange County Sanitation District Wednesday, November 8, 2017 Regular Meeting of fhe 5:00 P.M. ADMINISTRATION Administration Building COMMITTEE Board Room 10844 Ellis Avenue Fountain Valle CA 714 593-7433 AGENDA CALL TO ORDER: PLEDGE OF ALLEGIANCE: DECLARATION OF QUORUM: (Clerk of the Board) PUBLIC COMMENTS: If you wish to address the Committee on any item, please complete a Speaker's Form (located at the table outside of the Board Room) and submit it to the Clerk of the Board or notify the Clerk of the Board the item number on which you want to speak. Speakers will be recognized by the Chairman and are requested to limit comments to three minutes. REPORTS: The Committee Chair and the General Manager may present verbal reports on miscellaneous matters of general interest to the Committee Members. These reports are for information only and require no action by the Committee. • Capital Improvement Program (CIP)Video Presentation CONSENT CALENDAR: The Consent Calendar Items are considered to be routine and will be enacted, by the Committee, after one motion, without discussion. Any items withdrawn from the Consent Calendar for separate discussion will be considered in the regular order of business. 1. APPROVAL OF MINUTES (Clerk of the Board) RECOMMENDATION: Approve Minutes of the October 11, 2017 Administration Committee Meeting. 2. GENERAL MANAGER APPROVED PURCHASES AND ADDITIONS TO THE PRE-APPROVED OEM SOLE SOURCE LIST (Lorenzo Tyner) RECOMMENDATION: Recommend to the Board of Directors to: A. Receive and file District purchases made under the General Manager's authority and additions to the pre-approved OEM Sole Source List for the period of July 1, 2017 to September 30, 2017; and 11/08/2017 Administration Committee Agenda Page 1 of 3 B. Approve the following ADDITIONS TO PRE-APPROVED Original Equipment Manufacturer (OEM) SOLE SOURCE LIST: • GRAHAM CORPORATION — Liquid Ring Pump • HOWDEN ROOTS—Aeration Blowers Service (Replaces OEM manufacturer SIEMENS DEMAG DELAVAL TURBOMACHINERY INC. — Name change) 3. CONSOLIDATED FINANCIAL REPORT FOR FIRST QUARTER ENDED SEPTEMBER 30, 2017 (Lorenzo Tyner) RECOMMENDATION: Recommend to the Board of Directors to: Receive and file the Orange County Sanitation District First Quarter Financial Report for the period ended September 30, 2017. NON-CONSENT: 4. ORANGE COUNTY SANITATION DISTRICT COMPREHENSIVE ANNUAL FINANCIAL REPORT FOR THE YEAR END JUNE 30, 2017 (Lorenzo Tyner) RECOMMENDATION: Recommend to the Board of Directors to: Receive and file the Orange County Sanitation District's Comprehensive Annual Financial Report for the year ended June 30, 2017, prepared by staff and audited by Macias, Gin! & O'Connell, LLP (MGO), Certified Public Accountants, along with the following reports prepared by MGO: A. Report to the Board of Directors; and B. Independent Accountants' Report on Agreed-Upon Procedures Applied to Appropriations Limit Worksheets. INFORMATION ITEMS: None. DEPARTMENT HEAD REPORTS: CLOSED SESSION: None. OTHER BUSINESS AND COMMUNICATIONS OR SUPPLEMENTAL AGENDA ITEMS, IF ANY: 11/08/2017 Administration Committee Agenda Page 2 of 3 ADJOURNMENT: The next Administration Committee meeting is scheduled for Wednesday, December 13, 2017 at 5:00 p.m. Accommodations for the Disabled: Meeting Rooms are wheelchair accessible. If you require any special disability related accommodations, please contact the Orange County Sanitation District Clerk of the Board's office at (714)593-7433 at least 72 hours prior to the scheduled meeting. Requests must specify the nature of the disability and the type of accommodation requested. Aaenda Postina: In accordance with the requirements of California Government Code Section 54954.2,this agenda has been posted outside the main gate of the Sanitation District's Administration Building located at 108" Ellis Avenue, Fountain Valley, Cal'domia, not less than 72 hours prior to the meeting date and time above. All public records relating to each agenda item,including any public records distributed less than 72 hours priorto the meeting to all,or majority of the Board of Directors,are available for public inspection in the office of the Clerk of the Board. Agenda Description: The agenda provides a brief general description of each item of business to be considered or discussed. The recommended action does not indicate what action will be taken. The Board of Directors may take any action which is deemed appropriate. NOTICE TO DIRECTORS: To place items on the agenda for the Committee Meeting, items must be submitted to the Clerk of the Board 14 days before the meeting. Kelly A.Lore Clerk of the Board (714)593-7433 klore(olocsd.com For any questions on the agenda, Committee members may contact staff at: General Manager James Herberg (714)593-7300 iherberp(a,ocsd.com Assistant General Manager Bob Ghirelli (714)593-7400 rahirelli(oyocsd.com Director of Finance and Lorenzo Tyner (714)593-7550 ItvneQocsd.com Administrative Services Director of Human Resources Celia Chandler 714 593-7202 cchandler ocsd.com 11/08/2017 Administration Committee Agenda Page 3 of 3 ITEM NO. 1 MINUTES OF THE ADMINISTRATION COMMITTEE Orange County Sanitation District Wednesday, October 11, 2017 at 5:00 P.M. A regular meeting of the Administration Committee of the Orange County Sanitation District was called to order by Committee Chair Wanks on October 11, 2017 at 5:02 p.m. in the Administration Building of the Orange County Sanitation District. Chair Wanks led the Flag Salute. A quorum was declared present as follows: COMMITTEE MEMBERS PRESENT: STAFF PRESENT: Chad Wanks, Chair Jim Herberg, General Manager Donald P. Wagner, Vice-Chair Bob Ghirelli, Assistant General Manager Jim Ferryman Celia Chandler, Director of Human Resources Peter Kim Rob Thompson, Director of Engineering Al Krippner Ed Torres, Director of Operations & Steve Nagel Maintenance Scott Peotter Lorenzo Tyner, Director of Finance & Erik Peterson (Alternate) Administrative Services Sal Tinajero Kelly Lore, Clerk of the Board Greg Seboum, Board Chair Gilbert Barela David Shawver, Board Vice-Chair Jennifer Cabral Marc Dubois COMMITTEE MEMBERS ABSENT: Al Garcia Glenn Parker Mark Manzo Theresa Smith Andrew Nau Mike White OTHERS PRESENT: Brad Hogin, General Counsel Kassie Radermacher, WNDE PUBLIC COMMENTS: None. REPORTS: General Manager Jim Herberg stated that one of the goals the Board has set for the agency is to be leaders in the industry and be involved in the community. In line with this goal, he informed the committee of the recently held OC Diversity Committee Leadership Symposium hosted by BLAST and the upcoming American Academy of Environmental Engineers and Scientists (AAEES) annual fall event to be held at OCSD. 10/11/2017 Administration Committee Minutes Page 1 &4 Committee Chair Wanke did not provide a report. DEPARTMENT HEAD REPORTS: There were no reports provided. CONSENT CALENDAR: 1. APPROVAL OF MINUTES (Clerk of the Board) MOVED, SECONDED, AND DULY CARRIED TO: Approve Minutes of the September 13, 2017 Administration Committee Meeting. AYES: Ferryman, Kim, Krippner, Nagel, Peotter, Peterson (Alternate), Sebourn, Shawver and Wagner NOES: None ABSTENTIONS: Wanke ABSENT: Parker, T. Smith and Tinajero NON-CONSENT: 2. CONTRACTED INTERNAL AUDITS IN SEARCH OF FICTITIOUS EMPLOYEES AND SEARCH OF FICTITIOUS VENDORS (Lorenzo Tyner) Director of Finance and Administrative Services Lorenzo Tyner introduced Controller Mike White who provided a brief explanation of the audit findings and recommendations. Mr. White further stated that additional procedures will be added to address the auditors findings. MOVED. SECONDED, AND DULY CARRIED TO: Recommend to the Board of Directors to: Receive and file the August 24, 2017, White Nelson Diehl Evans (WNDE) audit report in Search of Fictitious Employees and Search of Fictitious Vendors. AYES: Ferryman, Kim, Krippner, Nagel, Peotter, Peterson (Alternate), Sebourn, Shawver, Wanke and Wagner NOES: None ABSTENTIONS: None ABSENT: Parker, T. Smith and Tinajero 3. DOIG DRIVE PROPERTY DISPOSAL - BROKER (Lorenzo Tyner) Director of Finance and Administrative Services Lorenzo Tyner provided a brief introduction and history of this item. Committee Chair Wanke requested that he and staff review the RFP language prior to its release. MOVED. SECONDED, AND DULY CARRIED TO: Recommend to the Board of Directors to: Authorize the General Manager to conduct a Request for Proposal 10/11/2017 Administration Committee Minutes Page 2 of 4 process and subsequently award for real estate broker services to facilitate the sale of the Orange County Sanitation District's real property at 7311 Doig Drive, Garden Grove, CA. AYES: Ferryman, Kim, Krippner, Nagel, Peotter, Peterson (Alternate), Sebourn, Shawver, Wanks and Wagner NOES: None ABSTENTIONS: None ABSENT: Parker, T. Smith and Tinajero INFORMATION ITEMS: 4. STRATEGIC PLAN UPDATE (Bob Ghirelli) Assistant General Manager Bob Ghirelli introduced this item and indicated that the updated plan would be presented to the Board of Directors for approval in November. Dr. Ghirelli briefly reviewed the strategic goals and the changes staff are recommending in the Levels of Service. Dr. Ghirelli, Mr. Herberg, and Board Chairman Sebourn responded to questions regarding a "rolling plan' with annual goals vs. an update. Board Chairman Sebourn stated that in the past few years the Board had engaged in an annual workshop; however, that resulted in very little additional information being introduced. Mr. Herberg indicated a new Five-year Strategic Plan, including a full Board workshop, will be brought to the Board of Directors next year. Director Tinajero arrived at the meeting at 5:30 p.m. Alternate Director Peterson departed the meeting at 5:30 p.m. 5. ORANGE COUNTY SANITATION DISTRICT PROCUREMENT PROCESS (Lorenzo Tyner) Mr. Tyner introduced Contract and Purchasing Manager Marc Dubois who provided a PowerPoint presentation that included an overview of the Sanitation District's procurement process, the types of procurements, methods, approval thresholds, and ethics involved in procurement. Mr. Dubois responded to a variety of questions from the Committee regarding: approval levels, purchasing ordinance, RFP evaluation procedure, and advertising. Public Affairs Supervisor Jennifer Cabral provided information regarding the educational videos that the District has recently created, and showed the Budget video. CLOSED SESSION: None. 10/11/2017 Administration Committee Minutes Page 3 of OTHER BUSINESS AND COMMUNICATIONS OR SUPPLEMENTAL AGENDA ITEMS, IF ANY: Board Vice-Chair Shawver stated that he recently represented the District at the CSDA Conference in Monterey. Board Chair Sebourn responded to a question from Director Wagner regarding ongoing discussions with OCTA. He stated that OCSD, OCTA, and the City of Santa Ana are cooperatively working together regarding the OC Streetcar project. Mr. Herberg and Board Chair Seboum reiterated that the agency is also working cooperatively with OCTA on the 1-405 project. Chair Wanke notified staff that he received information that transdermal patches are labeled for disposal into the toilet and requested staff to look into this. ADJOURNMENT: Committee Chair Wanke declared the meeting adjourned at 6:00 p.m.to the next regularly scheduled meeting of Wednesday, November 8, 2017 at 5:00 p.m. Submitted by: Kelly A. Lore, CMC Clerk of the Board 10/11/2017 Administration Committee Minutes Page 4 of 4 ADMINISTRATION COMMITTEE Meeting Date TOBd.Of Dir. u/oe/v a/rs/v AGENDA REPORT IWrnNumber Item Number z Orange County Sanitation District FROM: James D. Herberg, General Manager Originator: Lorenzo Tyner, Director of Finance and Administrative Services SUBJECT: GENERAL MANAGER APPROVED PURCHASES AND ADDITIONS TO THE PRE-APPROVED OEM SOLE SOURCE LIST GENERAL MANAGER'S RECOMMENDATION A. Receive and file District purchases made under the General Manager's authority and additions to the pre-approved OEM Sole Source List for the period of July 1, 2017 to September 30, 2017; and B. Approve the following ADDITIONS TO PRE-APPROVED Original Equipment Manufacturer(OEM) SOLE SOURCE LIST: • GRAHAM CORPORATION — Liquid Ring Pump • HOWDEN ROOTS — Aeration Blowers Service (Replaces OEM manufacturer SIEMENS DEMAG DELAVAL TURBOMACHINERY INC. — Name change) BACKGROUND Staff provides the Administration Committee and the Board of Directors quarterly reports of General Manager approved purchases between $50,000 and $100,000 and additions to the pre-approved OEM Sole Source List. The Graham Corporation is the only company in the Orange County Sanitation District's (Sanitation District)area of operation authorized to sell Liquid Ring Vacuum Pumps used on the Steam Turbine electrical generator at Plant No. 2. Howden Roots is the new name of the already approved Sole Source vendor Siemens Demag Delaval Turbomachinery Inc. RELEVANT STANDARDS • Quarterly financial reporting • Ensure the public's money is wisely spent PRIOR COMMITTEE/BOARD ACTIONS December 2016 - Minute Order 12(b) authorized the General Manager to ratify additions or deletions to the OEM Sole Source list on the General Manager's quarterly approved purchases agenda report. Page 1 of 4 ADDITIONAL INFORMATION In accordance with Board purchasing policies, Ordinance No. OCSD-47, the General Manager has authority to approve purchases between $50,000 and $100,000. Below is a summary of General Manager approved purchases, in amounts exceeding $50,000, for the first quarter of fiscal year 2017-18: Vendor Name Amount Department Description/Discussion Sinkhole Repair on Dover Drive, CHARLES KING $7500000 Engineering Associated with Project 5-63 , . g g CO INC Sole Source Justification 1823 Reason: Emergency Replacement Valves for Slater Pump CS-AMSCO $51,945.00 Operations & Station Maintenance Board Approved Sole Source List M.O. 12/14/16, Item 12 DEMARIA Rebuild of Steve Anderson Lift Station ELECTRIC MOTOR $95,500.00 Operations & (SAILS) Pump#3 SERVICES, INC. Maintenance Board Approved Sole Source List M.O. 12/14/16, Item 12 Engineering Software Maintenance Support from 7/20/17 to 7/19/18 EMBARK $90,000.00 Engineering with 4 Optional 1-year Renewal Periods CONSULTING, LLC Sole Source Justification 1758 Reason: OEM Parts/Materials Available from Only One Source INSIGHT PUBLIC Administrative Purchase of 50 HP Elite Tablets SECTOR, INC. $85,727.00 Services Board Approved Cooperative Procurement M.O. 2122/17, Item 14 J R FILANC Operations & Yorba Linda Pump Station Repairs CONSTRUCTION $56.814.00 Maintenance Task Order Bid TOB-2017-886 of Master Service Contract S-2015-700-1 Page 2 of 4 Vendor Name Amount Department Description/Discussion MERCURY Operations & Fleet Strategy Consulting Services ASSOCIATES, INC. $92,020.00 Maintenance 7/10/17 to 12/27/17 Specification No. CS-2017-830 Premier Support for Software, MICROSOFT Administrative Maintenance, and Technical Aid CORPORATION $75,355.00 Services 9/18/17 to 9/17/18 Board Approved Sole Source List M.O. 12/14/16, Item 12 MOTOROLA 431 Administrative Purchase of 65 Motorola Radios SOLUTIONS $83, .68 Services Board Approved Cooperative Procurement M.O. 4/26/17, Item 11 NTH GENERATION 735 Administrative Purchase of 5 HP Servers COMPUTING INC $57, .05 Services Board Approved Cooperative Procurement M.O. 2122/17, Item 14 ORANGE COUNTY 1/25/17 to 3/31/18 General Bottling GWRS Water for Outreach WATER DISTRICT $63,000.00 Manager's Board Approved Agreement Office M.O. 1/25/17, Item 8 PAPE MATERIAL Operations & Purchase of 1 Genie Boom Lift for Fleet HANDLING INC $97,368.00 Maintenance Board Approved Cooperative Procurement M.O. 9/27/17, Item 12 Replace Generator Parts and Perform QUINN POWER g84 230 29 Operations & Load Bank Test SYSTEMS Maintenance Sole Source Justification 1830 Reason: Emergency Page 3 d4 Vendor Name Amount Department Description/Discussion STANDARD WonderWare Data Management Software AUTOMATION AND $68,356.75 Administrative 8/30/17 to 11/15/18 CONTROL LP Services Board Approved Sole Source List M.O. 12114/16, Item 12 Air Quality Support-Voluntary Risk YORKE Environmental Reduction Plan Development and Health ENGINEERING LLC $75,690.00 Services Risk Assessments Update Sole Source Justification 1804 Reason: Unique Product/Service FINANCIAL CONSIDERATIONS N/A ATTACHMENT The following attachment(s) may be viewed on-line at the OCSD website (www.ocsd.corn with the complete agenda package: N/A Page 4 of 4 ADMINISTRATION COMMITTEE Meeting Date TOBd.Ot Dir. u/oe/v at 7 AGENDA REPORT emNumber Item Number 3 Orange County Sanitation District FROM: James D. Herberg, General Manager Originator: Lorenzo Tyner, Director of Finance and Administrative Services SUBJECT: CONSOLIDATED FINANCIAL REPORT FOR FIRST QUARTER ENDED SEPTEMBER 30, 2017 GENERAL MANAGER'S RECOMMENDATION Receive and file the Orange County Sanitation District First Quarter Financial Report for the period ended September 30, 2017. BACKGROUND Included in this consolidated report are the following quarterly financial reports for the period ended September 30, 2017: First Quarter Budget Review The Budget Review Summary provides the Directors, staff, and general public with a comprehensive overview of the financial results of the Orange County Sanitation District (Sanitation District) through the first quarter ended September 30, 2017. • Quarterly Treasurer's Report This section reports on financial portfolio performance with respect to the Sanitation District's funds. Both Long-Term and Liquid Operating Monies Portfolios are summarized. A performance summary table can be found on page 2 of this section. The report also contains information on the U.S. and global economic outlook from the Sanitation District's investment manager, Chandler Asset Management. • Certificates of Participation Quarterly Report The report includes a summary of each outstanding debt issuance and a comparative chart illustrating the COP rate history. RELEVANT STANDARDS • Quarterly financial reporting ADDITIONAL INFORMATION The quarterly treasurer's report contained within the Consolidated Financial Reports for the First Quarter Ended September 30, 2017 is being submitted in accordance with the Sanitation District's investment policy that requires the report be submitted to the governing body following the end of each quarter and includes the following information: Page 1 d 3 • Performance results in comparison with the 3-month treasury bill index for the liquid operating portfolio; and the Merrill Lynch Corp./Govt. 1-5 Year Bond index for the long term portfolio as identified in the investment policy; and the time-weighted total rate of return for the portfolio for the prior three months, six months, nine months, twelve months, and since inception compared to the Benchmark returns for the same periods: Portfolio Performance Summary Quarter Ended September 30,2017 Liquid Operating Monies(%) Long-Tenn Operating Monies(%) Total Rate Total Rate of of Return Benchmark Return Benchmark 3 Months 0.26 0.26 0.42 0.38 6 Months 0.47 0.47 0.88 0.86 9 Months 0.61 0.57 1.40 1.34 12 Months 0.73 0.66 0.55 0.27 Annualized Since inception 30 Nov 2014 0.47 0.34 1.24 1.19 • A listing of individual securities held at the end of each reporting period (see the detailed listings of each security contained within the report). • Cost and market values of the portfolios: Liquid Oper. Long-Term Cost $49.4 M $332.8 M MV $49.5 M $333.2 M • Modified duration of the portfolio compared to Benchmark: Liquid Oper. Long-Term B.M. 0.16 2.60 Port. 0.17 2.44 • Dollar change in value of the portfolio for a one-percent (1%) change in interest rates: Liquid Oper. — $82,732 Long-Term — $8,121,810 • None of the portfolios are currently invested in reverse repurchase agreements. • The percent of the Liquid Operating Monies portfolio maturing within 90 days: 62.8% • Average portfolio credit quality: Liquid Oper. —AA+/Aa1 Long-Term —AA/Aa1 Page 2 of 3 • Percent of portfolio with credit ratings below "A" by any rating agency, and a description of such securities: • Liquid Portfolio— no exceptions Long Term Portfolio— Percent of portfolio- 3.2% Maturity Cost Date Moody S&P Fitch AMRESCO Residential Securities 1999-1 $ 100,432.85 6/25/2029 Not Rated AA+ BBB Bank of America Corp Note $4,334,014.00 12/1/2017 Baal BBB+ A Goldman Sachs Group Inc. Note $ 692,806.00 1/18/2018 A3 BBB+ A American Express Credit Note $ 3,377,385.79 3/19/2018 A3 BBB+ A Morgan Stanley Note $ 3,200,848.00 7/28/2021 A3 BBB+ A • All investments are in compliance with this policy and the California Government Code, except for the following Lehman Brothers holdings that the District is pursuing collection through the bankruptcy court: Lehman Brothers Note-Defaulted $ 600,000 par value purchased 9/19/2008 Lehman Brothers Note-Defaulted $2,000,000 par value purchased 9/18/2008 • Sufficient funds are available for the Sanitation District to meet its operating expenditure requirements for the next six months. CEQA N/A FINANCIAL CONSIDERATIONS N/A ATTACHMENT The following attachment(s) may be viewed on-line at the OCSD website (www.ocsd.coml with the complete agenda package: • Consolidated Financial Reports for the First Quarter Ended September 30, 2017 Page 3 of 3 r a I y v,P AV 1 Orange County Sanitation District First Quarter Y _ Financial Report for the period ended September 30, 2017 Omnge County, California Table of Contents ExecutiveSummary...................................................................................................1 Budget Review Section 1 —Consolidated Financial Reports..........................................................................1 Section 2—Operating Budget Review Chart of the Cost per Million Gallons by Department—Budget and Actual..............1 Chart of the Net Expenses by Major Category— Budget and Actual........................1 Divisional Contributions to Cost Per Million Gallons ................................................2 Comparison of Expenses by Department.................................................................3 Summary of Collection, Treatment, and Disposal Expenses by Major Category.....4 Summary of District-Wide Revenues .......................................................................5 Summary of Collection, Treatment and Disposal Revenues....................................5 Summary of Collection, Treatment, and Disposal Expenses by Line Item...............6 Summary of Collection, Treatment, and Disposal Expenses by Process.................8 Chartof Staffing Trends...........................................................................................9 Section 3—Capital Improvement Program Budget Review Capital Improvement Program Graphs by Type and Funding Source......................1 Summary of Capital Improvement Construction Requirements- Current Year........2 Summary of Capital Improvement Construction Requirements - Project Life..........6 Section 4—Capital Assets Schedule & Debt Service Budget Review CapitalAssets Schedule ..........................................................................................1 Debt Service Budget Review....................................................................................1 Section 5—Self Insurance Budget Review General Liability and Property Fund Budget Review................................................1 Workers' Compensation Fund Budget Review.........................................................2 Quarterly Treasurers Repo rt........................................................................................1 QuarterlyCOP Reoort.................................................................................................1 FY 2017-18 First Quarter Financial Report This Page Intentionally Left Blank Executive Summary Consolidated Financial Reports For the First Quarter Ended September 30, 2017 Included in this consolidated report are the following quarterly financial reports for the period ended September 30, 2017: First Quarter Budget Review: The Consolidated Financial Reports Section provides the Directors, staff, and the general public with a comprehensive overview of the financial results of the Sanitation District through the first quarter ended September 30, 2017. Contained within the Consolidated Financial Reports is the budget-to-actual status of the Collections, Treatment and Disposal Operations, the Capital Improvement Program, the Self-Insurance Program, and Debt Service Outlays. Also included is a Capital Assets Schedule as of September 30, 2017. Various detail information can be found in this report. In summary: a) Most major expense categories are anticipated to be at or below budget. b) Total revenues are at 4.5 percent mainly due to the timing of property tax and sewer fee distribution from the County that occurs mostly after the first quarter. These two revenue sources make up 87.6 percent of the District's total budgeted revenue. Except for Service Fees, Property Taxes, and IRWD Capital Assessments, all other major revenue sources are currently tracking close to or exceeding revenue estimates. Overall, total revenues are projected to exceed budget at year-end. More detailed information on District revenues is provided within Section 1 — Pages 3 through 5. c) Collection, Treatment and Disposal Costs: As indicated within the Consolidated Financial Reports Section of this report, the net operating requirements through the first quarter of $35.5 million is currently tracking at 23.4 percent of the $151.9 million budget. In addition, net operating expenses have increased $2.8 million or 8.6 percent in comparison with the same period last year. Overall, staff expects the total operating costs to remain within budget throughout the remainder of the year. More detailed information on District operating expenses is provided within Section 1- Pages 1 through 3. The total cost per million gallons is approximately $2,050 based on flows of 188.3 million gallons per day. This is $200 per million gallons, or 8.9 percent lower than the budgeted cost per million gallon per day. A further description of these costs and benchmarking with other agencies is contained within Section 1 — Pages 6 through 8. Page 1 FY 2017-18 First Quarter Review d) The total projected capital outlay cash flow of the Capital Improvement Program (CIP) for FY 2017-18 has been revised to $126.4 million, or 75.7 percent of the board approved cash outlay of$167.0 million. The actual cash outlay spending through the first quarter is $19.4 million, or 11.6 percent of the total budgeted outlay. More detailed information on the CIP budget review can be found in Section 3. • Quarterly Treasurer's Report This section reports on financial portfolio performance with respect to the Sanitation District's funds. Both Long-Term and Liquid Operating Monies Portfolios are summarized. A performance summary table can be found on page 2 of this section. The report also contains information on the national economic outlook from the Sanitation District's money manager, Chandler Asset Management (Chandler). Chandler notes that the Long-Term Portfolio quarterly return of 42 basis points modestly outperformed the Bank of America Merrill Lynch 1-5 year AAA-A U.S. Corporate and Government Index return of 38 basis points, while the Liquid Operating Monies Portfolio quarterly return matched the three-month Treasury Bill index return benchmark of 26 basis points. Chandler further notes that the Federal Open Market Committee (FOMC) left the target federal funds range of 1.00%-1.25% unchanged at the September 19-20 meeting. However, the Committee began its balance sheet normalization program this month. The process of unwinding the Fed's $4.5 trillion balance sheet is beginning gradually by allowing $6 billion per month in Treasury securities and $4 billion per month in mortgage-backed and agency securities to roll off the balance sheet. Over time, the amounts will slowly increase to $30 billion per month in Treasury securities and $20 billion per month in mortgage- backed and agency securities. The Fed's updated economic projections still indicate one more rate hike before year-end is expected. However, the Fed lowered its median longer-run fed funds rate projection to 2.8% from 3.0%, and the median 2018 inflation forecast was lowered slightly suggesting that the Committee believes inflation may remain below the Fed's 2.0% target until 2019. GDP grew by 3.1% in the second quarter, following growth of 1.2% in the first quarter. The consensus forecast currently calls for GDP growth of about 2.6% in the third quarter and 2.4% in the current quarter. Chandler believes economists may trim their estimates for third quarter GDP growth, to reflect disruptions caused by Hurricanes Harvey and Irma. Tax reform or fiscal stimulus may ultimately help fuel stronger economic growth, but the timing and magnitude of such programs remains uncertain. The Treasury yield curve steepened in September, partially reversing some of the curve flattening that has happened year-to-date. The 2-year Treasury yield increased 16 basis points in September to 1.48% and the 10-year Treasury yield increased about 22 basis points to 2.33%. On a year-to-date basis, the 2-year Page 2 Executive Summary Treasury yield increased 29 basis points and the 10-year Treasury yield declined 11 basis points. The Consumer Price Index (CPI) was up 1.9% year-over-year in August, versus up 1.7% year-over-year in July. Core CPI (CPI less food and energy) was up just 1.7% year-over-year in August, unchanged from the prior month. The Personal Consumption Expenditures (PCE) index was up 1.4% year-over-year in August, unchanged from June or July. Core PCE (excluding food and energy) was up just 1.3% year-over-year in August, versus up 1.4% year-over-year in July. Inflation remains below the Fed's 2.0% target. Economic Outlook Traditional monetary policy was stable during the quarter as the Federal Open Market Committee (FOMC) left the federal funds rate unchanged at a range of 1.00% to 1.25% during the third quarter. Notably, the FOMC formally announced its well telegraphed plan to being the process of balance sheet normalization. The process of unwinding the Fed's $4.5 trillion balance sheet is beginning gradually by allowing $6 billion per month in Treasury securities and $4 billion per month in mortgage-backed and agency securities to roll off the balance sheet; the amount will increase by $10 billion per quarter, in the same 60/40 ratio, with the amount being capped at $50 billion per month over the next five quarters. The Fed provided updated economic projections in September, which indicate another rate hike before year-end is expected. However, the Fed lowered its median longer- run fed funds rate projection to 2.8% from 3.0%. The Chandler team is forecasting the terminal Fed Funds rate at equilibrium will be low, and expects the Fed's forecast to gradually compress over the coming quarters. The Fed's other economic projections were little changed in September, although the median 2018 inflation forecast was lowered slightly, suggesting that the FOMC now thinks inflation may remain below the Fed's 2.0% target until 2019. Risk markets continued to perform well during the third quarter, as equity prices were higher and investment grade corporate spreads tightened. The demand for high quality spread product in the fixed income markets remains robust, and Chandler does not anticipate market dynamics changing in the upcoming quarter. Beyond the upcoming quarter, however, they believe several policy developments have the potential to impact market valuations. Tax reform and the likely repatriation of monies back to the United States has the potential to lessen the demand for high quality fixed income assets, a development the team would welcome. Additionally, although the contraction of the Federal Reserve's balance sheet is quite modest, as the amounts increase in 2018, the term premium embedded in the Treasury curve is likely to come under pressure. • Quarterly Certificates of Participation (COP) Report The report includes a summary of each outstanding debt issuance and a comparative chart illustrating the COP rate history. Page 3 FY 2017-18 First Quarter Review This Page Intentionally Left Blank Page 4 Consolidated Financial Reports First Quarter Financial Report September 30, 2017 Financial Management is pleased to present the FY 2017-18 first quarter financial report. This report provides a comprehensive overview of the financial condition of the Sanitation District and reports on the status of all capital projects in progress. A summary of the sections contained within this report is provided below. Operating Budget Review., This section reports on collection, treatment and disposal net operating requirements. At September 30, 2017, 23.4 percent, or $35.5 million of the FY 2017-18 net operating budget of $151.9 million has been expended. Net operating expenses increased from the same period last year by $2.8 million, or 8.6 percent, mainly due to an increase of $1.2 million in Salaries and Benefits, $533,000 in Repairs and Maintenance, $472,000 in Contractual Services, $325,000 in Administrative Expenses, $302,000 in Professional Services, $257,000 in Other Operating Supplies, $110,000 in Utilities, $41,000 in Other Non-Operating Expenses, $31,000 in Research and Monitoring, and $28,000 in Printing and Publication. These increases to net operating expenses have been partially offset by decreases of$65,000 in Operating Materials and Supplies and an increase of $414,000 in indirect costs allocated out to capital projects. These and other variances that factor into this net decrease in expenses are discussed in more detail below. Overall, staff expects the total operating costs to remain at or slightly below budget throughout the remainder of the year. Significant operating results as of September 30, 2017 include the following: • Salaries. Wages and Benefits — Personnel costs of$22.0 million are on target at 23.6 percent of budget through the first quarter of FY 2017-18. Although the budget is based on a 5 percent vacancy factor, staffing is 51 full-time equivalents (FTE's), or 8.0 percent below the total 635 FTE's approved in the FY 2017-18 budget. Salary and benefit costs are $1.2 million or 5.9 percent higher than the $20.8 million incurred in the same period last year, mainly due to an increase of$1.2 million in salaries and wages due to a budgeted increase in FTE's of 8 or 1.3 percent and cost of living adjustments included in the new Memorandums of Understanding for all employee bargaining units. Net operating personnel costs are expected to approximate budget throughout the remainder of the year. • Administrative Expenses — Administrative Expenses totaled $644,000, or 32.3 percent of the $2.0 million budget through September 30. These costs are $325,000 or 101.6 percent higher at September 30 in comparison with the prior year mainly due to an increase of $296,000 in purchases of small computer items, primarily HP tablets and portable two-way radios. It is anticipated that the administrative costs will approximate budget at year-end. Section 1 - Page 1 FY 2017-18 First Quarter Report • Printing and Publication Expenses — Printing and Publication Expenses totaled $79,000, or 19.6 percent of the $404,000 budget through September 30. These costs are $28,000 or 55.0 percent higher at September 30 in comparison with the prior year, mainly due to an increase of $29,000 in notices and ads for career recruitment. It is anticipated that the printing and publication costs will be below budget at year-end • Training and Meetings — Training and meetings of $184,000 are below target at 14.7 percent of the $1.3 million budget. This account is lower than the proportionate budget due to the timing and need for training throughout the year. These costs have decreased over the same period last year by $27,000 or 12.7 percent, primarily due to Total Productive Maintenance Certification Program costs incurred in the prior period. Total training and meeting costs are anticipated to be below budget at year-end. • Operating Materials and Supplies — Operating materials and supplies of $3.9 million is on target at 25.1 percent of the $15.7 million budget through September 30. Operating Materials and Supplies have decreased from the prior year by $65,000 or 1.6 percent, primarily due to decreases in Chemical Coagulants of $90,000, Gasoline, Diesel and Oil of $27,000, and Safety Equipment of $17,000, offset by increases in Odor Control of $66,000. The decreases are mainly brought about by chemical process optimization, a decrease in unit costs, and a decrease of purchases for tools and equipment from the prior year. Based on current processes, operating materials and supplies are anticipated to approximate budget at year-end. • Contractual Services — Contractual services is on target at $6.1 million or 24.9 percent of the $25.5 million budget through September 30. Solids Removal costs, budgeted at $15.9 million, comprise the majority of this expense category. With a decrease of $553,000 or 12.3 percent lower than the prior year, due to renegotiation of composting contract rates, solids removal costs totaled $3.9 million, or 24.7 percent of budget at September 30. Overall, Contractual Services is higher by $472,000 or 8.4 percent over the same period last year. Other Contractual Services increased by $396,000 due to an increase in preventive maintenance services for the Civil Assets Management Program (CAMP), and Temporary Services increased by $387,000 due to position vacancies. In addition, Security Services increased by $255,000 due to heighted security and the addition of armed patrol services at both plants. These increases were offset by decreases of $21,000 in Oxygen due to prior period flows diverted from plant 2. County Service Fees totaled only $9,000, or 1.4 percent of the $659,000 budget through the first quarter as the preponderance of these fees are always billed by the County in the fourth quarter. Total contractual services costs are anticipated to approximate budget at year-end. • Professional Services — Professional services costs totaled $821,000 or 16.6 percent of the $4.9 million budget through September 30. Professional service costs, such as Engineering, Environmental Scientific Consulting, and Other Section 1 - Page 2 Consolidated Financial Reports Services, are proportionately low through September 30 due to a variety of factors such as timing of services needed, services being in the planning or request for proposal stage, the need for the service being re-evaluated, or utilization of internal staffing for projects. These costs are $302,000 or 58.2 percent higher at September 30 in comparison with the prior year mainly due to increases of $194,000 in legal services and $142,000 in other services, offset by a decrease of $41,000 in industrial hygiene services due to timing of services performed. It is anticipated that the costs for this category will be below budget at year-end. • Research and Monitoring — Research and monitoring costs totaled $184,000, or 21.0 percent of the $872,000 budget through September 30. These costs are $31,000, or 20.5 percent higher at September 30 in comparison with the prior year, mainly due to an increase in environmental monitoring and research costs. Total Research and Monitoring costs are anticipated to approximate budget at year- end. • Repairs and Maintenance — Repair and maintenance costs totaled $3.9 million, or 23.9 percent of the $16.2 million budget through September 30. These costs are $533,000, or 16.0 percent higher at September 30 in comparison with the prior year, mainly due to newly required service maintenance agreements. It is anticipated that the costs for this category will approximate budget at year- end. • Utilities — Utilities costs totaled $2.0 million, or 25.4 percent of the $7.9 million budget through September 30. These costs are $110,000 or 5.8 percent higher at September 30 in comparison with the prior year, primarily due to an increase in electricity charges of $86,000 and natural gas charges of $32,000 as a result of a Plant 2 CenGen shutdown as well as a new operating strategy implemented to reduce utility-provided electricity. It is anticipated that the costs will approximate budget at year-end. • Other Operating Supplies — Other operating supplies costs totaled $756,000, or 23.0 percent of the $3.3 million budget through September 30. Property and General Liability Insurance comprise the majority of this expense category. These costs are $250,000 or 90.0 percent higher at September 30 in comparison with the prior year primarily due to an increase in budgeted in-lieu premium charges in order to maintain recommended reserve balances. It is anticipated that the costs will approximate budget at year-end. • Revenues— Service Fees and Property Taxes —Through September 30, revenues from service fees are at <$66,000>, or <0.0> percent of budget and property taxes are $2.5 million, or 2.7 percent of budget. These items comprise the majority of the Sanitation District's revenues and are mostly collected by the County through the property tax roll and distributed to the Sanitation District throughout the year based on a set distribution schedule that begins in November of each year. The negative sewer service fee revenue of $66,000 is attributable to no sewer service fee apportionments having been scheduled or received from the County Section 1 - Page 3 FY 2017-18 First Quarter Report through the first quarter while $66,000 sewer service rebates had been issued for overcharges in prior years. This deficit in sewer service fee revenues is $305,000, or 82.2 percent less than the prior year due to a decrease in user fee rebates issued in the current period. An increase of$70,000 or 2.8 percent in property tax revenues over the prior period is due to an increase of approximately 2.0 percent in assessed property values and higher construction activities. These revenues are expected to approximate budget at year-end. • Revenues — Permittee User Fees — Permittee User Fees are at $4.5 million, or 34.6 percent of the $12.9 million budget. The higher revenues are due to an increase in the strength of the discharge from the permittees. The number of permittees fluctuates from year to year as businesses are established or close their operations. It is estimated that the permittee user charges will exceed budget at year-end. • Revenues — Inter District Sewer Use — SAWPA and SBSD — Inter District Sewer revenues - SAWPA and SBSD are at $700,000, or 21.5 percent of the $3.3 million budget. This revenue is derived from charges to the Santa Ana Watershed Protection Agency (SAWPA) and Sunset Beach Sanitary District (SBSD) for treatment of flows. These revenues are expected to approximate budget at year-end. • Revenues — Intra District Sewer Use — IRWD — Intra District Sewer revenues- IRWD are at $1.1 million, or 24.2 percent of the $4.6 million budget. This revenue is derived from charges to the Irvine Ranch Water District (IRWD) for treatment of flows. The revenues through the first quarter are higher than the same period last year by $91,000 or 9.0 percent, mainly due to an increase in unit costs of operation and maintenance charges to IRWD. These revenues are expected to approximate budget at year-end. • Revenues - Sludge Disposal — IRWD — Sludge Disposal fees - IRWD are at $2.9 million, or 50.0 percent of the $5.9 million budget. The revenue is for the handling, treatment and disposal of solids, derived from flows discharged from IRWD to the Sanitation District. The revenues through the first quarter are higher than the same period last year by $444,000 or 17.8 percent, mainly due to an increase in the unit costs and volume of solids processed by OCSD on behalf of IRWD. The quarterly billing to IRWD is based on estimates. These revenues are expected to exceed budget at year-end. • Revenues — Capital Assessments — IRWD and Other Agencies — Capital Assessments-IRWD and Other Agencies are at $437,000, or 8.1 percent of the $5.4 million budget. The revenues through the first quarter are higher than the same period last year by $108,000 or 32.7 percent mainly due to an increase in joint capital costs allocable to IRWD. It is estimated that the capital assessments will be below budget at year-end. • Revenues — Capital Facilities Capacity Charges (CFCC) — CFCC are at $4.6 million, or 46.2 percent of the $9.9 million budget. The revenues through the first Section 1 - Page 4 Consolidated Financial Reports quarter are higher than the same period last year by $423,000 or 10.2 percent due to more supplemental capital facilities capacity charges from industrial dischargers than at this time last year, offset by decreased construction activity. These revenues are expected to exceed the budget at year-end. • Revenues — Interest Earnings — Interest Earnings are at $1.8 million or 21.1 percent of the $8.4 million budget. The revenues through the first quarter are higher than the same period last year by $1.1 million or 154.7 percent due to higher yields earned on investments and higher cash and investment balances. It is estimated that the interest earnings will approximate the budget amount at year-end. • Revenues — CIP Reimbursements — CIP Reimbursements are at $671,000 or 31.5 percent of the $2.1 million budget. These revenues consist of reimbursements for construction projects, which were not received during the same period last year. These revenues are expected to exceed budget at year-end. • Revenues — Wastehauler — Wastehauler revenues are at $164,000 or 20.5 percent of the $800,000 budget. This revenue is derived from fees charged to wastehaulers allowing them to dump waste into the Sanitation District's system. These revenues are expected to approximate budget at year-end. • Revenues — CNG Sales — CNG Sales revenues are at $109,000 or 25.9 percent of the $420,000 budget. This revenue is derived from public sales at the District's Compressed Natural Gas (CNG) fueling station. The revenues through the first quarter are higher than the same period last year by $1,000 or 1.0 percent. These revenues are expected to approximate budget at year-end. Section 1 - Page 5 FY 2017-18 First Quarter Report Comparison of First Quarter Cost per Million Gallon Results with Budget Last Five Years 2,300 2,250 2,200 2,150 2,100 2,050 2,000 o a 1,950 �.sas t975 1,900 1,850 1,800 1,750 1,700 1,650 1.600 1,550 1,500 13-74 14-15 15-18 18-17 17-18 1st Annual 1st Annual 1st Annual 1st Annual 1st Annual Qtr Budget Otr Budget Otr Budget Otr Budget Oa Budget As demonstrated in the preceding graph for each of the last four fiscal years, the cost per million gallons at the end of the first quarter has been between 3.4 percent to 11.3 percent lower than the annual budget. The FY 2017-18 first quarter is 8.9 percent lower when compared with this year's budget. The variance from previous years is primarily due to a decrease in operating expenses, which are 8.6 percent lower than the same period last year and an increase in flows, which are 1.9 percent higher than the same period last year. Staff believes that overall operating costs will be below budget at year- end. The total cost per million gallons at September 30 is $2,050 based on flows of 188.3 million gallons per day. This is $200 per million gallons, or 8.9 percent, lower than the budgeted cost per million gallons of $2,250. There is an inverse relationship between the amount of flows and the cost per unit of collection, treatment, and disposal. Consequently, the lower cost per million gallons is due to net expenses being 6.5 percent less than the proportionate budget through September 30 and flows of 188.3 million gallons per day being 1.8 percent higher than the budgeted flow of 185 million gallons per day. More detailed information on operating revenues, costs, and related information is provided within Section 2. Section 1 - Page 6 Consolidated Financial Reports Following are data tables showing the last five years of Single Family Residential User Fees (SFR) and the cost per MG to collect, treat, and dispose of wastewater for OCSD and for similar agencies. The agencies used in the table were determined to be those that most closely resembled OCSD in terms of services provided and treatment levels. The summaries demonstrate that OCSD's SFR and cost per million gallons are each one of the lowest in their respective group. Benchmark Study Five-Year Single Family Residential Rate Rates as of July 2013 2014 2015 2016 2017 Agency SFR SFR SFR SFR SFR Notes San Francisco $ 701.40 $ 744.83 $ 784.44 $ 842.14 $ 937.44 City of San Diego $ 572.58 $ 572.58 $ 572.58 $ 572.58 $ 572.58 Note 5 Central Contra Costa Sanitary District $ 405.00 $ 439.00 $ 471.00 $ 503.00 $ 530.00 City of Los Angeles $ 409.20 $ 435.40 $ 464.04 $ 494.77 $ 526.58 Note 1 Vallejo Sanitation/Flood Control District $ 507.48 $ 520.20 $ 520.20 $ 520.20 $ 520.20 Sacramento County $ 312.00 $ 348.00 $ 384.00 $ 420.00 $ 432.00 Dublin San Ramon SerHces District $ 355.44 $ 372.96 $ 382.38 $ 382.38 $ 397.38 Union Sanitary District $ 337.76 $ 357.02 $ 377.00 $ 380.05 $ 393.35 East Bay MUD $ 331.10 $ 358.14 $ 355.18 $ 372.50 $ 390.52 City of Hayward $ 327.24 $ 337.08 $ 347.16 $ 357.60 $ 375.48 Orange County Sanitation District $ 308.00 $ 316.00 $ 322.00 $ 327.00 $ 331.00 City of Fresno $ 309.00 $ 309.00 $ 309.00 $ 309.00 $ 309.00 Note 4 IMne Ranch Water District $ 220.80 $ 246.00 $ 288.60 $ 309.00 $ 309.00 Note 2 Oro Loma Sanitary District $ 195.00 $ 200.00 $ 206.00 $ 221.00 $ 238.00 Los Angeles County $ 150.00 $ 151.00 $ 155.00 $ 159.00 $ 163.00 Note 3 Notes: (1)-Data is for the typical SFR customer rate and is not the average rate. (2)-Data represents the usage of 10 hundred cubic feet per unit. (3)-Data for 2013 and 2014 has been revised to remove ad valorem monies that were inadvertently included. (4)-Data represents the minimum SFR rate not including flow. (5)-Data represents the base sewer fee plus the average usage of 9 hundred cubic feet per month. Section 1 - Page 7 FY 2017-18 First Quarter Report Benchmark Study Five-Year Cost per MG FY 11-12 FY 12-13 FY 13-14 FY 14-15 FY 15-16 Agency Svc.Trt. Cost]MG Cost/MG CosVMG Cost/MG CosVMG Notes Central Contra Costa Sanitary District B 4 $4,203.43 $4,621.84 $5,778.43 $6,280.58 $6,453.65 Vallejo SanitatiordFlood Control District B 3 $5,176.00 $5,435.00 $6,153.00 $5,590.00 $5,396.00 San Francisco B 3 $4,778.96 $5,006.74 $5,400.28 $5,357.97 $5,268.23 Note 1 Union Sanitary District B 3 $3,267.06 $3,805.40 $3,832.47 $3,910.73 $3,957.08 City of San Diego B 2 $3,242.30 $3,340.35 $3,156.43 $3,591.69 $3,171.51 Dublin San Ramon Services District B 3 $2,009.57 $2,159.49 $2,506.60 $2,522.00 $2,895.95 East Bay MUD T 4 $2,320.02 $2,359.40 $2,559.18 $2,727.97 $2,598.53 Sacramento County T 3 $3,312.50 $2,143.16 $2,375.47 $2,494.40 $2,571.14 Note City of Los Angeles B 4 $1,935.00 $2,062.00 $2,163.00 $2,269.00 $2,452.00 Orange County Sanitation District B 3 $1,871.47 $1,906.01 $1,935.05 $2,070.97 $2,110.43 City of Fresno B 3 $1,383.60 $1,411.89 $1,552.39 $1,628.91 $1,678.28 Los Angeles County B 4 $1,156.00 $1,008.00 $1,223.72 $1,239.40 $1,371.06 Note 3 Legend for Service Provided and Treatment Level: B-Agencyoperates both collection and treatment facilities T-Agency provides treatment services but not collection 2-Advanced primary or pdmarywith some secondary treatment 3-Secondarytreatment 4-Advanced secondaryor secondarywith some tertiary treatment Notes: (1)-Beginning in Fiscal Year 2012-13,dataset represents wastewater flows from finalbed publidyavailable audited documents, (2)-Miles of sewers number changed in 2012 to include parallel force main pipes per the 2011 State of the District Report. (3)-Does not include source control or overhead costs. Section 1 - Page 8 Consolidated Financial Reports Capital Outlay Review: $200,000,000 $150,000,000 $100,000,000 $50,000,000 $0 9/30/17 Actual Projected 2017-18 2017-18 Capital Outlay Capital Outlay Capital Outlay Cashfiow Budget $19,398,345 $126,430,900 $166,975,657 As depicted by the preceding chart, Capital Outlays totaled $19.4 million or 11.6 percent of the capital outlay cash flow budget for FY 2017-18 as of September 30, 2017. Costs are proportionately low through the first quarter as some projects are still in the design phase or have experienced various delays or deferrals. Examples as of September 30 are the, Consolidated Demolition and Utility Improvements at Plant No. 2, which has a FY17-18 cash flow budget of $11.6 million but actual costs of only $945,000 and the Safety Improvements at Plants Nos. 1 and 2, which has a budget of $9.7 million but actual costs of only $234,000. Overall, the capital outlay costs of the capital improvement program are expected to approximate $126.4 million, or 75.7 percent of the capital outlay cash flow budget at year-end. More detailed information on the capital improvement program is provided within Section 3. Capital Assets Schedule and Debt Service Budget Review: Section 4 is the Capital Assets Schedule and Debt Service Section. This section shows the cost value of the Sanitation District's capital facilities at September 30, 2017, as well as the debt service costs resulting from the need to provide funding for the construction of capital facilities. The majority of principal payments on debt issues are due in August during the first quarter, and in February during the third quarter of each fiscal year. As of September 30, 2017, 53.0 percent of the principal payments have been made through the end of the first quarter. Total principal payments are expected to approximate budget at year- Section 1 - Page 9 FY 2017-18 First Quarter Report end. Interest costs are expensed ratably throughout the fiscal year. Interest expense is anticipated to approximate budget at year-end. Self-Insurance Budget Reviews: Section 5 is the Self-Insurance Section. Through September 30, the Self-Insurance Fund revenues totaled $675,000 or 25.0 percent of the budget, while expenses were $435,000 or 18.3 percent of the budget. Separate fund accounting is used for recording the revenue and expenses incurred in managing these liability claims. The revenues to these funds represent charges to operating divisions. Expenses to these funds include actual claims paid, claims administration, and excess loss policies. Section 1 - Page 10 Operating Budget Review Cost per Million Gallons by Department Budget and Actual September 30, 2017 $1,500 $1,400 $1,300 $1,200 $1,100 $1,000 $900 $800 $700 $500 $500 $400 $300 az00 $100 $0 el uE z8 K y � �eutlget �Aclual Collection, Treatment, & Disposal Expenses by Major Category Budget and Actual (in thousands) September 30, 2017 $75,000 $70,000 M'00o $00,000 MOO $50,00n $a5,00o $a0,000 $35,000 $30.000 $25,000dM $20.000 $15.000 $10,000 $5.000 $0 Eu o' 2 8 Meudga Nnaaai Section 2-Page 1 2017-18 First Quarter Report Divisional Contributions to Cost Per Million Gallons For the Three Months Ended September 30,2017 2017-18 9130115 9I30116 Annual 9130117 Actual Actual Budget Actual Flow in Million Gallons 17,212.80 16,992.54 67,525.00 17,320.06 Flow In Million Gallons per Day 18709 18470 185.00 188.26 Executive Management Department General Management Administration $ 26.38 $ 28.32 $ 43.12 $ 30.70 Board Services Sale 6.82 8.92 8.92 Public Affairs 12.25 12.86 16.42 13.82 Subtotal 44.29 48.00 68.46 53.44 Human Resources Department Human Resources 49.29 49.02 59.81 48.94 Risk Management/Safety I Security 37.81 57.06 95.17 83.53 Subtotal 87.10 106.08 154.98 132.47 Administrative Services Department Administrative Services 9.55 6.70 9.25 6.94 Financial Management 44.12 38.85 56.78 45.80 Contacts,Purchasing,&Materials Mgmt. 56.92 59.86 65.49 62.27 Information Technology 150.79 137.15 156.51 184.43 Subtotal 261.38 242.% 288.03 299.44 Facilities Support Services Department Facilities Support Administration 12.27 - - - Facilities Support 31.40 - - - Collections Engineering 37.74 - - - NPDES Source Inspection 30.20 - - - Odor and Corrosion Control 106.38 - - - Collection Facilities O&M 55.58 Subtotal 273.57 Environmental Services Department Environmental Services Administration - 11.27 12.23 12.07 Resource Protection - 76.32 85.27 75.62 Laboratory,Monitoring and Compliance 140.12 158.87 154.21 Subtotal 226.71 256.37 241.90 Engineering Department Engineering Administration TIM 5.72 6.49 6.08 Planning 42.08 43.23 46.78 49.37 Project Management Office 35.66 34.93 42.49 34.83 Civil and Mechanical Engineering 128.50 121.01 127.80 117.63 Electrical&Control System Engineering - 51.32 77.54 66.38 Environmental Compliance 8039 Subtotal 294.91 256.21 301.10 274.29 Operations&Maintenance Department Operations&Maintenance Administration 11.84 6.43 12.96 8.43 Collections Facilities 0&M - 163.09 179.86 186.66 Fleet Services - 27.21 29.10 26.70 Plant No. 1 Operations 469.66 430.76 412.69 373.60 Plant No.2 Operations 310.96 287.64 287.14 289.79 Plant No. 1 Maintenance 213.71 248.18 213.67 198.98 Maintenance Reliability and Planning - - 114.03 95.42 Plant No.2 Maintenance 140.68 157.29 218.41 164.09 Environmental Laboratory&Ocean Monitoring 114,23 Subtotal 1,261.08 1,320.60 1,467.86 1,343.67 Total Operating Expenses 2,222.33 2,200.16 2,536.80 2,345.21 Cost Allocation (247.65) (276.78) (286.80) (295.42) Net Operating Requirements $ 1, 774.68 $ 1,9 33.38 $ 2,2 00.00 $ 2,049.79 Section 2-Page 2 Operating Budget Review Comparison of Expenses by Department For the Three Months Ended September 30,2017 2017-18 9130115 9130116 Year to Data Budget% Department and Division Actual Actual Budget 9130/17 Realized Executive Management Department General Management Administration $ 454,052 $ 481,214 $ 2.911,810 $ 531,754 18.26% Board Services 97,421 115,807 602,340 154,476 25.65% Public Affairs 210,898 218,563 11108,900 239,435 21.59% Subtotal 762,371 815,584 4.623,050 925.665 20,02% Human Resources Department Human Resources 848,361 833,041 4.038,470 847,629 20,99% Risk Management/Safety/Security 650,820 969,542 6,426,070 1,446,767 22.51% Subtotal 1,499.181 1.802,583 10.464,540 2,294.396 21,93% Administrative Services Department Administrative Services 164,435 113,803 624,730 120,275 19.25% Financial Management 759,357 660,179 3,833,990 793,250 20.69% Contracts,Purchasing,&Materials Mgmt, 979,693 1,017,108 4,422,300 1,078,522 24,39% Information Technology 2,595,479 2.330,501 10.568,540 3,194,317 30.22% Subtotal 4,498,964 4,121,591 19,449,560 5,186,364 26.67% Facilities Support Services Department Facilities Support Administration 211,132 - - - 0,00% Facilities Support 540,554 - - - 0.00% Collections Engineering 649,530 - - - 0.00% NPDES Source Inspection 519,828 - - - 0.00% Odor and Corrosion Control 1,831,093 - - - 0,00% Collection Facilities 0&M 956,757 0.00% Subtotal 4,708,894 - - - 0.00% Environmental Services Department Environmental Services Administration - 191,477 825,750 209,135 25.33% Resource Protection - 1,279,884 5,758,120 1,309,788 22.75% Laboratory,Monitoring and Compliance 2,380,990 10727,570 2,670.898 24.90% Subtotal 3,852,351 17,311,440 4,189,821 24.20% Engineering Department Engineering Administration 135,663 97,187 438,390 105,345 24.03% Planning 724,304 734,644 3.158,970 855,091 27,07% Project Management OfOce 613,840 593,577 2.868,900 603,334 21.03% CMI and Mechanical Engineering 2,211,829 2,056,323 8,629,930 2,037,393 23.61% Electrical&Control System Engineering - 872,079 5,235,710 1,149,722 21.96% Environmental Compliance 1,390.676 0,00% Subtotal 5,076,310 4,353,810 20,331,900 4,750,885 23.37% Operations&Maintenance Department Operations&Maintenance Administration 203,796 109,297 875,030 146,017 16.69% Collectors Facilities 0&M - 2.771,291 12,144,740 3,232.914 26,62% Fleet Services - 462,332 1.965,050 462,460 23.53% Plant No.l Operations 8,084,157 7,319,734 27,866,660 6,470,777 23.22% Plant No.2 Operation 5,352,442 4,887,717 19,389,450 51019,118 25.89% Plant No.1 Maintenance 3,678,480 4,217,151 14,428,280 3,446,394 23,89% Maintenance Reliability and Planning - - 7,700,130 1,652,656 21.46% Plant No.2 Maintenance 2,421,532 2,672,816 14,748,410 2,842,015 19.27% Environmental Laboratory&Ocean Monitoring 1,966,282 0.00% Subtotal 21,706,689 22,440,338 99,117,750 23,272.351 23.48% Total Operating Expenses 38,252.409 37,386,257 171,298,240 40,619,482 2371% Cost Allocation (4,262,690) (4,703,125) (19,394,560) (5,117,058) 26.38% Net Operating Requirements $ 33,989,719 $ 32,683,132 $ 151,903,680 $ 35,502.424 23.37% Section 2-Page 3 2017-18 First Quarter Report Summary of Collection, Treatment, &Disposal Expenses by Major Category For the Three Months Ended September 30,2017 Expense Expense Increase Increase Percent Budget Through Through (Decrease) (Decrease) Budget Remaining Description 2017-18 9130117 9130116 $ % Realized Budget Salary&Wages $ 70,883,000 16,380,310 15,202,438 $ 1,177,872 7.75% 23.11% $54.502,690 Employee Benefits 22,478,330 5,629,980 5,581,855 48,125 0.86% 25.05% 16,848,350 Administrative Expenses 1,996,550 644,491 319,765 324,726 101.55% 32.28% 1,352,059 Printing&Publication 403,900 79,301 51,163 28,138 55.00% 19.63% 324,599 Training&Meetings 1,252,320 183,568 210,307 (26.739) -12.71% 14.66% 1,068,752 Operating Materials&Supplies 15,724,300 3,940,666 4,005,543 (64,877) -1.62% 25.06% 11,783,634 Contractual Services 24,489,090 6,087.090 5,614,896 472,194 8.41% 24.86% 18.402,000 Professional Services 4,942,990 821,483 519,412 302,071 58.16% 16.62% 4,121,507 Research&Monitoring 872,400 183,511 152,338 31,173 20.46% 21.04% 688,889 Repairs&Maintenance 16,175,110 3,859,714 3,326,791 532,923 16.02% 23.86% 12,315,396 Utilities 7,898,590 2,006.298 1,896,176 110,122 5.81% 25.40% 5,892,292 Other Materials,Supplies, and Services 4,181,660 803,070 505,573 297,497 58.84% 19.20% 3,378,590 Net Cost Allocation (19,394,560) (5,117,058) (4,703,125) (413,933) 8.80% 26.38% (14,277,502) Net Operating Requirements 151,903,680 35,502,424 32,683,132 2,819,292 8.63% 23.37% 116,401,256 Gallonage Flow(MG) 67,525.00 17,320.06 16,992.54 327.52 1.93% Gallonage Flow(MGD) 185.00 188.26 184.70 3.56 1.93% Gallonage Flow($'a/MG) $2,250000 $2,049.79 $1,923.38 $126.41 6.57% Section 2-Page 4 Operating Budget Review Summary of Revenues For the Three Months Ended September 30, 2017 Revenue Percent Revenue Increase Increase Budget Through Budget Remaining Through (Decrease) (Decrease) Description 2017-18 9/30/17 Realized Budget 9130116 $ % Service Fees $291,158,000 $ (65,999) -0.02% $291,223,999 $ (370,591) $ 304,592 82.19% Permit Fees 12,925,000 4,473,396 34.61% 8,451,604 445,496 4,027,900 904.14% Inter District Sewer Use-SAWPA&SBSD 3,263,000 700,014 21.45% 2,562,986 773,080 (73,066) -9.45% Intra District Sewer Use-IRWD 4,552,800 1,101,284 24.19% 3,451,516 1,010,397 90,887 9.00% Sludge Disposal-IRWD 5,880,000 2,940,920 50.02% 2,939,080 2,496.973 443,947 17.78% Capital Assessments-IRWD&Other 5,375,000 437,228 8.13% 4,937,772 329,406 107,822 32.73% Capital Facilities Capacity Charges 9,900,000 4,575,083 46.21% 5,324,917 4,152,008 423,075 10.19% Property Taxes 93,666,000 2,519,562 2.69% 91,146,438 2A49,906 69,656 2.84% Interest Earnings 8,398,000 1,775,451 21.14% 6,622,549 697,031 1,078,420 154.72% CIP Reimbursements 2,130,000 670,562 31 A11% 1,459,438 - 670,562 100.00% Wastehauler 800,000 163,951 20.49% 636,049 162,891 1,060 0.65% CNG Sales 420,000 108,895 25.93% 311,105 107,841 1,054 0.98% Parts&Leases 255,000 92,623 36.32% 162,377 62,145 30,478 49.04% Other 475,000 50,247 10.58% 424,753 45,863 4,384 9.56% Power Sales 30,000 10,383 34.61% 19,617 8,407 1,976 23.50% Other Sales 45,000 4,849 1018% 40,151 13,857 (9,008) -65.01% Total Revenues $439,272,800 $ 19,558,449 4,45% $419,714,351 $ 12,384,710 $ 7,173,739 57.92% Section 2-Page 5 2017-18 First Quarter Report Summary of Collection,Treatment, &Disposal Expenses by Line Item For the Three Months Ended September 30,2017 Expense Percent Expense Increase Increase, Budget Through Budget Remaining Through (Decrease) (Decrease) Description 2017-18 9130117 Expensed Budget 9130/16 $ % Salaries.Wages&Benefits Salaries&Wages $ 70,883,000 $ 16,380,310 23.11% $ 54,502,690 $ 15,202.438 $ 1,177,872 7.75% Employee Bacardi Retirement 10,792,800 2,811,103 26.05% 7,981,697 2,80,322 (29,219) -1.03% Group Insurances 10,421,800 2,471,541 23.72% 7,9W,259 2,290,335 181,206 7.91% Tuition&Certification Relmb 102,000 19,843 19.45% 82,157 26,381 (6,538) -24.78% Edu.degrees,Cart.&Lic. 380,700 121,484 31.91% 259,216 86,W2 35,102 40.64% uniform Rental 110,600 31,671 28.64% 78,929 21,519 10,152 47.18% Workers'Compensation 554,330 138,584 25.W% 415,746 299,078 (160,494) -53.66% Unemployment Insurance 24,700 11,920 48.26% 12,780 %M4 2,536 27.02% EMT Supplemental Banal 91,400 23,834 26.08% 67,566 8,454 15,380 181.93% Total Benefits 22,478,330 5,629,980 25.05% 16,W,350 5,581,855 48,125 0.86% Salaries,Wages&Benefits 93,361,330 22,010,290 23.58% 71,351,040 20,784,293 1,225,997 5.90% Man,Supply,&Services Administrative Expenses Memberships 615,130 177,958 28.93% 437,172 175,770 2,188 1.24% Office Exp-Supplies 6&220 8,642 13.05% 57,578 12,767 (4,125) -32.31% Postage 320,570 91 2.88% 311,324 11,653 (2,407) -20.66% Books&Publications 41,530 6,137 12.37% 36,393 7,551 (2,414) -31.97% Forms Sm 190 34.55% 980 - 190 N/A Smell Computer Items 750,01 384714 51.30% 365,286 88,784 295,930 333.31% Minor Furniture&Fixtures 202,550 58,604 28.93% 143,946 23,240 35,364 152.17% Subtotal 1,996,550 ff 4491 32.28% 1,352,059 319,765 324,726 101.55% Printing&Publication Repro-In-House 243,%0 41,694 17.09% 202,266 43,208 (1,514) -3.50% Printing-Outside 112,560 4,395 3.90% 108,165 4,201 194 4.62% Notices&Ads 47,330 33,212 70.17% 14,118 3,754 29,458 784.71% Photo Processing 50 0.00% 50 N/A Subtotal 403,900 79,301 19.63% 324,599 51,163 28,138 55.00% Training&Meetings Meetings 198,620 18763 9.45% 179,857 25,194 (6,431) -25.53% Training 1,053,700 164,805 15.64% 8W'895 185,113 (20,308) Subtotal 1,252,320 183,568 14.66% 1,068,752 210,307 (26,739) -12.71% Operating Mafls&Supplies Chemical Coagulants S, 5,000 1,323,130 25.32% 3,901,870 1,412,902 (89,772) -6.35% Odor Control 7,494,000 1,993,4W 26.60% 5,500,550 1,927,869 66,581 3.40% Disinfection 307,600 35,819 11.64% 271,781 18,414 (12,595) -26.02% Chemicals-Misc&Cogan 342,000 68,832 20.13% 273,168 81,059 (12,227) -15.08% Gasoline,Diesel&Oil 565,790 102,729 18.16% 463,061 129,315 (26,586) -20.56% Tools 401,500 90,798 22.61% 310,702 &1 30,236 49.93% Safety equlpmarvemis 517,290 137,646 26.61% 379,644 154,700 (17,054) -11.02% Solt',Paints&Jan.Supplies 91,600 21,963 23.98% 69,637 18,626 3,337 17.92% Lab Chemicals&Supplies 587,160 129,634 22.08% 457,526 133,869 (4,235) -3.16% Other Operating Supplies 188,360 36,665 19.47% 151,695 38,123 (1,468) -3.82% Property Tax Fees 4,000 0.00% 4,000 104 (104) -100.00-4 Subtotal 15724,300 3,940,666 25.06% 11,783,634 4,005,543 (64,877) -1.62% Contractual Services Solids Removal 15,900,000 3,933,840 24.74% 11,966,160 4,486,716 (552,876) -12.32% Other Waste Disposal 990.040 1a4,018 18.59% 801 188,032 (4,014) -2.13% Groundskeeping 129,720 40,929 31.55% 88,791 31,679 6,250 18.02% Janitorial 366,440 97,601 26.63% 268,839 96,450 1,161 1.19% Outside Lab Services 25g000 34,056 13.62% 215,944 32,080 1,976 6.16% Oxygen 375,111 63.744 17.0% 311,256 85,171 (21,427) -25.16% County Service Fee 658,700 9,482 1.44% 649,218 6,345 3,137 49.44% Temporary Services 1,637,190 462,726 30.10% 1,074,464 75,412 387,314 513.60% Security Services 1,600,000 400,577 25.04% 1,199,423 145,484 255,093 175.34% Other 2,682,000 860,117 32.07% 1,821,883 4M,527 395,590 85.16% Subtotal 24,489,090 6,087,090 24.86% 18,402,000 5,614,896 472,194 8.41% (Continued) Section 2-Page 6 Operating Budget Review Summary of Expenses by Line Item For the Three Months Ended September 30,2017 Expense Percent Expense Increase Increase Budget Through Budget Remaining Through (Decrease) (Decrease) Description 2017-18 9130117 Expensed Budget 9130116 $ % Continued: Professional Services Legal 977,000 317,200 32A7% 659,800 123,671 193.529 156A9% Audit&Accounting 259,300 103,389 39.87% 155,911 70,302 33,087 47.06% Engineering 1,758,0W 87,246 4.96% 1,6]0,]54 105,026 (17,780) -16.93% Enviro Scientific Consulting 150,800 - 0.00% 150,800 13,244 (13,244) -100.00% Software PMm Consulting 416,000 79,101 19.01% 336,899 56,876 23,225 41S7% Advocacy Eftods 176,000 39,000 22.16% 137,000 34,350 4,050 13.54% Industrial Hygiene Services 50,000 10,906 21.81% 39,094 51,371 (40,465) -78.77% Labor Negotiation Services 20,000 - 0.00% 20,000 23,103 (23,103) -100.00% Other 1,135,890 184,641 1&26% 961,249 42,469 142,172 33437% Subtotal 4,942,990 821,483 16.62% 4,121,M7 519,412 302,071 58.16% Research&Monitoring Environmental Monitoring 352,200 77,261 21.94% 274,939 51,806 25,455 49A4% Air Quality Monitoring 95,200 - 0.00% 95,200 532 (532) -100.00% Research 425,000 106,250 2500% 318,750 100,000 6,250 6.25% Subtotal 872,400 183,511 2104% 688,889 152,338 31,173 20.46% Repairs&Maintenance Materials&Services 13,278,200 2,666,708 20.08% 10,611,492 2.668,330 (1,622) -0.06% Svc.MR, Agreements 2,896,910 1,193,006 41.18% 1,703,904 658,461 534,545 81.18% Subtotal 16,175,110 3,859,714 23,86% 12,315,396 3,326,791 632,923 1&02% Utilities Telephone 400,000 90,761 22.69% 309,239 80,580 10,173 12.62% Diesel For Generators 14,290 1,032 T22% 13,268 2,967 (1,925) -65A0% Natural Gas 780,500 217,265 27.84% 563,235 185,326 31,939 17.23% Power 6,037,0W 1,554,540 25.75% 4,482,460 1,468,354 86,186 5.87% Water 666,800 142,700 21.40% 524,1W 158,951 (16,251) -10.22% Subtotal 7,898,590 2,006,298 26,40% 5,892,292 1,896,176 110,122 5.81% Other Operating Supplies Outside Equip Rental 107,600 34,991 32.52% 72,609 14,249 20,742 145.57% Insurance Premiums 32,000 26,189 81.84% 5,811 31,049 (4,860) -1&65% Prop&Gen Liab Insurance 2,110,870 527,718 25.00% 1,583,152 277,776 249,942 89.98% Freight 71,560 24,302 33.96% 47,258 18,758 5,544 29.56% Misc.Operating Expense 259,250 52,160 20.12% 207,090 53,393 (1,233) -2.31% Regulatory Operating Fees 716,900 90,951 1230% 624,949 104,485 (13,534) -12S6% Subtotal 3,297,180 756,311 22.94% 2,50,869 499,710 256,601 51.35% General Mgr Contingency &Reappropriaeons 666,500 0.00% 665,500 N/A Other Non-Oper Expense Others 218,980 46,759 21.35% 172,221 5,863 40,896 697.53% Subtotal 218,980 46,759 21,36% 172,221 6,863 40,896 697.53% Total Materials, Supplies&Services 77,936,910 18,609,192 23.88% 59,327,718 16,601slut 2,007,228 12.09% Total Expenditures 171,298,240 40,619,482 23J1% 130,6]8,]58 37,386,257 3,233,225 865% Cost Allocation (19,394,560) (5,117,00) 26.38% (14,277,502) (4,703,125) (413,933) 880% Net Operating Requirements $ 151.903,680 $ 35,502,424 23.37% $ 116,401,256 $ 32.683,132 $ 2,819.292 8.63% Section 2-Page 7 2017-18 First Quarter Report Summary of Collection,Treatment,8 Disposal Expenses by Process For the Three Months Ended September 30, 2017 Increase Increase Actual Actual (Decrease) (Decrease) 9/30/17 9130/16 $ % Process: Preliminary Treatment $ 1,522,640 $ 1,849,396 $ (326,756) -17.67% Primary Treatment 2,618,895 2,330,909 287,986 12.36% Secondary Treatment 2,127,304 1,794,022 333,282 18.58% Cryogenic Plant(Plant 2) 134,829 160,618 (25,789) -16.06% Ef0uent Disposal 148,271 160,747 (12,476) -7.76% Solids Handling 10,026,424 10,811,145 (784,721) -7.26% Cogeneration 5,147,694 3,911,947 1,235,747 31.59% Utilities 620,935 661,097 (40,162) -6.08% Electrical Distribution 270,148 300,583 (30,436) -10.13% Miscellaneous Buildings 3,101,713 2,002,825 1,098,889 54.87% External Location 608 14,060 (13,451) -95.67% Nedssa Vessel 48,815 49,858 (1,043) -2.09% North County Yard - 2,929 (2,929) -100.00% Laboratory 3,933,117 3,247,852 685,265 21.10% Collections 5,801,031 5,385,146 415,885 7.72% Net Operating Requirements $ 35,502,424 $ 32,683,132 $ 2,819,292 8.63% Section 2-Page 8 Operating Budget Review Staffing Trends Full Time Equivalents September 30,2017 700 650 624 624 624 627 635 600 36 52 550 :1 500 450 6/30/14 6130115 6/30/16 6130/17 9/30/17 8Adua1 8Vacant At September 30, 2017, the total head count was 596 employees, or a full time equivalency of 584. Section 2-Page 9 2017-18 First Quarter Report This Page Intentionally Left Blank Section 2- Page 10 CIP Budget Review Capital Improvement Program By Type and Funding Source For the Three Months Ended September 30, 2017 MCollecions Facilll 31,4% eHeadearks: 2.1% EPdmary Treatment 1.0% oSecondary Treatment 03% MSolids Handling&Digestion: 41.1% Docean OURaII SYatems: 5.0% Duality Systems: 5.2% ?AA MProcess Related Special Projects: 12% Mlnformaton Management Systems: 3 2% MStrategic&Master Planning: 0.6% Ill Management Projects: 0.1% MReseamG: 0.5% OSuppod Fedli0es: 4.4% Mothers: 0.0% MPdor Year Treatment Projects: 0.0% lic., al Equll Pwcbases: 3 9% Total Capital Improvement Outlays-$19,398,345 Replacement/Rehabilitation: 44% Improved Treatment: 16% ❑Additional Capacity: 35% ■Support: 5% Total Capital Improvement Outlays-$19,398,345 Section 3- Page 1 FY 2017-18 First Quarter Report Summary of Capital Improvement Construction Requirements - Current Year For the Three Months Ended September 30, 2017 2017-18 2017-18 2017-18 Cashflow Actual at Projected Budget 9/30/2017 Outlay Collection System Improvement Projects Collections Facilities Raitt and Bristol Street Sewer Rehab& Extension 68,623 - 11,400 Santa Ana River Interceptor(SARI) Realignment 201,407 23,578 45,300 SARI Rock Stabilizers Removal 515,545 20,446 440,100 Newhope-Placentia Trunk Grade Separation Replacements 132,306 3,195 54,800 Newhope-Placentia Trunk Replacement 9,464,252 2,313,471 9,436,200 Lakeview Grade Separation Project 114,950 87,827 99,200 Tustin Rose OCTA Grade Separation Project 64,700 5,880 24,300 Orangethorpe OCTA Grade Separation 12,901 9,174 19,200 Seal Beach Pumping Station Upgrade and Rehabilitation 4,375,967 16,961 4,534,000 Rehabilitation of Western Regional Sewers 9,528,506 237,070 7,748,300 Interstate 405 Widening Project Impacts on OCSD Sewers 36,860 29,975 73,500 Newport Force Main Rehabilitation - 16,009 137,500 Bay Bridge Pumping Station Replacement 709,700 53,691 608,100 Newport Beach Pump Stations Odor Control Improvements 67,514 - 25,000 District 6 Trunk Sewer Relief 4,616,301 109,662 4,100,600 Gisler-Redhill System Improvements, Reach"B" 6,698,851 2,608,525 5,757,700 MacArthur Pumping Station Rehabilitation 41,271 - - Master Facilities Engineering Projects-Collections 3,795,001 228,821 2,821,900 Master Planning Studies-Collections 2,922,309 143,708 143,800 Research Program-Collections - 1,619 1,700 Bay Bridge Pump Station and Force Mains Rehab Study 90,344 16,836 72,500 Additional Charges to CIP Closed at 6/30/17 169,777 169,800 Subtotal-Collections Facilities 43,457,308 6,096,225 36,324,900 Revenue Area 14 Newport Force Main Rehabilitation (2.18%) 357 3,100 Subtotal-Revenue Area 14 357 3,100 Total Collection System Improvement Projects 43,457,308 6,096,582 36,328,000 (Confined) Section 3-Page 2 CIP Budget Review Summary of Capital Improvement Construction Requirements - Current Year For the Three Months Ended September 30, 2017 2017-18 2017-18 2017.18 Cashflow Actual at Projected Budget 9/3012017 Outlay Treatment&Disposal Projects Headworks Headworks Rehabilitation and Expansion at Plant 1 7,229,469 153,440 5,475,800 Truck Line Odor Control Improvements P1 35,245 20,934 134,300 Headworks Modifications at P2 for GWRS Final Expansion 1,789,057 239,879 2,972,000 Subtotal -Headworks 9,053,771 414,253 8,582,100 Primary Treatment Primary Clarifiers Repl & Impr at Plant No. 1 - 133 200 A-Side Primary Clarifiers Repl. at P2 7,038,302 189,336 5,592,700 Subtotal-Primary Treatment 7,038,302 189,469 5,592,900 Secondary Treatment Return Activated Sludge Piping Replacement Plant No.1 263,483 31,514 522,700 Activated Sludge Aeration Basin Deck Repair at P2 1,638,294 6,325 927,500 Return Activated Sludge Piping Replacement at P2 487,352 18,016 137,400 Subtotal -Secondary Treatment 2,389,129 55,855 1,587,600 Solids Handling& Digestion Digester Rehabilitation at Plant 1 2,306,580 414,496 414,500 Sludge Dewatedng and Odor Control at Plant 1 13,707,858 1,944,435 4,115,500 Solids Thickening and Processing Upgrades 267 1,248 209,900 Plant No.2 Digester Facilities Rehabilitation 159,528 39,936 287,900 Sludge Dewatedng and Odor Control at Plant 2 20,049,153 5,569,448 19,366,800 Interim Food Waste Receiving Facility 440,383 119,000 Subtotal-Solids Handling &Digestion 36,663,769 7,969,563 24,513,600 Ocean Ouffall Systems Final Ef0uent Sampler and Building Area Upgrades 541,037 (4,369) 217,800 Ocean Outfall System Rehabilitation 7,471,473 966,681 7,301,100 Subtotal-Ocean Outfall Systems 8,012,510 962,312 7,518,900 Utility Systems Cengen Emissions Control Project 251,540 431 12,000 Digester Gas Facilities Rehabilitation 733,218 65,060 291,800 Natural Gas Pipelines Repl at Plant No. 1 and 2 88,946 586 90,600 Electrical Power Distribution System Improvements - - 1,845,500 Uninterruptable Power Supply Impr. at P1 45,512 3,447 16,700 Consolidated Demolition&Utility Improvements at P2 11,646,047 945,498 10,748,000 Subtotal-Utility Systems 12,765,263 1,015,022 13,004,600 (Confined) Section 3-Page 3 FY 2017-18 First Quarter Report Summary of Capital Improvement Construction Requirements - Current Year For the Three Months Ended September 30, 2017 2017-18 2017-18 2017-18 Cashflow Actual at Projected Budget 9/3 012 01 7 Outlay Process Related Special Projects Safety Improvements at Plants Nos. 1 and 2 9,986,488 234,017 6,144,200 Subtotal -Process Related Special Projects 9,986,488 234,017 6,144,200 Information Management Systems Process Control Systems Upgrades - - - Project Management Information System 1,951,448 184,521 724,300 Power Monitoring &Control Systems at P2 1,764,544 143,191 2,052,200 Master Information Technology Capital Program 1,176,832 222,641 222,700 Geographic Information System 659,791 24,273 96,300 EAM Software and Process Implementation 658,725 - 690,000 PDS2D Software Replacement 83,814 10,625 18,700 Process Control System Upgrades Study 963,277 33,465 717,800 Subtotal-Information Management Systems 7,258,431 618,716 4,522,000 Strategic& Master Planning Master Planning Studies 4,082,267 112,792 4,894,500 Climate Change Impact Study 147,135 2,186 33,000 Subtotal-Strategic&Master Planning 4,229,402 114,978 4,927,500 Water Management Projects GWRS Final Expansion Coordination 86,651 15,841 115,300 Subtotal -Water Management Projects 86,651 15,841 115,300 Research Research Program 1,305,436 89,165 630,300 Subtotal-Research 1,305,436 89,165 630,300 Support Facilities Master Facilities Engineering Projects- Plant 9,675,530 736,711 4,245,800 Pl Fleet Services UST Leak Remediation 1,693,273 18,977 19,000 Master Small Capital Replacement/Rehabilitation 2,308,427 - - Title 24 Access Compliance&Building Rehab Project 1,709,156 30,993 1,931,400 Headquarters Complex, Site& Security&Entrance Realign. 5,389,573 68,650 2,699,500 Site and Security Improvements at Plant No.2 10,881 1,300 Subtotal-Support Facilities 20,786,840 855,331 8,897,000 (Continued) Section 3-Page 4 CIP Budget Review Summary of Capital Improvement Construction Requirements - Current Year For the Three Months Ended September 30, 2017 2017-18 2017-18 2017-18 Cashflow Actual at Projected Budget 9/30/2017 Outlay Others Interstate 405 Widening Impacts on OCSD Front Entrance 16,451 8,014 150,400 P2 Southwest Perimeter Screening 46,606 - 28,200 Capital Improvement Program Mgmt. Services (554) (600) Subtotal-Others 63,057 7,460 178,000 Additional Charges to CIP Completed at 6/30/17 9,511 9,600 Total Treatment and Disposal Projects 119,639,049 12,551,493 86,223,600 Capital Equipment Purchases 3,879,300 750,270 3,879,300 Total Collection,Treatment and Disposal Projects and Capital Equipment Purchases $166,975,657 $ 19,398,345 $126,430,900 Section 3 - Page 5 FY 2017-18 First Quarter Report Summary of Capital Improvement Construction Requirements- Project Life For the Three Months Ended September 30,2017 Current Total Approved June 30,2017 Year Projected Remaining Project Accumulated Projected Cost at Future Budget Cost Cost June 30,2018 Budget Collection System Improvement Projects Collections Facilities Raiff and Bristol Street Sewer Rehab&Extension 13,622,000 259,075 11,400 270,475 13,351,525 Santa Ana River Interceptor(SARI)Realignment 11,404,000 5,673,355 45,300 5,718,655 5,685,345 SARI Rock Stabilizers Removal 6,860,000 410,508 440,100 850,608 6,009,392 Taft Branch Sewer Relief 1,928,000 12,083 - 12,083 1,915,917 Newhope-Placentia Trunk Grade Separation Replacements 4,300,000 4,059,157 54,800 4,113,957 186,043 Newhope-Placentia Trunk Replacement 112,000,000 30,442,121 9,436,200 39,878,321 72,121,679 Yoffie Linda Pumping Station Abandonment 7,053,000 - - - 7,053,000 Lakeview Grade Separation Project 330,000 70,262 99,200 169,462 160,538 Tustin Rose OCTA Grade Separation Project 586,000 423,587 24,300 447,887 138,113 Orangethorpe OCTA Grade Separation 1,505,000 1,482,972 19,200 1,502,172 2,828 Beach Trunk/Knott Interceptor Sewer Relief 118,678,000 - - - 118,678,000 Seal Beach Pumping Station Upgrade and Rehabilitation 54,000,000 3,583,755 4,534,000 8,117,755 45,882,245 Rehabilitation of Western Regional Sewers 217,069,000 7,706,718 7,748,300 15,455,018 201,613,982 Interstate 405 Widening Project Impacts on OCSD Beware 528,000 2,866 73,500 76,366 451,634 Newport Force Main Rehabilitation 58,367,238 58,147,927 137,500 58,285,427 81,811 Crystal Cove Pumping Station Rehabilitation 10,882,000 - - - 10,882,000 Bay Bridge Pumping Station Replacement 64,000,000 217,700 608,100 825,800 63,174,200 Newport Beach Pump Stations Odor Control Improvements 4,066,000 - 25,000 25,000 4,041,000 District 6 Trunk Sewer Relief 7,965,000 1,791,858 4,100,600 5,892,458 2,072,542 Gisler-Redhill System Improvements,Reach"1" 25,213,000 18,093,894 5,757,700 23,851,594 1,361,406 MacArthur Pumping Station Rehabilitation 8762,000 - - - 8,762,000 Main Street Pump Station Rehabilitation 39,219,000 - - - 39,219,000 Gisler Red-Hill Interceptor Rehabilitation 15,300,000 - - - 15,300,000 Edinger/Bolsa Chica Trunk Improvements 5,159,000 - - - 5,159,000 Edinger Pumping Station Rehabilitation 8,880,000 - - - 8,880,000 Slater Avenue Pump Station Rehabilitation 9,729,000 - - - 9,729,000 Master Facilities Engineering Projects-Collections 14,192,000 816,413 2,821,900 3,638,313 10,553,687 Master Planning Studies-Collections 11,953,614 1,533,083 143,800 1,676,883 10,276,731 Research Program-Collections - - 1,700 1,700 (1700) Bay Bridge Pump Station and Force Mains Rehab Study 725,000 505,121 72,500 577,621 147,379 Additional Charges to CIP Closed at 6130117 169,800 169,800 (169,800) Subtotal-Collections Facilities 834,275,852 135,232,455 36,324,900 171,557,355 662,718,497 Revenue Area 14: Newport Force Main Rehabilitation(2.18%) 1,300,762 1,295,875 3,100 1,298,975 1,787 Subtotal-Revenue Area 13 1,300,762 1,295,875 3,100 1,298,975 1,787 Total Collection System Improvement Projects 835,576,614 136,528,330 36,328,000 172,856,330 662,720,284 (Continued) Section 3-Page 6 CIP Budget Review Summary of Capital Improvement Construction Requirements- Project Life For the Three Months Ended September 30,2017 Current Total Approved June 30,2017 Year Projected Remaining Project Accumulated Projected Cost at Future Budget Cost Cost June 30,2018 Budget Treatment&Disposal Projects Headworks Headworks Rehabilitation and Expansion at Plant 1 436,000,000 6,084,545 5,475,800 11,560,345 424,439,655 Truck Line Odor Control Improvements P1 9,299,000 9,035,390 134,300 9,169,690 129,310 Headworks Modifications at P2 for GWRS Final Expansion 54,000,000 229,284 2,972,000 3,201,284 50,798,716 Subtotal-Headworks 499,299,000 15,349,219 8,582,100 23,931,319 475,367,681 Primary Treatment Primary Clarifier&Trickling Filter Odor Control at P1 74,800,000 - - - 74,800,000 Primary Clarifiers Repl&Impr at Plant No.1 112,000,000 520,619 200 520,819 111,479,181 A-Side Primary Clarifiers Repl.at P2 491,000,000 4,817,329 5,592,700 10,410,029 480,589,971 Subtotal-Primary Treatment 677,800,000 5,337,948 5,592,900 10,930,848 666,869,152 Secondary Treatment Return Activated Sludge Piping Replacement Plant No.1 3,979,000 34,632 522,700 557,332 3,421,668 Activated Sludge Aeration Basin Deck Repair at P2 2,800,000 264,277 927,500 1,191,777 1,608,223 Return Activated Sludge Piping Replacement at P2 15,000.000 7,050 137,400 144,450 14,855,550 Subtotal-Secondary Treatment 21,779,000 305,959 1,587,600 1,893,559 19,885'"1 Solids Handling&Digestion Digester Rehabilitation at Plant 1 67,150,000 64,908,366 414,500 65,322,866 1,827,134 Sludge Dewatering and Odor Control at Plant 1 188,328,000 165,A2,702 4,115,500 169,888,202 18,439,798 Solids Thickening and Processing Upgrades 48,150,000 47,879,175 209,900 48,089,075 60,925 Plant No.2 Digester Facilifies Rehabilitation 49,220,000 196,634 287,900 484,534 48,735,466 Sludge Dewatering and Odor Control at Plant 2 90,477,000 46,648,765 19,366,800 66,015,565 24,461,435 Interim Food Waste Receiving Facility 5,400,000 - 119,000 119,000 5,281,000 Digester P,Q,R,&S Replacement 158,000,000 1585000,000 Subtotal-Solids Handling&Digestion 606,725,000 325,405,642 24,513,600 349,919,242 2565805,758 Ocean Oulfall Systems Final Effluent Sampler and Building Area Upgrades 16,411,000 15,925,650 217,800 16,143,450 267,550 Ocean Outfall System Rehabilitafion 147,000,000 8,813,199 7,301,100 16,114,299 130,885,701 Subtotal-Ocean Oulfall Systems 163,411,000 24,738,849 7,518,900 32,257,749 131,153,251 Utility Systems Cengen Emissions Control Project 23,820,000 22,247,572 12,000 22,259,572 1,560,428 UPS System Upgrades 8,087,000 - - - 8,087,000 Digester Gas Facilities Rehabilitation 96,500,000 181,030 291,800 472,830 96,027,170 Natural Gas Pipelines Repl at Plant No.1 and 2 1,310,000 24,928 90,600 115,528 1,194,472 Electrical Power Distribution System Improvements 34,608,000 - 1,845,500 1,845,500 32,762,500 (Confined) Section 3-Page 7 FY 2017-18 First Quarter Report Summary of Capital Improvement Construction Requirements- Project Life For the Three Months Ended September 30,2017 Current Total Approved June 30,2017 Year Projected Remaining Project Accumulated Projected Cost at Future Budget Cost Cost June 30,2018 Budget Utility Systems(continued) Ca l Generation Rehab at Plant No. 1 87,000,000 - - - 87,000,000 Unintermptable Power Supply Impr.at P1 4,800,000 3,351 16,700 20,051 4,779,949 Consolidated Demolition&Utility Improvements at P2 30,300,000 5,453,054 10,748,000 16,201,054 14,098,946 Central Generation Rehab at Plant No.2 114,000.000 114,000,000 Subtotal-Utility Systems 400,425.000 27,909,935 13,004,600 40,914,535 359,510,465 Process Related Special Projects Safety Improvements at Plants Nos.l and 2 19,000.000 1,606,938 6,14g200 7,751,138 11,248,862 Subtotal-Process Related Special Projects 19,000.000 1,606,938 6,14g200 7,751,138 11,248,862 Information Management Systems Process Control Systems Upgrades 102,399,000 - - - 102,399,000 Project Management Infonnadon System 4,000,000 701 724,300 725,001 3,274,999 Power Monitoring&Control Systems at P2 24,100,000 2,211,062 2,052,200 4,263,262 19,836,738 Master Information Technology Capital Program 10,000,000 573,006 222,700 795,706 9,204,294 Geographic information System 4,568,000 2,456,512 96,300 2,552,812 2,015,188 EAM Software and Process Implementation 7,500,000 4,765,108 690,000 5,455,108 2,044,892 PDS2D Software Replacement 530,000 352,351 18,700 371,051 158,949 Process Control System Upgrades Study 3,554,000 69,484 717,800 787,284 2,766,716 Subtotal-Information Management Systems 156,651,000 10,428,224 4,522,000 14,950,224 141,700,776 Strategic&Master Planning Master Planning Studies 16,698,386 6,295,834 4,894,500 11,190,334 5,508,052 Climate Change Impact Study 590,000 3,919 33,000 36,919 553,081 Subtotal-Strategic&Master Planning 17,288,386 6,299,753 4,927,500 11,227,253 6,061,133 Water Management Projects GWRS Final Expansion Coordination 1,132,000 115,300 115,300 1,016,700 Subtotal-Water Management Projects 1,132,000 - 115,300 115,300 1,016,700 Research Research Program 8,500,000 54,133 630,300 684,433 7,815,567 SCCWRP Nutrient Cycling Sampling 95,000 95,000 95,000 Subtotal-Research 8,595,000 149,133 630,300 779,433 7,815,567 (Continued) Section 3-Page 8 CIP Budget Review Summary of Capital Improvement Construction Requirements- Project Life For the Three Months Ended September 30,2017 Current Total Approved June 30,2017 Year Projected Remaining Project Accumulated Projected Cost at Future Budget Cost Cost June 30,2018 Budget Support Facilities Master Facilities Engineering Projects-Plant 28,373,000 6,269,643 4,245,800 10,515.443 17,857,557 P1 Fleet Services UST Leak Remediation 14,952.000 194,404 19,000 213,404 14,738,596 Master Small Capital ReplacementlRehabilitation 15,622,000 626,765 - 626,765 14,995,235 Title 24 Access Compliance&Building Rehab Projecl 18,400,000 13,852,170 1,931,400 15,783,570 2,616,430 Headquarters Complex,Site&Security&Entrance Realign. 179,067,000 528,437 2,699,500 3,227,937 175,839,063 Site and Security Improvements at Plant No.2 252,000 236,410 1,300 237,710 14,290 P2 Warehouse Relocation 9,800,000 - - - 9,800,000 P2 Collections Yard!Relocation 1,500,000 - - - 1,500,000 TPAD Digester Facility at P2 419,000,000 419,000,000 Subtotal-Support Facilities 686,966,000 21,707,829 8,897,000 30,604,829 656,361,171 Others Interstate 405 Widening Impacts on OCSD Front Entrance 2,655,000 - 150,400 150,400 2,504,600 Banning Gale Relocation&Grading at Plant No.2 2,931,000 - - - 2,931,000 P2 Southwest Perimeter Screening 2,800,000 - 28,200 28,200 2,771,800 Capital Improvement Program Mgml.Services 300,000 61,180 (600) 60SS0 239,420 Subtotal-Others 8,686,000 61,180 178,000 239,180 8,446,820 Additional Charges to CIP Completed at 6130117 9,600 9,600 (9,600) Total Treatment and Disposal Projects 3,267,757,386 439,300,609 86,223,600 525,524,209 2,742,233,177 Capital Equipment Purchases 16,000,000 9,058,965 3,879,300 12,938,265 3,061,735 Total Collection,Treatment and Disposal Projects and Capital Equipment Purchases $4,119,334,000 $584,887,904 $126,430,900 $711,318,804 $3,408,015,196 Section 3-Page 9 FY 2017-18 First Quarter Report This Page Intentionally Left Blank Section 3- Page 10 Capital Assets Schedule & Debt Service Budget Review Capital Assets Schedule For the Three Months Ended September 30, 2017 Capital Facilities Budget Review Balance Year-to-Date Balance 07/01/17 Additions 9130/17 CONSTRUCTION IN PROGRESS: Treatment Plant $ 386,799,209 $ 13,301,763 $ 400,100,972 Collection System 75,034,241 6,096,582 81,130,823 Subtotal 461,833,450 19,398,345 481,231,795 PROPERTY,PLANT&EQUIPMENT tat cost): Land and Property Rights 25,247,046 - 25,247,046 Collection Lines and Pump Stations 830,551,347 - 830,551,347 Treatment Facilities 2,366,129,584 - 2,366,129,584 Effluent disposal facilities 97,014,820 - 97,014,820 Solids disposal facilities 3,463,236 - 3,463,236 General and administrative facilities 246,051,157 - 246,051,157 Excess purchase price over book value on acquired assets 19,979,000 19,979,000 Subtotal 3,588,436,190 3,588,436,190 Total Properly,Plant&Equipment&CIP $ 4,050,269,640 $ 19,398,345 $ 4,069,667,985 Debt Service Budget Review 2017-18 Year-to-Date Remaining Budget Payments %of Budget Budget Principal Payments by Debt Issue: 2009A COP 4,465,000 - 0.00% 4,465,000 2010A BABs - - 0.00% - 2010CBABs - - 0.00% - 2011ACOP 20,960,000 20,960,000 100.00% - 2012ACOP - - 0.00% - 2012BCOP - - 0.00% - 2014ACOP 6,715,000 - 0.00% 6,715,000 2015A COP - - 0.00% - 2016ACOP - - 0.00% - 2016BCANs 7,426,217 - 0.00% 7,426,217 2017A COP 0.00% Subtotal Principal Payments 39,566,217 20,960,000 52.97% 18,606,217 Interest Expense by Debt Issue: 2009A COP 457,750 114,475 25.01% 343,275 2010A BABs 2,897,639 993,399 34.28% 1,904,240 2010C BABs 6,523,780 2,236,682 34.29% 4,287,098 2011ACOP 3,872,350 924,475 23.87% 2,947,875 2012A COP 3,735,900 934,050 25.00% 2,801,850 2012E COP 3,187,400 796,800 25.00% 2,390,600 2014A COP 4,254,500 1,063,650 25.00% 3,190,850 2015A COP 6,375,500 1,593,850 25.00% 4,781,650 2016A COP 6,977,300 1,744,350 25.00% 5,232,950 2016B CANs 865,692 549,300 63.45% 316,392 2017A COP 3,318,500 830,667 25.03% 2,487,833 Subtotal Interest Expense 42,466,311 11,781,698 27.74% 17,865,788 Total Debt Service $ 82,032,528 $ 32,741,698 39.91% $ 36,472,005 Section 4- Page 1 2017-18 First Quarter Report This Page Intentionally Left Blank Section 4 - Page 2 Self Insurance Budget Review General Liability and Property Fund Budget Review For the Three Months Ended September 30,2017 Percent Actual of Budget Remaining Actual 2017.18 Through Through 2017-18 Through Increase Budget 9/30/17 9130/17 Budget 9/30116 (Decrease) Revenues: In-Lieu Premiums $ 2,110,870 $ 527,718 25.00% $ 1,583,152 $ 277,776 $ 249,942 Miscellaneous Other Revenue - 3,532 N/A - - 3,532 Service Department Allocations 18,700 4,674 24.99% 14,026 4,674 - Total Revenues 2,129,570 535,924 25.17% 1,597,178 282,450 253,474 Expenses: Benefits/Claims 100,000 2,500 2.50% 97,500 607,372 (604,872) Legal Services 130,000 1,938 1.49% 128,062 29,404 (27,466) Professional Services 25,000 0.00% 25,000 25,313 (25,313) Subtotal 255,000 4,438 1.74% 250,562 662,089 (657,651) Policy Premium Expense 1,080,000 300,528 27.83% 779,472 293,152 7,376 Total Expenses 1,335,000 304,966 22.849% 1,030,034 955,241 (650,275) Excess Revenue(Expense) 794,570 230,958 $ 567,144 (672,791) 903,749 Beginning Reserves 54,205,430 54,445,772 55,252,299 (806,527) Ending Reserves 8 55A00,000 $5Q676,730 $ 54,579.508 $ 97222 Section 5-Page 1 FY 2017-18 First Quarter Report Workers'Compensation Fund Budget Review For the Three Months Ended September 30,2017 Percent Actual of Budget Remaining Actual 2017-18 Through Through 2017-18 Through Increase Budget 9/30/17 9/30/17 Budget 9/30116 (Decrease) Revenues: In-Lieu Premiums $ 554,330 $ 138,582 25.00% $ 415,748 $ 299,075 $ (160,493) Miscellaneous Other Revenue 10,000 - 0.00% 10,000 - - Total Revenues 564,330 136,582 24.560/6 425,748 299,075 (160,493) Expenses: Benefits/Claims 600,000 72,623 12.10% 527,377 80,728 (8,105) Legal Services 175,000 5,937 3.39% 169,063 16,913 (10,976) Professional Services 65,000 N/A 65,000 14,075 (14,075) Subtotal 840,000 78,560 9.35% 761,440 111,716 (33,156) Policy Premium Expense 200,000 51,628 25.81% 148,372 52,206 (578) Total Expenses 1,040,000 130,188 12.52% 909,812 163,922 (33,734) Excess Revenue(Expense) (475,670) 8,394 $ (484,064) 135,153 (126,759) Beginning Reserves 2,475,670 2,464,418 1,913,178 551,240 Ending Reserves $ 2,000,000 _L 2.472.812 $ 2.048,331 $ 424,481 Section 5-Page 2 'e? Op October 31, 2017 STAFF REPORT Quarterly Treasurer's Report For the Three Months Ended September 30, 2017 SUMMARY Section 15.0 of the District's Investment Policy includes quarterly reporting requirements for the District's two investment portfolios. These two funds, the "Liquid Operating Monies," and the "Long-Term Operating Monies" are managed by Chandler Asset Management, the District's external money manager. The ongoing monitoring of the District's investment program by staff and Callan Associates, the District's independent investment advisor, indicates that the District's investments are in compliance with the District's adopted Investment Policy and the California Government Code, and that overall performance has tracked with benchmark indices. In addition, sufficient liquidity and anticipated revenues are available for the District to meet budgeted expenditures for the next six months. The District's portfolios do not include any reverse repurchase agreements or derivative securities. ADDITIONAL INFORMATION Performance Reports The Quarterly Strategy Review, prepared by Chandler Asset Management, and the Investment Measurement Service Quarterly Review, prepared by Callan Associates, is attached for reference. Also attached are Long-Term and Liquid Operating Monies Summary of Performance Data and Portfolio Statistics charts that depict the performance results, estimated yield and duration, credit quality, and sector diversification of the District's portfolios, as of September 30, 2017. The Liquid Operating Monies portfolio,with an average maturity of 62 days, consists entirely of high quality fixed income investments consistent with the District's investment policy. Portfolio Performance Summary The following table presents a performance summary of the District's portfolios as compared to their benchmarks for the period July 1 through September 30, 2017. OCSD ♦ P.O.Box8127 ♦ Fountain Valley,CA 9272M127 ♦ (716)%2-2411 Quarterly Treasurer's Report For the Three Months Ended September 30, 2017 Page 2 of 3 Portfolio Performance Summary Quarter Ended September 30,2017 Liquid Operating Monies(%) Lang-Term Operating Monies(%) Total Rare of Total Rate of Realm Benchmark0) Realm Benchmark'I 3 Months 0.26 0.26 0.42 0.38 6 Months 0.47 0.47 0.88 0.86 9 Months 0.61 0.57 1.40 1.34 12 Months 0.73 0.66 0.55 0.27 Annualized Since inception 30 Nov 2014 0.47 0.34 1.24 1.19 Market Value 49.5M $333.2M Average Quality "AA1/101V °AA"PAal' Current Yield(%) 1.6 1B Estimated Yield to Maturity(%) 1.2 1.6 Quarterly DeposXs(Withdmwals) ( 75.2M) O.OM Estimated Annual Income .6M T5.8M (1) Benchmarks: • Liquid Operating Portfolio: 3-Month Treasury Bill Index • Long-Term Operating Portfolio: Merrill Lynch Corp/Govt. 1-5 Year Bond Index Portfolio Market Values Comparative marked-to-market quarter-end portfolio values are shown in the following table, and in the attached bar chart. Liquid Long-Term Quarter Operating Operating Ending Monies($M) Monies($M) 31 Dec 16 113.0 316.6 31 Mar 17 85.2 318.2 30 Jun 17 124.4 331.8 30 Sep 17 49.5 333.2 District's Investment Account Balances as of September 30, 2017 Book Balances Estimated Investment Accounts September 30,2017 Yield(%) State of Calif.LAIF $59,788,981 1.11 Union Bank Checking Account 155,621 0.25 Union Bank Overnight Sweep Account 453,000 0.63 Union Bank W/C Checking 82,151 0.00 Chandler-Short-term Portfolio 49,296,313 1.16 Chandler-Long-term Portfolio 331,862,157 1.64 Petty Cash 3,000 N/A BNY Mellon OCIP Reserve 3,590,424 0.75 TOTAL 445.231.647 1.51 Debt Service Reserves w/Trustees 4 984 92fl 0.88 Quarterly Treasurer's Report For the Three Months Ended September 30, 2017 Page 3 of 3 District's Cost of Funds on Debt Issues as of September 30, 2017 Annual Cost of Funds Outstanding Interest Issue Description COP Balance Rate(%) 2009A Fixed $9,155,000 4.72 201 OA Fixed 80,000,000 3.68 201 OC Fixed 157,000,000 4.11 2011A Fixed 75,370,000 2.61 2012A Fixed 100,645,000 3.54 2012B Fixed 66,395,000 1.50 2014A Fixed 85,090,000 2.34 2015A Fixed 127,510,000 3.30 2016A Fixed 145,890,000 3.02 2016B Fixed 109,875,000 0.87 2017A Fixed 66.370 000 2.55 TOTAL SI 09001N1 Weighted Avg.Cost of Funds 2.89 ATTACHMENTS 1. Chandler Quarterly Report 2. Summary of Performance Data and Portfolio Statistics — Liquid Operating Monies 3. Summary of Performance Data and Portfolio Statistics— L-T Operating Monies 4. Investment Transactions and Balances in LAIF 5. Asset Summary by Asset Type — Liquid Operating Portfolio 6. Asset Summary by Asset Type — Long Term Portfolio 7. Asset Summary by Asset Type— Owner Controlled Insurance Program Escrow with Liberty Mutual 8. Asset Detail — Consolidated Holdings 9. Custody Transaction History—Consolidated 10. Callan Quarterly Review 11. Chandler Quarterly Review 12. Rating Agency Comparisons C/" CHANDLER ASSET MANAGEMENT September 30, 2017 Mr. Mike White, CPA Controller Orange County Sanitation District 10844 Ellis Avenue Fountain Valley CA 92708-7018 Dear Mike, Bond Market Recap The Federal Open Market Committee (FOMC) left the fed funds target rate unchanged at a range of 1.00%-1.25% at the September 19-20 meeting. However, the Committee began its balance sheet normalization program this month. The process of unwinding the Fed's $4.5 trillion balance sheet is beginning gradually by allowing $6 billion per month in Treasury securities and $4 billion per month in mortgage-backed and agency securities to roll off the balance sheet. Over time, the amounts will slowly increase to $30 billion per month in Treasury securities and $20 billion per month in mortgage-backed and agency securities. The Fed's updated economic projections still indicate one more rate hike before year-end is expected. However, the Fed lowered its median longer-run fed funds rate projection to 2.8% from 3.0%. The Fed's other economic projections were little changed in September, although the median 2018 inflation forecast was lowered slightly, suggesting that the Committee now thinks inflation may remain below the Fed's 2.0%target until 2019. GDP grew by 3.1% in the second quarter, following growth of 1.2% in the first quarter. The consensus forecast currently calls for GDP growth of about 2.6% in the third quarter and 2.4% in the current quarter. We believe economists may trim their estimates for third quarter GDP growth, to reflect disruptions caused by Hurricanes Harvey and Irma. Tax reform or fiscal stimulus may ultimately help fuel stronger economic growth, but the timing and magnitude of such programs remains uncertain. The Treasury yield curve steepened in September, partially reversing some of the curve flattening that has happened year-to-date. The 2-year Treasury yield increased 16 basis points in September to 1.48% and the 10-year Treasury yield increased about 22 basis points to 2.33%. On a year-to-date basis, the 2-year Treasury yield increased 29 basis points and the 10- year Treasury yield declined 11 basis points. Since the beginning of this year, we believe market participants have grown skeptical that the Trump administration will deliver on many of their legislative objectives. However, the administration recently outlined a general framework for tax reform, sparking some renewed optimism that changes to the tax code may help boost economic growth. C/" CHANDLER ASSET MANAGEMENT The yield curve steepened in September but has flattened year-to-date. The spread between 2- year and 10-year Treasury yields was just 85 basis points at the end of September, compared to 126 at the end of 2016. In the three months ending in September, the 2-year Treasury yield increased about ten basis points while the 10-year Treasury yield increased just three basis points. Immediately following the US Presidential election last fall, the Treasury yield curve steepened, but much of that has since reversed. Consumer Prices The Consumer Price Index (CPI) was up 1.9% year-over-year in August, versus up 1.7% year- over-year in July. Core CPI (CPI less food and energy) was up just 1.7% year-over-year in August, unchanged from the prior month. The Personal Consumption Expenditures (PCE) index was up 1.4% year-over-year in August, unchanged from June or July. Core PCE (excluding food and energy) was up just 1.3% year-over-year in August, versus up 1.4% year-over-year in July. Inflation remains below the Fed's 2.0%target. Retail Sales On a year-over-year basis, total retail sales were up 3.2% in August compared with a 3.5% increase in July. On a month-over-month basis, retail sales declined 0.2% in August, below expectations for a 0.1% increase. Excluding autos and gas, retail sales fell 0.1% in August. Overall, August retail sales were lackluster. Although August results may have been negatively impacted by Hurricane Harvey, the retail sales figures for July were also revised down. Labor Market U.S. payrolls declined 33,000 in September, well below the +80,000 consensus estimate. However, September payrolls were likely significantly distorted by the hurricanes. The unemployment rate decreased to 4.2% in September from 4.4% in August, and the labor participation rate increased to 63.1% from 62.9%. A broader measure of unemployment called the U-6, which includes those who are marginally attached to the labor force and employed part time for economic reasons, declined to 8.3%from 8.6%. Wages jumped 0.5% in September. On a year-over-year basis wages were up 2.9% in September, versus up 2.7% year-over-year in August. Housing Starts Total housing starts fell slightly in August but were still stronger than expected. Single-family starts increased 1.6% in August, partially offsetting a 6.5% decline in multi-family starts. Permits were stronger than expected in August, up 5.7%, driven by a 19.6% surge in multi-family permits. Overall, the August housing starts report was favorable, particularly considering it includes some effects from Hurricane Harvey. 2 C/" CHANDLER ASSET MANAGEMENT TREASURYYIELDS 9/3012017 6/30/2017 CHANGE 3 Month 1.05 1.01 0.04 2 Year 1.49 1.38 0.11 3 Year 1.62 1.55 0.07 5 Year 1.94 1.89 0.05 7 Year 2.17 2.14 0.03 10 Year 2.33 2.31 0.02 30 Year 2.86 2.84 0.02 Economic Data Remains Indicative of Slow Growth ECONOMIC INDICATOR Current Release Prior Release OneYear Ago Trade Balance (42.4)$13In AUG 17 (43.6)$Bin JUL 17 (41.1)$Bin AUG 16 GDP 3.1%JUN 17 1.2%MAR 17 2.2%JUN 16 Unemployment Rate 4.2%SEP 17 4A%AUG 17 4.9%SEP 16 Prime Rate 4.25%SEP 17 4.25%AUG 17 3.5%SEP 16 CRB Index 183.09 SEP 17 180.86 AUG 17 186.31 SEP 16 Oil(West Texas Intl $51.67 SEP 17 $47.23 AUG 17 $48.24 SEP 16 Consumer Price Index(y/o/y) 1.9%AUG 17 1.7%JUL 17 1.1%AUG 16 Producer Price Index(y/o/y) 2.9%AUG 17 2.296JUL 17 (1.9%)AUG 16 Dollar/Euro 1.18 SEP 17 1.19 AUG 17 1.12 SEP 16 Swrce:eloomberg 3 C/" CHANDLER ASSET MANAGEMENT Performance Attribution Long-Term Portfolio The Long-Term portfolio modestly outperformed the benchmark during the quarter, generating a return of 0.42% versus 0.38% for the Bank of America 1-5 Year AAA-A US Corporate and Government Index. During the quarter the overweight to spread product versus the benchmark was additive to results as both Agency and Investment Grade Corporate spreads modestly tightened. The term structure of the Long-Term portfolio remains positioned for interest rates to move higher, thus the Chandler team has kept a dedicated allocation to the zero to one year portion of the maturity distribution, which also proved to be additive to the positive performance differential versus the benchmark. The Chandler team added securities in the Treasury, Agency, Asset Backed, Certificate of Deposit, and Commercial Paper sectors of the market during the quarter. The majority of purchases were focused at both the front end and long end of the eligible maturity distribution; the Chandler team continues to position the portfolio to be underweight the one to three year portion of the curve. In Chandler's judgement, the aforementioned one to three year portion of the maturity distribution is unattractively valued based on the teams forward based expectations for interest rates and monetary policy. The duration of the portfolio was unchanged during the quarter, remaining at 2.44, as the team continues to position portfolios to be slightly below the duration of the benchmark based on the expectation of a modestly rising interest rate environment. Liquid Portfolio The Liquidity portfolio matched the return of the benchmark during the quarter, generating a return of 0.26% versus the 0.26% return for the Bank of America Merrill Lynch 3-Month Treasury Bill Index. The portfolio experienced heavy cash outflows on a net basis, as $75 million was withdrawn from the portfolio during the quarter. Due to the short maturity profile of the strategy, many securities were purchased across the Treasury, Agency, Commercial Paper and Corporate sectors of the market to keep the portfolio as fully invested as possible, despite the large net cash outflow. The purchased securities ranged in maturity from July 2017 to March 2018. Chandler continues to invest in the Agency discount note sector to partially offset upcoming cash flow needs while being more opportunistic, and yield seeking, with the short maturity Corporate notes in the portfolio. 4 C/" CHANDLER ASSET MANAGEMENT Economic Outlook Traditional monetary policy was stable during the quarter as the Federal Open Market Committee (FOMC) left the federal funds rate unchanged at a range of 1.00% to 1.25% during the third quarter. Notably, the FOMC formally announced its well telegraphed plan to being the process of balance sheet normalization. The process of unwinding the Fed's $4.5 trillion balance sheet is beginning gradually by allowing $6 billion per month in Treasury securities and $4 billion per month in mortgage-backed and agency securities to roll off the balance sheet; the amount will increase by $10 billion per quarter, in the same 60/40 ratio, with the amount being capped at $50 billion per month over the next five quarters. The Fed provided updated economic projections in September, which indicate another rate hike before year-end is expected. However, the Fed lowered its median longer-run fed funds rate projection to 2.8% from 3.0%. The Chandler team is forecasting the terminal Fed Funds rate at equilibrium will be low, and expects the Fed's forecast to gradually compress over the coming quarters. The Fed's other economic projections were little changed in September, although the median 2018 inflation forecast was lowered slightly, suggesting that the FOMC now thinks inflation may remain below the Fed's 2.0% target until 2019. Risk markets continued to perform well during the third quarter, as equity prices were higher and investment grade corporate spreads tightened. The demand for high quality spread product in the fixed income markets remains robust, and we do not anticipate market dynamics changing in the upcoming quarter. Beyond the upcoming quarter, however, we think several policy developments have the potential to impact market valuations. Tax reform and the likely repatriation of monies back to the United States has the potential to lessen the demand for high quality fixed income assets, a development the team would welcome. Additionally, although the contraction of the Federal Reserve's balance sheet is quite modest, as the amounts increase in 2018, the term premium embedded in the Treasury curve is likely to come under pressure. Strategy Strategy highlights for the Long-Term Portfolio in coming months: • Increase the overall maturity profile of the Corporate component of the District's portfolio. o Although valuations in the high quality corporate segment of the market are fully valued in Chandler's judgement, the team will still utilize upcoming maturities in the banking, energy, and technology sectors to keep the overall exposure to the corporate sector stable. o Due to Chandler's desire to maintain exposure at the wings of the maturity distribution, new corporate exposure will likely be added between the four to five year maturity points. • Valuations in the Agency sector remain expensive; the Chandler team will continue to deemphasize exposure to the sector until valuations become more attractive. • Opportunistically increase exposure to the short maturity Asset Backed and Commercial Paper sectors of the market which continue to have reasonable valuations relative to alternative high quality, short maturity, alternatives. 5 C/" CHANDLER ASSET MANAGEMENT Strategy highlights for the Liquidity Portfolio in coming months: • Continue to ladder the Agency discount note and Treasury exposure to coincide with forecasted liquidity needs. • Opportunistically add Corporate exposure to the portfolio where the additional spread compensation versus the Treasury curve is compelling. • Maintain a dedicated exposure to the Treasury sector on an ongoing basis to ensure ample liquidity in the portfolio at all times. Compliance Issues CA Orange County Sanitation District Long Term September 30,2017 COMPLIANCEPOLICY Assets menegetl by CbandlerAsse(Menegementere in NII compliance dith State Imvard aeh the inresbnentibmicy Category Sbndad Comment Treasury Issues 5years matlmum maWny Complies' Summational "AA-or better by of 3 NRSIFI 30%mapmun; 5%max indi 5yame meant, Includes only Complies IADB,II and IFC per CGO U.S.Aged— 20%maxissuer, 5yearsmatimummannty Complies U.S.Corsi(MI 'A'or better lmg temratling by l of 3 NRSROs; 30%maximum;5%max letter, 5 years max maWdy Complies Municipal Secumes 'A'or bother b 1 of 3 NRSROS'10%maximum 5%max issuer5 yeady mesedinnum maturity Complies Assetsaidedi CMOs(hortyli •AA•orbetter by l of 3 NRSRC%; "A'or N9ner issuer rating by 103 NRSRC% 20%maximum; 5% complies' medical max issuer(excluding MSSI oMagency),5 max memory NegoBable CDx 'A'or better on its big term debt by t of 3 NRSROx; 'At P1-or Ngnest start tern mange by l of 3 Complies NRSR05; 3056maximum;5%maxissuer, 5yeere mexlreNety CDIITD3 5%max Issuer, 5 years max maturity Complies Banker's Acceptanrsa A-1,orequiralera highest sMlt term mtirg by l af3 NRSRCS;40%maximum 5%maxsexual,180 Complies ideasmax noaWn Comment Paper A-1,orequlrslsd by l a03 NRSRO A•or baderby l of3 NRSROn,Ifblg Ism dam ousted;25% Compiles peodmi 5%maxissuer 270dr mean Must Fund B Money Market 1-igbestmergby2NRS110s; 20%maximum;10%maxpermusedfund; 20%maxpermoneymarket Complies MuWal Fund nutbefixld Recipients.Agreements 102%dlsensil'Isatin Complies Ressrse Rapsursibeary,Agreements 5%maximun 90 d max maturity Cam lies IAIF Not le ad byimesMerlt adbser complies AW Durl Noted caused 50 moMls-(80%to 120%offt benclee ) complies Maximus Matunty 5 years maximum matinty Complies' 'Ina Oast nee unente-a.ec(ft)s oust veb meWtlliee greeterthan 5 ymn inclWlry one(1)AB5.W pb(coss,ee2mttn(I))MBe ad one(b Vmsur, All sendsore were dnmlm Imm me gaga,..manager am mmonm name npamneee. 6 C/" CHANDLER ASSET MANAGEMENT Orange County Sanitation Diatrid Liquid OL Sepaimber3ll COMPLIANCE WITH INVESTMENT POLICY Assetamanaged by ChandlerAssel Managementare m Nli compliance wM Stafe lawand WM Me inm MentpMicy Standard Comment Trawar Sues 1War Maximum maNnty; Mini allocation of 10% Complies Stprere4onal "AA'or better by I of 3 NRSROsu 30%maximum; 5%max issuer, I War maturity, Complies Includes of ADS.E RD.and IFC per CDC U.S.Agencies 20%max fiscal l Wouncrximum maturity Complies U.S.Corporate(fin"i 'A'or better long term hiring by l of 3 NRSROs,30%osmium;5%max ianswer; IWar Complies max memory Asset BBdcadlCMOs "AA`or befer by l of 3 NRSRC,, "A"or higher issuerratir,by l of 3 NRSROs; 20% Complies maximum; 5%maxlssuer, 1 maWd NegMlable CDs "A'or bederon its long term debt by l of 3 NRSROs 1 W it or highest shortorm fatlngs Complies 61of 3 NR5RO5. 30%maximum,5%max lsamen1 war max maturity CDaITDS 5%max Issuer,l year max maturity Complies Bankera Accaptances A-1.or equivalent shed term rating by l of 3 NR3RO5140%maximum;5%max issuer,180 Complies days max marvi CommemlalPaper A-1,or agJeelen,by of 3 NRSROS;-A Or better by l of 3 NRSROs,if lorg term debt Complies Issued' 25%mammum,5%maxiamr,2]0da maWn MWmIFUMBMonsy Market MmotIFurd Hlgbeamw,by2NRSR0s; 20%metlmvn;10%maxpermNuaIWM; 20%maxper Complies moneyousarmitonutualford! Repucbaee Agmemeras 102%colla alliration Complies Reason,Re urchaseA reements 5%madown 90 days malubly, complies LAIF Not used by irnesomem soldier Complies Prohbited MUNdpal Securities Complies Prohibited Mortgage Securibas Complies A,Duration %tWaxces: 180days; Maxdwat nof1QWar Complies Maximum MaWdy I War maximum matudy Complies C/" CHANDLER ASSET MANAGEMENT OCSD Lehman Exposure September 30,2019 COMPLIANCE WITH INVESTMENT POLICY Assets managed by ChandlerAsset Management are in full compliance with State lawand with the immalment policy Category Standard Comment Treasu"sues Steams maximummaturity Complies Supram4onal "AA•orbetterbylof3NRSR0s; 30%maximum; 5%ma; 5yeammaturity Complies Includes only ADB,IBRD,au!IFC per CGC U.S.Agencies 20%max issuer' 5 we.maximum maturity Complies U.S.Corpoate(Mi 'A'or better cing teen red ng by l of 3 NRSROs; 30%maximum;5%max issuer, 5 Complies' years max maturity Munldpal Securities 'A'or Ngher by l of 3 NRSROS;10%maximum; 5%max issuer 5Were Complies maximum maturity Asset Backed/CMOs/ 'AA'or better by of3 NRSROs; "A'or higher issuer rating by l of3 NRSROs; Complies Morlgagebacked 20%maximum; 5%max issuer(excluding MBS/gout agerwy);5 years max maturity Negotiable CDs 'A'or better on its long term debt by l of3 NRSRCs; "ALP1'or highest short Complies tern ratings by 1 of 3 NRSROs; 30%maximum;5%max issuer, 5 Were max maturity CDs/TDS 5%max issuer, 5 we.max maturity Combine BankeesAcceptances A-1,or equivalent highest short temp rating by l of 3 NRSROS; 40%maximum; Complies 5%max issuer,180 days max maturity Coanmerelei Paper A-1,or equivalent by l o1`3 NRSROS; "A'or better by l of3 NRSROs,lflong tern Complies debtissued' 25%maximum' 5%maxissuer 270da maxmatun Money Market Fund Hi hestati b 2of3NRSROs' 20%maximun'10%maxissuer Complies Re urchaseA amments 102%collateralimtion Complies Reverse Repurchase 5%maximum,90 days max maturity Complies Agreements -AF Not used b imeahneMadNser Complies AA Duration Not to exceed 80 mi - 80%to 120%ofele benchmark Complies Maximum Maturity 5 years maximum maturity Complies 'Account Wds$2 million race,elue(cueip 525ESCOYe)and Wooden one, due(cuslp 525ESC1 W)ortlermned-shman Bros HdEVpa that were pumMaed by nre prerwa meme0er. Compn.ar time Mpurcneae. 8 C/" CHANDLER ASSET MANAGEMENT Defaulted Bonds OCSD Lehman Expmum-Account#10284 For the Month Ending 913 012 0 1 7 eR.DDD slrovMA4 A. LY.menBmmes Mognvmmleq epbl.D I..n. 5],N]M no xmlm I&M NR.NR OAO 0 0 w laaull Rm wazwRI.Rom mw.b DDDv DDDK oxn'1en om wNR cwpwa szsemiN ®mD.m a oao sxERVIR ItlmW sdM.M>GINRM ;Cm.ttQW .19'A]B 1AR,1]w.Y RRx I... �WU% NRINR ]xa DmN o.Irevme amx xlbx Dm tA545WID ICiJFl.W b]I ).W6pp\pp GOw{ tANSWA] OW% W 11.]q>NWINRDAD TOULNMIIOLp ;::;= ] IwA]1ID I.".1 NR/NR xJ5 ;DW.NIM 60bR t514b3A] D.W 11.>xNl wl NR QW 9 OIL CHANDLER ASSET MANAGEMENT Ratings Orange County Sanitation District Long Term September 30,2017 vs.June 30,2017 mow AM AA A U NR O9/d917 7.5% 705% 113% 3.2% 7,5% 0&34017 11,8% as 11A% 3.2% 7.6% sm-vs wa, Orange County Sanitation District Liquid September 30,M17 vs.June 30,2017 amx more om AM M A U MR 03/30n7 V.m 12.2% 20.0% 0.0% 00% 0&3N11 B&9% 259% 5,2% 0A% 00% sa,o.scawu.P 10 C/" CHANDLER ASSET MANAGEMENT OCSD Investment Program Quarter End Portfolio Value $600,000.000 Liquid Operating Monies $500,000,000 •Long-Term Operating Monies $400,000,000 $300,000,000 $200,000.000 $100,000,000 `��S %A" )j 4��i IPA" HISTORICAL YIELD CURVE 4.00% �SEPTEMBER 2017 AUGUST 2017 3.00% — SEPTEMBER2016 __________________________________________________2.86%- 2.17% 2.33% 2.00% 1.94% ____________ _ __________________________ 1.62% 1.49% 1.19% 1.00% 1.05% 0.00% a s a s s l a u GilOrange County Sanitation District Liquid Portfolio Summary Account#10282 As of 913 012 01 7 PORTFOLIO CHARACTERISTICS ACCOUNTSUMMARY •• 911" Beg.Values End Values Issuer %Portfolio Average Duration 0.17 as of 8/31/17 as of 9130/17 Government of United States 21.2 Average Coupon 1.64% Market Value 76,221,473 49,303,889 First American Gov(Obligation 19.5% Average Purchase YTM 1.12% Accrued Interest 199,520 182,588 Federal Home Loan Bank 14.1 Averse Market YTM 1.16% Total Market Value 76,420,993 49,486,477 9 Federal Home Loan Mortgage Corp 10.3 Average S&P/Moody Rating AA+/Aal Income Earned 79,841 63,830 Bank of Tokyo-Mit UFJ 2.5 Average Final Maturity 0.17 yrs COntAYD -27,000,000 JP Morgan Chase&Co 2.1 Average Life 0.15 yrs Par 76,184,405 49,279,321 General Electric Co 2.1 Book Value 76,226,938 49,307,700 United Parcel Service 2.0 I Cost Value 76,276,046 49.436,322 73 9 Y • - • • MATURITY DISTRIBUTION aD% US us Corporate - - Treasury 62.9% (28.2%) (21.2%) AA 80 (42.2%) Commercial Negotiable 40% 3i2% Paper CD (4.5%) (2.0%) qqA 20% (37 7%) Money Market Agency Fund! (24.5%) % 0 25 25-.5 5.1 1 1.5 15.2 2.25 25-3 3. A Maturity(Yrs) (20 0%) Total Rate of Return Current Latest Year Annualized Since As of 9/30/2017 Month 3 Months To Date 1 Yr 3 Yrs 5Yrs 10 Yrs 11/30/2014 11/3012014 Orange County Sanitation District Liquid 0.09% 0.26% 0.61 % 0.73% N/A NIA N/A 0.47% 1.33% BAML 3-Month US Treasury Bill Index 0.09% 0.26% 0.57% 0.66% N/A N/A N/A 0.34% 0.95% Chandler Meal Management-CONFIDENTIAL Page 1 Execution Time:100MI711:10:05 PM C/" Orange County Sanitation District Long Term Portfolio Summary Account#10268 As of 913 012 01 7 PORTFOLIO CHARACTERISTICS ACCOUNTSUMMARY •• aaaa� 9r Beg.Values End Values Issuer %Portfolio Average Duration 2.44 as of 8/31/17 as of 9130/17 Government of United States 32.3 Average Coupon 1.81 % Market Value 332,562,574 332,014,640 Federal National Mortgage Assoc 11.2% Average Purchase YTM 1.73% Accrued Interest 1,341,711 1,185,227 Federal Home Loan Bank 8.8 Average Market YTM 1.64% Total Market Value 333,904,286 333,199,867 Federal Home Loan Mortgage Corp 5.9% Average S&P/Moody Rating AA/Aal Income Earned 469,208 473,047 Intl Bank Recon and Development 3.0 Average Final Maturity 2.74 yrs ContAVD -6,762 Inter-American Dev Bank 2.9% Average Life 2.53 yrs Par 330,773,611 331,422,261 John Deere ASS 2.2 Book Value 330,704,839 331,327,657 Bank of Tokyo-Mit UFJ 2.0% I Cost Value 332.126,194 332,760,837 68.3% • - - • • MATURITY DISTRIBUTION 97% MBS 20% 1ae% 1B.3% 18.7% %) (0.6%) (70.5%I u8_Corp (Me%) US Treasury 15% BBB (32.3%) (3.2%) CP (2.0%) NR Munkipals 10% 8.9% (7.5%) (1.4%) ��..Negotiable CD 84% AAA MMF (1.8%) 5% 4.2% 4A% (7.5%) (1.3%) CMO Supranational (0.8%) (6.6%) ABS Agency o-ss ss-s s-i i-i 2-s a-x a-s s. A - (47%) (24.7%) Maturity yrs) (11.3%) Total Rate of Return Current Latest Year Annualized Since As of 9/30/2017 Month 3 Months To Date 1 Yr 3 Yrs 5Yrs 10 Yrs 11130/2014 11/3012014 Orange County Sanitation District Long Tenn -0.21 % 0.42% 1.40% 0.55% N/A N/A N/A 1.24% 3.54% BAML 1-5 Yr US Corporate/Govt Rated AAA-A Index -0.29% 0.38% 1.34% 0.27% N/A N/A N/A 1.19% 3.42% BAML US 15 Yr US Corp/Gout Rated AAA-BBB Index -0.25% 0.44% 1.56% 0.53% N/A N/A N/A 1.36% 3.89% Chandler Asset Management-CONFIDENTIAL Page l Execa9an Time:100M171I M M PM Orange County Sanitation District Investment Transactions and Balances in the State of California Local Agency Investment Fund September 30, 2017 Par Value Book Value Market Value Rate Yield Balance September 1,2017 $48,888,981 $48,888,981 $48,888,981 1.11 1.11 Deposits: 9/27/2017 23,600,000 23,600,000 23,600,000 1.11 1.11 Total Deposits 23,600,000 23,600,000 23,600,000 1.11 1.11 Quarterly Interest Distribution 1.11 1.11 Withdrawals: 9/7/2017 (5,700,000) (5,700,000) (5,700,000) 1.11 1.11 9/13/2017 (2,300,000) (2,300,000) (2,300,000) 1.11 1.11 9/21/2017 (2,500,000) (2,500,000) (2,500,000) 1.11 1.11 9/28/2017 (2,200,000) (2,200,000) (2,200,000) 1.11 1.11 Total Withdrawals (12,700,000) (12,700,000) (12,700,000) 1.11 1.11 Balance September 30,2017 $59,788,981 $59,788,981 $59,788,981 1.11 1.11 0-01-B-4 Iobankm ` 40--01-B-02 08-04 0101 -21-02908-04 OCS CHANDLER LIQUID OPERATING PORT ACCOUNT 6745046600 Period from September 1,2017 to September 30,2017 AS$ET$UMMARY 09/30/2017 09/3012017 %OF ASSETS MARKET BOOK VALUE MARKET Cash And Equivalents 16,392,587.37 16,387,772.90 33.13 U.S.Government Issues 18,013,890.00 18,099,559.96 36.40 BOND Corporate Issues 14,889,835.70 14,937,864.25 30.09 Total Assets 49 298 313.07 49 425197.11 99.62 Accrued Income 187,217.39 187,217.39 0.38 Grand Total 49483530.46 49612414.50 100.00 #W—..EQ.VV.A.cR Estimated Annual Income 702,218.57 0-01-B-4 Iobankm gn 40--01-B-02 08-04 0101 -21-02908-04 OCS CHANDLER LONG-TERM PORTFOLIO Page 6 of 56 ACCOUNT 6745046601 Period from September 1,2017 to September 30,2017 AWT$UMMARY 09/30/2017 09/3012017 %OF ASSETS MARKET K VALUE MARKET Cash And Equivalents 10,951,935.34 10,930,215.16 3.29 U.S.Government Issues 193,579,933.07 193,305,093.24 58.09 Corporate Issues 100,849,453.24 102,282,082.58 30.26 Supranational Issues 21,951,574.90 22,077,842.05 6.59 BOND CASH E°UIV BACGR Municipal Issues 4,529,260.80 4,307,633.89 1.36 Miscellaneous .00 1,112,174.55 0.00 Total Assets 33 ,862 57.35 3342015,041.47 99.59 Accrued Income Grand 1,368,118.86 1,368,118.86 0.41 Total 333 230 276.21 335 383 160.33 100.00 Estimated Annual Income 5,872,988.64 ncou3022 a o6mvzon Through as/3orzenBi MELLON co e08 OCSD LIBERTY MUTUAL Statement of assets Held _ Speaks/ Mark.PH. Mwk01 Velw ACmrrM lnconro Per VYu AwM 0wu40en Awralrei .Gear Uabroad are, l4wluY YIYd FIXED INCOME 3,000,I)DO.OW UNDEDSTATESTMASURYNOTEIBDND 09.73400 3,690,424.00 12,393.44 0.76% CUS1P:912028M26 09.72268 3,690,016.63 27,000.00 MATURITYDATE:0VIS)i MTE:0.760% M00Drs As e 7a FIXED INCOME 3,690,424.00 12,3WM 0.76% steel 27,001180 ACCDUNTT01i %no thaA.00 12,30il Ill 3,600,016.09 21,000.00 Tolel Market Value Pon Tool Acmed breams 3.81(f 1T.44 Statement of Transactions Therein M Tmecrwn D.scroolon bass PrescInt Ober aInYU:eW No Transactions This Period The Bank of New York Mellon may ullllm subYdladesand auditors to provide servlcea and cerlaln poducle to the Account. Subeltllmlw and affiliates may be compensated former feral and products. 99 Tha yell oleecurlllea eel forth on this Account Statement are delermlPad by The Bark of New York Mellon for Corporate Trust on Me bale of mniet prices and Information 8 OW�by The Bankof WwYom MellonframwnalliUaMIblrdpares(im)Wlr Intlw nl WWWwWom)('Ihlydpony RiclnOeeMms"). The Bwkof New York Mellon has rot veri sworn merkel values or infomaWn and makes no..I..wto the accuracy or rorracthaee of=oh market values or Information or that the market values set forth a wlM1ls ACCDwtSn,emenl rellem IM1e valueol me eecaiaesmtcwamMizWupon Ihamkoleud,e wl,W. In sell the mametYllws flu Mauritis eel fall In this Accwnt Statement may dillerlrom the market eicasand Informal for Me same sawdllea used byotMrbuelren uNN pl The BI New Y.A Mellon or l,s subsld oie.or affiliates,based upon marker prices aral nforma,icn received 9ornot er MA parry Pakln9 servlwsAll by own other business unlit. Corporato Thal Wake not compare Its market values with those used by,or reconcile different mark0t values Used by,other bwinees uNN of The Bwh of New Vak Mellor or In eubeMlMlea or lie aiklletee. The Berk of New York Mallon shall not be liable for any loss,darwpe or ekPanw incurrebas a resultol orarli from or related to,he marketvalues or Informal provided by third party prbhq wrvlees cr 1M1s dlllerences'm marks,prleesor ld.mos,bn pm Att by other Mild Party prbiry esrvkes. U.S.Bank Pivot Page: 1 of 8 Consolidated Holdings Report-Detail,With Totals Prim Dale: 10/300017 at t:D:44pm Asset Class,CUSIP Settle Dated As Of: 09/302017 CUSIP. le—Dare aamm, Annual %Total U.—Heed There r Aaml DeurloMonand SEDOL Mawein Dan 8&P In m/ nil Pa. Unar FM Cane Market Vain e Market U.SI lane CASH CASH Pnnapol CSak -1949,797,16 -1,949,71716 Income COh 1,949,797,16 1,949,797.16 To.For AbA Type: CASH Sk" $ODA .99% CASH EQUIVALENTS COMM PAPER-DISCOUNT 06538BYSO BANKOFTOKYOMITSUBISCP IINB/17 05IO8a2017 0(maS 99.069000 7,885,00IN0000 ),040,87]94 7,974,67065 25.79231 11/08n017 89233OXW1 TOYOTAMOTORCREDIFCOCP I(aNW17 OVOV2017 .000WO 99.90,50)) 1,000,M,0000 999,022,22 959,060'w 37,73 10/0/2017 TOW For Anne Type: COMM PAPER-DISCOUNT SRM7,900.16 $8,813,730.65 233E 525ASOA9 SHORT TERM FDS-TAXABLE(ACM) 318,46V567 FMSTAMGOVTOBFDCLZ .009005 100.0000s) 11,477,142.0600 11,477,142.06 11,4T1,142.06 .an FGZXX Total For Ansel Type: SHORT TERM FDSTAXABLE(ALSO SI1,477,142.W 1114I,142.06 3.01% 50100 CORPORATE OBLIGATIONS CORPORATE BONDS AND NOTES 025WAY5 AMEMCANE3PRESS 2000E 3/19/18 03/19/2008 A3 070000 102493M 2,900,000.0000 3,377,385.79 2,97229200 -405,088.79 OV19/2010 BBB+ 02665WAH4 AMERICANHONDAMFN 2.250% &15/19 09/09a014 A2 .022500 100]99Htl 4,000,Oa7.0000 4,046,"Boo 4,031,760.00 -14,99000 08/15/2M9 A+ 02665WAT8 AMERICANIFNDAMTN 1.500% 3/13/18 03/13n015 A2 .015000 100.045000 1,000'".0000 1,001,140.00 1,000,450.00 -690.00 03/13/2018 A+ 037833BS8 APPLE INC 235WA 2=1 0M3n0A AAI .022500 100.805" 4,000,000AW00 4,050,84000 4,032200.W -18,6M.00 02/23/2021 AA+ 060505DP6 BANKOFAMERICA 5A50%IL01/17 VMoV2007 BAAI 057500 100.688M 3AW0010000 4,334,014.00 3,826.1"te) -502870.00 IV01/2017 BBB+ 06406HCE7 BANKOFNYMTN 13WAe IWIIS 10/25a012 At .013000 99.9110.tl 870,M.0000 869,364.90 86o225.70 -139.20 01)25/2018 A 06406HCWJ BANK NY MELLON MTN 2.300%9/11/19 09/112014 At .023000 100.776000 2,120,000.0000 2,142,175.20 2,136,451.20 -5,724.00 09/112019 A 06406RAA5 BANKOFNYMTN 2600°A V07M WAVY2017 At .026000 100995000 2,500,"ame0 2,50,1,475,0) 2,524,875.W 20,R0.00 OV072022 A OM17GXH6 BANKOPNOVACD 1.570o4 V09/18 OAV/2017 015700 99.95300) 5,825,000.0000 5,825,000.03 5,82 6225 -2,737.75 fflo(v2010 073902CD8 BEARSTEARNSCOINC 4NIK 71OVIS 06/25a(E3 A3 .W50010215601) 3,200,000.0000 3,523,52000 32M,992.00 -254,52800 07=2018 N/A U.S.Bank Pivot Page: 2 of 8 Consolidated Holdings Report-Detail,With Totals Prim Dale: 10/300017 at Lll:4 pm Asset Class,CUSIP Settle Dated As Of: 09/302017 CUSIP% hao Dare Moody Annml %Talal U.p11.d Tkke A,wl Dew,Intlon and SEDOL Malotlh Daa up loassn n. P Il. 1 Est C'32 Ma,kel V.I. MMM.rk Gal./Ipn 084664BT7 BERKSHIRE HATHAWAY I W1. 5A502 05/15/2012 AA2 Woos) 103.357000 4,000,000.0000 4,131,120,W 4,134,280 OR 3,1000 05/15/2022 AA 1667.AA8 CHEVRON CORE 1.104%EV05/17 IV05a012 AA2 011040 99952000 2,000,000.0000 1,988,60000 I,SS9,040.W 10,440.00 IV05/2017 AA- 166764BC3 CHEVRON CORE 1.344%11AW/17 IIII72015 AA2 .013490 99..8000 1,000'".0000 I,000,780.00 559,980.00 -800.00 HMG017 AA- 1667MB04 CHEVRON CORE 2.100% 5/16GI 05/16C016 AA2 .021000 HORN9000 2,500,0.U0000 2p85,350.00 2,501,225.0a 15,87500 05/1fCNO1 AA- 24422ESS9 30H14DEERECAPMTN 2300%9116G9 09/15/2014 Al -023W0 101,100000 5,000,000.0000 5.046,984.00 5.055,000-W 8,01600 0%IfiC019 A 24422ES17 IOHNDEEREMTN 1.35W.. 1/16�18 01/162015 A2 .013500 99986WU 1,m0,"'0000 9 ,619.50 959,860.W 240.50 OU160018 A 30231GAD5 EKXON MOBIL 1.305% 3/0&18 03/0Mh)15 AAA .013050 99.947020 1,000'".0000 999,620.00 559,470.00 -150.00 03/06/2018 AA+ 30231GAV4 EXXON MOBIL 2.222% 3101/21 03/03n016 AAA .022220 100755" 3,000,"Rom0 3,016,097,40 3,022,650.0a 6,552.60 03/01/2021 AA. 36960HC6 GENERAL ELECTRIC CO 5250"L 12/M/17 1&06/2007 A1 -052500 100.698000 1,000,W.0000 1,033,650.00 LW6980W -26,670.00 EVON2017 AA- 36962G7M0 GENERAL ELEC CA MTN 2.200Ye IOWN) 01/09/2015 At .022000 100R920()0 3,00RIooR000 5,014,950.00 5,044ORM 29,650.00 OI/09/2020 AA- 38141GFG4 GOLDMANSACHSGP 5.95011, 1IIW18 DIHW008 A3 .059500 101.268000 600,000.0000 692,806.00 6%,608.00 -85,199.00 OIIIW2018 BBB+ 40428HPH9 HSBC USA INC 1625% 1/16/18 IMM012 A2 .016250 100037" 4,000,000A000 4,003,63000 4,001p80.0) -2,150.00 01/1&2018 A 40428HPR7 HSBC USA INC 2.350%ClOnO 03M5/2015 Al 023500 100.63900) 1,250,000.0000 L222,787.50 1,25798750 35 00.00 03/05nM0 A 458140AL4 MIELCORP 1.350%12115117 IVII1012 At .013500 100014000 3,000,000,0000 3,W8,UOW 3,000,420.W -RIBORO LVIS/2017 A. 46625HGYO IPMORGANCHASE&CO6.000% I/15118 19202007 A3 .MOWO 101.273" 1,000'".0000 1,032,600.00 1,012,730.0a -19,870.00 01/I5am A- 46625HKA7 IPMORGANCHASECO 2250% 1/23/20 01/23/2015 A3 .022500 100,538" 2,000'".0000 L994,880W 2,010,760.0a 15,880st 01/23/2020 A- 525RSCHO LEHMAN BRTH MTN IS OL0001% 12M13 01/2Y2008 N/A L0)000 6.3000Y) 600,000L000 344,365.48 37sOROB -306,565A8 0IONO013 N/A 532457BF4 ELILILLYCO Lam 3/15/19 OV25/2014 A2 .019500 100488W 4,000,000.0000 4,009,675,W 4,00.520.00 9,843 00 03A5/2019 AA- 59491831`8 MICROSOFTCORP 1.550% 8/08/21 DWOM016 AAA .015500 9&234W0 3,035'".0000 3,041,385.15 2,WI25.30 -50,159.85 08/a8no21 AAA 61747WAL3 MORGAN STANLEY 5.SW1. 728Q1 07f28Q011 A3 .055000 110.923000 2,800'".0000 3,200,&B.00 3,105,844.W -95,W4.00 07/28/2021 BBB+ U.S.Bank Pivot Page: 3 of 8 Consolidated Holdings Report-Detail,With Totals Prinl Dale: 10/300017 at Lll:4 pm Asset Class,CUSIP Settle Dated As Of: 09/302017 CUSIP% Inoe Dare Moody Annuel %Talal UneeaBaE TIkpk Mst-Ift Dan up 1 1w, UWa FM Cast Make,V.I.e MaHnt G./l,a52 67459XD5 OCCIDENTALPETAOLM I5W/e 2115/IB O6I2L2012 A3 015000 999aw 2,000'".0000 1,98634o.W 1,0822000 11,98000 OV15/2019 A 674599CM OCCIDENTALPETROLEUM 2600%VM2 04/042016 A3 .026000 100616PT1 3,350,000.0000 3,354,589,50 3370,636.W I6,W6.50 01/15/2022 A 68389%ANS ORACLE CORD 1300%10/15/17 10/25n012 WR .012000 99.988020 1,000'".0000 999,870.00 559,880.00 10.00 10/IS/2017 NM 6935=1 PNCBANKNAMN 1.500%2/23/I8 o2QIMS A2 .015000 IOOM000 1,000'"am0o I,000,32000 1,000,070.00 -250.00 02/23/2018 A 747525AD5 QUALCOMM INC 2.250% 520QO 05Q0/2015 At 022500 101059000 5.000,OJ0.0000 4,995,195.40 5,052,95000 57,754.60 OL20KU0 A 808513AK1 C1WtLES SCFl "CORP L500%3/10/18 03/10/2015 A2 .015MO 100033M 1,000,Oa7.0000 1,001,100W I,M,330.00 -770.00 03/10/2018 A 869581M130 SVENSKACO 1.175%1002/17 05/05/2017 .011750 100.000000 1,000'".0000 1,W0019.85 1,0.'U,000AO -19.85 I0/av2on 911312API UN1WD PARCBL L125%IO/01/17 09=012 WR 011250 100000.40 1,000,0.\7.0000 999,580,W I,M,000.00 420.00 IO/01n013 Na 92826CAA0 VISAMC 12W/.12/14/17 ININ2015 WR 012NO 100.035M 1.000, JJ.0000 999,700.00 I.M.35000 65000 IVIN2017 A+ W9743GM6 WELLS FARGO CO MN 2600N 72220 07/2n015 A2 .026WO 101404000 5,000,Oa10000 5,001,65000 51070,200.00 68,55000 07/2L2020 A TaWFoaAm,t Ty : CORPORATE BONDS AND NOTES $101,281,107.67 599,785,752.95 26.19% 31,495,35A72 CORPORATE PAVDOWN SECURITIES 03215PFN4 AMRESCO 0.03168%6/25/29 10/20/1. N/A .000317 M.468" I33,743.2900 100,432.85 126,344.61 25,91136 A060029 06/252029 A+ 43814PAE6 HONDAAUTO 1570% 1/2120 09/29/2017 N/A 015700 99993" 965,O0N0000 964,914,21 964,93245 1824 01/21amo AM 43814QAC2 HONDAAUTO 1390%VMS 05/31/2016 AM .013900 "S11000 1,810,0100000 6809964.89 1,806579.10 -3,38579 M/15/2020 N/A 43814TAB8 HONDAAUTO 1.420A M2119 03/28/2017 AM .014200 99.%2000 1,74R532.3100 1,748,490.52 1,747,867.87 -6M.65 07/22/2019 N/A 477877AD6 IOHN DEERS OWNER I.07M 11/15/18 09/03/2014 AAA .010700 99.WNX) 391,358.0700 391,541.52 391217.18 -3N.M 11/152018 N/A 47787%AB3 IOHN DEERE OWNER 1 500%10115/19 03MV2017 AM 015000 99963" Ip10,00NO000 1,409,994,36 1,409p78.30 -51606 10/IS/2019 N/A 47788BABO IOHN DEERE OWNER 1590%4/1520 07/18/2017 AM .015900 99,"3000 960,O ,0000 959,916,58 959,452.80 i 333 M/15/2020 N/A 47788BAD6 AMIN DEERS OWNER 1820%10/IS/21 07/18/2017 AM .018200 99.934000 675,020.0000 674,950.59 674,5M.50 -396.09 10/15aMi N/A 47788MAC4 IOHN DEERS OWNER I160%411560 03/OV2016 AAA .013600 99.828M 2p20,000.0000 2,419,619.09 2,415,837.60 3,781.49 04/15/2020 N/A U.S.Bank Pivot Page: 40f 8 Consolidated Holdings Report-Detail,With Totals Print Date: 10/300017 at 1:D:44pm Asset Class,CUSIP Settle Dated As Of: 09/302017 CUSIP% Inoe Dale Moody Annuel %Talal V.-H" Tkkee Ar.1)NrdBd0oeod SEDOL MalorlM Dan up INS I"N" U.", FM Cm, Wore,V.I.e grkel Go,.I 47788NAB4 3OHN DEERE OWNER 1'W%2/15,19 07/27/2016 AAA 010900 99.937000 1,5U,412.7500 t,584,316, 0 1,583,41457 -Wa53 OZ15/2019 N/A 62888UAA8 NCUAGUARANTEEDNT 1.81391%11V6/17 II117n010 AAA .016078 100018000 301,727.9300 301,726,57 301.782.24 55.67 NON0417 11/OS/2017 AA. 6M747ABO NISSANAUTO 1.470% 1/15n0 03/2W2017 AAA .014700 99.973000 1,365,000.0000 1,3MS93.04 1,364,631.45 -361.59 01/15/2020 N/A o078WAB1 NISSANAUTO 1.070% 5/15/19 OWIW2016 AAA .010700 9991200a 1,166,9510100 1,166,905W 1,165,924.09 -98095 O5/15/2019 N/A 784453AA5 SLMA 287698%0. SM O&M2008 BAA3 .028770 102350000 31,5108900 31,383,05 3225140 96935 SLM2623 M/25/2023 AA+ 89236WAC2 TOYOTAAUTO 1.120%V15/19 03/04/2015 AAA .011200 9994300J 1,009A,13.4400 1,00o690,75 1,WR267S3 4M.92 TA11119 ON1512019 ANA Total F-A-s Type: CORPORATE PAYDOWN SECURITIES $15,93039.16 31519531535.99 4.19% $14,696.33 SUPRANATIONALS SUPRANATIONAL NOTES 4581XOCS5 INTER AMERICAN REVEL 1.875% 3/I5al 01/14/2016 AAA .018750 I00003000 3,500,"a000 3,590p0500 3,5W,105.00 -90,00.00 03/15/2021 AAA 45MXOCW6 INTERAMERDEVBK 2.125% 1/1822 01//82017 AAA _021250 100.49NN 3,00O000.0000 2,996,3IO.00 3.014,700W 181390.00 01/IBROII N/A 4581XOCX4 INTERAMERDEVBK L625% 51IV20 M/1=017 AAA .016250 99.714W0 3,035'".0000 3,027,807,05 3,026,319.90 -1,497.15 05AW2020 AAA 459058US INTLBK MTN 1.000%6/15/18 m/30/2015 AAA .010000 99.763000 5,000'".0000 4,991,I70.00 4,980,150.00 3,020.00 06/15/2018 AAA 459058FY4 INM BK 2.O0aX, to 22 01/26/2017 AAA .020CW 99914000 5,000,000.0000 5,030,550.00 4,995,700.00 -34,85000 01/26/20M N/A 45950KG7 INTLPINANCECORP 1 125% 720/21 0720/2016 AAA .011250 97.064O00 2.5001000.0000 2,U].600.00 2,426,60OW -I5,00000 07/2W2021 AAA Tobl For Asel Type. SUPRANATIONALS 522,OY/,842.05 521,951,574.90 5.76% 4126,267.15 MISCELLANEOUSASSETS MEMOSNOTATIONS 525ESCOY6 LEHMAN BIRTH HLD ESC .000000 000000 2,000,000.0000 1,112,174.55 W -1,112,17455 Ton]For ANe,Type: MEMOSMO.ON3 $1,11;174,55 $0.0 .09% 41,112,17155 MUNICIPAL OBLIGATIONS MUM BDS-FIXED TAXABLE 64971M5E8 NEWYORKNYCav 4.075%IIN120 IIN32010 AAI N0750 1062760N Ip00,O00A000 1,400,00Ow 1,407,8W.00 87X&tA0 11/01n020 AAA 733MWAO9 PORTAUTHNYNI 5309%1101/19 07/01/200o AM '053090 106,882. 2,I10,O0).0000 2,507,633,99 2,60792O80 10028691 IV01/2019 AA- U.S.Bank Pivot Page: 5 of 8 Consolidated Holdings Report-Detail,With Totals Prinl Dale: 10/300017 as Lll:4 pm Asset Class,CUSIP Settle Dated As Of: 09/302017 CUSIP, Taro Dare Mootly Annuel %Total Tama" Tleker Asut DeurloMon enJ SEDOL Stiletto,It up ltmasne,T. I". Deal FM Cost Market V.I.e Market G.l./LAO 9133662/5 UNIVOPCALIPOMIA 5035% 5/15M a/182010 AA3 050350 10336900() 400,0200000 400.000.00 433,476W 33,47600 05/15/2021 AA- ToltlPorAnetType: MUNI BDS�FIXEDTAXABLE 54,sr,63389 S4,529,260.80 1.19% 8221626.91 USTREAS&AGENCYOBLIGATIONS GNMA,FNN[ / MC POOLS 31348SWZ3 I L M C W86064 2.762% 1101/28 IY01/l9 N/A .027620 102.857" 2,259.9400 2,202% 2,322.45 119.49 786064F 01/01/2@8 N/A 31371NUC7 I MA#257179 4.500%"WS 03/olaw8 N/A .045000 107,561" 21,417.8100 Z2,65143 23,03711 385.78 257179A M/01/2028 N/A 11176KM I MA 4157969 5 000%9/0155 09/01/2005 N/A -050000 110.204030 14g248.0500 155,066.64 15896712 3.90048 357969A 09/01/2035 N/A 31381MA3 FNMAW66397 3.400%IINVZO 11N12010 N/A .034000 103.762000 354,011.2300 346,350,23 367,329.13 20,97890 466397A IINI/2020 N/A 3138EGa6 FNMANAL0869 4.500%bbll39 09/01R011 N/A .045000 107.639000 15,6M.7700 16,575.49 16,870.01 294.52 AL0869A 06Aa/2W9 N/A 31403DIZ3 I MA#745580 5.000% &01/36 05/01n006 N/A .050000 110.22" 139,808.6900 150,294.35 154,099.93 3,905.58 745580A 06Pla036 N/A 31403GXF4 I MA#748678 5 000%10N1M 1N01/"3 N/A 050000 109.839000 4$W 6900 4.515.74 4,614W 9526 748678A 10/0V2W3 N/A 31406MYS I MA 4815971 5.000% 3/0155 03/0V2005 N/A .050000 110215000 ]M,0560100 262,360,23 Z68.986.33 6,626.10 815971A WAI/2035 N/A 31406XWT5 I MA#823358 3.274%M1135 M/0la005 N/A .032740 105.198" 133,185.4900 132,144.94 140,108.42 7,%3.48 82335M 0Y012035 N/A 31407BXH7 FNMA,826080 5.000% 7/01/35 0610la005 N/A .050000 110287M 26,403.5800 28,383,83 29,119.72 735.89 826080A 07/01a035 N/A 31410F4V4 PNMAM888336 5 000% 7/01/36 04/01/2007 N/A 050000 109.781W 269,0859000 289,267,14 295A0497 6,13783 899336A 07/OlaO36 N/A 31417YAY3 FNMAMMAWZ2 4.SOr%4/01/29 03/01/2W9 N/A .045000 1026500J0 25,575A700 27,048,55 27,531.99 483M MAW22A MAI/"29 N/A 36MSCAZ9 G N M A 11#0800232250%IV20R6 12/01/1996 N/A .U2500 103.355M 21,960.5500 M,323.38 22,697.33 373.95 080023M IL20=6 N/A 36Z25CC20 GN MA 11#080088 2 625%(Z027 06/01/1997 N/A .026250 103.57300) 25,431.0600 25,987,38 26,339.71 352.33 080088M 06/20/2027 N/A 36225C1,128 O N M A 11,0804082625%520/30 05M/2091 N/A .026250 103.846000 73,9890000 73,217,56 7AV4.62 3SWA6 080408M 05/20/2030 N/A 36225CNM4 G N M A 11#0803952,625%4/2080 M/01/2000 N/A .026250 103.87400 9,1793000 9,05,10 %533.87 43877 080395M MW2030 N/A 36M5DCB8 G N M A I I N809652,125%720M 07/0120(4 N/A .021250 104.251000 72,499.4500 72,454,15 75,581.40 3,127.25 080965M 07/202034 N/A Total For Anet Type: GNMA/FNMA/FHLMC POOLS SL6391959.10 11,00,378.21 AS% $59,419.11 REMICS AND OTHER WVT FAYOO WNS U.S.Bank Pivot Page: 6 of 8 Consolidated Holdings Report-Detail,With Totals Prim Dale: 10/300017 at Lll:4 pm Asset Class,CUSIP Settle Dated As Of: 09/302017 CUSIP% hao Dare ..ad, Annuel %Tatal UomIDM TI,ke, M.DeuHndon and SEDOL M.C."o,IT S&P 1 Pa. Umn FM Cast Ma,ke,Value Ma,ket G.I./ 3133TCE95 F H L M C MLTCL MT0 3.192%$115132 /2101/1999 _03,920 104snw 29,502,7500 29.533.61 30,83716 1,30355 FHDO32 OW15/2032 313"M5 F H L M C MLTCLMTG 6.500'/e9WI43 09Aaa003 N/A .065000 II5,60WDtl 905,2W.1300 1,025,139,14 1,046.447.56 21,30842 09/25/2043 N/A 31397QUO FNMAGTDREMIC 1113%2R5/41 0125R011 N/A .019172 10L.1000 277,M.2100 277,853.36 282,556.80 4,703.44 OV25/2041 N/A 31398V398 FHLMCMLTCLMTG 4151% 16N20 m/01C010 N/A .042510 104.630000 900,020.0000 951,046,99 941,670.00 -9,37688 01/25/2020 N/A 3837H4N%9 ONMAGTDREMIC 1.7U%VI600 0VW2w N/A _017340 100416000 22,755.6700 22.755.67 22,85033 9466 GNM1630 OVIN2030 N/A 83162CUO SBAGTDDEVPART 034 3N121 03/14/2001 N/A .063400 104.80100) 47,016.4800 47,016,49 49,273.74 2,257,26 03/01/2021 N/A 912828WU0 USTREASURYIPS 0.125% 7/1524 07/15/2014 AAA .001250 98.933020 10,721,776.0000 10,577,056.09 10,613,807.72 36,751.63 07/15/20M N/A Toni For Neel TSpe. REMICSAND OTHER GOYT PAYDO"S S12,930.40U3 512,987,443.31 3.41% S57p42.08 US AGENCIES 300A7CV5 FHLBDEB 1375%2/1821 OVI2016 AAA 013750 98.967000 5,365,000L000 5.343,325,,40 5,309,57955 -33,74585 OVO2021 AA. 3133782M2 FHLBDEB 1,50Yb 3N8/19 OVW2012 AAA -015NO 100,N3M 7,500,0010000 7,589,190.00 7,503.225W -85,965 00 03N8/2019 AA+ 31337SA43 FHLBDEB 1,375% 3109/18 OV13/2012 AAA .013750 100.087000 7,500,000.0000 7,M4,850.00 7,506,525.00 -38,325.00 031WI2018 AA, 313379RB7 FHLBDEB 1,875%6/11/21 0N05/2012 AAA .018750 100.301" 4,000,000.0000 4,030,160.00 4,012,040.00 -18,120.00 W11=1 AA+ 313383HU8 FHLBDEB 1,75W/ 611WO 0603/2013 AAA 017500 100.166000 5,000,W0.0000 5,008,95000 5,WB,3&aW d5000 0N12/2020 AA. 3135GOD75 FNMADEB 1.500%N22/20 M/27/2015 AAA .015000 99.72000a 5,000,000.0000 4,955,650.00 4,986.000.00 3035000 06/2L2020 AA+ 3135GOF73 FNMA L500%11/3020 10/19/2015 N/A .015000 99.330000 7,500,000.0000 7,370,726.00 7,449,750.W 79,024.00 11/302020 AA+ 3135GOG72 FNMA L125%IY14/18 11/032015 N/A .011250 99.653000 5,000'".0000 4,963,950.00 4,982,650.00 18,700.00 12/142018 AA+ 3135GOJ20 FNMADEB 1.175%Y26R1 OV05/2016 AAA 013750 98769000 10,000,000T000 10,OW,950W 9,876,90000 -1N,O5000 0226/2021 AA+ 3135GOS39 FNMA 2WO% 1N522 01/0/2017 AAA '020000 100254000 3,000,000.0000 2,999,57000 3,W7,620-W 13,05000 01/05/2022 M+ 3135GOT45 FNMA L875%4/05/22 04/10/2017 AAA .018750 99.773000 5,000'".0000 4,972,500.00 4,988,650.W 16,150.00 M/05/2022 AA+ 3137EABA6 FHLMC MTN 5.125%11/17/17 INIL2007 AAA .051250 100.506000 5,000,".0000 5,113,950.00 5,025,300.0a -88,650.00 11/172017 AA+ U.S.Bank Pivot Page: 7 of 8 Consolidated Holdings Report-Detail,With Totals Prim Dale: 10/300017 at Lll:4 pm Asset Class,CUSIP Settle Dated As Of: 09/302017 CUSIPB War Dare Moody Ararat %Total Uana1D4A Tots, A,ut Deaerl re,ti a l SEDOL Msfi rlto Date S&P ltroana,T. Pa. Dan FM Cart Walter V.I.e Market flgt,/lyg5 3"7EADMB PHLMCMTN 1250°/r 10/02/19 IOIOWW2 AAA 0125M 99.427000 7,500,000.0000 7,399,650.00 7,457.025W 57,37500 10/0V2019 AA+ 3137EADN6 FHLMC MTN 0.75W.. VIVA 11/ 1V012 AAA .007500 99.883WJ 5,000,WJ.0000 4,967,50000 g994,150.00 26,65000 OVIL2018 AA+ 3137EADP1 FHLMC 0.875% 3/07/18 01/172013 AAA .08750 99.858020 5,000'".0000 4,974,100.00 T, ,900.00 18,BW.00 03/07/2018 AA+ Total For Asset Type: US AGENCE S S87,270,021.40 S87,100,614.55 22.85% 31694 85 US AGENCIES-DISC/ZERO CRN 313385MV5 FHLBDISCNTS 10/11/17 10/110016 N/A 000000 99.975" 2,000,WS0000 1,999,366.67 1,939,50000 13333 IW116017 N/A 313385MO FHLBDISCNTS IIIIY17 11/142016 N/A .000000 94883. 5,000,000.0000 4,993,579.17 4,994150W 570,83 11/132017 N/A Total PorA..l Type: USAGENCIES-DISOZEROCas S6,992,945.84 $6,993,650.00 IX% V"16 USTREASURYBONDS&NOTES 912828333 USTREASURYNT 1.50a%. 1A1/19 01/31/2014 AAA .015000 100.1W^LU 11,000,".0000 11,0,12,439.19 11,011,60.00 -30,779.19 01/31/2019 N/A 9128281`39 USTREASURYNT 1750S4. 9/30/19 09/30/2014 AM .017500 10S504000 5,800,"amo0 5,873,186,87 5,029,23200 -43,954A7 09/30/2019 N/A 9/2828020 US TRPASURY NT 0,875%11/15/17 11/172014 AAA .W8750 99.975000 2,000,M,0000 1,999.756,70 1,9991500-W 9,74330 Wtsn017 N/A 912828G61 USTREASURYNT 1.5W%11/30/19 IL01/2014 AAA .015000 99984000 7,500,000.0000 7,M9,6M,50 7,498,800.W 49,16550 11/304019 N/A 912828H37 USTREASURYNT 0.875% 1115/18 01/15n015 AAA .08750 99.918WU 5,500,WU.0000 5,4W,569.21 5,495p90.W 920.79 01/15/2010 N/A 912828176 USTREASURYNT 175WG 3/31/Z2 OV31n015 AM .017500 99434WU 5,000'"am00 4,976,38394 4,971,700.0) -4,60394 03/31/2022 N/A 912828L24 US TREASURY NT 1,875% 801)22 OV31/2015 AAA -018750 99.742000 6,000,000.0000 5,997.8320 5,984,520-W -3,3R60 08/31/2022 N/A 9128281.99 USTREASURYNT 1375%10/31L0 IIN2/2015 AM .013750 99.1720.tl 5,500,Oa10000 5,4M,666.87 5,454,460.W 29,793,13 IW31/2020 N/A 912828N89 USTREASURYNT 1.375% 1/31/21 024aa016 AAA .013750 98.9CO20 6,000'".0000 5,895,MO.41 5,936,460.W 40,619.59 01/31/2021 N/A 912828P20 USTREASURYNT 0.750G LIVI8 02.aIn016 AM .007500 9aM200U 5,000,"amo0 4,994,35169 4,993,I00.0(t -Ia5169 01/31/2018 N/A 9128283N1 USTREASURYNT 1.500%351/19 04/OL2012 AAA -015000 100-117M 5,000,000.0000 5,016.423.0 5005,850-W -10,573.00 UST1519 OV31/2019 N/A 912828T34 USTREASURYNT 1.125% 990/21 09/30/2016 AM 011250 97.371M 7,000,0010000 6,757,91408 6,815X0.W 58,05592 09/30/2021 N/A 912828T67 US TREASURY NT 1.250%10/3121 10/31/2016 AAA .012500 97]66000 6,000'".0000 5,813,691.98 5,065,960.W 51268.02 10/31/2ml N/A U.S.Bank Pivot Page: 8 of 8 Consolidated Holdings Report-Detail,With Totals Prim Date: 10/300017 at Lll:4 pm Asset Class,CUSIP Settle Dated As Of: 09/302017 CUSIP% hao Dale Moody Annml %Talal Uomli" Tlekea ASODe HNS,—ASEDOL Maloelo,Dan up luasan�. 1w, UWa FNI Cast Mahe'Value Ma,ke1 G.I./ 912828TS9 US TREASURY NT 0625%900I17 IOIOVM2 WR _DM250 100.000000 2,500,000.0000 2,496.68&06 2500,000 W 33u94 09/30/2012 N/A 912828U65 USTREASURYNT 1,750%11/30/21 1150=6 ANN .017500 996E0000 7,000,000.0000 6,900,49220 6,976,200.W 75,707,80 11/30=1 N/A 912828119 USTREASURYNT 0.750% 2R8/1S OV281013 AAA .W7500 99.813000 3,500,000.0000 3,496,457.04 3,493,455.00 3,002.04 OV28/2018 N/A 912828V72 US TREASURYNT 1,875% IMM OWD2017 AM .018750 100.05100D 3,000,0010000 3,004,814,74 3,WI,530A0 -3aN.74 01/31/2022 N/A 912828WS5 USTREASURYNT 1625% 680/19 0OW2014 AM 016250 100285M 2,000,000.0000 1,996,861.44 2,WS.700 8,939.56 06/30/2019 N/A 912828WW6 USTREASURYNT 1625% 781/19 07/31/2014 ANN .016250 100285000 5,000,Oa10000 5,012,38870 5,014,250.W 1,96130 07/31/2019 N/A 912828XE5 USTREASURYNT 1.500% 5/31/20 0&OU2015 AAA .015W0 99.781020 5,000'".0000 4,966,423.00 4,989,050.W 22,627.00 05/31/2020 N/A 912S28XW5 USTREASURYNT 1750G 6ft0 06I30/2017 AM .017500 9927000) 5,000,0.\10000 4,973,454,25 4,963,500.00 -9,95025 06/30/2022 N/A Total F.,M.Type: US TREASURY BONDS&NOTES S109S ,271.47 510E806,MV.00 28.81% 324;115.53 Grand Total 5383,440,235.58 5351,155A70A2 100.00% 3 251,762.16 ••••* End Of Report e"" U.S.Bank Pivot Page: 1 of 14 Transaction History With Totals Print Date: 10/30/2017 at 3:26:17 pro By Account Id,Post Date Data From: 09/01/2017 Thm: 09/30/2017 COME TYLn Pn.l 'hvn SEC MFc Nn C.m MO..— E,nm roe,D., n.@D.le same D.rc sEUOE rn ive EoA.�. U.I. PeC.e C... Fa Fa COA c.INLo® caNEn.e 67A1M6m0 OCS CHANDLER LIQUID OPERATING PORT ewn BeDeNngCW Hod CW:189,11A69 Dome C.,.: 1.1,17. o181CUF.B.W OAMI.II 31816V567 1 310 MTERRn EARNED ON MST AM GOVT OB FD .00W .1 1n 011 W Z.I. W .1. W I. CL Z IMRONO OW.SHARES DUE.11.17 .TEREST FROM v III TTO BA I III Pw E..B9 On.T BOB. O.W OW O.W Con. OAF O.I. 6W (ODDI2017 09NSR019 O9i vM17 318RMo67 P m PURCHASEOUNRSOrrEAIAMGOYTOBFD 2.B616i00 ILOMOO W W W 1.B61A1 2,8614B .oI W CLZ P—DR4 SW IIN TTBYI Boa a.m BJa -2p61M S,B6LCd B.B. O.W .11 30231GAL6 1 310 In BEREST EARNED ON E)rXON MOBIL OOCO WSS00 W W In 652500 W D. LO 1305A 3/05/I8 SI PV ON 1C@Ttl.0000 SHARES ..11 11 BSASID12 O9 017 09AM2017 31& 62 P 10 PCRCHABEDONRSOFFIFSTAMOOVTOBFD 152500W 1. to to W 1,52500 6,525W D. m In. PaN No 09NN20IT To181 O.W OAF O.M on QSSS.W on a.W W/1WOD 01H.17 WIIIIMI7 11.S17 P 10 NRCHASEOUNDSOFFIRSTAMGOVTOBFD I.Mn I'M I. In W W -".,I0 7,S111W 0O m I. CLZ WIR.M17 1.11.1 1 310 cr EREST EARNED ON CHARLES SCHWAB CORY .0. WW00 W W W 7,,MN W o W 15W4 vI1118$I PV ON Irosto 0000 SHARES rml D..nNIRITnm aw o.M AM B.aO T,saO.W ..So 0.. W/13/2017 02665WATB 1 310 WTEREST EARNED ON AMERICAN HONDA SON D. LOaa]0 W W W 7,SOO.Oo W W W 11.3/I3/IB II PV ON I OOOOO SHARES .911.17 W/13I2017 09I13R017 MIDD017 OWAIS67 P 10 PURCHASED DNITSOFFn STAMGOYTOSFD 7$(SIWW I. W W W -7,.n. T,SWW D. W F. CLZ PONDW09/13O0I7T0B1 BAO OJN O.FO 0.00 7.106W B.I. 6W OLIMm17 09/IM2017 011411017 31BMV56/ P 211 6OL➢1MFISOFMBTAMGOVTOBFDCLZ dp02.11470e 1. to to W 3,Wjvll. 1,W7,IM 7. m m F . W/IMM17 09/1311017 WIDI2017 912v3H37 P 10 NRCHASEO PAR VALUE OF U S TREASUSAIn 3.OPo,..A 9N261 W W W -2.9 ,7UAS 2,9 ,7834B 00 m 0.875% 1/IS/ISIMOROANSTABLBY@CO. COLIXt..PAR VALUEAT949M11.1 W/IMMI7 W1412017 912KBH37 1 300 PAID ACCRUED INTEREST ON PURCHASE OF U S .OGW PW00 W W 00 A,ISI E2 W AO W noP D(VNT 0875% 1/15119 PWD84mIvaM7T1W OAO OAO OAO I.W J,If122 O.I. O.W MIM17 (IMII3017 WI2112m7 313385ME0 P m PURCHASEDPARVALUEOFFHLBDISCrM "ODE..WW W9S31 W W W 4,999,IW17 CM.166.67 .00 W B1I1D/IEFFERIEBLLCI1..,WIPAR ALUEAT W.9433IMI U.S.Bank Pivot Page: 2 of 14 Transaction History With Totals Print Date: 10/30/2017 at 3:26:17 pro By Account Id.Post Date Data From: 09/01/2017 TIFTE 09/30/2017 COME TYLn rot Teen SEC MFc Nef C.. MO..— U-ITern r..,B." n.@Btle seme Bae SEBOL m ive U." P.C.e L-RR Fa F. eoA e.INLo® ea.L... 6785086W0 ORS CEANDLER LIQUID OPEMTING PORT O9RI.D FIGIIID O9/E I.N7 11.117 P 10 PURCHASED UN ITS OF FIRST AM GOVF OB FD E3,000,CPo.W00 ILCOMO W W W -I3,OW.WJW 3].WJ,WRID .00 W F. CLZ 09R1/E017 WDION? O9/EIR017 3IBMV567 P M SOLD UBM OF MST AM GOVT OB FO CL Z -0,999.Ifb.6700 IWMBO W W W 1,9.,1.17 A.939,166.67 .00 W C.S 092]I D 0921R017 O OG)17 91Z796LU1 P 20 MALLIEW PAR VALUE OF U S TRFASURT BILL "'ISSILW00 1'. W W W 2$946E.N C,-J16IS E. LO 961/1721.000AN PAR VALUE AT IN% N FOODD 912M6LU1 1 110 INTEREST EARNED ON U S TREASURYBR.L E. WM✓v0 FE W W ]].SO)I, W 00 W 9R1/17 S1 PV ON llWJ000.000 SHARES DUE 9oUAB723,000LW PAR VALUEAT 100% PoYD..VRM.M71[OM11 OAO Ra OAO B. 53.803A3 BOB D.00 .1I.7 NO.I17 G9O.IU] "Ill . , P ID PURCHASED PAR VALUE OF F F C B DISC NTS LINFLEWW00 .W9819 W W OF 9,99488859 9998,58089 0. .W 9R6117=FERIES LLC/G,NE0a2 FAR VALUEAT 999888009% WR2I3017 09R]/3017 IFG3 017 313385MA1 P 30 MATURED PAR VALUE OF F H L B DISC NOS 7,1W,0.OWN L. W W W 7,G86S86.88 -7AMFMARR AO W 9ILL177,500,W0 PAR VALUE ATIN% .2.17 313185MA1 1 110 INTEREST EARNED ON F H L B DISC NTS LOON tOS00 W W W 13.451.12 W Bo .W 9Q2G7$I TV ON 75W]W.OEM SHARES DUE IR2/ 177,500,000 PAR VALUHAT IW% (RALMt(ID 09 017 09/2li2017 ]13]85SUB P 10 PURCHASED PAR VALUE OF F H L B DISC B. E,3W,.wx, 9A861 W W W .2,199.6WA1 2.IW,6m.M .DO W 9/271I7/aNYMELLON/ING BAN.N V EQUFFYILNGSIN PAR VALUE AT 99.98611091% 091E/2017 09/22/2017 O9/2L2017 313365MFL P 10 PURCHASED PAR VALISE OF F H L B DI SC NTS IFEBBIRN 9A860 W O W D.,917S2 299,957.92 E. W 9R7/17 I FFDF?LLON/MG BAN.NV EQUFTYAW.W3 PAR VALUE AT 99.99597333% N F.D 09/22 OD O9QL201, 1.. P 20 SOLD L BEFS OF FIRST AM GOFF OR FO CL 2 -I4,I9SDLIA00 1'LfOa30 W W W DAUR]I9ID .14,4%,11101 EE W FGZu 09R1.D 09/] IFI 09/2L2F11 ]1&MV567 P 1D PURCHASED VNRI OF FIRST.OOVT OB FD 7.10ELXRNN IIXRYpO W W W .7,10LLt00 'BLow E. 00 W F.. CLZ 0922IM17 QB/M017 01=017 MRFWGF1 P 10 PURCHASED PAR VALUE OF T VA DISC NTS ;IBERBWW S 119 W W W -1,5W,7T/.]R L939,77771 00 W 90&17/CITIGROUP GLOBAL MARKETS EJQ11AN W PAR VALUE AT 99N1119% PWDm R9CJaI7TB1 BEE OAO BEE R. 1M.12 B. O.W NADM17 vCeON7 09I25R017 31816V567 P 20 SOLD FIRM OFF MST AM GOIT OR FB CL Z -1AEL.31300 IpW30 W W W I,WL65333 -LW1.653.33 .W .W F. W125/2017 09/OD17 09IOABO7 MoREB P 10 PIIRCHAREDPARVAFUE OFPNC BANKNAMTN 1"FEARl.W00 1.1. W W W U.;OI. U.,.0.W BE .W SLUM 2/2118IGOL.MAB SACHS&CO. LLC11,000,00)PAR VALUE AT 1 W02% 0911.17 B9RS12017 69]IIR.a 1 3W PAIDACCRUFD.TEEFIT ON PfIR WAIR OP .No fOTa30 W W W -I nDa W .W W PNCBANKNAMTN ISW%ffi3/I8 U.S.Bank Pivot Page: 3 of 14 Transaction History With Totals Print Date: 10/30/2017 at 3:26:17 pm By Account Id,Post Date Data From: 09/01/2017 Thm: 09/30/2017 CUSIP TYLn Pn.l 'hvn SEC MBc Nn C.. sen.ITem E,Tern rO.I H.Ie ,..Ho, seme D.rc sEUOL rn ive ]UN.—N. U I_ tr.. C.A. Fee Fee COA e.INLo® eaNLn.. .1ol W0 OCS CHANDLER LIQUID OPERATING PORT Pml D.le 090 aO17 Tole wFE u.N wFE IN -1a$$.ss E.aE S. 09l[N3011 09/ N1 O .17 IIIIIIMES P 30 MATfIRED PAR VALUE OFFFC B DISC NTS 100W,CPo.NN ICOM00 W W W "NS,88R89 'NS,oa.89 .0. W 912&1710.000AW PAR VALUE AT I W% 09 .11 llll I3ME5 1 310 WTEREST FPRNEO ON F F C B DISC NTS E. LOSSSO W W W 1,uI.II W 00 W 9RL17S[PV ON I WJJ000.COW SHARES DUE "AwSV 1,I'wo.P.Vt..,IN% ..N 7 09/ I0 ..]I 31&16V567 P 10 PURCBAWDV SOFFIRSTAMOOVIOBFD 12,000,LN.W00 1. 00 W W -12,CtO,WS00 IZWS.0NIr 00 LO I.. CLZ O91N2019 .11.I19 C9b.6pEq INI.ME1 P MpTUREDrARVALUEO1TVAOISCNT3 a.EWEB .W .W �W NO 1. IyW,77T]S 1..,77771 N NW 9IR6I I41.000.OW PAR VALIIO ATIW% 09RNM17 ER05NNE1 I 110 INTERESTEARNEDONTVADISCNTS 0. 0.tlN W W W S1133 W 00 W 9R6I17$1 PC ON�W W SHARES DUE 911.11 4XW.DAR VAWEAT 1.°A Pm1 E..ISANIO17 TO.. OAO 000 Ea ON ¢9.33 0.0. 0.W M712017 P 210 CASH DISBUSSE ENT PAID TO ANION BANK NN NNN W W W 170W.W3.W W .N .W OUfODMD DOMESTIC WIRE PERDHDTD 9RL17 09R7/ 17 0ffi 017 C MO17 313385MM P ID MATUTUDPARVALUEOFFHLBDUCNTS ..,IN J.W00 1. W W W 3.597.W666 -M97.096.66 .N W 9/E7/172600.OW PAR VALDEAT I W% 091.17 313385MF0 1 310 WTERESTEPRNEDONFHLBDI$CNTS E. ESSEEN W W W 2.W3X O] 00 LO 9R117U PV ON 269W00.00W SHARES DUE MR 172.600.NOPARVALUEATIW% 091.11 092 Nl 09I272E17 10131. P 20 MATDREDPARVALUEOFFBLBDECNTS SOwwoI0 L. W W W I,I.16567 A.999.166 Al 00 W IV2WI75.0000W PAR VALUE AT IN% 09R7I2017 3133SSMF0 1 )10 WT ..EARNED eN F H L a D6C NTS I. NNN W W W 83333 W 0E [O 9R7/17 S1 PV ON SNS]N.fiON SHARES DUE 91.17 I.N..EW PAR.E A'1.% 0 71DU7 Ino7CO17 W127AHU7 313355MPo P 20 MATUREDDARVALUEOFFHLBOISCNTS -2.2W0.o%N 1'. to W .W 2.W"..,N 2,1.,1. f DE SU 9I27I172$000NPARVALUEATIN% .7.17 3133ESMF0 1 310 INFERESTEARNEDONFHLBDISCNTS .1. WJJW to W W .1.11 W .0. W 9I2i/10VPVON2IDSS NEESHARFSDUE 9I27ROV 5.1100N PAR VAWEAT 1 W°A WRA2017 0927R017 09I27R017 3133SHoR P N MA3UREDEARVALUEOFFHLBDUrC S 3W.ONASN 1. W W W 2N,91731 2iSA957.92 N W 9a7nT3WEEE FAR V.woBAT 1 W% .1.17 313I85SN 1 310 INPERESTEARNEDONFHLBDISCNTS .NEE NNN W W W 42.fi5 W .N W �121IISI PVON3WNE WNSBARE$DUE 9R7/20173000W PAR VALUEAT I W% N11.17 3135GO 1 310 DIMUSTEARNEDONFNMADEB 1N. E. tOSSSO W W W 30.N000 W 00 W 9/1117111 PV ON ONN0.00N SHARES DUE 9I27/2017 U.S.Bank Pivot Page: 4 of 14 Transaction History With Totals NET Date: 10/30/2017 at 3:26:17 pro By Account Id,Post Date Data FFom: 09/01/2017 Th.: 09/30/2017 CURIE TYLn rON Teen SEC MFc Nef C.. SUNTeem L,nm Io.I D.le n.@Btle seme Bele SEBOL m TT— � Un_11. Ee.e CAM. FM F_ee eoA e.INLo® eaNLn.. 6Td5M6W0 OCS CHANDLER LIQUW OPERATING PORT O 7R 17 09Q7R019 O M017 ]I]SGOZIA P N MATURED PAR VALUE OF F N M A ME .6.OW,WJ.OWO ILWMO W W W 60W,000W 399E}50.00 1.65000 W 1 NFE'919/1940.YLW0 PAR VALUE AT I W 9 0 7/E017 09O7/3017 O9 M017 3ISMV567 P M SOLO IINFIS OF MST AM OOVT OB FE CL Z 37RFN.W00 IWM✓JO W Fe W I7.OW.W]W .E7,.,.RDD .00 W C.N 0 1.11 0.EVI O9/➢1NI 0.. P 10 FURCHAREO CNFTS OF FIENT AM 00VT OR FD 18.630.000W I 0 W W W -18.630WSW 18.6]Q000 RR 00 W F. W27I2017 092 RO .71011 89L]]OWM P M MATCREDPARVALUEOFTOYOTAMO]OR �2,SW Wtl W00 IOLCWO RR W W 2,694C09.72 -24960097E 00 RE CREOFCOCP 9 172.50FMPARVALUEAT IW% 09R1IM17 I.Ol 19 1 )0 WIERESTEARNEOONTOYOTAMOTORCREOIT E. MWO W W W 5$9020 W 00 W COOP 9Q7/17o PV ON 25WOW R RHARES DUE 927MI7;SPo..PAR V .UEAT IW. PWD.h W/E720t7TSM1I OAO OAi OAO R. 'c RS..0 1..n 0.W MR617 O9 017 PBI38R017 313385PE0 P le PURCHASED PAR VALVE OF F H L BDISC NTS S.O... .16 W W W L,9933N.1I AM3.579.17 .00 .W 11113117 IBNYMMHO SECURITIES USA INC",m%RW PAR VALUE AT 9,RO'S.N MR617 09 017 V12V2017 I1R86V567 P E0 SOLO UMLS OF FIRSTAM GOOF OB FE CL Z .5.992,WLIWO 1.. W W W 5.99;WIJ9 -5,992.601.39 .EE .W FGZ%X ME/2017 09/2&2017 O9 W017 89ll]G%W1 P 10 PURCHASED FAR VALUE OP TOYOTA MOTOR I.OW.mm .1 W M,022.22 .00 ER CREOITCOCP 10FM7O,EM0ROAN SECURYCESLLC11.0W.Cf0PAR VALUEAT W.222 b FWE.R.Aoo7TOM11 0M 000 0.M R. O.M Rn O.W W12 17 O9 017 09Q912017 313385MV5 P le PURCHASED PAR VALUE OF F H L BDISC ENS 20W,RQ(ENS 999683 W W W -1999U66.67 I,W3.366.67 .RE .W I NI 1/17 OEFEERIER LI ,OOROW FAR VALUE AT W S1135M 09129/20/7 09 017 O9/2912017 ]1]7EAOI0 P 20 MATJETDPARVALIIEOFFHLMC MTN ILOMOO W W W 5.285,.3. la.,775.65 2U.35 0 1� 929/1753R5.W0PARVALVEAT1W% W129/2017 ]I]7EAOL0 1 310 MTERERTEARNEOONPHLMC MTN E. fOS300 W W W .',c,R0 W .W W NXo{9/29/17$1 PVON53ESW00000SHARES DUE9R96017 ..11 0.00 O9/292Ell 0.. P 10 FLvCHAREDUMfSOFFIRNTAM00VTOa FD 310.958.1800 1. W W W d10,958.18 ]I."o 18 00 FR F. CLZ W29I2017 W.017 FB/292017 ]1616V567 P 20 SOIL UNIT60I.TAMOOVICE PD CLZ 1MSEN W W W 1,1.1 0 -1,M,36667 RE 20 F. 09/29120/7 09/]9/2017 09129/20II 91282SPL0 P 10 MOE,REO PAR VALUE OF U S TREASURYNT ;Op50.yW00 9MRO 1.,N 52,69 49X.352 Al 00 .W 0750% 1/]I/IB/OOIDMAN 6ACHR@CO. LLC/5.000 W PAR VALUE AT 99RRIDA8C U.S.Bank Pivot Page: 5 of 14 Transaction History With Totals Print Date: 10/30/2017 at 3:26:17 pro By Account Id,Post Date Data From: 09/01/2017 Th.: 09/30/2017 CUSIP 'IkLn ro. 'hvn SEC MFc nef C.. MO..— L,n— rn.,D.le n.@Dae sNtle D.rc sEUOL rn ive U." P... C— Fa p_u COA e.INLo® eaNLn.. 6]I.. OCs CHANDLER LIQUED OPERATING PORT O vN17 09Q9/E017 91ESESPEO 1 300 PAIDACCRUMMTERESTONPURCHASEOFUS E. LWJ00 W W W 4,114.13 W .00 W T.SCRYNT glSaY IoNI PeYDe409R940 PI Tole1 O.OJ O.W O.OJ O.W Sg95.33 EZIdS O.W A—.16W5W6W0T t.1 0. O.W -SgeSgNl.q 1$SIJS aW A....I E...n ssM1 PneoipalCssM1:1fl,E9.51 h—C.IS:."VU,R Tat.1C.IS:S. U.S.Bank Pivot Page: 6 of 14 Transaction History With Totals Print Date: 10/30/2017 at 3:26:17 pro By Account Id,Post Date Data From: 09/01/2017 Thm: 09/30/2017 CUSIP TYLn rn.l 'hvn SEC MFc nn V.m ISO.I Teem E,Tern rnrt Dm n.@Dae same B.rc sEUOL rn ive U." E,.e U- Fa Fa COA c.INLo® caNLn.e 6]45M6W1 OCS CHANDLER LONGTERM PORTEOLIO Hewn aedening CeW Mtlptl Cae6:-Ip.O,]61.11 emme C.W: 1p 761.11 olalCut.0.00 WN@OV 303IIOAVI 1 310 MTEREST EARNED ON E% MOBIL I. WJJ00 W W W 33.33000 W .0. W .1 V IV ON IWW t1 WSHARES DUE11.1] ooDM17 ISAHOO] 09IOU1017 318MVM7 P 10 PURCHASEOUNRSOFFIRSTAMGOVTOBM 33X.,I)ON ILWMO W W W d1.130.00 I3,330.W .00 W I. CLZ .1.17 318MV567 1 310 WTEREST PARNED BE MST AM GOVT HB FD .1. IWJ00 W W W 7,1.0 W 00 W I= CLZ UNR ED "II005XARES DVE UI3 IRM] THEREBY FROM 111111 TO.1117 09 JM17 OMIR017 O9i01R017 318MV567 P 10 PIIRCHASEDUMTSOr IncMAMGOV100PD 17.1170DIW ICWWO W W W 47,I37U9 1],13].W 00 W 1. CLZ 091.11 N3162CL10 1 310 rNrMrDTEARNEOONSBAOIDDEVPART 0. WMYJO W W W 1,971.18 W 00 W 6IM°A 3NIR1 SI PV ON I9]1.18005HARESDUE 91I.V7 0091]NPVON 6$1N3d91DUE 91 1117 (SonV 17 OMIO017 MiNB017 83162CW0 P N PNDW EMEVALUEOPSBAGTDOEVPART -15,1659100 1]18]O W W W 15.165.91 -15,165.91 00 W 631Pb 3NIR1 Pw1DMe QISKoU17T0M1 UJO OJp UJO 7�Ln .b tm.c. 0.00 0.00 0910512U17 U9 1M, 09ML201] 1D.VM1 P 10 PIRrnknD=SOFFIRvTAMOOV10BM 22,485100 I. W W W -2I4961 =29.61 00 .W I. rL Z 09/.17 S. 1 IIO THEREBY EARNED ON BSBC OBA MC 0. NWUO W W W n1V10 W 00 W 1150%3NSR081 PV ON LIISTLo0 SHARES DIIE 915R017 P YNoO9N5V2017UO l O.N O.N OAO -7$83.11 1I.ol.61 on O.W .I, 313MADPI 1 310 TNIEREST EARNED ON P H L M C O8]5°b 0. .PTJifp Bo .W W 2487511 W 0. .W 1.1t S$I IV ON 1Wa2 oo Mr.DUE 9UR017 WN7R017 09/O7RM7 09 M017 318b 7 P 10 PURCHASEOUNITSOFFIRSTAMGOVTOBFD &6153000 LP?TNp W W W 015.30 6.M130 .00 W CLZ OVD] 17 09 017 09MM017 318MV567 P m PURCHASEOUMFSOFFIRSTAMGOVTOBFD 21,8]Sn000 1. W W W 11.17500 I= CLZ 091tl112017 638S.S 1 310 WTEREST PARNED ON NCUA GUARANTEEDM .BOW f08830 B0 W W 468A2 D.11 1.91397%IINSI7 SI FT ON 46842W SHARES DUE 90M17"A I S I IPV ON .9,S11M PV DUH 91 1117 09N7I3017 O9 017 0 7/ 017 63 RRUOA8 P N MD BSD1NPARVALUEOFNCUAGUARANTEHD -8116.6800 5636368 W W W 8.468U -8.IG680 Do M NGNWI7 NTIM3C%DMW17 P D,4090]II0I7TINI O.OU U.W O.UU 0.00 11.1n.46 0.00 S. U.S.Bank Pivot Page: 7 of 14 Transaction History With Totals Print Date: 10/30/2017 at 3:26:17 pro By Account Id,Post Date Data From: 09/01/2017 Th.: 09/30/2017 CUSIP TYLn rwl 'hvn SEC MFc Nef C.. sbwl.- E,n- rn.,D.le n.@Dae sNtle D.rc sEUOE rn ive U." P... C- Fa Fa COA e.INLo® eaNLn.. .IoaW1 OCS CHANDLER LONGTERM PORTFOLIO O9/ 17 3133782W 1 310 MTEREST EARNED ON F H L B DEB I500% .00W WSJ00 W W W 56550.00 W .00 W J/08/1941 PV ON 1w000 .SHARES DUE 9 1] 09/08/2011 09N NI 09..11 11.10 P 10 rURCHASEDUNITSOFPIRSTAMGOY .Fo 561500000 IW}TJO W W W -56250.00 56)SOW E. W CLZ POHDRftO 0177001 OJO O.W O.p An 56 IS.. 0.00 aW 09/IloiA7 MIOSHCW] 1 310 INTEREST EARNED ON6ANKNV MEL.M1N E. WS]00 W W W 2E360.00 W 00 W 1]W%.1111,$I PV ON260000.CfQl SHARES @OIT 03/I0017 1I3378Ad3 1 )10 .TEESST EARNED ONFH L B DEB 13751 OOW q.W00 W W W 51561.1. W 00 o ]N9/I S SI PV ON 75W]00.0000 SHARES DUE 9'.M 7 M UW017 09/11OU7 09IIII U7 318 567 P 10 PURCHASEDUNRSOPFIRSTAMGOVTOBFD ]S,W35000 1. W W W - ,%250 T5.99E 50 00 W PGZ1[X rw1D.h N/11/201]TOM1I OAO 0.00 0.M 0.00 ]3.W2.. 0.0. 0.00 W/13/2017 912828WU0 P 6G BGOKVALUEOFUSTREASURYIPS EAM% .00W . W W W .W W .00 .W TI1ANADCJSTEDBY-3120WUNITS DECK H TO ADNST FOR CHANGE M CPI W/13MU7 912..E P 6E FFDBASISOFUSTREASURYIPS 0.125% .00W LOSS]0 W W W .W 3.120W .00 .W TIISMADNOTEDBY 111.W UNIT9 DECRE46b TO ADNST FOR CHANGE IN CPI .111.11 9128E.. P 63 S.COST OP U S TREASUEY I P S 0.125% E. LOSSJ'0 W W W EE O] .E. W T/15MADNSTEDBY 3120 W UNITS DECREASE M.STPORCHANGB W CTI 0 11.17 912528WU0 P 65 PARVALUEOPUOTRE SURYIPS ECo% d,120L000 .LM]00 W W W LO W E. .LO 711S ADIU=BY-3120W UNITS DECIIBASB TO ADNST PO0.Co...M CP1 .D.VlAv o7T.. OAO OJN OAO 0.00 -3,00. ..0. 0.W W/15I2017 0111,111, WI151201T 161,U1 P 20 PAIE.EARVALUEOFCHASEISSUANCE -0,1ggosoo0 dJ.. ,. 1011M)1J IE IIS 17 TRUST 106%9IILI9 CMO MAU PAYDOWN W/IOU7 161571HHO 1 310 INFEREST EARNED ON CHASE ISSUANCE.1 OOW PW00 W W W J,65)00 W .0. W I KO'F 9/16111$1 PV ON 616WW 000E SHARES D11b11.17 W/I1I2017 3133TCE95 1 310 WTEREST EARNED ON F H L M C MLTCL MUG .00W tWP00 W W W 81.G7 PHL3032 I I68%BI15A0$1 PV ON SLW W SPARES DUE 9/IS/201730.0@6VPVON 30,86045PVDUE 9nvn W/151201T 09/1L2M7 W115/201T 1133TCE95 P 20 DoECCWNPARVALUEOFPHLMCMLTCL -]J 97Wo .WTIW iW W W 135711 -1.111,11 00 -142 FHWW2 MTO 3.168%BIISA2 W/I1R01T 09/I1R017 WI15401] JINSSWZJ P EO PAIDWWNPARVALUEOFP H LM C#78W6 -1636W PTJJ011 W W W IAIS -ISW 00 W 78W50F 2762% I10128AUGUST FHLMC DUE 9/ILI7 U.S.Bank Pivot Page: 8 of 14 Transaction History With Totals Print Date: 10/30/2017 at 3:26:17 pm By Account Id,Post Date Data From: 09/01/2017 Thou: 09/30/2017 CUSIP TYLn rn.l 'hvn SEC MFc Nn V.. Sen..— E,n— rn.�Dae n.@Dae sNtle D.rc sEUOE m ive U." P.CE.. C— Fa Fa COA e.INLo® eaNLn.. .,..I I OCS CHANDLER LONGTERM PoRTPoLIO O9/I1/E01] 31349MD 1 310 MTEREST EARNED ON P H L M CN]860M .00W WIJ00 W W W 5.23 W .ol W IS., 3. l N IRI$I PV ON SDW SHARES DOE 911L 17XLY PELMCME 9/I5/I7 .11.11 09/I1101 O11.11 318MV50 P 10 rvCHASEE.SOFPIRSTAMOOVIORFD 35].81]6800 IWYYJO W W W -II7$17A 257,817.68 .00 W C.S CLZ .15.11 09/I51011 O9/15201] 11.17 P 10 PIIBCHASED=SOFFIBST,oIWVIMFD 9],OB6.1800 1. W W W ,537,086.18 53],0861S 00 W FO CIZ O9 vII1] loot AC2 1 310 INTEREST EARNED ON XONOAAUN E. Wa300 W W W 2,096IS W 00 W 13W 111/2 1 PV ON 3W6.58W SHARES ME 9/152017$OWlolIVON 1910,WIWFVOOE 9/IS/17 W 11.17 9581%MSS 1 310 INTEREST EARNED ON INTER AoESCAN DEVEL .DOW fOaS00 W W W 31,S..I. O] .E. W I.7v4 3/I512l I1 PV ON JSM.TW OOOO SHARES .911.17 .11.17 47]S7]AD6 1 310 W EREST EA M ON JOHN DEERE OWNER .00W LOaa50 W W W 451.78 W 00 W I% 11/15118$1 PV ON 451.78W SHARES DUE 9/lRl017 OEW59oVON 506,60CPVDUE 9/ILI] W/15M17 09/I5II017 WI15/1017 477977AIIS P EO PNO WWNPAR VALUE OF IOHNDEEREOWNER -IISaWA000 WJYJO W W W IISaWM -n5,363A5 .00 �54.05 1%PK 11/15I18 .15.17 477E AB3 1 310 INTEREST EARNED ON IOHN DEERS OWNER .DOW fOaaSO W W W 1,]63.50 W .00 W 11.l011ll1 E1 IV ON 1]..1 SHARES ME 9/l560[7$0.00@5?VON l,4l0,OW.WPVDIIE IN TEI .11.17 J]]BBBABO 1 310 TER "I,.$]I ON IOHN DEERS OWNER .00W 0.W000 W W W 1A16.80 MI.EW J/I520E1 PV ON 96WL11 W00 SHARES DVE9/IS/E01] W 11.17 4771 BAW 1 110 NPEREST EARNED ON JOHN DEERE OWNER E. tOW00 W W W I.W5.13 e l 111SR I$1 PV ON 611W0 W00 SHARES DVE9/I.17 .11.17 41IV Ap 1 110 INTEREST EARNED ON IOHN DEERS OWNER .DOW fOaaSO W W W 2,741.67 136 V1I O II IV ON 27Q 67M SHARES ME 9//56011 M.113 FIl. I...O 0.DO PV OUE 9/15/1] W/I1IMI7 OTBBNABJ 1 310 INTEREST EARNED ON RICE DEERE OWNER .1. PW00 W W W 1.653.86 W AO W I ISE,V 1919$1 PV co 1663.6E00 SHARES DUE 9/ISR0170.OW91?V0N 1.831,76732PVDUE 9/IS/I] 09/15601P 0/ISR017 01152.11 Y//1BNAR4 P M PAH IBOWNPARVALUEOFICEll EEREOWNER -247,3545700 PW00 O] W W 2417X11 -247,339,a I. ll. IOW IlIll9 O9/11., 11N17RF4 1 310 MEREST EARNED ON.LIWX Co 1.91EI, 0. .WNpO W No W J90W.00 No -00 .W Ill 9V IV ON 4WI]OOLDOO SHARES ME 9/1560V 09/I1I2017 04747AM 1 Ill INTEREST EARNED ON IS.AUTO OOW WJMO W W 00 E67I.13 W .1. W I 4]65 1/1520 E I PV ON 16]21300 SHARES ME 911S 17$0A0123?VON 1.365AW.WPVDUE 9/IS/I] U.S.Bank Pivot Page: 9 of 14 Transaction History With Totals Print Date: 10/30/2017 at 3:26:17 pm By Account Id,Post Date Data From: 09/01/2017 Thm: 09/30/2017 CUSIP TYLn Pn.l 'hvn SEC MFc Nn C.. sen.ITem C,Tern Io.I D.le n.@Dae seme D.rc sEUOL rn TaY EoA.� U." r.0.e C— F_ee F. COA e.INLo® eaNLn.. 6]OSM6W1 OCS CHANDLER LONG-TERM PORTEOLW O9/IS/IDI] S47nCAB1 1 310 MTEREST EARNED ON M IAN AUTO I. WM100 W W W 1,185.51 W .EO W L.11 5/IS/11$1 PV ON IISSSI W SHARES ME 9/IS/E01]$0.00089?VON 1,3R9,11IT711DUB pIT W/150317 09/I5R017 09IISR017 6547BWAB1 P EO PAUJCOWNPAR VALUE OF NIESANAVFO -16335U.E600 0.>b00 W W W 163,SW36 -163.SBJ85 00 691 10]65 LIS/19 .11.17 89ll6WACE 1 310 WTERESTEARNED ON TOYOTA AUTO .1. WMI00 W W W 1,110.55 W .00 W 111119 IM L15/Il EI PVMIIE II00SHMESECE 9/15 17BOOgB3?VON 1.189,872IEVDUO worn O9/ISI2012 09/15201] %IISR01] 89236WAC2 P 20 PAIDCOWNPARVALUEOFTOYOTA. -Iea0317900 . .W .to .W H.,Wo 79 -IW,0065] EE 2222 TA 11119 IMO%LIS/19 PW No WIMO17 IDM1l 0.0. JSO.SI ECN.17 Lf2EESE9 1 310 WTEREST EARNED ON JOEN DEERE CAP MI 0. W W W 57,50000 W .00 W 23W4 9/I119$1 ION 56666W0000 SHARES DUE9/16ROV W/IER01] 09/18 017 PSIVIOn 318MV567 P 10 PIIRCHASEDLEICSOFFIRSTAMGOVTOBFD 4,102,116.1 1. W W W -0,2a.16EI 4202,836.20 .00 .W F. CLZ 09/IS/20n 09/18RO17 O9/IW017 31806V567 P 10 PURCHASEDIIMTSOFPIRSTAMGOWMED I33161P IWM✓JO W W W -133A6 133.K 1. CLZ 09/IS/2017 I.., 1 III WTERESTRARNEDONONMACnP IC I. LW000 Co W 00 3in W 00 W CNM1630 I 2/16A0$1 PV ON 34250)SHARES ME 911.115000105/PV ON 23,on.PV DUE "I'll, W/IE/2017 09/162017 PSIVIOn AUMOPS9 P 20 PAIOMWNPALICU,EEOFGNMAGm EPSM ..INN tOS00 W W W 9000E -9W.02 .00 .W GNM1630 1.2116CE W/H.17 03.1., 1 310 WTERESTEMNEDMEEM AAUN 0000 fOBJ]0 W W W 133A6 W .W .W HA1101. IIPE1 1/1SCM I MI18562051InUEES .911.1] W/IS/2017 OWJIC 01] 011MOn 439IMABI P 20 rA1DMWNPARVALUPOFNONDAAIITO 45M.EII0 LO88J'0 W W W 1.8 .Al -15S,.I,61 .W I580 NA11018A I OPN 6l1M8CM0FMALMDS)W POHDetl09/IaROn Tolal 0A0 0JN 0.M J.985.]99.4 O,p3,09.t03 0-00 35.N 09/19I201] 025616AT5 1 111 WTEREBTEMNED M..CAN E%PRE58 I. PtlWO W W W 1.,.t0 W OO ro 7 too VIW18$I PV M 21SOOP)0000 SHARES IIE910.11 O9/1912019 09/192017 WlIvIOn 318 567 P 10 PVRCHASEOUNCCSOFFICoAMGOVTOBm 260.4101 1 00 .to Y0 1.,.41 2W.XI2 5 OP SU FG= CLZ Pm1IE o w1mon TOM Soa 000 Soa -I." 261on.05 ..0. O.W U.S.Bank Pivot Page: 10 of 14 Transaction History With Totals Print Date: 10/30/2017 at 3:26:17 pm By Account Id.Post Date Data From: 09/01/2017 Th.: 09/30/2017 CUSIP TYLn 10.1 'hvn SEC MFc Nef C.. MO..- D,Tern Io.I Dtle nWe Btle seme B.rc sEUGL Pn ive Ue_11. P.0 Ee C- Fee Fee COA e.INLo® eaNLn.. 6],..I MS CHANDLER LONG-TERM PORTFOLIO O9 17 0& 017 EEII)n017 318MV563 P 10 PURCHASED UNITS OF FIRSTAM GOVS OB ED 5.9ll.9300 IWMGO W W W -5,933.9E 1,93313 .0(1 W F= CLZ 0 .11 ..R1 09ISOR01, 16II., P 30 PAID.FAR VA. EG II lIMO8. 141 0IO) W W W N3.30 -14887 E. -567 OBW2)M 335ffA 13ROR6 AVGUST GNMADVE 9RN17 09R.11 ]6225CA29 1 310 WT¢RESTEAEEW NGNMA IIp IXC3 E. WMYJO W W W 41 El W 00 W OSW23M 22WA 12 O S o PV ON 41 KID SHARES WE 111.11 A000ST GNMADVE 91.11 0 .R 7 09/20R017 09202017 ]6225CC20 P M PAID WWN PAR VALVE OF G N M A I I ROSINS$ -219630E 0.W00 W W W 2196E 2244] 0E IS. .1. 262516I 1AUGUST GNMADUE 1.11 09RdM17 1.111. 1 30 INTEREST EARNED ONONMA II.SEII D. W W W 16U W 00 W 08W11M 26251.6R 1$I PV ON 56,I1W SHARPS WE 92.11 AVGVST GNMADVE 9RED 034WM17 0..'C' G9I2pR017 J6]25RJ2B P SO PAIOWWNPARVALVEOFONMA H AIDR j,ER250E . W W W ZR1R15 -1.471,87 D' SDS 080408M 2625%520 ..WST GNMA. 9.11 Ev2.17 36325CNE8 1 310 WTERESTEARNEDONGNMA IIpSD W8 .0. . W W W 167.3E W DI W .Sm I.S%9 .$]PV.N .,.RRARESCD. 9ROROI7AUGVST WSIAWE RRW17 M(RN017 09 017 0960/3017 36Z35CNM4 P 20 PAIOLOWNPARVALIIEOFGNMA 11WO8095 -328.8100 WMI00 W W W 52S.81 d3583 .EO 2. .9. 2625%42W30AVGUST GN Wn 92N17 O91NOR017 36IISCNM4 1 310 INMRESTEARNEDONGNMA IIMEED95 I. fOTa30 W W W 20.8E W .00 .W 0095M 2.v,4RN30SI PVON308W)SNARESDUE 9ROR2017 AUGUST GNMAWE 9RWI7 09RW3017 09 017 O9R20R017 36 SDCB8 P 30 PAIDLbWNPARVALUEDPGNMA IINOSLS65 -j 124.8400 WMYJO W N W 2,124.M 3,13351 .00 133 O.1. 2.12YA V2W34 AUGUST WSCkWE 9Q 17 09RW2011 ]6225OCBS 1 310 WTERESTEPRNEDONGNMA IIp IDI5 1. WbJO W W W 11211 W 00 W ERD EIM 2.125%7I20A4$1 PV ON I32.I5W SHARES WE 11O.ITA000ST GNMADUE 11.11 .D.Y09/2d Orr,.1 UAO O.N AM R. 43L4 OAO 19.3E OSRIIdEII .1111117 EII21R017 T18 16 7 P 10 PVRCHASEDV SOFFIRSTAMOOW06FD pa6983700 1'. iW W i0 -DE691,37 DR69S17 DE .W FG= CLZ W1II2017 431I4TAa8 1 310 INTEREST EARNED ON HOf1OAAVIO D. PTJMp W W W 22."8 W .1. W I A20%1.19$I PV ON 22lO1.SHARER WE 9I31ROI7$RIX RPVON ISS.Wa00PVDUE 9.1117 0921I201i 09212W7 PB211E17 41M.R P ZO PAIDD0 NrARVALVEOFHWDAACTO .136,n76900 AA'Xp00 W W W 1]6}67. -I1,4.. 326 W I.71.11 PoYD.h RMI1 017Ub l WO OAi OAO OAO S,.RS4 RI, O.W U.S.Bank Pivot Page: 11 of 14 Transaction History With Totals Print Date: 10/30/2017 at 3:26:17 pra By Account Id,Post Date Data From: 09/01/2017 Th.: 09/30/2017 CUSIP TYLn rn.l 'hvn SEC MFc Nef C.. MO..— D..Rn— rn.�Dae n.@Dae RNtle D.rc sEUOL m iv E-I.� U." P.CP.C.e C— Fa P_u COA e.INLo® eaNLn.. 6],..I OCS CBANDLER LONG-TERM PORTPDLID O9R5/E01] 0]EI11FN4 1 310 INTEREST EARNED ON AMPESCO 3W689% .00W WJYJO W W W 250A2 W .ER W AD. W356951 PV on 11R 2004HARES DVE 945/201I "W182/PVON 133,74129PVDUE 9Q5/17 RCI56 17 09QSQ017 O9QS12017 3I37INIlC7 P 20 MID PAR VALUE OF F N M A M257179 -1529000 RESER W W W 152.90 -11171 .ER %81 27V?Rv 41..IRS.UST FNMADUE 9RI5 I .5.11 ]1]]INIIC7 1 110 WTPRPST PARNEV ON PN MA%25TIry dIN% I. WMYJO W W W 8089 W 00 W 2 o"A V 1M St FV ON 8089W SHARES DUE 9125RR17 AUGUST PNMADVE 925I17 Rvo.V 09/252017 .11.11 ]1,]6 , P 20 PAIVWWNPARVALVEOPFNMAQ57969 d.652771R 0.W00 W W W 1,11271 A..'rI 00 17396 JST9l9A I.RRI90 AUDUST FNMADUE .1117 0 1.S 7 JI176RT22 1 )0 INTEREST EARNED ONFNMARI179fi9 50001 I. OTIW W W to 61621 W 00 W 157969A .1135 SI PV ON 6162WO SHARES..11.11 AUDUST ..Cr 9¢5117 .11.11 09Q56017 G9RI1R] JI]81PDA3 P 20 PAID WWN PAR VALUE OF F N M A W6397 1313900 0 W W W 63LH 11111 0. 1367 W39M 33131%II10I2GAVGUST PNMADVE 925117 Ev21.17 313SIPDA3 1 310 INTERonM[NEDONFNMAA66397 .0. WW00 W W W 1,038.31 W .00 W 466]97A 151➢%11N I20E1 PV ON 103R]1W SHARPS DVE 9RS 17AVGUST FNMADUE 9R5I17 M SM17 0925QG17 09RS12017 ]1]SEG6F6 P 20 PNOWWNPARVALIIEOFFNMAp 0869 -326.8900 LOS00 W W W .6.89 d45.72 .IR -11.13 gL0869p 45W%61IR9 AVGUST PNMADVE 92V17 0911.17 ]1]8EG6F6 1 310 En ERESTEMNEOONPNMAMALOS69 I. fOaa30 W W W 6RIR W .ER W AL0869A 41.fiN IR9 SI PV ONW WTJ 6NARES DUE MR 17AVGUST FNMADUE 9RN17 0911.17 1119 11 1 110 INTERESTEPRNEDONPHLMCMLTCLMTG E. fOa300 W W W 4,91075 O3 E. W 6.5WN 9/2VG3$1 PV ON 493075W SHARES DUE 9R5/201Tf00R54 P N 91Q29]0)1VDIIE 9/25/IT W125RI17 Q9 ,RG17 M9 !IA017 3139 e P 20 PAIOWWNPARVALUEOFFHLMCMLTCL SWE 9000 391.81.1 W W W I.Rc.9G -5,767.75 .IR -674.81 INTO 6,.S 1111,11 0911.17 ]1]97QREG 1 310 INTEREST EARNED ONFNMAGTDREMW R. WJYJD W W W 453.61 W .00 W L IIJ%2R5141$I PV ON411S1 W BHARES DVE 9R5601]$O.OGIM?V ON 284,loo VDU. ,W17 E9R5W17 vCe@017 M12V017 31397QRE0 P 20 RoDWWNPARVALUEOFFNMAGTDREMIC 1933200 . W W In 6p9332 1.oRlJ AO 2W I.I IJX.5.1 .111.17 31398V198 1 110 INTERESTEARNEDONFHLMCMLTCLMTG I. WMI00 W W W 3,188.25 W .IR .W m% Vu20E110.1 u00 SVARES DVE9R5I20V W SM17 0925Q017 G CI017 ]IW]DIZ P N PNDWWNPARVALUEOFFNMA#74o80 8.662.710G WJ300 W W W 2.6 .71 3,862.41 .W -191.1. 7411. 1.6N I3SACDCST FNMADVE 9R117 U.S.Bank Pivot Page: 12 of 14 Transaction History With Totals Print Date: 10/30/2017 at 3:26:17 pra By Account Id.Post Date Data From: 09/01/2017 Th.: 09/30/2017 CUSIP TYLn Pn.l 'hvn SEC MFc Nef C.. MO..— L,n— Pn.�Dae n.@Dae sNtle D.rc sEUOL Pn ive U." P.C.e C— Fa F_u COA e.INLo® eaNLn.. 6],..I OCS CHANDLER LONGTERM PORTFOLIO O9R5/IDI] 11.1.1 1 310 MTEREST EARNED ON F N M A4N5580 5000% I. WM100 W W W 59R63 W .ER W LSS60A W0 .0 1PV ON"D 63008XARES DVE 1151.11 AUWST FNMADVE RD5/17 RCI56 17 09Q 017 O SDO1] 31103GXF4 P . PAID.FAR VA. EF N MA pEIIIE -16.EOW WS]00 W W W 163E -1542 .ER -122 7,1.1Ck SWTS IONI/D AVOVBT FNMADV61.117 .5.11 31... 1 310 WTERESTE MONFNMA#U8619 000% 1. WMYJO W W W 1711 W 00 W 7nS78A INOIgI SI PV ON I].5]OO SHARESDUE 92iR011 AUGUST FNMADVE 925I17 0925I2017 09/252017 .11.1, 31 COSFQYB P A PAIVWWNPARVALVEOFFNMA#S15991 d3i69600 0 W W W 3,SS696 -9EDD E. 16611 SD59 A 5W0 vn5s AUGUST FNMADUE M5117 .11.17 JIJ06 s 1 310 .TERE.EARNED ONFNMAp8159]1 RtM0 E. . W W W 1M172 W 00 W 815971A 3N1/3531 PV ON IO3I ROO SHARESDIIE 925Q017 AUGURY ADUE 925117 0911.11 0."IC, E9IELID1] JIJO5XWI5 P EO PAID WWN PAR VALVE OF P N M A#923358 1773600 . W W W 41111 1AbJ 0. 3]J BE33SBA 12]4%2NIAS AUOVBT CD... .11 .1.17 31W5X 1 310 WTEREST EARNED ON F N M AM823358 3374Yo .0. . W W W 34.68 W DE W 3E331SA .011$I PV ON 1646WO SHARES DUE R1112 0 AUGUST FNMADUE M5117 M5M17 0925Q017 MCIO1] 3110]BXH] P E0 PAIOWSSoECt ALIIEOFFNMAp86080 135.14E0 WMI00 W W W E35.14 -E52.18 .IR .17.64 BEd180A 5WT: 7155 AVGURT FNMADCF 91V17 09/1.17 3107BXM 1 310 WTERESTEARNEDONPNMAADIWO 5000% D. . W W W 110.99 W .ER W RVRDA 1I011SSIPVON11I,. ARERDVERII.V AUWST FNMADIIE RD5/I7 09R5M17 OvDS 017 W MOD 31410M P EO PAID..VALUEOPFNMA..vI 6 .18024.890E f03330 W W W ID024.89 -10,77676 .ER -0518] IIRC A 5 W 7/RWSAUGUST FNMADUE 9/25/17 091.11 31410P4V1 1 110 WTERERTEPRNEDONFNMA#MRD6 000% R. WbJO W W W L162.96 W OO W 1.31 7N1/3651PVON116396WSHARESWE9R50017 AUWST PNMADSIE 925I17 M5=7 O95Q017 E9/25/017 314[ AY3 P M PAU)COWNPAR VALVEOFiNMAI1MARtl22 1.S9 00 0.W00 W W W 31.9 -IIll.6f 00 2011 MAO122A 4.5W%4NIR9 ADGUST FNMADUE ffi5117 .1512017 314[ AYJ 1 310 EJTERESTEARNEDONFNMAXMAW22 1. W W W 9776 W IE .W MAOO22A 41.411/A BI PV ON 97.E603 SHARES WE 9ZE 17 AVOVaT FNMADVE 94I5/I7 09R5IE017 vCe@017 PBl 017 318 67 P IB PURCHAREDU SOFFIRSTAMGOWCBFD IIXIR 00 1'. W W W -13.211,M 112n. .0. .W FGZILY CLZ WDSI2017 09125R017 M5R01] 318NV567 P IB NRCHASEDU SOFFIRRTAMGOVTOBFD 3436].8800 ItWMO W W W -34,36].88 34,367.8E .IR W CI,Z Pw DIW OMv 017 TIMI OAO OAF OAO O.W 11,7R3.35 0.00 -E,E11.94 U.S.Bank Pivot Page: 13 of 14 Transaction History With Totals Print Date: 10/30/2017 at 3:26:17 pm By Account Id,Post Date Data From: 09/01/2017 Thm: 09/30/2017 COME TRLn ROO 'hvn SEC Mhc nn C.m MO..— E,n— ro.,o.le n.@Dae sNtle D.rc SEDGE m i I U." P.0 I C— FI Fa COA e.INLo® eaNEn.. 6],..I OCS CHANDLER LONG-TERM PORTFOLIO O92]/S01] 91S.E.t P 6i BODE 1LUEO1USTREA .IFR OILS% E. WSS00 W W W .W W .00 W 1/1.`I MEET IRRIE.TS DECRE46b TO ADNST FOR CHANGE W CPI 091.11 91S..0 P 63 FEDBAMSOPUSTRBAMTATIS OILS% E. LOSSJ'0 W W W .00 3,6GOW .00 W ]/IS ADNSTm BY 36W.WUNITS DECREASE TOADIUSTFORCHANGE W CPI .1.11 912628W110 P 63 STATE COST OF V S TREASURY I P A 0125% 0. WMYJO W W W 00 W 00 W 7/IS/NADESTEDBY36W.WU TS DECREASE TO. vTPOECHANGEWCPI 092]I201] 91232SW110 P 65 FARVALUEOFUSTRFASURYFFS OILS% -3,6W0000 0.W00 W W W W W 00 [O ]/IS ADrJSTEDBY36W.~1TTS DECREASE TO ADRIST MR CHANGE M CPI POYOah092]281]'IbM1I OAO OAl EAO I.W "Em. 0.0. 0.00 .11.11 0..'C' D.II, JIBMVS6] P . SOLO TEAS OF FRET AM.1 OB PD CLZ -5,996514S600 1'. W W In Sy9691d6 -,W.5M,26 FGZ1[X RCIRS 17 092]201] 09IS82017 912UBL4 P 10 PURCIUSED PAR VALUE OF U S TREASURY M 6.000,0.tl.W00 93]9]1 W W W f,98],83360 5,987,832.60 .00 W I e]5%S/3122/fA ..SACNS RCO. LLC/6,000,CW PAR VALUE AT 9%7W21 IA W/18/S017 ..Mn ID.S. 1 300 PAID ACCRUED MTEREST ON PURCHASE OF U S .Im tOS00 W W W 1,701.R W .I0 .W TREASVRYNT IA95%ROI= Pw D.a B9nAAIQDTom w.R Bn w.R A. -g,]Rl.r An, B.aB 09/S9/ 17 09292017 0929Q017 31WK 67 P A SOLD M OF FIRST AM GOVT OR PO CL 2 -964.9141100 F. W W 00 9H,91431 ~14,31 .EA W 1. O9 17 0925R01] O9R92017 43814PAB6 P 10 PVRC.REDPARVALVEOFNONDAAGTO 965,WJ.0000 999911 W W W AH,9LL21 ."1I 21 00 W 1.5]0% 12120I1P.MORGANSECURITIES LLCN65,WPARVALUBATS9RO10984% Pp Oah 89/E9281]ieM1l O.M OJN O.M 8.00 O.G 8A0 RW A—.1 616016601ID1.1 OAO OAO OAO 8A0 4 R,R 8 J.Sb -IA29.32 Xmoel EeJing Crh ItlnalpalCuh:-1}g51].65 Iemme G.h: L51 E,513.tl TOM1ICUL:O.W U.S.Bank Pivot Page: 14 of 14 Transaction History With Totals Print Date: 10/30/2017 at 3:26:17 pen By Account Id,Post Date Data From: 09/01/2017 Thor 09/30/2017 CUSIP 'IkLn Pn.l 'nvn sec MFc Nn ce. MO..— b,n— ro.,b.e n.@o.Ee sNtle n.rc sEUOL pn ive U." er.. C.A. Fa Fa e.A e.WLn® ea.L— .1bo. OC SANITATION DISTRICT CONSOLmATEU Aemoel BedeningCW P ntlpel Cub:0.00 b.—C..6: 0.. fomoel 61f01 1rA.1 O.W OW OAO 0.. O.M 0.00 0.. AemoulC Nug Cub P nelpel Cub:0.. ft—Cn6:000 TolaICUF.0.00 GmtlT—I OAO O.OJ Ea 0.n0 R0.....H IX7.61 -I SE9d3 Gmtl IDM Cua Pd,,ipal Cua:-I,W9,M).16 I—Cub: 1,W9,79f16 To1.I C.":S. ***** End Of Report ***** Callan September 30,2017 Orange County Sanitation District Investment Measurement Service Quarterly Review The following report was prepared by Callan using informatlon fmm sources that Include the following land Wsleads); fund enterprisers); Investment managers);Callan computer software;Callan investment manager and fund sponsor database;Mind party data vendors;and other outside sources as directed by Me client Callan assumes no responsibility for the accuracy or completeness of the informal provided,or methodologies employed,by any informal providers external to Callan.Reasonable core has been taken to assure the accuracy of the Callan database and computer wflware.Callan tices not provide strice regarding,nor shall Callan be responsible for,the purchase,sale,hedge or holding of individual securities,including,without limitation secunties of the Giant(i.e. company stack)or derivatives In the client's accounts. In preparing the fallowing report,Callan has not reviewed the risks of individual securry holdings or the conformity of individual security holdings with the client's investment policies and guidelines,nor has it assumed any responsibility to do so. Advice pertaining to the merits of'individual securities and denval should be discusser with a third pant securities expert. Copyright 2017 by Callan. Table of Contents September 30, 2017 Capital Markel Review 1 Active Management Overview Market Overview 9 Domestic Fixed Income 10 Asset Allocation Investment Manager Asset Allocation 12 Investment Manager Returns 13 Asset Class Risk and Return 17 Manager Analysis Chandler-Long Term Operating Fund 19 Chandler-Liquid Operating Money 23 Callan Research/Education 25 Definitions 28 Disclosures 33 Callan Orange County Sanitation District Executive Summary for Period Ending September 30, 2017 Asset Allocation September 30, 2017 Market Value Weiaht Net New Inv. Don nBC Fixed mcane Long Ten Operating Fund' 333230,276 87.07% 0 sod Fund $382,713,807 100.0% $(75,200,000) Performance Last Last Last Last Last 3 5 7 Quarter Year Years Years Years Domestic Fixed Income Long Term Operating FundA 0.37% 0.57% 1.45% 0.86% 1.53% Chandler 0.37% 0.57% - - - Blmbg Govt/Cred 1-5 Year lox 0.43% 0.51% 1.51% 1.20% 1.51% ML1-5 Govt/Corp 0.44% 0.53% 1.54% 1.26% 1.58% Liquid Operating MoniesA 0.26% 0.73% 0.43% 0.31% 0.28% Chandler 0.26% 0.73% - - - Cltiarouo 3-Month Treasury BIII 0.26% 0.64% 0.29% 0.19% 0.16% Total Fund 0.29% 0.42% 1.19% 0.71% 1.30% Target' 0.40% 0.55% 1.29% 1,05% 1.29% Cunent OuarterTarget=80.0%ML 1-5 GOWCotp and 20.0%3mo T-Bills. AAssetsweie transferred in kind to Chandleron 12/1/2014.Previous pedomtance reflects PIMCO. Recent Developments During the quarter, $75.2 million was withdrawn from the total portfolio. The entire amount was taken from the Liquid Operating Monies. Organizational Issues PIA Manager Performance Treasury yields rose modestly during the quarter, particularly on the short end of the curve. The 10-year Treasury yield dipped to 2.00%during the period on geopolitical risks related to North Korea, but ended September at 2.33%. On the long end, the 30-year Treasury dropped to 2.66%on September 7,but finished the quarter where it started at 2.86%.The 2- year Treasury ended the quarter at 1.47%, its highest level since August 2008. The Fed left rates unchanged at its September meeting, but 12 of the 16 FOMC members expect one more hike this year; markets are pricing a 70%probability of an additional hike. The Fed also announced that its previously communicated plan to reduce the size of its balance sheet Callan Orange County Sanitadw Qstr October 29,2017 would begin in October of this year. it will reduce reinvestment of its holdings by $10 billion per month, increasing this amount gradually each quarter to about $50 billion per month at the end of 2018. The Bloomberg Barclays Aggregate Index rose 0.9%, and all fixed income sectors produced positive returns in the third quarter. High yield (MIL High Yield CP Index) led the way during the quarter, up 2.0%. Long duration (Bloomberg Long GovllQedit Index), credit (Bloomberg Credit Index) and leveraged bans (CS Leveraged Loans Index) followed, up 1.5%, 1.4% and 1.1%, respectively. Mortgages (Bloomberg Mortgage Backed Securities Index) returned 1.0%, and TIPS (Bloomberg US TIPS Index) rebounded after a disappointing second quarter, up 0.9%. Bringing up the rear were governments (Bloomberg Government Index +0.4%).All fixed income sectors are positive year to date. The Long Term Operating Fund rose 0.37% in the quarter, lagging the MIL 1-5 Govt/Corp Index (+0.44%) and ranking in the 73' percentile versus peers. The portfolio was short duration compared to the benchmark (2.44 versus 2.75 years), which helped relative performance as the very short end of the yield curve rose. The portfolio generated a lower yield than the benchmark (1.7% vs. 1.8%), which weighted on results. The Long Term Operating Fund had less than 30% invested in credit and less than the permitted 20% invested in the combination of asset-backed securities, commercial mortgage backed securities,and CMOs as of September 30,2017(see page22). The Liquid Operating Portfolio gained 0.22% (after fees) in the quarter, which slightly trailed the return of the 3-month Treasury(+026%).The Portfolio returned 0.58%(after fees) for the trailing 12-months and ranked 33r°percentle versus peers. Cordially, S. Gordon M.Weightman, CFA Senior Vice President 2 Capital Market Review CallanCALLAN CMR Preview Third Quarter 2017 Up, Up, Up, and Away 2 Healthy Risk Appetite Drove Yields 5 GLOBAL EQUITY e a G E GLOBAL FIXED INCOME PA G E — The S&P 500 Index jumped 4.5%,led by Tech and Energy — The Bloomberg Barclays U.S.Aggregate Bond Index rose 0.8% — U.S.small cap topped large cap;growth outpaced value — The 10-year Treasury yield ended the quarter at 2.33% — Momentum remained thetoPpedooning factor year-todffie(+27.5%) — The Bloomberg Barclays Munlclpal Bond Index increased t.t% — Non-U.S. developed equity bested the U.S. for the third straight — High yield credit performed well,aided by investors quest for yield quarter — The Bloomberg Barclays Global Aggregate Index dimbed 1.8% — Emerging markets outpaced developed ones,also for the tried con- (unhedged) sec rt re quarter — Emerging market debt also did well; the JPM EMBI Global Diversified — Developed non-U.S.small cap surpassed large cap Index($denominated)jumped 2.6% Additional Callan Newsletters and Resources Coming Soon to Our Slog 'Perspectives' Hedge Fund Monitor Real Assets Reporter Economy Fund Sponsor An analysis of hedge fund manag- A review of real estate and other U.S. second quarter real GDP Each quarter we track the median ere and marketplace issues real assets growth was revised up to 3.1% return for all fund types, includ- (annualized), the fastest pace ing endowments and foundations, Private Markets Trends Callan DC Indez^' since the first quarter of 2015. public plans, corporate plans, and The latest news and trends in pit. A Web tool tracking performance While the major hurricanes may Taft-Hartley plans. Our analysis vale equity investing and fund tows of over 90 DC plans provide a temporary setback to offers insight into the factors that DC Observer Callan Target Date Index'e growN in the third quarter,rebuild. drove performance and how van. A look at the Issues and challenges An online feature tracking returns ing efforts are likely to boost GDP ous types of funds fared relative to facing DC plan sponsors and allocations of target date funds In the fourth quarter and beyond. each other. Visit our Research Library at callan.comllibrery Find even more on our blog at callancomlblog Broad Market Quarterly Returns U.S.Equity Non-U.S.Equity U.S.Fixed Income Non-U.S.Fixed Income Russell 3000 MSCI ACWI ex USA Bloomberg Barclays Agg Bloomberg Barclays GbI ex US t t t t +4.6% +6.2% +0.8% +2.5% Sources:Bloomberg Barcla,Ml Russell Investment Group Knowledge.Experience.Integrity. Global Equity U.S. Stocks:The 'Everything Rally'Marched On The Tech (+8.6%) and Energy (+6.8%) sectors led the S&P The Goldilocks environment("Not too 500(+4,5%).The globally dominant Tech names(the so-called +4.6% hot, not too cold, but just right") and -FAAMG"stocks, or Facebook,Amazon,Apple, Microsoft, and RUSSELL 3000 investor complacency continued to Google) continued to drive results in the sector, which now keep volatility at multi-decade lows accounts for 23%of the S&P 500 and 38%of the Russell 1000 and propel stock markets to new highs, in spite of escalating Growth Index. Tech alone has accounted for approximately tensions with North Korea, several severe natural disasters, 40%of the S&P 500's return year-to-date,with key drivers being and uncertainty around the prospects for tax reform and other strong earnings reports, increasing market share, and prod- U.S. domestic agenda items. The S&P 500 Index, Russell uct innovation. Record-high valuations for several companies 2000 Index,and Nasdaq Composite Index all hit record highs raised concern over their influence on the overall performance on the final trading day of the quarter. It was the Nasdaq's 50th of the Index should a correction occur. record close this year. The Energy sector continued to see signs of incremental Stocks, bonds, and commodities alike rewarded investors in improvement during the quarter due to a backdrop of improv- what's been coined the"everything rally,"marked by its surpds- ing supply and demand. Consumer Staples (-1.3%) was the ingly low volatility.Even cash is up from its dismal 0%days and sole sector to deliver a negative result as momentum-oriented posted a +0.3% quarterly result. Investors'attention remained stocks and sectors garnered favor. focused on the hopeful promise of tax reform along with the generally upbeat picture of the U.S. economy. But contrarians Small cap stocks outperformed large cap. In addition, growth question where longer-term alpha can be found amid stretched outperformed value(Russell 1000 Growth: +5.9%vs. Russell equity valuations. 1000 Value:+3.1%;Russell 2000 Growth:+6.2%vs.Russell Quarterly Performance of Select Sectors •Russell t WO •Russell 2000 I II II i i I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I II i II II I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I Technology Energy all& Producer Financial Will Reatlh Care Conwmcr Consumer Processln8 canaries Sen'icea Olarelknary Staples sauna Russell ImesMenl Group 2 1 Callan U.S.Equity:Quarterly Panama Global Stocks: Stronger Outside the U.S. �] Non-U.S. developed economies con- Russell MOO- 4.6% +6.2% tinued to gain traction. Second quar- Russell 1000- 4.6% MSCI ACW I Ex USA ter GDP growth in the euro zone was Russel IOM Grsa 5.6% 2.3% (year-over-year)with consumer confidence and demand both showing strength. The euro Russell l000 vawe- 8a% gained ground versus the U.S.dollar and the pound continued S&P 500- 4.5% to strengthen on hawkish comments from the Bank of England. Russell INIep e.5% Outside of Europe. Japan's economy continued to slowly Russell xsoo- a7% recover: second quarter GDP growth was 2.5% (annualized). Russell 2000 6.]% While this was lower than expected, the economy has now expanded for six consecutive quarters. Sources:Russell w.estmem Group.Standard&Peers' Non-U.S. developed equity (MSCI World ex USA: +5.6%) outperformed the U.S.for the third consecutive quarter as the European market (MSCI Europe: +6.5%) continued to post U.S.Equity:One-Year Returns positive economic data and corporate earnings growth with some signs of political stability. Russell M00 1&]% Russell 1000 18.5% The dollar's losses against the euro stemmed from an upside Russell 1n00 Gmwm 21.6% surprise with European growth and market-friendly outcomes Rusull 1000 sell- 15.1% in European elections. Economically sensitive sectors outper- formed defensive securities. S&P MO 18.6% Russell Mil 15.3% All sectors generated positive returns. Energy and Materials Ressell25W 17.8% were the top two performers as a result of higher oil and com- Russe810M 20.7% modify prices. WTI and Brent prices surged by 12%and 20%, respectively,driven by favorable supply and demand dynamics. Seureea:Russell Investment Group.Scandam&Pours Copper rallied 9% due to tightening supply and positive eco- nomic data from China. 2000 Value: +5.1%). Biotech (+14.5%) and a surge in small Value outpaced growth as economically sensitive sectors cap value on tax reform news in September bolstered small posted strong quarterly results. cap stocks during the quarter. Biotech benefited from the eas- ing of pricing risks as well as the FDAs approval of genetics- Emerging Markets: Upbeat Signs Across the Board based therapeutics. Emerging markets topped developed +7 9% markets for the third consecutive From a factor perspective,momentum(+27.5%YTD)remained MSCI EM quarter, fueled by a soft dollar, syn- thetopperformerwhile defensive(+8,5%YTD)wasthe laggard. chronized global growth, and strong Investor behavior has had a meaningful influence on results as oil and commodity prices.Brazil was the best-performing coun- investors tend to project their optimism across the broad market try within emerging markets given the hope of achieving fiscal and chase momentum during periods of strength. Knowledge.Experience.Integrity. 1 3 Global Equity:Quarterly Returns (U.S.Dollar) Global Equity:One-Year Returns (U.S.Dollar) MSCIACWI 5.2% MSCI ACWI 18]% MSCI Wotltl 4.8% MSCI Wail — 18.2% MSCI ACWI ea USA 03% MSCACWIea USA 19.6% MSCIW.0d.USA 5.6% MSCIWwM..USA 181pb MSCI ACWI en USA Small Cap 6.9% MSCI ACWI ex USA Small Cap — 19.2% MSCI Wotltl ex USA Small Cap 7.3% MSCIWMdex USASmll Cep -20.4% Al Eel-UK 6.9% MSCIEuro UK 2i0% MSCI UK 5.2% MSCI UK 14.6% MSCI Japan 3.7% MSCIJepan — 14A% MSCI Purn.ex Japan _0.0% MSCI Pal ex Japan — 14.1% MSCI Emm9ing MaAels 7.9% MSCI E—,,,MaAels —22.5% MSCI China 14.7% MSCI China 33.0% MSCI Framl Marlela 8.0% MSCI prouder Mantels - 25.5% Source'.MSCI Source:MSCI reforms to spur economic growth. China continued to fare well Non-U.S. Small Cap: Mixed Messages with GDP growth of 6.9%exceeding expectations;the Chinese (� Developed non-U.S.small cap(MSCI Tech and Real Estate sectors were top performers. +6.9% World ex USA Small Cap: +7.3%) MSCI ACWI Ex USA SC outperformed large cap In the risk- All sectors within emerging markets posted positive returns, on market environment marked by led by economically sensitive sectors such as Real Estate, improving economic activity in Europe.The top three perform- Energy, Materials,and Financials. ing Countries were Germany (+17.0%), Norway (+16.4%), and Italy (+115%).All sectors posted positive returns, led by Brazilian and Russian banks surged during the quarter, Energy and Technology. spurred by rising oil and commodity prices and improving lending conditions. Small cap (MSCI Emerging Markets Small Cap: +5.6%) lagged large Cap in emerging markets due to the strong perfor- Despite a strong showing by value factors, growth and mance of large Cap Asian technology Companies.The top three momentum dominated the market given the returns of large performing Countries were Pew (+42.8%), Brazil (+31.8%), cap Asian tech companies, helped in part by the demand for and Chile(+19,8%),all benefiting from higher oil and commod- mobility and connectivity. ity prices. Growth outperformed value in developed small Cap, propelled by optimism surrounding European growth. Conversely,value outpaced growth in emerging market small cap, supported by positive oil and commodity prices. 4 1 Callan Global Fixed Income U.S. Bonds: Low Volatility Drove Returns U.S.Treasury Yield Curves Yields rose modestly, particularly on +0.8% the short end of the U.S. Treasury •September 30,2017 •Jane x,2017 •September 30,2016 BB AGGREGATE yield curve. The 10-year Treasury 4% _ yield touched 2.00%during the quar- ter on geopolitical risks related to North Korea, but ended the 3% - - - ----------- quarter at 2.33%.Moderate growth and inflation kept long-term rates low and range bound. Volatility in fixed income markets 2% _ _ (as well as equities) sat at near historic lows; the overall risk appetite remained strong.And in general, lower-rated credits 1% 111119— again outperformed investment grade. o% I � iil „ i , l � i � � i . . . I . . . . . . . The Bloomberg Barclays U.S. Aggregate Bond Index 0 s 10 16l 20 2s aIo was up 0.8% in the quarter. The Bloomberg Barclays U.S. Maturity(Yearsl Corporate Bond Index rose 1.3%.High yield corporates fared Bounce:Bloomberg even better, with the Bloomberg Barclays U.S. Corporate High Yield Bond Index up 2.0%. TIPS rebounded from their underperformance in the previous quarter. Corporate credit spreads tightened on strong demand and robust corporate earnings. Financials and Utilities were the The Bloomberg Barclays U.S.TIPS Index rose 0.9%and the leading sectors during the quarter. High yield credit continued 10-year breakeven spread (the difference between nominal to perform well,aided by the hunt for yield.The upward trend in and real yields)rose to 1,84%as of quarter-end from 1,73%at earnings along with corporate discipline has led to the highest the end of the second quarter. rating agency upgrade-downgrade ratio since 2013. U.S.Fixed Income:Quarterly Returns U.S.Fixed Income:One-Year Returns Bloomberg Brulays Gov/CretlX 1-3 Yr ■0.3% Bloomberg Barclays GovlCretllt 1-3 Yr , 0]X Bloomberg Banays Inerna Gov/CredM1 _0.6% Blwmbmg Bell Inlerm Gov/CretlX I03% Bloomberg Berdaya Aggregate _0.0% Bloomberg Barclays Aggregab 10.1% Bloomberg Barclays Long GovlCa l - 1.9% -0.8%1 Bloomberg Brady,Long G./Gred9 Blwmberg Barclays UnWilia l -1.0% Bloomberg Burns,Univemal . 1.0% CS Leverage0 Loan. - 1.1% CS Lseria etl Loans - 6A% Bloomberg Bardaya Corp.High Yield 2.0% Bloomberg Barclays Ca,High Yield Bloomberg Barclays U5 TIPS - 0.9% 41.796 1 Bloomberg Sense,US TIPS Sources:Bloomberg Barclays,Credit Suisse Sources:Bloomberg Bamlay4 credit Suisse Knowledge.Experience.Integrity. 1 5 The municipal bond market also performed well;the Bloomberg with Brazil (+it%) being the best performer and Argentina's Barclays Municipal Bond lndexreturned 1.1%for the quarter first-ever local bonds(-4%)being the worst on worries over the and the shorter duration 1-10 Year Blend Index was up 0.7%. success of reforms. Global Bonds: Many Reasons to Cheer Rates were also steady overseas, Change In 10-Year Global Government Bond Yields +2e5% though dollar weakness boosted 2Q17to3Q17 Be GBL AGO rx US returns. The Bloomberg Barclays Global Aggregate Index returned U.S.Tralaur, ■ 3bps +1.8% (unhedged) versus +0.8% for the hedged version. -1 bw Germany Emerging market debt posted solid returns. The JPM EMBI U.K. — 11 bps Global Diversified Index($denominated)was up 2.6%.Gains Canada 36bps were broad-based with only beleaguered Venezuela (-11%) sbps0 Japan down. The local currency JPM GBI-EM Global Diversified Index increased +3.6%. Returns were mixed for this index, Source:Bloornbem Global Fixed Income: Quarterly Returns Global Fixed Income:One-Year Returns Bloombey Barclays Global Aggregate — 1.9% .1.3%■ Bbomberg Barclays Global Aggregate Bloomberg Bamlays Global Agg(hdg) -g.6% -0.2%I Bloomberg Bamlaya Global Ago rodw Bloomberg Bardaya Global Hlgh Yleld — 2.9% Bloomberg Sarclaya Global Hlgh y d 9.3% Bloombeg Barclays Global Agg ex US 2.5% -2A%= BWontery Sand.,Global A,ex US JPM EMBI Global Doyers6lad — 2.6% JPM EMBI Global Dlvxafflad — 6.6% JPM GBI-EM Global Di..ifled 3.6% JPM GBI-EM Global Di.oafflad 7.3% JPM EMBI GI DW JPM GBI-EM GI Div — 3.1% JPM EMBI GI Dlv NPM GBI-EM GI DN 6.0% JPM CEMBI —2.2% JPMCEMBI 5.9% Sources:Bloombery Barclay;JP Morgan Soumea:Bloomberg Bamlaya,JP Wr,an 6 1 Callan Active Management Overview Market Overview Active Management vs Index Returns Market Overview The charts below illustrate the range of returns across managers in Callan's Separate Account database over the most recent one quarter and one year time periods. The database is broken down by asset class to illustrate the difference in returns across those asset classes.An appropriate index is also shown for each asset class for comparison purposes.As an example, the 0rsl bar in the upper chart illustrates the range of returns for domestic equity managers over the last quarter. The triangle represents the S&P 500 return. The number next to the triangle represents the ranking of the S&P 500 in the Large Cap Equity manager database. Range of Separate Account Manager Returns by Asset Class One Quarter Ended September 30,2017 10% 9% 8% ]% 8% 4 K 4% (58) 3% fi5) 2% 8) 1% [l9)® El 0% Large Cap Small Cep Non-US Domestic Non-US Real EquXy Equity Equity Fixed Income Fixed Income Estate ve see No Russell 2000 MSCIEAFE Blmbg Aggr Bd Citi Non-USGoA NCREIF Index 10ih Percentile 6.35 i 58 9.33 1.16 3.24 2.90 25M Percentile 569 646 726 1,03 262 2,53 Median 471 543 605 0,92 261 1,69 )5M Percentile 3.99 448 5.24 0.86 2.44 1.21 90iX Percentile 3.19 3.18 6.40 0]6 2.12 076 Index • 448 567 540 0,85 2.57 1.75 Range of Separate Account Manager Returns by Asset Class One Year Ended September 30,2017 30% 25% 20% (80) (50)EI (64)�71 c 15% K 5% (57) 0% (5%) 95) (10%) Large Cep Small Cap NomUS Domestic Non-US Real EquXy Equity Equity Fixed Income Fixed Income Estate Upw Russell 2000 MBGI EAFE Blmbg Aggr Bd Giti Non USGoA NCREIF Index 10M Percentile 26.02 25.53 26.62 1.60 6.]8 13.6] 25iX Percentile 2 .89 23.15 22.68 1.00 344 10.56 Median 19.62 20.74 20.37 0.64 in 94) ].]6 75th Percentile 1]48 11)5 1].60 om (2.14) 5.23 901h Percentile 15.62 15.53 16.05 0.08 (2.]2) 511) Callan • 18.61 20.74 19.10 0.07 (3.14) 8.94 Canal l Orange County sanitation District g Domestic Fixed Income Active Management Overview Interest rates were range-bound during the third quarter.The yield on the 10-year U.S.Treasury closed the quarter at 2.33%, two basis points higher than at the end of the second quarter. The yield curve continued its flattening trend and the 2-year Treasury yield ended the quarter at 1.47%, its highest level since August 2008. The Bloomberg Barclays Aggregate U.S. Bond Index posted a +0.8% result with corporate bonds outperforming other investment grade sectors.TIPS regained some of their underperformance from the previous quarter. The Bloomberg Barclays U.S. TIPS Index rose 0.9% and the 10-year breakeven spread(the difference between nominal and real yields)rose to 1.84%as of quarter-end from 1.73%at the end of the second quarter. Separate Account Style Group Median Returns for Quarter Ended September 30,2017 Blmbg Aggregate: 0.85% 3.0% Blmbg High Yield: 1.98% Blmbg Long GWCred 1,53% 2.5% ________________________________ 2.08 2.0% --- us c 58 ______________________ N 1.16 1.13 1.0% --------------�t- 0.70 0.5% ____- 0.0% Derensive IMermed Core Cora Plus Emended Bank High Yield Bond Maturity Loans Separate Account Style Group Median Returns for One Year Ended September 30,2017 Bimbg Aggregate'. 0.07% 12% Blmbg High Yield: 8.88% Blmbg Long Gici (079%) 10% 8.82 8% ________________________________ w6% ________________________________ E s.ze d 2% -------------------186— ---1.03 -- -- e5a O6a 0% (0 33) (2%) Defensive Intioni care Core Plus Emended Bank High Yleltl /'�,, 1,, Band Maturity Loans Callan chase county Sanitation Dis ict to Asset Allocation Investment Manager Asset Allocation The table below contrasts the distribution of assets across the Fund's investment managers as of September 30, 2017,with the distribution as of June 30,2017. The change in asset distribution is broken down into the dollar change due to Net New Investment and the dollar change due to Investment Return. Asset Distribution Across Investment Managers September 30,2017 June 30,2017 Market Value Weight Net New Inv. Inv.Return Market Value Weight Domestic Fixed Income Long Term Operating Fund' 333,230,276 87,07% 0 1.233.970 331.996,306 72,74% Liquid ODeratina Monies' 49,183,530 12.93% (75,200,000) 242,051 124,441,479 27.26% Total Fund $382,713,807 100.0% 8(75,200,000) $1A76,022 $456,437,785 100.0% 'Chandler replaced PIMCO during,the 4th quarter of 2014.Assets were transferred In+lnd as of 12I01I2014. Callan Orange County Sandation DiaNct 12 Investment Manager Returns The table below details the rates of return for the Fund's investment managers over various time periods ended September 30, 2017. Negative returns are shown in red, positive returns in black. Returns for one year or greater are annualized. The first set of returns for each asset class represents the composite returns for all the fund's accounts for that asset class. Returns for Periods Ended September 30,2017 Last Last Last Last Last 3 5 7 Quarter Year Years Years Years Domestic Fixed Income Long Term Operating Fund^ 0.37% 0.57% 1.45% 0.86% 1.53% Chandler 0.37% 0.57% - - - BlmbgGovt/Cred1-5 Year ldx 0.43% 0.51% 1.51% 1.20% 1.51% ML 1-5 Govt/Corp 0.44% 0.53% 1.54% 1.26% 1.58% Liquid Operating Monies^ 0.26% 0.73% 0.43% 0.31% 0.28% Chandler 0.26% 0.73% - - - Citigroup 3-Month Treasury Bill 0.26% 0.64% 0.29% 0.19% 0,16% Total Fund 0.29% 0.42% 1.19% 0.71% 1.30% Target* 0.40% 0.55% 1.29% 1.05% 1,29% Current Quarter Target=80.0%MIL US Corp/Gov:1-5Y and 20.0%Citi 3 Mo T-Bill. Callan were transferred in kind to Chandler on 12/112014.Previous performance reflects PIMCO. Callan Omr,e County Sandarinn Distnd 19 Investment Manager Returns The table below details the rates of return for the Fund's investment managers over various time periods ended September 30, 2017. Negative returns are shown in red, positive returns in black. Returns for one year or greater are annualized. The first set of returns for each asset class represents the composite returns for all the fund's accounts for that asset class. Returns for Periods Ended September 30,2017 Last Last Last 10 15 22 Years Years Years Domestic Fixed Income Long Term Operating Fund^ 2.94% 3.16% 4.38% Blmbg Govt/Cred 1-5 Year Idz 2.75% 2.96% 4.20% ML 1-5 Govt/Corp 2.77% 2.97% 4.23% Liquid Operating Monies^ 0.64% 1.43% 2.63% Citigroup 3-Month Treasury Bill 0.42% 1.21% 2.31% Total Fund 2.48% 2.83% 4.10% Target` 2.30% 2.62% 3.85% Current Quarter Target=80.0%MIL US Corp/Gov:1-5Y and 20.0%Citi 3 Mo T-Bill. Callan were transferred in kind to Chandler on 12/112014.Previous performance reflects PIMCO. Callan Omrr County Sandarinn DisNtl 14 Investment Manager Returns The table below details the rates of return for the Fund's investment managers over various time periods. Negative returns are shown in red, positive returns in black. Returns for one year or greater are annualized. The first set of returns for each asset class represents the composite returns for all the fund's accounts for that asset class. 12/2016- 9/2017 2016 2015 2014 2013 Domestic Fixed Income Long Term Operating Fund^ 1.38% 1.58% 0.85% 1.98% (1.77%) Chandler 1.38% 1,58% 0.85% - - Blmbg Govl/Cred 1-5 Year Idx 1.58% 1.56% 0.97% 1.42% 0.28% ML 1-5 Govt/Com 1.56% 1.62% 1.05% 1.51% 0.32% Liquid Operating Monies^ 0.61% 0.47% 0.22% 0.09% 0.13% Chandler 0.61% 0.47% 0.22% - Citiarouo 3-Month Treasury Bill 0.56% 0.27% 0.03% 0.03% 0.05% Total Fund 1.13% 1.15% 0.80% 1.73% (1.49%) Target* 1.36% 1.35% 0.85% 1.21% 0.26% *Current Quarter Target=80.0%ML US Corp/Gov:1-5Y and 20.0%Citi 3 Mo T-Bill. ^Assets were transferred in kind to Chandler on 12/112014.Previous performance reflects PIMCO. Callan 0mr,,e County SantlerinnDist c ,s Investment Manager Returns The table below details the rates of return for the Fund's investment managers over various time periods. Negative returns are shown in red, positive returns in black. Returns for one year or greater are annualized. The first set of returns for each asset class represents the composite returns for all the fund's accounts for that asset class. 2012 2011 2010 2009 2008 Domestic Fixed Income Long Term Operating Fund^ 3.06% 4.59% 4.42% 5.52% 5.37% Blmbg Govt/Cred 1-5 Year Idx 2.24% 3.14% 4.08% 4.62% 5,12% ML1-5 Govt/Corp 2.47% 3.10% 4.17% 4.88% 4.65% Liquid Operating Monies- 0.17% 0,24% 0.25% 0,58% 2,40% Ciligroup 3-Month Treasury Bill 0.07% 0.08% 0.13% 0.16% 1.80% Total Fund 2.70% 3.70% 3.68% 4.65% 4.61% Target` 1.99% 2.49% 3.36% 3.93% 4.08% Current Quarter Target=80.0%MIL US Corp/Govl 1-5Y and 20.0%Citi 3 Mo T-Bill. ^Assets were transferred in kind to Chandler on 12/112014.Previous performance reflects PIMCO. Callan 0mr,,e County santle,InnmisNtl ,a Asset Class Risk and Return The charts below show the seven year annualized risk and return for each asset class component of the Total Fund.The first graph contrasts these values with those of the appropriate index for each asset class.The second chart contrasts them with the risk and return of the median portfolio in each of the appropriate CAI comparative databases. In each case, the crosshairs on the chart represent the return and risk of the Total Fund. Seven Year Annualized Risk vs Return Asset Classes vs Benchmark Indices 1.4% 1.2% 1.0% N K 0.8% 0.6% 0.4% 0.2% _ �CiW�YLIt 0.0% 0.0% 05% 1.0% 1.5% Standard Deviation Seven Year Annualized Risk vs Return Asset Classes vs Asset Class Median 16% 1 6% 1.2% 1.0% 0.8% N K 0.6% 04% 0.2% 0.0% 0.0% 05% 1.0% 1.5% Standard Deviation Callan Omrr County 8anda1lnn DIsfti „ Manager Analysis Chandler-Long Term Operating Fund Period Ended September 30, 2017 Investment Philosophy Chandler Asset Management's Short Term Bond strategy is driven by quantitative models and focuses on active duration management,sector selection and term structure.The strategy seeks to achieve Consistent above-benchmark returns with low volatility relative to the style's performance benchmark. The firm has a unique focus on high quality fixed income management, and places risk control as a higher objective than return. Assets were transferred in kind to Chandler on 12/l/2014.Previous performance reflects PIMCO. Quarterly Summary and Highlights Quarterly Asset Growth • Long Term Operating Fund's portfolio posted a 0.37%return Beginning Market Value $331,996,306 for the quarter placing it in the 73 percentile of the Callan Net New Investment $0 Defensive Fixed Income group for the quarter and in the 82 Investment Gains/(Losses) $1.233,970 percentile for the last year. • Long Term Operating Fund's portfolio underperformed the Ending Market Value $333,230,276 ML US Corp/Govt 1-5Y by 0.07% for the quarter and outperformed the ML US Corp/Govt 1-5Y for the year by 0.04%. Performance vs Callan Defensive Fixed Income(Gross) (( 7 4.6% 26) ) 4.0% 3.s% 3.0% 291®6(3 ) 2.5%- 2.0% ( y 1 II�� (( 1 1.6% 42)�A(5 pgl®A14 21�614 351♦ 0 ) A18 ) 0.- - 40 A(7 3) A(0 ) So% LastO Last al 1 Chandler Lost 3 Ym Lied 5Yrs Last 7Ym LaN10Yrs Last20.5Yrs Yr Inception 101h Pemantila 0.80 199 2.13 2,06 1.81 2.22 3.36 4.49 25m Peman111e 052 135 1,75 1,67 148 1.85 259 425 Median 041 103 1,38 1,33 1,15 1.40 245 398 751h Percentile 0.36 073 1.13 1.12 0.94 1.13 2.11 3.78 With Percentile 0.29 0At 1.00 1.02 0.86 100 1.94 3.65 Long Term Operating Fund •A 0.37 0.57 1.38 1.45 ow 1.53 2.94 4.38 Undue G.Wcred 1-5 Year to. 06 043 051 1,50 1,51 120 1.51 2.75 420 ML US ComlGon l-S( • 044 0.53 I'M 1.54 1.28 1.58 2.77 4.23 Callan Defensive Fixed Income(Gross) Relative Return vs ML US Corp/Govt 1-SY Annualized Seven Year Risk vs Return 2.0% 30% 15% __ _______ __ __ 2.5% 0% E OC 05% - E 2.0% 0 0.0% 1.5% t o% (1.5%) 11 0.5% 10 2011 2012 2013 2014 2015 2016 2017 0.2 0.4 us us 10 12 1.4 1.8 1.8 Standard Deviation Long Term Operating Fund Callan Orange County sanitation cornet 19 Long Term Operating Fund Return Analysis Summary Return Analysis The graphs below analyze the manager's return on both a risk-adjusted and unadjusted basis.The first chart illustrates the manager's ranking over different periods versus the appropriate style group.The second chart shows the historical quarterly and cumulative manager returns versus the appropriate market benchmark. The last chart illustrates the manager's ranking relative to their style using various risk-adjusted return measures. Assets were transferred in kind to Chandler on 12M/2014. Previous performance reflects PIMCO. Performance vs Callan Defensive Fixed Income(Gross) 20% 15% 10% AA( 5 ( fi% 8 A B A 176iaA 1 4"AB 1 17�8( 012 Bl 0% A ) (S%) (10%) 12116.9/b M16 2015 2014 2013 2D12 2011 2010 2009 2003 loth Percentile 2.15 2.82 1.17 1.50 1.20 4.46 2.72 4.71 13.74 6.63 25th Pemen0le 1.68 2.17 1.01 1.27 0.81 2.60 2.30 4.01 8.60 5.64 Median 1.33 1.56 091 1.11 0.65 181 185 3.18 5.95 3.88 75th Pememile 113 1.18 e75 087 040 145 185 272 2.53 (0.1]j 90h Percentile 0.94 1.03 0.64 073 0.29 0.92 1." 2.41 182 (3.46 Long Tenn Op ng Fend *A 1,38 1.58 085 1,98 (1,77) 3.06 4.59 442 5.52 5.37 elm Gowcred -5 Year ldx eB 1.58 1.56 0.97 142 0.28 2.24 3.14 4.08 4.62 5.12 ML US Com/Gevt 15Y ♦ 1.56 1.62 1.05 151 0.32 2.47 3.10 4.17 4.88 4.65 Cumulative and Quarterly Relative Return vs ML US Corp/Govt 1-SY 6% 4% 2% --- --- -- -- - --- -- -- -- -__ of 0% N (4%) --- - --- --- --- (6%) (8%) 07 2000 2009 2010 Mill 2012 2013 M14 2015 2016 2017 Long Term Opemtlng Fund 0 Blmbg Ge VCre l 15 Year Idx 0 Cellan Defensive Fix Inc Risk Adjusted Return Measures vs ML US Corp/Govt 1-SY Rankings Against Callan Defensive Fixed Income(Gross) Seven Years Ended September 30,2017 38 2.5 2.0 1.5 6(80) 1.0 A 97 0.5 0.0 A 1994 5 (1.0) (1.5) Alpha Sharpe Excess Return Ret10 Ratio 10h Percentlle 1.18 2.16 0.75 25th Percentile 0.78 1.81 0.335 Median 0.40 1.60 0.21 75th Percentile 0.23 1.35 0.73 gg 00h Percentile 0.02)) 1.10 1.00)) Lon Fund 0.84 /'�,,Blmbg GovVCree1-5Yearldx �B ROB 11.08 10.88) Callan Oraroe County Sanitation District 20 Long Term Operating Fund Bond Characteristics Analysis Summary Portfolio Characteristics This graph compares the managers portfolio characteristics with the range of characteristics for the portfolios which make up the manager's style group. This analysis illustrates whether the manager's Current holdings are Consistent with other managers employing the same style. Fixed Income Portfolio Characteristics Rankings Against Callan Defensive Fixed Income as of September 30,2017 35 3.0 2.5 ill,(5) (14) 2.0 1.0 0.5 0.0 (0.5) Average EReceve Coupon CA Duration "to Yield Rate Convexity 101b Pemen1le 2.05 3.00 2.31 2.89 0.06 250M1 PercenNe 1.92 2.28 2.02 2 A6 0 05 Median 1.78 2.03 1.83 2.14 o.09 75tM1 Percentile 1.]0 1.88 170 1.89 001 901M1 Pemen0le 1.17 1.0] 1.56 1.52 (0A Long Term Operating Fund • 2.M 2.53 1.73 1.81 - 91mhg Gov/Cred 1-5 Yr ♦ 2.75 2.88 1.82 2.22 pre Sector Allocation and Quality Ratings The first graph compares the managers sector allocation with the average allocation across all the members of the manager's style.The second graph compares the manager's weighted average quality rating with the range of quality ratings for the style. Sector Allocation Quality Ratings September 30,2017 vs Callan Defensive Fixed Income Tray US Trey �4to ___ AAA RMBS F-21 -------- Aq+ Gom(1.11aaA) � (22)♦ AA Other 0(53) ASS Tax-Exempt US Muni Aa coon a7 A CMC. A- Weighted Average Quality Rating CMBS tom Percentile AAA 25M Percentile AA Gov Related Median AA ]lain Percentile AA, 901M1Percentile A o% 10% 20% 30% 60% 50% 60% ]o% Bo% Long Term Operating FuM Callan Defensive Fixatl Income Long Term Opereting Fund 0 AA Callan Blmbg Gw/Cmd 1-5 Yr Blml,g GavlCmc 1-5 Yr ♦ AA* Callan Orange County Sanitation DisNct 21 Long Term Operating Fund Portfolio Characteristics Summary As of September 30, 2017 Portfolio Structure Comparison The charts below compare the structure of the portfolio to that of the index from the three perspectives that have the greatest influence on return. The first chart compares the two portfolios across sectors. The second chart compares the duration distribution.The last chart compares the distribution across quality ratings. Sector Allocation US Troy US Trey 32% 61% ABS CI% % MB Tar-Exempt US Muni 1% 10% R 25% 10% Gash 1% 40'. 12% v Related Cory Qnc%l WA) CMOs Corp lP)%144A) 24% % Long Term Operating Fund Blmbg Govt/Credit 1.5 Year Weighted Average: Duration Duration Distribution ■ Long Term opameng Fund: 2.44 70% ■ Blmbg GoWC%dit 1-5 Year 2.76 0 60% ---_______5SL ------ ------ ______ ______ 0 ______ ______ d 40% -- 40.5 —————%? —98.2 —————— —————— —————— O d 1 % ______ ______ ______ 0% 0.0 3.] <1 1-3 35 5-0 7-10 NO Years Duration WelgMed Average: Gualdy Duality Distribution Long Term Oyemting Fund M 100% ■ Blmbg GOWCmdit l-5 Year: AAr p 80% ______ ___ ___ __ ___ ___ 68.8 r0s ___ __ ___ ___ L 60% _ L ___ ___ __ ___ ___ ______o Q. ].5 7.5 3.2 o% APA M A BBB Be B CCC CC C 0 NIR Quality Rating CallanGrange county Sendation Distnd Chandler-Liquid Operating Money Period Ended September 30, 2017 Investment Philosophy Assets were transferred in kind to Chandler on 12/1/2014. Previous performance reflects PIMCO. Quarterly Summary and Highlights Quarterly Asset Growth • Liquid Operating Money Net's portfolio posted a 0,22% Beginning Market Value $124.441,479 return for the quarter placing it in the 32 percentile of the Net New Investment $-75,200,000 Callan Money Market Funds group for the quarter and in the 33 percentile for the last year. Investment Gains/(Losses) $242,051 • Liquid Operating Money Nefs portfolio underperformed the Ending Market Value $49,483,530 Citigroup 3-Month Treasury Bill by 0.03%for the quarter and underperformed the Citigroup 3-Month Treasury Bill for the year by 0.06%. Performance vs Callan Money Market Funds(Net) 2.5% 0 06 3]) 2.0% 1.5% 1.0% 0.5% 26)H(33 45)® 22)®132 24)®(24 24)�(25 21) (26® (26 18) (23 0.0% Last Otr Last Chandler Last 3 Ym Last 5Yrs Last 7Yrs LastlOYrs Last20.5Yrs Yr Inception 10T Percentile 031 101 0a 0.50 0.33 026 065 257 25M Percentile 0.24 06 0.31 0.20 0.17 0.12 0.49 230 Median 0.19 0A5 0.18 0.17 0.10 0.07 0.39 222 75M Peroentlle 0.11 020 0.08 0,07 0.05 0.03 0.31 2.10 90T Perwntile 005 008 0,03 0,03 0.02 ou 025 195 Liquid Operating Mona,Net • 022 058 0.32 0,28 0.16 0.13 048 2A8 Ciligmup 3-Month Treasury Bill ♦ 0.26 054 0.31 0.29 0.19 0.16 O.42 2.31 Relative Returns vs Callan Money Market Funds(Net) Citigroup 3-Month Treasury Bill Annualized Seven Year Risk vs Return 0.10% 2 5% 608% __ _______ __ __ 20% 0 O6% E s% = ON% f y 0.02% 1.0% � 0.00% 0.5% 0.0% (0.04%) . •.. . (0.06%) (0.5%) 10 2011 2012 2013 2014 2015 2016 2017 (0.5) OA 05 10 15 20 25 /'� ■Lpuid operating Money Net Standard Deviation Callan cranes County Sanitation Oistdct 21 Liquid Operating Money Net Return Analysis Summary Return Analysis The graphs below analyze the manager's return on both a risk-adjusted and unadjusted basis.The first chart illustrates the manager's ranking over different periods versus the appropriate style group.The second chart shows the historical quarterly and cumulative manager returns versus the appropriate market benchmark. The last chart illustrates the manager's ranking relative to their style using various risk-adjusted return measures. Assets were transferred in kind to Chandler on 12M/2014. Previous performance reflects PIMCO. Performance vs Callan Money Market Funds(Net) 3.5% 30% 2.6% 2.0% 1.5% 61 1.0% 0.5% 26®35 26 22 02 14 0.0% (0.5%) 121ifi-9/17 M16 2015 2014 2013 2012 2011 2010 2009 2008 101h PercenMe 0.89 071 ell 00] 0.08 0.18 008 0.15 0.52 2.]] 25th PecenOle 0.57 028 003 002 0.02 003 002 005 0.28 2.46 Median 0.41 0.10 0.01 001 0.01 0.01 0.01 0.01 0.12 2.03 75th Pecendle 0.18 0.01 0.00 O rl 0.00 0.01 0.00 0.01 0.03 1.46 Mh PercenMe 0.07 000 000 000 0.00 000 000 000 gel 1.08 Liquid Operating Money Net 01 0.49 0.32 0.07 (Orin (0.02) 0.02 0.09 0.10 OA3 2.25 Citigroup 3-Mordh Treasury Bill ♦ 0.56 0.27 0.03 003 0.05 0.07 0.08 0.13 0.16 1.80 Cumulative and Quarterly Relative Return vs Citigroup 3-Month Treasury Bill 1.2% 10% 0.8% - --- -------- --- --- --- --- --- --- of y 06% .� 0.2% --- --- -------- - - -- Y 0.0% (0.2%) 0.4%) 07 2008 2009 2010 2011 2012 2013 2016 2015 2016 2017 10 Liquid Opened,Money Net 0Callan Monay MaAat Funds Risk Adjusted Return Measures vs Citigroup 3-Month Treasury BIII Rankings Against Callan Money Market Funds(Net) Seven Years Ended September 30,2017 4 2 g s) 4) (e) M (10) Adpha SM1 rye Excess ReturnRat. Ratio 1 Orb Peroardle 0.10 036 108 25th Percentile (0.03) 'O.S6) 0.99 Median (0.07) 1.38 1.55 75th Perraniae (nil) 1336) 181 901h Percentile (0.12) (70]) 236 /'� Liquid Operating Money Net • M N) (0A7) (0.67) CallanOrange County 6andation District 24 Callan Research/Education CALLAN Callan INSTITUTE 3rd Quarter 2017 Education Research and Educational Programs The Callan Institute provides both research to update clients on the latest industry trends and carefully structured educational programs to enhance the knowledge of industry professionals.Visit wwmcallan.coMlibrary to see all of our publications,and www.callan.com/blog to view our blog"Perspectives,"For more information contact Anna West at 415.974.5060/institute@callan.mm. New Research from Callan's Experts The Pdvate Debt Pie: Do You Want a The Triple Play: Adding Timberland, Farmland, and Sllee? Do You Need One? I As institution- Infrastructure to Portfolios I Timberland, farmland, and infrs- -___ al investors consider the merits and risks of structure offer diversifcation,stable income,and inflation protec- constructing private debt allocations in their tion for institutional investor portfolios. Callan believes a combi- pomolios, Callan's Jay Kloepfer, the director nation of these three real assets offers distinct advantages. ----- of Capital Markets Research:and Jay Nayak, a consultant in our Private Equity Research Reaching for Higher Ground:The Evolution of TDFs I Target group, prepared a set of answers to some key questions about date funds(TDFs)are an improvement over former common de. private debt. faults, but they need to evolve. The solutions include using un- correlated asset classes, in-plan annuities, 'dynamic" qualified Callan 2017 Nuclear Decommissioning Funding Study I This default investment alternatives,or guaranteed income products, study,done annually,offers key insights into the status of nuclear decommissioning funding in the U.S.The 2017 study covers 54 Periodicals utilities with an ownership interest in the 99 operating nuclear Private Markets Trends, Summer 2017 1 Gary Robertson dis- reactors and 11 of the non-operating reactors in the U.S.It found cusses the surge of money into the private markets as high prices that the health of nuclear decommissioning funding has remained persist. fairly stable,hovering near 70%over the past decade. Hedge Fund Monitor,3rd Quarter 2017 1 Jim McKee discusses ■® Callan 2017 Private Equity Survey four major secular trends that are on a predictable course to in. Callan conducted a survey of institu- cre,singly weigh on markets over the longer lens:demographics, policy, ____ tional private equity investors. We fo- fiscal p cy,monetary policy,and market valuations. cused on deployment models, patterns -— of investment and commitment activities Market Pulse Flipli 2nd Quarter 2017 1 A quarterly market over time,governance and oversight,staffing and resources,and reference guide covering investment and fund sponsor trends in responsibilities for program administration functions.Our Survey the U.S. economy, U.S. and non-U.S. equities and fixed income, included 69 institutional investors with private equity programs alternatives,and defined contribution plans. totaling$103.3 billion.Our Survey found that an army of adminis- tration issues affect how institutional private equity portfolios are Capital Market Review, 2nd Quarter 2017 1 A quarterly news- constructed, monitored, and managed. We found these factors letter providing insights on the economy and recent performance led to less than ideal choices for implementing the programs, in equity,fixed income,alternatives,international, real estate,and often including sub-optimal use of the discretionary consultant/ other capital markets. fund-of-funds model for certain private equity programs. Monthly Periodic Table of Investment Returns I This update reflects the latest results for major indices. The Center for Investment Training Events Educational Sessions Miss out on a Callan conference or workshop? Event summa- The Center for Investment Training, better known as the "Callan des and speakers presentations are available on our websile: College;provides a foundation of knowledge for industry profes- www.callan.com/library/ sionals who are involved in the investment decision-making pro. Mark your calendars for our upcoming Regional Workshops, cess.It was founded in 1994 to provide clients and non-clients alike October 24 in New York and October 26 in Chicago,where we'll with basic-to intermediate-level instruction.Our next sessions are: rover highlights from our soon-to-be published Investment Man- Introduction to Investments agement Fee Survey and other aspects of fees. San Francisco,April 10-11,2018 Callan's National Conference will be held January 29-31,2018,at San Francisco,July 24-25, 2018 Me Palace Hotel in San Francisco. Chicago, October 2-3,2018 This program familiarizes fund sponsor trustees, staff, and asset For more information about events, please contact Barb management advisers with basic investment theory,terminology, Gerraty:415.274.30931 gerraty@callan.com and practices. It lasts one-and-a-half days and is designed for in- dividuals who have less than two years of experience with asset. management oversight and/or support responsibilities.Tuition for the Introductory "Callan College" session is $2,350 per person. Tuition includes instruction, all materials, breakfast and lunch on each day,and dinner on the first evening with the instructors. Customized Sessions The 'Callan College" is equipped to customize a curriculum to meet the training and educational needs of a specific organization. These tailored sessions range from basic to advanced and can take place anywhere—even at your office. Learn more at www.callan.com/events/callan-college-intro or contact Kathleen Cu nnie:415.274.30291 can nie@callan.com Education: By the Numbers 525 Attendees(on average)of the 50+ Unique pieces of research the Institutes annual National Conference Institute generates each year 3 500 Total attendees of the'Callan 1980 Year the Callan Institute College since 1994 was founded "We think the best way to learn something is to teach it. Entrusting client education to our consultants and specialists ensures that they have a total command of their subject matter. This is one reason why education and research have been cornerstones of our firm for more than 40 years." t Ron Peyton,Executive Chairman Callan V @CallanLLC ID Callan Definitions Risk/Reward Statistics The risk statistics used in this report examine performance characteristics of a manager or a portfolio relative to a benchmark (market indicator) which assumes to represent overall movements in the asset class being considered. The main unit of analysis is the excess return, which is the portfolio return minus the return on a risk free asset (3 month T-Bill). R-Squared indicates the extent to which the variability of the portfolio returns are explained by market action. It can also be thought of as measuring the diversification relative to the appropriate benchmark. An r-squared value of.75 indicates that 75% of the fluctuation in a portfolio return is explained by market action. An r-squared of 1.0 indicates that a portfolio's returns are entirely related to the market and it is not influenced by other factors. An r-squared of zero indicates that no relationship exists between the portfolio's return and the market. Relative Standard Deviation is a simple measure of a managers risk(volatility) relative to a benchmark. It is calculated by dividing the manager's standard deviation of returns by the benchmark's standard deviation of returns. A relative standard deviation of 1.20,for example, means the manager has exhibited 20% more risk than the benchmark over that time period. A ratio of .80 would imply 20% less risk. This ratio is especially useful when analyzing the risk of investment grade fixed-income products where actual historical durations are not available. By using this relative risk measure over rolling time periods one can illustrate the "implied" historical duration patterns of the portfolio versus the benchmark. Residual Portfolio Risk is the unsystematic risk of a fund,the portion of the total risk unique to the fund(manager)itself and not related to the overall market. This reflects the"bets"which the manager places in that particular asset market. These bets may reflect emphasis in particular sectors, maturities (for bonds), or other issue specific factors which the manager considers a good investment opportunity. Diversification of the portfolio will reduce or eliminate the residual risk of that portfolio. Rising and Declining Periods refer to the sub-asset class cycles vis-a-vis the broader asset class. This is determined by evaluating the cumulative relative sub-asset class index performance to that of the broader asset class index. For example, to determine the Growth Style cycle, the S&P 500 Growth Index (sub-asset class) performance is compared to that of the S&P 500 Index(broader asset class). Sharpe Ratio is a commonly used measure of risk-adjusted return. It is calculated by subtracting the "risk-tree" return (usually 3 Month Treasury Bill)from the portfolio return and dividing the resulting"excess return" by the portfolio's risk level (standard deviation).The result is a measure of return gained per unit of risk taken. Sortino Ratio is a downside risk-adjusted measure of value-added. It measures excess return over a benchmark divided by downside risk. The natural appeal is that it identifies value-added per unit of truly bad risk. The danger of interpretation, however, lies in these two areas: (1)the statistical significance of the denominator,and (2) its reliance on the persistence of skewness in return distributions. Standard Deviation is a statistical measure of portfolio risk. It reflects the average deviation of the observations from their sample mean. Standard deviation is used as an estimate of risk since it measures how wide the range of returns typically is. The wider the typical range of returns,the higher the standard deviation of returns,and the higher the portfolio risk. If returns are normally distributed (Is. has a bell shaped curve distribution) then approximately 2/3 of the returns would occur within plus or minus one standard deviation from the sample mean. Total Portfolio Risk is a measure of the volatility of the quarterly excess returns of an asset. Total risk is composed of two measures of risk: market(non-diversifable or systematic)disk and residual(diversifiable or unsystematic) risk. The purpose of portfolio diversifcation is to reduce the residual risk of the portfolio. Callan 29 Risk/Reward Statistics Tracking Error is a statistical measure of a portfolio's risk relative to an index. It reflects the standard deviation of a portfolio's individual quarterly or monthly returns from the index's returns. Typically,the lower the Tracking Error, the more "Index-like"the portfolio. Traynor Ratio represents the portfolio's average excess return over a specified period divided by the beta relative to its benchmark over that same period. This measure reflects the reward over the risk-free rate relative to the systematic risk assumed. Note:Alpha,Total Risk,and Residual Risk are annualized. Callan 30 Fixed Income Portfolio Characteristics All Portfolio Characteristics are derived by first calculating the characteristics for each security, and then calculating the market value weighted average of these values for the portfolio. Allocation by Sector- Sector allocation is one of the tools which managers often use to add value without impacting the duration of the portfolio. The sector weights exhibit can be used to contrast a portfolio's weights with those of the index to identity any significant sector bets. Average Coupon-The average coupon is the market value weighted average coupon of all securities in the portfolio. The total portfolio coupon payments per year are divided by the total portfolio par value. Average Moody's Rating for Total Portfolio- A measure of the credit quality as determined by the individual security ratings. The ratings for each security, from Moody's Investor Service, are compiled into a composite rating for the whole portfolio. Quality symbols range from Aaa+ (highest investment quality-lowest credit risk)to C (lowest investment quality- highest credit risk). Average Option Adjusted(Effective)Convexity-Convexity is a measure of the portfolio's exposure to interest rate risk. It is a measure of how much the duration of the portfolio will change given a change in interest rates. Generally,securities with negative convexities are considered to be risky in that changes in interest rates will result in disadvantageous changes in duration. When a security's duration changes it indicates that the stream of expected future cash-flows has changed, generally having a significant impact on the value of the security. The option adjusted convexity for each security in the portfolio is calculated using models developed by Lehman Brothers and Salomon Brothers which determine the expected stream of cash-flows for the security based on various interest rate scenarios. Expected cash-flows take into account any put or call options embedded in the security, any expected sinking-fund paydowns or any expected mortgage principal prepayments. Average Option Adjusted(Effective)Duration- Duration is one measure of the portfolio's exposure to interest rate risk. Generally, the higher a portfolio's duration, the more that its value will change in response to interest rate changes. The option adjusted duration for each security in the portfolio is calculated using models developed by Lehman Brothers and Salomon Brothers which determine the expected stream of cash-flows for the security based on various interest rate scenarios. Expected cash-flows take into account any put or call options embedded in the security, any expected sinking-fund paydowns or any expected mortgage principal prepayments. Average Price-The average price is equal to the portfolio market value divided by the number of securities in the portfolio. Portfolios with an average price above par will tend to generate more current income than those with an average price below par. Average Years to Expected Maturity- This is a measure of the market-value-weighted average of the years to expected maturity across all of the securities in the portfolio. Expected years to maturity takes into account any put or call options embedded in the security, any expected sinking-fund paydowns or any expected mortgage principal prepayments. Average Years to Stated Maturity- The average years to stated maturity is the market value weighted average time to stated maturity for all securities in the portfolio. This measure does not take into account imbedded options, sinking fund paydowns,or prepayments. Current Yield-The current yield is the current annual income generated by the total portfolio market value. It is equal to the total portfolio coupon payments per year divided by the current total portfolio market value. Callan 31 Fixed Income Portfolio Characteristics Duration Dispersion- Duration dispersion is the market-value weighted standard deviation of the portfolio's individual security durations around the total portfolio duration. The higher the dispersion, the more variable the security durations relative to the total portfolio duration ('barbellness"), and the smaller the dispersion, the more concentrated the holdings' durations around the overall portfolio's ('bulletnessi The purpose of this statistic is to gauge the 'bulletness' or 'barbellness'of a portfolio relative to its total duration and to that of its benchmark index. Effective Yield-The effective yield is the actual total annualized return that would be realized if all securities in the portfolio were held to their expected maturities. Effective yield is calculated as the internal rate of return, using the current market value and all expected future interest and principal cash flows. This measure incorporates sinking fund paydowns,expected mortgage principal prepayments,and the exercise of any"in-the-money"imbedded put or call options. Weighted Average Life-The weighted average life of a security is the weighted average time to payment of all remaining principal. It is calculated by multiplying each expected future principal payment amount by the time left to the payment. This amount is then divided by the total amount of principal remaining. Weighted average life is commonly used as a measure of the investment life for pass-through security types for comparison to non-pass-through securities. Callan 32 Disclosures Callan 1 Quarterly List as of September 30, 2017 List of Callan's Investment Manager Clients Confidential-For Callan Client Use Only Callan takes its fiduciary and disclosure responsibilities to clients very seriously.We recognize that there are numerous potential conflicts of interest encountered in the investment consulting industry and Mat it is our responsibility to manage those confide effectively and in the best interest of our clients. At Callan,we employ a robust process to Identify,manage,monitor and disclose potential conflicts on an ony3oing basis. The list below is an important component of our conflicts management and disclosure process. It identities those investment managers Mat pay Callan fees for educational,consulting,software,database or reporting products and services. We update the list quarterly because we believe that our fund sponsor clients should know the investment managers that do business with Callan,particulady Mesa investment manager clients that Me fund sponsor clients may be using or considering using.Callan is committed to ensuring that we do not consider an investment managers business relationship with Callan,or lack thereof,in performing evaluations for or making suggestions or recommendations M its other clients. Please refer to Callan's ADV Part 2A for a more detailed description of the services and products Mat Callan makes available to investment manager clients through our Institutional Consulting Group,Independent Adviser Group and Fund Sponsor Consulting Group. Due to the complex corporate and organizational ownership structures of many investment management firms,parent and affiliate firm relationships are not Indicated on our list. Fund sponsor clients may request a copy of Me most currently available list at any time.Fund sponsor clients may also request specific information regarding the fees paid to Callan by particular fund manager clients. Per company policy,information requests regarding fees are handled exclusively by Callan's Compliance Department, Manager Name Manager Name 1607 Capital Partners,LLC Brigade Capital Management,LP Aberdeen Asset Management PLC Brown Brothers Hammon&Company Acadian Asset Management LLC Camber Investors,LLC AEGON USA Investment Management Capital Group AEW Capital Management CastleArk Management,LLC Affiliated Managers Group,Inc. Causeway Capital Management Alcamo CBRE Global Investors AllianceBemstein Chartwell Investment Partners Allianz Global Investors ClearBndge Investments,LLC Allianz Life Insurance Company of North America Cohen&Steers Capital Management,Inc. American Century Investments Columbia Management Investment Advisers,LLC AMP Capital Investors Limited Columbus Circle Investors Amundi Smith Breeden LLC Conning Asset Management Company Angelo,Gordon&Co. Corbin Capital Partners,L.P. Apollo Global Management Cornerstone Capital Management AOR Capital Management Cramer Rosenthal McGlynn,LLC Area Management LLC Credit Suisse Asset Management Adel Investments,LLC Cowl irm Investors,Inc. Aristotle Capital Management,LLC D.E.Shaw Investment Management,L.L.C. Arl Holdings Deplores,Race&Zollo,Inc. Atlanta Capital Management Co.,LLC Deutsche Asset Management Aviva Investors Americas Diamond Hill Capital Management,Inc. AXA Investment Managers Dimensional Fund Advisors LP gaffe Gifford Overseas Limited Doubleline Baird Advisors Duff It Phelps Investment Mgmt Co. Bank of America Eagle Asset Management,Inc. gaining.LLC EARNEST Partners,LLC Baron Capital Management,Inc. Eaton Vance Management Barrow,Hanley,Mewhinney&Strauss.LLC Epoch Investment Partners,Inc. Blackpool Fayez Sarotim&Company BMO Global Asset Management Federated Investors BNP Paribas Investment Partners Fidelity Institutional Asset Management BNV Mellon Asset Management Fiera Capital Corporation Boston Partners First Eagle Investment Management,LLC Brentles Investment Partnere.L.P. First Hawaiian Bank Wealth Management Division Brandywine Global Investment Management,LLC Fisher Investments Callan I Knowledge.Experience.Integrity. Page 1 of 2 Manager Name Manager Name Franklin Templeton Nikko Asset Management Co.,Ltd. Franklin Templeton Institutional Nortrom Tmst Asset Management Fred Alger Management,Inc. Nuveen Investments,Inc. Fuller&Thaler Asset Management,Inc. OFI Global Asset Management GAM(USA)Inc. Old Mutual Asset Management GMO O'Shaughnessy Asset Management,LLC Goldman Sachs Asset Management Pal Investment Management Company Goodwin Capital Advisers Parametric Portfolio Associates Guggenheim Investments Peregrine Capital Management,Inc. Guggenheim Partners Asset Management PGIM GW&K Investment Management PGIM Fixed Income Harbor Capital Group Trust PGIM Real Estate Hartford Funds PineBridge Investments Hartford Investment Management Co. Pioneer Investments Heitman LLC PNC Capital Advisors,LLC Henderson Global Investors RPM America Holland Capital Management Principal Global Investors Hotchkis&Wiley Capital Management,LLC Private Advisors,LLC HSBC Global Asset Management Rome.Investments,LLC Income Research t Management,Inc. OMA(Quantitative Management Associates) Insight Investment Management Limited RBC Global Asset Management INTECH Investment Management,LLC Regions Financial Corporation Invesco RidgeWorth Capital Management,Inc. Investec Asset Management Rockefeller&Co..Inc. Ivy Investments Roekpoint Group Janus Capital Management,LLC Rothschild Asset Management,Inc. Jarislowsky Fraser Global Investment Management Russell Investments Jensen Investment Management Santander Global Facilities Jobs Peak Advisors Schrader Investment Management North America Inc. Johnson Institutional Management Smith,Graham&Co.Investment Advisors,L P. J.P.Morgan Asset Management Smith Group Asset Management J.P.Morgan Chase&Company Standard Life Investments Limited Kayne Anderson Capital Advisors LP Standish KayCmp State Sheet Global Advisors Lazard Asset Management Stone Harbor Investment Partners,L.P. Legal&General Investment Management America T.Rowe Price Associates,Inc. Lincoln National Corporation Taplln,Canida&Habacht LM Capital Group,LLC Teachers Insurance&Annuity Association of America LMCG Investments,LLC The Boston Company Asset Management,LLC Longview Partners The Guardian Life Insurance Company of America Loomis,Styles&Company,L.P. The Hartford Lord Abbetl&Company The Cranston.Group Los Angeles Capital Management The London Company LSV Asset Management The TCW Group,Inc. MacKay Shields LLC Thompson,Siegel&Walmsley LLC Macquarie Investment Management Hormedy Delaware Thornburg Investment Management,Inc. Investments) Tri-Star Trust Bank Man Investments Inc. RIBS Asset Manag ement Manul'rfe Asset Management Van Eck Global McKinley Capital Management,LLC MPS Invest n ix Management Versus Capital Group MidFirst Bank Victory Capital Management Inc. Vo Mondrian Investment Partners Limited Asset Management,Inc. Montag&Caldwell,LLC Voye Financial Voya Investment Management(M1a ING) Morgan Stanley Investment Management WCM Investment Management � Mountain Lake Investment Management LLC WEDGE Capital Management MUFG Union Bank,N.A. Wellington Management Company,LLP Neuberger Berman Wells Capital Management Newton Investment Management He Newton Capital Mgmi Western Asset Management Company N-icch.,olas Investment Farmers Willem Blair&Company Callan I Knowledge.Experience.Integrity. Page 2 of 2 September 30,2017 Investment Report Orange County Sanitation District Period Ending September 30, 2017 6225 Lusk Blvd San Diego, CA 92121 1 Phone 0 c111JI Table of Contents SECTION 1 Economic Update SECTION 2 Account Profile SECTION 3 Consolidated Information SECTION 4 Portfolio Holdings SECTION 5 Transactions OR SECTION 1 Economic Update 011 Economic Update ■ The Federal Open Markel Committee (FOMC) left the fed funds target rate unchanged at a range of 1.00%-1.25%at the September 19-20 meeting. As expected, the Committee announced plans to initiate the balance sheet normalization program in October. The process of unwinding the Fed's $4.5 trillion balance sheet will begin gradually by allowing $6 billion per month in Treasury securities and $4 billion per month in mortgage-backed and agency securities to roll off the balance sheet. Over time, the amounts will slowly increase to$30 billion per month in Treasury securities and $20 billion per month in mortgage-backed and agency securities. The Fed's plans to unwind the balance sheet was widely telegraphed and the policy statement was generally in line with expectations. There were no dissenting votes among FOMC members in September. The Fed's updated economic projections still indicate one more rate hike before year-end is expected. However, the Fed lowered its median longer-run fed funds rate projection to 2.8% from 3.0%. The Fed's other economic projections were little changed, although the median 2018 inflation forecast was lowered slightly, suggesting that the Committee now thinks inflation may remain below the Fed's 2.0% target until 2019. ■ GDP grew by 3.1% in the second quarter, following growth of 1.2% in the first quarter. The consensus forecast currently calls for GDP growth of about 2.3% in the third quarter and 2.7% in the current quarter. Many economists have trimmed their estimates for third quarter GDP growth and boosted their estimates for fourth quarter growth, to reflect disruptions caused by the hurricanes. Tax reform or fiscal stimulus may ultimately help fuel stronger economic growth, but the timing and magnitude of such programs remains uncertain. ■ The Treasury yield curve steepened in September, partially reversing some of the curve flattening that has happened year-to-date. The 2-year Treasury yield increased 16 basis points in September to 1.48% and the 10-year Treasury yield increased about 22 basis points to 2.33%. On a year-to-date basis, the 2-year Treasury yield increased 29 basis points and the 10-year Treasury yield declined 11 basis points. Since the beginning of this year, we believe market participants have grown skeptical that the Trump administration will deliver on many of their legislative objectives. However, the administration recently outlined a general framework for tax reform, sparking some renewed optimism that changes to the tax code may help boost economic growth. CiIII Employment Nonfarm Payroll (000's) Unemployment Rate 350 13.0% 300 12.0% —Underemployment Rab(V6) 11.0% —Unempbymenl Rate(U3) 'w 210 2W 10.0% 9.0% a 150 8.0% c 100 V ].0% O � w 6.0% 0 5.0% -50 4.0% -100 y�II aq 441, - ,c 3.0% >S >S •>6 >6 >6 >6 • 76 >B >6 >6 » » D S :USOe Ha ntof Labw Sw :USDspa ent MLaGr U.S. payrolls declined 33,000 in September, well below the +80,000 consensus estimate. However, September payrolls were likely significantly distorted by the hurricanes. The unemployment rate decreased to 4.2% in September from 4.4% in August, and the labor participation rate increased to 63.1% from 62.9%. A broader measure of unemployment called the U-6, which includes those who are marginally attached to the labor force and employed part time for economic reasons, declined to 8.3%from 8.6%. Wages jumped 0.5% in September. On a year-over-year basis wages were up 2.9% in September, versus up 2.7%year-over-year in August. 0111 Inflation Consumer Price Index (CPI) Personal Consumption Expenditures 3.5% 3.5% (PCE) CPIYOY%Change —PCEPMce MlgN YOY%CA 3.0% Core CPI YOY%Change 3.0% enge PCE CoreR for YOY%CN�le 2.5% 2.5% u $ c 2.0% `m 2.0% L X1.5% 1.5% 9 1.0% >O 1.0% > > 0.5% 0.5% 0.0% 0.0% QS% -05% "q 7S %7& 441, 76 ltl*,76 11�p,7s 76 %,» ��>> l> Is 40k16 �1& yah>s 1s 40kI& �7! 4�k7> » source:US De aN nt ollab source:US Department al LaO r The Consumer Price Index (CPI) was up 2.2% year-over-year in September, versus up 1.9% year-over-year in August. Core CPI(CPI less food and energy)was up just 1.7%year-over-year in September, unchanged for the past five consecutive months.The increase in headline CPI inflation was driven in part by an increase in energy prices following the hurricanes. The Personal Consumption Expenditures (PCE) index was up 1.4%year-over-year in August, unchanged from June or July. Core PCE (excluding food and energy) was up just 1.3%year-over-year in August, versus up 1.4%year-over-year in July. Inflation remains below the Fed's 2.0%target. IIIII■ CIR I Consumer Retail Sales YOY % Change Consumer Confidence 6.0% 1W 5.0% 125 120 m 4.0% 115 i u > 710 3.0% u 105 O v � 2.0% 100 95 1.0% 90 0.0% 85 S O�'S ,-s y�'s S�'s O�'6 -y,, •E� Sm� `� +1 `4� s'%a,s'Hay's�6�stiok'eax �ry Source:US CePert I of Cor . Souce:F a'W Reserve On a year-over-year basis, retail sales were up 4.4% in September, versus up 3.5% year-over-year in August. On a month-over-month basis, retail sales increased 1.6% in September, following a 0.1% decline in August. The increase in September retail sales was generally in line with expectations, and was driven in large part by a surge in hurricane-related replacement demand for vehicles as well as a spike in post-hurricane gasoline prices. However, excluding autos and gas, retail sales grew at a moderate pace, up 0.5% in September, month-over-month. Meanwhile, the consumer confidence index remained strong in September at 119.8 versus 120.4 in August, despite weakness in the hurricane states of Texas and Florida. ORS Economic Activity Leading Economic Indicators (LEI) Chicago Fed National Activity Index (CFNAI) 0.7% — oso 0.6% 0.5% 0.40 d o.4% v IT0.3% IF 0.20 0.2 Q a` 0.1% i 0.00 c 0.0% f i m -Q20 -0.1% -0.2% Q40 Q3% -0.s0 76 N 76 1G h�6 76 ryek16 �> h1> "ihl6 1o1, 76 �76 4�1' 76 76 �oL76 ��> �6h7> » Source:the COM Mre Bo M Source Fe eml Reserve Bank or Chicago The Index of Leading Economic Indicators (LEI) rose 0.4% in &gust, following a 0.3% increase in July. The increase in the LEI suggests economic growth may improve through year-end. However, the Chicago Fed National Activity Index (CFNAI) decreased to - 0.04 in August on a 3-month moving average basis from zero in July. According to the Chicago Fed, the CFNAI points to subpar economic growth. Overall, we believe the economy remains on a slow growth trajectory. CIRI Housing Housing Starts S&P/CaseShiller20 City Composite Home 1600 6.5% Price Index '- •MUIU Family HOudl Sfatls Y 1400 •SlnBle Family Wutlnp Shrb fk 6.0% `0 1200 1000 orn 5.5% 5 0 F 800 ti 5.0% T 600 4.5% � O c 400 U 4.0% C 200 f p 3.5% I9. +O T 11+ + 'O 9{ 'ya `1, cl Wn, 93 `2i Qk 1, q9; `2i is k�s 95.�6 his .A�s k�s �j h�j J) ly. ly. ly, ly, )) 1J Souse:US Census Bureau Soumo:58P Total housing starts fell slightly in August but were still stronger than expected. Single-family starts increased 1.6% in August, partially offsetting a 6.5% decline in multi-family starts. Permits were stronger than expected in August, up 5.7%, driven by a 19.6% surge in multi-family permits. Overall, the August housing starts report was favorable, particularly considering it includes some effects from Hurricane Harvey.According to the Case-Shiller 20-City home price index, home prices were up 5.8%year-over-year in July, versus up 5.6%year-over-year in June. C1111 Manufacturing Institute of Supply Management Purchasing Industrial Production sz Manager Index 3.0% Expanding 60 2.0% 58 1.0% aa c UU 0.0% 54 52 O -20% 50 46 30% Contracting 46 4.0% 'S %�'s ✓`ma's �A'6 O�1& �'> '> �'> 94h1$ ��'S �'E �x1, �'G rye's �'> y�h'> ��o'S '> Sourceansfdutei Supply Management Source:Fe Deal Reserve The Institute for Supply Management (ISM) manufacturing index increased to 60.8 in September from 58.0 in August.A reading above 50.0 suggests the manufacturing sector is expanding. However, Industrial Production was up just 1.5% year-over-year in August versus up 2.4%year-over-year in July.Although the ISM Manufacturing index(which is based on a survey from a relatively small sample size of roughly 300 manufacturing firms)has been quite strong, Industrial Production has recently contracted. Gross Domestic Product (GDP) Gross Domestic Product(GDP) 7Private on ExpendituresrO.4%71.3% 7-0.2% 0.6% 5.0% sticlmiestmem 4.0% 3.0% Net Exports and Imparts 0.4% -1.6% 0.2% 0.2% 2.0% 1.0% Federal Government Expenditures 0.1% 0.0% -0.2% 0.1% 0.0% State and Loral(Consumption and Grass r_GDP DOD%Change Investment) 0.0% 0.1% 0.1% -0.2% -10% —GDP YOY%Clang. -20% Total 2.8% 1.8% 1.2% 3.1 11 @%,�> >Ok>14% O�> £'�>4% H'�> ^�> >�oD>`fp2> l > 2 2 a3 9 19 S S @ @ Source: US D.part of of Com— Soule: US Depad~t of C r,s Second quarter GDP grew at an annualized pace of 3.1%, following growth of 1.2% in the first quarter. Second quarter GDP growth was revised up slightly from the second estimate of 3.0%, after being revised up from the advance estimate of 2.6%. Second quarter growth was driven by consumer spending and business investment. The consensus forecast currently calls for GDP growth of about 2.3% in the third quarter. Growth is expected to accelerate modestly in the current quarter, at a pace of about 2.7%, as post-hurricane rebuilding efforts intensify. G111 Bond Yields US Treasury Note Yields US Treasury Yield Curve 3.5% 3.5% 2-Yeer —Sap-17 3.0% �&Year 3.0% �JUn17 to-veer —Sep-is 2.5% 2.5% X 2.0% 92.0% 5= 1.5% 5: 1.5% 1.0% 1.0% 0.5% 0.5% 0.0% vt.y, 0.0% Source:B .be source:Bloomberg The yield curve has flattened meaningfully this year. The spread between 2-year and 10-year Treasury yields was just 85 basis points at the end of September, compared to 126 at the end of 2016. In the three months ending in September, the 2-year Treasury yield increased about ten basis points while the 10-year Treasury yield increased just three basis points. Immediately following the US Presidential election last fall, the Treasury yield curve steepened meaningfully, driven by heightened expectations for tax reform,fiscal stimulus, and above-trend economic growth under the Trump administration. However, market participants are skeptical the Trump administration will deliver on their legislative agenda. Ilia SECTION 2 Account Profile 011 Objectives Investment Objectives The investment objectives of the Orange County Sanitation District are first, to provide safety of principal to ensure the preservation of capital in the overall portfolio; second, to provide sufficient liquidity to meet all operating requirements; and third, to earn a commensurate rate of return consistent with the constraints imposed by the safety and liquidity objectives. Chandler Asset Management Performance Objective Liquid Operating Monies—will be compared to the 3-month T-Bill rate and operate with a maximum maturity of one year. Long-Term Operating Monies—will be compared to the Bank of America Merrill Lynch 1-5 Year Corporate Government Rated AAA—A Index. Strategy In order to achieve these objectives, the portfolio invests in high quality fixed income securities consistent with the investment policy and California Government Code. C1111 Compliance ` Orange County Sanitation District Long Term September 30,2017 COMPLIANCEPOLICY Assets managed by ChandlerAsset Management are in full compliance With State lawand wth the investment policy Category Standard Comment Treasury Issues 5 years maximum maturity Complies' Supranational "AA"or better by l of 3 NRSROs; 30%maximum; 5%max issuer; 5years maturity; Includes only. Complies IADB IBRD and IFC per CGC U.S.Agencies 20%max issuer, 5 years maximum maturity Complies U.S.Corporate(MTNs) "A"or better long term rating by 1 of 3 NRSROs; 30%maximum;5%max issuer; 5 years max maturity Complies Municipal Secunties "A"or higher b 1 of 3 NRSROS; 10%maximum; 5%max issuer, 5 years maximum maturity Complies Asset Backed/CMOs/Mortgage- "AA"or better by l of 3 NRSROs; "A"or higher issuer rating by 1 of 3 NRSROs; 20%maximum; 5% Complies' backed max issuer(excluding MBS/ ovt agency);5 years max matunty Negotiable CDs "A"or betteron its long tens debt by 1 of 3 NRSROs; "A1/P1"or highest short term ratings by 1 of 3 Complies NRSROs; 30%maximum;5%max issuer; 5 years max maturity CDs/TDS 5%max issuer; 5years max maturity Complies Bankers Acceptances A-1,or equivalent highest short tens rating by l of 3 NRSROS; 40%maximum; 5%max issuer,180 Complies days max maturity Commercial Paper A-1,or equivalent by 1 of 3 NRSROS; "A"or better by 1 of 3 NRSROs,if long term debt issued; 25% Complies maximum; 5%max issuer; 270 days max maturity Mutual Fund&Money Market Highest rating by 2 NRSROs; 20%maximum; 10%max per mutual fund; 20%max per money market Complies Mutual Fund mutual fund Repurchase Agreements 102%collateraliation Complies Reverse Repurchase Agreements 5%maximum,90 days max maturity Complies LAIF Not used by investment adviser Complies Avg Duration Not to exceed 60 months - (80%to 120%of the benchmark) Complies Maximum Maturity 5 years maximum maturity Complies' 'The portfolio has twenty-three(23)securities vrith maturities greater than 5 years including one(1)ABS,four(4)CMOs,seventeen(17)MBS and one(1)treasury. All securities were inherited from the pretious manager and complietl at time of purchase. CJJJJ Portfolio Characteristics Orange County Sanitation District Long Term 9/30/2017 6/30/2017 Benchmark` Portfolio Portfolio Average Maturity(yrs) 2.72 2.74 2.79 Modified Duration 2.60 2.44 2.44 Average Purchase Yield n/a 1.73% 1.68% Average Market Yield 1.73% 1.64% 1.60% Average Quality" AAA AA/Aa2 AA/Aa2 ContributionslWithdrawals 12,792 Total Market Value 333,199,867 331,805,369 `BAML 1-5 Yr US Corporate/Govt Rated AAA-A Index '"Benchmark is a blended rating of S&P, Moody's,and Fitch.Portfolio is S&P and Moody's respectively. Multiple securities were purchased across the Treasury,Agency, Asset Backed,Certificate of Deposit and Commercial Paper sectors of the market to keep the portfolio structure in-line with Chandler objectives. The purchased securities ranged in maturity from November 2017 to August 2022. Several securities matured and one large ASS position was called, to help facilitate the new holdings in the portfolio. Sector Distribution Orange County Sanitation District Long Term September 30, 2017 June 30, 2017 Negotiable CD 1.8% ABS ABS 6.1 4.7% US Treasury US Treasury 29.2% 32.3% Agency 24.7% Agency 26.1 CMO 0.8%Commercial CMO Paper 0.8 Commercial 2.0% Paper Money Market 3 8% Fund FI Money Market 1.3% US Corporate Fund FI US Corporate Mortgage 24.0% 01 0.9 23.9% Supranational Municipal Pass Thru Supra*national Mortgage 6.6% Bonds 0.6% Bonds Pass Thru 1.4% 8.2% 1.4% 0.6% The sector allocation was stable. GR I Issuers Orange County Sanitation District Long Term—Account#10268 As of 9/30/2017 Issue Name Investment Type % Portfolio Government of United Stales US Treasury 32.33% Federal National Mortgage Association Agency 10.64% Federal Home Loan Bank Agency 8.83% Federal Home Loan Mortgage Corp Agency 5.25% Intl Bank Recon and Development Supranational 3.01% Inter-American Dev Bank Supranational 2.88% John Deere ASS ASS 2.23% Bank of Tokyo-Mit UFJ Commercial Paper 1.99% Bank of Nova Scotia Houston Negotiable CD 1.75% Occidental Petroleum Corporation US Corporate 1.62% JP Morgan Chase&Co US Corporate 1.60% Wells Fargo Corp US Corporate 1.53% Qualcomm Inc US Corporate 1.53% General Electric Cc US Corporate 1.52% Deere&Company US Corporate 1.52% Bank of Nev,York US Corporate 1.40% ChevronTeuace Corp US Corporate 1.36% Honda ABS ASS 1.36% First American Govl Obligation Fund Class-Z Money Market Fund FI 1.35% HSBC USA Corp US Corporate 1.28% Berkshire Hathaway US Corporate 1.25% Honda Motor Corporation US Corporate 1.21% Apple Inc US Corporate 1.21% Eli Lilly&Cc US Corporate 1.21% Bank of America Corp US Corporate 1.17% Morgan Stanley US Corporate 0.94% Exxon Mobil Corp US Corporate 0.91% Microsoft US Corporate 0.90% American Express Credit US Corporate 0.89% Port Authority of New York and New Jersey Municipal Bonds 0.80% GR I Issuers Orange County Sanitation District Long Term—Account#10268 As of 9/30/2017 Issue Name Investment Type % Portfolio Nissan ASS ASS 0.76% International Finance Corp Supranational 0.73% Federal Home Loan Mortgage Corp CMO 0.61% Intel Corp US Corporate 0.60% New York City Transitional Finance Authority Municipal Bonds 0.45% Federal National Mortgage Association Mortgage Pass Thou 0.45% Toyota ABS ASS 0.30% Goldman Sachs Inc. US Corporate 0.18% University of California Municipal Bonds 0.13% NCUA Guaranteed Notes CMO 0.09% Federal National Mortgage Association CMO 0.08% GNMA Mortgage Pass Thru 0.06% AMRESCO Residents Securities Carp Mortgage Pass Thou 0.04% Small Business Administration ASS 0.01% SUM Corp ASS 0.01% GNMA CMO 0.01% Federal Home Loan Mortgage Corp Mortgage Pass Thou 0.00% Total 100.00% Quality Distribution Orange County Sanitation District Long Term September 30, 2017 vs. June 30, 2017 80.00% 70.00% — 60.00% — 50.00% — 40.00% — 30.00% 20.00% 10.00% — 0.00% AAA AA A <A NR •6/30/2017 •6/30/2017 AAA AA A <A NR 09/30/17 7.5% 70.5% 11.3% 3.2% 7.5% 06/30/17 11.8% 66.0% 11.4% 3.2% 7.6% Soume:S&P FZWngs JJjjj Duration Distribution Orange County Sanitation District Long Term Portfolio Compared to the Benchmark as of September 30, 2017 35.00% 30.00% 25.00% 20.00% 15.00% 10.00% 5.00% 0.00% 0.0.25 0.25-0.50 0.50-1 1.2 2.3 3-4 4.5 5+ •Orange County Sanitation District Long Tenn •BAML 1-5 Vr US Corporate/Gout Rated AAA-A Index 0-0.25 0.25-0.50 0.50-1 1 -2 2-3 3-4 4-5 5+ Portfolio 7.4% 9.2% 7.4% 19.3% 16.8% 22.4% 13.8% 3.6% Benchmark* 0.0% 0.0% 1.5% 31.8% 28.6% 23.1% 14.9% 0.0% 'BAML 1-5 Vr US Corporate/Gout Rated AAA-A Index The duration of the portfolio was unchanged on a quarter over quarter basis, remaining at 2.44. The Chandler team continues to position the portfolio fora modest rise in interest rates, predominately via the underweight allocation to the one to three year portion of the maturity distribution. KI Investment Performance MEN Orange County Sanitation District Long Term Period Ending September 30,2017 Total Rate of Return Annualized Since Inception November 30,2014 1.40% 1.20% 1.00% 0.80% 0.60% 0.40% 0.20% 0.00% 12 months 2rare 3years 5Were 10 years Since Inception •Ominge County Sanitation District Long Term Annualized 3 months 12 months 2 years 3 years 5 years 10 years Since IOcaphOn Orange County Sanitation District Long Term 0,42% 0.55% 1,27% N/A N/A N/A 1.24% BAML 1-5 Yr US Corporate/Goat Rated AAA-A Index 0.38% 0.27% 1.04% N/A N/A N/A 1.19% Total rate of return:A measure of a portfolio's performance overtime. It is the internal rate of return,which equates the beginning value of the portfolio with the ending value; it includes interest eamings,realized and unrealized gains and losses in the portfolio. C1111 Compliance CALOrange County Sanitation District Liquid September 30,2017 COMPLIANCEPOLICY Assets managed by ChandlerAsset Management am in full compliance vith State lawand wth the investment policy Category Standard Comment Treasury Issues 1 year maximum maturity; Minimum allocation of 10% Complies Supranational "AA"or better by 1 of 3 NRSROs; 30%maximum; 5% max issuer; 1 year maturity, Complies Includes only: IADB, IBRD and lFC per CGC U.S.Agencies 20%max issuer, l year maximum maturity Complies U.S.Corporate(MTNs) "A"or better long term rating by 1 of 3 NRSROs;30%maximum;5%max issuer; 1 year Complies max maturity Asset Backed/CMOs "AA"or better by 1 of 3 NRSROs; "A"or higher issuer mting by 1 of 3 NRSROs; 20% Complies maximum; 5%max issuer; 1 year max maturity Negotiable CDs "A"or better on its long tens debt by 1 of 3 NRSROs ; "A1/P1"or highest short term ratings Complies by 1of3 NRSROs; 30% aximum;5%max issuer1 year max maturity CDs/TDS 5%max issuer, 1 year max maturity Complies Banker's Acceptances A-1,or equivalent short tens rating by l of 3 NRSROS;40%maxi mum;5%max issuer; 180 Complies days max maturity Commercial Paper A-1,or equivalent by 1 of 3 NRSROS;"A"or better by 1 of 3 NRSROs,if long tens debt Complies issued; 25%maximum;5%max issuer;270 days max maturity Mutual Fund & Money Market Mutual Fund Highest rating by2 NRSROs; 20%maximum; 10%max per mutual fund; 20%max per Complies money market mutual fund Repurchase Agreements 102%collatemlization Complies Reverse Repurchase A reements 5%maximum,90 days max maturity Complies LAIF Not used by investment adviser Complies Prohibited Municipal Securities Complies Prohibited Mortgage Securities Complies Avg Duration NOtto exceed 180 days; Max duration of 112 year Complies Maximum Maturity 1 year maximum maturity Complies C1111 Portfolio Characteristics Orange County Sanitation District Liquid 9/30/2017 6/30/2017 Benchmark` Portfolio Portfolio Average Maturity(yrs) 0.17 0.17 0.14 Modified Duration 0.16 0.17 0.14 Average Purchase Yield n/a 1.12% 0.93% Average Market Yield 0.99% 1.16% 0.96% Average Quality" AAA AA+/Aal AAA/Aaa Contributions/Withdrawals -75,200,000 Total Market Value 49,486,477 124,436,078 `BAML 3-Month US Treasury Bill Index '"Benchmark is a blended rating of S&P, Moody's,and Fitch.Portfolio is S&P and Moody's respectively. Many securities were purchased across the Treasury,Agency, Commercial Paper and Corporate sectors of the market to keep the portfolio as fully invested as possible. The purchased securities ranged in maturity from July 2017 to March 2018. Cash flows were heavy during the quarter,with modest contributions early in the quarter and large withdrawals later in the quarter. In aggregate$75 million was withdrawn from the portfolio during the reporting period. Sector Distribution Orange County Sanitation District Liquid September 30, 2017 June 30,2017 Supranational US Treasury US Treasury 0.9 21.2% 28.5" Agency 24.5% Commercial Agency Paper US Corporate 54.0% US Corporate 4.5% 8.5% 28.2% Negotiable Money Market CD Fund FI 1.6 19.5% Money Market Negotiable Fund FI Commercial CD 2.3% Paper 2.0% 4.1% The sector allocation changed materially with the large contraction in the market value of the portfolio. Some of the larger changes include the 19.7% increase in the Corporate allocation, to 28.2%of the portfolio, offset by the 29.5% decline in the Agency allocation, to 24.5% of the portfolio. The Money Market fund allocation was also elevated due to maturities at the end of the month that was not economical to reinvest prior to the end of the quarter. GR I Issuers Orange County Sanitation District Liquid-Account#10282 As of 9/30/2017 Issue Name Investment Type % Portfolio Government of United Stales US Treasury 21.23% First Amencan Govt Obligation Fund Class-Z Money Market Fund FI 19.53% Federal Home Loan Bank Agency 14.13% Federal Home Loan Mortgage Corp Agency 10.35% Bank of Tokyo-Mit UFJ Commercial Paper 2.51% JP Morgan Chase&Co US Corporate 2.07% General Electric Co US Corporate 2.07% United Parcel Service US Corporate 2.03% Oracle Corp US Corporate 2.03% ChevrenTexaco Corp US Corporate 2.03% Svenska Handelsbanken NY Negotiable CD 2.03% Intel Coup US Corporate 2.03% Visa Inc US Corporate 2.03% HSBC USA Corp US Corporate 2.03% Deere&Company US Corporate 2.03% PNC Financial Services Group US Corporate 2.02% Charles Schwab Corprrhe US Corporate 2.02% Honda Motor Corporation US Corporate 2.02% Exxon Mobil Corp US Corporate 2.02% Toyota Motor Corp Commercial Paper 2.02% Bank of New York US Corporate 1.76% Total 100.00% Quality Distribution Orange County Sanitation District Liquid September 30, 2017 vs. June 30, 2017 80.00% 70.00% 60.00% 50.00% 40.00% 30.00% 20.00% 10.00% — 0.00% AAA AA A <A NR •6/30/2017 •6130/2017 AAA AA A c4 NR 09/30/17 37.7% 42.2% 20.0% 0.0% 0.0% O6/30/17 68.9% 25.9% 5.2% 0.0% 0.0% Soume:S&P FZWngs JJjjj Duration Distribution Orange County Sanitation District Liquid Portfolio Compared to the Benchmark as of September 30, 2017 120.00% 100.m% 30.00% 60.00% 40.00% 20.00% 111% 0-0.25 0.25-0.50 0.50.1 1 .1.5 1.5.2 2.2.5 2.5.3 3+ •Orange County Sanitation District Liquid •BAML 3-Month US Treasury Bill Index 0-0.25 0.25-0.50 0.50-1 1 -1.5 1.5-2 2-2.5 2.5-3 3+ Portfolio 62.8% 37.2% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% Benchmark* 100.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 'BAML 3-Month US Treasury Bill Index he duration of the portfolio was close to unchanged,currently 0.17 versus 0.14 at the end of the prior quarter. The Chandler team continues to manage the portfolio versus forecasted cash flow needs of the District KI Investment Performance Orange County Sanitation District Liquid Period Ending September 30,2017 Total Rate of Return Annualized Since Inception November 30,2014 0.80% 0.70% 0.60% 0.50% 0.40% 0.30% 0.20% 0.10% 0.00% 12 months 2yeare 3years 5Were 10 years Since Inception •Orange County Sanitation District Liquid •BAML 3-Month US Treasury Bill Index Annualized 3 months 12 months 2 years 3 years 5 years 10 years Since IOcaphOn Orange County Sanitation District Liquid 0.26% 0,73% 0.57% N/A N/A N/A 0.47% BAML 3-Month US Treasury Bill Index 0.26% 0.66% 0.46% N/A N/A N/A 0.34% Total rate of return:A measure of a portfolio's performance over time. It is the internal rate of return,which equates the beginning value of the portfolio with the ending value; it includes interest eamings,realized and unrealized gains and losses in the portfolio. C1111 Compliance C." OCSD Lehman Exposure September 30,2017 COMPLIANCE • Assets managed by Chandler Asset Management are in full compliance wth State lawand wth the investment policy Category Standard t Treasury Issues 5 years maximum maturity Complies Supranational "AA"or better by of 3 NRSROs; 30%maximum; 5%max; 5years maturity, Complies Includes only'. IADB IBRD and IFC per CGC U.S.Agencies 20%max issuer 5 years maximum maturity Complies U.S. Corporate(MTNs) "A"or better long term rating by 1 of 3 NRSROs; 30% maximum;5%max issuer; 5 Complies' years max maturty Municipal Securities "A"or higher by of 3 NRSROS; 10%maximum; 5%max issuer; 5years Complies maximum maturity Asset Backed/CMOs/ "AA"or better by l of 3 NRSROs; "A"or higher issuer re0ng by 1 of 3 NRSROs; Complies Mortgage-backed 20%maximum; 5%max issuer(excluding MBS/gout agency);5 years max maturity Negotiable CDs "A"or better on its long term debt by 1 of 3 NRSROs; "A1/P1"or highest short Complies term ratings by 1 of 3 NRSROs; 30%maximum;5%max issuer; 5 years max maturity CDs/TDS 5%max issuer 5 years max maturity Complies Banker's Acceptances A-1,or equivalent highest short term rating by l of 3 NRSROS; 40% maximum; Complies 5%max issuer, 180 days max maturity Commercial Paper A-1,or equivalent by 1 of 3 NRSROS; "A"or better by 1 of 3 NRSROs, if long tens Complies debt issued; 25%maximum; 5%max issuer, 270 days max maturity Money Market Fund Hi hestretin b 2of3NRSROs; 20%maximum; 10°/maxissuer Complies Re umhaseAgreements 102%collateralimbon Complies Reverse Repurchase 5%maximum,90 days max maturity Complies Agreements LAIF Not used by investment adviser Com lies Avg Duration Not to exceed 60 months - 80%to 120%of the benchmark Complies Maximum Maturity 5 years maximum maturityCom lies Account holds$2 million face value(cusip 525ESCOy6)and$600,000 face value(cusip 525ESC113])of defaulted Lehman Bras Holdings that v ere purchased!by the preWous manager. Complied at time of purchase. C1111 Portfolio Characteristics OCSD Lehman Exposure 9/30/2017 6/30/2017 Portfolio Portfolio Average Maturity(yrs) 21.35 21.35 Modified Duration 0.00 0.00 Average Purchase Yield 0.00% 0.00% Average Market Yield 0.00% 0.00% Average Quality NR/NR NR/NR ContributionsfWithdrawals 0 Total Market Value 188,421 190,371 OR SECTION 3 Consolidated Information C1111 Portfolio Characteristics Orange County Sanitation District Consolidated 9/30/2017 6/30/2017 Portfolio Portfolio Average Maturity(yrs) 2.42 2.07 Modified Duration 2.14 1.81 Average Purchase Yield 1.64% 1.47% Average Market Yield 1.58% 1.43% Average Quality AA/Aa2 AA+/Aal Contri butions/W ilhdrawals Total Market Value 382,874,766 456,431,818 Sector Distribution Orange County Sanitation District Consolidated September 30, 2017 June 30,2017 ABS ABS US Treasury 4.1 h US Treasury 4.4% 30.9% 29.0 0 Agency 24.7 Agency CMO 33.10 0.7% Commercial Paper CMO 2.3% 0.6% Money Market Fund FI US Corporate Commercial US Corporate 3.7% 198% Paper 24.4% Mortgage 8 go y Supranational �fflone Market Supranational Pass Thru 6.2% Mortgage Fund Fl Negotiable Municipal 05% Negotiable Municipal 5.8/ CD Bonds CD Bonds Pass Thru 1.3% 1.8% 1.2% 0.4% 1.0% 0.4% OR SECTION 4 Portfolio Holdings Orange County Sanitation District Long Term Holdings Report Account 010268 As of 9/30117 Purchase D.:o Cost V.:u: Mid Price Market Value %of Pod. MoodyIS&P Maturity CUSP Security Description Par Value/Units Book Yie d Book Va Mkt YTM Accrued Ind. Gain/Loss Fitch Duration ASS 111111 477877AD6 John Deere Owner Trust 2014-B A3 391,358.07 0210412015 391,541.52 99.96 391,215.46 0.12% Asa INR 1.13 1.07%Due 11/15/2018 1.05% 391,366.24 1A1 % 186.11 (150.78) AAA 0.11 89236WAC2 Toyota Auto Receivables Owner 2015-A 1,009,843.44 0212412015 1,009,690.75 99.94 1,009,262.24 0.30% Aaa I AAA 1.38 1.12%Do.211512019 1.13% 1,009,824.05 1.36% 502.68 (561.81) NR 0.25 47788NAM John Deere Owner Trust 2016-B A2 1,584,412.75 07I19I2016 1,584,316.10 99.94 1,583,414.44 0.48% Asa/NR 1.38 1.09%Due 2115/2019 1.10% 1,584,360.75 1.40% 767.66 (946.31) AAA 0.20 65478WAB1 Nissan Auto Receivables Owner 2016-C 1,166,951.01 08/02/2016 1,166,905.04 99.91 1,165,929.36 0.35% Asa INR 1.62 A2A 1.08% 1,166,924.06 1.37% 554.95 (994.70) AAA 0.30 1.07%Due 5/15/2019 43814TAB8 Honda Auto Receivables 2017-1 A2 1,748,532.31 03/21/2017 1,748,490.52 99.96 1,747,867.76 0.52% Asa INR 1.81 1.42%Due 712212019 1.43% 1,748,499.76 1.50% 689.70 (632.00) AAA 0.53 47787 AB3 John Deere Owner Trust 2017-A A2 1,410,000.00 0212212017 1,409,994.36 99.96 1,409,476.89 0.42% Asa/NR 2.04 1.5%Due 10/15/2019 1.50% 1,409,995.62 1.56% 940.00 (518.73) AAA 0.63 654747AB0 Nissan Auto Receivables 2017-A A2A 1,365,000.00 0312112017 1,364,993.04 99.97 1,364,632.82 0.41 % Aea/NR 2.29 1.47%Due 111512020 1.47% 1,364,994.31 1.52% 891.80 (301.49) AAA 0.65 43814PAB6 Honda Auto Receivables Owner T 17-3 965,000.00 0925/2017 964,914.21 99.99 964,936.31 0.29% NR/AAA 2.31 A2 1.50% 964,914.41 1.58% 84.17 21.90 AAA 0.89 1.57%Due 112112020 47788MA04 John Deere Owner Trust 2016-A A3 2,420,000.00 0212312016 2.419,619.09 99.83 2,415,825.50 0.73% Asa INR 2.54 1.36%Due 411512020 1.37% 2,419,765.38 1.60% 1,462.76 (3,939.88) AAA 0.73 438140AC2 Honda Auto Receivables 2016-2 A3 1,810,0W.W 0512412016 1,809,964.89 Net 1,806,580.91 0.54% Asa INR 2.54 1.39%Due 4115/2020 1.40% 1,809,977.00 lust% 1,118.18 (3,396.09) AAA 0.87 47788BABO John Dears Owner Trust 2017-8 A2A 960,000.00 0711112017 959,916.58 99.94 959,451.84 0.29% Asa/NR 2.54 1.59%Due 4/15/2020 1.60% 959,922.82 1.66% 678.40 (470.98) AAA 0.92 83162CUO Small Business Administration 2001-20C 47,016.48 0310612001 47,016.48 104.W 49,273.60 0.01 % Asa/AA+ 3.42 6.34%Due 311/2021 6.34% 47,016.48 4.36% 248.40 2,267.12 AAA 1.82 4778BBAD6 John Deere Owner Trust 2017-B A3 675,000.00 07/112017 674,950.59 99.93 674,555.85 0.20% Asa/NR 4.04 1.82%Due 1011512021 1.83% 674,952+98 1.86% 546.00 (397.13) AAA 2.12 78445JAA5 SLMA 2008-9A 31,510.89 08122IM08 31,383.05 102.35 32,251.43 0.01 % Baa31 AA+ 5.57 2.817%Due 4/25/2023 2.89% 31,462.36 2A6% 167.65 789,07 B 3.45 15,583,696.22 15,574,674.41 4.68% Asa/AAA 2.15 Total ASS 15,584,624.95 1.39% 15,583,976.22 1.54% 8,838.36 (9,301.81) AAA 0.67 AGENCY 3137EADN6 FHLMC Note 5,000,000.00 01/23/2015 4,967,500,00 99.88 4,994,155.00 1.50% Asa IAA+ 0.28 0J5%Due 1/12/2018 0.97% 4,996,906.19 1.16% 8,229.17 (2,751.19) AAA 0.28 3137EADPI FHLMC Note 5,000,000.00 01/132015 4,974,100.00 Was 4,992,890.00 1.50Is Aaa/AA+ 0.43 0.875%Due 31712018 IN% 4,996,457+93 1.20% 2,916.67 (3,567.93) AAA 0.43 313378A43 FHLB Note 7,500,000.00 0211112015 7,544,850.00 100.09 7,506,547.50 2.25% Ass/AA+ 0.44 1.375%Due 319/2018 1.18% 7,506,361A2 1.18% 6,302.08 186.08 AAA 0." Chandler Asset Management-CONFIDENTIAL 35 Orange County Sanitation District Long Term Holdings Report Account 010268 As of 9/30117 Purchase D.:o Cost V.:u: Mid Price Market Value %of Pod. MoodyIS&P Maturity CUSIP Security Description Par Value/Units Book Yie d Book Va Mkt YTIA Accrued Ind. Gain/Loss Fitch Duration AGENCY 111111 3135GOG72 FNMA Note 5,000,000.00 12/18/2015 4,963,950.00 99.65 4,982,625.00 1.50% Ann/AA+ 1.21 1.125%Due 12/14/2018 1.37% 4,985,467.45 1A2% 16,718.75 (2,842.45) AAA 1.19 3133782102 FHLB Note 7,500,000.00 Various 7,589,190.00 100.04 7,503,187.50 2.25% Aaa/AA+ 1.44 1.5%Due 3/8/2019 1.14% 7,537,385+24 1.47% 7,187.50 (34,197.74) AAA 1.42 3137EADM8 FHLMC Note 7,500,000.00 Various 7.399,650.00 99.43 7,457,040.00 2.25% Aee/AA+ 2.01 1.25%Due 10/212019 1.61 % 7,447,269.28 1.54% 46,614.58 9,770.72 AAA 1.96 313383HU8 FHLB Note 5,000,000.00 Nat 3/2015 5,008,950.00 100.17 5,008,290.00 1.51 % Ass/AA+ 2.70 1.75%Due 611212020 1.71 % 5,004,997.59 1.69% 26,493.06 3,292.41 NR 2.61 3135GOD75 FNMA Note 5,000,000.00 1111612015 4,955,650.00 99.72 4,985,980A0 1.50% Asa/AA- 2.73 1.5%Due 3=020 1.70% 4,973,717.54 1.61% 20,625.00 12,262.46 AAA 2.65 3135GOF73 FNMA Note 7,500,000.00 Various 7,370,726.00 99.33 7,449,727.50 2.25% Aaa/AA+ 3.17 1.6%Due 1113012020 1.87% 7,417,462.30 132% 37,812.50 32,265.20 AAA 3.06 3130A7CV5 FHLB Note 5,365,000.00 0211712016 5,343,325AO 98.97 5,309,552.73 1.60% Aaa/AA+ 3.39 1,375%Due V18/2021 1,46% 5,350,336.72 1.69% 8,811.27 (40,783.99) AAA 3.28 3135GOJ20 FNMA Note 10,000,000.00 Various 10.040,950.00 Wr 9,876,880.00 2.97% Aee/AA+ 3.41 1.375%Due 212612021 1.28% 10,030,398.49 1.76% 13,368.06 (153,518.49) AAA 3.31 313379RB7 FHLB Note 4,000,000.00 W30/2017 4,030,160.00 100.30 4,012,052.00 1.21 % Ass/AA+ 3.70 1.875%Due 611112021 1.67% 4,029,482.49 1.79% 22,916.67 (17,430.49) AAA 3.54 3135GOS38 FNMA Note 3,000,000.00 0113012017 2,994,570.00 100.25 3,007,623.00 0.91 % Asa/AA+ 4.27 2%Due 115)2022 IN% 2,995,303.05 1.94% 14,333.33 12,319SS AAA 4.05 3135GOT45 FNMA Note 5,000,000.00 0510512017 4,972,500.00 N.T? 4,988,625.00 1.51 % Aaa/AA+ 4.52 1.875%Due 4I512022 1.99% 4,974,739,26 1.93% 44,531.25 13,88534 AAA 4.27 82,156,071.40 82,075,175.23 24.72% Aaa/AA+ 2.33 Total Agency 82,365,000.00 1A7% 82,246,284.95 1.56% 276,859.89 (171,109.72) AAA 2.25 62888UAA8 NCUA Guaranteed Note CMO 2010-R2 301,727.93 11/10/2010 301,726.57 100.02 301,782.24 0.09% Ass/AA+ 0.10 1.605%Due 11/612017 0.00% 301,726.57 0.73% 336.75 55.67 NR 0.01 31398VJ98 FHLMC FHMS K006 A2 900,000.00 1112312010 951,046.88 104.63 W,668.20 0.28% Aaa/AA+ 2.32 4.251%Due 1/25/2020 3.54% 912,914.37 1.94% 3,188.25 28753.83 AAA 2.06 3837H4NX9 GNMA Pool#2000-9 22,755.67 01/2412000 22,765.67 100.50 22,870.36 0.01 % Aaa/AA+ 12.39 1.737%Due 2116/2030 1.75% 22,755S7 129% 32.86 114.69 AAA 0.03 3133TCE95 FHLMC FSPC E3A 29,502.75 0311111998 29,533.61 100.25 29,576.51 0.01 % Aaa/AA+ 14.88 3.228%Due 8/15/2032 3,19% 29,516.13 1.65% 79.36 60.38 AAA 1.49 31397OREO FNMA FNR 20113 FA 277,940.21 1212012010 277,853.36 101.33 281,631.26 0.08% Aee/AA+ 23.42 1.917%Due 2I25I2041 1.92% 277,872.63 1.77% 88.79 3,768.63 AAA 0.14 313NJY35 FHLMC FSPC T582A 905,200.13 O6/09/2011 1,025,139.14 115.99 1,049,923.53 0.32% Ass/AA+ 26.00 6.5%Due 9125/2043 5.40% 1,001,733+18 3.55% 980.63 48,190+35 AAA 5.29 2,608,055.23 2,627,452.10 0.79% Aaa/AA+ 14.01 Total CMO 2,437,126.69 3.65% 2,546,518.55 2.42% 4,706.64 80,933.55 AAA 2.88 Chandler Asset Management-CONFIDENTIAL 36 Orange County Sanitation District Long Term Holdings Report Account 010268 As of 9/30117 Purchase Da:o Cost V.:u: Nut Price Market Value %of Pod. MoodyIS&P Maturity CUSIP Security Description Par Value/Units Book Yie d Book Va Mkt YTM Accrued Ind. Gain/Loss Fitch Duration COMMERCIAL PAPER 06538BY80 Bank of Tokyo Mitsubishi NY Discount 6,640,000.00 07/07/2017 6,609,581.42 99.86 6,630,678.18 1.99% P-1 IA-1 0.11 CP 1.35% 6,630,678.18 1.35% 0.00 0.00 NR 0.11 1.33%Due 11/812017 6,609,581.42 6,630,678.18 1.99% P-1/A-1 0.11 Total Commercial Paper 6,640,000.00 1.35% 6,630,678.18 1.35% 0.00 0.00 NR 0.11 MONEY MARKET FUND Fit MMW 31846V567 First American Govt Obligation MMKT 4,492,008.74 Various 4,492,008,74 1.00 4,492,008,74 1.35% Ace I AAA 000 Class-Z 0.89% 4492,00874 089% coo 0.00 AAA 000 4,492,008.74 4,492,008.74 1.35% Anal AAA 0.00 Total Money Market Fund FI 4,492,008.74 0.89% 4,492,008,74 0.09% 0.00 0.90 AAA 0.00 MORTGAGE PASS THRU 31381PDA3 FNMA FN 466397 354,011,22 12/01/2010 346,350,22 103.76 367,329.12 0.11 % Asia IAA+ 3.09 84%Due 11I112020 3.80% 351.624.83 2A0% 234.04 15,70,i 29 AAA 2.86 36225CAZ9 GNMA Poi G280023 21,960.55 08/08/197 22,324.26 103.35 22,697.24 0.01 % Aaa/AA+ 9.23 1.625%Due 1MM026 1.52% 22,074S0 1.90% 29.74 622.34 AAA 2.94 36225CC20 GNMA Pool#G280068 25,431.05 0611111997 25,987+37 103.57 26,339.80 0.01 % Asa/AA+ 9.73 2,74%Due 6/20/2027 2,60% 25,612.34 1.98% 58.07 727.46 AAA 2.91 31366SVd2!3 FHLMC FH 786064 2,257.93 0211812000 2,202.95 102.86 2,322.45 0.00% Aini 10.26 3.377%Due 1/1/2028 3.58% 2,237.70 2.77% 6.35 84.75 AAA 4.82 31371NUC7 FNMA FN 257179 21,417.80 12/06011 22,651A2 107.56 23,037.16 0.01 % Ass,/AA+ 10.51 4.5%Due V1/2028 3.72% 22,212.25 2.11% 80.32 824.91 AAA 3.25 31417YAY3 FNMA P.I#FN MA0022 25,575.46 12/05/2011 27,048.54 107.65 27,531.85 0.01 % Asia/AA+ 11.51 4.5%Due V112029 3,76% 26,554A1 2.26% 95.91 977," AAA 3.38 3138EG6F6 FNMA FN AL0869 15,672.77 12/05/2011 16,575.49 107.64 16,870.03 0.01 % Asia/AA+ 11.68 4.5%Due 6/1/2029 3.77% 16,275.57 Z21% 13.71 594.46 AAA 3.38 03215PFN4 AMRESCO Residential Securities 1999-1 133,743.29 05/2012011 100,432.85 9830 131,465.64 0.04% NR IAA+ 11.74 A 5,80% 112,139.65 2.46% 48.52 19,325+99 BBB 7.81 2.177%Due 612512029 36225CNM4 GNMA Pool#G280395 9,178.30 03/15/2000 9,095.10 103.87 9,533.87 0.00% Asia/AA+ 12.56 2.74%Due 4120/2030 2.81 % 9,143.38 1.96% 20.% 390.49 AAA 3.60 36225CN28 GNMA Poi G280408 73,989.04 0311512000 73,237+59 103.85 76,834.29 0.02% Aaa/AA+ 12.64 2.74%Due 512012030 2,82% 73,672+49 1.98% 168194 3,161.80 AAA 3.69 31403GYF4 FNMA P.I#FN 748678 4,200.69 Di 4,515.74 109.84 4,613.97 0.00% Aaa/AA+ 16.01 5%Due 10/1/2033 4.16% 4,450.07 2.39% 17.50 163.90 AAA 3.79 36225DCB8 GNMA Pool#G280965 72,499.44 07/19/2004 72,45 A4 104.25 75,581.10 0.02% Aaa/AA+ 16.81 2.09%Due 712012034 2.10% 72,473+99 1.62% 126.27 3,107.11 AAA 3.01 Chandler Areal Management-CONFIDENTIAL 37 Orange County Sanitation District Long Term Holdings Report Account 010268 As of 9/30117 DescriptionPurchase Da:o Cost V.:u: Mid Price Market Value %of Pod. kill Maturity CUSIP Security MORTGAGE PASS THRU i 31406XWT5 FNMA Pool#FN 823358 133,185.44 01/11/2006 132,144.94 105.20 140,108.02 0.04% Ann/AA+ 17.36 3.274%Due 21112035 3.34% 132,563.89 257% 363.37 7,544.13 AAA 5.28 31406POY8 FNMA Pool#FN 815971 244,056.02 O611012013 262,360.24 110.21 268,985.37 0.08% Aaa/AA+ 17.43 5%Due 3I1/2035 4.21 % 258,793.94 2.50% 1,016.90 10,191+43 AAA 4.01 31407BXH7 FNMA PwI#FN 826080 26,403.59 0611012013 28,383.85 110.29 29,119.67 0.01 % Aaa/AA+ 17.76 5%Due 711/2035 4.22% 28,003.89 2.50% 110.01 1,115.78 AAA 4.02 31376KTU FNMA FIN 357969 144,248.04 O6/10/2013 155,066.63 110.20 158,966.68 0.05% Aaa/AA+ 17.93 5%Due 911/2035 4.22% 153,006.77 2.51% 140.24 5,959.91 AAA 4.04 31403DJ23 FNMA Poo1#745580 139,808.68 MIIOIN13 150,294.34 110.22 lK099.92 0.05% Aaa/AA. 18.68 5%Due 611=36 4.26% 148,363.33 2.52% 582.54 5736.59 AAA 4.06 3141OF4V4 FNMA P.I#FN 888336 269,08572 W/1012013 289,267.17 109.78 295,405.26 0.09% Aaa/AA+ 1876 5%Due 711/2036 4.25% 285,563.91 2.51% 1,121.19 9,841.35 AAA 4.04 1,740,392.84 1,830,841.44 0.55% Aaa I AA+ 13.81 Total Mortgage Pass Thru 1,716,725.03 3.94% 1,744,767.31 2.34% 4,234.58 86,074.13 AAA 4.05 MUNICIPAL BONDS 73358WAG9 Port Authority of NY B NJ TE-REV 2,440,000,00 Various 2,507,633,89 107.24 2,616,704.80 0.80% Aa3/AA- 2.17 5,309%Due lW12019 4,97% 2,454,065,73 189% 43,179.87 162,639,07 AA- 2.03 64971M5E8 New York NY TE-REV 1,400,000.00 1012712010 1,400,000.00 106.23 1.487,164.00 0.45% Aal/AAA 3.09 4.075%Due 11/1/2020 4.08% 1.400,000.00 1.98% 23,770.83 89,164.00 AAA 2.86 913366EJ5 Univ of California Rgts Med TE-REV 400,000.00 11I09I2010 400,000.00 108.97 435,880.00 0.13% Aa3/AA- 3.62 5.035%Due 5/15/2021 5.04% 400,000.00 2A3% 7,608.44 35,880.00 M. 3.28 4,307,633.89 4,539,748.80 1.38% Aa21 AA 2.61 Total Municipal Bonds 4,240,000.00 4.68% 4,254,065.73 1.97% 74,559.14 285,683.07 AA 2.42 NEGOTIABLE CD 06417GXH6 Bank of Nova Scotia Yankee CD 5,825,000.00 08/08/2017 5,825,000.00 100.00 5,825,000.00 175% P-1/A-1 0.86 1.57%Due 819/2018 1.57% 5,825,000.00 1.57% 13,463.84 0.00 NR 085 5,825,000.00 5,825,000.00 1.75% P-1/A-1 0.86 Total Negotiable CD 5,825,000.00 1.57% 5,825,000.00 1.57% 13,463.84 0.00 NR 0.85 SUPRANATIONAL IL 459058EJB Intl,Bank Recon B Development Note 5,000,000,00 Various 4,991,170,00 99.76 4,988,140.00 1.50% Aaa I AAA 0,71 1%Due 6/15/2018 1.07% 4,997,66722 134% 14,72222 (9,52722) AAA 070 4581XOCX4 Inter-American Dan,Bank Note 3,035,000.00 04I05I2017 3,027,807.05 99.71 3.026,332.04 0.92% Are I AAA 2.62 1.625%Due 5l D2020 170% 3,028,905.80 174% 23,152.41 (2,57376) AAA 2.53 4581XOCS5 Inter-American Dee Bank Note 3,500,000.00 0712512016 3,590,405.00 100.00 3,500,115.50 1.05% Aaa IAAA 3.46 1.875%Due 3/15/2021 1.30% 3,567,336.51 1.87% 2,916.67 (67,221.01) AAA 3.33 45950KCJ7 International Finance Corp Note 2,500,000.00 11IM12016 2,441,600.00 97.06 2,426,595A0 0.73% Aaa I AAA 3.81 1.125%Due 7/2012021 1.64% 2.452,679.98 1.93% 5,546.88 (26,084.98) NR 3.69 Chandler Asset Mere,orent-CONFIDENTIAL 38 ��" Orange County Sanitation District Long Term Holdings Report Account 070268 As of 9/30117 Purchase D.:o Cost V.:u: Midt Price Market Value %of Pod. MoodI Maturity CUSP Security Description Par Value/Units Book Yie d Book Vs Mkt Y'I'M Accrued Ind. Gain/Loss Fitch Duration SUPRANATIONAL 4581XOCW6 Inter-American Dev Bank Note 3,000,000.00 01/10/2017 2,996,310.00 100.49 3,014,694.00 0.91 % Ads INR 4.30 2.125%Due 1118/2022 2.15% 2,996,827.33 2.01% 12,927.08 17,866.67 AAA 4,07 459058FY4 Intl.Bank Remn 6 Development Note 5,000,000.00 06I26I2017 5,030,550.00 99.91 4,995,720.00 1.50% Asa/NR 4,33 2%Due 1/26/2022 1.86% 5,028,798.03 202% 18,055.56 (33,078.03) AAA 4.11 22,077,842.05 21,951,596.54 6.61 % Aaa I AAA 3.07 Total Summational 22,035,000.00 1.58% 22,072,214,87 1,79% 77,320.82 (120,618.33) AAA 2.94 US CORPORATE ad 060505DP6 Bank of America Corp Note 31800,000.00 01115/2014 4,334,014,00 100.69 3,826,136.40 1.17% Baal IBBB+ 0.17 5.75%Due 12I112017 1,95% 3,823,102.73 1S5% 72,833.33 3,033.67 A 0.17 166764AA8 Chevron Corp Callable Note Cant 2,000,000.00 12I04I2014 1,988,600.00 99.95 1,999,040.00 0.60% Aa2/AA- 0.18 1115/17 1.30% 1,999,321.43 1sO% 7,114.67 (281.43) NR 0A0 1.104%Due 1215I2017 458140AL4 Intel Corp Note 2,000,000.00 0112612015 2,008,280.00 100.01 2,000,281 0.60% Al/A+ 0.21 1.35%Due ID15/2017 1.20% 2.000,590.87 1.28% 7,950.00 (310.87) All 0.21 40428HPH9 HSBC USA Inc Note 3,000,000.00 Various 3,003,290.00 100.D4 3,001,119.00 0.90% A2/A 0.30 1.625%Due 1/16/2018 1.59% 3,000,322.98 149% 10,156.25 796.02 AA- 0.29 38141 GFG4 Goldman Sachs Group Inc Note 600,000.00 Various 692,806.00 101.27 607,606.80 0.18% Ai I BBB+ 0.30 5.95%Due 1/1812018 2,74% 605,352.76 1.68% 7,239.17 2,254.04 A 0.30 674599CD5 Occidental Petroleum Callable Note Cant 2,000,000.00 0110612015 1,986,340.00 99.91 1,998,216.00 0.60% A31A 0.38 1/15/18 1.73% 1,998,348.26 1.81% 3,833.33 (132.26) A 0.29 1.5%Due 2/15/2018 025816AY5 American Express Credit Note 2,900,000.00 Various 3,377,385+79 102.49 2,972,291.20 0.89% A3I BBB+ 0.47 7%Due 3/19/2018 4.28% 2.931,142.90 1.65% 8,786.86 41,148.30 A 0.47 073902CD8 Beer Stearns Note 3,200,000.00 01115I2014 3.523,520.00 102.16 3,268,996.40 0.99% A3INR 0.75 4.65%Due 712/2018 2.25% 3,254,617.67 1.76% 36,786.67 14,380.73 A+ 0.74 532457BF4 Eli Lilly B CO Note 4,000,000.00 Various 4,009,675.00 100.49 4,019,536.00 1.21 % A2/AA- 1.45 1.95%Due 3115/2019 1.89% 4,003,295+03 1.61% 3,466.67 16,240+97 A 1.43 02665WAH4 American Honda Finance Note 4,000,000.00 Various 4.046,640.00 100.79 4,031,740.00 1.21 % At/A+ 1.87 2.25%Due 8I15I2019 1.93% 4,022,904AS 1.82% 11,500.00 8,835.52 NR 1.83 06406HCW7 Bank of New York Callable Note Cont 2,120,000.00 0211012016 2,142,175.20 100.78 2,136,446.98 0.64% At IA 1.95 8/11/2019 1.99% 2,131,837.23 1 87% 2,708.89 4,609.73 AA- 1.82 2.3%Due 9/11 R019 24422ESS9 John Deere Capital Core Note 5,000,000.00 Various 5.046,984.00 101.E0 5,055,010.00 1.52% A2/A 1.96 2.3%Due 9/16/2019 2.07% 5.020,993.18 1.73% 4,791.67 34,016.82 A 1.91 36962G7MO General Electric Capital Corp Callable 5,000,000.00 Various 5,014,960.00 100.89 5,044,585.00 1.52% At/AA- 2.28 Note 1X 12I812019 2.13% 5,006,913.27 138% 25,055.55 37,671.73 AA- 2.12 2.2%Due 1/9/2020 46625HKA7 JP Morgan Chase Callable Note Cont 2,000,000.00 02IM12015 1,994,880.00 100.54 2,010,768.00 0.61 % A3/A- 2.32 1212312019 2.30% 1,997,608.69 2.00% 8,5m.m 13,159.41 A+ 2.16 2.25%Due 112312020 Chandler Aseal Management-CONFIDENTIAL 39 ��" Orange County Sanitation District Long Term Holdings Report Account 010268 As of 9/30117 Purchase D.:o Cost V.:u: Mid Price Market Value %of Pod. MoodyIS&P Maturity CUSP Security Description Par Value/Units Book Yie d Book Va Mkt YTM Accrued Ind. Gain/Loss Fitch Duration US CORPORATE 40428HPR7 HSBC USA Inc Note 1,250,000.00 02/05/2016 1,222,787.50 100.64 1,257,991.25 0.38% MIA 2.43 2.35%Due 3l5/2020 2.92% 1,233,764.12 2.08% 2,121.53 24,227.13 AA- 2.35 747525AD5 Oualcomm Inc Note 5,000,000.00 0511912015 4,995,195.40 101.06 5,052,9W.W 1M% At IA 2.64 2.25%Due 5/20/2020 2.27% 4,997,467.38 1.84% 40,937.51 55,482.62 NR 2.53 94994BGM6 Wells Fargo Corp Note 5,000,000.00 07/16/2015 5.001,650.00 101.40 5,070,180.00 1.53% A21A 2.81 2.6%Due 7/22/2020 2.59% 5,000,925.70 2.08% 24,916.67 69,254.30 AA- 2.69 037833BS8 Apple Inc Callable Note Cant 112312021 4,000,000.00 05/23/2016 4,050,840.00 1N.80 4,032,184M 1.21 % Aa1/M+ 3.40 2.25%Due 212312021 1.96% 4,036,122.37 2.00% 9,5W.W (3,938.37) NR 3.25 30231 GAV4 Exxon Mobil Corp Callable Note Cant 3,000.000.00 Various 3,016,097.40 1 W.76 3,022,662.W 0.91 Is Aaa/AA+ 3.42 2/1/2021 2.10% 3.011,543.10 1.99% 5,555.01 11,118.90 NR 3.27 2.222%Due 3/112021 166764BG4 Chevron Corp Callable Note Cant 2,500,00.0 0512012016 2,485,350.00 1W.05 2,501,227.W 0.76% Affi/AA- 3.63 4/152021 2.23% 2,489,332+99 2.09% 19,687.50 11,894.51 NR 3.37 2.1%Due 5/1612021 6174MAL3 Morgan Stanley Note 2,800,000.00 N/N/2014 3,200,848.00 110.92 3,105,855.20 0.94% A31 BBB+ 3.83 5.6%Due 7/28/2021 3.24% 3,014,893.94 2.49% 26,950.00 90,961.26 A 3.46 594918BP8 Microsoft Callable Note Cant 7/8/21 3,045,000M Various 3,041,385.15 96.23 2,991,231.39 0.90% Aaa/AAA 3A6 1.55%Due BI82021 1.57% 3,042,214+63 2.03% 6,948.52 (50,983.24) AA+ 3.71 06406RAA5 BANK OF NV MELLON CORP Note 2,500,000.00 02110812017 2.504,475.00 101.00 2,524,880.00 0.76% At/A 4.36 Callable 19122 CONT 2.56% 2.503,899.68 2.36% 9,7W.W 20,980.32 AA- 4.01 2.6%Due 2I72022 674599CK9 Occidental Petroleum Callable Note Cant 3,350,000.00 0412512017 3,354,589.50 1 W.62 3,370,646.05 1.02% M I A 4.54 3/152022 2,57% 3,354.187.73 2.45% 40,162.78 16,458.32 A 4.14 2.6%Due tJ15/2022 084664BT7 Berkshire Hathaway Note 4,000,000.00 0512312017 4,131,120.00 103.36 4,134,272.00 1.25% Aa2/AA 4.62 3%Due 5115/2022 2.30% 4,121,872.97 2.23% 45,333.33 12,399M A+ 4.26 80,173,877.94 79,035,853.15 23.85% At/A+ 2.32 Total US Corporate 78,065,000.00 2.22% 78,602,575.99 1.90% 440,565.71 433,277.16 A+ 2.19 US TREASURY 91282BG20 US Treasury Note 2,000,000.00 Various 1,989,756.70 Well 1,999,502.W 0.60% Ass IM+ 0.13 0.875%Due 11/1 5201 7 1.05% 1,999,566+97 1.07% 6,610.05 (ag.97) AAA 0.12 912828UR9 US Treasury Note 31500,000.00 N12212016 3,496,457.04 ".at 3,493,437.50 1.05% Aaa/AA- 0.41 0.75%Due 2/28/2018 0.81 % 3.499,211.51 1.20% 2,247.93 (5,774.01) AAA 0.42 91282BB33 US Treasury Note 11,000,000.00 Various 11,042,439.19 1m.11 11,011,605.W 3.31 % Aaa/AA+ 1.34 1.5%Due 1/31/2019 1.37% 11,018,246.13 1A2% 27,798.91 (6,641.13) AAA 1.31 912828SN1 US Treasury Note 5,000,000.00 1212812016 5,016,423+00 1M.12 5,005,860.00 1.W% Aaa/M+ 1.50 1.5%Due 3/312019 1.35% 5,010,908.71 1.42% 2W.04 (5,048.71) AM 1.48 912828WS5 US Treasury Note 2,000,000.00 Various 1,996,861.44 iW.29 2,005,704.00 0.60% Aaa/M+ 1.75 1.625%Due 6/30/2019 1.66% 1,998,890.26 1.46% 8,213.32 6,813.74 AM 1]1 912828WW6 US Treasury Note 5,000,000.00 Various 5,012,388.70 1W.29 5,014,260.00 1.51Is Aaa/M+ 1.83 1.625%Due 713112019 1.57% 5,004,568.76 1.47% 13,688.86 9,691.24 AM 1.80 Chandler Asset Management-CONFIDENTIAL 40 ��" Orange County Sanitation District Long Term Holdings Report Account 010268 As of 9/30117 Purchase Da:d Cost V.:u: Mid Price Market Value %of Pod. MoodyIS&P Maturity CUSIP Security Description Par Value/Units Book Yie Book Va Mkt YTM Accrued Ind. Gain/Loss Fitch Duration US TREASURY 1111 91282BF39 US Treasury Note 5,800,000.00 10/27/2014 5,873,186.87 100.50 5,829,226.20 1.75% Ann/AA+ 2.00 1.75%Due 9/30/2019 1.48% 5,829,673.65 149% 278.84 (447.45) AAA 1.96 912828G61 US Treasury Note 7,500,000.00 12/19/2014 7,449,634.50 Was 7,498,830.00 2.26% Aaa/AA+ 2.17 1.5%Due 11/30/2019 1.64% 7,477,944.15 1.51% 37,807.38 20,885+85 AAA 2.11 912828XE5 US Treasury Note 5,000,000.00 1212112016 4.966,423.00 99.78 4,989,060.00 1.50% Aaa/AA+ 2.67 1.5%Due 5/31/2020 1.70% 4,973,988.62 1.58% 25,204.92 16,071.48 AAA 2.59 91282BL99 US Treasury Note 5,500,000.00 Various 5,424,666.87 99.17 5,454,454.W 1.65% Ass/AA+ 3.09 1.375%Due 10/31/2020 1.67% 5,452,703.41 1.65% 31,647.42 1,751.09 AAA 2.99 9128281,89 US Treasury Note 6,000,000.00 Various 5,895,840.41 98.94 5,936,484A0 1.79% Aaa/AA- 3.34 1.375%Due 1/31/2021 1.81 % 5.916,186.08 1.70% 13,899.45 20,297.92 AAA 3.24 912828TU US Treasury Note 7,000,000.00 Various 6,757,914.08 97.37 6,815,977.00 2.05% Aaa/AA+ 4.00 1.125%Due 9/30/2021 1.89% 6,798,55871 1.81% 216.35 17,418.29 AAA 3.89 91282BT67 US Treasury Note 6,000,000.00 12/13/2016 5,813,691,98 97.T7 5,865,936.00 1.77% Aaa/AA+ 4.09 1.25%Due 10/3112021 1,92% 5,844,116,02 1.82% 31,385.87 21,819.98 AAA 3.94 912828UM US Treasury Note 7,000,000.00 1212612016 6,900,492,20 99.66 6,976,214.00 2.11 % Aaa/AA+ 4.17 1.75%Due 11/30/2021 2.06% 6,915,775.53 1.83% 41,168.03 60,438.47 AAA 3.98 91282BV72 US Treasury Note 3,000,000.00 02/27/2017 3,004,814.74 1W.05 3,001,524.00 0.90% Ass/AA+ 4.34 1.875%Due 113112022 1.84% 3,004,239.01 1.86% 9,476.% (2,715.01) AAA 4.13 91282BJ76 US Treasury Note 5,000,000.00 04125I2017 4,976,383.94 99.43 4,971,680.00 1.49% Aaa/AA- 4.50 1.75%Due 3I31I2022 1.85% 4,978,456S1 1.88% 240.38 (8,776.91) AAA 4.31 912828=5 US Treasury Note 6,000,000.00 0712512017 4,973,454.25 99.27 4,963,475.00 1.W% Ass/AA+ 476 1.75%Due 6130/2022 1.86% 4,974,442.34 lSl% 22,112.77 (10,967.34) AAA 4.52 91282BL24 US Treasury Note 6,000,000.00 012712017 5,987,832.60 99.74 5,984,532.00 1.80% Aaa/AA+ 4.92 1.875%Due 813112022 1,92% 5,987,852.90 1.93% 9,633.98 (3,320.90) AAA 4.67 912828WUO US Treasury Inlabon Index Note 10721,776.00 Various 10.608,015.83 98.99 10,613,850.59 3.19% Aaa/AA+ 679 0.125%Due 7/15I2024 0.23% 10,644,236.43 0.27% 2,840.67 (30,385.8,1) AAA 6.75 107,186,677+34 107,431,611.79 32.33% Aaa I AA+ 3.31 Total US Treasury 109,021,776.00 1.52% 107,329,566ell 1.50% 284,678.07 102,045,79 AAA 3.21 332,760,837.07 332,014,640.38 100.00% Aai I AA 2.74 TOTAL PORTFOLIO 331,422,261A1 173% 331,327,656.54 1.64% 1,185,227.05 686,983.84 AAA 2.44 TOTAL MARKET VALUE PLUS ACCRUED 333,199,867.43 Chandler Asset Management-CONFIDENTIAL 41 J'" Orange County Sanitation District Liquid Holdings Report Account#70282 As of 9/30117 Purchase Da:o Cost Va:u: Mut Price Market Value %of Pod. MoodyIS&P Maturity CUSIP Security Description Par Value/Units Book Yie d Book Va Mkt YTM Accrued Ind. Gain/Loss Fitch Duration AGENCY III 313385MV5 FHLB Discount Note 2,000,000.00 09/29/2017 1,999,366.67 99.97 1,999,472.23 4.04% P-1IA-1+ 0.03 0.95%Due 10/11/2017 0.96% 1,999,472.23 0.96% 0.00 0.00 F-1+ 0.03 313385PEO FHLB Discount Note 5,000,000.00 N/2812017 4,993,579.17 Was 4,993,997.92 10.09% P-1IA-1+ 0.12 1.005%Due I1/13/2017 1.02% 4,993,997+92 1.02% 0.00 0.00 F-1+ 0.12 3137EABA6 FHLMC Note 5,000,000.00 W12612017 5.113,950.00 100.51 5,025,290.00 10.35% Aaa/AA+ 0.13 5.125%Due 11/17Y2017 1.00% 5,026,263.19 1.22% 95,381.94 (963.19) AAA 0.13 12,106,891 12,018,760.15 24.48% Aaa I AAA 0.11 Total Agency 12,000,000.00 1.00% 12,019,723.34 1.10% 95,381.94 (963,19) AAA 0.11 COMMERCIAL PAPER 89233GXWI Toyota Motor Credit Discount CP 1,000,000.00 09/28/2017 999,022.22 99.91 999,113.89 2.02% P-1IA-1+ 0.08 1.1%Due 1013012017 1,12% 999,113,89 1,12% 0.00 0,00 NR 0.08 06538BY80 Bank of Tokyo Mitsubishi NY Discount 1,245,000.00 0710712017 1,239,296.52 9S86 1,243,252.16 2.51 % P-1 IA-1 0.11 CP 1.35% 1,243,252.16 1.35% 0.00 0.00 NR 0.11 1,33%Due 11I8I2017 2,238,318.74 2,242,366.05 4.53% P-11 A-1 0.10 Total Commercial Paper 2,245,000.00 1.25% 2,242,366+05 1.25% 0.00 0.00 NR 0.10 MONEY MARKET FUND Fit 31846V567 First American Govt Obligation MMKT 9,664,320.82 Various 9,664,320,82 1.00 9,664,320.82 19.53% Aaa I AAA 0.00 Cbini 0.89% 9,664,320.82 0.89% 0.00 0.00 AAA 0.00 9,664,320.82 9,664,320.82 19.53% Aaa/AAA 0.00 Total Money Market Fund FI 9,664,320.82 0.89% 9,664,320+82 0.89% 0.00 0.00 AAA 0.00 NEGOTIABLE CD 3591 Svenska Handelsbanken Yankee CD 1,000,000.00 05/08/2017 1,000,019,85 100.00 1,000,000.14 2.03% P-1l A-1+ 0.01 1.175%Due 1002017 1.17% 1,000,000.14 1.17% 4,863.19 0.00 F-1+ 0.01 1,000,019.85 1,000,000.14 2.03% P-1/A-1+ 0.01 Total Negotiable CD 1,000,000.00 1.17% 1,000,000.14 1.17% 4,863.19 0.00 F-1+ 0.01 US CORPORATE 911312AP1 UPS Note 1,000,000.00 05/12/2017 999,580.00 100.00 1,000,000.00 2.03% At/A+ 0.00 1.125%Due 10/1/2017 1.24% 1,000,000.00 1A3% 5,625.00 0.00 NR 0.00 68389XAN5 Oracle Corp Note 1,000,000.00 0313012017 999,870+00 99.99 999,880.00 2.03% At/AA- 0.04 1.2%Due 10/15/2017 1. 2% 999,990.81 1.48% 5,533.33 (110.81) A+ 0.04 166764BC3 Chevron Corp Note 1,000,000.00 0111812017 1,000,780.00 100.00 999,978.00 2.03% Aa2/AA- 0.11 1.344%Due 11NI2017 1.24% 1,000,104.90 1.36% 5,301.33 (126.90) NR 0.11 369604BC6 General Electric Cc Note 1,000,000.00 012(2017 1,033,650.00 100.70 1,006,984.00 2.07% Al/AA- 0.18 5.25%Due 121612017 1.24% 1,007,187+38 1.41% 16,770.83 (203.38) AA- 0.18 Chandler Asset Management-CONFIDENTIAL 42 J'" Orange County Sanitation District Liquid Holdings Report Account#70282 A.of 9/30117 Purchase Da:o Cost Va:u: Mkt Price Market Value %of Pod. MoodyIS&P Maturity CUSIP Security Description Par Value/Units Book Yie d Book Va Mkt YTM Accrued Ind. Gain/Loss Fitch Duration US CORPORATE III 92826CAA0 Visa Inc Note 1,000,000.00 07/12/2017 999,700.00 100.03 1,01 2.03% AI IA- 0.21 1.2%Due 1211412017 1.27% 999,852.00 L03% 3,566.67 493.00 NR 0.21 458140AL4 Intel Corp Note 1,000,000.00 0711312017 1,000,160.00 100.01 1,000,140.00 2.03% Al/A+ 0.21 1.35%Due 1211512017 1.31 % 1,000,080+00 1.28% 3,975A0 60.00 A+ 0.21 46625HGYO JP Morgan Chase Note 1,000,000.00 0411112017 1.032,600.00 101.27 1,012,727.00 2.07% A3/A- 0.29 6%Due 1115/2018 1.57% 1,012,667.88 1.60% 12,666.67 69.12 A+ 0.29 404281-PH9 HSBC USA Inc Note 1,000,000.00 0511112017 1,000,340.00 100A4 1,000,373.00 2.03% A2/A 0.30 1.625%Due 111612018 1.57% 1,000,148.49 1.49% 3,385.42 224.51 AA- 0.29 24422EST7 John Dears Capital Cory Note 1.000000A0 Various 999,619.50 99.89 99918W.W 2.03% A21 A 0.30 1.35%Due 1/16/2018 1.43% 999,776.30 1.39% 2,812.51 83.70 A 0.29 06406HCE7 Bank of New York Callable Note Cont 870,000.00 O6I22I2017 869,364.90 99.91 869,227.44 1.76% At 1 A 0.32 1212512017 1.43% 869,652.49 L58% 2,073.50 (425.05) M. 0.32 1.3%Due 112S12018 691 PNC Bank Callable Note Cant 1/24/2018 1,000,000.00 M12112017 1.000,320.00 100.01 1,000,074.DO 2.02% A2/A 0.40 1.5%Due 2/23/2018 1.40% 1,000,304.13 1.48% 1,583.33 (230.13) A+ 0.31 30231 GALS Enron Mobil Coup Note 1,000,000.00 07/20/2017 999,620.00 Was 991 2.02% Asa/AA+ 0.43 1.305%Due 3/612018 1.37% 999,735.36 1A3% 91 (264.36) NR 0.43 808513AK1 Chades Schwab Corp Callable Note 1,000,000.00 OW01IN17 1,001,100.00 100.03 1,000,331.00 2.02% A21A 0.44 Cant 211012018 1.37% 1.000,564.10 1.41% 875.00 (233.10) A 0.35 1.5%Do.N10/2018 02665WATO American Honda Finance Note 1,000,000.00 0312712017 1,001,140.00 100.05 1,000,450.00 2.02% Al/A+ 0.46 1.5%Due 3/13/2018 1.30% 1,000,533.97 lA0% 750.00 (83.97) NR 0.45 13,937,844.40 13,889,040.44 28.20% At/A+ 0.26 Total US Corporate 13,870,000.00 1.36% 13,890,587.81 1.39% 65,11M.84 (747.37) A+ 0.25 US TREASURY 912828H37 US Treasury Note 5,500,000.00 Various 5,491 98.92 5,495,506.50 11.13% Aaa/AA+ 0.29 0.875%Due 111512018 1.11 % 5,496,258.04 1.15% 10,20041 (751.54) AAA 0.29 912828P20 US Treasury Note 5,000,000.00 09/28/2017 4.991 99.86 4,993,095.00 10.10% Aee/AA+ 0.34 0.75%Due 1/31/2018 1.09% 4,994,443.78 1.16% 6,317.93 (1,MB.78) AAA 0.33 10,488,921.90 10,488,601.50 21.23% Ann I AA+ 0.31 Total US Treasury 10,500,000.00 1.10% 10,490,701.82 1.16% 16,510.34 (2,100.32) AAA 0.31 49,436,321,55 49,303,889.10 100.00% Act IAA+ 0,17 TOTAL PORTFOLIO 49,279,320.82 1.12% 49,307,699,98 1A6% 182,588.31 (3,810.88) AAA (I TOTAL MARKET VALUE PLUS ACCRUED 49,486,477.41 Chandler Areal Management-CONFIDENTIAL 43 C/" OCSD Lehman Exposure Holdings Report Account#10284 As of 9/30117 Purchase D.:d Cost Valu: Mitt Price Market Value %of Pon. MoodyIS&P Maturity CUSIP Security Description Par Value/Units Book Yie Book Val Mkt Y-TIM Accrued Int. G.in/L.se Fitch Duration COMMON STOCK SLHOPNTA4 Lehman Brothers,Inc Open Position 60,64149 11/21/2014 57,842.64 042 25,621.03 13.60% NRINR 000 Lang Exposure 0.00% 57,842.64 0.00% 0100 (32,221,61) NR 000 Due 9/3 012 01 7 57,842.64 25,621.03 13.60% NRINR 0.00 Total Common Stock 60,641.49 N/A 57,842.64 0.00% 0100 (32,221,61) NR 0,00 US CORPORATE 525ESCIB7 Lehman Brothers Note-Defaulted 600,000.00 09/19/2008 344,365,48 6.30 37,800.00 20.06% NR/NR 0.32 Due 1/24/2018 0.00% 344,365.48 0.00% 0.00 (306,565.48) NR 0.00 525ESCOY6 Lehman Brothers Note Defaulted2,000,000.00 09/18/2008 1,112,174.55 6.25 125,000.00 66.34% NR/NR 32.08 Due 10/2nD49 O.00% 1,112,174.55 0.00% 0.00 (987,174.55) NR 0.00 1,456,540.03 162,800.00 86.40% NR/NR 24.71 Total US Corporate 2,600,000.00 N/A 1,456,540.03 0.00% 0.00 (1,293,740.03) NR 0.00 1,514,382.67 188,421.03 100.00% NR/NR 21.35 TOTAL PORTFOLIO 2,660,841.49 N/A 1,514,382.67 0.00% 0.00 (1,325,961.64) NR 0.00 TOTAL MARKET VALUE PLUS ACCRUED 188,421.03 Chandler Asa n Management-CONFIDENTIAL 44 All SECTION 5 Transactions CAI Transaction Ledger Orange County Sanitation District Long Term -Account#10268 June 30,2017 through September 30, 2017 transaction Settlement CUSIP Cranny yea Data Yield Amount laurshi Total Amount Gami _ UISITIONS PurcM1ase 07/07/2017 06538BY80 6,640,000.00 Bank of Tokyo Mitsubishi NY Discount CIO 99542 1,35% 6,609,58142 0.00 6609,58142 0.00 1 33%Due:1110812017 Purchase 071IM017 47788BAB0 960.00060 John%Due ON1512020 Deere Owner Tmm2017-BA2A 1.59 98991 160% 959.916.58 0.00 959.916.58 000 : Purchase 07/IM017 47788BAD8 675,000.00 John D.Owlrer Trust 2017-13 A3 99.993 1.83% 674,950.59 O.CO 674,950.59 0.00 182%Due:101152021 Purchase 07filli 9128281 5.OW.000.00 US Treasury Note 99.469 1.86% 4,973,454.25 6,181 4,979,636.31 0.00 1.75%Due:0613012022 Purchase 01I0912017 O8417GXH6 5,825,W0.00 Bank of N.SMie Yank.CD 100.000 t 57% 5,825,000.00 ON 5,825,000.00 0.00 1.57%Due:CM912018 Purchase OW10017 3133791 4,000,00000 FHLB Note 101 167% 4.030,16000 16.688.67 4,046,82667 0.00 1.875%Due:06111/2021 Purchase 09C=017 912828124 6,OW,WO.00 US Treasury NOW 99.797 1 92% 5,987,832.60 0,701.66 5,996,534.26 0.00 1.875%Di 081 Purchase (IM11f2)9 43814PAB6 985,OW W Honda Auto ReceNadea Miner T 17-3 A2 99.991 158% 964,91021 ODO 964,914.21 0.00 1.57%DUe:0112112020 SUMetal 30,065,000.00 30,025,809.65 31,550.39 30,057,360.04 0.00 Security 07/312017 91282OWUO 9,881 US Treasury fiblikn Index Note 100.000 9,880.00 0.54 9,881 0.00 Contribution 0,125%DUe:0711WO24 Security OMW017 912828WUO 9,672.00 US Treasury Inflation Index Note 100.000 9,672.00 1.54 9,673.54 0.00 Commotion 0.125%Due:0m512024 Subtotal 19,592.00 19,s52.00 2.08 19,554.09 0.00 TOTAL ACQUISITIONS 30.084.552.00 30,045361.65 31,55247 30,076914.12 0.00 DISPOSITIONS Maturity 07I0712017 06538BU76 6,345,000.00 Bank of Tokyo Mitsubishi NY Discount CP 99.600 6,345,000.00 0.00 6,345,000.00 0.00 1.18%Due:0710712017 Maturity 07114f2017 3137EADVB 5.OW.000.00 FHLMC None 100.000 5,000,000.00 0.00 5,000,000.00 000 0.75%Due:0711412017 0111 Transaction Ledger Orange County Sanitation District Long Term -Account#10268 June 30,2017 through September 30, 2017 Transaction Settlement Art Oleo Interest Type Date CUSIP Quantity Ser,rifty Deecriptiorl pro. Yi'*'Id Amount PorlSold Total Amount Gairill-oss Maturity 07114=17 4581X000I 5,000,000.00 Inter-Annericen Do,Benk Note 100.000 5,000,W0.00 0.00 5.000,00.00 0.00 1%Due:07114n017 Maturity OMM017 89233GV29 6,3W.Wo 00 Toyota Mobs Credit Discount CP 99238 61300.W000 0.00 6,300,00000 000 1.23%Due:O810&2017 Subtotal 22,645,W0.00 22,4545,1)1 OAO 22,045,WO.00 0.00 Secant) 0913W017 91282SWUO 6,760.00 US Treasury lopytim lMe[Not. 99.753 6,760.00 1,77 6,761.77 48.92 WiMdrdwal 0.125%Due:0711WO24 Subtotal 6,760.N0 6,760.00 1.77 6,761.77 46.92 TOTAL DISPOSITIONS 29,897,164.52 29,897,164.52 110.401.87 30.007.566.39 48.92 CAI Transaction Ledger Orange County Sanitation District Liquid -Account#10282 June 30,2017 through September 30, 2017 transaction Some Q........ Security Description U. Acp'Disp Interest T Up. ..te Yield Amount PurfSold Total Amount GamiLoss UISITIONS _ PumM1ase 07/06/2017 313397LC3 2000,000.00 FHLMC OIscouMNoi gg g45 1.01% 1996,90644 0.00 1996,90444 0.00 :1%Due a B13uz0n PumM1ase 07106R017 912796LUI 5.000.000.00 US Treasury Bill 99.795 097% 4.989,73865 0.00 4.989,73865 000 0.96%Due:0W2112017 Punches. 07M7C017 06538BY80 1,245,030.00 Bank of Tclp Mitsubishi NY Diacwni CP 99.542 1.35% 1,239,296.52 ON 1,239,296.52 0.00 1,33%Due:1110812011 PumM1ase 0711MO17 91282BH37 2.500,000.00 US Treasury Note 99.871 1.13% 2.4%.785.73 10.816.64 2.507,602.37 0.00 0.875%Due:01/15rz016 Purchase 07114Y017 313385JX5 1,OO ,wo.00 FHLB Discount Note 99.947 1.01% 999,472.22 0.00 999,472.22 0.00 1%Due:08102ne17 PumM1ase 071142017 912796LUl 51000A0000 US Treasury Bill 99.826 O92% 4,991,298.33 0.00 4,991,29833 0.00 0.91%Due:0W2112017 PumM1ase 07I1712017 92826CAA0 1,000,000.00 Use me Note 99.970 1,V% 999,700.00 1,100.00 1,0W,W0.00 0.00 1.2%Due:12114C017 Pmshase 0711MO17 458140AL4 1,083,830.00 leal Corp Note 100.016 131% 1,008160.00 1,237.50 1,001,397.50 0.00 1.35%Dui,a&1512017 Purchase 071IM017 69372AVH2 2.000.00000 Paccar F'mancial Discount CP 99,908 113% 1.998.15000 0.00 1.998.15000 0.00 .11%Due:OW1712017 Purchase 07I19C017 89233GVVT9 2,503,030.00 Toyota year Credit Diaccunt CP 99.776 1.17% 2,494,409.72 0.00 2,494,409.72 0.00 1.15%Due:0912712017 Purchase OMM017 912796UI 5OOO.00D00 US Treasury Bill 99,983 091% 4.999.130.35 0.00 4.999.13035 0.00 0.89%Due:0712712017 Purchass 07ClC017 313385JX5 70D,000.00 FHLB Diawunt Note 99.967 1.W% 699,769.00 0.00 699,769.00 0.00 099%Due:OWD2017 PumM1ase 0MM017 313385MA1 7,500,000.00 FHLB DIrecom Note 99.821 1.04% 7,486,546.88 0.00 7.485,546.88 0.00 1.02%Due:0912&2017 Purchase 07C4 017 313385JX5 2,700,000.00 FHLB Discount Note 99.975 1.00% 2,699,331.75 0.0 2,699,331.75 0.00 0.99%Due:OMD2017 PumM1ase 07OW017 30231GAL6 110M.W000 Ewen Mobil Corp Note 99.962 137% 999,62000 5,038.75 1,004,65875 000 1.305%Due:0MM018 0111 Transaction Ledger Orange County Sanitation District Liquid -Account#10282 June 30,2017 through September 30, 2017 Transaction Settlement Am,Map interest Type Date CUSIP Q- R, Security Description "ies Yie'ld Amount PunSold Total Amount Gairill-on, Purchase 0]I25I2017 313385JX5 1,100,wo.00 FHIB Discount Note 1%Due:08102n017 gg.g]g 1,01% 1,099,]5556 0.00 1.099]55.56 0.00 Purchase OWIWD17 24422EST7 450,00000 John Deere Capital Carp Note 99%8 143% 449,85600 540.00 450,39600 000 1.35%Due:0111W2018 Purchase 0811=017 313385MF0 2,600000.00 FHIB DIsoOunt Note 99.888 102% 2.597.096.66 000 2,597,096.66 0.00 1.01%Due.0912712017 Purchase OR114 017 91292SH37 3,003,030.00 US Treasury Note 99.926 1.10% 2,997,78348 4,351.22 3,002,134.70 0.00 0.875%Due:011156018 Purchase ORMM17 313385MF0 5.000.000.00 FHtB Discount Na4 99.983 101% 4.999.166.67 0.00 4.999.166.67 0.00 1%Due:0912m017 Purchase OMM017 313313ME5 10,OPo,W0.00 FFCB Discount Nate 99.989 101% 9,9p8,688. t, 0M 9,99688B.89 0.00 1%Duc0W W017 Purchase 0912=017 313385MFO 300.00000 FHLB Discount Note 99,986 102% 299.957,92 0.00 299.95792 0.00 1.01%Due OW2712017 Purchase 09QM017 313385MF0 2,200,000.00 FHIB Discount Note 99.986 1.01% 2,199,694.44 o.W 2,199,694.44 0.00 1%Due:0907/2017 Purchase 091M017 880590ME1 2,000,000.00 TVA Discount Note 1%Due OW2W2017 99.989 1.01% 1,999,]AJB 0.00 1,999,P7J5 0.00 : Purchase 091252017 69353REJ3 1,000000.00 PNC Bank Cables Note Cant 1/24/2018 100.032 1.40% 1,000320.00 1,333.33 1,001,653.33 0.00 1.5%Due:02MM18 Purchase M842017 3133UPEO 51000,00000 FHLB Discount Note 99S72 102% 4,993,579,17 0.00 4.90,579,17 0.00 1.005%Due:1111=017 Purchase 09Q=017 892MGM I 1,000000.00 To)vla Motor Crack Discount CP 99902 1,12% 999,022.22 000 999.022.22 0.00 1.1%Due:10MM17 Purchase 0912912017 313385MV5 2,003,030.00 FHLB Discount Note 99.968 696% 1,999,366.67 000 1,999,368.67 0.00 0.95%Due:lWlII2017 Purchase ORQ2 017 912828P20 SOW,000.00 US Treasury Note 99.887 1 09% 4.994.352.69 6.114.13 5.000.466.82 0.00 0.75%Due:0113112018 Subtotal 80,799,000.00 80.718,01.74 30,531.57 80,748A83.31 0.00 TOTAL ACQUISITIONS 80.795.000.00 80.718.931.74 30.531.67 80.749.463.31 0.00 CAI Transaction Ledger Orange County Sanitation District Liquid -Account#10282 June 30,2017 through September 30, 2017 transaction Samice—ut B, Q........ Security Description lince Acclimate Interest T 1P. Date Yield Amount ParlSold Total Amount Sell POSITIONS Maturity 07/062017 9127941 15,000 000 00 U9 Treasury Bill 0 565%Due 07/06201] 100.000 15,000 000 00 0.00 15,000 000 00 0.00 : Mawbrk 07107QO17 003MU76 1.705,00000 Bank of Tok,Mitsubishi NY Discount CP 99,600 1.705,00000 ON 1,705,000.00 0.00 1.18%Due:0710712017 Maturity 07/IM017 39113WEU 1,003,wB00 Toronto Dominion NY Yankee CD 1,2%Due:07113M17 100.000 1,OD3,W0.00 12,133.33 1,012,133.33 0.00 Newark 0711MO17 t590500C4 1,168W0.00 Intl.Bank Recon a Development Note 1.1 2 5%Due 07f1&2017 100.O00 1,1621W0.00 ON 1,162,WO.00 0.00 : Maturity 071192017 89233GUKO 1,9W,W0.00 Toyama Mote,Credit Discount CP 99750 1,9m,mODO ON 1,9w,wOD0 0.00 1.01%Due:0711912017 Mawark 070MO17 912796KB4 51,000,00000 US Treasury BlLL 100m0 510W.00000 O.m 5,000100000 0.00 0.77%Due:072012017 Matuark 07@1f2017 313385JK3 10,000000.00 FHIB Discount Note 100.000 10,OW,W0.00 OW 10,OW,W0.00 0.00 0.85%Due:0712112017 MaWtlty 07a512017 06538BUR2 1,5N,W0.00 Bank of Tokyo MitsubiaM NY Discount CP 99.704 1,503,W0.00 0.00 1,5W,W0.00 0.00 1.12%Due:072512017 Mawark 0]n6f201] 3133WOO 800.000J10 1Discount Not, 100000 800,000.00 ON 800,90000 0.00 1.02%Due:0712512017 Maturity 0712612017 313MW07 19,06QWo.00 iDiscount Note 100.000 19,0m,mo.00 Bm 19,0W,Wo.00 0.00 0.82%Due:0712612017 Maturity 0712712017 912796111 5.000,W000 US Treasury Bill 100000 5.0W.W0.00 O.W 5.0W.W0.00 0.00 0.89%Due:0712712017 Maturity 07/28T017 31331 5,0m,m0.00 FHIB Discount Note 100.000 5,000,000.00 Bud 5,O00,000.00 0.00 086%Due:07128/2017 Newtlrk 072M017 3137ENDJ5 7,OW,WO.00 FHLMC Note 100.000 7,OW,WO.00 ON 7,OW,WO.00 0.00 1%Due:07ne12017 Maturity OBehl 313385J%5 16,503,000.00 FHIB Discount Note 100.000 16,500,000.00 BW 16,500,000.00 0.00 0.979%Due:OMM017 Mawark OWIWD17 47016DA07 1100C,1)(3000 Johnson B Johnson Nate 1000m 1101)(111)(1000 O.m 1,0W,W000 0.00 5.55%Due:0611512017 0111 Transaction Ledger Me Orange County Sanitation District Liquid -Account#10282 June 30,2017 through September 30, 2017 Transaction Settlement Art Oleo Interest Type Date CUSIP Unit I,, Security Description Inc. Yi'*'Id Amount Perolold Total Amount Gainli Matunty 01 691 2,000,000.00 Peccer Financial Discount Do 99908 2,000,000.00 0.00 2000,00.00 0.00 1.11%Due.OW1712017 Mutant, OW10017 3133971LC3 20W,W000 FHLMC Discount Note IWOM 20W,W000 O.W 20W,W000 0.00 1%Due:08131209 Maturity 09212017 912796LU1 23,0W,W0.00 US Treasury Bill 100.000 23,0W,W0.00 OW 23,OW,WO.00 0.00 0.958%Due:092112017 Meant, 092MI)17 3133MMAl 7,503,030.00 FHLB Discount Note 100.000 7,503,030.00 0.03 7,51)(3,0130.00 0.00 1.02%Due:091=2017 Maturity 09262017 313313ME5 10,0W.W0.00 FFCB Discount Note 10D000 10,0W.W0.00 0.00 10.0W.W0.00 0.00 Is,Due 0 912 6 2 017 Maturity 092M017 880590ME1 2,OW,WO.00 TVA Dismount Nate 100.000 2,0 tW0.00 0.03 2,OW,WO.00 0.00 t%Dmc 0N62017 Maturity 09272017 313385MF0 10.1 W,W0.00 FHLB Discount Note 100000 10.1W.W000 O.W 10.1W.W0.00 0.00 1.005%Due:09272017 Maturity 092me17 3135GIM0 6,0W,W0.00 FNMA Note 100.000 6,0W,W0.00 O.W 6,0W,W0.00 0.00 t%Due:M72017 Maturity 09272017 89233GWT9 2,5W,WO.00 Toyota Motor Credit Discount CP 99.776 2,51M,W0.00 OM 2,51M,W0.00 0.00 1.15%Due:OW2712017 Maturity 09292017 3137E 10 5,285,WO.00 FHLMC Note 100.000 5,285,W0.00 O.W 5,285,W0.00 0.00 1%ones OMM017 spenry 09IS2017 91262STS9 2,5W,W000 US Treasury Note 10000 2,5W,W000 O.W 2,500,00000 0.00 0.625%Due:09I302017 Subtotal IWA52,000.00 162,052,11)(10.00 12,133.33 162,460,133.33 0.00 TOTAL DISPOSITIONS 162A52.900.00 162,052.W0.00 12.133.33 162080.133.33 0.00 c111JI Disclosure Information contained herein is confidential. Prices are provided by IDC, an independent pricing source. In the event IDC does not provide a price or if the price provided is not reflective of fair market value, Chandler will obtain pricing from an alternative approved third party pricing source in accordance with our written valuation policy and procedures. Our valuation procedures are also disclosed in Item 5 of our Form ADV Part 2A. Rating Agency Comparisons A summary of investment grade ratings are listed below. More complete descriptions of Moody's and Standard & Poor's ratings are included in the following pages. Quality/Grade Mood 's Standard & Poor's Fitch Best Quality Aaa AAA AAA High Quality Aal AA+ AA+ Aa2 AA AA Aa3 AA- AA- Upper Medium Grade Al A+ A+ A2 A A A3 A- A- Medium Grade Baal BBB+ BBB+ Baa2 BBB BBB Baa3 BBB- BBB1 Moodv's - Investment Grade "Aaa" - Bonds rated Aaa are judged to be of the best quality. They carry the smallest degree of investment risk. Interest payments are protected by a large or by an exceptionally stable margin and principal is secure. While the various protective elements are likely to change, such changes as can be visualized are most unlikely to impair the fundamentally strong position of such issues. "Aa" - Bonds which are rated Aa are judged to be of high quality by all standards. Together with the Aaa group they comprise what are generally known as high grade bonds. They are rated lower than the best bonds because margins of protection may not be as large as in Aaa securities or fluctuation of protective elements may be of greater amplitude or there may be other elements present which make the long-term risks appear somewhat larger than in Aaa securities. "A" - Bonds which are rated A possess many favorable investment attributes and are to be considered as upper medium grade obligations. Factors giving security to principal and interest are considered adequate, but elements may be present which suggest a susceptibility to impairment sometime in the future. Mae" - Bonds which are rated Baa are considered as medium grade obligations; i.e., they are neither highly protected nor poorly secured. Interest payments and principal security appear adequate for the present but certain protective elements may be lacking or may be characteristically unreliable over any great length of time. Such bonds lack outstanding investment characteristics and in fact have speculative characteristics as well. Bonds in the As, A, and Bee are also assigned "1", "2", or "S' based on the strength of the issue within each category. Accordingly, "At" would be the strongest group of A securities and "AY would be the weakest A securities. Be, B, Caa, Ca, and C - Bonds that possess one of these ratings provide questionable protection of interest and principal ("Be" indicates some speculative elements; "B" indicates a general lack of characteristics of desirable investment; "Caa" represents a poor standing; "Ca" represents obligations which are speculative in a high degree; and "C" represents the lowest rated class of bonds). "Caa", "Ca" and "C" bonds may be in default. Standard and Poor's-Investment Grade AAA- Debt rated "AAA" has the highest rating assigned by S&P. Capacity to pay interest and repay principal Is extremely strong. AA - Debt rated "AA" has a very strong capacity to pay interest and repay principal and differs from the highest rated issues only in small degree. A - Debt rated "A" has a strong capacity to pay interest and repay principal although it is somewhat more susceptible to the adverse effects of changes in circumstances and economic conditions than debt in higher rated categories. BBB - Debt rated "BBB" is regarded as having an adequate capacity to pay interest and repay principal. Whereas it normally exhibits adequate protection parameters, adverse economic conditions or changing circumstances are more likely to lead to a weakened capacity to pay interest and repay principal for debt in this category than in higher rated categories. Standard and Poor's - Speculative Grade Retina Debt rated "BB", "B", "CCC", "CC" and "C" is regarded as having predominantly speculative characteristics with respect to capacity to pay interest and repay principal. "BB" indicates the least degree of speculation and "C" the highest. While such debt will likely have some quality and protective characteristics these are outweighed by major uncertainties or major exposures to adverse conditions. BB - Debt rated "BB" has less near-term vulnerability to default than other speculative issues. However, it faces major ongoing uncertainties or exposure to adverse business, financial, or economic conditions which could lead to inadequate capacity to meet timely interest and principal payments. The "BB" rating category is also used for debt subordinated to senior debt that is assigned an actual or implied "BBB" rating. B - Debt rated "B" has a greater vulnerability to default but currently has the capacity to meet interest payments and principal repayments. Adverse business, financial, or economic conditions will likely impair capacity or willingness to pay interest and repay principal. The "B" rating category is also used for debt subordinated to senior debt that is assigned an actual or implied "BB" or"BB" rating. CCC - Debt rated "CCC' has a currently identifiable vulnerability to default, and is dependent upon favorable business, financial, and economic conditions to meet timely payment of interest and repayment of principal. In the event of adverse business, financial, or economic conditions, it is not likely to have the capacity to pay interest and repay principal. The "CCC' rating category is also used for debt subordinated to senior debt that is assigned an actual or implied "B" or"B" rating. CC - The rating "CC' typically is applied to debt subordinated to senior debt that is assigned an actual or implied "CCC' debt rating. C-The rating"C'typically is applied to debt subordinated to senior debt which is assigned an actual or implied "CCC" debt rating. The "C' rating may be used to cover a situation where a bankruptcy petition has been filed, but debt service payments are continued. Cl -The rating "Cl" is reserved for income bonds on which no interest is being paid. D - Debt rated "D" is in payment default. The "D" rating category is used when interest payments or principal payments are not made on the date due even if the applicable grace period has not expired, unless S&P believes that such payments will be made during such grace period. The "D" rating also will be used upon the filing of a bankruptcy petition if debt service payments are jeopardized. Plus (+) or Minus (-) - The ratings from "AA" to "CCC' may be modified by the addition of a plus or minus sign to show relative standing within the major rating categories. NR-Indicates no rating has been requested,that there is insufficient information on which to base a rating, or that S&P does not rate a particular type of obligation as a matter of policy. 2017-18 First Quarter Report This Page Intentionally Left Blank 'e? Op October 31, 2017 STAFF REPORT Certificates of Participation (COP) Quarterly Report for the Period Ended September 30, 2017 Summary The District began issuing Certificates of Participation (COPS) in 1990. These COPs were a part of our long-term financing plan that included both variable interest rate and traditional fixed rate borrowing. Following are the current outstanding debt issues of the District: In May 2009, the District issued $200 million of fixed rate COPs, Series 2009A at a true interest cost of 4.72 percent for the issue. In May 2010, the District issued $80 million of fixed rate BABs, Series 2010A at a true interest cost of 3.68 percent for the issue. In December 2010, the District issued $157 million of fixed rate BABs, Series 2010C at a true interest cost of 4.11 percent for the issue. In October 2011, the District issued $147.595 million of fixed rate COPS, Series 2011A refunding a portion of the Series 2000 variable rate debt and a portion of the Series 2003 fixed rate debt. The true interest cost for the issue is 2.61 percent. In March 2012, the District issued $100.645 million of fixed rate COPs, Series 2012A refunding the Series 2003 fixed rate debt. The true interest cost for the issue is 3.54 percent. In August 2012, the District issued $66.395 million of fixed rate COPS, Series 2012E refunding the Series 2000 variable rate debt. The true interest cost for the issue is 1.50 percent. With the issuance of Series 201213, there remains no variable interest rate COPS at the District. OCSD ♦ P.O.Box8127 ♦ Fountain Valley,CA 9272M127 ♦ (714)%2-2411 Quarterly COP Report For the Three Months Ended September 30, 2017 Page 2 of 2 In August 2014, the District issued $85.09 million of fixed rate COPS, Series 2014A, refunding a portion of Series 2007B debt. The true interest cost for the issue is 2.34 percent. In February 2015, the District issued $127.51 million of fixed rate COPS, Series 2015A, refunding $152.99 million of the Series 2007E debt. The true interest cost for the issue is 3.30 percent. In March 2016, the District issued $145.88 million of fixed rate CANS, Series 2016A, refunding $162.78 million of the Series 2009A fixed rate debt. The true interest cost for the issue is 3.02 percent. In November 2016, the District issued $109.875 million of fixed rate CANS, Series 201613, refunding the Series 2014B CANS. The true interest cost for the issue is 0.87 percent. In February 2017, the District issued $66.37 million of fixed rate COPS, Series 2017A, refunding $91.885 million of the Series 2007A debt. The true interest cost for the issue is 2.55 percent. Additional Information The graph entitled, "OCSD COP Rate History Report,' shows the various fixed interest rates of the District's thirteen debt issues. Attachments 1. Graph - OCSD COP Rate History Report Prepared by Finance,1 0/3 012 01 7,10:52 AM OCSD COP RATE HISTORY REPORT SEPTEMBER 2017 5.00 4.00 3.00 w 2.00 1.00 0.00 DATE —Son-2007A Rued —B Fi. —Sens,201-FixMSena 2010A Fw" —Se1-201-F— —9anea 2011A Fi. —Genes 20124 Fixetl —r W¢ 101.Fuld ISeM92010A.x —Sloe.2014B Flx¢ Sene52m6A Fkld —Sll1 2016A Fdd —Se.,.166.. —SlmB 2017A F1x¢ HAd epAasdMMCom monWonthl y and Quarterly Treasurer's Report\FV 17-1 MCOP Rate History Report FV 17-18 2017-18 First Quarter Report This Page Intentionally Left Blank ORANGE COUNTY SANITATION DISTRICT FINANCIAL MANAGEMENT DIVISION 10844 Ellis Avenue Fountain Valley, California 92708-7018 714.962.2411 www.ocsd.com 09/30/17 ADMINISTRATION COMMITTEE Meeting Date TOBd.Ot Dir. u/oety utts/ 7 AGENDA REPORT ItemNumber Item Number a Orange County Sanitation District FROM: James D. Herberg, General Manager Originator: Lorenzo Tyner, Director of Finance and Administrative Services SUBJECT: ORANGE COUNTY SANITATION DISTRICT COMPREHENSIVE ANNUAL FINANCIAL REPORT FOR THE YEAR END JUNE 30, 2017 GENERAL MANAGER'S RECOMMENDATION Recommend that the Board of Directors receive and file the Orange County Sanitation District's Comprehensive Annual Financial Report for the year ended June 30, 2017, prepared by staff and audited by Macias, Gini & O'Connell, LLP (MGO), Certified Public Accountants, along with the following reports prepared by MGO: A. Report to the Board of Directors; and B. Independent Accountants' Report on Agreed-Upon Procedures Applied to Appropriations Limit Worksheets. BACKGROUND The Comprehensive Annual Financial Report (CAFR) for the year ended June 30, 2017 is being presented for the Committee's consideration. Included within the report are the Orange County Sanitation District's financial statements for the year ended June 30, 2017, along with the Independent Auditor's Report that includes their unmodified opinion. RELEVANT STANDARDS • Annual financial report and audit letter ATTACHMENT The following attachment(s) may be viewed on-line at the OCSD website (wwwocsci.com) with the complete agenda package: • Report to the Board of Directors • Independent Accountants' Report on Agreed-Upon Procedures Applied to Appropriations Limit Worksheets • Comprehensive Annual Financial Report for the Year Ended June 30, 2017 Page 1 d 1 Cert ed Account Public Accountants October 26,2017 To the Board of Directors Orange County Sanitation District 10844 Ellis Avenue Fountain Valley,California We have audited the basic financial statements of the Orange County Sanitation District(the District)for the year ended June 30, 2017. 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 letter to you dated June 15, 2017. 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 District are described in Note 1 to the basic financial statements. The application of existing policies was not changed during 2017. As described in Note 1 to the basic financial statements, the District implemented GASB Statement No. 82,Pension Issues—an Amendment of GASB Statements No. 67, No. 68 & No. 73. As a result of the implementation of GASB No. 82, required supplementary information was slightly revised to include covered payroll (which is payroll on which contributions to a pension plan are based and ratios that use that measure instead of covered-employee payroll. We noted no transactions entered into by the 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. The most sensitive estimates affecting the District's financial statements were: • Valuations of actuarially determined contributions, deferred outflows of resources, deferred inflows of resources, and net pension liability for the District's employee pension plan and additional retiree benefit account plan are based on actuarial calculations, which incorporate actuarial methods and assumptions adopted by the Board of Directors. • Management's estimates of workers' compensation and general liability is based on reports prepared by third party actuarial valuations. We evaluated the key factors and assumptions used to develop the estimate liability in determining that they are reasonable in relation to the financial statements taken as a whole. Macias Gini&O'Connell LLP 0675 MacMM1ur CouR SuRe 600 Npxpoh Bearl�,G91660 www.mgocpa.com 1 • Allowances for uncollectible accounts. Management determines the allowance for uncollectible accounts receivable by evaluating individual customer accounts receivable at least one year past due and considering the customer's financial condition, credit history and current economic conditions. • Management's estimate of depreciation is based on the useful-lives of the capital assets. We evaluated the key factors and assumptions used to develop the useful-lives of the capital assets in determining that it is reasonable in relation to the financial statements taken as a whole. • Actuarial valuations of annual required contributions and the funded status of the other postemployment benefits (OPEB) plan is based on actuarial calculations, which incorporate actuarial methods and assumptions adopted by the Board of Directors. • Fair values of investments are based on quoted market prices or significant other observable inputs from independent published sources.We evaluated the key factors and assumptions used to develop the fair value of investments in determining that it is 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 disclosures affecting the financial statements were: • The disclosure of net pension liability and other postemployment benefits in Note 5 and 6 to the financial statements,respectively, me based on actuarial valuations. • Transactions with Irvine Ranch Water District—Revenue Area No. 14 as disclosed in Note 7. • Local Sewer Facilities Transfer as disclosed in Note 9. The financial statement disclosures are neutral,consistent,and clear. Difficulties Encountered in Performing the Audit We encountered no significant difficulties in dealing with management in performing and completing our audit. 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.There were no misstatements detected as a result of audit procedures and corrected by management which were material,either individually or in the aggregate,to the financial statements taken as a whole. Disagreements with Management For purposes of this letter, professional standards define a disagreement with management is a financial accounting, reporting, or auditing matter, whether or not resolved to our satisfaction, that could be significant to the financial statements or the auditor's report. We are pleased to report that no such disagreements arose during the course of am audit. Management Representations We have requested certain representations from management that are included in the management representation letter dated October 26,2017. 2 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 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 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 Matters We applied certain limited procedures to Management's Discussion and Analysis, Schedule of Proportionate Share of Net Pension Liability,Schedule of District Contributions,Schedule of Net Pension Liability — Additional Retiree Benefit Plan, Schedule of Changes in Net Pension Liability - Additional Retiree Benefit Plan and Schedules of Funding Progress, which are required supplementary information (RSI)that supplements the basic financial statements.Our procedures consisted of inquiries of management regarding the methods of preparing the information and comparing the information for consistency with management's responses to our inquiries,the basic financial statements,and other knowledge we obtained during our audit of the basic financial statements. We did not audit the RSI and do not express an opinion or provide any assurance on the RSI. We were engaged to report on the"Combining Area"financial statements,which accompany the financial statements but are not RSI. With respect to this supplementary information, 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. We were not engaged to report on the introductory and statistical sections,which accompany the financial statements but are not RSI. Such information has 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 it. Restriction on Use This information is intended solely for the information and use of the Board of Directors and management of the District and is not intended to be,and should not be,used by anyone other than these specified parties. Very truly yours, r 3 Orange County Sanitation District Independent Accountants'Report on Applying Agreed-Upon Procedures Related to Appropriations Limit Calculation Year Ended June 30,2017 O Certified Public Accountants Cert ed Account Public Accountants Independent Accountants' Report on Applying Agreed-Upon Procedures To the Honorable Members of the Board Orange County Sanitation District We have performed the procedures enumerated below to the accompanying Appropriations Limit Worksheet of the Orange County Sanitation District(the District)for the year ended June 30,2017.These procedures,which were agreed to by the District and the League of California Cities (as presented in the publication titled Agreed-Upon Procedures Applied to the Appropriations Limitation Prescribed by Article XIII-B of the California Constitution), were performed solely to assist the District in meeting the requirements of Section 1.5 of Article XIII-B of the California Constitution.The District's management is responsible for the Appropriations Limit Worksheet. This agreed-upon procedures engagement was conducted in accordance with attestation standards established by the American Institute of Certified Public Accountants. The sufficiency of these procedures is solely the responsibility of those parties specified in this report.Consequently,we make no representation regarding the sufficiency of the procedures described below either for the purpose for which this report has been requested or for any other purpose. The procedures performed and our findings me as follows: 1. We obtained the completed worksheets setting forth the calculations necessary to establish the District's appropriations limit and compared the limit and annual adjustment factors included in those worksheets to the limit and annual adjustment factors that were adopted by resolution of the District Board of Directors.We also compared the population and inflation options included in the aforementioned worksheets to those that were selected by a recorded vote of the District Board of Directors. Finding:No exceptions were noted as a result of our procedures. 2. For the accompanying Appropriations Limit Calculation, we added Line A, last year's limit, to Line E,total adjustments,and compared the resulting amount to Line F,current year's limit. Finding:No exceptions were noted as a result of our procedures. 3. We compared the current year information presented in the accompanying Appropriations Limit Calculation to the appropriate supporting calculations described in item 1 above. Finding:No exceptions were noted as a result of our procedures. 4. We compared the prior year Appropriations Limit presented in the accompanying Appropriations Limit Calculation to the prior year Appropriations Limit adopted by the Board of Directors for the prior year. Finding: We noted a$1,666 variance based on the procedures performed. However, the variance was due to rounding as the District reports the Appropriations Limit in thousands, rounding $101,768,666 down to $101,767,000. Macias Gini&O'Connell LLP 0675 MacMM1ur CouR SuRe 600 Npxpoh Bearl,.G91660 www.mgocpa.com 1 We were not engaged to and did not conduct an examination or review, the objective of which would be the expression of an opinion or conclusion, respectively, on the accompanying Appropriations Limit Calculation of the District. Accordingly, we do not express such an opinion or conclusion. Had we performed additional procedures, other matters might have come to our attention that would have been reported to you.No procedures have been performed with respect to the determination of the appropriations limit for the base year, as defined by Article XIII-B of the California Constitution. This report is intended solely for the information and use of the Board of Directors and management of the District, and is not intended to be, and should not be, used by anyone other than these specified parties. However,this report is a matter of public record and its distribution is not limited. i / P-'S (,h, C7'Cal�e(! r Newport Beach,California October 26,2017 2 Orange County Sanitation District Appropriations Limit Calculation Year Ended Jane 30,2017 Amount Source A. Last year's limit $ 95,682,784 B. Adjustment factors: 1. Population change 1.00940000 State Finance 2. Per capita change 1.05370000 State Finance Total adjustments [(B.1 x B.2)-1.01 0.06360478 C. Annual adjustment 6,085,882 (BxA) D. Other adjustments: 1. Lost responsibility(-) - 2. Transfer to private (-) - 3. Transfer to fees (-) - 4. Assumed responsibility(+) Subtotal E. Total adjustments 6,085,882 (C+D) F. This year's Inn@ $ 101,768,666 (A+E) 3 A... . T 114 P Orange County Sanitation District Comprehensive Annual Financial Report for the year ended June 30 , 2017 40� Fie If .,� Orange County, California i� ORANGE COUNTY SANITATION DISTRICT ORANGE COUNTY, CALIFORNIA COMPREHENSIVE ANNUAL FINANCIAL REPORT FOR THE YEAR ENDED JUNE 30, 2017 Prepared By: Administrative Services Department Financial Management Division Michael D.White, CPA Controller (THIS PAGE LEFT INTENTIONALLY BLANK) ORANGE COUNTY SANITATION DISTRICT Comprehensive Annual Financial Report Table of Contents For the Year Ended June 30, 2017 Paae INTRODUCTORY SECTION: Letterof Transmittal..................................................................................................................... i-vii GFOA Certificate of Achievement............................................................................................... vill Boardof Directors........................................................................................................................ ix OrganizationChart...................................................................................................................... x Mapof Service Area.................................................................................................................... A FINANCIAL SECTION: Independent Auditors' Report...................................................................................................... 1-2 Management Discussion and Analysis-Required Supplementary Information........................ 3-9 Basic Financial Statements: Statement of Net Position................................................................................................... 12 Statement of Revenues, Expenses, and Changes in Net Position .................................... 13 Statementof Cash Flows.................................................................................................... 14 Notes to Basic Financial Statements.................................................................................. 15-48 Required Supplementary Information: Proportionate Share of the Net Pension Liability-OCERS Pension Plan......................... 50 Schedule of District Contributions-OCERS Pension Plan............................................... 51 Net Pension Liability-Additional Retiree Benefit Account................................................ 52 Changes in Net Pension Liability-Additional Retiree Benefit Account............................. 53 Schedule of Funding Progress-Other Postemployment Benefits.................................... 54 Supplementary Information: Combining Area Schedule of Net Position.......................................................................... 56 Combining Area Schedule of Revenues, Expenses, and Changes in Net Position .......... 57 Combining Area Schedule of Cash Flows.......................................................................... 58 STATISTICAL SECTION: Net Position by Component-Last Ten Fiscal Years.................................................................. 60 Revenues and Gross Capital Contributions by Source-Last Ten Fiscal Years........................ 61 Expenses by Type-Last Ten Fiscal Years................................................................................ 62 Change in Net Position-Last Ten Fiscal Years......................................................................... 63 Cash and Investment Reserve Balances-Last Ten Fiscal Years............................................. 64 Sewer Service Fees-Last Nine Fiscal Years and Next Fiscal Year.......................................... 65 Number of Accounts and Revenues by Customer Class-Last Ten Fiscal Years..................... 66 Principal Sewer Service Customers-Current Fiscal Year and Nine Years Ago....................... 67 Ratio of Annual Debt Service to Total Expenses-Last Ten Fiscal Years................................. 68 Debt Coverage Ratios-Last Ten Fiscal Years. 69 Computation of Direct and Overlapping Debt 70 Ratios of Outstanding Debt-Last Ten Fiscal Years. 71 Comparison of the Volume of Wastewater Treated-Last Ten Fiscal Years 72 Authorized Full-time Equivalents by Function-Last Ten Fiscal Years 73 Biosolids Produced-Last Ten Fiscal Years 74 Capital Asset Statistics-Last Ten Fiscal Years......................................................................... 75 Demographic Statistics-Last Ten Fiscal Years......................................................................... 76 Estimated Population Served by Orange County Sanitation District.......................................... 77 Principal Orange County Employers-Current Fiscal Year and Nine Years Ago....................... 78 OperatingIndicators.................................................................................................................... 79 OTHER DATA&TRENDS: Cash and Investment Portfolio 82 Property Tax Rates-Direct and Overlapping Governments-Last Ten Fiscal Years............... 83 Assessed and Estimated Actual Value of Taxable Property-Last Ten Fiscal Years................ 84 Property Tax and User Fee Levies and Collections-Last Ten Fiscal Years 85 Property Value and Construction-Last Ten Fiscal Years 86 Insurancein Force....................................................................................................................... 87 (THIS PAGE LEFT INTENTIONALLY BLANK) Serving.. Orange County Sanitation District Anaheim 108"Ellis Avenue,Fountain Valley,CA 92708 714.962.2411 • www.ocsd.com B Buena October 26, 2017 CY Fountain Va The Board of Directors of the Orange County Sanitation District, Fulls Orange County, California Garden G Submitted herewith is the Comprehensive Annual Financial Report of the Orange County Sanitation District, Orange County, California for the fiscal year ended June 30, 2017. This report includes the Huntington B financial position and activity of individual revenue areas, as described within the Governmental Structure below,as of June 30,2017 and was prepared by the Financial Management Division of the Sanitation District's Administrative Services Department. La Ha Responsibility for both the accuracy of the data, and the completeness and fairness of the presentation, including all disclosures, rests with the Sanitation District. To the best of our knowledge La Pal and belief,the enclosed data is accurate in all material respects and is reported in a manner designed Los Alam to present fairly the financial position and changes in the financial position of the Sanitation District. All disclosures necessary to enable the reader to gain an understanding of the agency's financial Newport a activities have been included. Ora Included within the accompanying financial statements are all of the organizations, activities, and functions controlled by the Sanitation District's Board of Directors in accordance with the Pla Governmental Accounting Standards Board (GASB) Codification of Governmental Accounting and Financial Reporting. For the purpose of this evaluation, control was determined by the Board's Santa responsibility for: (1) adoption of the budget and user charges, (2) taxing authority, and (3) establishment of policies. The reporting entity and its services are described in further detail in Note Seal 8 - 1 of the financial statements. Stan An audit of the books, financial records and transactions of the Sanitation District is conducted annually by independent certified public accountants. The Sanitation District selected the accounting Tu firm of Macias Gini & O'Connell LLP to perform the audit for the year ended June 30, 2017. The auditors' report on the Sanitation District's basic financial statements and supplementary information Villa is located on page 1 within the financial section of this report. This report renders an unmodified opinion on the Sanitation District's basic financial statements for the year ended June 30, 2017. County of Ora Management's discussion and analysis(MD&A)immediately follows the independent auditors'report Costa M and provides a narrative introduction, overview, and analysis of the basic financial statements. The Sanitary Dis" MD&A complements this letter of transmittal and should be read in conjunction with it. Midway City Sanitary District GOVERNMENTAL STRUCTURE Irvine Ra Water Dis The Orange County Sanitation District encompasses the Northern section of Orange County. The Sanitation District provides wastewater treatment for an area of the County covering 479 square miles Yorba D and serving a population of approximately 2.6 million, or 81 percent of the County's population. The Water Di Sanitation District was originally incorporated in 1954 as nine separate public corporations, or districts. In April of 1998, at the Sanitation District's request, the Board of Supervisors of the County of Orange passed Resolution No. 98-140 ordering the consolidation of these nine County Sanitation Districts into a new, single sanitation district, to be known as the Orange County Sanitation District, effective July 1, 1998. This action was recommended to the Board by the Local Agency Formation Commission in order to simplify governance structures, reduce the size of the Board, ease administrative processes, streamline decision-making and consolidate accounting and auditing processes. The boundaries of the nine previous districts had remained intact for the purpose of Our Mission: To protect public health and the environment by providing effective wastewater collection, treatment, and recycling. collecting sewer user fees at the previously established rate schedules, and were referred to as nine individual revenue areas through June 30, 2000. Effective July 1,2003, all Revenue Areas, except Revenue Area 14, consolidated user fee rates and all enterprise fund accounting and budgeting activities and are now known as the Consolidated Revenue Area. The Sanitation District is managed by an administrative organization composed of directors appointed by the agencies or cities which are serviced by the Sanitation District. Each of the two remaining Revenue Areas, the Consolidated Revenue Area and Revenue Area 14, has its own budget and is responsible for the construction and maintenance of its own collection system. All Revenue Areas,except Revenue Area 14 and the portion of the Consolidated Revenue Area previously known as Revenue Area 13, receive their own share of the one-percent ad valorem property tax levy. In addition, all Revenue Areas except Revenue Area 14, collect user fees from property owners. Revenue Area 14 receives all of its revenues from service charges to the Irvine Ranch Water District. The purpose of the Sanitation District's wastewater management program is to protect the public's health, preserve the beneficial uses of the coastal waters, and maintain air quality. The objectives of operating the treatment plants are to process and dispose of the treated wastewater and the separated solids in accordance with Federal, state, and local laws including the Environmental Protection Agency. The Sanitation District sewerage system includes approximately 396 miles of sewers that convey wastewater generated within the Sanitation District's boundaries to the Sanitation District's two wastewater treatment plants, Reclamation Plant No. 1 located in the City of Fountain Valley, and Treatment Plant No.2located in the City of Huntington Beach. Plants No. 1 and No. 2 have secondary treatment capacities of 182 million gallons per day(mgd)and 150 mgd, respectively. In fiscal year 2017-18, both plants are projected to receive a combined average daily wastewater flow of 185 million gallons per day from residential, commercial, and industrial sources. After wastewater receives secondary treatment at Plant No. 1, it flows to the Groundwater Water Replenishment System (GWRS) at the Orange County Water District, located adjacent to the Sanitation District, where it undergoes a state-of-the-art purification process consisting of microfiltralion, reverse osmosis, and ultraviolet light with hydrogen peroxide. The product water is near-distilled quality. Approximately 35 million gallons (132,500 cubic meters) per day of the GWRS water are pumped into injection wells to create a seawater intrusion barrier. Another 65 million gallons (246,000 cubic meters) are pumped daily to Orange County Water District's percolation basins in Anaheim where the GWRS water naturally filters through sand and gravel to the deep aquifers of the groundwater basin. Remaining outflows of treated wastewater from Plants 1 and 2 are combined and discharged to the ocean off the Huntington Beach coast through an outfall pipe that is 120 inches in diameter and approximately five miles long. The last mile of the outfall pipe is a diffuser that dilutes the wastewater with seawater in a ratio of 148 parts seawater to one part treated wastewater at an average depth of 185 feet. ECONOMIC CONDITIONS AND OUTLOOK In June 2017, Chapman University forecasts that the real U.S. gross domestic product will grow 2.2 percent in 2017 as compared to 1.6 percent in 2016. The growth forecasted in consumer and investment spending was led largely by strong gains in housing starts. For a recovery that is one of the longest on record at eight years, the lack of inflationary pressure is remarkable. With only moderate inflation, the Fed will not be as aggressive in raising interest rates. According to the California Employment Development Department (EDD), Orange County generated a slight increase of approximately 0.1 percent in payroll jobs from August 2016 to August 2017. During this same time period, unemployment in Orange County decreased to 4.2 percent from 4.4 percent while the unemployment in California as a whole decreased to 5.4 percent from 5.6 percent. In June 2017, Chapman University forecasted Orange County's 2017 total payroll employment to increase 1.5 percent over the prior year, or the addition of 23,200 payroll jobs in 2017. This is the slowest rate of growth since the recovery began in 2009. It is also lower than Chapman University's forecasts for job growth of 1.7 percent in the U.S. and 2.1 percent in California. Despite the forecasted slowing in Orange County job growth, Chapman University continues to project an increase in housing appreciation to 6.2 percent. Short-run increases can occur when inventories remain tight. Longer-run economic and demographic forces will eventually dominate the pricing equation, especially when affordability, as measured by the median home price-to-median income ratio, is projected to continue increasing. According to Chapman University, residential permit valuation in the County is forecasted to decrease from 10.9 percent growth in 2016 to 3.9 percent growth in 2017. MAJOR INITIATIVES Following are the District's current major initiatives as outlined in the General Manager's work plan for FY 2017-18: 1. Safety and Security • Cyber Security—Implement findings from consultant report on cyber-security risks. • Safety Engineering Solutions and Physical Site Security — Implement physical site security enhancements as needed to ensure all facilities remain secure. • Voluntary Protection Plan (VPP) Certification — Complete a full review and audit of all Safety and Health policies, and implement the new safety software module. Conduct a third-party VPP readiness assessment and draft a VPP implementation plan by June 2018. 2. Succession Planninc • Workforce Planning and Development — Implement changes to the recruitment and selection process that continue to decrease time-to-fill. Deploy semi-annual workforce vulnerability assessments to all departments so that they can identify vulnerable positions, and leverage existing technologies to provide the organization with tools to develop and manage key talent and talent loss due to retirements. • Staffing Study— Conduct a comprehensive staffing study that identifies required staffing levels and opportunities to improve organizational efficiency and effectiveness. Develop the scopes of work with all internal stakeholders for the studies and have the consultant(s) procured by June 2018. 3. Resource Recovery Food Waste — Issue a request for proposal for a Professional Design Services Agreement for the Interim Food Waste Receiving Facility Project. 4. Reliability • New Electrical Safety Standards and Lubrication Program — 1.) Develop a plan and schedule to begin implementation of changes to the preventative maintenance program, including identifying labor and resource needs, for the electrical distribution system based upon new electrical safety standards and for legacy assets not currently in the new maintenance management system (MAXIMO). 2.) Develop a program and schedule for implementing a comprehensive machinery lubrication and oil analysis program for rotating equipment. • Fleet Business Plan—Recommend a Fleet Business Plan to the Board of Directors that will include a replacement policy recommendation considering regulatory requirements, green Fleet criteria, and Fleet best practices. iii • Civil Assets Maintenance— Implement the operational housekeeping program, and develop a multi- year program for condition assessment and maintenance of civil assets. • Operational Resiliency— Finalize the development of an agency-wide Continuity of Operations Plan that identifies the most critical business and operational functions that ensure the Sanitation District remains operational during a major disaster and/or emergency. Present the findings and plan to the Board of Directors no later than May 2018. • Seismic — Continue the seismic study of OCSD's Plant Facilities, completing the sub-surface exploratory work and engineering analysis to develop strategies to mitigate seismic vulnerabilities. 5. Operational Optimization • Rates—Complete a comprehensive rate study to determine the proper allocation of costs among user types and a recommend future rate plan including Capital Facilities Capacity Charges and Industrial User Charges. Present a 5-year rate program for residential, commercial, and industrial users for Board consideration in April 2018. • OCSD Headquarters Building—Complete the Final Concept Design for the Headquarters Complex. Complete the Preliminary Design and begin Detailed Design for the Ward and Garfield Perimeter Improvements. • Dental Amalgam Rule—Create oversight program to implement new federal dental amalgam rule by June 30, 2018. • National Laboratory Certification — Implement laboratory procedures and corrective measures in response to national laboratory certification audit and obtain final certification by June 30, 2018. Strategic Planning In December 2015, the Board of Directors approved the biennium update to the rolling five-year strategic plan. This is a comprehensive strategic plan to steer OCSD's efforts and engage the organization to envision service levels and operational needs for the next five years. This annual process begins with the General Manager's Office initiating the planning effort with the Executive Management Team, and then soliciting input and ideas from managers and supervisors. A draft of the updated five-year strategic plan is then presented to the Board of Directors during a workshop, where Board Members discuss and deliberate changes and additions to the plan. Driven by our Mission, Vision and Core Values, the 2015 Strategic Plan update maintains the District's aggressive efforts to meet the sanitation, health, and safety needs of the 2.6 million people being served in a cost effective manner,while protecting the environment where we live. Since implementation of the first comprehensive strategic plan in 2007, 40 strategic goals has been established and completed. In December 2015, the District updated the Five-Year Strategic Plan and, as part of the strategic planning process, reaffirmed the following goals: • Completion of the Odor Control Master Plan; • Development of Future Biosolids Management Options; • Research new energy efficiency and conversion technologies; • Complete the transfer of 174 miles of local sewers to a local agency; • Determine partnerships, needs, strategies, benefits and costs associated with recycling of Plant No.2 effluent water;and • Workforce planning and development to ensure that the right people with the right skills and abilities, are in the right place, at the right time. iv This Strategic Plan continues to chart a focused roadmap of success for the future of the Orange County Sanitation District. It addresses critical operations and construction issues, financial and budgeting challenges, and gives a clear and concise direction to staff, ratepayers, regulatory agencies, and the general public. SERVICE EFFORTS AND ACCOMPLISHMENTS The following service efforts and accomplishments were achieved by the Sanitation District during the year ended June 30, 2017: • Utility of the Future from the National Association of Clean Water Agencies(NACWA) • 2017 Excellence Award in Information Technology Practices from the Municipal Information Systems Association of California (MISAC) • Honor Award in Planning for Biosolids Master Plan from the American Academy of Environmental Engineers&Scientists • Honor Award in Environmental Sustainability for Effluent Reuse Study from the American Academy of Environmental Engineers&Scientists • Safety Plant Award from the Santa Ana River Basin Section of the California Water Environment (SARBS) • Certificate of Achievement for Excellence in Financial Reporting from the Government Finance Officers Association (GFOA) • District Transparency Certificate of Excellence from the Special District Leadership Foundation • Distinguished Budget Presentation Award from GFOA • Silver Award of Distinction-Website Re-Design Communicator Award from the Academy of Interactive&Visual Arts (AIVA) • Silver Award of Distinction-CIP Annual Report 2015-2016 Communicator Award from AIVA • Gold Award of Distinction-2015-16 Annual Report Communicator Award from AIVA • American In-House Design Award- Utility of the Future Annual Report from Graphic Design USA • Gold Peak Performance Award for P1 and P2 from NACWA • Achievement of Excellence in Procurement Award from the National Procurement Institute. ACCOUNTING AND BUDGETARY CONTROLS The Sanitation District's accounting records are maintained on the accrual basis. In developing and evaluating the Sanitation District's accounting system, consideration is given to the adequacy of internal accounting controls. Internal accounting controls are designed to provide reasonable, but not absolute, assurance regarding: (1) the safeguarding of assets against loss from unauthorized use or disposition; and (2)the reliability of financial records for preparing financial statements and maintaining accountability for assets. The concept of reasonable assurance recognizes that: (1) the cost of a control should not v exceed the benefits likely to be derived; and (2) the evaluation of costs and benefits requires estimates and judgments by management. We believe that the Sanitation District's internal accounting controls adequately safeguard assets and provide reasonable assurance of proper recording of financial transactions. Each year the Sanitation District's Board of Directors adopts an annual operating plan. A joint works budget is first prepared that identifies the specific capital projects and operating activities to be undertaken by the Sanitation District during the year. The budgetary level of control, the level at which expenses cannot exceed budget, is exercised at the individual district, or fund level. The Sanitation District has adopted a Uniform Purchasing Policy that identifies the agreed upon purchasing standards. ACCUMULATED FUNDS AND RESERVES POLICY The Board of Directors of the Orange County Sanitation District has established the following Accumulated Funds and Reserves Policy: Cash Flow Reserve: is established to fund operations, maintenance and certificates of participation expenses for the first half of the fiscal year, prior to the receipt of the first installment of the property tax allocation and the sewer service user fees which are collected as a separate line item on the property tax bill. The level of this reserve will be established as the sum of an amount equal to six months operations and maintenance expenses and the total of the annual debt(COP) service payments due in August each year. Operating Contingency Reserve: is established to provide for non-recurring expenditures that were not anticipated when the annual budget and sewer service fees were considered and adopted. The level of this reserve will be established at an amount equal to ten percent of the annual operating budget. Capital Improvement Reserve: is established to fund annual increments of the capital improvement program. The long-tens target is for one half of the capital improvement program to be funded from borrowing and for one half to be funded from current revenues and reserves. With this program in mind, the target level of this reserve has been established at one half of the average annual capital improvement program through the year 2026. Levels higher and lower than the target can be expected while the long-term financing and capital improvement programs are being finalized. Catastrophic Loss or Self-Insurance Reserves: are established for property damage including fire, flood and earthquake; for general liability; and for workers' compensation. These reserves are intended to work with purchased insurance policies, FEMA disaster reimbursements and State disaster reimbursements. Based on the current infrastructure replacement value of$6.2 billion, the reserve level has been set to fund the District's non-reimbursed costs, estimated to be$57 million. Capital Replacement/Renewal Reserve Policy: is established to provide thirty percent of the funding to replace or refurbish the current collection and treatment and disposal facilities at the end of their useful economic lives. The current replacement value of these facilities is estimated to be $3.09 billion for the collection facilities and $3.11 billion for the treatment and disposal facilities. The initial reserve level was established at$50 million, which will be augmented by interest earnings and a small portion of the annual sewer user fees in order to meet projected needs through the year 2030. Debt Service Reserves: Provisions of the various Certificate of Participation (COP) issues require debt service reserves to be under the control of the Trustee for that issue. These reserve funds are not available for the general needs of the District and must be maintained at specified levels. The level of required COP service reserves at June 30, 2017 was$5.0 million. In addition, the District's Debt Service Reserve policy requires total debt service reserves to be ten percent of the total outstanding COP debt,or $107 million at June 30, 2017. vi Accumulated funds exceeding the levels specified by District policy will be maintained in a rate stabilization fund. These funds will be applied to future years' needs in order to maintain rates or to moderate annual fluctuations. There is no established target for this reserve. As of June 30, 2017, the Sanitation District was in compliance with the Accumulated Funds and Reserves Policy with designated cash and investments totaling $611 million, and have been earmarked for the following specific purposes in accordance with the Sanitation District's reserve policy: Designated Cash and Investments Designated For Cash Flow Contingency $174 million Designated For Self-Insurance 57 million Designated For Capital Improvements 173 million Designated For Debt Service Requirements 107 million Total Designated Cash and Investments S 511 million CERTIFICATE OF ACHIEVEMENT FOR EXCELLENCE IN FINANCIAL REPORTING The Government Finance Officers' Association of the United States and Canada (GFOA) awarded a Certificate of Achievement for Excellence in Financial Reporting to the Orange County Sanitation District for the Sanitation District's comprehensive annual financial report for the year ended June 30, 2016. This was the twenty-second consecutive year that the Sanitation District has received this award. In order to be awarded a Certificate of Achievement, a governmental unit must publish an easily readable and efficiently organized comprehensive annual financial report, whose contents conform to program standards. Such reports must satisfy both generally accepted accounting principles and applicable legal requirements. A Certificate of Achievement is valid for a period of one year only. We believe that our current comprehensive annual financial report continues to meet the Certificate of Achievement Program requirements and we are submitting it to GFOA to determine its eligibility for another certificate. ACKNOWLEDGMENTS This report could not have been accomplished without the dedicated services of the Financial Management Division staff, and I would like to especially express my appreciation to Line Hsiao, Accounting Supervisor, who assisted in its preparation. I would also like to thank the Sanitation District's Board of Directors, the General Manager, and the Director of Finance and Administrative Services for their interest and support in conducting the financial operations of the Sanitation District in a responsible and progressive manner. Respectfully submitted,`� G"� ` Michael D. White, CPA Controller vii G Government Finance Officers Association Certificate of Achievement for Excellence in Financial Reporting Presented to Orange County Sanitation District California For its Comprehensive Annual Financial Report for the Fiscal Year Ended June 30, 2016 *s/-A44 Executive Director/CEO viii ORANGE COUNTY SANITATION DISTRICT Board of Directors As of June 30, 2017 Agency Active Director Alternate Director Cities: Anaheim Denise Barnes Lucille Kring Brea Glenn Parker Cecilia Hupp Buena Park Fred Smith Virginia Vaughn Cypress Mariellen Yarc Stacy Berry Fountain Valley Steve Nagel Cheryl Brothers Fullerton Greg Seboum Jesus Silva Garden Grove Steve Jones Kris Beard Huntington Beach Barbara Delgleize Erik Peterson Irvine Donald P. Wagner Lynn Schott La Habra Tim Shaw Michael Blazey La Palma Peter Kim Gerard Goedhart Los Alamitos Richard Murphy Warren Kusumoto Newport Beach Scott Peotter Brad Avery Orange Teresa Smith Mark Murphy Placentia Chad Wanks Ward Smith Santa Ana Sal Tinajero David Benavides Seal Beach Ellery Deaton Sandra Massa-Lavilt Stanton David Shawver Carol Warren Tustin Allan Bernstein Chuck Puckett Villa Park Robert Collacolt Diana Fascenelli Sanitary Water Districts: Costa Mesa Sanitary District James M. Ferryman Robert Ooten Midway City Sanitary District Al Krippner Charlie Nguyen Irvine Ranch Water District John Withers Douglas Reinhart Yorba Linda Water District Phil Hawkins Brooke Jones County Areas: Member of the Board Michelle Steel Shawn Nelson of Supervisors ix ORANGE COUNTY SANITATION DISTRICT Organizational Chart As of June 30, 2017 yn,.w C.esaal Envimtnemal Operations aM AM1nn aawe Maiaganatl Humn Newrtm ,i Sarvi®s y,�aiisg� Mandan ® eaninemtes an,:�mtan Mmmnestai sat Fnandm Hemurte Collect.Famines exam Sea Maug eaten,I Mana,,ernent PrdeWn Phmitg Opeatons aM Safety/Seamy Maintenance CwNxls.PurtM1asirg Laborabry. Pmjed Management PWlic Mars BMmerias Monitonrg estl �� Flat Services M.agemem Cwnplunce Imesnation Crvil&MeWnol %ant No 1 reundogy Egbeemg operates. Electial B Camtd Plant No.2 Sydens Egineemg Operatan Plat No,1 Mstlsrana Plain No 2 Maintemrce Maintenance Rdiabililyantl Planning X ORANGE COUNTY SANITATION DISTRICT Map of Service Area As of June 30, 2017 OCSD Mrvloa Ma LA HABRA BREA YORBA FULLER LINDA PLAC A LA B EK T� p K PRE ANAHdM VILL 0 A S O PA LOS ORANGE `—� ITO ROV 1 �.BACN IN EA Pce I ANT UNT " ANA ALLE P1 rHUB GTO NIWAFE COSTA MESA NEWPORT BEACH N uro��rex. Semv area p neary x.. Sewer paelines rc,..ti.n_av mRk S Reclamation Rant No.1(P1) heatment Plant W.Y(P2) wm7m m..m uuwamtia. � Pump and lM[statbns akwagmrsimaa.��.m O OninmwrateC Orange County(wflfte areas) scam.oymv A (THIS PAGE LEFT INTENTIONALLY BLANK) xii Certified MGO Accountants Accountnt ants Independent Auditors' Report To the Board ofDrectors Orange County Sanitation District Fountain Valley,California We have audited the accompanying financial statements of the Orange County Sanitation District (the District)as of and for the year ended Jane 30,2017,and the related notes to the financial statements,which collectively comprise the District's basic financial statements as listed in the table of contents. Management's Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America;this includes the design,implementation,and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement,whether due to fraud or error. Auditor's Responsibility Our responsibility is to express an opinion on these financial statements based on our audit.We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the financial statements,whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the District's preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances,but not for the purpose of expressing an opinion on the effectiveness of the District's internal control.Accordingly,we express no such opinion.An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion,the financial statements referred to above present fairly,in all material respects,the financial position of the Orange County Sanitation District, as of June 30, 2017, and the changes in its financial position and its cash flows for the year then ended in accordance with accounting principles generally accepted in the United States of America. Macias Gini&O'Connell Lis 06951itaU hur CouRScke 600 1 Nppporl Bearlt CA92660 www.mgocpa.com Other Matters Required Supplementary Information Accounting principles generally accepted in the United States of America require that the management's discussion and analysis, Schedule of Proportionate Share of the Net Pension Liability, Schedule of District Contributions, Schedule of Net Pension Liability — Additional Retiree Benefit Account, Schedule of Changes in Net Pension Liability —Additional Retiree Benefit Account,and Schedules of Funding Progress, as listed in the 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 our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. Other Information Our audit was conducted for the purpose of forming an opinion on the financial statements that collectively comprise the District's basic financial statements. The separate "Combining Area" financial statements, introductory section, statistical section, and other data and trends are presented for purposes of additional analysis and are not a required part of the basic financial statements. The"Combining Area"financial statements are the responsibility of management and were derived from, and relate directly to, the underlying accounting and other records used to prepare the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America.In our opinion,the"Combining Area" financial statements are fairly stated, in all material respects, in relation to the basic financial statements as a whole. The introductory and statistical sections and other data and trends 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. �p / r ias Gw C�'�aUlell Newport Beach, California October 26,2017 2 Management Discussion and Analysis June 30,2017 This section of the financial statements of the Orange County Sanitation District (District) is management's narrative overview and analysis of the financial activities of the District for the fiscal year ended June 30, 2017. The information presented here is to be considered in conjunction with additional information provided within the letter of transmittal located in the Introductory Section of this report. Financial Highlights • As of June 30, 2017, the District's assets and deferred outflows of resources exceeded its liabilities and deferred inflows of resources by $2,041.2 million (net position). Of this amount, $536.3 million represents unrestricted net position, which may be used to meet the District's ongoing obligations to citizens and creditors. • Total net position increased$122.6 million, or 6.4 percent over the prior year. • Net Capital Assets, consisting of non-depreciable capital assets and depreciable capital assets net of accumulated depreciation, increased $34.0 million, or 1.3 percent over the prior year. • Net investment in capital assets increased $75.6 million, or 5.3 percent. • Unrestricted Net Position increased$47.0 million,or 9.6 percent over the prior year. • Total outstanding bonded debt decreased by$71.8 million from the prior year to$1.044 billion. Overview of the Basic Financial Statements The District operates as a utility enterprise and presents its financial statements using the economic resources measurement focus and the full accmal basis of accounting. As an enterprise fund, the District's basic financial statements are comprised of two components: financial statements and notes to the financial statements. This report also contains other supplementary information in addition to the basic financial statements themselves. In accordance with the Governmental Accounting Standards Board (GASS)Codification of Governmental Accounting and Financial Reporting Standards, the District's financial statements include a Statement of Net Position; Statement of Revenues, Expenses, and Changes in Net Position; and a Statement of Cash Flows. The Statement of Net Position includes the District's assets, deferred outflow of resources, liabilities, and deferred inflows of resources; and provides information about the nature and amounts of investments in resources (assets)and the obligations to District creditors (liabilities). It also provides the basis for computing the rate of return, evaluating the capital structure of the District, and assessing the liquidity and financial flexibility of the District. The Statement of Revenues, Expenses, and Changes in Net Position accounts for the current year's revenues and expenses. This statement measures the success of the District's operations over the past year and can be used to determine the District's creditworthiness. It also highlights the District's dependency on property tax revenues in supplementing user fees and other charges for recovering total cost. The final required financial statement, the Statement of Cash Flows, reports cash receipts, cash payments, and net changes in cash resulting from operations, investments, and financial activities of the reporting period. 3 Net Position As previously noted, net position increased $122.6 million, or 6.4 percent over the net position for FY 2015-16, to$2,041.2 million in Fiscal Year 2016-17. (Dollars in thousands) Percentage June 30, June 30, Increase Increase 2017 2016 (Decrease) (Decrease) Assets and deferred outflow of resources Assets Current and other assets $ 600,066 $ 609,676 $ (9,610) -1.6% Net Capital assets 2,603,458 2,569,440 34,018 1.3% Total assets 3,203,524 3,179,116 24,408 0.8% Deferred outflows of resources 74,510 90,762 (16,252) -17.9% Total Assets and deferred outflows of resources 3,278,034 3,269,878 89156 0.2% Liabilities Current liabilities 99,376 102,319 (2,943) -2.9% Noncurrent liabilities 1,107,762 1,225,948 (118,186) -9.6% Total liabilities 1,207,138 1,328,267 (121,129) -9.1% Deferred inflows of resources 29,671 23,039 6,632 28.8% Total Liabilities and deferred inflows of resources 1,236,809 1,351,306 (114,497) -8.5% Net position: Net investment in capital assets 1,504,898 1,429,269 75,629 5.3% Unrestricted 536,327 489,303 47,024 9.6% Total net position $ 2,041,225 $ 1,918,572 $ 122,653 6.40/6 Current and other assets decreased $9.6 million, or 1.6 percent, due primarily to net cash provided by operations of $98.8 million, proceeds from property taxes of $88.0 million, contributions from other governments of $24.4 million, receipt of capital facilities capacity charges of $15.6 million, investment income of $3.1 million, and other government repayments of $4.3 million offset by capital outlays of $104.5 million, bonded debt retirements of$53.5 million, interest paid of$47.0 million, and local sewer line transfer payment of$38.8. Net Capital assets increased $34.0 million, or 1.3 percent, due mostly to the ongoing capital improvement program construction in progress additions of$131.3 million and land additions of$10.6 million, offset by depreciation of$96.3 million and the ownership transfer of local sewer net capital assets of$9.3 million to the East Orange County Water District(EOCWD). Included in total capital outlay additions is the Sludge 4 Dewatering and Odor Control Project at Plant No. 1 and Plant No. 2 with total project budgets of$188.3 million and $90.5 million, respectively. These projects construct primary sludge thickening facilities to improve solids handling capacity, replace aging sludge dewatering facilities, reduce biosolids handling and disposal, and rehabilitate obsolete solids handling odor control equipment. In FY 2016-17, the District incurred project costs of$13.7 million at Plant No. 1 and$20.7 million and Plant No. 2 bringing the total cost-to-date to $165.8 million and $46.6 million, respectively, with completion scheduled in FY 2017- 18. Collection system projects includes the Newhope-Placentia Trunk Replacement. The Newhope-Placentia Trunk Replacement incurred outlays of$17.3 million in FY 2016-17 with a total project budget of$112.0 million through the projected completion in FY 2021-22. This project will increase the size of approximately 35,000 feet of the trunk line from Yorba Linda Boulevard to Orangewood Avenue. The upsized sewer will accommodate Flows from the newly abandoned Yorba Linda Pump Station and the newly interconnected Atwood Sub-trunk. The Gisler-Redhill System Improvements (Reach "B") is another collection system project that incurred outlays of $11.8 million in FY 2016-17 with a total project budget of $25.2 million through projected completion in FY 2018-19. This project will replace a section of the existing sewer and rehabilitate other reaches in the Gisler-Redhill System. This will include installing a larger diameter pipelines, providing interties, new diversion settings, and sliplining and relining manholes. See page 8 for the Schedule of Capital Assets and listing of other major capital additions for FY 2016-17. Deferred Outflows of Resources decreased $16.3 million, or 17.9 percent from the prior year primarily due to pension investment earnings underperforming the actuarial valuation projection by$9.1 million and the difference between carrying amount of the retired debt, Certificates of Participation (COP) Series 2009A, and the acquisition price of COP Series 2017A, in the amount of$3.4 million. Deferred Inflows of Resources increased $6.6 million, or 28.8 percent over the prior year is primarily due to the increase in pension expense as a result of the change in actuarial assumptions. Net Investment in capital assets increased $75.6 million, or 5.3 percent over the prior year primarily due to the result of the net increase in capital assets of$34.0 million coupled with a $41.6 million decrease in related debt. Unrestricted net position increased $47.0 million, or 9.6 percent due to the overall increase in net position of$122.6 million offset by the increase in net investment in capital assets of$75.6 million. 5 Changes in Net Position Net position increased $122.6 million in FY 2016-17, or 6.4 percent over the prior year. (Dollars in thousands) Percentage June 30, June 30, Increase Increase 2017 2016 (Decrease) (Decrease) Revenues: Operating revenues Service Charges $ 312,237 $ 314,477 $ (2,240) -0.7% Permit and inspection fees 1,045 951 94 9.9% Total operating revenues 313,282 315,428 (2,146) -0.7% Non-operating revenues Property taxes 88,284 84,407 3,877 4.6% Investment and interest income 3,081 9,183 (6,102) -66.4% Contrib.from other government 24,388 13,103 11,285 86.1% Other 2,757 1,555 1,202 77.3% Total non-operating revenues 118,510 108,248 10,262 9.5% Total revenues 431,792 423,676 8,116 1.9% Expenses: Operating expense other than depreciation and amortization 150,252 153,501 (3,249) -2.1% Depreciation and amortization 96,320 90,502 5,818 6.4% Non-operating expense 78,918 34,078 44,840 131.6% Total expenses 325,490 278,081 47,409 17.0% Income before capital contributions 106,302 145,595 (39,293) -27.0% Capital facilitites capacity charges 16,351 17,974 (1,623) -9.0% Increase in net position 122,653 163,569 (40,916) -25.0% Beginning net position 1,918,572 1,755,003 163,569 9.3% Ending net position $ 2,041,225 $ 1,918,572 $ 122,653 6.40/6 As previously staled, an enterprise fund is used to account for the operations of the District, which is financed and operated in a manner similar to private business enterprises. This allows the District to delemnine that the costs (expenses, including depreciation and amortization) of providing wastewater management services on a continuing basis are financed or recovered primarily through user charges. Sewer service user fees are evaluated annually based primarily on budget requirements for total operation and maintenance expenses and capital outlays for providing wastewater management services. Property tax revenues are dedicated for the payment of debt service. In FY 2016-17, operating revenues decreased $2.1 million, or 0.7 percent from the prior year that is reflective of the $5.7 million decrease in local sewer service fees as ownership of the local sewer lines was transferred over to EOCWD on August 2, 2016. This decrease in local sewer service fees was somewhat offset by the 1.6 percent increase in the average sewer user fee rate over the prior year. 6 Sources of Revenue Functional Expenses ■Collections June 30, 2017 June 30,2017 20% 19% 9% ■Treatment 8. El Interest 9% 1% Disposal ❑User Fee s ❑Depreciation 8 Amortization ❑Other 5% EYo 35% ❑Interest ❑Taxes Levied Expense ■Other 30% The$10.3 million, or 9.5 percent increase in non-operating revenues primarily consists of a $11.3 million, or 86.1 percent increase in contributions from other governments, a $3.9 million, or 4.6 percent increase in property tax revenues, and a $1.2 million, or 77.3 percent increase in other, somewhat offset by a $6.1 million, or 66.4 percent decrease in investment and interest income. The increase in contributions from other governments is reflective of the increase in capital contributions from the Irvine Ranch Water District. The increase in property tax revenue is primarily the result of the increase in total assessed valuation of 5.3 percent over the prior year. The decrease in investment and interest income is attributable to lower yields earned on investments and lower cash and investments balances. Yields earned on investments decreased from 1.7 percent in FY 2015-16 to 0.6 percent in FY 2016-17 while rash and investment balances decreased from $544.8 million at June 30, 2016 to $511.0 million at June 30, 2017. Operating expense before depreciation and amortization decreased $3.2 million or 2.1 percent from the prior year. The majority of this decrease is attributable to the $1.6 million, or 19.8 percent decrease in other operating expenses, the $1.1 million, or 15.6 percent decrease in utilities, the $1.1 million, or 11.7 percent decrease in feasibility studies, and the $1.3 million, or 1.7 percent decrease in salaries and benefits,that were somewhat offset by a$1.7 million, or 6.2 percent increase in contractual services. The decrease in other operating expenses is mostly attributable to the reduction in pending claims of $1.7 million. The decrease in utilities is attributable to the decrease in electricity charges from the reduction in outfall pumping and the implementation of a more cost-effective strategy in managing the District's electrical needs. Feasibility studies are done to determine the necessity and the preferred designs of future potential construction projects and fluctuate from year-to-year, as required. The increase in Contractual Service is mostly attributable to the increases in security, with the addition of armed patrol services at both plants, and increases in preventative maintenance services for the Civil Assets Management Program (CAMP). Operating salaries and benefits decreased by $1.3 million to $74.3 million, a 1.7 percent decrease from the prior year. The operating salaries and benefits costs are part of the overall decrease of$1.7 million in total salaries and benefits when including the salaries and benefits capitalized within the capital improvement program. Overall, total District salaries and benefits were $90.3 million, a 2.9 percent decrease from the prior year total of$93.0 million. This decrease is reflective of the $5.2 million, or 30.5 percent decrease in retirement premiums as a result of the $214.1 million pay down against the Districts unfunded actuarial accrued pension liability (UAAL) over the current and previous two fiscal years. This pay down resulted in a UAAL premium rate decrease from 7.86 percent in FY 2015-16 to 0.69 percent in FY 2016-17. Non-operating expense increased $44.8 million, or 131.6 percent, and is primarily reflective of the $50.8 million transfer of local sewer service fee assets including $41.5 million of local sewer accumulated capital repair and replacement funds to EOCWD. Somewhat offsetting this increase is the decrease in pollution remediation expense as $6.4 million was incurred in the prior year but none recorded in fiscal year 2016- 7 17, and a decrease in interest expense of$2.0 million, a 7.1 percent decrease from the prior year as the District continues to pay down on its long-tens bonded debt. Capital Facility Capacity Charges decreased $1.6 million, or 9 percent from the prior year due to the slowdown in construction activity as total building permit valuation in Orange County is projected to increase 4.5 percent in Calendar Year 2017 from the prior year increase of 10.1 percent. Capital Assets At June 30, 2017, the District had a net investment of$2.603 billion in capital assets. This represents a net increase(including additions and deletions)of$34.0 million or 1.3 percent over the prior year. (Dollars in thousands) Percentage June 30, June 30, Increase Increase 2017 2016 (Decrease) (Decrease) Land $ 25,247 $ 15,960 $ 9,287 58.2% Construction in Progress 461,833 499,376 (37,543) -7.5% Sewage collection facilities 482,558 447,377 35,181 7.9% Sewage treatment facilities 1,515,969 1,496,469 19,500 1.3% Effluent disposal facilities 34,636 36,155 (1,519) -4.2% Solids disposal facilities 297 307 (10) -3.3% General and administrative facilities 82,918 73,549 9,369 12.7% Assets acquired in excess of book value - 248 (248) -100.0% Capital assets,net $ 2,603,458 $ 2,569,441 $ 34,017 1.3% Major capital asset additions for the current fiscal year included the following: • $20.7 million—Sludge Dewatering and Odor Control at Plant No. 2 $17.3 million—Newhope-Placentia Trunk Replacement • $13.7 million—Sludge Dewatering and Odor Control at Plant No. 1 • $11.8 million—Gisler-Redhill System Improvements- Reach"B" $10.6 million— 18475 Pacific St. & 18484 Bandilier Cir. Property Acquisition • $ 5.3 million—Ocean Ouffall Booster Station Rehabilitation More detailed information about the District's capital assets is provided in Notes 1 and 3 of Notes to the Financial Statements. Debt Administration At June 30, 2017, the District had $1.044 billion outstanding in bonded debt, a net decrease of $71.8 million, or 6.4 percent from the prior year. This reduction consisted of the accumulation of principal payments made in accordance with the schedule of debt service payments and the refunding of$120.9 million of Series 2014E Revenue Refunding Certificates of Participation (COP) with Series 2016E Revenue Refunding COP issued in the amount of $109.9 million in November 2016 and the partial refunding of$91.6 million of Series 2007A Certificates of COP with Series 2017A Wastewater Refunding Revenue Obligations issued in the amount of$66.4 million issued in February 2017. Moody's, Standard and Poors, and Fitch Ratings all reaffirmed their AAA rating of the Orange County Sanitation District. The District's long-range financing plan is designed to maintain this high rating. Over the next five years, the District is projecting over$1 billion in future treatment plant and collection system 8 capital improvements. In accordance with the District's long-term debt fiscal policy, the District will restrict long-term borrowing to capital improvements that cannot be financed from current revenue. However, no new debt issuances are being proposed over the next five years to assist with the funding of the system improvements scheduled over this time period. For more information on long-term debt activities, see Note 4 of the Notes to Basic Financial Statements. Economic Factors and Next Year's Budgets and Rates • The unemployment rate within the County of Orange is currently 4.2 percent, a slight decrease from the rate of 4.4 percent a year ago. • Inflation for the Los Angeles-Riverside-Orange County area increased 2.0 percent in 2016 over the prior year based on the actual percentage change in the consumer price index according to the U. S. Department of Labor, Bureau of Labor Statistics. • The actual rate of return on investments decreased from the 1.7 percent earnings rate in FY 2015-16 to 0.6 percent for FY 2016-17. All of these factors are considered in preparing the District's biennium budget. The District's user fee schedule was increased by 1.2 percent for FY 2017-18 over the prior year. The annual fee applicable to the District's largest customer base and the underlying basis for all other user rates: the single-family residential fee, increased by $4.00, from $327.00 to $331.00. This rate increase was necessary to finance the District's cash flow needs as capital improvement outlays alone are projected to be $148.1 million in FY 2017-18 and are projected to total $2.5 billion over the next 10 years in order to rehabilitate and upgrade existing facilities and maintain full secondary treatment standards. Requests for Information The financial report is designed to provide a general overview of the District's finances. Questions concerning any of the information provided in this report or requests for additional financial information should be addressed to the Financial Management Division, Orange County Sanitation District, 10844 Ellis Avenue, Fountain Valley, CA 92708-7018. 9 (THIS PAGE INTENTIONALLY LEFT BLANK) 10 ORANGE COUNTY SANITATION DISTRICT BASIC FINANCIAL STATEMENTS 11 ORANGE COUNTY SANITATION DISTRICT Statement of Net Position June 30,2017 2017 Current assets: Cash and cash equivalents $ 89,374,975 Investments 416,675,560 Accounts receivable, net of allowance for uncollectibles$236,187 45,679,780 Accrued interest receivable 1,947,562 Connection fees receivable 3,712,660 Property tax receivable 1,319,052 Inventories 7,163,534 Due from other governmental agency 5,791,345 Prepaid expenses 1,733,053 Total current assets 573,397,521 Noncurrent assets: Restricted: Cash and cash equivalents 4,992,427 Unrestricted: Non-depreciable capital assets 487,080,496 Depreciable capital assets,net of accumulated depreciation 2,116,377,833 Due from other governmental agency 20,472,023 Net OPEB asset 1,193,073 Other noncurrent assets,net 10,344 Total noncurrent assets 2,630,126,196 Total assets 3,203,523,717 Deferred outflows of resources: Deferred losses on defeasances 37,127,405 Deferred outflows related to pensions 37,382,920 Total deferred outflows of resources 74,510,325 Total assets and deferred outflows of resources 3,278,034,042 Current liabilities: Accounts payable 10,000,957 Accrued expenses 15,253,785 Retentions payable 3,461,476 Interest payable 17,789,350 Current portion of long-term obligations 52,870,671 Total current liabilities 99,376,239 Noncurrent liabilities: Noncurrent portion of long-term obligations 1,099,679,143 Net pension liability 8,082,853 Total Noncurrent liabilities 1,107,761,996 Total liabilities 1,207,138,235 Deferred inflows of resources: Deferred inflows related to pensions 29,670,775 Total liabilities and deferred inflows of resources 1,236,809,010 Net position: Net investment in capital assets 1,504,898,388 Unrestricted 536,326,644 Total net position $ 2,041,225,032 See Accompanying Notes to Basic Financial Statements. 12 ORANGE COUNTY SANITATION DISTRICT Statement of Revenues, Expenses, and Changes in Net Position For the Year Ended June 30, 2017 2017 Operating revenues: Service charges $ 312,237,336 Permit and inspection fees 1,044,752 Total operating revenues 313,282,088 Operating expenses other than depreciation and amortization: Salaries and benefits 74,290,587 Utilities 6,118,859 Supplies, repairs and maintenance 25,473,968 Contractual services 29,547,427 Feasibility studies 8,305,420 Other 6,516,078 Total operating expenses other than depreciation and amortization 150,252,339 Operating income before depreciation and amortization 163,029,749 Depreciation and amortization 96,320,430 Operating income 66,709,319 Non-operating revenues: Property taxes 88,284,195 Investment and interest income 3,081,016 Contributions from other government 24,388,397 Other 2,756,896 Total non-operating revenues 118,510,504 Non-operating expenses: Interest 25,648,352 Local sewer service transfer 50,783,259 Other 69,146 Loss on disposal of assets 2,417,676 Total non-operating expenses 78,918,433 Income before capital contributions 106,301,390 Capital contributions; Capital facilities capacity charges 16,351,185 Change in net position 122,652,575 Total net position-beginning 1,918,572,457 Total net position-ending $ 2,041,225,032 See Accompanying Notes to Basic Financial Statements. 13 ORANGE COUNTY SANITATION DISTRICT Statement of Cash Flows For the Year Ended June 30, 2017 2017 Cash Bows from operating activities: Receipts from customers and users $ 286,809,139 Payments to employees (108,554,324) Payments to suppliers (79,412,392) Net cash provided by operating activities 98,842,423 Cash Bows from noncapital financing activities: Proceeds from property taxes 88,025,973 Payments for sewer service transfer and other obligation (38,770,357) Net cash provided by noncapital financing activities 49,255,616 Cash Bows from capital and related financing activities: Capital facilities capacity charges 15,621,440 Additions to capital assets (104,543,497) Interest paid (47,057,561) Principal payments on debt obligation (35,576,000) Proceeds released to escrow account on defeased debts (212,470,000) Proceeds from debt issuances 195,288,273 Debt issuance costs (752,912) Contribution from other government 35,661 Net cash used in capital and related financing activities (189,453,596) Cash Bows from investing activities: Proceeds from the sale of investments 821,428,761 Purchases of investments (833,789,163) SARI project payments 4,258,104 Interest received 7,877,603 Net cash used in investing activities (224,695) Net decrease in cash and cash equivalents (41,580,252) Cash and cash equivalents,beginning of year 135,947,654 Cash and cash equivalents,and of year $ 94,367,402 Reconciliation of operating income to net cash provided by operating activities: Operating income $ 66,709,319 Adjustments to reconcile operating income to net cash provided by operating activities: Depreciation and amortization 96,320,430 Bad debt expense(Net recoveries) 137,270 (Increaset/decrease in operating assets: Accounts receivable (26,451,883) Inventories (302,833) Prepaid and other assets (268,402) Increase/(decrease)in operating liabilities: Accounts payable (3,514,394) Accrued expenses 1,462,767 Due to other governmental agency (21,067) Net pension liability (34,154,528) Pension/OPEB/accrued leave payable (461,373) Compensated absences 268,035 Other payable (362,529) Claims and judgments (518,389) Net cash provided by operating activities $ 98,842,423 Noncash activities- Unrealized(loss)on the fair value of investments $ (4,550,282) Receivable from non-operating activities 3,266,614 Capital assets acquired through accounts payable 3,992,243 Capital facilities capacity charges contributed 729,745 See Accompanying Notes to Basic Financial Statements. 14 ORANGE COUNTY SANITATION DISTRICT Notes to Basic Financial Statements For the Year Ended June 30, 2017 (11 Summary of Significant Accountina Policies Reoortino Entity The Orange County Sanitation District(OCSD)is a public agency which owns and operates certain wastewater facilities in order to provide regional wastewater collection, treatment, and disposal services to approximately 2.6 million people in the northern and central portion of the County of Orange, California. OCSD is managed by an administrative organization comprised of directors appointed by the agencies and cities which are serviced by OCSD. OCSD's service area was originally formed in 1954 pursuant to the County Sanitation District Act and consisted of seven independent special districts. Two additional districts were formed and additional service areas were added in 1985 and 1986. These special districts were jointly responsible for the treatment and disposal facilities which they each used. In April of 1998, the Board of Supervisors of Orange County passed Resolution 98-140 approving the consolidation of the existing nine special districts into a new, single sanitation district. This action was taken in order to simplify the governance structures, reduce the size of OCSD's Board of Directors, ease administrative processes, streamline decision-making and consolidate accounting and auditing processes. Pursuant to the Resolution and Government Code Section 57500, the predecessor special districts transferred and assigned all of their powers, rights, duties, obligations, functions and properties to OCSD, including all assets, liabilities,and equity. Effective July 1, 1998, the organization became known as the Orange County Sanitation District. The boundaries of one of the previous districts, now known as Revenue Area No. 14, have been maintained separately because their use of OCSD's collection, treatment, and disposal system is funded by the Irvine Ranch Water District(IRWD). The boundaries of the other eight districts have been consolidated and are collectively referred to as the Consolidated Revenue Area. OCSD utilizes joint operating and capital outlay accounts to pay joint treatment, disposal, and construction costs. These joint costs are allocated to each revenue area based on gallons of sewage Flow. The supplemental schedules and statements show internal segregations and are not intended to represent separate funds for presentation as major or non-major funds in the basic financial statements. The accompanying financial statements present OCSD and its blended component unit, the Orange County Sanitation District Financing Corporation. The Corporation is a legally separate entity although in substance it is considered to be part of OCSD's operations. OCSD is considered to be financially accountable for the Corporation which is governed by a board comprised entirely of OCSD's board members. There is no requirement for separate financial statements of the Corporation; consequently, separate financial statements for the Corporation are not prepared. The Corporation had no financial activity during the fiscal year ended June 30, 2017, other than principal and interest payments on outstanding certificates of participation/revenue obligations and notes(see Note 4). OCSD is independent of and overlaps other formal political jurisdictions. There are many governmental entities, including the County of Orange, that operate within OCSD's jurisdiction; however, financial information for these entities is not included in the accompanying financial statements in accordance with the Governmental Accounting Standards Board (GASS) Codification of Governmental Accounting and Financial Reporting Standards. 15 ORANGE COUNTY SANITATION DISTRICT Notes to Basic Financial Statements For the Year Ended June 30, 2017 Measurement Focus and Basis of Accounting OCSD operates as an enterprise activity. Enterprise funds account for operations that are financed and operated in a manner similar to private business enterprises, where the intent of the Board of Directors is that the costs (expenses, including depreciation and amortization) of providing services to the general public on a continuing basis be financed or recovered primarily through user charges. Basis of accounting refers to when revenues and expenses are recognized in the accounts and reported in the financial statements. Enterprise funds are accounted for on the flow of economic resources measurement focus and use the accrual basis of accounting, whereby revenues are recognized when earned and expenses are recognized when incurred, regardless of the timing of related cash flows. The accounting policies of OCSD conform to accounting principles generally accepted in the United States of America (GAAP) as applicable to governments. The Governmental Accounting Standards Board (GASS) is the accepted standard-setting body for establishing governmental accounting and financial reporting principles in the United States. Ooeratino Plans Each year, OCSD staff prepares an annual operating plan which is adopted by the Board of Directors. The annual operating plan is used to serve as a basis for monitoring financial progress, estimating the levy and collection of taxes, and determining future service charge rates. During the year, these plans may be amended as circumstances or levels of operation dictate. Cash and Cash Equivalents Investments with original maturities of three months or less when purchased and money market funds and external investment pools that can be withdrawn on demand are considered to be cash equivalents. Investments Except for certain investments in monies held by fiscal agent as disclosed in Note 2, section "Fair Value of Investments', all other investments are stated at fair value (the price that would be received to sell an asset in an orderly transaction between market participants acting in their economic best interest at the measurement date). Changes in fair value that occur during the fiscal year are reported as part of investment and interest income. Investment and interest income includes interest earnings and realized and unrealized gains or losses in fair value. Investment and interest income are recorded as revenues and receivables when declared and realized gains or losses are recorded when the investment is sold. Accounts Receivable Accounts receivable is reported net of the allowance for uncollectible receivables. Uncollectible receivables were $236,187 at June 30, 2017. Unbilled sewer services through June 30, 2017 are recorded as revenue and receivables. Management determines the allowance for uncollectible receivables by evaluating individual accounts receivable at least one year past due and considering a customer's financial condition, credit history and current economic conditions. Accounts receivables are written off when deemed uncollectible. Recoveries of accounts receivables previously written off are recorded when received. 16 ORANGE COUNTY SANITATION DISTRICT Notes to Basic Financial Statements For the Year Ended June 30, 2017 Inventories Inventories, which is held for consumption and not resale, is stated at cost on a weighted-average basis, and then is expensed when used. Capital Assets Outlays for property, plant, equipment, and construction in progress are recorded in the revenue area which will use the asset. Such outlays may be for individual revenue area assets or for a revenue area's share of joint assets. Capital assets of property, plant, and equipment are defined as assets with an initial, individual cost of more than $5,000 and an estimated useful life of at least three years. Such assets are recorded at cost, except for assets acquired by contribution, which are recorded at fair market value at the time received. Cost includes labor; materials; outside services; vehicle and equipment usage; other ancillary costs consisting of direct charges such as engineering, purchasing, supervision, or fringe benefits. Interest costs, net of interest earnings, are capitalized on projects. During the fiscal year ended June 30, 2017, net interest costs of$12,624,952 were capitalized. Depreciation of plant and equipment is provided for over the estimated useful lives of the assets using the straight-line method in accordance with generally accepted accounting principles. OCSD also considers the guidelines of estimated useful lives as recommended in the State of California Controllers Uniform System of Accounts for Waste Disposal Districts, which range from 3 to 75 years. The following are estimated useful lives for major classes of depreciable assets: Sewage collection facilities — 50 years, Sewage treatment facilities — 40 years, Sewage disposal facilities — 40 years, General plant and administrative structures — 40 years, and other General plant and administrative facilities and equipment-4 to 25 years. Amortization Amortization of the excess purchase price over the book value of assets acquired is provided using the straight-line method over an estimated useful life of 30 years. Premiums and discounts on certificate anticipation notes and wastewater refunding revenue obligations are amortized to interest expense over the respective terms of the installment obligations based on the effective interest method (Note 4). Restricted Assets Certain assets are classified as restricted because their use is limited by applicable debt covenants. Specifically, the assets are restricted for installment payments due on certificates of participation and revenue obligations or are maintained by a trustee as a reserve requirement for the certificates of participation and revenue obligations. When both restricted and unrestricted resources are available for use, it is OCSD's policy to use restricted resources first, then unrestricted resources as they are needed. Deferred Charges on Defeasances For advance refundings resulting in defeasance of debt, the difference between the reacquisition price and the net carrying amount of the old debt(i.e. deferred charges) is reported as a deferred outflow of resources and amortized to interest expense based on the effective interest method over the remaining life of the old debt or the life of the new debt,whichever is shorter. OCSD's deferred charges on the refunding debt at June 30, 2017 are$37,127,405. 17 ORANGE COUNTY SANITATION DISTRICT Notes to Basic Financial Statements For the Year Ended June 30, 2017 Net Position Net position represents the total of assets and deferred outflows of resources less liabilities and deferred inflows of resources, and is classified into two categories: Net Investment in Capital Assets — This amount consists of capital assets, net of accumulated depreciation, reduced by the outstanding balances of any borrowings used for the acquisition, construction or improvement of those assets and excludes unspent debt proceeds. Deferred outflows of resources that are attributable to the acquisition, construction or improvement of those assets or related debt also are included in this component of net position. Unrestricted—This amount represents the residual of amounts not classified in the other category and represents the net equity available for OCSD. Compensated Absences OCSD's employees, other than operations and maintenance personnel, are granted vacation and sick leave in varying amounts with maximum accumulations of 200 hours and 560 hours for vacation and sick days earned but unused, respectively. Operations and maintenance personnel accrue between 80 and 250 personal leave hours per year depending on years of service. Personal leave can be accumulated up to a maximum of 440 hours. Vacation and sick leave benefits and personal days are recorded as an expense and liability when earned by eligible employees. The distribution between current and long-term portions of the liability is based on historical trends. Claims and Judgments OCSD records estimated losses when it is probable that a claim liability has been incurred and when the amount of the loss can be reasonably estimated. Claims payable includes an estimate for incurred but unreported claims. The distribution between current and long-term portions of the liability is based on historical trends. Pensions OCSD has two pension plans for retirees: a defined benefit pension plan maintained through and by the Orange County Employees' Retirement System (OCERS) and the Additional Retiree Benefit Account (ARBA) administered directly by OCSD. For purposes of measuring the net pension liability, deferred outflows of resources, deferred inflows of resources related to pensions, and pension expense, information about the fiduciary net position of OCSD's cost sharing multiple- employer plan with the OCERS plans (Plans) and additions to/deductions from the Plans'fiduciary net position have been determined on the same basis as they are reported by OCERS. Benefit payments (including refunds of employee contributions) are recognized when due and payable in accordance with the benefit term. Investments are reported at fair value. A deferred outflow of resources and deferred inflow of resources related to pensions result from changes in the components of the net pension liability and are applicable to a future reporting period. OCSD's deferred outflows related to pensions, defamed inflows related to pensions, and net pension asset for OCERS at June 30, 2017 are$36,398,658, $29,670,775, and ($10,384,508), respectively. OCSD's deferred outflows related to pensions, deferred inflows related to pensions, and net pension liability for ARBA at June 30, 2017 are $984,261, $0, and $18,467,361, respectively. 18 ORANGE COUNTY SANITATION DISTRICT Notes to Basic Financial Statements For the Year Ended June 30, 2017 In aggregate for both plans, OCSD's total deferred outflows related to pensions, deferred inflows related to pensions, and net pension liability at June 30, 2017 are $37,382,920, $29,670,775, and $8,082,853, respectively. Property Taxes The County is permitted by State law (Proposition 13) to levy taxes at one percent of full market value (at time of purchase) and can increase the assessed value no more than two percent per year. OCSD receives a share of this basic levy, proportionate to what was received in the 1976 to 1978 period. Property taxes are determined annually and attached as enforceable liens on real property as of January 1 and are payable in two installments which become delinquent after December 10 and April 10. The County bills and collects the property taxes and remits them to OCSD in installments during the year. Property tax revenues are recognized when levied. The Board of Directors has designated property tax revenue to be used for the annual debt service requirements prior to being used as funding for current operations. Capital Facilities Capacity Charges Capital facilities capacity charges represent fees imposed at the time a structure is newly connected to OCSD's system, directly or indirectly, or an existing structure or category of use is increased. This charge is to pay for District facilities in existence at the time the charge is imposed or to pay for new facilities to be constructed that are of benefit to the property being charged. Operating and Non-operating Revenues and Expenses Operating revenues and expenses result from collecting, treating, and disposing of wastewater and inspection and permitting services. OCSD's operating revenues consist of charges to customers for the services provided. Operating expenses include the cost of providing these services, administrative expenses, and depreciation and amortization expenses. All revenues and expenses not meeting these definitions and which are not capital in nature are reported as non-operating revenues and expenses. Construction Commitments OCSD has active construction projects to add additional capacity, improve treatment, or replace/rehabilitate existing assets. At June 30, 2017, the outstanding commitments with contractors totaled$60,687,702. Self-Insurance Plans For the year ended June 30, 2017, OCSD was self-insured for portions of workers compensation, property damage, and general liability. The self-insurance portion of the workers' compensation exposure is the $1,000,000 deductible per occurrence under the outside excess insurance coverage to statutory levels. The self-insurance portion of the property damage exposure covering fire and other perils is the $250,000 per occurrence deductible (for most perils) under the outside excess property insurance coverage to $1 billion. The self-insurance portion of the property damage exposure covering flood is the $100,000 per occurrence deductible with outside excess property insurance coverage to $300 million. The self-insurance portion of the property damage exposure covering earthquake is the 5% per structure, minimum $5,000,000 deductible with outside excess insurance coverage to $25 million on covered structures. OCSD has insured a number of key structures against the peril of earthquake, all other structures are completely self- insured. The self-insurance portion of the boiler & machinery exposure is the deductible ranging 19 ORANGE COUNTY SANITATION DISTRICT Notes to Basic Financial Statements For the Year Ended June 30, 2017 from $25,000 to $350,000 under the outside excess boiler & machinery insurance coverage to $100 million per occurrence combined limit. The self-insurance portion of the general liability exposure is the $500,000 per occurrence deductible under the outside excess liability coverage to $40 million per occurrence and aggregate. The self-insurance portion of the pollution liability exposure is the$75,000 per loss deductible under the outside pollution liability insurance coverage to $10 million. There were no significant changes in insurance coverage during the fiscal year ended June 30,2017. During the past three fiscal years there have been no settlements in excess of covered amounts. Claims against OCSD are processed by outside insurance administrators. These claims are charged to claims expense based on estimated or known amounts which will ultimately be paid. Claims incurred but not yet reported have been considered in determining the accrual for loss contingencies. Workers' compensation reserves are actuarially determined and general liability estimated loss accruals are estimated using past experience adjusted for current trends and any other factors that would modify past experience. The estimate of the claims liability also includes any amounts for incremental and nonincremental claim adjustment expenses. OCSD management believes that there are no unrecorded claims as of June 30, 2017 that would materially affect the financial position of OCSD. Deferred Compensation Plan OCSD offers its employees a deferred compensation plan established in accordance with Internal Revenue Code Section 457. The plan permits all employees of OCSD to defer a portion of their salary until future years. The amount deferred is not available to employees until termination, retirement, death or for unforeseeable emergency. The assets of the plan are held in trust for the exclusive benefit of the participants and their beneficiaries. Since the plan assets are administered by an outside party and are not subject to the claims of OCSD's general creditors, in accordance with GASS Statement 32, the plan's assets and liabilities are not included within OCSD's financial statements. New GASB Pronouncement The accompanying financial statements reflect the implementation of GASB Statement No. 82, Pension Issues-an amendment of GASB Statements No. 67, No. 68, and No. 73. The purpose of this statement is to address certain issues that were raised with respect to Statements No. 67, Financial Reporting for Pension Plans, No. 68, Accounting and Financial Reporting for Pensions, and No. 73, Accounting and Financial Reporting for Pensions and Related Assets That Are Not within the Scope of GASB Statement 68, and Amendments to Certain Provisions of GASB Statements 67 and 68. The requirements of this Statement that are applicable to OCSD are effective for reporting periods beginning after June 30, 2016 and has been implemented in fiscal year 2016- 207 resulting in revisions to the presentation of payroll-related measures in certain pension schedules presented as required supplementary information. 20 ORANGE COUNTY SANITATION DISTRICT Notes to Basic Financial Statements For the Year Ended June 30, 2017 (21 Cash and Investments Cash and investments as of June 30, 2017 are classified within the accompanying Statement of Net Position as follows: Statement of Net Position: Current, Unrestricted: Cash and cash equivalents $ 89,374,975 Investments 416,675,560 Subtotal -current, unrestricted 506,050,535 Restricted: Cash and cash equivalents 4,992,427 Subtotal -restricted 4,992,427 Total cash and cash equivalents and investments $511,042,962 Cash and investments consist of the following as of June 30, 2017: Cash on hand $ 3,000 Deposits with financial institutions 1,676,401 Managed portfolio-cash and investments 504,371,134 Subtotal -unrestricted cash and investments 506,050,535 Monies held by trustees: Cash and cash equivalents $ 4,992,427 Subtotal -monies held by trustees 4,992,427 Grand total cash and investments $511,042,962 21 ORANGE COUNTY SANITATION DISTRICT Notes to Basic Financial Statements For the Year Ended June 30, 2017 Investments Authorized by the California Government Code and OCSD's Investment Policy The following table identifies the investment types that are authorized by the California Government Code and OCSD's investment policy. This table and the subsequent tables identifies certain provisions of either the California Government Code or OCSD's investment policy (whichever is more restrictive)that address interest rate risk, credit risk, and concentration of credit risk. Authorized Maximum by OCSD's Maximum Investment Investment Type-Authorized by Investment Maximum Percentage in a Single the California Government Code Policy? Maturity (1)(3) of Portfolio(1) Issuer(1) Local Agency Bonds Yes 5 years 10% (2) 5% (2) U.S. Treasury Obligations Yes 5 years No limit No limit California State Treasury Obligations Yes 5 years No limit No limit U.S. Agency Securities Yes 5 years No limit 20% (2) Banker's Acceptances Yes 180 days 40% 5% (2) Commercial Paper Yes 270 days 25% 5% (2) Negotiable Certificates of Deposit Yes 5 years 30% 5% (2) Repurchase Agreements Yes 1 year 20% (2) 5% (2) Reverse Repurchase Agreements Yes 90 days (2) 5% (2) 5% (2) Corporate Medium-Tenn Notes Yes 5 years 30% 5% (2) Mutual Funds Yes N/A 20% 10% Money Market Mutual Funds Yes NIA 20% 20% Mortgage Pass-Through Securities/ CMO/Asset-Backed Securities Yes 5 years 20% 5% (2) County Investment Pools Yes NIA 15% (2) 15% (2) Local Agency Investment Fund (LAIF) Yes NIA 15% (2) 15% (2) Supmnational Obligations Yes 5years 30% 5% (2) Notes (1)Restrictions are In acco Hancevith the California Government Code unless indicated ptheruse. (2)The restriction is In accordance rwth OCSD's Investment POIIoyvAtich is more restrictive than the California Government Code. (3)As albwe l by California Government Code Section 53601,the Board of Directors has adopted a policyof a maximum maturflyof 51aam for investments pumhased by OCSD's exiernal monsymanagerforthe long-tern investment portfolio. TM1e tlumlion of[M1e longterm investment po Molio can neveremeetl 60 montM1s. Inustudi Mspurohasedforth¢shod-term portfolio are subject to the maturityrestriglons noted In this table. 22 ORANGE COUNTY SANITATION DISTRICT Notes to Basic Financial Statements For the Year Ended June 30, 2017 Investments Authorized by Debt Agreements The investment of debt proceeds held by trustees is governed by provisions of the debt covenant agreements, rather than the general provisions of the California Government Code or OCSD's investment policy. The following table identifies the investment types that are authorized for investments held by OCSD's debt trustees. This table and the subsequent tables identifies certain provisions of the debt covenant agreements that address interest rate risk, credit risk, and concentration of credit risk. Maximum Maximum Investment Type-Authorized by the Maximum Percentage Investment in a Debt Covenant Agreement Maturity of Portfolio Single Issuer State and Local Agency Bonds 5 years No limit No limit U.S. Treasury Obligations 5 years No limit No limit U.S. Agency Securities 5 years No limit No limit Bankers Acceptances 180 days 40% 30% Commercial Paper 270 days 40% 10% Negotiable Certificates of Deposit 5 years 30% 30% Repurchase Agreements 1 year No limit No limit Corporate Medium-Term Notes 5 years 30% 30% Mutual Funds N/A 20% 10% Money Market Mutual Funds N/A 20% 20% Local Agency Imestment Fund (LAIF) N/A No limit No limit Guaranteed Investment Contracts N/A No limit No limit 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 an investment has before maturity, the greater the sensitivity of its fair value to changes in market interest rates. One of the ways that OCSD 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 evenly over time, as necessary to provide the cash flow and liquidity needed for operations. OCSD monitors the interest rate risk inherent in its managed portfolio by measuring the modified duration of its portfolio. The duration of monies held for shorter term purposes is recommended by OCSD's Treasurer and is based on OCSD's cash flow requirements in meeting current operating and capital needs. The average duration of monies invested for shorter term purposes may never exceed 180 days. The duration of monies held for longer tens purposes is recommended annually by OCSD's Treasurer and is based on OCSD's five-year cash flow forecast. The average duration may not exceed 120 percent nor be less than 80 percent of the recommended duration. The average duration of monies invested for longer term purposes may never exceed 60 months. There is no stated maximum maturity for the Money Market Mutual Funds. The money market mutual funds for Blackrock Institutional Fund and First American Government Obligations Fund are daily liquid funds available on demand. 23 ORANGE COUNTY SANITATION DISTRICT Notes to Basic Financial Statements For the Year Ended June 30, 2017 Following is a table which summarizes OCSD's managed portfolio investments by purpose with the modified duration as of June 30,2017. Modified Modified Duration Duration Investment Type Fair Value (in years) (in months) Short-Term Portfolio: U.S. Agency Securities $ 67,069,749 0.123 1.48 Local Agency Investment Fund 46,198,204 0.532 6.38 U.S. Treasury Bills 32,918,360 0.101 1.22 Corporate Medium-Tenn Notes 10,462,697 0.117 1.41 Commercial Paper 5,089,005 0.157 1.88 Money Market Mutual Funds 2,916,333 0.083 1.00 U.S. Treasury Notes 2,497,225 0.250 3.00 Certificates of Deposit 2,000,255 0.185 2.23 Supmnationals 1,161,919 0.050 0.60 Short-tens portfolio subtotal $ 170,313,747 0.232 2.78 Long-Term Portfolio: U.S. Treasury Notes $ 89,501,697 2.751 33.02 U.S. Agency Securities' 84,622,084 2.311 27.73 Corporate Medium-Tenn Notes 79,245,629 2.425 29.10 Supmnationals 26,947,634 2.587 31.04 Asset Backed Securities/CMO' 22,905,326 0.862 10.35 Commercial Paper 12,571,626 0.221 2.65 U.S. Treasury Inflation-Protected Securities (TIPS)" 10,519,114 6.933 83.20 Taxable Municipal Bonds 4,569,166 2.670 32.04 Money Market Mutual Funds 2,949,857 0.082 0.99 U.S. Govt. Backed Mortgage Pools (GNMA)' 225,254 0.185 2.23 Long-term portfolio subtotal $334,057,387 2.429 29.15 Total Portfolio $504,371,134 Includes highly sensitivesecunties. The investment's duration in excess offive years was permitted by OCSD's Investment Policy at the lime it was purchased. 24 ORANGE COUNTY SANITATION DISTRICT Notes to Basic Financial Statements For the Year Ended June 30, 2017 OCSD monitors the interest rate risk inherent in its other investments using specific identification of the investments. Following is a table of these investments all held by trustees, as of June 30, 2017. Fair Value Maturities Cash equivalents held by fiscal agents: Money Market Mutual Funds: First American Govemment Obligations Fund 4,992,360 34 days Blackrock Institutional Funds 67 35 days Total Fair Value of Investments Held by Fiscal Agents $ 4,992,427 Investments with Fair Values Highly Sensitive to Interest Rate Fluctuations OCSD's investments (including investments held by trustees) include the following investments that are highly sensitive to interest rate fluctuations (to a greater degree than already indicated in the information provided above): Mortgage-backed securities: These securities are subject to early payment in a period of declining interest rates. The resulting reduction in expected total cash flows affects the fair value of these securities, making them highly sensitive to change in interest rates. At fiscal year end, the fair value of investments in mortgage-backed securities totaled $4,673,177 including $2,896,073 of mortgage pass-through securities, $1,551,850 of U.S. agency securities, and $225,254 of U.S. government backed mortgage pools. Fair Value of Investments OCSD measures and records its investments using fair value measurement guidelines established by generally accepted accounting principles. These guidelines recognize a three-tiered fair value hierarchy,as follows: Level 1: Quoted prices for identical investments in active markets; Level 2: Observable inputs other than quoted market prices; and Level 3: Unobservable inputs. 25 ORANGE COUNTY SANITATION DISTRICT Notes to Basic Financial Statements For the Year Ended June 30, 2017 At June 30, 2017, OCSD had the following fair value measurements for its managed investment portfolio: Quoted Prices in Active Significant Other Markets for Observable Unobservable Identical Assets Inputs Inputs Investment Type Fair Value Lewl1 Le l2 Level Investments in Short-Term Portfolio: U.S. Agency Securities $ 67,069,749 $ - $ 67,069,749 $ U.S. Treasury Bills 32,918,360 - 32,918,360 Corporate Medium-tens Notes 10,462,697 - 10,462,697 Commercial Paper 5,089,005 - 5,089,005 U.S. Treasury Notes 2,497,225 - 2,497,225 Certificates of Deposits 2.000,255 - 2,000,255 - Supranationals 1.161,919 - 1,161,919 - Imestments in Long-Tenn Portfolio: U.S. Treasury Notes 89.501,697 89,501,697 - U.S. Agency Securities 84.622,084 - 84,622,084 - Corporate Medium-tens Notes 79,245,629 - 79,245,629 - Supranationals 26,947,634 - 26,947,634 - Assel Backed Securities/CMO 22,905,326 - 22,905,326 - Commercial Paper 12,571,626 - 12,571,626 - US Treasury Inflation Protected Securities (TIPS) 10,519,114 - 10,519,114 - TaxableMunicipalBonds 4,569,166 - 4,569,166 - U.S. Go�emmenl Backed Mortgage Pools 225,254 - 225,254 - Fair Value Hierarchy Totals $ - $452,306,740 $ - Investments Not Subject To Fair Value Hierarchy: Local Agency Investment Fund(LAIFr 46,198,204 Money Market Mutual Funds' 2,916,333 Money Market Mutual Funds" 2,949,857 Total Portfolio $504,371,134 'Invesfedin Short-Term Portfolio "Invested in Lang-Term Portfolio The Bank of New York Mellon is the custodial bank for all of OCSD's investments shown above in the managed portfolio, except for LAW. Investments classified as Level 2 are valued using the Bank of New York Mellon's fair value hierarchy matrix based on the asset type classification. The fair value hierarchy level matrix is based on discussions with (1) pricing vendors, (2) broker/dealers, (3) investment managers, (4) industry groups, and (5) independent accounting firms. Monies held by trustees (fiscal agents) that are invested in money market mutual funds are reported at carrying cost. 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. The following table presents the minimum rating as required by the California Government Code, OCSD's investment policy, or debt agreements, and the actual rating as of year-end for each investment type. 26 ORANGE COUNTY SANITATION DISTRICT Notes to Basic Financial Statements For the Year Ended June 30, 2017 Imesbnent Type and the Lowest Rating Reported at Year End Fair Value Investments with no legal minimum rating&no required disclosure: U.S.Treasury Obligabons $135,436,396 U.S.Agency Securities-GNMA 225.254 Subtotal $135,661,650 Investments with no legal minimum rating: U.S.Agency Securities (other than GNMA): Rating ofM+(Standard&Poor's) 151,691,833 Municipal Bonds: Rating ofAs1 (Moodys) 1,498,882 Rating ofAa3(Moodys) 3,070,284 Certificates of Deposits; Rating ofP-1 (Moodys) 2,000,255 Local Agencylmestment Fund(LAIF): Not rated 46,198,204 Subtotal 204,459,458 Investments with a legal minimum rating(or its equivalent)of A Corporate Medium-Term Notes: Rating of Asa(Moodys) 1,004,820 Rating ofAs1 (Moodys) 4,026,520 Rating of AA+(Standard and Poor's) 5,998,999 Rating of AA(Standard&Poor's) 5,491,120 Rating of At (Moodys) 15,094,730 Rating ofA+(Fitch) 4,126,480 Rating ofA(Standard&Poofs) 10,575,236 Rating ofA2(Moodys) 20,954,696 Rating ofA3(Moodys)' 11,682,918 Rating of Baal (Moodys)' 3,864,296 Rating of BBB+(Standard&Poofs)' 6,726,011 Not rated 162,500 Money Market Mutual Funds: Rating ofAaa(Moodys) 5,840,569 Not rated 25,621 Invested with fiscal agents: Rating of Aaa-mf(Moodys) 4,992,427 Subtotal 100,566,943 Investments with a legal minimum rating(or its equivalent)of AA Asset Backed Sewdbes/CMO: Rating of Asa(Moodys) 19,975,537 Rating of AA+(Standard&Poor's) 2,769,888 Rating of BBB(Fitch)" 126,185 Rating of B(Fitch)' 33.716 Supranational Obligabons: Rating ofAaa(Moodys) 28,109,553 Subtotal 51,014,879 Investments with a legal minimum rating(or its equivalent)of"Prime": Commercial Paper: Rating of Al (Standard&Poofs)' 9,513,376 Rating ofA(Fitch)* 8,147,255 Subtotal 17,660,631 Total $509,363,561 ' Investment was in compliance with legal requirements at the fime it was purchased. 27 ORANGE COUNTY SANITATION DISTRICT Notes to Basic Financial Statements For the Year Ended June 30, 2017 Concentration of Credit Risk Limitations on the amount that OCSD is allowed to invest in any one issuer have been identified previously in the section "Investments Authorized by the California Government Code and OCSD's Investment Policy" and in the section "Investments Authorized by Debt Agreements." OCSD follows whichever guideline is the most restrictive. As of June 30, 2017, OCSD had the following investments representing five percent or more of total investments: Name of Issuer Fair Value % of Total Federal Home Loan Mortgage Corporation (FHLMC) $ 91,935,002 18.05% Federal National Mortgage Association (FNMA) $ 62,105,282 12.19% Custodial Credit Risk Custodial credit risk for deposits is the risk that in the event of the failure of a depository financial institution, a government will not be able to recover its deposits or will not be able to recover collateral securities that are in the possession of an outside party. The California Government Code and OCSD's investment policy contain legal requirements that limit the exposure to custodial credit risk for deposits as follows: a financial institution must 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 deposits by pledging first trust deed mortgage notes having a value of 150% of the secured public deposits. Custodial credit risk for investments is the risk that in the event of the failure of the counlerparty (e.g., broker-dealer) to a transaction, a government will not be able to recover the value of its investment or collateral securities that are in the possession of another party. The California Government Code and OCSD's investment policy do not contain legal or policy requirements that would limit the exposure to custodial credit risk for investments. As of June 30, 2017, in accordance with OCSD's investment policy, none of OCSD's investments were held with a counterparty. All of OCSD's investments were held with an independent third party custodian bank registered in the name of OCSD. OCSD uses Bank of New York (BNY) Mellon as a third party custody and safekeeping service for its investment securities. Investment in State Investment Pool OCSD is a voluntary participant in the Local Agency Investment Fund (LAIF) that is regulated by California Government Code Section 16429 under the oversight of the Treasurer of the State of California. The fair value of OCSD's investment in this pool is reported in the accompanying financial statements at amounts based upon OCSD's pro-rata share of the fair value provided by LAIF for the entire LAIF portfolio (in relation to the amortized cost of that portfolio). The balance available for withdrawal is based on the accounting records maintained by LAIF, which are recorded on an amortized cost basis. Included in LAIF's investment portfolio are mortgage-backed securities, other asset-backed securities, loans to certain state funds, securities with interest rates that vary according to changes in rates greater than a one-for-one basis, and structured notes. The amounts invested in LAIF are recorded as cash and cash equivalents at June 30, 2017. 28 ORANGE COUNTY SANITATION DISTRICT Notes to Basic Financial Statements For the Year Ended June 30, 2017 (31 Capital Assets Capital asset activity for the year ended June 30, 2017 is as follows: Beginning Ending Balance at Additions/ Deletions/ Balance at July 1,2016 Transfers Transfers June 30,2017 Capital assets not depreciated: Cost Land $ 15,959,559 $ 10,634,339 $ (1,346,852) $ 25,247,046 Construction in progress 499,376,059 131,296,794 (168,839,403) 461,833,450 Total nondepreciable assets 515,335,618 141,931,133 (170,186,255) 487,080,496 Depreciable capital assets: Cost Sewage collection facilities 781,138,758 63,014,305 (13,601,716) 830,551,347 Sewage treatmentfacilities 2,278,136,004 88,044,458 (50,878) 2,366,129,584 Effluent disposal facilities 97,014,820 - - 97,014,820 Solids disposal facilities 3,463,236 - - 3,463,236 General and administrativefacilities 229,446,444 16,859,783 (255,070) 246,051,157 Excess purchase price over book value on acquired assets 19,979,000 19,979,000 Subtotal 3,409,178,262 167,918,546 (13,907,664) 3,563,189,144 Accumulated depreciation: Sewage collection facilities (333,761,992) (18,508,273) 4,276,901 (347,993,364) Sewage treatment facilities (781,666,625) (68,544,964) 50,878 (850,160,711) Effluent disposal facilifies (60,860,054) (1,519,439) - (62,379,493) Solids disposal facilities (3,156,252) (9,719) - (3,165,971) General and administrative facilities (155,896,808) (7,490,305) 254,341 (163,132,772) Excess purchase price over book value on acquired assets (19,731,270) (247,730) (19,979,000) Subtotal (1,355,073,001) (96,320,430) 4,582,120 (1,446,811,311) Net depreciable assets 2,054,105,261 71,598,116 (9,325,544) 2,116,377,833 Net Capital assets $2,569,440,879 $213,529,249 $(179,511,799) $2,603,458,329 Forthe fiscal yeareaded June 30,2017,capdalasset add9busaro$0.9 esM,n less than the amount deleted from Construction in Progress due to$2.9 mildon of prior capkalponact casts that ware written off as expense,partially onset by capff l equipment pumhases of$2.0 mfflbn.Amounts rerouted as d.letions/tmna rs forth.fiscal year.nded June 30, 209 reflect Me...for asmercoflecUou facrldiesof$13.6asMon and accumulateddeprectation af$4.3 mJtion m conjunction wdh the Irsnaferof 174 asAasof localsewerfecAtesto the East Orange County Water0stdct. 29 ORANGE COUNTY SANITATION DISTRICT Notes to Basic Financial Statements For the Year Ended June 30, 2017 (4) Long-Term Liabilities The following is a summary of the changes in long-term liabilities for the year ended June 30, 2017: Beginning Ending Due within Long-term Balance,July 1 Additions Deletions Balance,June 30 one year amount Arbitrage payable $ 362.529 $ 1.153,194 $ (1,515723) $ - $ - $ - compensated absences 7,549,338 7.326,262 (7,057,227) 7,817,373 7.175,628 641,745 Claims and judgments 4,571.067 497,501 (1,015,890) 4,052,668 752,880 3,299,788 Certificates of participation, revenue obligations&notes 1,116,050,000 176,245,000 (248,045,000) 1,044,250,000 32,140,000 1,012,19,000 Wanorked premium(discount) 90,672,347 18,838,268 (13,080,842) 96,429,773 12,802,163 83,627,610 Totals $1,29,205,271 $204,059,225 $(270,714,682) $1,152,549,814 $52,870,671 $1,099,679,M3 Arbitrage Payable The Tax Reform Act of 1986 (the Act) requires OCSD to calculate and remit rebatable arbitrage earnings to the Internal Revenue Service. Certain of OCSD's debt and interest earnings on the proceeds thereof are subject to the requirements of the Act. During the fiscal year ended June 30, 2017 arbitrage payments of$1,515,723 were remitted. OCSD's liability at June 30,2017 is $0. Compensated Absences OCSD's policies related to compensated absences are described in Note 1. OCSD's liability at June 30, 2017 is$7,817,373 with an estimated $7,175,628 to be paid or used within the next fiscal year. Claims and Judgments Payable OCSD is self-insured in a number of areas as described in Note 1. The following is a summary of the change in claims and judgments payable for the years ended June 30, 2017 and 2016: 2016-17 2015-16 Claims and judgments payable at July 1 $4,571,057 $2,550,597 Claims incurred during the fiscal year 497,501 2,713,076 Payments on claims during the fiscal year (1,015,890) (692,616) Claims and judgments payable at June 30 4,052,668 4,571,057 Less: current portion (752,880) (540,640) Total long-term claims and judgments payable $3,299,788 $4,030,417 30 ORANGE COUNTY SANITATION DISTRICT Notes to Basic Financial Statements For the Year Ended June 30, 2017 Certificates of Participation/Revenue Oblioations and Notes OCSD issues certificates of participation, revenue obligations and notes in order to finance construction of the treatment facilities. Each issuance represents a direct and proportionate interest in the semi-annual interest payments. Installment payments for the issues are payable from any source of lawfully available funds of OCSD. Certificates of participation, revenue obligations, and notes at June 30, 2017 are summarized as follows: Amount 2009A certificates of participation $ 9,155,000 2010A wastewater revenue obligations 80,000,000 2010C wastewater revenue obligations 157,000,000 2011A wastewater refunding revenue obligations 96,330,000 2012A wastewater refunding revenue obligations 100,645,000 2012B wastewater refunding revenue obligations 66,395,000 2014A wastewater refunding revenue obligations 85,090,000 2015A wastewater refunding revenue obligations 127,510,000 2016A wastewater refunding revenue obligations 145,880,000 2016B revenue refunding certificate anticipation notes 109,875,000 2017A wastewater refunding revenue obligations 66,370,000 Total certificates of participation, revenue obligations, and notes $1,044,250,000 Outstanding Certificates of Participation/Revenue Obligations and Notes All of the outstanding debt of OCSD is senior lien debt with rate covenants that require a minimum coverage ratio of 1.25. The minimum coverage ratio is the ratio of net annual revenues available for debt service requirements to total annual debt service requirements. As of June 30, 2017, the coverage ratio for senior lien debt was 3.41. May 2009 Certificates of Participation. Series 2009A On May 7, 2009, OCSD completed the sale of $200,000,000 of certificates of participation. The certificates were issued to finance and to reimburse OCSD for the acquisition, construction, and installation of additional improvements made to the wastewater system. The interest rate on the certificates is fixed and will range from 3.00 percent to 5.00 percent. Annual principal payments are due on February 1, beginning February 1, 2010 through February 1, 2019. On March 30, 2016, $162,780,000 of the outstanding principal balance of the 2009 Series A certificates was advance-refunded with the proceeds of the March 30, 2016 wastewater refunding revenue obligations Series 2016A (see below) in a transaction accounted for as an in-substance defeasance. These funds are held in an escrow account that is not reflected on OCSD's financial statements because it has been legally defeased. At June 30, 2017, this $162,780,000 represents the amount still outstanding on bonds considered defeased. The trust agreement for the certificates requires the establishment of a reserve which was funded from certificate proceeds. The June 30, 2017 reserve of $4,947,156 is held by US Bank,the trustee, and meets the reserve requirement. 31 ORANGE COUNTY SANITATION DISTRICT Notes to Basic Financial Statements For the Year Ended June 30, 2017 May 2010 Wastewater Revenue Obligations, Series 2010A On May 18, 2010, OCSD completed the sale of $80,000,000 of wastewater revenue obligations under the federally taxable Build America Bonds program. The obligations were issued to finance and to reimburse OCSD for the acquisition, construction, and installation of additional improvements made to the wastewater system. The stated interest rate on the obligations is fixed and will range from 5.56 percent to 5.58 percent, however, in accordance with their designation as Build America Bonds, OCSD expects to receive a cash subsidy from the United States Treasury equal to 35 percent of the interest payable with respect to these revenue obligations. The expected net interest rate on the obligations is fixed and will range from 3.614 percent to 3.627 percent. Annual principal payments are due on February 1, beginning February 1, 2034 through February 1, 2040. The trust agreement for the revenue obligations does not require the establishment of a reserve. December 2010 Wastewater Revenue Obligations, Series 2010C On December 8, 2010, OCSD completed the sale of $157,000,000 of wastewater revenue obligations under the federally taxable Build America Bonds program. The obligations were issued to finance and to reimburse OCSD for the acquisition, construction, and installation of additional improvements made to the wastewater system. The stated interest rate on the obligations is fixed and will range from 6.35 percent to 6.40 percent, however, in accordance with their designation as Build America Bonds, OCSD expects to receive a cash subsidy from the United States Treasury equal to 35 percent of the interest payable with respect to these revenue obligations. The expected net interest rate on the obligations is fixed and will range from 4.1275 percent to 4.16 percent. Annual principal payments are due on February 1, beginning February 1, 2031 through February 1, 2044. The trust agreement for the revenue obligations does not require the establishment of a reserve. October 2011 Wastewater Refunding Revenue Obligations, Series 2011A On October 3, 2011, OCSD completed the sale of $147,595,000 of wastewater refunding revenue obligations. The obligations were issued to refund $89,800,000 of the outstanding principal balance of 2000 Series A and B refunding certificates of participation, and $83,320,000 of the outstanding principal balance of 2003 certificates of participation. The staled interest rate on the obligations is fixed and will range from 3 percent to 5 percent. Annual principal payments are due on August 1 and February 1, beginning August 1, 2012 through February 1,2026. The trust agreement for the revenue obligations does not require the establishment of a reserve. March 2012 Wastewater Refunding Revenue Obligations, Series 2012A On March 22, 2012, OCSD completed the sale of $100,645,000 of wastewater refunding revenue obligations. The obligations were issued to refund the $108,180,000 outstanding principal balance of the 2003 certificates of participation. The stated interest rate on the obligations is fixed and will range from 3 percent to 4 percent. Annual principal payments are due on February 1, beginning February 1, 2031 through February 1, 2033. The trust agreement for the revenue obligations does not require the establishment of a reserve. 32 ORANGE COUNTY SANITATION DISTRICT Notes to Basic Financial Statements For the Year Ended June 30, 2017 August 2012 Wastewater Refundina Revenue Obligations, Series 2012E On August 16, 2012, OCSD completed the sale of $66,395,000 of wastewater refunding revenue obligations. The obligations were issued to refund the remaining $91,900,000 outstanding principal balance of the Series 2000A and 2000B refunding certificates of participation. The stated interest rate on the obligations is fixed and will range from 3 to 5 percent. Annual principal payments are due on February 1, beginning February 1, 2019 through February 1, 2026. The trust agreement for the revenue obligations does not require the establishment of a reserve. August 2014 Wastewater Refundina Revenue Obligations, Series 2014A On August 7, 2014, OCSD completed the sale of $85,090,000 of wastewater refunding revenue obligations. The obligations were issued to partially refund an amount of$93,930,000 of the outstanding principal balance of 2007 Series B certificates of participation. The stated interest rate on the obligations is fixed at 5 percent. Annual principal payments are due on February 1, beginning February 1, 2018 through February 1, 2027. The trust agreement for the revenue obligations does not require the establishment of a reserve. February 2015 Wastewater Refundina Revenue Obligations, Series 2015A On February 12, 2015, OCSD completed the sale of $127,510,000 of wastewater refunding revenue obligations. The obligations were issued to partially refund an amount of $152,990,000 of the outstanding principal balance of 2007 Series B certificates of participation. The stated interest rate on the obligations is fixed at 5 percent. Annual principal payments are due on February 1, beginning February 1, 2028 through February 1,2037. The trust agreement for the revenue obligations does not require the establishment of a reserve. March 2016 Wastewater Refundina Revenue Obligations, Series 2016A On March 30, 2016, OCSD completed the sale of $145,880,000 of wastewater refunding revenue obligations. The obligations were issued to partially refund an amount of $162,780,000 of the outstanding principal balance of 2009 Series A certificates of participation. The stated interest rate on the obligations is fixed and will range from 4 to 5 percent. Annual principal payments are due on February 1, beginning February 1, 2020 through February 1, 2039. The trust agreement for the revenue obligations does not require the establishment of a reserve. November 2016 Revenue Refundina Certificate Anticipation Notes,Series 2016B On November 1, 2016, OCSD completed the sale of $109,875,000 of revenue refunding certificate anticipation notes. The notes were issued to fully refund the $120,850,000 outstanding principal balance of the 2014 Series B revenue refunding certificate anticipation notes. The interest rate on the notes is fixed at 2 percent. The notes will mature on December 15, 2018. OCSD expects the principal and interest on the notes to be paid from proceeds of the sale, prior to the maturity date, of a future series of certificates of participation, notes or other obligations. 33 ORANGE COUNTY SANITATION DISTRICT Notes to Basic Financial Statements For the Year Ended June 30, 2017 The aggregate difference in debt service between the refunding debt and the refunded debt is a positive amount of approximately $140,036. The total future payments for the new debt provide a net present value loss of approximately$228,533 to refund the old debt. The trust agreement for the certificates does not require the establishment of a reserve. February 2017 Wastewater Refunding Revenue Obligations, Series 2017A On February 1, 2017, OCSD completed the sale of $66,370,000 of wastewater refunding revenue obligations. The obligations were issued to refund $91,620,000 of the outstanding principal balance of 2007 Series A certificates of participation. The stated interest rate on the obligations is fixed at 5 percent. Annual principal payments are due on February 1, beginning February 1, 2021 through February 1, 2030. The aggregate difference in debt service between the refunding debt and the refunded debt is a positive amount of approximately $16.4 million. The total future payments for the new debt provide a net present value gain of approximately$14.5 million to refund the old debt. The trust agreement for the revenue obligations does not require the establishment of a reserve. Annual Amortization Requirements The annual requirements to amortize all debt related to certificates of participation, revenue obligations, and anticipation notes as of June 30, 2017, including the Revenue Refunding Certificate Anticipation Notes, Series 2016B that currently matures in December 2018, are as follows: Year Ending June 30, Principal Estimated Interest Total 2018 $ 32,140,000 $ 43,798,119 $ 75,938,119 2019 141,530,000 41,616,369 183,146,369 2020 32,730,000 38,934,869 71,664,869 2021 30,430,000 37,298,369 67,728,369 2022 28,405,000 35,776,869 64,181,869 2023-2027 159,435,000 157,655,346 317,090,346 2028-2032 221,120,000 115,307,183 336,427,183 2033-2037 260,925,000 60,753,071 321,678,071 2038-2042 125,260,000 15,440,206 140,700,206 2043-2047 12,275,000 613,808 12,888,808 Total $ 1,044,250,000 $ 547,194,210 $ 1,591,444,210 34 ORANGE COUNTY SANITATION DISTRICT Notes to Basic Financial Statements For the Year Ended June 30, 2017 (5) Pension Benefits OCSD has two pension plans for retirees: a defined benefit pension plan maintained through and by the Orange County Employees' Retirement System (OCERS)and the Additional Retiree Benefit Account(ARBA)administered directly by OCSD. Pension Plan (A) General Information about the Pension Plan Plan Description: All qualified permanent and probationary employees are eligible to participate in OCSD's Employee Pension Plan (Plan), which is a cost-sharing multiple employer defined benefit pension plan administered by the Orange County Employees Retirement System (OCERS). OCERS was established in 1945 under the provisions of the County Employees Retirement Law of 1937 (CERL). The Plan operates under the provisions of the California County Employees' Retirement Law of 1937 (CERL), the California Public Employees' Pension Reform Act of 2013 (PEPRA), and the regulations, procedures and policies adopted by OCERS' Board of Retirement. The Plan's authority to establish and amend the benefit terms are set by the CERL and PEPRA and may be amended by the California state legislature. The Plan is a tax qualified plan under Section 401(a) of the Internal Revenue Code Benefits Provided: OCERS provides service retirement, disability, death and survivor benefits to plan members who may be public employees or beneficiaries. The CERL and PEPRA establish benefit terms. Benefits are based on years of credited service equal to one year of full time employment. Members of plans B, G and H with ten years of service credit are entitled to receive a retirement allowance beginning at age 50; members of plan U with 5 years of service are eligible to receive a retirement allowance at age 52. Members attaining age 70 are eligible to retire regardless of credited service. 35 ORANGE COUNTY SANITATION DISTRICT Notes to Basic Financial Statements For the Year Ended June 30, 2017 Benefits are determined by plan formula, age, years of service and final average salary (FAS) as follows: Plan G Plan H Plan B Plan U After 9121179 Prof/Sup:After 1011/10 Hire Date Pnor to 9121/79 PmVSup`.Before 10/1/10 OCEA:After 811111 On or after 1/1/2013 OCEA': Before 8/1111 501:After 7/1111 501': Before 7/1/11 All; Before 111/2013 Final Average Highest 12 months Highest 36 months Highest 36 months Highest 36 months Compensation(FAS) Normal Retirement Age Age 55 Age 55 Age 57.5 Age 67 SerNce Requirement Age 70,any years Age 70,any years Age 70,any years Age 70,any years Eligibility Age 50, 10 years Age 50, 10 years Age 50, 10 years Age 52,5 years Benefit percent per 2.5%per year of FAS 2.5%per year of 1.667%par year of 2.5%per year of year of service for for every year of FAS for every year of FAS for every year of FAS for every year normal retirement age senice credit service credit service credit of service credit Benefit Adjustments Reduced before age Reduced before age Reduced before age Reduced before age 55 55 57.5 67 Public Employees Infernal Revenue Code Internal Revenue Code Internal Revenue Code Pension Reform Act FAB Limitation Section 401(a)(17) Section 401m)(17) Section 401(a)(17) (PEPRA): 120%of Social Security wage base per year Prof/Sup:Professional and Supervisor employee groups,bargaining unit SPMO. OCEA Administrative,Clencal,Engineering,and Technical Services employee groups,bargaining unit OCEA 501:operators and Maintenance employee groups,bargaining unit InWashonal Union of Operating Engineers Local 501. A cost of living adjustment is provided to benefit recipients based on changes in the Consumer Price Index (CPI) up to a maximum of 3% per year. Any increase greater than 3% is banked and may be used in years when the CPI is less than 3%. The increase is established and approved annually by the Board of Retirement. The Plan also provides disability and death benefits to eligible members and their beneficiaries, respectively. For retirees the death benefit is determined by the retirement benefit option chosen. For all other members the beneficiary is entitled to benefits based on the member's years of service and whether or not the cause of death is service related. At June 30, 2017, the following employees were covered by the benefit terms: Inactive Employees or Beneficiaries currently receiving benefits 439 Inactive Employees entitled to but not yet receiving benefits 104 Active Employees 578 Total 1,121 36 ORANGE COUNTY SANITATION DISTRICT Notes to Basic Financial Statements For the Year Ended June 30, 2017 (B) Contributions: Participating employers and active members are required by statute to contribute a percentage of covered salary to the Plan. CERL requires that the employer contribution rates for all public employers be determined on an annual basis by the actuary and be effective on the July 1 following notice of a change in rate. Funding contributions are determined annually on an actuarial basis as of December 31 by OCERS. The actuarially determined rate is the estimated amount necessary to finance the costs of benefits earned by employees during the year,with an additional amount to finance any unfunded accrued liability. Contributions to the Plan from OCSD were $7,709,733 for the year ended June 30, 2017. An additional$39,116,110 was contributed to pay down OCSD's Net Pension Liability. Contribution rates in effect for the fiscal year ended June 30, 2017 are as follows: Plan G Plan H Plan B Plan U Employer Contribution Rate, 7/1/16-6/30/17 13,09% 13.09% 10.99% 9.69% Employee Contribution Rate, 711/16-6130/1 7(2) 6.35-12.23%(1) 5.89-12.93Yo(1) 6.77-12.38% 6.43-13.67% Paid by Employer for Employee 3.50% 3.50% 0.00% 0.00% (1)Net of employer paid portion of 3.5% (2)Employee rates are determined by the age of entry into the retirement system. For the measurement period ended June 30, 2017, the contributions and average employer's contribution rate as a percentage of covered payroll were as follows: Avamge Employee(Paid Employer Employer by Employer) Contribution Plans Contributions Contributions Rate(%) Plan G $ 15,829 $ 4,232 0.03% Plan H 6,095,367 1,616,267 12.38% Plan B 621,422 - 1.00% Plan U 977,115 - 1.57% Total $ 7.709.733 $ 11620,499 (C) Pension Liabilities: As of June 30, 2017, OCSD reported a negative net pension liability of ($10,384,508) for its proportionate share of OCERS' net pension liability. The net pension liability was measured as of December 31, 2016 and the total pension liability used to calculate the net pension liability was determined by an actuarial valuation as of that date. OCSD's proportion of the net pension liability was based on a projection of OCSD's long-term share of contributions to the pension plan relative to the projected contribution of all participating employers, actuarially determined. At December 31, 2016, OCSD's proportion of the net pension liability was (0.200%), which was a decrease of 0.942% from its proportion measured as of December 31, 2015. The change in OCSD's proportion of the net pension liability during the fiscal year ended June 30, 2017 was caused by the contributions and projections noted above and an additional contribution of $39,116,110 in November 2016 by OCSD to the plan. 37 ORANGE COUNTY SANITATION DISTRICT Notes to Basic Financial Statements For the Year Ended June 30, 2017 (D) Pension Expense and Deferred Outflows/Inflows of Resources Related to Pensions For the year ended June 30, 2017, OCSD recognized pension expense of $11,341,716 for its proportionate share of the pension expense. At June 30, 2017 OCSD reported its share of deferred outflows of resources and deferred inflows of resources related to pensions from the following sources: Defamed Outflows Deferred Inflows of of Resources Resources Difference between expected and actual experience $ - $ 14,897,427 Net difference between projected and actual investment earnings on pension plan investments 24,696,915 8,021,253 Changes of Assumptions (1) - 6,589,263 Changes in proportion and differences between employer contributions and proportionate share of contributions 1,720,279 162,832 Employer contributions paid to OCERS subsequent to the measurement date 9,981,464 - Total $ 36,398,658 $ 29,670,775 (1) The nnnetary effects of changes in actuarial assumptions and method totals$6,589,263. These changes include: • adjustrrents to the mortality tables. • retirement assumptions for deferred vested mairbers(age at retirerrenl 58,increase of 4 25%in reciprocity,and an increase in compensation increases), • %in the rate of marriage for male and ferrele rrenbers at retirement or pre-retiretrent death, • an increase in the Consumer Rioe index of 3.0%per year,rreximm increase is 3%, • and a slight increase of.50%in salaries per year. Detail for these changes is available in the Segal Actuarial Valuation for December 31,2016,Section 3. This report is available on the OCERS w eb88e at www.ocers.org. The amount $9,981,464 reported as deferred outflows of resources related to pensions resulting from OCSD's contributions to OCERS subsequent to the measurement date will be recognized as a reduction of the net pension liability in the year ended June 30, 2018. Other amounts reported as deferred outflows of resources and deferred inflows of resources related to OCERS pensions will be recognized in pension expense as follows: Year ended June 30 Amount 2018 $ 915,342 2019 915,342 2020 (475,761) 2021 (3,838,015) 2022 (770,489) Thereafter 38 ORANGE COUNTY SANITATION DISTRICT Notes to Basic Financial Statements For the Year Ended June 30, 2017 (E) Actuarial Assumptions and Methods: The total pension liability in the December 31, 2016 actuarial valuation was determined using the following actuarial assumptions, applied to all periods included in the measurement: Investment rate of return 7.25% of net pension plan investment expenses, including inflation Discount rate 7.25% Inflation rate 3.00% Projected salary increases 4.25%to 13.5% Cost of living adjustment 3.0% of retirement income The mortality assumptions used in the total pension liability at December 31, 2016 were based on the RP-2000 Combined Healthy Mortality Table projected with the Society of Actuaries Scale BB to 2020. For healthy general members, no adjustments are made. For disabled general members the ages are set forward six years for males and three years for females. The basis for determining the mortality assumptions used were based on the results of the actuarial experience study for the period January 1, 2011 through December 31, 2013. Further details of the Experience Study can be found in the OCERS CAFR, available on their website at www.ocers.org. (F) Long-Term Expected Real Rate of Return The long-tens expected rate of return on pension plan investments was determined using a building-block method in which expected future real rates of return (expected returns, net of inflation) are developed for each major asset class. These returns are combined to produce the long-term expected rate of return by weighting the expected future real rates of return by the target asset allocation percentage and by adding expected inflation and deducting expected investment expenses. 39 ORANGE COUNTY SANITATION DISTRICT Notes to Basic Financial Statements For the Year Ended June 30, 2017 The target allocation and projected arithmetic real rates of return for each major asset class, after deducting inflation, but before investment expenses, used in the derivation of the long-term expected investment rate of return assumption are summarized in the following table for the calendar year ended December 31, 2016: Weighted Average Long- Target Term Expected Real Rate Asset Class Allocation of Return (Arithmetic) Large Cap U.S. Equity 14.90% 5.92% Small/Mid Cap US Equity 2.73% 6.49% Developed International Equity 10.88% 6.90% Emerging International Equity 6.49% 8.34% Core Bonds 10.00% 0.73% Global Bonds 2.00% 0.30% Emerging Markets Debt 3.00% 4.00% Real Estate 10.00% 4.96% Diversified Credit (US Credit) 8.00% 4.97% Diversified Credit(Non-US Credit) 2.00% 6.76% Hedge Funds 7.00% 4.13% Global Tactical Asset Allocation 7.00% 4.22% Real Return 10.00% 5.86% Private Equity 6.00% 9.60% Total 100.00 (G) Discount Rate: The discount rate used to measure the total pension liability was 7.25% for the year ended December 31, 2016. The projection of cash flows used to determine the discount rate assumed that plan member contributions will be made at the current contribution rate and that employer contributions will be made at rates equal to the actuarially determined contribution rates. For this purpose, only employer contributions that are intended to fund benefits for current plan members and their beneficiaries are included. Projected employer contributions that are intended to fund the service costs for future plan members and their beneficiaries, as well as projected contributions from future plan members, are not included. Based on those assumptions, the pension plan's fiduciary net position was projected to be available to make all projected future benefit payments for current plan members. Therefore, the long-term expected rate of return on pension plan investments was applied to all periods of projected benefit payments to determine the total pension liability as of December 31, 2016. (H)Sensitivity of the Proportionate Share of Net Pension Liability to Changes in the Discount Rate: The following table represents OCSD's proportionate share of the net pension liability calculated using the discount rate of 7.25%, as well as what OCSD's proportionate share of the net pension liability would be if it were calculated using a discount rate that is 1 percentage point lower(6.25%) or 1 percentage point higher(8.25%)than the current rate: 1% Decrease Current Discount Rate 1% Increase Net Pension Liability (6.25%) (7.25%) (8.25%) December 31, 2016 $ 73,906,089 $ (10,384,508) $ (79,756,756) 40 ORANGE COUNTY SANITATION DISTRICT Notes to Basic Financial Statements For the Year Ended June 30, 2017 (1) Pension Plan Fiduciary Net position: Detailed information about OCERS' fiduciary net position is available in a separately issued OCERS comprehensive annual financial report. That report may be obtained from OCERS at 2223 Wellington Avenue, Santa Ana, California 92708 or at their web site (www.ocers.org). Additional Retiree Benefit Account(ARBA) The OCSD ARBA plan is a single-employer defined benefit plan which was administered by OCERS until February 29, 2008, when OCSD began direct administration. This benefit was established by the OCSD Board of Directors on October 25, 1992. It provides a monthly payment to retirees towards the premium costs of health insurance for the retiree and eligible dependents. The retiree is not required to use this amount for health insurance premium or to remain on the OCSD medical plan. The plan is currently paying benefits to 295 retirees. The ARBA plan is not subject to the reporting requirements of GASS 68 and 71 because a trust has not been set up for the plan. However, GASB 73 has been implemented for the ARBA plan in the fiscal year ended June 3 0, 2016. The plan is a funded on a pay-as-you-go plan from general funds and is administered by OCSD. The stand-alone financial statements are not issued for the plan. Benefits: Employees who retire receive $10 per month for every year of service up to a maximum of 25 years, or$250 per month. This amount is independent of salary and is fixed at retirement. Because OCSD cannot ensure the use of the benefit for payment of eligible health insurance expenses, the benefit is taxable to the retiree. Survivor benefits are provided in the event that a retiree pre-deceases his/her spouse. For retirees hired prior to July 1, 1988, OCSD provides health insurance coverage for 21/:months per year of service (see Note 6—Other Postemployment Benefits). ARBA benefits begin immediately after this benefit ends. For those hired on or after July 1, 1988, ARBA benefits begin immediately upon retirement and continue for life. Employees hired into the OCEA bargaining group after August 1, 2011 are ineligible for this benefit. Benefits are determined by hire date, bargaining unit and years of service as follows: Hire date All Prior to 7/1188 All:After 7/1/88 OCEA`. Before 8/1/11 Benefit amount per $10 per month x years of sermce up to $10 per month x years of senice up to year of service for a maximum of 25 years a maximum of 25 years normal retirement age Samce requirement Age 50 or o%er with 10 or more years Age 50 or over with 10 or more years eligibility Any age with 30 or more years Any age with 30 or more years Age 70 or over, any years Age 70 or over, any years Benefit payments Monthly for life Monthly for life Immediately after retiree health Benefit schedule insurance coverage ends Immediately upon retirement OCEA: AErnhistrative,clerical,Engineering,and Technical Services ernobyee groups,bargaining unit OCEA. No cost of living adjustment is provided to benefit recipients. 41 ORANGE COUNTY SANITATION DISTRICT Notes to Basic Financial Statements For the Year Ended June 30, 2017 At June 30, 2017, the following employees were covered by the benefit terms: Inactive Employees or Beneficiaries currently receisng benefits 295 Inactive Employees entitled to but not yet receimng benefits 62 Active Employees 543 Total 900 Contributions: There are no employee contributions for this plan; OCSD covers 100% of the cost. OCSD utilizes a pay-as-you-go method for funding the plan. Contributions to the Plan from OCSD were$646,850 for the year ended June 30, 2017. Pension Liabilities: As of June 30, 2017, OCSD reported net pension liability of$18,467,361 for its ARBA plan. The total pension liability used to calculate the net pension liability was determined by an actuarial valuation as of July 1, 2015. The actuarial evaluation performed as of July 1, 2015, used the Entry Age, Level Percent of Pay Cost Method. This method represents the present value of all benefits accrued through the valuation date assuming that each employee's liability is expensed from hire date until retirement date as a level percentage of pay. The following table shows the changes in the Net Pension Liability: Increase(Decrease) Total Pension Plan Fiduciary Net Pension Liability Net Position Liability/(Asset) (a) (b) ( c)= (a)-(b) Beginning Balance at July 1, 2016 $ 18,313,122 $ $ 18,313,122 Changes in the year: Service Cost 278,330 - 278,330 Interest on Total Pension Liability 593,711 - 593,711 Changes of Benefit Terms - - - Changes ofAssumptions (70,952) - (70,952) Benefit Payments(1) (646,850) - (646,850) Net changes 154,239 154,239 Ending Balance at June 30, 2017 $ 18,467,361 $ $ 18,467,361 (1)As part of the July 1,2015 actuarial valuation report,Derrsey,Fllliger&Associates preperaC a projection of the expecterl annual cost to Me gsMkt to pay AMA benefits. 42 ORANGE COUNTY SANITATION DISTRICT Notes to Basic Financial Statements For the Year Ended June 30, 2017 Pension Expense and Deferred Outflows/Inflows of Resources Related to Pension: For the year ended June 30, 2017, OCSD recognized pension expense of$995,074 for its ARBA plan. At June 30, 2017 OCSD reported its share of deferred outflows of resources and deferred inflows of resources related to pensions from the following sources: Deferred Outflows Deferred Inflows of Resources of Resources Difference between expected and actual experience $ - $ Changes of Assumptions (1) 984,261 Net difference between projected and actual investment earnings on pension plan investments - Employer contributions over actuary projections - - Total $ 984,261 $ - (1)the monetary effects of changes in actuarial assumptions and method totals$9M,261. These changes include a change in the discount rate from 3.75%as of the valuation date to 3.25%as of the statement date. Amounts reported as deferred outflows of resources related to ARBA pensions will be recognized in pension expense as follows: Year ended June 30 Amount 2018 $ 123,033 2019 123,033 2020 123,033 2021 123,033 2022 123,033 2023 123,033 2024 123,033 2025 123,030 Actuarial Assumptions and Methods: The total pension liability in the July 1, 2015 actuarial valuation was determined using the following actuarial assumptions, applied to all periods included in the measurement: Investment rate of return 3.75% per annum as of July 1, 2015 (Valuation Date) 3.25% per annum as of June 30, 2016 Measurement Date Discount rate 3.25% Inflation rate 2.50% per annum Projected salary increases 3.00% per annum (for service cost only; benefits not pay-related) The mortality assumptions used in the total pension liability at July 1, 2015 were based on the RP- 2015 Employee and Health Annuitant Mortality Tables for Males or Females, as appropriate, without projection. Discount Rate: The discount rate used to measure the Total Pension Liability was 3.75% as of the valuation date, July 1, 2015, and 3.25% as of the measurement date, June 30, 2016. Because 43 ORANGE COUNTY SANITATION DISTRICT Notes to Basic Financial Statements For the Year Ended June 30, 2017 there are no assets held in a trust that meets GASS 68 or 71, the discount rate is based on the 20 year,tax exempt general obligation municipal bonds with an average rating of AA or higher. Sensitivity of the Total Pension Liability to Changes in the Discount Rate: The following table represents the Total Pension Liability calculated using the discount rate of 3.25% as of the measurement date, as well as what Total Pension Liability would be if it were calculated using a discount rate that is 1 percentage point lower (2.25%) or 1 percentage point higher (4.25%) than the current rate: 1% Decrease Current Discount Rate 1% Increase Net Pension Liability (2.25%) (3.25%) (4.25%) June 30, 2017 $ 21,382,199 $ 18,467,361 $ 16,107,158 (6) Other Poslemolovment Benefits OCSD offers medical insurance to active and retired employees, as well as their qualified dependents. This is a single-employer defined benefit plan administered by OCSD. All retirees may choose coverage in an OCSD medical plan, with retirees paying the full premium. However, for employees hired prior to July 1, 1988, medical benefits begin immediately at retirement with OCSD paying 2.5 months of premium for each year of continuous service toward the cost of coverage under OCSD medical plans. At the termination of this period the retiree may elect to continue coverage at his/her own expense. This plan was established and may be modified only by action of the OCSD Board of Directors. The stand-alone financial statements are not issued. As of the date of the latest actuarial valuation (711115), there were 576 active employees, 72 retirees paying premiums, and 72 retirees whose premium is fully paid by OCSD. For the fiscal year ended June 30, 2017, premiums ranged between $205 and $3,831 per month, depending on the plan and number of dependents covered. Funding Policy., There are no employee contributions to this plan; OCSD covers 100% of the cost for qualifying employees as stated above. Retirees opting to remain with the plan after employment pay 100% of the premium cost, except for those for whom OCSD pays for a period (see above). An actuarial evaluation was performed as of July 1, 2015, using the Entry Age Normal, Level Percent of Pay Cost Method. This method represents the present value of benefits accrued through the valuation date, assuming that each employee's liability is expensed from hire date until retirement date as a level percentage of pay. The unfunded actuarial liability was amortized on a level dollar basis over an open period of 30 years. OCSD utilizes a pay-as-you-go method for funding the plan. For fiscal year ended June 30, 2017, OCSD contributed $1,034,593 and retirees contributed $1542,710 to cover current year expenses. Annual OPEB Cost and Net OPEB Obligation/(Asset): The annual OPEB cost is calculated based on the annual required contribution of the employer (ARC), an amount actuarially determined in accordance with the 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 amortize the unfunded actuarial liabilities over 30 years. 44 ORANGE COUNTY SANITATION DISTRICT Notes to Basic Financial Statements For the Year Ended June 30, 2017 The following OPEB cost and net OPEB obligation/(asset) was determined for the year ended June 30, 2017: June 30, 2017 Annual required contribution $ 559,620 Interest on net OPEB obligation (27,439) Adjustment to annual required contribution 41,039 Annual OPEB cost 573,220 Contributions made (1,034,593) Increase(decrease) in net OPEB obligation (461,373) Net OPEB obligation, beginning of year (731,700) Net OPEB obligation/(asset), end of year $ (1,193,073) OCSD's annual OPEB cost contributed and the net OPEB obligation/(asset) for the years ended June 30, 2015, 2016, and 2017 are shown in the following table. Annual OPEB Cost Fiscal Year Annual Actual Percentage of OPEB Net OPEB Ended OPEB Cost Contributions Cost Contributed Obligation/(Asset) 6/30/15 $ 751,430 $ 1,072,643 142.7% $ (116,600) 6/30/16 561,787 1,176,887 209.5% (731,700) 6/30117 573,220 1,034,593 180.5% (1,193,073) Funded status and funding progress: The funded status of the plan as of July 1, 2015, based on the July 1, 2015 actuarial valuation (most current valuation available)was as follows: Actuarial accrued liability (AAL) $9,179,161 Actuarial value of assets - Unfunded AAL (UAAL) 9,179,161 Funded ratio 0.0% Covered payroll $60,025,942 UAAL as a percentage of covered payroll 15.3% The preceding noted actuarial accrued liability was based on the July 1, 2015 actuarial valuation. Projections of benefits for financial reporting purposes are based on the substantive plan and include the types of benefits provided at the time of each valuation. The actuarial valuation contained in the report involve estimates that are subject to continual revision as they reflect a long-term perspective. Assumption used in the report also include techniques designed to reduce short-term volatility in AAL and the actuarial value of assets. Current estimates of the funded status and trend information about the funding progress are presented in the Required Supplementary Information section following the notes to the basic financial statements. The net OPEB asset is reported in the noncurrent portion of assets on the Statement of Net Position. 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 plan members) and 45 ORANGE COUNTY SANITATION DISTRICT Notes to Basic Financial Statements For the Year Ended June 30, 2017 include the types of benefits provided at the time of each valuation and the historical pattern of sharing the 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. The ARC for the current year was determined as part of the July 1, 2015 actuarial valuation using the Entry Age Normal, Level Percent of Pay Cost Method. The actuarial assumptions include a 3.75% investment rate of return, an annual rate of inflation of 2.5%, and an annual healthcare cost trend rate of 8.0%. The UAAL is being amortized ratably over an open 30 years amortization period. Inflation assumptions are included as part of the healthcare cost trend. No benefit increase is anticipated and the benefit is unaffected by changes in salary. (7) Transactions with Irvine Ranch Water District—Revenue Area No. 14 Formation of Revenue Area No. 14& Excess Purchase Price Over Book Value of Acquired Assets On July 1, 1985, Revenue Area No. 14 was formed as an independent special district as a result of a negotiated agreement between OCSD and Irvine Ranch Water District (IRWD). At the time of Revenue Area 14's creation, OCSD consisted of eight independent special districts (see Note 1 — Reporting Entity). The eight existing districts sold a portion of the joint treatment facilities and land to the newly created district and recorded capacity rights revenue at the time of the sale. In accordance with the negotiated agreement between OCSD and IRWD, IRWD paid OCSD $34,532,000 for an initial 15,000,000 gallons per day capacity in OCSD's joint treatment facilities (with an ultimate collection capacity of 32,000,000 gallons per day) and for a pro-rata interest in real property (based on flow of 32,000,000 gallons per day). The book value of the assets acquired was determined to be $14,553,000 as of June 30, 1986; these assets were recorded at book value in Revenue Area 14. The excess of the purchase price over the assets' book value was$19,979,000 and was recorded as an intangible asset in Revenue Area 14. The excess of the purchase price over the assets' book value is being amortized over the remainder of the useful lives of the original assets acquired. As of June 30, 2017, after recognizing current year amortization of$247,730,the unamortized amount of the excess of purchase price over the assets' book value was$0. Annual Transactions IRWD entered into a separate agreement with Revenue Area 14 on January 1, 1986 whereby IRWD agreed to fund quarterly payments of Revenue Area 14's proportionate share of OCSD's joint capital outlay revolving fund budget requirements and certain capital improvements during the term of the agreement, for which contributions of $2,673,280 were recorded as contribution from other government during the fiscal year ended June 30, 2017. IRWD also agreed to fund the annual integration adjustment of Revenue Area 14's equity share in OCSD's Joint Works Treatment Facilities based on the flows discharged to OCSD. Integration contributions of $21,678,191 to Revenue Area 14 were recognized and reported as contributions from other government during the fiscal year ended June 30, 2017. These contributions received from or credited to IRWD for their agreed-upon share of capital assets and equity share in OCSD's Joint Works Treatment Facilities are calculated as prescribed in the agreements. In addition, a separate agreement for transfer of IRWD's wastewater solids residuals to OCSD was entered on April 28, 2010. IRWD agreed to pay OCSD a charge for interim solids handling charge which include annual capital and quarterly operating expense components designed to compensate OCSD for IRWD's share of the cost of operating and maintaining the existing facilities for the treatment of solids. As a result, $4,484,149 in annual solids capital handling charges were 46 ORANGE COUNTY SANITATION DISTRICT Notes to Basic Financial Statements For the Year Ended June 30, 2017 reported as operating revenue in Consolidated Revenue Area, and $9,973,470 in quarterly solids operating and maintenance charges were reported as operating revenue in Revenue Area No. 14 during the fiscal year ended June 30, 2017. Any amounts credited to IRWD are not refunded in cash but are held as a credit to satisfy future contributions required of IRWD. Amounts owed from IRWD are invoiced on a quarterly or annual basis. As a result, a balance of$33,894,106 was reported in accounts receivable and $5,791,345 in due from other governmental agency as of June 30, 2017. Annual Cash Reserve Requirement The cash reserve contribution requirement from IRWD at June 30, 2017; in accordance with Amendment No. 2 to the Agreement between IRWD and OCSD Acquiring Ownership Interests, Assigning Rights, and Establishing Obligations; is $11.2 million. This rash reserve requirement is recognized as a liability to IRWD. (8) Commitments. Due From Other Governmental Agency. and Contingencies Relocation of the Santa Ana Regional Interceptor: On June 29, 2010, OCSD entered into an agreement to lend the Orange County Flood Control District(OCFCD)60 percent of the amount of the contract awarded to design and construct the relocation of the Santa Ana Regional Interceptor, but not to exceed $72 million. On December 18, 2012, a new agreement was executed that superseded the prior agreement and reduced OCSD's maximum loan obligation to $59,036,400 based on lower than expected construction costs. OCFCD agrees to repay the loan from any subvention funds received by OCFCD, with the total balance repaid by no later than July 1, 2022. Repayment installments will be made within 30 days equal to 60 percent of any subvention funds received by OCFCD. Interest shall accrue on the unpaid balance from July 1, 2018 at an annual interest rate of two percent until the unpaid balance has been repaid. During the fiscal year ended June 30, 2017, OCSD received loan repayments totaling $3,533,364, leaving an outstanding loan receivable balance of $20,472,023 which is included in the due from other governmental agency balance on the statement of net position. Pollution Remediation: An Underground Storage Tank (UST) at Plant No. 1 failed the pressure test to ensure its tank integrity.As a result of the test failure, OCSD voluntarily took this UST out of service and tested the immediate surrounding area and determined that both gasoline and diesel were present. During the fiscal year ended June 30, 2017, OCSD completed an analysis of remediation alternatives resulting in a less costly remediation plan for the contaminated soil than the plan developed during the previous fiscal year. The new remediation plan received approval from the Orange County Health Care Agency, and based upon their feedback a final design will now be completed. This new remediation plan calls for removal and disposal of approximately 2,200 tons of contaminated soil, and some limited groundwater treatment. This work is anticipated to begin in the spring of 2018 and be completed by January 2019. As of June 30, 2017, actual costs of$194,404 were incurred. Total remaining costs are estimated not to exceed $5,000,000, including post-remediation monitoring costs for a five-year period and a project contingency of 50 percent for the remediation effort. Based on the lower estimated costs of the new remediation plan, the previously recorded liability was reduced by $1,162,499 and reported as an "Other Non- operating Revenue." Litigation: Certain claims involving disputed construction costs have arisen in the ordinary course of business. Additionally, OCSD is a defendant in lawsuits. Although the outcome of these matters is not presently determinable, management does not expect that the resolution of these matters will have a material adverse impact on the financial condition of OCSD. 47 ORANGE COUNTY SANITATION DISTRICT Notes to Basic Financial Statements For the Year Ended June 30, 2017 (91 Local Sewer Facilities Transfer On February 27, 2014, OCSD entered into an agreement to transfer 174 linear miles of local sewer facilities in the unincorporated area of Area 7 and in the City of Tustin, to East Orange County Water District (EOCWD). The transfer was contingent upon receiving Orange County Local Agency Formation Commission (OC LAFCO) approval of EOCWD's request to activate EOCWD's latent powers to provide wastewater services and to slightly adjust EOCWD's boundary, solely for local sewer service,which was not within EOCWD's water service area. The agreement was amended on April 22, 2015 to extend the timeframes and term of the original agreement, to provide for a disbursement of$25 million of accumulated local sewer capital repair and replacement funds within five days following the date of transfer, to provide for a reconciliation of OCSD's records and transfer of any accumulated capital repair and replacement funds in excess of the $25 million within six months following the dale of transfer, and to prohibit the diversion of wastewater flows away from OCSD. Due to delays in receiving approval from OC LAFCO, the agreement was amended a second time on December 24, 2015 to extend the time frames identified in the previous agreement, as amended. On May 11, 2016, the OC LAFCO Commission executed Resolution 14-01, which approved EOCWD's application for reorganization and amended its sphere of influence, thus providing for the transfer of the local sewers to EOCWD. In accordance with the above agreements, OCSD made three disbursements totaling $41.5 million of local sewer accumulated capital repair and replacement funds to EOCWD during fiscal year 2016-17. Local sewer capital assets transferred had an approximate book value net of depreciation of approximately $9.3 million for a total local sewer service transfer non-operating expense of$50.8 million. 48 ORANGE COUNTY SANITATION DISTRICT REQUIRED SUPPLEMENTARY INFORMATION 49 ORANGE COUNTY SANITATION DISTRICT Proportionate Share of the Net Pension Liability Orange County Employees Retirement System (OCERS) Pension Plan Last 10 Fiscal Years(1) Reporting Date: June 30,2015 June 30, 2016 June 30, 2017 Measurement Dale: December 31, 2014 December 31, 2015 December 31, 2016 District's proportion of the net pension liability 1.13% 0.74% (0.20%) District's proportionate share of the net pension liability $ 57,418,760 $ 42,439,759 $ (10,384,508) District's covered payroll (2) $ 58,641,163 $ 59,789,927 $ 60,000,017 District's proportionate share of the net pension liability as a percentage of its covered payroll 97.92% 70.98% (17.31%) OCERS'fiduciary net position as a percentage of the total pension liability 89.61% 92.74% 101.70% (1) The amounts presented for each fiscal year were determined as of December 31. Data for fiscal years ended June 30, 2008 through 2014 is not available in a comparable format. (2) Covered payroll represents compensation earnable and pensionable compensation. Only compensation earnable and pensionable compensation that would possibly go into the determination of retirement benefits are included. 50 ORANGE COUNTY SANITATION DISTRICT Schedule of District Contributions Orange County Employees Retirement System (OCERS)Pension Plan Last 10 Fiscal Years (1) June 30, 2015 June 30, 2016 June 30, 2017 Contractually required contribution $ 17,201,569 $ 12,222,849 $ 7,709,734 Contributions in relation to the contractually required contribution $ (17,201,569) $ (12,222,849) $ (7,709,734) Contribution deficiency(excess) $ $ $ District's covered payroll (2) $ 58,641,163 $ 59,789,927 $ 60,000,017 Contributions as a percentage of covered payroll 29.33% 20.44% 12.85% (1) Data for fiscal years ended June 30, 2008 through 2014 is not available in a comparable format. (2) Covered payroll represents compensation eamable and pensionable compensation. Only compensation earnable and pensionable compensation that would possibly go into the determination of retirement benefits are included. 51 ORANGE COUNTY SANITATION DISTRICT Net Pension Liability Additional Retiree Benefit Account (ARBA) Last 10 Fiscal Years (1) June 30, 2015 June 30, 2016 June 30, 2017 Districts net pension liability $ 16,680,614 $ 18,313,122 $ 18,467,361 Districts covered payroll (2) $ 60,025,942 $ 60,595,474 $ 62,266,907 Districts net pension liability as a 27.79% 30.22% 29.66% percentage of its covered payroll (1) The amounts presented for each fiscal year were determined as of July 1. Data for fiscal years ended June 30, 2008 through 2014 is not available in a comparable format. (2) Covered payroll represents compensation eamable and pensionable compensation. Only compensation earnable and pensionable compensation that would possibly go into the determination of retirement benefits are included. 52 ORANGE COUNTY SANITATION DISTRICT Changes in Net Pension Liability Additional Retiree Benefit Account (ARBA) Last 10 Fiscal Years (1) June 30, 2016 June 30, 2017 Beginning Balance at July 1 $ 16,680,614 $ 18,313,122 Changes in the year: Service Cost 270,223 278,330 Interest on Total Pension Liability 626,386 593,711 Changes of Benefit Terms _ _ Changes of Assumptions 1,230,327 (70,952) Benefit Payments (2) (494,428) (646,850) Net changes 1,632,508 154,239 Ending Balance at June 30 $ 18,313,122 $ 18,467,361 (1) The amounts presented for each fiscal year were determined as of July 1. Data for fiscal years ended June 30, 2008 through 2015 is not available in a comparable format. (2) As part of the July 1, 2015 actuarial valuation report, Demsey, Filliger&Associates prepared a projection of the expected annual cost to the District to pay ARBA benefits. 53 ORANGE COUNTY SANITATION DISTRICT Schedule of Funding Progress Other Postemployment Benefits (OPEB) Last Three Actuarial Valuations The schedule of funding progress presents multiyear trend information that shows whether the actuarial value of the plan asset is increasing or decreasing due time relative to the actuarial accrued liabilities for benefits. Actuarial Actuarial Actuarial UAAL as a Valuation Accrued Value of Unfunded AAL Funded Covered Percentage of Date* Liability(AAL) Assets (UAAL) Ratio Payroll Covered Payroll 7/1/2011 $ 10,706,789 - $ 10,706,789 0.0% $59,787,560 17.9% 7/1/2013 10,650,711 - 10,660,711 0.0% 59,832,408 17.8% 7/1/2015 9,179,161 - 9,179,161 0.0% 60,025,942 15.3% * Based on most recent actuarial valuation available. 54 ORANGE COUNTY SANITATION DISTRICT SUPPLEMENTARY INFORMATION 55 ORANGE COUNTY SANITATION DISTRICT Combining Area Schedule of Net Position June 30,2017 Revenue Consolidated Totals Area No.14 Revenue Area Eliminations 2017 Current assets: Cash and cash equivalents $ - $ 89.374,975 $ - $ 89,374,975 Investments - 416,675,560 - 416,675,560 Accounts receivable,net of allowance for uncollectibles$236,187 33,894,106 11,785,674 - 45,679,780 Accrued interest receivable - 1,947,562 - 1,947,562 Connection fees receivable - 3,712,660 - 3,712,660 Property tax receivable - 1,319,052 - 1,319,052 Inventories - 7,163,534 - 7,163,534 Due from other revenue area 39,685,451 (39,685,451) - Duefromothergovernmentalagency 5,791,345 - - 5,791,345 Prepaid expenses 1,733,053 1,733,053 Total current assets 39,695,451 573,397,521 (39,695,451) 573,397,521 Noncurrent assets: Restricted: Cash and cash equivalents - 4,992,427 - 4,992,427 Unrestricted: NonEepreciable capital assets 14,489,785 472,50,711 - 487,080,496 Depreciable capital assets,net of accumulated depreciation 78.160,306 2,038,217,527 - 2,116,377,833 Due from other governmental agency - 20,472,023 - 20,472,023 Net OPEB asset - 1,193,073 - 1,193,073 Other noncurrent assets,net 10,344 10,344 Total noncurrent assets 92,650,091 2,537.476,105 2,630.126,196 Total assets 132.335,542 3,110.873,626 (39.685,4511 3,203.523,717 Deferred outflows of resources: Deferred losses on defeasances - 37,127,405 - 37,127,405 Deferred outflows related to pensions 37,382,920 37,382,920 Total deferred outflows of resources - 74.510,325 - 74.510,325 Total assets and deferred outflows of resources 132,335,542 3,185,383,951 (39,685,451) 3,278,034,042 Current liabilities: Accounts payable - 10,000,957 - 10,000,957 Accrued expenses - 15,253,785 - 15,253,785 Due to other revenue area 39,685,451 - (39,685,451) - Retentions payable - 3,461,476 - 3,461,476 Interest payable - 17,789,350 - 17,789,350 Current portion of long-term obligations 52,870,671 52,870,671 Total current liabilities 39.685,451 99.376,239 (39,685,451) 99.376,239 Noncurrent liabilities: Noncurrent portion of long-term obligations - 1,099,679,143 - 1,099,679,143 Net pension liability 8,082,853 8,082,853 Total Noncurrent liabilities - 1,107,761,996 - 1,107,761,996 Total liabilities 39,685,451 1,207,1M 235 (39,685,451) 1,207,138,235 Deferred inflows of resources: Deferred Inflows related b pensions 29.670,775 29.670,775 Total liabilities and deferred inflows of resources 39.685,451 1,236.809,010 (39.685,451) 1,236.809,010 Net position: Net Investment in capital assets: Collection system 17,299,691 528,427,283 - 545,726,974 Treatment and disposal-land 794,999 14,315,091 - 15,110,090 Treatment and disposal system 74,555,401 1,968,055,864 - 2,042,621,265 Capital assets related debt (1,098,559,941) (1,098,559,941) Subtotal 92,650,091 1,412,248,297 - 1,504,898,388 Unrestricted: 536,326,644 536,326,644 Total net position $ 92.650,091 $ 1,948,574,941 $ $ 2,041,225,032 56 ORANGE COUNTY SANITATION DISTRICT Combining Area Schedule of Revenues, Expenses, and Changes in Net Position For the Year Ended June 30,2017 Revenue Consolidated Totals Area No. 14 Revenue Area 2017 Operating revenues: Service charges $ 7,064,287 $ 305,173,049 $ 312,237,336 Permit and inspection fees 19,367 1,025,385 1,044,752 Total operating revenues 7,083,654 306,198,434 313,282,088 Operating expenses other than depreciation and amortization: Salaries and benefits $ (3,376,698) $ 77,667,285 74,290,587 Utilities 265,713 5,853,146 6,118,859 Supplies,repairs and maintenance 1,286,080 24,187,888 25,473,968 Contractual services 10,582,165 18,965,262 29,547,427 Feasibility studies 256,504 8,048,916 8,305,420 Other 591,557 5,924,521 6,516,078 Total operating expenses other than depreciation and amortization 9,605,321 140,647,018 150,252,339 Operating income(loss)before depreciation and amortization (2,521,667) 165,551,416 163,029,749 Depreciation and amortization 3,053,599 93,266,831 96,320,430 Operating income(loss) (5,575,266) 72,284,585 66,709,319 Non-operating revenues: Property taxes 2,608,688 85,675,507 88,284,195 Investment and interest income 14,733 3,066,283 3,081,016 Contributions from other government 24,352,736 35,661 24,388,397 Other 43,526 2,713,370 2,756,896 Total non-operating revenues 27,019,683 91,490,821 118,510,504 Non-operating expenses: Interest 144,212 25,504,140 25,648,352 Loral sewer service transfer - 50,783,259 50,783,259 Other 2,526 66,620 69,146 Loss on disposal of assets 16,410 2,401,266 2,417,676 Total non-operating expenses 163,148 78,755,285 78,918,433 Income before capital contributions 21,281,269 85,020,121 106,301,390 Capital contributions: Capital facilities capacity charges - 16,351,185 16,351,185 Change in net position 21,281,269 101,371,306 122,652,575 Total net position-beginning 71,368,822 1,847,203,635 1,918,572,457 Total net position-ending $ 92,650,091 $ 1,948,574,941 $ 2,041,225,032 57 ORANGE COUNTY SANITATION DISTRICT Combining Area Schedule of Cash Flows For the Year Ended June 30,2017 Revenue Consolidated Totals Area No.14 Revenue Area Eliminators 2017 Cash Bows from operating activities: Receipts from customers and users $ 8,168.676 $278,640,463 $ - $286,809,139 Payments to employees 2,291,676 (110,846,000) - (108,554,324) Payments to suppliers (12,982,019) (66,430,373) (79,412,392) Net cash provided by(used in)operating activities (2,521,667) 101,364,090 98,842,423 Cash Bows from noncapital financing activities: Proceeds from property taxes 2,608,688 85,417,285 - 88,025,973 Payments for sewer service transfer and other obligation 41,195 (38,811,552) (38,770,357) Net cash provided by noncapital financing ectivkles 2,649,883 46,605,733 49,255,616 Cash flows from capital and related financing activties: Capital facilities capacity charges - 15,61 - 15,61 Additions to capital assets (24,351,472) (82,585.371) 2,393,346 (104,543,497) Disposal of capital assets - (21,959,390) 21,959,390 - Interest paid (144,212) (46,913,349) - (47,057,561) Principal payments on debt obligation - (35,575,000) - (35,575,000) Proceeds released to escrow account on caressed debts - (212,470,000) - (212,470,000) Proceeds from debt issuances - 195,288,273 - 195,288,273 Debt issuance costs - (752,912) - (752,912) Contribution from other government 24,352,736 35,661 (24,352,736) 35,661 Net cash used in capital and related financing activities (142,948) (189,310,648) (189,453,596) Cash flows from investing activities: Proceeds from the sale of investments - 821,428,761 - 821,428,761 Purchases of investments - (833,789,163) - (833,789,163) SARI project payments - 4,258,104 - 4,258,104 Interest received 14,732 7,862,871 7,877,603 Net cash provided by(used in)investing activities 14,732 (239,427) (224,695) Net(decrease)in cash and cash equivalents - (41,580,252) - (41,580,252) Cash and cash equivalents,beginning of year 135,947,654 135,947,654 Cash and cash equivalents,end of year $ $ 94,367,402 $ $ 94,367,402 Reconciliation of operating income(loss)to net cash provided by(used in)operating activities: Operating income(less) $ (5,575.266) $ 72,284,585 $ - $ 66,709,319 Adjustments to reconcile operatng income(loss) to net cash provided by operating activities: Depreciation and amortization 3,053,599 93,266,831 - 96,320,430 Bad debt expense(Not recoveries) - 137,270 - 137,270 (Increase)/decrease in operating assets: Accounts receivable (23,715,266) (2,736,617) - (26,451,883) Inventories - (302,833) - (302,833) Prepaid and other assets - (268,402) - (268,402) Increase/(decrease)in operating liabilities: Accounts payable - (3,514,394) - (3,514,394) Accrued expenses - 1,462767 - 1,462,767 Due to other governmental agency 24,800,288 (24,821:355) - (21,067) Net pension liability (1,085,022) (33,069,506) - (34,154,528) Pension/OPEB/accrued leave payable - (461,373) - (461,373) Compensated absences - 268,035 - 268,035 Other payable - (362,529) - (362,529) Claims and judgments (518,389) (518,389) Net cash provided by(used in)operating activities $ (2,521,667) $101,364,090 $ $ 98,842,423 Noncash activities: Unrealized!(loss)on the fair value of investments $ - $ (4,550,282) $ (4,550,282) Receivable from non-operating activities - 3,266,614 3,266,614 Capital assets acquired through accounts payable - 3,992,243 3,992,243 Capital facilities capacity charges contributed - 729,745 729,745 58 ORANGE COUNTY SANITATION DISTRICT STATISTICAL SECTION This part of the comprehensive annual financial report of the Orange County Sanitation District (OCSD) presents detailed information as a content for understanding what the information in the financial statements, note disclosures, and required supplementary information says about OCSD's overall financial health. Contents Pages Financial Position and Trends These schedules contain current and trend information to help the reader understand OCSD's financial position and how OCSD's financial performance and well-being have changed over time. 60-64 Revenue Capacity These schedules contain information to help the reader assess OCSD's most significant revenue source of sewer service fees. 65-67 Debt Capacity These schedules present information to help the reader assess the affordability of OCSD's current levels of outstanding debt and OCSD's ability to issue additional debt in the future. All of OCSD's debt is recorded in a proprietary fund; consequently, many 68-71 of the schedules which are applicable to governmental funds are not presented. Operating Information These schedules contain data to help the reader understand how the information in OCSD's financial report relates to the services it provides and the activities it performs. 72-75 Demographic and Economic Factors These schedules offer demographic information to help the reader understand the environment within which OCSD's financial activities take place. 76-79 59 ORANGE COUNTY SANITATION DISTRICT Net Position by Component (Dollars in Thousands) Last Ten Fiscal Years $2,500,000 $2,000,000 $1,500,000 $1,aoo,000 $500,000 $0 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 201516 201617 ONet Investment in Capital Assets 13Unrestrict I Net Investment in Fiscal Year Capital Assets Unrestricted Total Net Position 2007-08 $ 847,426 $ 428,561 $1,275,987 2008-09 948,869 399,452 1,348,321 2009-10 1,121,057 310,016 1,431,073 2010-11 1,131,063 379,423 1,510,486 2011-12 1,125,966 471,652 1,597,618 2012-13 1,180,298 520,427 1,700,725 2013-14 1,204,706 617,589 1,822,295 2014-15 1,327,384 434,460 1,761,944 '2' 2015-16 1,429,269 489,303 1,918,572 tat 2016-17 1,504,898 536,327 2,041,225 (') Beginning net position restated due to implementation of GASB 65. (2) Beginning net position restated due to implementation of GASB 68. (3) Beginning net position restated due to implementation of GASB 73. Source: Orange County Sanitation District's Financial Management Division. 60 ORANGE COUNTY SANITATION DISTRICT Revenues and Gross Capital Contributions by Source (Dollars in Thousands) Last Ten Fiscal Years $325,000 $300,000 $275,000 $250,000 $225,000 $200,000 $175,000 $150,000 $125,000 $100,000 $75,000 $50,000 $25,000 $6 -$25,000 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 ■Operating Revenue ■Non-Operating Revenue SCapital Contributions Operating Revenue Non-Operating Revenue Permh R Total Fiscal Service Inspection Total Property Non- Capital Year Charges Fees Operating Taxes Interest Other Operating Contributions 2007-08 $ 184,180 $ 1,196 $ 185,376 $ 65,210 $ 20,235 $ 13 $ 85,458 $35,408 2008-09 206,422 895 207,317 66,427 14,836 1,634 82,897 17,937 2009-10 225,059 629 225,688 64,759 19,166 6,939 90,864 (2,406) 2010-11 244,465 784 245,249 64,307 10,092 11,015 85,414 9,800 2011-12 259,491 1,030 260,521 67,882 15,747 8,486 92,115 8,936 2012-13 303,400 1,176 304,576 79,240 (3,913) 3,781 79,108 12,797 2013-14 300,611 848 301,459 74,944 6,498 12,595 94,037 14,093 2014-15 301,548 902 302,450 79,835 4,806 9,996 94,637 17,656 2015-16 314,477 951 315,428 84,407 9,183 14,658 108,248 17,974 2016-17 312,237 1,045 313,282 88,284 3,081 27,146 118,511 16,351 Source: Orange County Sanitation District's Financial Management Division. 61 ORANGE COUNTY SANITATION DISTRICT Expenses by Type (Dollars in Thousands) Last Ten Fiscal Years $250,000 $225,000 $200,000 $175,000 $150,000 $125,000 $100,000 $75,000 $50000 $zs,000 $o 2007-08 2006-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2076-17 ■Operating Expense ■Non-Operating Expense Operating Expense Non-Operating Expense Fiscal Salaries& Maint& Depr& Total Interest Total Non. Year Benefits Utilities Other Amort Operating Expense Other Operating 2007-08 $ 67,629 $ 8,092 $ 56,169 $ 47,767 $ 179,657 $ 22,517 $ 17,818 $ 40,335 2008-09 67,498 7,242 89,816 32,520 197,076 24,899 13,842 38,741 2009-10 69,652 6,934 61,499 52,036 190,121 27,537 13,736 41,273 2010-11 73,112 6,948 63,328 49,288 192,676 29,129 39,245 68,374 2011-12 75,642 7,405 89,272 56,051 228,370 28,700 8,433 37,133 2012-13 76,878 6,403 66,536 63,907 213,724 42,315 37,335 79,650 2013-14 79,179 6,381 60,887 99,805 246,252 40,450 1,317 41,767 2014-15 79,657 7,246 62,323 94,186 243,412 34,112 3,168 37,280 2015-16 75,576 7,246 70,679 90,502 244,003 27,597 6,482 34,079 2016-17 74,291 6,119 69,843 96,320 246,573 25,648 53,270 78,918 Source: Orange County Sanitation District's Financial Management Division. 62 ORANGE COUNTY SANITATION DISTRICT Change in Net Position (Dollars in Thousands) Last Ten Fiscal Years $2,500,000 $2,000,000 $1,500,000 $1,000,000 $500,000 $0 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 Ending Net Position by Fiscal Year Fiscal Total Total Changein Beginning Ending Year Revenues Expenses Net Position Net Position Net Position 2007-08 $306,242 $ 219,992 $ 86,250 $1,189,737 $ 1,275,987 2008-09 308,151 235,817 72,334 1,275,987 1,348,321 2009-10 314,146 231,394 82,752 1,348,321 1,431,073 2010-11 340,463 261,050 79,413 1,431,073 1,510,486 2011-12 361,572 265,503 96,069 1,501,549 i'I 1,597,618 2012-13 396,481 293,374 103,107 1,597,618 1,700,725 2013-14 409,589 288,019 121,570 1,700,725 1,822,295 2014-15 414,743 280,692 134,051 1,627,793 (sl 1,761,844 2015-16 441,650 278,082 163,568 1,755,004 (3) 1,918,572 2016-17 448,144 325,491 122,653 1,918,572 2,041,225 (f1 Beginning net position restated due to implementation of GASB 65. Ixl Beginning net position restated due to implementation of GASB 68. (3) Beginning net position restated due to implementation of GASB 73. Source: Orange County Sanitation District's Financial Management Division. 63 ORANGE COUNTY SANITATION DISTRICT Cash and Investment Reserve Balances (Dollars in Millions) Last Ten Fiscal Years Capital Debt Cash Flow Self- Improvement Service Fiscal Year Contingency Insurance Program Requirements Total 2007-08 $ 149 $ 57 $ 219 $108 $ 533 2008-09 172 57 172 133 534 2009-10 185 57 102 129 473 2010-11 187 57 176 141 561 2011-12 196 57 186 138 577 2012-13 174 57 234 135 600 2013-14 189 57 296 131 673 2014-15 177 57 194 129 557 2015-16 181 57 190 117 545 2016-17 174 57 173 107 511 Notes: The Cash Flow Contingency Reserve is to fund operations, maintenance, and certificates of participation debt service expenses for the first half of the fiscal year, prior to the receipt of the first installment of the property tax allocation and sewer service user fees. The Self-Insurance Reserve is to provide requirements for property damage including fire,flood and earthquake,general liability and workers'compensation. The Capital Improvement Program Reserve is to fund annual increments of the capital improvement program with a target level at one half of the average annual capital improvement program over the next 10 years. The Debt Service Required Reserves are monies held and controlled by a trustee pursuant to the provisions of certificates of participation issues, and the monies are not available for the general needs of the District. Source: Orange County Sanitation Districfs Financial Management Division. 64 ORANGE COUNTY SANITATION DISTRICT Sewer Service Fees Single Family Residence Rate Last Nine Fiscal Years and Next Fiscal Year Sewer service fees are comprised of three categories: residential customers, commercial customers, and industrial customers. Although the majority of sewer service fee revenues are from residential and commercial customers(see the schedule of Number of Accounts and Revenues by Customer Class), the fee paid by each residential and commercial customer is less than the individual fees paid by industrial customers. The rates for commercial and industrial customers are derived from the base sewer service fee charged for a single-family residence and are based on the type of business and the strength and volume of waste that is discharged into the sewer system. Due to the complexity of the rate structure for commercial and industrial customers and since the rates are derivatives of the single-family residence rate, only the single-family residence rate is presented within the statistical section. Sewer Service Fiscal Year Charge 2008-09 $ 201.00 2009-10 221.00 2010-11 244.00 2011-12 267.00 2012-13 294.00 2013-14 308.00 2014-15 316.00 2015-16 322.00 2016-17 327.00 2017-18 331.00 Annual Sewer Service Fees Single Family Residence 400 350 u 300 LL 250 Q� 200 K y 150 100 50 0 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 Fiscal Year Source: Orange County Sanitation Districfs Financial Management Division. 65 ORANGE COUNTY SANITATION DISTRICT Number of Accounts and Revenues by Customer Class (Dollars in Millions) Last Ten Fiscal Years Residential/Commercial Industrial Number of Total Percentage Total Percentage Equivalent Sewer Svc. of Sewer Number of Sewer Svc. of Sewer Fiscal Single-Family Charge Service Charge Customer Charge Service Charge Year Dwellings Revenue Revenues Accounts Revenue Revenues 2007-08 880,208 $ 160.2 93% 520 $ 12.1 7% 2008-09 887,290 178.3 95% 515 9.9 5% 2009-10 880,213 194.5 95% 487 10.8 5% 2010-11 878,408 214.3 95% 479 10.1 5% 2011-12 874,008 233.4 96% 516 9.5 4% 2012-13 883,477 259.8 96% 527 10.8 4% 2013-14 873,308 269.0 95% 489 14.4 5% 2014-15 824,465 260.5 95% 467 14.2 5% 2015-16 863,317 278.0 96% 450 12.6 4% 2016-17 859,869 281.2 95% 466 13.8 5% $350,000,000 $300,000,000 $250,000,000 $200,000,000 $150,000,000 $100,000,000 $50,000,000 $0 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 ■Residential/Commercial Users ■Industnal Users Source: Orange County Sanitation District's Financial Management Division. 66 ORANGE COUNTY SANITATION DISTRICT Principal Sewer Service Customers For the Current Fiscal Year and Nine Years Ago Fiscal Year Ended 6130117 Fiscal Year Ended 6130/08 Industrial Industrial Permittee %to Total Permittee %to Total Service Service Charge Service Service Charge Customer Charges Rank Revenue Charges Rank Revenue House Foods America Corp. $ 1,328,551 1 0.43% $ 525,676 7 0.29% Kimberly-Clark Worldwide, Inc. 1,139,233 2 0.36% 1,032,500 1 0.56% Cargill, Inc. 1,119,665 3 0.36% Pulmuone Wildwood, Inc. 749,655 4 0.24% Stremicks Heritage Foods, LLC 678,705 5 0.22% 689,749 5 0.37% MCP Foods, Inc. 676,563 6 0.22% 798,449 4 0.43% Schreiber Foods, Inc. 635,504 7 0.20% Ameripec Inc. 593,679 8 0.19% 414,671 8 0.23% Jazz Semiconductor 549,292 9 0.18% Nor-Cal Beverage Co. Inc(Main) 538,242 10 0.17% Alstyle Apparel-A&G Inc. 1,023,517 2 0.56% Disneyland Resort 874,842 3 0.47% Disneyland Resort--DCA 623,095 6 0.34% Pepsi-Cola Bottling Group 381,371 9 0.21% Seven-Up Bottling Company 304,864 10 0.17% $ 8,009,089 2.57% $ 6,668,734 3.63% Although the majority of sewer service fee revenues are from residential and commercial customers (see the schedule of Number of Accounts and Revenues by Customer Class), the fee paid by each residential and commercial customer is less than the individual fees paid by industrial customers. Consequently, this schedule shows the largest sewer service fee customers. Source: Orange County Sanitation District's Financial Management Division. 67 ORANGE COUNTY SANITATION DISTRICT Ratio of Annual Debt Service to Total Expenses (Dollars in Thousands) Last Ten Fiscal Years 70% 60% 50% 40% 30°% 20% 10% 0% 2007-08 2000-09 2009-10 2910-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 Ratio of Debt Total Service to Total Fiscal Principal Total Debt Operating Operating Year (1) Interest Service(3) Expenses(2) Expenses 2007-08 $ 11,025 $ 36,484 $ 47,509 $ 131,890 36.02% 2008-09 21,305 40,840 62,145 164,556 37.77 2009-10 24,030 46,052 70,082 138,085 50.75 2010-11 25,895 49,426 75,321 143,388 52.53 2011-12 14,370 50,975 65,345 172,319 37.92 2012-13 23,965 53,640 77,605 149,817 51.80 2013-14 39,590 53,163 92,753 146,447 63.34 2014-15 27,875 53,586 81,461 149,226 54.59 2015-16 29,405 50,301 79,706 153,501 51.93 2016-17 35,575 47,143 82,718 150,252 55.05 Notes (1)-Excludes principal reductions due to advanced refunding. (2)-Excludes depreciation and amortization expense. (3)-Debt consists of certificates of participation, revenue obligations, and anticipation notes. Source: Orange County Sanitation District's Financial Management Division. 68 ORANGE COUNTY SANITATION DISTRICT Debt Coverage Ratios (Dollars in Millions) Last Ten Fiscal Years The Orange County Sanitation District has no legal debt limits as imposed by State legislation. The District does have contractual covenants within the existing Certificates of Participation indenture agreements Which require minimum coverage ratios of 1,25, The coverage ratio is calculated as the ratio of net annual revenues available for debt service payments to total annual debt service requirements. 3.50 3.00 I 2,50 2,00 1,50 1,00 0.50 ER 200708 2008-09 2009-10 2010-11 411-12 2012-13 2013-14 2014-15 2015-16 2016-17 Fiscal Year Ending June 30, M08 2009 2010 2011 2012 2013 2014 W15 2016 2017 Operating 8 Nor-operating Revenues: Service Charges,Net of Refunds-Regional $ 160.2 $ 178.3 $ 194.5 $ 214.3 $ 233.4 $ 259.8 $269.0 $ 260.5 $ 278.0 $ 281.2 Service Charges,Net of Refunds-Local - 5.6 5.6 5] 5] 5.8 5] 5.5 5.7 1.3 Industrial sewer Service Charges 12.1 9.9 10.8 10.1 9.5 10.8 14.4 14.2 12.6 13.8 SAWPA Assessment 4.4 3.9 as 4.9 3.6 2.7 2.4 2.7 3.2 3.3 IRWDAssessment 6.3 7.7 6.7 18.2 14.2 25.6 19.6 26.4 26.6 36.0 Ad Valorem Taxes 65.2 66.4 64.8 64.3 67.9 79.2 74.9 79.8 84.4 88.3 Interest Earnings 20.2 14.8 19.2 10.1 15.7 (3.9) 6.5 4.8 9.2 3.1 Other Revenues 2.5 3.6 8.4 3.0 2.5 3.7 3.0 3.2 4.0 SO Total Revenues 270.9 290.2 316.6 330.6 362.5 383.7 395.5 397.1 423.7 432.0 Operating Expenses(1) 131.9 164.6 138.1 143.4 172.3 149.8 146.4 149.2 153.5 150.3 Net Revenues $ 139.0 $ 125.6 $ 178.5 $ 187.2 $ 180.2 $ 233.9 $249A $ 247.9 $ 270.2 $ 281.7 Debt Service Requirements Pnncipal Payments 11.0 21.3 24.0 25.9 14.4 24.0 39.6 27.9 29.4 35.6 Interest Payments 31.8 36.3 43A 46.5 51.0 53.6 53.2 53.6 50.3 47A Total Debt Service Requirements $ 42.8 $ 57.6 $ 67.1 $ 72.4 $ 65.4 $ True $ 92.8 $ 81.5 $ 79J $ 82J Coverage Ratios 3.25 2.18 2.66 2.59 2.76 3.01 2.68 3.04 3.39 3.41 Ending Reserves(2) $ 425.0 $ 401.0 $ 3"0 $ 420.0 $ 439.0 $ 465.0 $542.0 $ 428.0 $ 428a $ 404.0 Notes 11)-Operating expenses exclude depreciation and amortlxation expenses. (2)-Excludes debt service nerves In accordance With the Distinct's reserve policy. Source:Orange County Sanitation Districts Financial Management Division. 69 ORANGE COUNTY SANITATION DISTRICT Computation of Direct and Overlapping Debt June 30, 2017 Total Debt District's Sham 6130@e17 %Applicable fit of Debt N30117 OVERLAPPING TAX AND ASSESSMENT DEBT(annual on all progeny assessed bumped f$393,682,838,3331 Metropolitan Water District of Southern California $ 74,905,000 15.223% $ 11,402,788 Coast Community College District 805,a44,504 99.370 800,761 North Orange County Joint Community College Distrlc 240,284,001 97.471 234,207,219 Rancho Santiago Community College District and School Facilities Improvement Dist.No.' 315,121,533 99.012&100.000 312,571,539 Seel and Laguna Beach Unified School Districts 39,569,029 99.983&15.101 18,549,764 Garden Grove United School District 329,610,160 100.000 329,640,160 Irvine Unified School District School Facilities Improvement Distnd No.1 95,OOi 100.000 95,000,000 Los Alamitos Unified School District School Fell due,Improvement Distinct No.1 104,615,227 96.627 101,086,555 Newport Mean Unified School District 217,659,160 99.995 217,648,267 Placama-Yorta Linda Unified School District 242,284,159 98.973 239,795,901 Rowland Unified School District 243,811,564 0.149 363279 Saddleback Valley United School District 118,585,000 11.582 13,734,515 Santa Ana United School District 265,510,216 100.000 265,510,216 Tustin Unified School District School Fall fee Improvement District No.2002-1 46,550,254 99.958 46,530,703 Tustin Unified School District School Facilities Improvement District No.2008.1 88,340,000 99.956 88,301,130 Tustln Unified School District School Fall fee Improvement District No.2012-1 27,720,000 99.970 27,711,684 Anaheim Union High School Distract 130,663,955 100.000 130,663,955 Fullerton Joint Union High School District 126,837,910 91.666 116,267,239 Huntington Beach Union High School District 193,079,998 99.000 191,149,198 Other School Districts 615,549,839 97.303-100.000 613,672,489 Irvine Ranch Water District Improvement Dialects 576,406,680 Various 512,576,511 Bonita Canyon Community Facilities District No.98-1 31,675,000 100.000 31,675,000 Irvine Unified School District Community Facilities Districts 05,416,000 100,000 656,416,000 Tustln Unified School District Community Facilities Districts 235,850,000 100.000 235,850,000 City of Tudin Community Facilities Districts 10060i 100.000 100dadi 0 Other Community Facilities Districts 523,494,983 99.998-100.000 523,493,771 Orange County Assessment Districts 57,890,000 100.000 57,890,000 City of Irvine 1915 Act Bonds 824,983,000 100.000 824,963,000 Other 1915 Ad bonds 11,411,808 100.000 11,411,808 TOTAL OVERLAPPING TAX AND ASSESSMENT DEBT $6,808,468,375 DIRECT AND OVERLAPPING GENERAL FUND DEBT: Orange County General Fund Obligations $ 227,516,000 74.982% $ 170,51 Orange County Pension Obligation Bonds 386762,539 74.982 290,002,287 Orange County Board of Education Candidates of Participation 14,440,000 74.982 101 Coast Community College District Certificates of Participation 3,610,000 99.370 3,587,257 Brea-OliWW Unified School District Certificates of Participatior 18,410,000 99.983 18,406,870 Orange Unified School Distrid Certificates of Participation and Benefit Obligations 105,713,145 97.912 103,505,855 Placentia-Vorta Linda Unified School District Certificates of PaNciptim, 951540,355 98.973 94,559,156 Santa Ana Unified School District Certificates of Participatior 75,937,067 100.000 75,937,067 Other Unified School District General Fund Obligations 57,811.903 Various 5114411989 Union High School District Certificates of Participation 123,476,090 Various 121,176,346 School District Certificates of Participation 93,588,853 Various 93,150755 City of Anaheim General Fund Obligations 623,352,465 99.209 618,421,747 City of Costa Mesa General Fund Obligations 20,660,000 100.000 20,660,000 City of Garden Grove General Fund Obligations 23,600,000 100.000 23,600,000 City of Huntington Beach General Fund and Judgment Obligation Bonds 46,626,530 98.680 46,011,060 City of La Habra General Fund Obligations 22,145,000 100.000 22,145,000 City of Newport Beach Certificates of Participation 110,595.000 99.994 110,588,364 City of Santa Ana General Fund Obligations 59,357,500 100.000 59,357,500 Other City General Fund Obligations 208,859.866 Various 82,870,875 Orange county Sanitation District a 100.000 a 12) TOTAL GROSS OVERLAPPING GENERAL FUND DEBT $2,016,845,576 Lela: City of Anaheim supported obligations 618,421,747 TOTAL NET OVERLAPPING GENERAL FUND DEBT $1,398,423,829 OVERLAPPING TAX INCREMENT DEBT: $1,073,917,228 57.933100.000% $1,069,892,768 TOTAL DIRECT DEBT $0 GROSS OVERLAPPING&COMBINED TOTAL DEBT $9,896,006,719 (3) NET OVERLAPPING&COMBINED TOTAL DEBT $9,276,584,972 (1) The percentage ofoverapping debt applicable to the dldbq is estimated using taxable assessed property value. Applicable percentages were estimated bydelermining the portion of the overlapping districts assessed value that is within the boundaries of the sanitation district divided by the district's total taxable assessed value. (2) Excludes wastewater revenue certificates of participation. Payment,decided candidates of participation have been redlasufed as district revenue supported issues and are no longer included as direct debt in the debt statement. (3) Excludes tax and revenue anticipation notes,enterprise revenue,mortgage revenue and non-bonded capital lease obligations.Qualified!Zone Academy Bonds ere included based on principal due at maturity. Trial Overlapping Tax Gross Combined Net Combined Total Overlapping R�tygjq: and Assessment Debt Total Debt Tpall Debt Tex Increment Debt Land and Improvement Assessed Valuation ($391,776,472,583'. 1.74% 2.53% 2.37% All Property Assessed Valuation ($393,682,838,333 2.51% 2.36% Redevelopment ncremental Valuation ($53,490,437,965', 2.00% Source:California Municipal Statistics 70 ORANGE COUNTY SANITATION DISTRICT Ratios of Outstanding Debt Last Ten Fiscal Years Debt as a (5) (3) Percentage Total Median of Median (4) Debt Fiscal Outstanding Family Family Population per Year Debt Income(1) Income Estimate(2) Capita 2007-08 $ 1,096,049,542 $ 84,100 0.008% 2,522,820 434.45 2008-09 1,262,936,747 86,100 0.007% 2,539,990 497.22 2009-10 1,306,255,753 87,200 0.007% 2,563,170 509.63 2010-11 1,427,792,453 84,200 0.006% 2,457,571 580.98 2011-12 1,376,404,782 85,300 0.006% 2,472,122 556.77 2012-13 1,325,928,512 84,100 0.006% 2,491,268 532.23 2013-14 1,278,998,124 84,900 0.007% 2,521,803 507.18 2014-15 1,241,140,357 85,900 0.007% 2,548,745 486.96 2015-16 1,206,722,347 85,000 0.007% 2,578,681 467.96 2016-17 1,140,679,773 88,000 0.008% 2,586,803 440.96 Notes & Data Sources (1)- Data is for the entire County of Orange. (2)- Data is for the estimated population served by the Orange County Sanitation District. (3)- Data Source: U.S. Department of Housing and Urban Development. (4)- Data Source: Demographic Research Unit, California Department of Finance. (5)- Data Source: Orange County Sanitation District. Debt includes certificates of participation, revenue obligations, and anticipation notes and is presented net of original issuance discounts and premiums. 71 ORANGE COUNTY SANITATION DISTRICT Comparison of the Volume of Wastewater Treated With Revenues and Expenses Last Ten Fiscal Years Millions of Gallons of Collection, Waste- Treatment water &Disposal Total Total Total Total Treated Cost per Operating Non-Operating Operating Non-Operating Fiscal Per Million Costs Costs Revenues Revenues Year Day Gallons (In Thousands) (In Thousands) (In Thousands) (In Thousands) 2007-08 221 1,541.18 $ 179,657 $ 40,335 $ 185,376 $ 85,458 2008-09 211 1,576.67 197,076 38,741 207,317 82,897 2009-10 196 1,588.72 190,121 41,273 225,688 90,864 2010-11 207 1,816.62 192,676 68,374 245,249 85,414 2011-12 201 1,871.47 228,370 37,133 260,521 92,115 2012-13 200 1,906.01 213,724 79,650 304,576 79,108 2013-14 198 1,936.64 246,252 41,767 301,459 94,037 2014-15 187 2,070.97 243,412 37,280 302,450 94,637 2015-16 183 2,110.43 244,003 34,079 315,428 108,248 2016-17 188 2,054.56 246,573 78,918 313,282 118,511 Total expenses in FY 2016-17 increased $105.5 million, or 48.0 percent since FY 2007-08, primarily as a result of expansion of the Capital Improvement Program (CIP) and increase in operational services levels with OCSD's decision beginning in FY 2002-03 to maximize existing secondary treatment facilities as OCSD moved from a 50/50 mix of primary and secondary effluent treatment to meeting secondary treatment standards as of December 31,2012. Depreciation expense represents 46.0 percent of the increase as a result of the expansion in capital facilifles and the financing associated with the expansion. Other non-operating expense represents 33.6 percent of the increase due to the FY 2016-17 local sewer facilities transfer to East Orange County Water District. Maintenance, chemicals, utilities, and other operating costs represent another 11.1 percent of the increase, primarily due to the increase in the levels of treatment referred to above. In FY 2016-17 personnel expenses decreased 1.7 percent over the prior year. This decrease is mainly due to a decrease in OCERS retirement contribution rate as a result of paying down the unfunded actuarial accrued liability over the previous three years. The full-time equivalent positions authorized increased by 3 in FY 2016-17. As depicted from the chart above, actual wastewater treatment flows were 221 mgd in FY 2007-08. Due to unusual dry weather conditions during the last several years due to California's record-breaking drought, FY 2016-17 had flows of only 188 mgd, a decrease of 33 mgd or 15%since FY 2007-08. Source: Orange County Sanitation District. 72 ORANGE COUNTY SANITATION DISTRICT Authorized Full-time Equivalents by Function Last Ten Fiscal Years 300 250 200 150 100 so 0 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Weneral Management(1) ■Human Resources (2) OAdministrative Services (2) ■Environmental Services (3) ■Facilities Support Services(3) •Technical Services mEngineedng •Operations and Maintenance Fiscal Year Ending June 30, 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 General Management(1) 26 26 13 13 13 12 12 14 15 15 Human Resources (2) 16 16 17 27 17 16 18 16 27 27 Administrative Services (2) 82 81 92 85 111 111 110 111 98 99 Environmental Services (3) - - - - - - - - - 91 Facilities Support Services(3) 57 68 71 70 84 81 78 76 63 - Technical Services 109 107 105 102 - - - - - - Engineering 93 98 96 112 128 125 123 123 127 116 Operations and Maintenance 247 241 245 230 281 281 283 284 294 279 Total FTE's 630 637 639 639 634 626 624 624 624 627 Notes (1)-Management Discretion positions used on a temporary basis have been excluded from FTE count. (2)- In 2016, Risk Management moved from Administrative Services to Human Resources Department. (3)- In 2017, District reorganization created Environmental Services and eliminated Facilities Support Services. Source: Orange County Sanitation District's Financial Management Division. 73 ORANGE COUNTY SANITATION DISTRICT Biosolids Produced Last Ten Fiscal Years 300,000 250,000 200,000 150,000 100,000 50,000 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 DWet Tonnage DDryTonnage Fiscal Year Wet Tonnaae Dry Tonnage 2007-08 248,717 50,884 2008-09 249,202 51,342 2009-10 245,668 50,799 2010-11 253,557 49,133 2011-12 280,572 47,556 2012-13 274,957 43,365 2013-14 279,362 50,764 2014-15 275,943 45,515 2015-16 283,052 50,439 2016-17 288,771 50,641 Source:Orange County Sanitation District's Environmental Compliance Division. 74 ORANGE COUNTY SANITATION DISTRICT Capital Asset Statistics Last Ten Fiscal Years Miles of Trunk& Number Primary Secondary Fiscal Subtrunk of Pump Treatment Treatment Year Sewers Stations Capacity(1) Capacity(1) 2007-08 568 17 376 200 2008-09 582 17 376 212 2009-10 579 17 376 212 2010-11 587 17 376 212 2011-12 572 17 376 332 2012-13 572 17 376 332 2013-14 580 17 376 332 2014-15 580 17 376 332 2015-16 570 17 376 332 2016-17 396 17 376 332 Notes (1)-Capacity is presented as million gallons treated per day. Source: Orange County Sanitation District 75 ORANGE COUNTY SANITATION DISTRICT Demographic Statistics Covering The Entire County of Orange(t) Last Ten Fiscal Years Total (5) (6) (2) Personal Per Capita Median Public (r) Fiscal Population Income Personal Family School Unemployment Year Estimates (in thousands) Income Income Enrollment Rate 2007-08 3,108,000 $ 155,925,156 (3) $ 50,169 $ 84,100 503,492 5.3% 2008-09 3,135,000 145,247,447 (3) 46,331 86,100 504,136 9.3% 2009-10 3,166,000 147,138,449 (3) 46,475 87,200 502,239 9.5% 2010-11 3,030,000 154,131,535 (3) 50,868 84,200 502,903 9.2% 2011-12 3,056,000 169,584,000 (4) 55,492 85,300 502,195 7.9% 2012-13 3,082,000 166,370,000 (4) 53,981 84,100 501,801 6.1% 2013-14 3,114,000 174,451,000 (4) 56,022 84,900 500,487 5.2% 2014-15 3,148,000 183,052,000 (4) 58,149 85,900 497,116 4.3% 2015-16 3,183,000 190,935,000 (4) 59,986 85,000 493,030 4.4% 2016-17 3,194,000 199,492,000 (4),(s) 62,458 88,000 490,430 3.8% Notes and Data Sources (1) - The Orange County Sanitation District services 479 square miles or 60% of the total 799 square miles that make up the boundaries of the County of Orange. (2)-Data Source: Demographic Research Unit, California Department of Finance. (3)-Data Source: Bureau of Economic Analysis, U.S. Department of Commerce. (4)-Data Source:A. Gary Anderson Center for Economic Research,Chapman University. (5)-Data Source: U.S. Department of Housing and Urban Development. (6)-Data Source: California Department of Education, Educational Demographics Unit. (7)- Data Source: State of California, Employment Development Department as of June 30 of each fiscal year. (8)- Forecasted number. 76 ORANGE COUNTY SANITATION DISTRICT Estimated Population Served by the Orange County Sanitation District June 30, 2017 Population as of January 1,2017 Anaheim 358,546 Brea 44,214 Buena Park 83,884 Costa Mesa 114,044 Cypress 49,655 Fountain Valley 56,709 Fullerton 142,234 Garden Grove 176,277 Huntington Beach 197,574 Irvine 267,086 La Habra 62,084 La Palma 15,984 Los Alamitos 11,739 Newport Beach 84,915 Orange 140,882 Placentia 52,268 Santa Ana 341,341 Seal Beach 24,890 Stanton 39,611 Tustin 82,372 Villa Park 5,944 Westminster 93,533 Yorba Linda 67,890 Subtotal Cities I'I 2,513,676 Estimated Population Served in Unincorporated Areas(2) 73,127 2,586,803 Data Sources: (1)Demographic Research Unit, State of California Department of Finance (2)Center for Demographic Research, California State University, Fullerton. 77 ORANGE COUNTY SANITATION DISTRICT Principal Orange County Employers(1) For the Current Fiscal Year and Nine Years Ago Fiscal Year Ended 6130/17 Fiscal Year Ended 6130108 Percentage of Percentage of Number of Total County Number of Total County Employers Employees(2) Rank Employment(3) Employees(2) Rank Employment(4) Walt Disney Co. 29,000 1 1.91% 20,000 1 1.29% University of Califomia, Irvine 23,605 2 1.55% 17,579 3 1.13% County of Orange 18,264 3 1.20% 18,748 2 1.20% St.Joseph Health 11,925 4 0.78% 10,047 4 0.65% Allied Universal 8,229 5 0.54% Kaiser Peunanente 7,694 6 0.51% Boeing Co. 6,103 7 0.40% 9,961 5 0.64% Wal-Mart Stores Inc. 6,000 8 0.39% California State University, Fullerton 5,781 9 0.38% 5,634 8 0.36% Bank of America Corp. 5,500 10 0.36% 5,000 10 0.32% Yuml Brands Incorporated 7,200 6 0.46% AT&T Incorporated 6,000 7 0.39% Home Depot, Incorporated 5,450 9 0.35% Total 122,101 8.02% 105,619 6.79% Notes&Data Sources (1)-Data is for the entire County of Orange. (2)-Data Sources: Orange County Business Journal Book of Lists, County of Orange (3)-Data Source:State of California, Employment Development Department, -Percentage is calculated by dividing employees by total employment of 1,521,600 as of June 2017. (4)-Data Souroe:State of California, Employment Development Department. -Percentage is calculated by dividing employees by total employment of 1,555,900 as of June 2008. 78 ORANGE COUNTY SANITATION DISTRICT Operating Indicators June 30, 2017 District Organization: The Orange County Sanitation District is one consolidated district made up of two revenue areas which service unincorporated county areas and twenty-three cities and related special districts, as follows: Consolidated Revenue Area County of Orange(unincorporated areas) Cities: Anaheim Huntington Beach Santa Ana Brea Irvine Seal Beach Buena Park La Habra Stanton Costa Mesa La Palma Tustin Cypress Los Alamitos Villa Park Fountain Valley Newport Beach Westminster Fullerton Orange Yorba Linda Garden Grove Placentia Special Districts: Midway City Sanitary Districl Costa Mesa Sanitary District Yorba Linda Water District Revenue Area No. 14 County of Orange(unincorporated areas) Cities: Irvine Orange Tustin Special District: Irvine Ranch Water District Governing Body: 25-member Board of Directors Authorized Full-Time Equivalent Employees: 627 Operational Date: July 1, 1954 Authority: California Health & Safely Code Section 4700 at. seq. Services: Wastewater collection,treatment,and disposal Service Area: 479 square miles Population Served: 2.6 million Total Miles of Sewers (including force mains): 396 miles Number of Pumping Stations: 17 Wastewater System Treatment Capacities (Million Gallons per Day) Actual Flows Existing Primary Existing Secondary FY16-17 Treatment Capacity Treatment Capacity Plant 1 112 208 182 Plant 2 76 168 150 Total In 376 332 Source: Orange County Sanitation District's Financial Management Division. 79 (THIS PAGE INTENTIONALLY LEFT BLANK) 80 ORANGE COUNTY SANITATION DISTRICT OTHER DATA &TRENDS Information within this section consists of other data and trends including additional annual disclosures as required by the Sanitation Districts debt covenants beyond what is allowed to be reported in the Statistical Section. 81 ORANGE COUNTY SANITATION DISTRICT Cash and Investment Portfolio As of June 30,2017 Net Unrealized Cost Market Value GaIN(Loss) Shares Par Base Base %of Total Base INVESTMENT PORTFOLIO: CASH&CASH EQUIVALENTS(U.S.DOLLAR): CASH EQUIVALENTS $ 60,641 $ 93,295 $ 25,621 0.01% $ (67,674) COMMERCIAL PAPER-DISCOUNT 1,900,000 1,895,256 1,895,256 0.41% - FEDERAL HOME LOAN BANK-3 MONTHS OR LESS 9,800,000 9,783,493 9,783,493 2.14% - FNMA ISSUES-3 MONTHS OR LESS 19,000,000 18,962,050 18,962,050 4.14% - SHORTTERMINVESTMENTFUNDS(US REGULATED) 5,840,669 5,840,569 5,840,569 1.28% - U.S.TREASURY BILLS-3 MONTHS OR LESS 5,000,000 4,990,381 4,990,381 1.09% SUBTOTAL-CASH B CASH EQUIVALENTS 41,601,210 41,565,044 41,497,370 9.06% (67,674) FIXED INCOME SECURITIES(U.S.DOLLAR): ASS-CAR LOANS 8,916,211 8,915,740 8,907,788 1.94% (7,952) ASS-CREDIT CARDS 4,140,000 4,139,643 4,137,268 0.90% (2,375) ASS-EQUIPMENT 6,939,186 6,939,012 6,930,482 1.51% (8,530) ASS-HOME EQUITY 133,743 100,433 126,186 0.03% 25,753 ASS-SMALL BUSINESS ADMINISTRATION 62,182 62,182 65,359 0.01% 3,177 ASS-STUDENT LOANS 33,013 32,880 33,716 0.01% 836 BANKING&FINANCE 46,190,000 47,071,674 44,571,098 9.73% (2,500,576) CAPITAL GOODS 6,000,000 6,048,600 6,061,670 1.32% 13,070 CERTIFICATES OF DEPOSIT-U.S. 2,000,000 2,001 2,0001 01 - COMMERCIALPAPER-DISCOUNT 15,850,000 15,765,375 15,765,375 3.44% - FEDERAL HOME LOAN BANK 15,000,000 14,967,632 14,967,632 3.27% - FHLMCMULTICLASS 1,852,198 2,024,989 2,048,772 0.45% 23,783 FHLMC POOLS 2,307 2,227 2,371 0.00% 144 FNMA POOLS 1,435,848 1,491 1,549,461 0.34% 52,607 FNMA REMIC 295,836 295,743 299,679 0.07% 3,936 GNMA MULTI FAMILY POOLS 217,552 217,558 225,254 0.05% 7,696 GNMA REMIC 25,81 25,880 25,995 0.01% 115 HEALTH CARE 5,000,000 5,024,985 5,01 1.09% (2,445) INSURANCE 4,000,000 4,131,120 4,126,480 0.90% (4,640) OIL&GAS 13,850,000 13,831,757 13,874,841 3.03% 43,084 PENDING TRADES - 16 16 0.00% - SUPRANATIONALISSUES 28,197,000 28,260,449 28,109,552 6.13% (150,897) TAXABLE MUNICIPALS 4,240,000 4,307,634 4,569,166 1.00% 261,532 TECHNOLOGY 15,045,000 15,095,572 15,052,309 3.29% (43,263) TRANSPORTATION 1,000,000 999,580 999,390 0.22% (190) U.S.TIPS 10,708,964 10,591,700 10,519,114 2.29% (72,586) US AGENCIES 106,650,000 106,520,447 106,426,808 23.23% (93,639) US GOVERNMENTS 92,400,000 91,704,078 91,998,922 20.08% 291 U.S.TREASURY BILLS 28,000,000 27,927,979 27,927,979 6.10% - WHOLELOAN-CMO-COLLATERALIZED Ml OBLIG 329,925 329,900 330,083 0.07% 183 SUBTOTAL-FIXED INCOME SECURITIES 418,514,865 418,831,893 416,676,560 90.94% (2,156,333) TOTAL INVESTMENT PORTFOLIO $ 460,116,075 460,396,937 458,172,930 100,00% $ (2,224,007) DEMAND DEPOSITS AND CASH ON HAND 1,679,401 1,679,401 MONIES HELD WITH FISCAL AGENTS 4,992,427 4,992,427 MONIES WITH THE LOCAL AGENCY INVESTMENT FUND 46,247,195 46,198,204 TOTAL CASH AND INVESTMENTS $ 513,315,960 $ 511,042,962 Source: BNY Mallon Trust and Orange County Sanitation Districts Financial Management Division. 82 ORANGE COUNTY SANITATION DISTRICT Property Tax Rates-Direct and Overlapping Governments Last Ten Fiscal Years Tax Rate OCSD 1958 OCSD's General Average Fiscal Basic Obligation Total Share of Year Levy Bonds Tax Rate Basic Levy 2007-08 1.00% 0.00% 1.00% 1.63% 2008-09 1.00% 0.00% 1.00% 1.64% 2009-10 1.00% 0.00% 1.00% 1.63% 2010-11 1.00% 0.00% 1.00% 1.64% 2011-12 1.00% 0.00% 1.00% 1.64% 2012-13 1.00% 0.00% 1.00% 1.64% 2013-14 1.00% 0.00% 1.00% 1.65% 2014-15 1.00% 0.00% 1.00% 1.63% 2015-16 1.00% 0.00% 1.00% 1.62% 2016-17 1.00% 0.00% 1.00% 1.61 Notes In 1978, California voters passed Proposition 13 which set the property tax rate at a 1.00% fixed amount of assessed value. This 1.00% is shared by all taxing agencies within which the subject property resides. In addition to the 1.00% fixed amount, property owners were charged taxes as a percentage of assessed property values for the payment of OCSD general obligation bonds (which were paid in full in fiscal year 1998-99). Source: County of Orange Auditor-Controller's Office. 83 ORANGE COUNTY SANITATION DISTRICT Assessed and Estimated Actual Value of Taxable Property (Dollars In Thousands) Last Ten Fiscal Years 1111110,111 aso,0oo 000 moo0oo0 az5o00o 000 EIOO,000000 a15o u000 a100000000 M 2007-0e 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 201546 2016 P Percent Changein Fiscal Assessed Year Secured Unsecured Total Value 2007-08 $ 288,051,467 $ 4,681,838 $ 292,733,305 8.14% 2008-09 301,717,479 5,894,003 307,611,482 5.08% 2009-10 299,038,654 6,116,530 305,155,184 -0.80% 2010-11 298,099,034 6,238,834 304,337,868 -0.27% 2011-12 302,526,970 6,163,979 308,690,949 1.43% 2012-13 310,451,986 5,901,040 316,353,026 2.48% 2013-14 323,064,994 6,220,505 329,285,499 4.09% 2014-15 343,102,030 7,378,643 350,480,673 6.44% 2015-16 365,267,850 6,936,768 372,204,618 6.20% 2016-17 385,137,024 6,642,312 391,779,336 5.26% In 1978,the voters of the Stale of California passed Proposition 13 which limited property taxes to a total maximum rate of 1% based upon the assessed value of the property being taxed. Each year,the assessed value of property may be increased by an inflation factor which is limited to a maximum increase of 2%. With a few exceptions, property, is only reassessed at the time that it is sold to a new owner. At that point, the new assessed value is reassessed at the purchase price of the property sold. The assessed valuation data shown above represents the only data currently available with respect to the actual market value of taxable property and is subject to the limitations described above. Consequently,the assessed and estimated values are the same. Source: Orange County Auditor-Controllers Office. 84 ORANGE COUNTY SANITATION DISTRICT Property Tax and User Fee Levies and Collections (Dollars in Thousands) Last Ten Fiscal Years $400,000 $350,000 $300,000 $250,000 $200,000 $150,000 $100,000 $50,000 $- 200A08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 201415 2015-16 2018-17 omi.ir...m uu.F.emy rtmara.era-Fw G.11 1 (1) Total Tax Current Tax Percent Total Tax %of Total %of Pass. Fiscal and User and User Fee of Levy Delinquent and User Fee Collection O/5 Delinquencies Through Year Fee Levy Collection Collected Collection Collection to Lavy Delinquencies to Levy Payments 2007-08 $228,622 $ 228,635 100.01 $ 329 $ 228,964 100.15 $ (13) (0.01) $ - 2008A9 254,092 254,106 10.01 395 254,5D1 100.16 (14) (0.01) - 2009-10 272,050 272,110 100.02 226 272,336 100.11 (60) (0.02) - 2010-11 292,646 292,689 100.01 120 292,809 100.06 (43) (0.01) - 2011-12 314,077 314,133 100.02 121 314,254 100.06 (56) (0.02) 3,116 2012-13 340,298 340,156 99.96 64 340,220 99.98 142 0.04 14,687 2013-14 356,607 356,108 99.86 76 356,184 99.88 499 0.14 7,274 2014-15 362,978 362,927 99.99 108 363.035 100.02 51 0.01 8,447 (2) 2015-16 371,502 370,170 99.64 637 370,807 99.81 1,332 0.36 9,199 (2) 2016-17 381,226 380,078 99.70 608 380,686 99.86 1,148 0.30 9,751 Notes (1)Upon dissolution of California redevelopment agencies during fiscal year 2011-12,property tax increment formerly remitted to OCSD by its member city redevelopment agencies was instead deposited into the newly formed Redevelopment Property Tax Trust Fund(RPTTF)from which the Auditor/Controller makes disbursements on behalf of the successor agencies. There is no tax levy associated with these collections; thus, they have been excluded from the "% of Total Collection to Levy' calculation. (2) In fiscal year 2014-15 and 2015-16, the County did not bill user fees for wholly exempt agencies not subject to property taxes. In fiscal year 2014-15 and 2015-16, OCSD internally billed user fees of$5 million and 54.5 million, respectively, to wholly exempt agencies. These amounts have been excluded from the levy and collection amounts above, as only tax and user fees included on County property tax billings are shown in this schedule. Source:Orange County Auditor-Controller's Office. 85 ORANGE COUNTY SANITATION DISTRICT Property Value and Construction Covering The Entire County of Orange(1) (Dollars In Thousands) Last Ten Fiscal Years Non- Assessed Residential Residential Property Value(2) Construction (3) Construction(3) Total Fiscal Calendar No.of Construction Year Value Year Value Units Value Value(3) 2007-08 $ 412,669,779 2008 $ 1,439,120 3,159 $ 1,037,713 $ 2,476,833 2008-09 428,809,224 2009 952,480 2,200 855,193 1,807,673 2009-10 422,965,596 2010 1,151,929 3,091 1,029,407 2,181,336 2010-11 420,751,575 2011 1,300,019 4,807 1,236,973 2,536,992 2011-12 424,769,642 2012 1,265,430 6,163 1,560,509 2,825,939 2012-13 432,902,274 2013 1,521,280 10,453 2,653,728 4,175,008 2013-14 447,749,156 2014 1,993,154 10,636 2,640,484 4,633,638 2014-15 476,303,290 2015 2,196,000 10,897 2,834,000 5,030,000 2015-16 504,650,360 2016 2,442,000 12,083 3,094,000 5,536,000 2016-17 531,052,158 2017 2,396,000 12,556 3,388,000 5,784,000 (4) Notes and Data Sources (1) - The Orange County Sanitation District services 479 square miles or 60% of the total 799 square miles that make up the boundaries of the County of Orange. (2)- Data Source: Orange County Auditor-Controller's Office. (3)- Data Source: A. Gary Anderson Center for Economic Research, Chapman University. (4)- Forecasted numbers. 86 ORANGE COUNTY SANITATION DISTRICT Insurance in Force As of June 30, 2017 Type Insurer Deductible Limit All-Risk Property Fire and Other Perils Public Entity Property $250,000 per $1 billion/occurrence Insurance Program occurrence (Lexington and others) Flood Public Entity Property $100,000 per $300 million/occurrence Insurance Program occurrence Earthquake Everest and others 5% per structure, $25 million (certain structures only) min. $5,000,000 Boiler&Machinery Public Entity Property $25,000 to $100 million/occurrence Insurance Program $350,000 (Lexington and others) Crime Insurance National Union Fire $25,000 $5 million Excess Security National Insurance $500,000 $40 million/occurrence General Liability (first$10 million layer); and annual aggregate Berkley National ($20 million layer excess$10 million) Great American ($10 million layer excess$30 million) Travel&Accident Chubb Group of Insurance None Accidental Death & Dismemberment: Companies Class 1: Elected Officials, $500,000 per occurrence Class 2: Employees, 10X annual salary, up to$500,000 per occur. Excess Workers' CSAC Excess Insurance $1,000,000 Unlimited statutory coverage Compensation Authority Program Each Accident each accident,each employee $4 million employers liability Pollution Liability CSAC Excess Insurance $75,000 $10,000,000 per loss Authority Program Watercraft Liability Atlantic Specialty $15,000 $10 million Hull&Machinery Atlantic Specialty $15,000 $1.3 million Pollution Liability Great American Ins. Co, None $5 million OCIP Main Basket("OCIP"=Owner Controlled Ins. Program for Construction) Workers Comp. Liberty Mutual $250,000/occur. Unlimited statutory coverage General Liability Liberty Mutual $250,000/occur. $2 million/occurrence;$4 million agg. OCIP Excess Liability AIG $10,000 $100 million OCIP Pollution Liability Liberty Surplus $250,000 $10 million Source: Orange County Sanitation District's Risk Management Office. 87 (THIS PAGE INTENTIONALLY LEFT BLANK) 88 O iXE V ORANGE COUNTY SANITATION DISTRICT FINANCIAL MANAGEMENT DIVISION 10844 Ellis Avenue Fountain Valley, California 92708-7018 714.962.2411 www.ocsd.com 06/30/17 ORANGE COUNTY SANITATION DISTRICT Agenda Terminology Glossary Glossary of Terms and Abbreviations AQMD Air Quality Management District ASCE American Society of Civil Engineers BOD Biochemical Oxygen Demand CARS California Air Resources Board CASA California Association of Sanitation Agencies CCTV Closed Circuit Television CEQA California Environmental Quality Act CIP Capital Improvement Program CRWQCB California Regional Water Quality Control Board CWA Clean Water Act CWEA California Water Environment Association EIR Environmental Impact Report EMT Executive Management Team EPA US Environmental Protection Agency FOG Fats, Oils, and Grease gpd gallons per day GWRS Groundwater Replenishment System ICS Incident Command System IERP Integrated Emergency Response Plan LOS Level Of Service MGD Million Gallons Per Day NACWA National Association of Clean Water Agencies NPDES National Pollutant Discharge Elimination System NWRI National Water Research Institute O & M Operations & Maintenance OCCOG Orange County Council of Governments OCHCA Orange County Health Care Agency OCSD Orange County Sanitation District OCWD Orange County Water District OOBS Ocean Outfall Booster Station OSHA Occupational Safety and Health Administration PCSA Professional Consultant/Construction Services Agreement PDSA Professional Design Services Agreement POTW Publicly Owned Treatment Works ppm parts per million PSA Professional Services Agreement RFP Request For Proposal RWQCB Regional Water Quality Control Board Glossary of Terms and Abbreviations SARFPA Santa Ana River Flood Protection Agency SARI Santa Ana River Interceptor SARWQCB Santa Ana Regional Water Quality Control Board SAW PA Santa Ana Watershed Project Authority SCADA Supervisory Control And Data Acquisition SCAP Southern California Alliance of Publicly Owned Treatment Works SCAQMD South Coast Air Quality Management District SOCWA South Orange County Wastewater Authority SRF Clean Water State Revolving Fund SSMP Sewer System Management Plan SSO Sanitary Sewer Overflow SWRCB State Water Resources Control Board TDS Total Dissolved Solids TMDL Total Maximum Daily Load TSS Total Suspended Solids WDR Waste Discharge Requirements WEF Water Environment Federation W ERF Water Environment & Reuse Foundation WIFIA Water Infrastructure Finance and Innovation Act WIIN Water Infrastructure Improvements for the Nation Act W RDA Water Resources Development Act Activated sludge process — A secondary biological wastewater treatment process where bacteria reproduce at a high rate with the introduction of excess air or oxygen and consume dissolved nutrients in the wastewater. Benthos —The community of organisms, such as sea stars, worms, and shrimp, which live on, in, or near the seabed, also known as the benthic zone. Biochemical Oxygen Demand (BOD) — The amount of oxygen used when organic matter undergoes decomposition by microorganisms. Testing for BOD is done to assess the amount of organic matter in water. Biogas—A gas that is produced by the action of anaerobic bacteria on organic waste matter in a digester tank that can be used as a fuel. Biosolids—Biosolids are nutrient rich organic and highly treated solid materials produced by the wastewater treatment process. This high-quality product can be recycled as a soil amendment on farmland or further processed as an earth-like product for commercial and home gardens to improve and maintain fertile soil and stimulate plant growth. Glossary of Terms and Abbreviations Capital Improvement Program (CIP) — Projects for repair, rehabilitation, and replacement of assets. Also includes treatment improvements, additional capacity, and projects for the support facilities. Coliform bacteria—A group of bacteria found in the intestines of humans and other animals, but also occasionally found elsewhere, used as indicators of sewage pollution. E. coli are the most common bacteria in wastewater. Collections system— In wastewater, it is the system of typically underground pipes that receive and convey sanitary wastewater or storm water. Certificate of Participation (COP)—A type of financing where an investor purchases a share of the lease revenues of a program rather than the bond being secured by those revenues. Contaminants of Potential Concern (CPC) — Pharmaceuticals, hormones, and other organic wastewater contaminants. Dilution to Threshold (DIT) — The dilution at which the majority of people detect the odor becomes the D/T for that air sample. Greenhouse Gases (GHG) — In the order of relative abundance water vapor, carbon dioxide, methane, nitrous oxide, and ozone gases that are considered the cause of global warming ("greenhouse effect'). Groundwater Replenishment System (GWRS) — A joint water reclamation project that proactively responds to Southern California's current and future water needs. This joint project between the Orange County Water District and the Orange County Sanitation District provides 70 million gallons per day of drinking quality water to replenish the local groundwater supply. Levels Of Service (LOS) — Goals to support environmental and public expectations for performance. N-Nitrosodimethylamine (NDMA) — A N-nitrosamine suspected cancer-causing agent. It has been found in the Groundwater Replenishment System process and is eliminated using hydrogen peroxide with extra ultra-violet treatment. National Biosolids Partnership (NBP)—An alliance of the National Association of Clean Water Agencies and Water Environment Federation, with advisory support from the US Environmental Protection Agency. NBP is committed to developing and advancing environmentally sound and sustainable biosolids management practices that go beyond regulatory compliance and promote public participation to enhance the credibility of local agency biosolids programs and improved communications that lead to public acceptance. Plume — A visible or measurable concentration of discharge from a stationary source or fixed facility. Glossary of Terms and Abbreviations Publicly Owned Treatment Works (POTW) —A municipal wastewater treatment plant. Santa Ana River Interceptor(SARI) Line —A regional brine line designed to convey 30 million gallons per day of non-reclaimable wastewater from the upper Santa Ana River basin to the ocean for disposal, after treatment. Sanitary sewer—Separate sewer systems specifically for the carrying of domestic and industrial wastewater. Combined sewers carry both wastewater and urban runoff. South Coast Air Quality Management District (SCAQMD) — Regional regulatory agency that develops plans and regulations designed to achieve public health standards by reducing emissions from business and industry. Secondary treatment — Biological wastewater treatment, particularly the activated sludge process, where bacteria and other microorganisms consume dissolved nutrients in wastewater. Sludge—Untreated solid material created by the treatment of wastewater. Total Suspended Solids (TSS)—The amount of solids floating and in suspension in wastewater. Trickling filter — A biological secondary treatment process in which bacteria and other microorganisms, growing as slime on the surface of rocks or plastic media, consume nutrients in wastewater as it trickles over them. Urban runoff—Water from city streets and domestic properties that carry pollutants into the storm drains, rivers, lakes, and oceans. Wastewater—Any water that enters the sanitary sewer. Watershed—A land area from which water drains to a particular water body. The Orange County Sanitation District's service area is in the Santa Ana River Watershed.