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11-09-2016 Administration Committee Agenda
Orange County Sanitation District Wednesday, November 9, 2016 Regular Meeting of the 5:00 P.M. ADMINISTRATION - Administration Building COMMITTEE Board Room 10844 Ellis Avenue w` Fountain Valley, CA 714 693-7433 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. REPORT OF DIRECTOR OF FINANCE AND ADMINISTRATIVE SERVICES: 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 Any items withdrawn from the Consent Calendar for separate discussion will be considered in the regular order of business. 1.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 12, 2016 Administration Committee Meeting. 2. GENERAL MANAGER APPROVED PURCHASES (Lorenzo Tyner) RECOMMENDATION: Recommend to the Board of Directors to: Receive and file District purchases made under the General Manager's authority for the period of July 1, 2016—September 30, 2016. 11/09/16 Administration Committee Agenda Page 1 of 3 3. IBM MAXIMO EMERGENCY AND LEVEL 3 SUPPORT (Lorenzo Tyner) RECOMMENDATION: Recommend to the Board of Directors to: A. Authorize a sole source purchase order agreement with Total Resource Management (TRM) for Maximo Emergency and Level 3 Support for one year commencing January 1, 2017 through December 31, 2017 for a total amount not to exceed $160,000. B. Authorize an option for three annual renewals at $160,000 per year for a total amount of$480,000. 4. CONSOLIDATED FINANCIAL REPORT FOR FIRST QUARTER ENDED SEPTEMBER 30, 2016 (Lorenzo Tyner) RECOMMENDATION: Recommend to the Board of Directors to: Receive and file Orange County Sanitation District First Quarter Financial Report for the period ended September 30, 2016. NON-CONSENT: 5. WASTEWATER REFUNDING REVENUE OBLIGATIONS, SERIES 2017A (Lorenzo Tyner) RECOMMENDATION: Recommend to the Board of Directors to: Authorize the General Manager to issue new fixed rate Certificates of Participation (COP), to be referred to as Wastewater Refunding Revenue Obligations, Series 2017A, in an amount sufficient to refund up to $91,620,000 of COP Series 2007A. 6. ORANGE COUNTY SANITATION DISTRICT COMPREHENSIVE ANNUAL FINANCIAL REPORT (CAFR) FOR THE YEAR END JUNE 30, 2016 (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, 2016, 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. 11/09/16 Administration Committee Agenda Page 2 of 3 INFORMATION ITEMS: 7. ORANGE COUNTY SANITATION DISTRICT TREATMENT PLANT OVERVIEW (Ed Torres) 8. ORANGE COUNTY SANITATION DISTRICT SEWER SERVICE CHARGES — REBATES (Lorenzo Tyner) CLOSED SESSION: None. OTHER BUSINESS AND COMMUNICATIONS OR SUPPLEMENTAL AGENDA ITEMS, IF ANY: ADJOURNMENT: The next Administration Committee meeting is scheduled for Wednesday, January 11, 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. Agenda 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 10844 Ellis Avenue, Fountain Valley, California, 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 prior to the meeting to all,or a 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 kloreralocsd.com For any questions on the agenda, Committee members may contact staff at: General Manager James Herberg (714)593-7300 iherbergiiDocsd.com Assistant General Manager Bob Ghirelli (714)593-7400 rohirelliCdocsd.00m Director of Finance and Lorenzo Tyner (714)593-7550 Itvner(cDomd.com Administrative Services Director of Human Resources Celia Chandler 714 593-7202 cchandler ocsd.com 11/09/16 Administration Committee Agenda Page 3 of 3 ITEM NO. 1 MINUTES OF THE ADMINISTRATION COMMITTEE Orange County Sanitation District Wednesday, October 12, 2016 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 Curry on October 12, 2016 at 5:01 p.m. in the Administration Building of the Orange County Sanitation District. Chair Curry led the Flag Salute. A quorum was declared present, as follows: COMMITTEE MEMBERS PRESENT: STAFF PRESENT: Keith Curry, Chair Jim Herberg, General Manager Lucille Kring, Vice-Chair Bob Ghirelli, Assistant General Manager Steven Choi Celia Chandler, Director of Human Resources Jim Ferryman Jim Colston, Director of Environmental Services Erik Peterson (Alternate) Rob Thompson, Director of Engineering Peter Kim Lorenzo Tyner, Director of Finance & Diana Fascenelli (Alternate) Administrative Services John Nielsen, Board Chair Tina Knapp, Deputy Clerk of the Board Greg Seboum, Board Vice-Chair Jennifer Cabral Al Garcia COMMITTEE MEMBERS ABSENT: Kathy Millea Joy Neugebauer Man Nguyen Glenn Parker Steve Speakman Teresa Smith Mike White Sal Tinajero OTHERS PRESENT: Brad Hogin, General Counsel Bill Morgan, White Nelson Diehl Evans (Winds) PUBLIC COMMENTS: None. REPORT OF COMMITTEE CHAIR: Committee Chair Curry did not provide a report. REPORT OF GENERAL MANAGER: General Manager Jim Herberg did not provide a report. 10/12/2016 Administration Committee Minutes Page 1 of 5 REPORT OF DIRECTOR OF FINANCE AND ADMINISTRATIVE SERVICES: Director of Finance and Administrative Services Lorenzo Tyner did not provide a report. CONSENT CALENDAR: 1. APPROVAL OF MINUTES (Clerk of the Board) MOVED, SECONDED AND DULY CARRIED TO: Approve Minutes of the September 14, 2016 Administration Committee Meeting. AYES: Choi, Curry, Fascenelli (Alternate), Ferryman, Kim, Kring, Nielsen, and Peterson (Alternate) NOES: None ABSTENTIONS: None ABSENT: Neugebauer, Parker, Sebourn, T. Smith, and Tinajero 2. TEMPORARY EMPLOYMENT SERVICES (Celia Chandler) MOVED, SECONDED AND DULY CARRIED TO: Recommend to the Board of Directors to: A. Authorize the General Manager to enter into contracts with various staffing firms for Temporary Employment Services (Specification No.CS-2009- 421BD); and B. Authorize the General Manager to add or remove staffing firms from the available pool as needed, to meet work requirements identified by the Human Resources Department, with no change to the approved total budget, at a cost not to exceed $814,400. AYES: Choi, Curry, Fascenelli (Alternate), Ferryman, Kim, Kring, Nielsen, and Peterson (Alternate) NOES: None ABSTENTIONS: None ABSENT: Neugebauer, Parker, Sebourn, T. Smith, and Tinajero 3. DEFERRED COMPENSATION PROGRAM UPDATE (Celia Chandler) MOVED, SECONDED AND DULY CARRIED TO: Recommend to the Board of Directors to: A. Adopt Resolution No. OCSD 16-XX, entitled: "A Resolution of the Board of Directors of the Orange County Sanitation District Acknowledging the Change in Title of the Current Deferred Compensation Plan Administrator to Voya Financial Services and Authorizing Voya Financial Services to 10/12/2016 Administration Committee Minutes Page 2 of 5 Continue Serving as Plan Administrator of the Deferred Compensation Plan for Officers and Employees of the Orange County Sanitation District; and, Repealing Resolution No. OCSD 09-02", and B. Authorize the General Manager, or his designee, to execute all documents necessary to effect said Deferred Compensation Plan, in a form approved by General Counsel. AYES: Choi, Curry, Fascenelli (Alternate), Ferryman, Kim, Kring, Nielsen, and Peterson (Alternate) NOES: None ABSTENTIONS: None ABSENT: Neugebauer, Parker, Sebourn, T. Smith, and Tinajero 4. RENEWAL OF ESRI GIS ENTERPRISE LICENSE AGREEMENT (Lorenzo Tyner) MOVED, SECONDED AND DULY CARRIED TO: Authorize the renewal of the Sole Source ESRI GIS Enterprise License Agreement for a two-year period commencing December 31, 2016 through December 30, 2018 for a total amount not to exceed $191,000. AYES: Choi, Curry, Fascenelli (Alternate), Ferryman, Kim, Kring, Nielsen, and Peterson (Alternate) NOES: None ABSTENTIONS: None ABSENT: Neugebauer, Parker, Sebourn, T. Smith, and Tinajero NON-CONSENT: 5. CONTRACTED INTERNAL AUDIT OF CAPITAL IMPROVEMENT PROJECT CONTRACTS (Lorenzo Tyner) Mr. Tyner introduced Controller Mike White who provided an overview of this item. Mr.White introduced Bill Morgan of White Nelson Diehl Evans who is in attendance tonight and available to answer questions. Mr.White indicated that the Board Audit Ad Hoc Committee reviewed this item and concluded that the Sanitation District is appropriately following the California Public Contract Code and Sanitation District Purchasing Policies and Procedures in administering its capital improvement project contracts. MOVED. SECONDED AND DULY CARRIED TO: Recommend to the Board of Directors to: Receive and file the Accountants' Report on Agreed-Upon Procedures Review on Capital Improvement Project Contracts. AYES: Choi, Curry, Fascenelli (Alternate), Ferryman, Kim, Kring, Nielsen, and Peterson (Alternate) NOES: None 10/1D2015 Administration Committee Minutes Page 3 of 5 ABSTENTIONS: None ABSENT: Neugebauer, Parker, Sebourn, T. Smith, and Tinajero 6. INVEST AND/OR REINVEST DISTRICT'S FUNDS (Lorenzo Tyner) Mr. Tyner provided a brief introduction of this item and Mr. White provided a recap of this item. Board Vice-Chair Seboum arrived at 5:06 p.m. Mr. White and Mr. Tyner responded to questions from the Committee regarding our consulting firm, return rates on the Sanitation District's investments, and the security of the Sanitation District's investments. Committee Chair Keith Curry and Board Chair John Nielsen also addressed questions regarding the security of investments. MOVED. SECONDED AND DULY CARRIED TO: Recommend to the Board of Directors to: Adopt Resolution No. OCSD 16-XX, entitled: "A Resolution of the Board of Directors of the Orange County Sanitation District, Authorizing the District's Treasurer to Invest and/or Reinvest District's Funds; Adopting District's Investment Policy Statement and Performance Benchmarks; and Repealing Resolution No. OCSD 15-25." AYES: Choi, Curry, Fascenelli (Alternate), Ferryman, Kim, Kring, Nielsen, Sebourn, and Peterson (Alternate) NOES: None ABSTENTIONS: None ABSENT: Neugebauer, Parker, T. Smith, and Tinajero 7. ELIMINATION OF UNFUNDED ACTUARIAL ACCRUED LIABILITY WITHIN THE ORANGE COUNTY EMPLOYEES' RETIREMENT SYSTEM (Lorenzo Tyner) Mr. Tyner provided an overview of this item and responded to a question from the Committee indicating that payment would be made from reserves. Mr. Tyner also addressed the possibility of creating a stabilization fund. MOVED. SECONDED AND DULY CARRIED TO: Recommend to the Board of Directors to: Direct staff to pay off the Orange County Sanitation District's unfunded actuarial accrued pension liability (UAAL) in its defined pension plan administered by the Orange County Employees Retirement System (OCERS) in an amount not to exceed $40 million. AYES: Choi, Curry, Fascenelli (Alternate), Ferryman, Kim, Kring, Nielsen, Sebourn, and Peterson (Alternate) NOES: None ABSTENTIONS: None ABSENT: Neugebauer, Parker, T. Smith, and Tinajero 10/1D2015 Administration Committee Minutes Page 4 of 5 INFORMATION ITEMS: 8. ORANGE COUNTY SANITATION DISTRICT BIOSOLIDS PROGRAM (James Colston) Director of Environmental Services Jim Colston provided a PowerPoint presentation on the Sanitation District's Biosolids Program, which included the history of the program, the production trends, and Master Plan overview. Mr. Colston responded to questions from the Committee regarding how Irvine Ranch Water District will be processing biosolids, payment from haulers for incoming waste, and where the outgoing biosolids are delivered. The future of the biosolids program was briefly discussed in relation to co-composting with Orange County Waste & Recycling and the future of the biosolids program as it relates to possible new technologies such as AquaCritox. CLOSED SESSION: None. OTHER BUSINESS AND COMMUNICATIONS OR SUPPLEMENTAL AGENDA ITEMS, IF ANY: Chair Curry reminded the Committee about the State of the District event being held on Friday, October 141h at 8:00 a.m. ADJOURNMENT: Committee Chair Curry declared the meeting adjourned at 5:49 p.m. to the next regularly scheduled meeting of Wednesday, November 9, 2016 at 5:00 p.m. Submitted by: Tina Knapp Deputy Clerk of the Board 10/12/2016 Administration Committee Minutes Page 5 of 5 ADMINISTRATION COMMITTEE Meeting Dare TOBd.OfDir. 11/09/16 11/16/16 AGENDA REPORT IternNumber IemNumber 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 GENERAL MANAGER'S RECOMMENDATION Receive and file District purchases made under the General Manager's authority for the period of July 1, 2016— September 30, 2016. BACKGROUND Staff provides the Administration Committee and the Board of Directors quarterly reports of General Manager approved purchases between $50,000 and $100,000. RELEVANT STANDARDS • Quarterly Financial Reporting • Ensure the public's money is wisely spent 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 2016-17: Vendor Name Amount Department Description/Discussion Fire Suppression System 7/1/16 to 3/31117 with Optional Two (2) 1-year Renewal Periods U.S. Communities Contract# 12-JLH-011 C, CINTAS FIRE Operations& in accordance with Ordinance OCSD-47, PROTECTION $90,000.00 Maintenance Section 2.03 B Cooperative Purchases District Wide Fire Protection Safety Training 10/1/16 to 6/30/17 U.S. Communities Contract# 12-JLH-011 C, CINTAS FIRE Human in accordance with Ordinance OCSD-47, PROTECTION $99,000.00 Resources Section 2.03 B Cooperative Purchases Page 1 of 2 Vendor Name Amount Department Description/Discussion PO for the Citibank Travel Account for travel arrangements made through California's State Travel Program, General Agreement#5159906 Manager's 11/1/16 to 10/31/17 CITIBANK, N.A. $60,000.00 Office GM Article 2, Section 2.2 b 1 Microsoft Premier Support for Software, Maintenance and Technical Support EN POINTE Administrative 9117/16 to 9/16/17 TECHNOLOGIES $72,890.00 Services Specification No. CS-2016-792 Occupational Health Suite Software GSA Contract# GS-35F-0032U, in Human accordance with Ordinance OCSD-47, MEDGATE INC. $57,691.30 Resources Section 2.03 B Cooperative Purchases Motorola Services and Products 9/8/16 to 5/20/20 County of Orange Agreement#MA-060- 15011560, in accordance with Ordinance MOTOROLA Administrative OCSD-47, Section 2.03 (B) Cooperative SOLUTIONS $80,000.00 Services Purchases CCTV Inspection of Manholes PROPIPE 9/21/16 to 9/20/17 PROFESSIONAL Operations & Sole Source Justification # 1610 PIPE SERVICES $65,000.00 Maintenance Reason: Unique Product/Service Windrock Engine Analyzer Approved CORF Budget Sole Source Justification # 1611 WINDROCK, Operations& Reason: OEM Parts/Materials Available INC. $53,125.00 Maintenance from Only One Source W INDSONG General Video Production Services for OCSD's PRODUCTIONS, Manager's Public Outreach and Education LLC $85,000.00 Office Specification No. 5-2016-771 ATTACHMENT The following attachment(s) may be viewed on-line at the OCSD website (wwwocsd.corn with the complete agenda package: N/A Page 2 of 2 ADMINISTRATION COMMITTEE Meeting Date TOBE.Of Dir. 11/09/16 11/16/16 AGENDA REPORT Item Item Number 3 Orange County Sanitation District FROM: James D. Herberg, General Manager Originator: Lorenzo Tyner, Director of Finance and Administrative Services SUBJECT: IBM MAXIMO EMERGENCY AND LEVEL 3 SUPPORT GENERAL MANAGER'S RECOMMENDATION A. Authorize a sole source purchase order agreement with Total Resource Management (TRM) for Maximo Emergency and Level 3 Support for one year commencing January 1, 2017 through December 31, 2017 for a total amount not to exceed $160,000. B. Authorize an option for three annual renewals at $160,000 per year for a total amount of$480,000. BACKGROUND IBM Maximo was implemented in January 2015 and is used by the Operations and Maintenance Department (O&M) in the lifecycle management of the Orange County Sanitation District (Sanitation District) treatment plants' physical assets. The product provides real-time visibility into asset performance and enables staff to proactively control and optimize asset performance. This includes improved asset and labor productivity, better optimization of maintenance resources, improved efficiency in inventory management, and prevention of asset failure. To properly maintain and repair the Sanitation District's facilities, the Information Technology (IT) division requires additional IBM Maximo software support from a third party vendor. RELEVANT STANDARDS • Maintain and Support Enterprise Asset and Financial Management Systems • Maintain a proactive asset management program • Protection of Orange County Sanitation District assets • Efficiency efforts reduce the cost to provide the current service level or standard PROBLEM O&M has requested additional functionality and IT support for the IBM Maximo software. The support originates from re-evaluating the business process and interest in additional Page 1 of 3 software modules such as Lock Out Tag Out(LOTO), Calibration, Max Assist, and Safety module. IT requires additional resources to support these O&M initiatives. PROPOSED SOLUTION An agreement with TRM will provide the additional support required. Over the past four years, TRM has provided best practices and Maximo expertise in assisting the Sanitation District in succeeding with the Maximo implementation. TRM has assisted the Sanitation District with the Maximo system architecture, configuration, and implementation, giving them unique knowledge because of their familiarity with the Sanitation District's business processes, personnel, and Maximo infrastructure. TRM is also the developer of Rules Manager, a proprietary software that is used by the Sanitation District to enforce all the business rules within IBM Maximo. Utilizing another vendor would not be a practical solution due to the experience and expertise TRM has gained working with the Sanitation District. TIMING CONCERNS The Maximo 7.6 upgrade will be going live in December 2016. IBM Maximo Emergency and Level 3 Support will be needed to support the post upgrade process and implement additional Maximo functionality as requested by O&M. RAMIFICATIONS OF NOT TAKING ACTION Not contracting with TRM will significantly impact the Maximo service level for O&M and the timeline for implementation of additional functionality. PRIOR COMMITTEE/BOARD ACTIONS July 2013-Approved a Professional Services Agreement(PSA)for CS-2011-499BD with Total Resources Management, Inc. May 2012 - Approved Amendment No. 2 to PSA for Specification No. CS-2011-499BD with Total Resources Management, Inc. October 2011 -Approved a Purchase Contract with Total Resource Management, Inc.for Phase 1 of Implementation of IBM Maximo Enterprise Asset Management System, Specification No. CS-2011-49913D. ADDITIONAL INFORMATION N/A Page 2 of 3 FINANCIAL CONSIDERATIONS This request complies with authority levels of the Sanitation District's Purchasing Ordinance. This item has been budgeted. 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 3 of 3 ADMINISTRATION COMMITTEE Meeting Date TOBE.Or .Dir. 11/09/16 11/16/16 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: CONSOLIDATED FINANCIAL REPORT FOR FIRST QUARTER ENDED SEPTEMBER 30, 2016 GENERAL MANAGER'S RECOMMENDATION Receive and file Orange County Sanitation District First Quarter Financial Report for the period ended September 30, 2016. BACKGROUND Included in this consolidated report are the following quarterly financial reports for the period ended September 30, 2016: First Quarter Budget Review The Budget Review Summary provides the Directors, staff, and the general public with a comprehensive overview of the financial results of the Orange County Sanitation District (Sanitation District)through the third quarter ended September 30, 2016. • 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, 2016 is being submitted in accordance with the Page 1 of 3 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: • 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, twelve months, year to date, and since inception compared to the Benchmark returns for the same periods: Portfolio Performance Summary Quarter Ended September 30,2016 Liquid Operating Monies(%) Long-Term Operating Monies N Total Rate Total Rate of of Return BenchirmlM Return Benchmark') 3 Months 0.10 0.10 0.06 -0.07 6 Months 0.19 0.17 0.78 0.80 9 Months 0.36 0.24 2.33 2.38 12 Months 0.41 0.27 2.00 1.81 Annualized Since inception 30 Nov 2014 0.32 0.16 1.61 1.70 • 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 $57.9 M $322.2 M MV $58.0 M $325.9 M • Modified duration of the portfolio compared to Benchmark: Liquid Oper. Long-Term B.M. 0.15 2.62 Port. 0.10 2.38 • Dollar change in value of the portfolio for a one-percent (1%) change in interest rates: Liquid Oper.- $60,406 Long-Term- $7,758,223 • None of the portfolios are currently invested in reverse repurchase agreements. • The percent of the Liquid Operating Monies portfolio maturing within 90 days: 87.0% Page 2 of 3 • Average portfolio credit quality: Liquid Oper. —AA+/Aa1 Long-Term —AA+/Aa1 • 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— 3.4% 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 9/18/2008 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 (wwwocsd.corn with the complete agenda package: • Consolidated Financial Reports for the First Quarter Ended September 30, 2016 Page 3 of 3 h,r ! • • ! ii -i- iwm �-+� 1 a 4�JN`I SANITAT�oN 2 p 9oJ sW2 fCj'Ne THE ENV,P�P . ounty, Califo�yj�.� 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 Repo rt.................................................................................................1 FY 2016-17 First Quarter Financial Report This Page Intentionally Left Blank Executive Summary Consolidated Financial Reports For the First Quarter Ended September 30, 2016 Included in this consolidated report are the following quarterly financial reports for the period ended September 30, 2016: • 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, 2016. 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, 2016. 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 2.9 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 86.9 percent of the District's total budgeted revenue. Except for Service Fees, Permit Fees, Property Taxes, IRWD Capital Assessments, and Interest Earnings, all other major revenue sources are currently tracking close to or exceeding revenue estimates. Overall, total revenues are projected to approximate 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 $32.7 million is currently tracking at 22.3 percent of the $146.4 million budget. In addition, net operating expenses have decreased $1.3 million or 3.8 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 $1,923.4 based on flows of 184.7 million gallons per day. This is $243.6 per million gallons, or 11.2 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 2016-17 First Quarter Review d) The total projected capital outlay cash flow of the Capital Improvement Program (CIP) for FY 2016-17 has been revised to $135.9 million, or 71.4 percent of the board approved cash outlay of$190.3 million. The actual cash outlay spending through the first quarter is $23.4 million, or 12.3 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 returned 6 basis points over the quarter, outperforming the Bank of America Merrill Lynch 1-5 year AAA U.S. Corporate and Government Index return of a negative 7 basis points, while the Liquid Operating Monies Portfolio returned 10 basis over the quarter, matching the three-month Treasury Bill index return benchmark. Chandler further notes that the Federal Open Market Committee (FOMC) kept the fed funds rate unchanged at a range of 0.25%-0.50% in September. The Fed's overall assessment of the economy was little changed from July. In the policy statement, the Committee noted the labor market has continued to strengthen but inflation remains below target. In deciding whether or not to raise the fed funds target rate, the Committee said "the case for an increase in the federal funds rate has strengthened but decided, for the time being, to wait for further evidence of continued progress toward its objectives." Although the potential exists for a rate increase at the next FOMC meeting on November 1-2, Chandler believes the Fed is likely to keep monetary policy on hold until December. If economic data remains modestly favorable over the next few months, they expect the Fed to hike the fed funds rate range by 25 basis points in December. Market participants estimate the economy grew at an annualized pace of about 2.9% in the third quarter. If accurate, that represents a pick-up from first and second quarter GDP growth of 0.8% and 1.4, respectively. The consensus forecast calls for GDP growth of about 2.5% in the fourth quarter. Labor market trends remain favorable, which should continue to provide a tailwind to economic growth. The unemployment rate was 5.0% in September, wage growth ticked higher, and payrolls increased by 156,000 (more than enough to absorb new entrants into the labor market). Consumer confidence is strong. Housing trends remain positive even though home price appreciation has softened. Oil prices have rebounded from earlier this year. The manufacturing sector, though still Page 2 Executive Summary under pressure, has slightly improved. Overall, domestic economic data remains indicative of slow growth. In September, the 2-year Treasury yield decreased four basis points and the 10- year Treasury yield increased one basis point. Leading up to the FOMC meeting in September, the yield curve steepened slightly. After the FOMC meeting in September, yields modestly declined. More recently, yields across the curve have increased as the market-implied probability of a fed funds rate hike before year- end has risen to more than 65%. In September, the Treasury yield curve was little changed. However, on a year- over-year basis the yield curve flattened with the 2-year Treasury yield up about 13 basis points and the 10-year Treasury yield down more than 44 basis points. Over the past year, financial market volatility has been elevated due to weak global economic growth, volatile commodity prices, political uncertainty, and divergent global central bank monetary policy. Economic Outlook Risk market performance was solid in the third quarter as economic data was generally favorable and market participants looked past the long-term implications of the Brexit vote in late June. Both the S&P 500 and NASDAQ composite were up just over 6.0% YTD through the end of September, compared to a total return of 2.7% and -3.3% YTD at the end of June 2016. Treasury yields also moved higher, with the two year note moving higher by 0.18%, the five year by 0.15%, and the ten year by 0.13%. Commodity prices continued to stabilize with Oil (West Texas Intermediate) trading in a relatively tight range centered around $47 per barrel during the quarter. Despite the continued global rhetoric on production cuts to support the price of oil, Chandler maintains the view the price will remain range bound. Looking out over an intermediate time horizon, Chandler believes that prices are unlikely to touch the lows from earlier in the year, and also unlikely to break out above $60 per barrel. Developed market central bank policy differentiation is likely to remain a theme in the markets over the coming year. The Federal Reserve's recently released Summary of Economic Projections continues to forecast a terminal Fed Funds rate much higher than current market expectations. Chandler anticipates the Federal Reserve and market forecast will gradually converge, with the Federal Reserve forecast adjusting by a greater amount. Sovereign bond yields abroad, particularly in Germany and Japan, remain exceptionally low, and negative in many maturities. The low and negative rates abroad will serve to put a cap on the ability of the US Treasury market interest rates to adjust materially higher. Chandler expects the dollar to strengthen over the coming year, which they say will serve as a de facto tightening of policy, and further expects the terminal Fed Funds rate to settle in above 1.00%, but well below the 3.00% Federal Reserve forecast as of September 2016. The markets are likely to remain volatile as the US Presidential election cycle winds down and investors consider the ability of Page 3 FY 2016-17 First Quarter Review fiscal spending to take a more prominent role in the domestic economic recovery with the new administration and a divided Congress. Chandler anticipates risk market performance will remain generally positive as investors continue to search for yield across asset classes. Treasury yields should continue to be under pressure, and move higher, but not by a dramatic amount as the Federal Reserve will be constrained in its ability to tighten traditional monetary policy due to the aforementioned global influences. • 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 4 Consolidated Financial Reports First Quarter Financial Report September 30, 2016 Financial Management is pleased to present the FY 2016-17 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, 2016, 22.3 percent, or $32.7 million of the FY 2016-17 net operating budget of $146.4 million has been expended. Net operating expenses decreased from the same period last year by $1.3 million, or 3.8 percent, mainly due to a decrease of $526,000 in Utilities, $462,000 in Salaries and Benefits, $234,000 in Operating Materials and Supplies, and $177,000 in Administrative Expenses, and an increase of $440,000 in indirect costs allocated out to capital projects. These reductions to net operating expenses have been partially offset by increases of $200,000 in Other Operating Supplies, $168,000 in Repairs and Maintenance, $63,000 in Training and Meetings, $59,000 in Contractual Services, and $51,000 in Professional Services. These and other variances that factor into this net increase in expenses are discussed in more detail below. Overall, staff expects the total operating costs to remain at budget throughout the remainder of the year. Significant operating results as of September 30, 2016 include the following: • Salaries. Wages and Benefits — Personnel costs of $20.8 million are slightly below target at 23.3 percent of budget through the first quarter of FY 2016-17. Although the budget is based on a 5 percent vacancy factor, staffing is 53 full-time equivalents (FTE's), or 8.5 percent below the total 627 FTE's approved in the FY 2016-17 budget. Salary and benefit costs are $462,000 or 2.2 percent lower than the $21.2 million incurred in the same period last year, mainly due to the decrease in OCERS retirement of $705,000. This decrease is reflective of the decrease in the employee contribution rate as a result of the $175 million pay down on the unfunded actuarial accrued liability over the previous two fiscal years. This decrease is partially offset by an increase of $349,000 in group insurance due to rising costs of healthcare. Net operating personnel costs are expected to be slightly below budget throughout the remainder of the year. • Administrative Expenses — Administrative Expenses totaled $320,000, or 18.2 percent of the $1.8 million budget through September 30. These costs are $177,000 or 35.6 percent lower at September 30 in comparison with the prior year mainly due to a decrease of $189,000 in purchases of small computer items. It is anticipated that the administrative costs will approximate budget at year-end. Section 1 - Page 1 FY 2016-17 First Quarter Report • Printing and Publication Expenses — Printing and Publication Expenses totaled $51,000, or 18.0 percent of the $284,000 budget through September 30. These costs are $7,000 or 12.1 percent lower at September 30 in comparison with the prior year, mainly due to a decrease in copy center costs as a result of removing mailroom services from the Xerox contract. It is anticipated that the printing and publication costs will be below budget at year-end • Training and Meetings — Training and meetings of $210,000 are below target at 18.2 percent of the $1.2 million budget. This account is lower than the proportionate budget due to the timing and need for training throughout the year. These costs have increased over the same period last year by $63,000 or 43.0 percent, which includes $72,000 for Total Productive Maintenance Certification Program costs not 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 $4.0 million is slightly below target at 24.0 percent of budget through September 30. Operating Materials and Supplies have decreased from the prior year by $234,000 or 5.5 percent, primarily due to decreases in Tools of $109,000, Chemical Coagulants of $88,000, Safety Equipment of $40,000, and Gas, Diesel and Oil of $33,000, offset by increases in Cogeneration and Miscellaneous Chemicals of $46,000. The decreases are mainly brought about by a decrease in the advance purchases for tools and equipment from the prior year, offset by increased use of activated carbon and urea due to Project J-111 to install emissions controls on 8 engines in Central Generation. Based on current processes, operating materials and supplies are anticipated to approximate budget at year-end. • Contractual Services — Contractual services is slightly below target at $5.6 million or 22.6 percent of budget through September 30. Solids Removal costs, budgeted at $17.2 million, comprise the majority of this expense category. With an increase of $17,000, or 0.4 percent higher than the prior year, solids removal costs totaled $4.5 million, or 26.1 percent of budget at September 30. In addition, Other Contractual Services increased by $63,000 due to an increase preventive maintenance services for the Civil Assets Management Program (CAMP). Overall, Contractual Services is higher by $59,000 or 1.1 percent over the same period last year. Total contractual services costs are anticipated to approximate budget at year-end. • Professional Services — Professional services costs totaled $520,000 or 12.5 percent of the $4.2 million budget through September 30. Most professional service costs, such as Legal, Engineering, Environmental Scientific Consulting, Software Program Consulting Services, Advocacy Efforts, and Other Services, are proportionately low through September 30 due to a variety of factors such as services being in the planning or request for proposal stage, timing of services needed, the need for the service being re-evaluated, or utilization of internal staffing for projects. These costs are $51,000 or 10.8 percent higher at September 30 in comparison with the prior year mainly due to an increase in engineering services Section 1 - Page 2 Consolidated Financial Reports and 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 $152,000, or 19.0 percent of the $860,000 budget through September 30. These costs are $6,000, or 4.3 percent higher at September 30 in comparison with the prior year, due to an increase in vessel services costs. Total Research and Monitoring costs are anticipated to be below budget at year-end. • Repairs and Maintenance — Repair and maintenance costs totaled $3.3 million, or 23.3 percent of the $14.3 million budget through September 30. These costs are $168,000, or 5.3 percent higher at September 30 in comparison with the prior year, mainly due to Plant 1 engine repairs and an increase in repair materials purchased, offset by a decrease in prior period service maintenance agreements due to timing of payments. It is anticipated that the costs for this category will approximate budget at year-end. • Utilities — Utilities costs totaled $1.9 million, or 21.3 percent of the $8.9 million budget through September 30. These costs are $526,000 or 21.7 percent lower at September 30 in comparison with the prior year, primarily due to a decrease in electricity charges of $552,000 as a result of decreased usage primarily related to decreased activities and outfall pumping, offset by an increase in natural gas charges of $12,000. The overall operating philosophy of the Central Generation facilities is to purchase electricity for power production rather than to purchase natural gas as a supplement to the digester gas needed to run the Central Generation facilities. This operating philosophy allows the Central Generation facilities to meet air emission requirements. It is anticipated that the costs will approximate budget at year-end. • Other Operating Supplies — Other operating supplies costs totaled $500,000, or 22.4 percent of the $2.2 million budget through September 30. Property and General Liability Insurance comprise the majority of this expense category. These costs are $154,000 or 124.0 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. Miscellaneous Operating Expenses have also increased over the prior year by $22,000, or 68.6 percent due to the increase in safety incentives and miscellaneous supplies. 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 ($371,000), or (0.1) percent of budget and Property taxes are $2.4 million, or 2.8 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. A decrease of $334,000 or 906.5 percent in service fee revenue over the prior period is due in part to timing of customer payments, and an increase of $362,000 in user Section 1 - Page 3 FY 2016-17 First Quarter Report fee refunds issued in the current period. An increase of $283,000 or 13.0 percent in property tax revenues over the prior period is due to an increase of approximately 2.0 percent in property tax rates, higher construction activities and property values, and timing of taxes collected by the County. These revenues are expected to approximate budget at year-end. • Revenues — Permittee User Fees — Permittee User Fees are at $445,000, or 4.0 percent of the $11.3 million budget. The number of permittees fluctuates from year to year as businesses are established or close their operations. The revenues through the first quarter are $27,000 or 6.5 percent higher in comparison with the same period last year due to an increase in the number of permittees and an increase in the amount of discharge from the permittees. It is estimated that the permittee user charges will be below budget at year-end. • Revenues — Inter District Sewer Use — SAWPA and SBSD — Inter District Sewer revenues- SAWPA and SBSD are at $773,000, or 23.6 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 $1.0 million, or 27.0 percent of the $3.7 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 $100,000 or 10.9 percent mainly due to an increase in flows discharged from IRWD and an increase in unit costs of operation and maintenance charges to IRWD. These revenues are expected to approximate or exceed budget at year-end. • Revenues - Sludge Disposal — IRWD — Sludge Disposal fees-IRWD are at $2.5 million, or 27.5 percent of the $9.1 million budget. The revenue is derived and fluctuated from flows discharged from IRWD to Sanitation District for the handling, treatment and disposal of solids. The revenues through the first quarter are higher than the same period last year by $66,000 or 2.7 percent, mainly due to an increase in costs charged to IRWD. These revenues are expected to approximate or exceed budget at year-end. • Revenues — Capital Assessments — IRWD — Capital Assessments-IRWD are at $328,000, or 7.4 percent of the $4.4 million budget. The revenues through the first quarter are lower than the same period last year by $256,000 or 43.9 percent mainly due to a decrease in joint capital costs charged 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 $4.2 million, or 30.8 percent of the $13.5 million budget. The revenues through the first quarter are higher than the same period last year by $527,000 or 14.5 percent due to increased construction activity, offset by less supplement capital facilities Section 1 - Page 4 Consolidated Financial Reports capacity charges from industrial dischargers than at this time last year. These revenues are expected to approximate or exceed the budget at year-end. • Revenues — Interest Earnings — Interest Earnings are at $697,000 or 8.1 percent of the $8.6 million budget. The revenues through the first quarter are lower than the same period last year by $1.4 million or 66.4 percent due to a lower interest rate environment than anticipated. It is estimated that the interest earnings will be below the budget amount at year-end. • Revenues — Wastehauler — Wastehauler revenues are at $163,000 or 21.7 percent of the $750,000 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 $108,000 or 27.0 percent of the $400,000 budget. The revenues through the first quarter are lower than the same period last year by $12,000 or 10.3 percent. These revenues are expected to approximate budget at year-end. • Revenues - Other—Other revenues are at$46,000 or 5.8 percent of the $800,000 budget. These revenues consist of miscellaneous revenues, such as reimbursements from insurance and employees. The revenues through the first quarter are lower than the same period last year by $6,000 or 12.3 percent. These revenues are expected to be below budget at year-end. Section 1 - Page 5 FY 2016-17 First Quarter Report Comparison of First Quarter Cost per Million Gallon Results with Budget Last Five Years 2,200 2,150 316] 2,100 2,050 z,9e9 bah 2,000 1,950 Sea ,,ns 900 ,850 1,800 1,609 1,750 1,761 1,700 1,650 1,600 1,550 1,500 12-13 13-14 14-15 15-16 16-17 tat Annual 1st Annual tat Annual tat Annual tat Annual Qtr Budget Qtr Budget Qtr Budget Qtr Budget Qtr 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 3.4 percent to 9.5 percent lower than the annual budget. The FY 2016-17 first quarter is 11.2 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 3.8 percent lower than the same period last year and a decrease in flows, which are 1.3 percent lower 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 $1,923.38 based on flows of 184.7 million gallons per day. This is $243.62 per million gallons, or 11.2 percent, lower than the budgeted cost per million gallons of $2,167. 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 10.7 percent less than the proportionate budget through September 30, which is partially offset by flows of 184.7 million gallons per day being 0.2 percent lower 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 Rate Rates as of July 2012 2013 2014 2015 2016 Agency SFR SFR SFR SFR SFR Notes San Francisco $667.92 3701.40 $744.83 $ 784.44 $ 842.14 City of San Diego $572.58 $572.58 $572.58 $ 572.58 $ 572.58 Vallejo Sanitation/Flood Control District $495.12 $507.48 $520.20 $ 520.20 $ 520.20 Central Contra Costa Sanitary District $371.00 $405.00 $439.00 $ 471.00 $ 503.00 City of Los Angeles $391.56 $409.20 $435.40 $ 464.04 $ 494.77 Note 1 Sacramento County $288.00 $312.00 $348.00 $ 384.00 $ 420.00 Dublin San Ramon Senices District $355.44 $355.44 $372.96 $ 382.38 $ 382.38 Union Sanitary District $319.55 $337.76 $357.02 $ 377.00 $ 380.05 East Bay MUD $305.10 $331.10 $358.14 $ 355.18 $ 372.50 City of Hayward $327.24 $327.24 $337.08 $ 347.16 $ 327.00 Orange County Sanitation District $294.00 $308.00 $316.00 $ 322.00 $ 309.00 City of Fresno $309.00 $309.00 $309.00 $ 309.00 $ 309.00 Irvine Ranch Water District $206.40 $220.80 $246.00 $ 288.60 $ 257.60 Note 2 Oro Loma Sanitary District $189.00 $195.00 $200.00 $ 206.00 $ 221.00 Los Angeles County $149.00 $150.00 $151.00 $ 155.00 $ 159.00 Note 3 Notes: (1)- Data is for the typical SFR customer rate and is not the average rate. (2)- Data represents the maximum SFR rate and is not the average rate. (3)- Data for 2013 and 2014 was revised to remove ad valorem monies that were inadvertently included. Section 1 - Page 7 FY 2016-17 First Quarter Report Benchmark Study Five-Year Cost per MG FY 10-11 FY 11-12 FY 12-13 FY 13-14 FY 14-15 Agency Syc.Trt. Cost/MG Cost/MG Cost/MG Cost/MG Cost/MG Notes Central Contra Costa Sanitary District B 5 $3,929.80 $4,203.43 $4,621.84 $5,778.43 $6,280.58 Vallejo Sanitation/Flood Control District B 3 $4,536.00 $5,176.00 $5,435.00 $6,153.00 $5,590.00 San Francisco B 3 $3,857.80 $4,778.96 $5,006.74 $5,400.28 $5,357.97 Note 1 Union Sanitary District B 3 $3,206.10 $3,267.06 $3,805.40 $3,832.47 $3,910.73 City of San Diego B 5 $3,208.48 $3,242.30 $3,340.35 $3,156.43 $3,591.69 East Bay MUD T 4 $2,000.31 $2.320.02 $2,359.40 $2,559.18 $2,727.97 Dublin San Ramon SeMces District B 5 $1,964.64 $2,009.57 $2,159.49 $2,506.60 $2,522.00 Sacramento County T 3 $1,591.75 $3.312.50 $2,143.16 $2,375.47 $2,494.40 Note 2 City of Los Angeles B 5 $1,836.00 $1,935.00 $2,062.00 $2,163.00 $2,269.00 Orange County Sanitation District B 3 $1,816.62 $1,871.47 $1,906.01 $1,935.05 $2,070.97 City of Fresno B 3 $1,263.50 $1,383.60 $1,411.89 $1,552.39 $1,628.91 Los Angeles County T 5 $1,078.00 $1,156.00 $1,008.00 $1,223.72 $1,239.40 Note 3 Legend for Service ProNded and Treatment Level: B-Agencyoperates both collection and treatment facilities T-Agency proNdes treatment semces but not co1lec0on 2-Advanced primary or primary with some seconderytreatment 3-Secondary treatment 4-Advanced secondaryor secondarywith some tertiarytreatment 5-Terharytreatment Notes: (1)-Beginning in Fiscal Year 2012-13,dataset represents wastewater flows from finalised publicly available 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 9/30116 Actual Projected 2016-17 2016-17 Capital Outlay Capital Outlay Capital Outlay Cashfiow Budget $23,407,415 $135,907,500 $190,309,393 As depicted by the preceding chart, Capital Outlays totaled $23.4 million or 12.3 percent of the capital outlay cash flow budget for FY 2016-17 as of September 30, 2016. Costs are proportionately low through the first quarter as some projects are still in the design phase or have experienced various delays. Examples as of September 30 are the Sludge Dewatering and Odor Control for Plants 1 and 2, which has a combined FY16-17 cash flow budget of $41.9 million but actual costs of only $5.2 million and the Rehabilitation of Western Regional Sewers, which has a budget of $16.0 million but actual costs of only $108,000. Overall, the capital outlay costs of the capital improvement program are expected to approximate $135.9 million, or 71.4 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, 2016, 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, 2016, 55.2 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- end. Interest costs are expensed ratably throughout the fiscal year. Interest expense is anticipated to approximate budget at year-end. Section 1 - Page 9 FY 2016-17 First Quarter Report Self-Insurance Budget Reviews: Section 5 is the Self-Insurance Section. Through September 30, the Self-Insurance Fund revenues totaled $582,000 or 24.9 percent of the budget, while expenses were $1.1 million or 45.1 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, 2016 $1 500 $1,400 $1,300 $1,200 $1,100 $1,000 $900 $800 $700 $s00 $s00 S400 $300 $200 $100 $0 _ y c � •fin � b `a' > E i8 w'� � E✓� �y w OE 6 w �eutlget �Aclual Collection, Treatment, & Disposal Expenses by Major Category Budget and Actual (in thousands) September 30, 2016 $70,000 M'000 $50,000 $55,000 W'000 U5,000 $40,000 $35,000 $ g000 $25,Ooo $20,000 $15,000 AIM $10,000 $5,000 Elm $0 w E n @ O g a 4 ¢ rc �8utlgef �ACWeI Section 2-Page 1 2016-17 First Quarter Report Divisional Contributions to Cost Per Million Gallons For the Three Months Ended September 30,2016 2016-1T 9/30114 9I30115 Annual 9130/16 Actual Actual Budget Actual Flow in Million Gallons 17,915.60 17,212.80 67,525.00 16,992.55 Flow in Million Gallons per Day 194.74 18].09 185.00 184.70 Executive Management Department Geneml Management Administration $ 24.31 $ 26.38 $ 43.90 $ 28.32 Board Services 5.57 5.66 9.38 6.82 Public Affairs 6.68 12.25 14.96 12.86 Subtotal 36.56 d4.29 68.24 48.00 Human Resources Department Human Resources 50.48 49.29 58.04 49.02 Risk Management/Safety I Security d4.9] 37.81 60.41 57.06 Subtotal 95.45 87.10 118.45 106.08 Administrative Services Department Administrative Services 8.36 9.55 8.75 6.70 Financial Management 42.16 44.12 50.51 38.85 Contracts,Purchasing,&Materials Mgmt. 59.49 56.92 61.74 59.86 Information Technology 154.53 150.79 152.05 137.15 Subtotal 264.54 261.38 273.05 242.56 Facilities Support Services Department Facilities Support Administration 8.45 12.27 - - Facilities Support 6.65 - - - Equipment Rebuild 24.65 - -Fleet Services 28.66 31.40 -Collections Engineering 39A1 3].]4 - - NPDES Source Inspection 29.06 30.20 - - Odor and Corrosion Control 96.93 106.38 - - Collection Facilities O&M 58.63 55.58 Subtotal 292.14 2]3.5] Environmental Services Department Environmental Services Administration - - 12.41 11.27 Resource Protection - - 88.10 75.32 Laboratory&Ocean Monitoring 153.76 140.12 Subtotal 254.2] 226.71 Engineering Department Engineering Administration 8.79 7.88 5.91 5.72 Planning 41.06 42.08 48.17 43.23 Project Management Offme 49.68 35.66 39.89 34.93 Civil and Mechanical Engineering 114.57 128.50 124.51 121.01 Electrical&Control System Engineering - - 68.29 51.32 Environmental Compliance 85.75 80.79 Subtotal 299.85 294.91 285.]T 256.21 Operations&Maintenance Department Operations&Maintenance Administration 10.36 11.84 10.15 6.43 Collections Facilities 0&M - - 191.04 163.09 Fleet Services - - 30.38 27.21 Plant No. l Operations 371.88 469.66 430.83 430.76 Plant No,2 Operations 313.66 310.96 316.61 287.64 Building,Grounds&Mechanical Maintenance 204.14 - - - Instrumentation&Electrical Maintenance 193.08 - - - PlanlNo. lMaintenance - 213.71 303.59 248.18 Plant No.2 Maintenance - 140.68 168.14 157.29 Environmental Laborotory&Ocean Monitoring 112.18 114.23 Subtotal 1,205.30 1,261.08 1,450.74 1,320.60 Total Operating Expenses 2,193.84 2,222.33 2,451.52 2,200.16 Cost Allocation (208.23) (247.65) (284.52) (27638) Net Operating Requirements $ 1, 885.61 $ 1,9 44.68 $ 2,16].00 $ 1,923.38 Section 2-Page 2 Operating Budget Review Comparison of Expenses by Department For the Three Months Ended September 30,2016 2016.17 9/30114 9130115 Year to Date Budget% Department and Division Actual Actual Budget 9130/16 Realized Executive Management Department General Management Administration $ 435,580 $ 454,052 $ 2,964,220 $ 481,214 16.23% Board Services 99,731 97,421 633,540 115,807 18.28% Public Affairs 119,695 210,898 1,010,100 218,563 21.64% Subtotal 655,006 762,371 4,607,860 815,584 17.70% Human Resources Department Human Resources 904,423 &48,361 3.918,890 833,041 21,26% Risk Management l Safety/Security 805,719 650,820 4,079,050 969,542 23P7% Subtotal 1,710.142 1.499,181 7.997,940 1,802.583 22,54% Administrative Services Department Administrative Services 149,838 164,435 590,830 113,803 19.26% Financial Management 755,290 759,357 3,410,810 660,179 19.36% Contracts,Purchasing,&Materials Mgmt. 1,065,857 979,693 4,169,220 1,017,108 24.40% Information Technology 2,768,527 2.595,479 10.267,510 2,330.501 22,70% Subtotal 4,739,512 4,498,964 18,438,370 4,121,591 22.35% Facilities Support Services Department Facilities Support Administration 151,457 211,132 - - 0.00% Facilities Support 119,146 - - - 0.00% Equipment Rebuild 441,691 - - - 0,00% Fleet Services 513,519 540,554 - - 0.00% Collections Engineering 700,751 649,530 - - 0.00% NPDES Source Inspection 520,712 519,828 - - 0.00% Odor and Corrosion Control 1,736,597 1,831,093 - - 0.00% Collection Facilities 0&M 1,060,312 956,757 0.00% Subtotal 5,234,185 4,708,894 0.00% Environmental Services Department Environmental Services Administration - - 838,250 191,477 22.84% Resource Protected - - 5,948,920 1,279,884 21.51% Laboratory&Ocean Monitoring 10,382,450 2,380,990 22.93% Subtotal 17.169,620 3,852,351 22.44% Engineering Department Engineering Administrator 157,505 135,663 399,390 97,187 24.33% Planning 735,592 724,304 3,252,440 734,644 22.59% Project Management Office 890,090 613,840 2,693,360 593,5A 22.04% Civil and Mechanical Engineering 2,052,518 2,211,829 8,407,280 2,056,323 24,46% Electrical B Control System Engineering - - 4.610,980 872,079 18.91% Environmental Compliance 1,536,320 1,390,674 0.00% Subtotal 5,372,025 5,076,310 19,363,450 4,353,810 22.48% Operations&Maintenance Department Operations&Maintenance Administration 185,645 203,796 685,600 109,297 15.94% Collections Facilities O&M - - 12,900,210 2,771,291 21.48% Fleet Services - - 2,051,320 462,332 22,54% Plant No.1 Operations 6,662,415 8,084,157 29.091,740 7,319,734 25.16% Plant No.2 Operations 5,619,386 5,352,442 21,378,950 4,887,717 22.86% Building,Grounds&Mechanical Maintenance 3,657,346 - - - 0.00% Instrumentation&Electrical Maintenance 3,459,180 - - - 0,00% Plant No.1 Maintenance - 3.678,480 20.499,680 4,217.151 20.57% Plant No.2 Maintenance - 2,421,532 11,353,810 2,672,816 23.54% Environmental Laboratory&Ocean Monitoring 2,009,382 1,966,282 0.00% Subtotal 21,593,354 21,706,689 97,961,310 22,440,338 22.91% Total Operating Expenses 39,304,224 38,252,409 165,538,550 37,386.257 22.58% Cost Allocation (3,730,868) (4,262,690) (19,182,030) (4,703,125) 24.52% Net Operating Requirements $ 35,573,356 $ 33,989,719 $ 146,356,520 $ 32,683,132 22.33% Section 2-Page 3 2016-17 First Quarter Report Summary of Collection, Treatment, &Disposal Expenses by Major Category For the Three Months Ended September 30,2016 Expense Expense Increase Increase Percent Budget Through Through (Decrease) (Decrease) Budget Remaining Description 2016-17 9/30/16 9130115 $ % Realized Budget Salary&Wages $ 66,833,000 15,202,438 15,276,963 $ (74,525) -0.49% 22.75% $51,630,562 Employee Benefits 22,456,800 5,581,855 5,968,981 (387,126) -6.49% 24.86% 16,874,945 Administrative Expenses 1,752,650 319,765 496,641 (176,876) -35.61% 18.24% 1,432,885 Printing&Publication 284,340 51,163 58,216 (7,053) -12.12% 17.99% 233,177 Training&Meetings 1,158,070 210,307 147,076 63,231 42.99% 18.16% 947,763 Operating Materials&Supplies 16,698,250 4,005,543 4,239,826 (234,283) -5.53% 23.99% 12,692,707 Contractual Services 24,831,420 5,614.896 5,555,874 59,022 1.06% 22.61% 19.216,524 Professional Services 4,160,830 519,412 468,646 50,766 10.83% 12.48% 3,641,418 Research&Monitoring 800,000 152,338 146,051 6,287 4.30% 19.04% 647,662 Repairs&Maintenance 14,265,930 3,326,791 3,158,689 168,102 5.32% 23.32% 10,939,139 Utilities 8,912,240 1,896.176 2,422,169 (525,993) -21.72% 21.28% 7,016,064 Other Materials,Supplies, and Services 3,385,020 505,573 313,277 192,296 61.38% 14.94% 2,879,447 Net Cost Allocation (19,182,030) (4,703,125) (4,262,690) (440,435) 10.33% 24.52% (14,478,905) Net Operating Requirements 146,356,620 32,683,132 33,989,719 (1,306,687) -3.84% 22.33% 113,673,388 Gallonage Flow(MG) 67,525.00 16,992.55 17,212.80 (220.25) -1.28% Gallonage Flow(MGD) 185.00 184.70 187.09 (2.39) -1.28% Gallonage Flow($'a/MG) $2,167000 $1,923.38 $1,974.68 ($51.30) -2.60% Section 2-Page 4 Operating Budget Review Summary of Revenues For the Three Months Ended September 30, 2016 Revenue Percent Revenue Increase Increase Budget Through Budget Remaining Through (Decrease) (Decrease) Description 2016-17 9130116 Realized Budget 9/30/15 $ % Service Fees $286,554,000 $ (370,591) 4).13% $286,924,591 $ (36,818) $ (333,773) 906.55% Permit Fees 11,272,000 445,496 3.95% 10,826,504 418,174 27,322 6.53% Inter District Sewer Use-SAWPA&SBSD 3,283,000 773,080 23.55% 2,509.920 710,417 62,663 8.82% Intra District Sewer Use-IRWD 3,737,690 1,010,397 27.03% 2,727,293 910,725 99,672 10.94% Sludge Disposal-IRWD 9,090,000 2,496,973 27.47% 6,593,027 2,430,983 65,990 2.71% Capital Assessments-IRWD 4,402,000 327,606 7.44% 4,074,394 584,040 (256,434) 43.91% Capital Facilities Capacity Charges 13,500,GD0 4,153,808 30.77% 9,346,192 3,626,500 527,308 14.54% Property Taxes 87,017,000 2,449,906 2.82% 94,567,094 2,167,339 282,567 13.04% Interest Earnings 8,606,000 697,031 8.10% 7,908.969 2,074,952 (1,377,921) -66.41% Wastehauler 750,000 162,891 21.72% 587,109 138,947 23,944 17.23% CNG Sales 400,000 107,841 26.96% 292,159 120,260 (12,419) -10.33% Rents&Leases 255,000 62,145 24.37% 192,855 60,921 1,224 2.01% Other 800,000 45,863 5.73% 754,137 52,296 (6,433) -12.30% Power Sales 20,000 8,407 42.04% 11,593 1,418 6,989 492.88% Other Sales 35,000 13,857 39.59% 21,143 16,282 (2,425) -14.89% Total Revenues $429721 690 $ 12384,710 288% $417,336,980 $ 13,276436 S (891,726) -6.729/o Section 2-Page 5 2016-17 First Quarter Report Summary of Collection,Treatment, &Disposal Expenses by Line Item For the Three Months Ended September 30,2016 Expense Percent Expense Increase Increase Budget Through Budget Remaining Through (Decrease) (Decrease) Description 2016.17 9130116 Expenses! Budget 9130115 $ % Salaries.Wanes&Benefits Salaries&Wages $ 66,833,000 $ 15,202,438 22.75% $ 51,630,562 $ 15,276,963 $ (74,525) -0.49% Employee Benefits Retirement 10,950,600 2,840,322 25.94% 8,110,278 3,544,964 (704,642) -19.88% Group Insurances 9,725,700 2,290,335 23.55% 7,435,365 1,941,153 349,182 11.99% Tuition&CortificaOon Relmb 175,600 26,381 15.02% 149,219 25.140 1,241 4.94% Edu.degrees,Cad.&Lic. 314.600 86,382 22.46% 228,218 73,034 13,348 18.28% Uniform Rental 53,200 21,519 40.45% 31,681 13,101 8,418 64.25% Workers Compensation 1,196,300 299,078 25.00% 897,222 W9,677 (70,599) -19.10% Unemployment nsurance 2,900 9,384 323.59% (6,484) 758 8,626 1131.99% EMT Supplemental Benefits 37,900 8,454 22.31% 29,446 1,154 7,3W 632.58% Total Benefits 22,456,800 5,581,855 24.86% 16,974,945 5,968,981 (387,126) 4i.49% Salaries,Wages&Stimulus 89,289,800 20,784,293 23.28% 66,505,507 21,245,944 (461,651) .2.17% Man,Supply.&Services Administrative Expenses Memberships 586,050 175,770 29.99% 410,280 173,067 2,703 1.56% Office Exp-Supplies 62.870 12,767 20.31% 50.103 10.193 2,574 25.25% Postage 41,040 11,653 28.39% 29,387 2,081 9,572 459.97% Books&Publications 50,970 7,551 14.81% 43,419 4,126 3,425 83.01% Forms 1,300 - 0.00% 1,300 - - NIA Small Computer Items 750,000 88,784 11.84% 651,216 277,995 (189,211) -68.06% Minor Furniture&Fixtures 260,420 23,240 8.92% 237,180 29,179 (5,939) Subtotal 1.752,650 319,765 18.24% 1,432,885 496,641 (176,876) -35.61% Printing&Publication Repro-In-House 243,690 43,208 17.73% 200,482 55,161 (11,953) -21.67% Pdnting-Oulside 20,750 4,201 20.25% 16,549 1,241 2,960 238.52% Nations&Ad. 19,850 3,754 18.91% 16,096 1,814 1,940 106.95% Photo Processing 50 0.00% 50 NIA Subtotal 284,340 51,163 17.99% 233,177 5$216 (7,053) Training&Meetings Meetings 208.310 25,194 12.09% 183.116 24.096 1,098 4.56% Training 949,760 185,113 19.49% 764,647 122,980 62,133 50.52% Subtotal 1,158,070 210,307 18.16% 947,763 147,076 63,231 42.99% Operating Mat'Is&Supplies Chemical Coagulants 5,126,550 1,412,902 27.56% 3,713,648 1,500,424 (87,522) -5.83% Odor Control 8,157,300 1,927,869 23.63% 6,229,431 1,900,253 27,616 1.45% Disinfection 170,500 48,414 28.40% 122,086 67.130 (18,716) -27.88% Chemicals-Misc&Cogan 472.000 81,059 17.17% 390.941 34.612 46,447 134.19% Gasoline,Diesel&Oil 632,790 129,315 20.44% 503,475 161,879 (32,564) -20.12% Tools 691,950 60,662 8.75% 631,388 169,156 (108,6m) -64.20% Safety equlpmenthods 587,560 154,700 26.33% 432,860 195,012 (40,312) -20.67% Sol,Paints&Jan.Supplies 82.390 18,626 22.61% 63,764 23.967 (5,341) -22.28% Lab Chemicals&Supplies 601,360 133,869 22.26% 467,491 139,764 (5,895) 4.22% Other OpemOng Supplies 171,850 38,123 22.18% 133,727 45,736 (7,613) -16.65% Property Tax Fees 4,000 IN 2.60% 3,896 1,893 (1,789) -94.51% Subtotal 16,698,250 4,005,543 23.99% 12,692,707 4,239,826 (234,283) Contractual Services Solids Remoyal 17,206,000 4,486,716 26.08% 12,719,284 4,469,375 17,341 0.39% Other Waste Disposal 886,400 188,032 21.21% 698.368 177,084 101948 6.18% Groundskeeping 129,720 34,679 26.73% 95,041 34,653 26 0.08% Janitorial 345,700 96,450 27.90% 249,250 117,834 (21,384) -18.15% Outside Lab Services 275,000 32,080 11.67% 242,920 30,154 1,926 6.39% Oxygen Plant Oper 406.000 85,171 20.98% 320.829 131.930 (46,759) -35.44% County Service Fee 671,700 6,345 0.94% 665,355 5,460 885 16.21% Temporary Sernces 814,400 75,412 9.26% 738,988 88,391 (12,979) -14.68% Security Services 660,000 145,484 22.04% 514,516 99,495 45,989 46.22% Other 3,436,500 464,527 13.52% 2,971,973 401,498 63,029 15.70% Subtotal 24,831,420 5,614,896 22.61% 19,216,524 5,555,874 59,022 1.06% (Continued) Section 2-Page 6 Operating Budget Review Summary of Expenses by Line Item For the Three Months Ended September 30,2016 Expense Percent Expense Increase Increase Budget Through Budget Remaining Through (Decrease) (Decrease) Description 2016-17 9130116 Expensed Budget 9130/15 $ % Continued: Professional Services Legal 1,363,500 123.671 9.07% 1,239,829 184,757 (61,086) -33.06% Audit&Amounting 270,700 70,302 25.97% 200,398 72,964 (2,662) -3.65% Engineering 743.000 105,026 14.14% 637,974 21,429 83.597 390.11% Enviro Scientific Consulting 125,000 13,244 10.60% 111,756 13,293 (49) -0.37% Sethi PMm Consulting 410,000 55,876 13.63% 354,124 42,728 13,148 30.77% Advocacy Efforts 176,000 34,350 19.52% 141,650 33,125 1.225 3.70% Industrial Hygiene Services 50.000 51,371 102.74% (1,371) 9,878 41.493 420.05% Labor Negotiation Services 80,000 23,103 28.80% 56,897 - 23,103 N/A Other 942,630 42,469 4.51% 90g161 90,472 (48,003) -53.06% Subtotal 4,160,830 519,412 12.48% 3,641,418 468,646 W,766 10.83% Research&Monitoring Environmental Monitoring 305,000 51,806 16.99% 253,194 46,051 5,756 12.60% Air Quality Monitoring 95,000 532 0.56% 94,468 - 532 N/A Research 400,000 100,000 25.00% 3001000 1001000 0.00% Subtotal 800,000 152,338 19.04% 647,662 146,051 6,287 4.30% Repairs&Maintenance Materials&Services 11,453,670 2,668,330 23.30% 8,785.340 2,435,402 232.928 9.56% Svc.Mtc.Agreements 2,812,260 658,461 23.41% 2,153,799 723,287 (64,826) -8.96% Subtotal 14,265,930 3,326,791 23.32% 10,939,139 3,158,689 168,102 5.32% Utilities Telephone 400,000 80,588 20.15% 319,412 72,076 8,512 11.81% Diesel For Generators 18,240 2.957 16.21% 15,283 2,904 53 1.83% Natural Gas 519,000 185,326 35.71% 333,674 173,641 11.685 6.73% Power 7,324,000 1,468.354 20.05% 5,855,646 2,020,284 (551.930) -27.32% Water 651,000 lm,951 24.42% 492,049 153,264 5,687 3.71% Subtotal 8,912,240 1,896,176 21.28% 7,016,064 2,422,169 (525,993) -21.72% Other Operating Supplies Outside Equip Rental 139,600 14,249 10.21% 125,351 324 13,925 4297.84% Insurance Premiums 32,000 31,049 97.03% 951 31,386 (337) -1.07% Prop&Gen Liab Insurance 1,111,100 277,776 25.00% 833,324 123,999 153,777 124.01% Freight 70.030 18,758 26.79% 51,272 18,432 326 1.77% Misc.Operating Expense 162,310 53,393 32.90% 108,917 31,662 21,731 68.63% Regulatory Operating Fees 715,900 104,485 14.59% 611,415 93,641 10,&14 11.68% Subtotal 2,230,940 499,710 22.40% 1,731.230 299,444 200,266 66.88% General Mgr Contingency &Reappropriations 1,015,700 0.00% 1,015,700 N/A Other Non-Oper Expense Others 138,380 5,863 4.24% 132,517 13,833 (7,970) -57.62% Subtotal 138,380 5,863 4.24% 132,517 13,833 (7,970) -67.62% Total Materials, Supplies&Services 76,248,750 16,601,964 21.77% 59,646,786 17,006,465 (404,501) Total Expenditures 165,538,550 37,386,257 22.58% 128,152,293 38,252,409 (866,152) -2.26% Cost Allocation (19,182,030) (4,703,125) 24.52% (14,478,905) (4,262,690) (440,435) 10.33% Net Operating Requirements $ 146,356,520 $ 32,683,132 22.33% $ 113,673.388 $ 33,989,719 $ i1,306,587) -3.84% Section 2-Page 7 2016-17 First Quarter Report Summary of Collection,Treatment,8 Disposal Expenses by Process For the Three Months Ended September 30,2016 Increase Increase Actual Actual (Decrease) (Decrease) 9/30116 9130/15 $ % Process: Preliminary Treatment $ 1,849,396 $ 1,855,202 $ (5,806) -0.31% Primary Treatment 2,330,909 2,995,614 (664,705) -22.19% Secondary Treatment 1,794,022 1,921,021 (127,000) -6.61% Cryogenic Plant(Plant 2) 160,618 230,668 (70,051) -30.37% Ef0uent Disposal 160,747 238,773 (78,025) -32.68% Solids Handling 10,811,145 11,052,888 (241,743) -2.19% Cogeneration 3,911,947 4,596,429 (684,483) -14.89% Utilities 661,097 639,619 21,478 3.36% Electrical Distribution 300,583 349,396 (48,813) -13.97% Miscellaneous Buildings 2,002,825 1,885,666 117,158 6.21% External Location 14,060 7,229 6,831 94.50% Nerlssa Vessel 49,858 43,335 6,523 15.05% North County Yard 2,929 37,168 (34,239) -92.12% Laboratory 3,247,852 2,945,812 302,040 10.25% Collections 5,385,146 5,190,898 194,248 3.74% Net Operating Requirements $ 32,683,132 $ 33,989,719 $ (1,306,587) -3.94% Section 2-Page 8 Operating Budget Review Staffing Trends Full Time Equivalents September 30,2016 700 650 626 624 624 624 627 600 38 36 qq 52 53 550 500 450 6/30113 6/30114 6/30/15 6130116 9/30/16 8Adua1 8Va.a t At September 30, 2016, the total head count was 583 employees, or a full time equivalency of 574. Section 2-Page 9 2016-17 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 30,2016 MGOIIeMlons Factitks: 40.2% MHeadworks: 3.5% MPrimaty Treatment: 1 2% GSecondary Treatment: 01% MSolids Handling 8 Digestion: 35.5% nOcean Outfall Systems: 5.3% nlltility Systems: 2.2% MP..,e Related Spmml Projects: 0.4% ■Information Management Systems: 2% MStrategic 8 Master Planning: 1.8% M Water Management Projects: 0.6% eResearch 0.2% OSupport Facilites: 4.2% Mothers: 00% Motor Year Treatment Projects: )A% MCapital EOulpment Purchases: 2 4% Total Capital Improvement Outlays -$23,407,415 Replacetnent/Rehabilitation: 35% 0!! Improved Treatment 15% ❑Additional Capacity: 46% ■Support: 4% Total Capital Improvement Outlays -$23,407,415 Section 3- Page 1 FY 2016-17 First Quarter Report Summary of Capital Improvement Construction Requirements - Current Year For the Three Months Ended September 30, 2016 2016-17 2016-17 2016-17 Cashflow Actual at Projected Budget 9/30/2016 Outlay Collection System Improvement Proiects Collections Facilities Santa Ana Trunk Sewer Rehab. $ 74,119 $ 4,865 $ 100,900 Raitt and Bristol Street Sewer Rehab& Extension 204,379 - 196,600 Santa Ana River Interceptor(SARI) Realignment 562,271 17,148 48,600 SARI Rock Stabilizers Removal 312,927 2,542 642,000 Newhope-Placentia Trunk Grade Separation Replacements 934,520 5,009 254,200 Newhope-Placentia Trunk Replacement 7,181,679 6,563,018 14,751,100 Newhope-Placentia Trunk Replacement, Segment B 13,762,266 64,567 64,600 Lakeview Grade Separation Project 154,706 - 104,800 Tustin Rose OCTA Grade Separation Project 71,317 - 164,300 Seal Beach Pumping Station Upgrade and Rehabilitation 5,964,626 68,210 2,594,900 Rehabilitation of Western Regional Sewers 16,018,059 108,347 8,597,200 Newport Force Main Rehabilitation 5,903,015 86,245 171,700 Bay Bridge Pumping Station Replacement - 30,806 216,100 District 6 Trunk Sewer Relief 4,623,818 21,870 1,019,800 Southwest Costa Mesa Trunk 876,199 914 1,000 Gisler-Redhill System Improvements, Reach 'B" 11,951,892 2,375,458 10,994,200 Gisler Red-Hill Interceptor Rehabilitation 102,511 - 50,400 Master Facilities Engineering Projects-Collections 1,429,603 27,923 462,400 Master Planning Studies-Collections 2,748,262 32,420 32,500 Bay Bridge Pump Station and Force Mains Rehab Study 361,019 9,870 209,800 Additional Charges to CIP Closed at 6/30/16 11,B49 11,900 Subtotal -Collections Facilities 73,237,188 9,431,061 40,689,000 Revenue Area 14 Newport Force Main Rehabilitation (2.18%) 131,554 1,922 3,600 Subtotal -Revenue Area 14 131,554 1,922 3,600 Total Collection System Improvement Projects 73,368,742 9,432,983 40,692,600 (Confined) Section 3-Page 2 CIP Budget Review Summary of Capital Improvement Construction Requirements - Current Year For the Three Months Ended September 30, 2016 2016-17 2016-17 2016-17 Cashflow Actual at Projected Budget 9/3 012 01 6 Outlay Treatment&Disposal Projects Headworks Headworks Rehabilitation and Expansion at Plant 1 6,705,388 355,852 6,042,700 Truck Line Odor Control Improvements P1 3,244,621 464,764 1,356,700 Headworks Modifications at P2 for GWRS Final Expansion 36,700 Subtotal -Headworks 9,950,009 820,616 7,436,100 Primary Treatment Primary Clarifier&Trickling Filter Odor Control at P1 95,767 - 58,700 Plant No. 1 Primary Treatment Upgrades 293,871 65,394 171,000 Primary Clarifiers Repl & Impr at Plant No. 1 - 124,268 179,800 A-Side Primary Clarifiers Repl.at P2 1,684,096 85,895 3,170,600 Subtotal -Primary Treatment 2,073,734 275,557 3,580,100 Secondary Treatment Activated Sludge Aeration Basin Deck Repair at P2 295,085 13,143 122,200 Oxygen Plant Demolition at Plant No. 2 428,585 3,123 24,500 Subtotal -Secondary Treatment 723,670 16,266 146,700 Solids Handling& Digestion Digester Rehabilitation at Plant 1 4,754,023 3,033,672 6,060,700 Sludge Dewatedng and Odor Control at Plant 1 18,460,389 2,625,230 12,692,600 Solids Thickening and Processing Upgrades 4,208,003 134,289 1,554,500 Sludge Dewatedng and Odor Control at Plant 2 23,463,706 2,525,153 20,950,000 Subtotal -Solids Handling&Digestion 50,886,121 8,318,344 41,257,800 Ocean Outfall Systems Final Ef0uent Sampler and Building Area Upgrades 5,602,416 789,403 4,458,800 Ocean Outfall System Rehabilitation 4,648,804 448,562 4,363,600 Subtotal -Ocean Outfall Systems 10,251,220 1,237,965 8,822,400 Utility Systems Cengen Cooling Water System Replacement - 1,699 1,700 Cengen Emissions Control Project 692,372 175,347 317,500 Digester Gas Facilities Rehabilitation 332,017 - 133,200 Natural Gas Pipelines Repl at Plant No. 1 and 2 33,573 11,238 108,900 Plant Water System Rehabilitation at Plant No. 1 11,645 410 500 Plant Water System Rehabilitation at Plant No. 2 1,884 4,084 4,100 Consolidated Demolition&Utility Improvements at P2 1,081,187 321,324 1,094,200 Plant Air System Master Plan 45,061 5,800 Subtotal -Utility Systems 2,197,739 514,102 1,665,900 (Confined) Section 3 - Page 3 FY 2016-17 First Quarter Report Summary of Capital Improvement Construction Requirements - Current Year For the Three Months Ended September 30, 2016 2016-17 2016-17 2016-17 Cashflow Actual at Projected Budget 9/30/2016 Outlay Process Related Special Projects Safety Improvements at Plants Nos. 1 and 2 704,960 95,275 3,459,500 Odor Control Master Plan 585,791 663,700 Subtotal -Process Related Special Projects 1,290,751 95,275 4,123,200 Information Management Systems Programmable Control Panel Upgrade 74,645 8,020 79,300 Power Monitoring &Control Systems at P2 2,590,934 89,178 2,425,000 Master Information Technology Capital Program 502,307 79,139 1,641,300 Geographic Information System 616,445 247,909 318,000 EAM Software and Process Implementation 471,467 34,890 109,900 PDS2D Software Replacement 98,061 5,000 5,000 Process Control System Upgrades Study 1,348,089 410 347,400 Subtotal -Information Management Systems 5,701,948 464,546 4,925,900 Strategic& Master Planning Master Planning Studies 3,363,060 425,158 8,777,100 Subtotal -Strategic&Master Planning 3,363,060 425,158 8,777,100 Water Management Projects Ef0uent Reuse Study 1,104,241 147,748 491,000 Subtotal -Water Management Projects 1,104,241 147,748 491,000 Research Research Program 1,149,080 - 247,300 Fuel Cell Demo 16,644 1,628 11,300 SCCWRP Nutrient Cycling Sampling 42,659 - 32,000 AquaCritox Evaluation/Design 255,469 35,320 125,600 Subtotal -Research 1,463,852 36,948 416,200 Support Facilities Master Facilities Engineering Projects- Plant 12,735,831 867,810 4,539,000 Master Small Capital Replacement/Rehabilitation 1,711,019 (19,471) 655,700 Title 24 Access Compliance&Building Rehab Project 3,816,143 102,421 2,219,500 Headquarters Complex, Site& Security&Entrance Realign. 5,951,410 35,678 2,388,200 Site and Security Improvements at Plant No.2 12,797 5,100 Subtotal -Support Facilities 24,227,200 986,438 9,807,500 (Continued) Section 3-Page 4 CIP Budget Review Summary of Capital Improvement Construction Requirements - Current Year For the Three Months Ended September 30, 2016 2016-17 2016-17 2016-17 Cashflow Actual at Projected Budget 913 012 01 6 Outlay Others Capital Improvement Program Mgmt. Services 24,326 12 100 Subtotal -Others 24,326 12 100 Additional Charges to CIP Completed at 6130116 82,046 82,100 Total Treatment and Disposal Projects 113,257,871 13,421,021 91,532,100 Capital Equipment Purchases 3,682,780 553,411 3,682,800 Total Collection,Treatment and Disposal Projects and Capital Equipment Purchases $190,309,393 $ 23,407,415 $135,907,500 Section 3 - Page 5 FY 2016-17 First Quarter Report Summary of Capital Improvement Construction Requirements- Project Life For the Three Months Ended September 30,2016 Current Total Approved June 30,2016 Year Projected Remaining Project Accumulated Projected Cost at Future Budget Cost Cost June 30,2017 Budget Collection System Improvement Projects Collections Facilities Santa Ana Trunk Sewer Rehab. 6,974,000 61686,800 100,900 6,787,700 186,300 Raiff and Bristol Street Sewer Rehab&Extension 13,622,000 259,075 196,600 455,675 13,166,325 Santa Ana River Interceptor(SARI)Realignment 11,404,000 5,592,473 48,600 5,641,073 5,762,927 SARI Rock Stabilizers Removal 3,743,000 265,733 642,000 907,733 2,835,267 Taft Branch Sewer Relief 1,928,000 12,083 - 12,083 1,915,917 Newhope-Placentia Trunk Grade Separation Replacements 5,739,000 4,045,695 254,200 4,299,895 1,439,105 Newhope-Placentia Trunk Replacement 34,708,000 9,737,373 14,751,100 24,488,473 10,219,527 Newhope-Placentia Trunk Replacement,Segment 65,367,000 26,909 64,600 91,509 65,275,491 Yoffie Linda Pumping Station Abandonment 7,053,000 - - - 7,053,000 Lakeview Grade Separation Project 330,000 68,892 104,800 173,692 156,308 Tustin Rose OCTA Grade Separation Project 586,000 283,638 164,300 447,938 138,062 Beach Tmnk/Knott Interceptor Sewer Relief 118,678,000 - - - 118,678,000 Seal Beach Pumping Station Upgrade and Rehabilitation 60,840,000 2,073,689 2,594,900 4,668,589 56,171,411 Rehabilitation of Western Regional Sewers 217,069,000 2,518,370 8,597,200 11,115,570 205,953,430 Newport Force Main Rehabilitation 62,604,800 56,646,974 171,700 56,818,674 5,786,126 Crystal Cove Pumping Station Rehabilitation 10,882,000 - - - 10,882,000 Bay Bridge Pumping Station Replacement 54,000,000 - 216,100 216,100 53,783,900 Newport Beach Pump Stations Odor Control Improvements 4,066,000 - - - 4,066,000 District 6 Trunk Sewer Relief 7,965,000 1,421,400 1,019,800 2,441,200 5,523,800 Southwest Costa Mesa Trunk 29,650,000 1,747,830 1,000 1,748,830 27,901,170 Gisler-Redhill System Improvements,Reach"B" 25,213,000 6,299,980 10,994,200 17,294,180 7,918,820 Browning Subtrunk Sewer Relief 16,952,000 - - - 16,952,000 MacArthur Pumping Station Rehabilitation 8,762,000 - - - 8,762,000 Main Street Pump Station Rehabilitation 39,219,000 - - - 39,219,000 Gisler Red-Hill Interceptor Rehabilitation 5,486,000 - 50,400 50,400 5,435,600 Edinger/Bolsa Chita 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 12,192,000 1,199,298 462,400 1,661,698 10,530,302 Master Planning Studies-Collections 10,636,304 402,264 32,500 434,764 10,201,540 Bay Bridge Pump Station and Force Mains Rehab Study 725,000 341,878 209,800 551,678 173,322 Additional Charges to CIP Closed at 6130116 11,900 11,900 (11,900) Subtotal-Collections Facilities 860,162,104 99,630,354 40,689,000 140,319,354 719,842,750 Revenue Area 14: Newport Force Main Rehabilitation(2.18%) 1,395,200 1,262,425 3,600 1,266,025 129,175 Subtotal-Revenue Area 14 1,395,200 1,262,425 3,600 1,266,025 129,175 Total Collection System Improvement Projects 861,557,304 100,892,779 40,692,600 141,585,379 719,971,925 (Continued) Section 3-Page 6 CIP Budget Review Summary of Capital Improvement Construction Requirements - Project Life For the Three Months Ended September 30,2016 Current Total Approved June 30,2016 Year Projected Remaining Project Accumulated Projected Cost at Future Budget Cost Cost June 30,2017 Budget Treatment&Disposal Projects Headworks Headworks Rehabilitation and Expansion at Plant 1 274,841,000 2,433,404 6,042,700 8,476.104 266,364,896 Truck Line Odor Control Improvements P1 9,299,000 7,359,325 1,356,700 8,716,025 582,975 Headworks Modifications at P2 for GWRS Final Expansion 50,000,000 36,700 36,700 49,963,300 Subtotal-Headworks 334,140,000 9,792,729 7,436,100 17,228,829 316,911,171 Primary Treatment Primary Clarifier&Trickling Filter Odor Control at P1 94,228,000 - 58,700 58,700 94,169,300 Plant No.1 Primary Treatment Upgrades 9,146,000 8,118,861 171,000 8,289,861 856,139 Primary Clarifiers Repl&Impr at Plant No.1 158,332,000 - 179,800 179,800 158,152,200 A-Side Primary Clarifiers Reel.at P2 428,264.000 978,734 3,170,600 4,149,334 424,114,666 Subtotal-Primary Treatment 689,970,000 9,097,595 3,580,100 12,677,695 677,292,305 Secondary Treatment Activated Sludge Aeration Basin Deck Repair at P2 2,331,000 55,798 122,200 177,998 2,153,002 Oxygen Plant Demolition at Plant No.2 3,444,000 2,816.671 24,500 2,841,171 602,829 Subtotal-Secondary Treatment 5,775,000 2,872,469 146,700 3,019,169 2,755,831 Solids Handling&Digestion Digester Rehabilitation at Plant 1 66,650,000 57,765,401 6,060,700 63,826,101 2,823,899 Sludge Dewatering and Odor Control at Plant 1 188,328,000 152,105,764 12,692,600 164,798,364 23,529,636 Solids Thickening and Processing Upgrades 51,150,000 46,778,286 1,554,500 48,332,786 2,817,214 Plant No.2 Digester Facilifies Rehabilitation 49,220,000 152,343 - 152,343 49,067,657 Sludge Dewatering and Odor Control at Plant 2 90,477,000 25,961,621 20,950,000 46,911,621 43,565,379 Subtotal-Solids Handling&Digestion 445,825,000 282,763,415 41,257,800 324,021,215 121,803,785 Ocean Outfall Systems Final Effluent Sampler and Building Area Upgrades 16,411,000 11,079,895 4,458,800 15,538,695 872,305 Ocean Outlall System Rehabilitaton 87,683,000 3,043,856 4,363,600 7,407,456 80,275,544 Subtotal-Ocean Outfall Systems 104,094,000 14,123,751 8,822,400 22,946,151 81,147,849 Utility Systems Cengen Cooling Water System Replacement 11,177,000 11,374,655 1,700 11,376,355 100,645 Cengen Emissions Control Project 23,820,000 21,945,471 317,500 22,262,971 1,557,029 UPS System Upgrades 8,087,000 - - - 8,087,000 Digester Gas Facilities Rehabilitation 87,897,000 9,458 133,200 142,658 87,754,342 Natural Gas Pipelines Repl at Plant No.1 and 2 1,310,000 2,282 108,900 111,182 1,198,818 Electrical Power Distribution System Improvements 34,608,000 - - - 34,608,000 Plant Water System Rehabilitation at Plant No.1 6,157,000 6,113,517 500 6,114,017 42,983 (Continued) Section 3-Page 7 FY 2016-17 First Quarter Report Summary of Capital Improvement Construction Requirements-Project Life For the Three Months Ended September 30,2016 Current Total Approved June 30,2016 Year Projected Remaining Project Accumulated Projected Cost at Future Budget Cost Cost June 30,2017 Budget Utility Systems(continued) Central Generation Rehab at Plant No. 1 73,151,000 - - - 73,151,000 Plant Water System Rehabilitation at Plant No.2 3,704,000 3,737,750 4,100 3,741,850 (37,850) Consolidated Demolition&UOlity Improvements at P2 38,460,000 3,205,873 1,094,200 4,300,073 34,159,927 Central Generation Rehab at Plant No.2 95,906,000 - - - 95,906,000 Plant Air System Master Plan 225,000 187,096 5,800 192,896 32,104 Subtotal-Utility Systems 384,802,000 46,576,102 1,665,900 48,242,002 336,559,998 Process Related Special Projects Safety Improvements at Plants Nos.1 and 2 9,702,000 202,858 3,459,500 3,662,358 6,039,642 Odor Control Master Plan 1,950,000 1,233,922 663,700 1,897,622 52,378 Subtotal-Process Related Special Projects 11,652,000 1,436.780 4,123,200 5,559,980 6,092,020 Information Management Systems Process Control Systems Upgrades 102,399,000 - - - 102,399,000 Programmable Control Panel Upgrade 2,283,000 1,785,807 79,300 1,865,107 417,893 Power Monitoring&Control Systems at P2 34,123,000 604,790 2,425,000 3,029,790 31,093,210 Master Information Technology Capital Program 10,000,000 - 1,641,300 1,641,300 8,358,700 Geographic Information System 4,568,000 1,947,390 318,000 2,265,390 2,302,610 EAM Software and Process Implementation 7,500,000 4,700,097 109,900 4,809,997 2,690,003 PDS2D Software Replacement 525,000 342,351 5,000 347,351 177,649 Process Control System Upgrades Study 3,554,000 347,400 347,400 3,206,600 Subtotal-Information Management Systems 164,952,000 9,380,435 4,925,900 14,306,335 150,645,665 Strategic&Master Planning Master Planning Studies 13,015,696 1,190,605 8777,100 9,967,705 3,047,991 Climate Change Impact Study 590,000 590,000 Subtotal-Strategic&Master Planning 13,605,696 1,190,605 8777,100 9,967,705 3,637,991 Water Management Projects Effluent Reuse Study 3,250,000 2,529,365 491,000 3,020,365 229,635 Subtotal-Water Management Projects 3,250,000 2,529,365 491,000 3,020,365 229,635 Research Research Program 8,500,000 - 247,300 247,300 8,252,700 Fuel Cell Demo 135,000 118,192 11,300 129,492 5,508 SCCWRP Nutrient Cycling Sampling 95,000 71,250 32,000 103,250 (8,250) AquaCritoz Evaluation/Design 588,000 402,510 125,600 528,110 59,890 Subtotal-Research 9,318,000 591,952 416,200 1,008,152 8,309,848 (Continued) Section 3-Page 8 CIP Budget Review Summary of Capital Improvement Construction Requirements - Project Life For the Three Months Ended September 30,2016 Current Total Approved June 30,2016 Year Projected Remaining Project Accumulated Projected Cost at Future Budget Cost Cost June 30,2017 Budget Support Facilities Master Facilities Engineering Projects-Plant 43,325,000 7,856,037 4,539,000 12,395,037 30,929,963 Master Small Capital ReplacementlRehabilitation 15,622,000 2,065,761 655,700 2,721,461 12,900,539 Title 24 Access Compliance&Building Rehab Project 17,509,000 12,967,931 2,219,500 15,187,431 2,321,569 Headquarters Complex,Site&Security&Entrance Realign. 179,067,000 169,006 2,388,200 2,557,206 176,509,794 Site and Security Improvements at Plant No.2 252,000 227,660 5,100 232,760 19,240 Subtotal-Support Facilities 255,775,000 23,286,395 9,807,500 33,093,895 222,681,105 Others Banning Gale Relocation&Grading at Plant No.2 2,812,000 227,660 - 227,660 2,584,340 Capital Improvement Program Mgml.Services 300,000 9,591 100 9,691 290,309 Subtotal-Others 3,112,000 237,251 100 237,351 2,874,649 Additional Charges to CIP Completed at 6130116 82,100 82,100 (82,100) Total Treatment and Disposal Projects 2,426,270,696 403,878,844 91,532,100 495,410,944 1,930,859,752 Capital Equipment Purchases 16,000,000 7,083,097 3,682,800 10,765,897 5,234,103 Total Collection,Treatment and Disposal Projects and Capital Equipment Purchases $3,303,828,000 $511,854,720 $135,907,500 $647,762,220 $2,656,065,780 Section 3-Page 9 FY 2016-17 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 30,2016 Capital Facilities Budget Review Balance Year-to-Date Balance 07/01/16 Additions 9/30116 CONSTRUCTION IN PROGRESS: Treatment Plant $ 405,065,130 $ 13,974,432 $ 419,039,562 Collection System 94,310,929 9,432,983 103,743,912 Subtotal 499,376,059 23,407,415 522,783,474 PROPERTY,PLANT&EQUIPMENT(at cost): Land and Property Rights 15,959,559 - 15,959,559 Collection Lines and Pump Stations 781,138,758 - 781,138,758 Treatment Facilities 2,278,136,004 - 2,278,136,004 Effluent disposal facilities 97,014,820 - 97,014,820 Solids disposal facilities 3,463,236 - 3,463,236 General and administrative facilities 229,446,444 - 229,446,444 Excess purchase price over book value on acquired assets 19,979,000 19,979,000 Subtotal 3,425,137,821 3,425,137,821 Total Property, Plant&Equipment&CIP $ 3,924.513,880 $ 23,407415 $ 3,947.921,295 Debt Service Budget Review 2016-17 Year-to-Date Remaining Budget Payments %of Budget Budget Principal Payments by Debt Issue: 2007A COP 265,000 - 0.00% 265,000 2007B COP 7,110,000 - 0.00% 7,110,000 2008B COP 8,815,000 8,815,000 100.00% - 2009ACOP 4,250,000 - 0.00% 4,250,000 2010A BABs - - 0.00% - 2010C BABs - - 0.00% - 2011ACOP 15,135,000 15,135,000 100.00% - 2012A COP - - 0.00% - 2012B COP - - 0.00% - 2014A COP - - 0.00% - 2014B CANS 7,827,411 - 0.00% 7,827,411 2015A COP - - 0.00% - 2016A COP 0.00 Subtotal Principal Payments 43,402,411 23,950,000 55.18% 19,452,411 Interest Expense by Debt Issue: 2007A COP 4,108,278 1,027,039 25.00% 3,081,239 2007B COP 355,500 88,950 25.02% 266,550 2008B COP 132,225 22,025 16.66% 110,200 2009A COP 585,250 146,225 24.99% 439,025 2010A BABs 2,897,639 993,269 34.28% 1,904,370 2010C BABs 6,523,780 2,236,375 34.28% 4,287,405 2011A COP 4,774,725 1,162,150 24.34% 3,612,575 2012A COP 3,735,900 934,050 25.00% 2,801,850 2012B COP 3,187,400 796,800 25.00% 2,390,600 2014A COP 4,254,500 1,063,650 25.00% 3,190,850 2014B CANS 496,694 1,208,500 243.31% (711,806) 2015A COP 6,375,500 1,593,850 25.00% 4,781,650 2016A COP 5,833,798 1,749,148 29.98% 4,084,650 Subtotal Interest Expense 43,261,189 13,022,031 30.10% 21,372,858 Total Debt Service $ 86,663,600 $ 36,972,031 42.66% $ 40,825,269 Section 4- Page 1 2016-17 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 30,2016 Percent Actual of Budget Remaining Actual 2016-17 Through Through 2016-17 Through Increase Budget 9/30/16 9130116 Budget 9/30/15 (Decrease) Revenues: In-Lieu Premiums $ 1,111,100 $ 277,776 25.00% $ 833,324 $ 123,999 $ 153,777 Service Department Allocations 18,700 4,674 24.99% 14,026 1,374 3,300 Total Revenues 1,129,800 282,450 25.00% 847,350 125,373 157,077 Expenses: Benefits/Claims 40,000 607,372 1518.43% (567,372) 7,549 599,823 Legal Services 130,000 29,404 22.62% 100,596 2,175 27,229 Professional Services 25,313 N/A (25,313) 25,313 Subtotal 170,000 662,089 389.46% (492,089) 9,724 652,365 Policy Premium Expense 1,220,000 293,152 24.03% 926,848 290,131 3,021 Total Expenses 1,390,000 955,241 68.72% 434,759 299,855 655,386 Excess Revenue(Expense) (260,200) (672,791) $ 412,591 (174,482) (498,309) Beginning Reserves 55,260,200 55,252,299 56,125,515 (873,216) Ending Reserves $55, 000,000 $ 54, 779,508 $ 55, 551,033 $(1,371,525) Section 5-Page 1 FY 2016-17 First Quarter Report Workers'Compensation Fund Budget Review For the Three Months Ended September 30,2016 Percent Actual of Budget Remaining Actual 2016-17 Through Through 2016-17 Through Increase Budget 9/30/16 9/30/16 Budget 9130115 (Decrease) Revenues: In-Lieu Premiums $ 1,196,300 $ 299,075 25.00% $ 897,225 $ 369,675 $ (70,600) Miscellaneous Other Revenue 10,000 - 0.00% 10,000 - - Total Revenues 1,206,300 299,075 24.79% 907,225 369,675 (70,600) Expenses: Benefits/Claims 660,000 80,728 12.23% 579,272 248,200 (167,472) Legal Services 170,000 16,913 9.95% 153,087 81,599 (64,686) Professional Services 60,000 14,075 23.46% 45,925 10,556 3,519 Subtotal 890,000 111,716 12.55% 778,284 340,355 (228,639) Policy Premium Expense 200,000 52,206 26.10% 147,794 48,585 3,621 Total Expenses 1,090,000 163,922 15.04% 926,078 388,940 (225,018) Excess Revenue(Expense) 116,300 135,153 $ (18,8531 (19,265) 154,418 Beginning Reserves 1,883,700 1,913,178 1,523,264 389,914 Ending Reserves $ 2,000,000 _L 2.048.331 $ 1.503,999 $ 544,332 Section 5-Page 2 'e? Op October 31, 2016 STAFF REPORT Quarterly Treasurer's Report For the Three Months Ended September 30, 2016 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, 2016. The Liquid Operating Monies portfolio, with an average maturity of 40 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, 2016. ODSD ♦ P.0.Box8127 ♦ Foun in Velley,C 927284127 ♦ (914)%2-2411 Quarterly Treasurer's Report For the Three Months Ended September 30, 2016 Page 2 of 3 Portfolio Performance Summary Quarter Ended September 30,2016 Liquid Operating Monies(%) Long-Term Operating Monies I%) Total Rate of Total Rate of Return Benchmark') Return Benchmark') 3 Months 0.10 0.10 0.06 -0.07 6 Months 0.19 0.17 0.78 0.80 9 Months 0.36 0.24 2.33 2.38 12 Months 0.41 0.27 2.00 1.81 Annualized Since inception 30 Nov 2014 0.32 0.16 1.61 1.70 Market Value $58om 325.9M Average Quality "AA+"I"A1V -AWP'Aal" Current Yield(%) 0.9 1.6 Estimated Yield to Maturity(%) 0.5 1.1 Quarterly Deposits(Withdrawals) (81.5)M (7.0)M Estimated Annual Income 0.3M W8M (1) Benchmarks: • Liquid Operating Portfolio: 3-Month Treasury Bill Index • Long-Teml Operating Portfolio: Merrill Lynch Corp/Govt. 1-5 Year Bond Index Portfolio Market Values Comparative marked-to-market quarter-end portfolio values are shown in the following table, and in the attached bar chart. Liquid Long-Term Quarter Operating Operating Ending Monies($M) Monies SM) 31 Dec.15 132.0 314.8 31 Mar. 16 63.8 319.6 30 Jun.16 139.4 332.7 30 Sep.16 58.0 325.9 District's Investment Account Balances as of September 30, 2016 Book Balances Estimated Investment Accounts September 30,2016 Yield(%) State of Calif.LAIF $18,672,556 0.63 Union Bank Checking Account 52,554 0.00 Union Bank Overnight Sweep Account 277,000 0.01 Union Bank W/C Checking 86,894 0.00 Chandler-Short-term Portfolio 57,842,514 0.51 Chandler-Long-term Portfolio 325,180,626 1.05 Petty Cash 3,000 N/A BNY Mellon OCIP Reserve 3.602.141 0.88 TOTAL $405.717 2H5 0.95 Debt Service Reserves w/Tmstees $21 9A5 45A 2.52 Quarterly Treasurer's Report For the Three Months Ended September 30, 2016 Page 3 of 3 District's Cost of Funds on Debt Issues as of September 30, 2016 Annual Cost of Funds Outstanding Interest Issue Description COP Balance Rate(%) 2007A Fixed $91,885,000 4.50 2007B Fixed 7,110,000 4.71 2009A Fixed 13,405,000 4.72 2010A Fixed 80,000,000 3.68 2010C Fixed 157,000,000 4.11 2011A Fixed 96,330,000 2.61 2012A Fixed 100,645,000 3.54 2012B Fixed 66,395,000 1.50 2014A Fixed 85,090,000 2.34 2014B Fixed 120,850,000 0.41 2015A Fixed 127,510,000 3.30 2016A Fixed 145,880,000 3.02 TOTAL $1 092 100 OW Weighted Avg.Cost of Funds 2.99 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 Account 8. Investment Listing (Yield Analysis Report) 9. Asset Detail — Consolidated 10. Custody Transaction History—Consolidated 11. Callan Quarterly Review 12. Chandler Quarterly Review 13. Rating Agency Comparisons C/" CHANDLER ASSET MANAGEMENT September 30, 2016 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) kept the fed funds rate unchanged at a range of 0.25%-0.50% in September. However, there were three dissenting votes (out of ten), as Esther George (Kansas City), Loretta Master (Cleveland), and Eric Rosengren (Boston) preferred to raise the target range by a quarter percent. The Fed's overall assessment of the economy was little changed from July. In the policy statement, the Committee noted the labor market has continued to strengthen but inflation remains below target. In deciding whether or not to raise the fed funds target rate, the Committee said "the case for an increase in the federal funds rate has strengthened but decided, for the time being, to wait for further evidence of continued progress toward its objectives." In her press conference, Fed Chair Yellen remarked that the next meeting on November 1-2 is a "live" meeting but given its proximity to the US Presidential election on November 8, we think the Fed is likely to keep monetary policy on hold until December. If economic data remains modestly favorable over the next few months, we expect the Fed will hike the fed funds rate range by 25 basis points in December. Market participants estimate the economy grew at an annualized pace of about 2.9% in the third quarter. If accurate, that represents a pick-up from first and second quarter GDP growth of 0.8% and 1.4, respectively. The consensus forecast calls for GDP growth of about 2.5% in the fourth quarter. Labor market trends remain favorable, which should continue to provide a tailwind to economic growth. The unemployment rate was 5.0% in September, wage growth ticked higher, and payrolls increased by 156,000 (more than enough to absorb new entrants into the labor market). Consumer confidence is strong. Housing trends remain positive even though home price appreciation has softened. Oil prices have rebounded from earlier this year. The manufacturing sector, though still under pressure, has slightly improved. Overall, domestic economic data remains indicative of slow growth. In September, the 2-year Treasury yield decreased four basis points and the 10-year Treasury yield increased one basis point. Leading up to the FOMC meeting in September, the yield curve steepened slightly. After the FOMC meeting in September, yields modestly declined. More recently, yields across the curve have increased as the market-implied probability of a fed funds rate hike before year-end has risen to more than 65%. GAL CHANDLER ASSET MANAGEMENT In September, the Treasury yield curve was little changed. However, on a year-over-year basis the yield curve flattened with the 2-year Treasury yield up about 13 basis points and the 10-year Treasury yield down more than 44 basis points. Over the past year, financial market volatility has been elevated due to weak global economic growth, volatile commodity prices, political uncertainty, and divergent global central bank monetary policy. Consumer Prices The Consumer Price Index (CPI) was up 1.1% year-over-year in August, versus up 0.8% year- over-year in July. Core CPI (CPI less food and energy) was up 2.3% year-over-year in August, vs. 2.2% in July. The Personal Consumption Expenditures (PCE) index was up 1.0% year-over- year in August, versus 0.8% in July. Core PCE (excluding food and energy) was up 1.7% year- over-year in August vs. up 1.6% year-over-year in July. Although Core CPI is trending above 2.0%, the Fed's primary inflation gauge is PCE which remains below the Fed's 2.0% target. Retail Sales On a year-over-year basis, total retail sales were up 1.9% in August, compared with a 2.4% increase in July. On a month-over-month basis, retail sales declined 0.3% in August, below expectations. Excluding autos, retail sales fell 0.1% in the month. Labor Market Nonfarm payrolls were lower than expected in September, up 156,000 versus the consensus forecast of 172,000. July and August payrolls were revised down by a net total of 7,000. On a trailing 3-month and 6-month basis, payrolls increased by an average of 192,000 and 169,000 per month, respectively. The unemployment rate inched up in September to 5.0% from 4.9% in August, as the participation rate increased to 62.9% from 62.8%. 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, remained unchanged in September at 9.7%. Wages increased 0.2% in September, following a 0.1% increase in August. On a year- over-year basis, wages were up 2.6% in September, versus 2.4% in August. Housing Starts Total housing starts fell 5.8% in August, following growth of 1.4% in July. Single-family starts fell 6.0% in August while multi-family starts declined 5.4%. Housing starts tend to be volatile on a month-to-month basis but the underlying trend remains favorable. Notably, single-family permit growth was strong in August. 2 C/" CHANDLER ASSET MANAGEMENT TREASURY YIELDS 9/3012016 6130/2016 CHANGE 3 Month 0.28 0.26 0.02 2 Year 0.76 0.58 0.18 3 Year 0.88 0.69 0.19 5 Year 1.15 1.00 0.15 7 Year 1.42 1.28 0.14 10 Year 1.60 1.47 0.13 30 Year 2.32 2.29 0.03 ECONOMIC INDICATOR CURRENT RELEASE PRIOR RELEASE ONE • Trade Balance (40.7) $Bin AUG 16 (39.5) $Bln JUL 16 (44.6) $Bln AUG 15 GDP 1A%JUN 16 0.8% MAR 16 2.6%JUN 15 Unemployment Rate 5.0%SEP 16 4.9%AUG 16 5.1%SEP 15 Prime Rate 3.5%SEP 16 3.5%AUG 16 3.25% SEP 15 CRB Index 186.31 SEP 16 180.21 AUG 16 193.76 SEP 15 Oil (West Texas Int.) $48.24 SEP 16 $44.70 AUG 16 $45.09 SEP 15 Consumer Price Index(y/o/y) 1.1%AUG 16 0.8%JUL 16 0.2%AUG 15 Producer Price Index(y/o/y) (2.1%)AUG 16 (2.2%)JUL 16 (3.1%)AUG 15 Dollar/EURO 1.12 SEP 16 1.12 AUG 16 1.12 SEP 15 3 C/" CHANDLER ASSET MANAGEMENT Performance Attribution Long-Term Portfolio The long-term portfolio produced positive returns during the quarter, both on an absolute and relative basis. The quarterly return for the long-term portfolio was 0.06% versus (0.07%)for the Bank of America Merrill Lynch 1-5 Year AAA-A US Corporate and Government Index. The primary driver of the positive performance differentiation of the portfolio was the term structure positioning of the portfolio. Notably, the portfolio remained underweight in the one to three year maturity range, adding to results as the yield curve re-priced post the large flight to quality in the market after the Brexit vote in late June. During the quarter the Chandler team added several new securities to the portfolio in the Asset Backed, Supranational, Negotiable CD, and Corporate sectors of the market. Changes in regulation related to prime money market funds led to some dislocation in short maturity non Treasury securities and the team took advantage via adding a Negotiable CD position and several ABS securities. The team continues to find the Supranational sector attractive relative to the Agency sector and will look to opportunistically increase exposure. The overall duration of the portfolio remains modestly below the benchmark as Chandler maintains the view the Federal Reserve will tighten policy in December. As the market prices in a higher probability of a tightening the team will look to close the duration gap versus the benchmark. Liquid Portfolio The Liquidity portfolio matched the return of the three month Treasury Bill benchmark during the quarter, generating a return of 0.10%. The portfolio experienced heavy negative cash flows with the net portfolio value shrinking to $57.9 million versus $139.4 million at the end of the prior quarter. Despite the contracting portfolio size the team still purchased many securities across the Treasury, Agency, Commercial Paper, and Corporate sectors of the market of optimize the structure of the portfolio. Similar to prior quarters the Chandler team continues to focus on positioning the portfolio to out-yield the benchmark after taking into account forecasted liquidity needs. 4 C/" CHANDLER ASSET MANAGEMENT Economic Outlook Risk market performance was solid in the third quarter as economic data was generally favorable and market participants looked past the long-term implications of the Brexit vote in late June. Both the S&P 500 and NASDAQ composite were up just over 6.0% YTD through the end of September, compared to a total return of 2.7% and -3.3% YTD at the end of June 2016. Treasury yields also moved higher, with the two year note moving higher by 0.18%, the five year by 0.15%, and the ten year by 0.13%. Commodity prices continued to stabilize with Oil (West Texas Intermediate)trading in a relatively tight range centered around $47 per barrel during the quarter. Despite the continued global rhetoric on production cuts to support the price of oil the Chandler team maintains the view the price will remain range bound. Looking out over an intermediate time horizon prices are unlikely to touch the lows from earlier in the year, and also unlikely to break out above $60 per barrel. Developed market central bank policy differentiation is likely to remain a theme in the markets over the coming year. The Federal Reserve's recently released Summary of Economic Projections continues to forecast a terminal Fed Funds rate much higher than current market expectations. Chandler anticipates the Federal Reserve and market forecast will gradually converge, with the Federal Reserve forecast adjusting by a greater amount. Sovereign bond yields abroad, particularly in Germany and Japan, remain exceptionally low, and negative in many maturities. The low and negative rates abroad will serve to put a cap on the ability of the US Treasury market interest rates to adjust materially higher. We expect the dollar to strengthen over the coming year, which will serve as a de facto tightening of policy, and further expect the terminal Fed Funds rate to settle in above 1.00%, but well below the 3.00% Federal Reserve forecast as of September 2016. The markets are likely to remain volatile as the US Presidential cycle winds down and investors consider the ability of fiscal spending to take a more prominent role in the domestic economic recovery with the new administration and a divided Congress. Chandler anticipates risk market performance will remain generally positive as investors continue to search for yield across asset classes. Treasury yields should continue to be under pressure, and move higher, but not by a dramatic amount as the Federal Reserve will be constrained in its ability to tighten traditional monetary policy due to the aforementioned global influences. Strategy Strategy highlights for the Long-Term Portfolio in coming months: • Continue to optimize the overall term structure positioning of the portfolio by remaining underweight portions of the yield curve most exposed to re-pricing post a December monetary policy tightening by the Federal Reserve. • Opportunistically increase the Corporate and Supranational exposure to enhance the total return opportunity of the strategy. • Continue to take advantage of market dislocations to enhance the total return opportunity of the portfolio. The team will pay particular attention to the evolution of the Commercial Paper market post the change in Money Market Fund regulation in mid- October 2016. 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 correspond to upcoming liquidity needs. • Periodically add to the Corporate exposure of the portfolio between maturities of six months to a year, where the additional spread to the Treasury curve is compelling. • Maintain a dedicated exposure to the Treasury sector of close to 20% on an ongoing basis. 6 C/" CHANDLER ASSET MANAGEMENT Compliance Issues CAS Orange County Sanitation District Long Term Septamber30,2016 COMPLIANCE WITH INVESTMENT POLICY Assets managed by Chandler Asset Management are in full compliance wth State lawand war the investmentpo4sy Category Standard Comment Treasury DA.. 5 yeam matlmun maturity Complies' Supomational "AA-or better by l of3 NRSROs; 30%maximum; 5%max issuer, 5years maturity; Complies Ircludes only ADB.IBM,and FC per COC U.S.Agencies 20%max issuer; 5 ram maximum maturity Complies U.S.Corporate(MTNS) "A'or better brg teml reEig by 1 of 3 NRSROs; 30%maximum;5%max issuer, 5 Complies are max maur Municipal Securldes "A'or higher by l of 3 NRSROS;10%maximum: 5%max issuer, 5 years maxinxm Complies maturity Asset Backed/CMOs/ "As'or better by l of 3 NRSROs; "A"or higher issuer citing by l of 3 NRSROs; 20% Complies* Mo a .backed m; 5%may,issuer(DAkuling MBS/ MA enc ;5 yeards max maturity Negotaba,CDs "A"or better on its dog wml debt by l of 3 NRSRCs; 'A11P1'or Nghest sllorttenm Complies ratings by 1 of3 NRSROs; 30%maximum;5%maxissuer, 5 years Max maturity CDSITDS 5%maxissuec 5yaarsmaxmaturity Complies Bankers Acceptances A-1,orequivalenthighestsMdtemlmIMbyl W3NRSR ; 40%maximun; 5% Complies Max issuer,180 d.W Max Wty Commercial Paper A-1,Or equivalent by 1 of3 NRSRO$ 'A'or better by l of3 NRSROs,iflogMm Complies deblissued' 25%maximum' 5%maxissuer' 270daysmaxmatunty Morey Market Fund Highestm61gby2of3NRSR0s; 20%lreximum;10%maxissuer Complies Repurchase Agreemens 102%collatemlimbon Complies Reverse Repurchase 5%maximum,90 days max maturity COmPI105 Agreements LAIF Not used byi AestmeM adviser Complies Avg Duration Nottoexce A160mon0ce - (80%b120%ofMabenclvrerk) Complies Maximurn Maturity 15 years maximum maturity, Complies• `the IArAM1 oeAty-hur(24)aecuAlles Ash maNnnes greetertlen 5 years lndAng one(1)ADS.Ale(5)CMOs,aews A(17)MISS as me(1)treeeury. All exuitiaswere InhoMe fi iMmm mmana andmmgladMlimaNwmhase. C/" CHANDLER ASSET MANAGEMENT C/" Orange County Sanitation District Liquid September 30,2016 COMPLIANCEe Assets managed by Chandler Asset Management am in full compliance with State lawand alth the investment policy Category Standard Comment Treasury Issues l year maximum maturity, Minimum allocation of 10% Complies Supranational "AA"or better by l of 3 NRSROs; 30%maximum; 5%max issuer; lyear Complies maturity; Includes a*. IADB,FIRD,and IFC 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, Complies 1 war max maturity Asset Backed/CMOs "AA"or better by l of 3 NRSROs: "A"or higher issuer rating by l of 3 NRSROs; Complies 20%maxi mum; 5%max issuer, 1 year max maturity Negotiable CDs "A"orbetter on its long term debt by l of 3 NRSROs; "A1/P1"or highest shod Complies term ratings by 1 of 3 NRSROs; 30%maximum;5%max issuer;1 year max maturity CDs/TDS 5%max issuer; l year max matuity Complies Bankers Acceptances A-1,or equivalent short term rating by l of 3 NRSROS; 40%maximum; 5%max Complies issuer,180 days max maturity Commercial Paper A-1,or equivalent by l of3 NRSROS; "A"or better by l of 3 NRSROs,if long Complies term debt issued; 25%maximum; 5%max issuer, 270 days max maturity Money Market Fund Highest rating b 2of3 NRSROs' 20%maximum;10%maxissuer Complies Repurchase Agreements 102%collateralization Complies Reverse Repurchase 5%maximum,90 days max maturity Complies Agreements 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 'Complies in the aggregate portfolio;Liquidity pmiblio has 24%max issuer concentration on Federel Natiorel Mortgage Axeoc(FNMAs). C/" CHANDLER ASSET MANAGEMENT C/" OCSD Lehman Exposure September 30,2016 COMPLIANCE WITH INVESTMENT POLICY Assets mane ed by Chandler Asset Management are in full com fiance dsh State lawand won the investment olic Category Standard Comment Treasury Issues 5 years maximum maturity Complies Supranatloral "AA"or better by l of 3 NRSROs; 30%maximum; 5%max 5years Complies maturity; Includes ori ADB,IBRD,and IFC per CGC U.S.Atiencies 20%max issuer 5 were maximum maturity Complies U.S.Corporate(MTNs) "A"or better long tens rating by 1 of 3 NRSROs; 30%maximum;5%max Complies" issuer' 5yeam max maturity Municipal Securities "A"or higher by l of 3 NRSRGS;10%maximum; 5%max issuer; 5years Complies maximum maturity Asset Backed/CMOs/ "AA"or better by l of 3 NRSROs; "A"or higher issuer rating by 1 of 3 Complies Mortgage-backed Ni 20%maximum; 5%max issuer(excluding MBS/gout agency);5 years max maturity, Negotiable CDs "A"or better on its long teem debt by l of 3 NRSROs; "A1/P1"or highest Complies short teml ratings by l of 3 NRSR0% 30%maximum;5%max issuer; 5 years max maturity CDs/TDS 5%max issuer 5 years max maturity Complies Bankers Acceptances A-1,or equivalent highest short tens rating by l of 3 NRSROS; 40% Complies maximum; 5%max issuer'180 days max maturity Commercial Paper A-1,or equivalent by l of 3 NRSROS; "A"or better by l of 3 NRSROs,if Complies long tern debt issued; 25%maximum; 5%max issuer, 270 days max maturity Money Market Fund Highest harm by 2of 3 NRSROs' 20%maximum;10%max issuer Complies Repurchase A reements 102%collatemliention complies Reverse Repurchase 5%maximum,90 days max maturity Complies Agreements LAF Not wed by imrestmeMadviser Complies Aw Duration Not to exceed 60 months - 80%to 120%ofthe benchmark Complies Maximum Maturity 5 years maximum maturity complies AccomR holds$2 million face slue(cusip S25ESWY6)ant$600,000 face slue(cusip 52SESC1K)ddefaulted Lehman area Holdings that were purchased by the prewus manager. Cwnplied at time of purchase. 9 C/" CHANDLER ASSET MANAGEMENT Defaulted Bonds CAROCSDLehman exposure Holdings Report Aacaunl p1=34 AsJ9/0116 W aRoNseam AHOPNTM Bn BMhesimOpenposllon 808410 11.1.1 are.1e 0Q ..n 1113% NRINM OD] LoN Emomrt OW% sF.2 a 0W% 000 {33.151) MR OD] Due9=018 R,BQ.N M/M.03 qAt% ..I.R On ]ahl Camon Slod BNBMA NIR Q'BQ.Ba BM% BAB 021.MR) N0. B.N IR W Men MTe 535ESCIB] L.. BMBn 50 e.NdbD..I.d 8 .05000 Osns.s Me 3] ]BB Q 3500n 3051% MR INR 033 Dw1=7 OW% 5.ss 37 0M% 000 {3155]53]) MR OW 525E5Cns6 L.. Bnge¢N..Debdied 2.0w.0f0.00 Os..s 11A0s]5s ]BB 157,5W 00 8637% RW mIDy/ 1 0.1 0M% 000 0i ,.1.) anOAO Mesa... xµle•.Be eanx ss. Oµ.. B.al.eg.slMR Rea B,aB,1q.0 23L3n.Ol WTALFORIMOLO ;aµcaL. 1.s51g.a• B.m,n0.a1MR E PLUs ALL uEB xa,ln.0a 10 OIL CHANDLER ASSET MANAGEMENT Ratings Orange County Sanitation District Long Tenn September 30,2018 vs. Jung 30,2015 rmm mm eem eo.w amR om uw u a .n xx � Rame ■ save AM AA A A MR N0111 133% ae.2% 10.0% 3.4% 51% WNWIs 11.114 )1]% 99% Se% l0% Orange County Sanitation District Liquid Jun.30,2016 ve. March 31,2016 imw mow mow wow mow ow nu en a .• xx ■ Wavle ■ come AM M A <A RR ea0na e1.6% 2s2% 6.1% 0.0% 00% mime 41.3% 07.6% 9.3% 0.0% 18% Bouio'.BfPwtlN. t1 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 $300,000,0DD $200,000,000 $100,000,000 $- Q Q HISTORICAL YIELD CURVE 4.00% �-s p 2016 —AUG 2011 3.00% SEP2015 _________________________________________________________ 2.00% _______________________________ ___________________ ------- 2.32%- 0 1.60% 1.42% 1.00% _______ - 1.15%____________________________________________________ 0.43% 0.88% 0.76 0.28% 111 0.00% 701, 12 C/" I Orange County Sanitation District Liquid Portfolio Summary Account#10282 As of 9/30/2016 IN Beg.Values End Values Issuer % Portfolio Average Duration 0.10 as of 8131116 as of 9130116 Federal National Mortgage Assoc 24.4 Average Coupon 0.88% Market Value 57,776,948 57,855,563 Federal Home Loan Bank 19.7 Average Purchase YTM 0.45% Accrued Interest 193,924 133,291 Federal Home Loan Mortgage Corp 10.8 Average Market YTM 0.51 % Total Market Value 57,970,872 57,988,854 9 Government of United States 10.4 Average S&P/Moody Rating AA+/Aai Income Earned 29,668 24,282 Drefus Treasury Money Market Fu 9.1 Average Final Maturity 0.11 yrs Cont/ND 0 Pepsico Inc 2.6 Average Life 0.08 yrs Par 57,713,858 57,818,222 Bank of Tokyo-Mit UFJ 2.2 Book Value 57,774,927 57,859,842 Eli Lilly 8 Cc 1.8 Cost Value 57,842,676 57,919,793 80 9 • - • • MATURITY DISTRIBUTION CREDIT 100% AAA Commercial 870°:a (52a%) Money -Paper Market (5.7%) 80% Fund FI (9.1 %) 6096 us Coryorate 40% (20.0%) 20% Agency as% AA (54.8%) US 3.5% (32A%) Treasury % (10.4%) I 0.35 .25..5 .5,1 1.1.5 1.5.2 2.2.5 2.5.3 Y A Maturity(Yrs) (14.8%) Total Rate of Return Current Latest Year Annualized Since As of 9/30/2016 Month 3 Months To Date 1 Yr 3 Yrs 5 Yrs 10 Yrs 11/30/2014 11/30/2014 Orange County Sanitation District Liquid 0.03% 0A0% 0.36% 0.41 % N/A N/A N/A 0.32% 0.59% BAML 3-Month US Treasury Bill Index 0.05% 0.10% 0.24% 0.27% N/A N/A N/A 0.16% 0.30 Chandler Aw Management-CONFIDENTIAL P...1 E..c .n Time:1091201610:47:22 AM GILI Orange County Sanitation District Long Term Portfolio Summary Account#10268 As of 9/30/2016 Is Beg.Values End Values Issuer % Portfolio Average Duration 2.38 as of 8131116 as of 9130116 Government of United States 25.6 Average Coupon 1.61 % Market Value 324,365,669 324,974,281 Federal National Mortgage Assoc 12.1 Average Purchase YTM 1.48% Accrued Interest 1,139,979 975,605 Federal Home Loan Bank 9.4 Average Market YTM 1.05% Total Market Value 325,505,648 325,949,886 9 Fedeml Home Loan Mortgage Corp 9.2 Average S&P/Moody Rating AA+/Aa1 Income Earned 393,830 393,148 Inter-American Dev Bank 2.6 Average Final Maturity 2.80 yrs COnt/WD -15,999 John Deere ABS 2.6% Average Life 2.47 yrs Par 319,552,770 320,129,636 JP Morgan ABS 2.0 Book Value 320,377,638 320,927,042 Bank of Tokyo-Mit UFJ 2.0 Cost Value 321,581,440 322,156,483 65.5% • - • • MATURITY DISTRIBUTION CREDIT us Mortgage AA Corporate Pass 30% 273% 6g,2%) (22.0%) Thru Commercial (0.7%) 25% Paper US (3.6%) Treasury 20Y 19.5% Municipal (25.6%) J6.3% 16.0% 16.0% Bonds (1.5%) Negotiable 16% Money CD Market (1.3%) 10% BBB (3A%) Fund Suprenational •.•% CMO (5.7%) 5% NR (1.0%) (5.1%) ABS Agency s-.zs ss-s s-1 1-2 z-s 3-4 4-5 s. AAA A (9.0%) (29.3%) Maturity(Yrs) (15.3%) (10.0%) PERFORMANCE Total Rate of Return Current Latest Year Annualized Sinu As of 9/30/2016 Month 3 Months To Date 1 Yr 3 Ym 5 Yrs 10 Yrs 11/30/2014 11/30/2014 Orange County Sanitation District Long Term OA4% 0.06% 2.33% 2.00% N/A N/A N/A 1.61 % 2.98% BAML 1-5 Yr US Corporate/Govt Rated AAA-A Index OAS% -0.07% 2.38% 1.81 % N/A N/A N/A 1.70% 3.15% BAML US 1-5 Yr US Corp/Govt Rated AAA-BBB Index 0.15% 0.05% 2.66% 2.10% N/A N/A N/A 1.81 % 3.35% Chandler Asset Management-CONFIDENTIAL Page 1 Execuaon Time:10/71201610:47:08 AM Orange County Sanitation District Investment Transactions and Balances in the State of California Local Agency Investment Fund September 30, 2016 Par Value Book Value Market Value Rate Yield Balance September 1, 2016 $38,772,556 $38,772,556 $38,772,556 0.63 0.63 Deposits: Total Deposits 0 0 0 0.63 0.63 Quarterly Interest Distribution 0.63 0.63 Withdrawals: 9/2/2016 (700,000) (700,000) (700,000) 0.63 0.63 9/9/2016 (5,200,000) (5,200,000) (5,200,000) 0.63 0.63 9/1 412 01 6 (2,800,000) (2,800,000) (2,800,000) 0.63 0.63 911 612 01 6 (400,000) (400,000) (400,000) 0.63 0.63 912 212 01 6 (4,900,000) (4,900,000) (4,900,000) 0.63 0.63 9/2 812 01 6 (3,100,000) (3,100,000) (3,100,000) 0.63 0.63 912 912 01 6 (3,000,000) (3,000,000) (3,000,000) 0.63 0.63 Total Withdrawals (20,100,000) (20,100,000) (20,100,000) 0.63 0.63 Balance September 30, 2016 $18,672,556 $18,672,556 $18,672,556 0.63 0.63 Asset Summary Report ID: GL8251 Base Currency: FIND BNY MELLON by Asset Type with Sectors Alternate Base Currency: Exchange Rate: OCS LIQ OF CHANDLER-OCSF07511102 9 30 2016 Status: FINAL Net Unrealized Cost Market Value % of Gain/Loss Description Shares Par Base Base Total Base CASH&CASH EQUIVALENTS U.S. DOLLAR COMMERCIAL PAPER-DISCOUNT 3,290,000.000 3,282,153.27 3,282,153.27 5.66% 0.00 FEDERAL HOME LOAN BANK- 1 YR OR LESS 11,400,000.000 11,398,131.48 11,398,131.49 19.66% 0.00 FEDERAL HOME LOAN MORTGAGES- 1 YR OR LESS 3,000,000.000 2,999,531.25 2,999,531.25 5.17% 0.00 FNMA ISSUES- 1 YR OR LESS 10,000,000.000 9,991,841.67 9,991,841.67 17.23% 0.00 SHORT TERM INVESTMENT FUNDS(US REGULATED) 5,266,222,230 5,266,222.23 5,266,222.23 9.08% 0.00 INTEREST 146,777.01 146,777.01 0.25% 0.00 U.S.DOLLAR 32,956,222.230 33,084,656.91 33,084,656.91 57.05% 0.00 CASH&CASH EQUTVALENTS 32,956,222.230 33,084,656.91 33,084,656.91 57.05% 0.00 FDIED INCOME SECURITIES U.S.DOLLAR BANKING&FINANCE 6,000,000.000 6,029,770.00 6,008,000.00 10.36% -21,770.00 FOOD BEVERAGE&TOBACCO 1,500,000.000 1,501,765.00 1,500,540.00 2.59% -1,225.00 HEALTH CARE 1,000,000,000 1,027,930.00 1,018,860.00 1.76% -9,070.00 TECHNOLOGY 2,000,000.000 2,005,060.00 2,001,200.00 3.45% -3,860.00 US AGENCIES 7,362,000.000 7,381,543.92 7,367,264.43 12.70% -14,279.49 US GOVERNMENTS 6,000,000.000 6,033,184.16 6,008,370.00 10.36% -24,814.16 UTILITY-TELEPHONE 1,000,000.000 1,002,660.00 1,000,400.00 1.73% -2,260.00 U.S. DOLLAR 24,862,000.000 24,981,913.08 24,904,634.43 42.95% .77,278.65 FIXED INCOME SECURITIES 24,862,000.0o0 24,991,913.08 24,904,634.43 42.95% -77,278.65 TOTAL ASSETS-BASE: 57,818,222.230 58,066,569.99 57,989,291.34 100.00% -77,278.65 10/17/2016 6:52:49PM EDT 1 Workbench Asset Summary Report ID: GL8251 Base Currency: USD BNY MELLON by Asset Type with Sectors Alternate Base Currency: Exchange Rate: OCS LONG CHANDLER-OCSF07522202 9 30 2016 Status: FINAL Net Unrealized Cost Market Value % of Gain/Loss Description Shares Par Base Base Total Base CASH&CASH EQUIVALENTS U.S. DOLLAR CASH EQUIVALENTS 60,641.490 93,294.59 25,621.03 0.01% -67,673.56 CERTIFICATES OF DEPOSIT-U.S. 4,075,000.000 4,075,000.00 4,075,000.00 1.25% 0.00 COMMERCIAL PAPER-DISCOUNT 11,630,000.000 11,591,907.08 11,591,907.08 3.55% 0.00 SHORT TERM INVESTMENT FUNDS(US REGULATED) 1,841,293.620 1,841,293.62 1,841,283.62 0.56% 0.00 CASH -607.28 -607.28 0.00% 0.00 PENDING TRADES 18.62 1&62 0.00% 0.00 INTEREST 1,022,753.89 1,022,753.89 0.31% 0.00 U.B.DOLLAR 17,606,925.110 18,623,650.52 18,555,976.96 5.69% -67,673.56 CASH&CASH EQUIVALENTS 17,606,925.110 19,623,650.52 18,555,976.96 5.69% -67,673.56 FIXED INCOME SECURITIES U.S.DOLLAR ADS-CAR LOANS 14,041,761.510 14,034,903.19 14,048,944.26 4.31% 14,041.07 ASS-CREDIT CARDS 6,640,000,000 6,638,764.23 6,640,970.20 2.04% 2,205.97 ADS-EQUIPMENT 8,355,493.720 8,356,316.41 8,358,717.43 2.56% 2,401.02 ASS-HOME EQUITY 133,743.290 100,432.85 125,690.61 0.04% 25,257.76 ABS-SMALL BUSINESS ADMINISTRATION 70,644.450 70,644.45 75,478.65 0.02% 4,834.20 ADS-STUDENT LOANS 37,851.810 37,698.24 37,935.46 0.01% 237.22 BANKING&FINANCE 39,370,000.000 40,291,126.86 38,395,871.40 11.77% -1,895,255.46 CAPITAL GOODS 5,000,000.000 5,014,950.00 5,126,050.00 1.57% 111,100.00 FHLMC MULTICLASS 1,978,607.100 2,166,093.97 2,244,214.30 0.69% 78,120.33 FHLMC POOLS 2,476.400 2,416.06 2,560.35 0.00% 144.29 FNMA POOLS 1,710,221.170 1,787,039.87 1,875,502.03 0.57% 88,462.16 FNMA REMIC 404,207.960 402,132.36 407,242.56 0.12% 5,110.20 GNMA MULTI FAMILY POOLS 243,698,070 243,780.87 252,982.10 0.08% 9,201.23 GNMA REMIC 35,255.800 35,255.80 35,431.73 0.01% 175.93 HEALTHCARE 4,000,000,000 4,009,675.00 4,069,160.00 1.25% 59,485.00 OIL&GAS 9,500,000.000 9,476,387.40 9,611,580.00 2.95% 135,192.60 SUPRANATIONAL ISSUES 18,500,000,000 18,621,825.00 18,598,535.00 5.70% -23,290.00 TAXABLE MUNICIPALS 4,240,000.000 4,307,633.89 4,735,090.00 1.45% 427,456.11 TECHNOLOGY 14,045,000.000 14,095,700.55 14,247,335.95 4.37% 151,635.40 10/17/2016 6:54:52PM EDT 1 Workbench Asset Summary Report ID: GL8251 Base Currency: USD BNY MELLON by Asset Type with Sectors Alternate Base Currency: Exchange Rate: OCS LONG CHANDLER-OCSF07522202 9 30 2016 Status: FINAL Net Unrealized Cost Market Value % of Gain/Loss Description Shares Par Base Base Total Base U.S.TIPS 10,540,816,000 10,423,531.89 10,694,711.91 3.28% 271,180.02 US AGENCIES 94,363,000.000 94,234,941.40 95,127,625.55 29.16% 892,684.15 US GOVERNMENTS 71,550,000,000 71,479,358.33 72,516,728.50 22.23% 1,037,370.17 WHOLE LOAN-CMO-COLLATERALIZED MTG OBLIG 418,964.850 418,962.95 419,044.45 0.13% 81.50 U.S.DOLLAR 305,183,742.130 306,249,571.57 307,647,402.44 94.31% 1,397,830.87 FIRED INCOME SECURITIES 305,183,742.130 306,249,571.57 307,647,902.44 94.31% 1,397,830.87 TOTAL ASSETS-BASE: 322,790,667.240 324,873,222.09 326,203,379.40 100.00% 1,330,167.31 1011712016 6:54:52PM EDT 2 Workbench Asset Summary Report M: GL8251 Base Currency: USD BNY MELLON by Asset Type with Sectors Alternate Base Currency: Exchange Rate: BSCROWACCOURT-OCSFOT555502 9 30 2016 Status: FINAL Net Unrealized Cost Market Value % of Gain/Loss Description Shares Par Base Base Total Base FIXED INCOME SECURITIES U.B. DOLLAR US GOVERNMENTS 3,594,000.000 3,603,596.33 3,594,000.00 100.00% -9,596,33 TOTAL ASSETS-BASE: 3,594,000.000 3,603,596.33 3,594,000.00 100.00% -9,696.33 1011712016 6:55:51PM EDT 1 Workbench Yield Analysis Report w: RAM23a Base Currency: BNY MELLON MSM7511102 9/30/2016 Liquid Oper-Pimco Units Held YTM/ Curren Moody's Market Total Cost %Type Option Security ID Security Description Call)EOP) t Quality Price Market Value %Market Adj Yield Rating Value Duration CASH &TEMPORARY Sum of Account Receivables 0.00 SUMRECV 146,777 AGENCY 10,700,000.00 FEDERAL HOME LN BK CONS DISC 0.19 A. 99.96 10,698,170 32.47 0.03 313384K40 10/12/2016 10,698,170 18.45 700,000.00 FEDERAL HOME LN BK CONS DICS N 0.20 A. 100.00 699,961 2.12 0.01 3133W59 10/05/16 699,961 1.21 3,000,000.00 FEDERAL HOME LN MM CORP DISC 0.21 A. 99.99 2,999,531 9.10 0.03 313396K36 0.000% 10/11/2016 DO 10/13/15 2,999,531 5.17 CERTIFICATES OF DEPOSIT 10,000,000.00 FEDERAL NATL MTG ASSN DISCOUNT 0.90 A. 99.99 9,991,842 30.32 0.04 3135881,37 MAT 10/19/2016 9,991,842 17.23 COMMERCNL PAPER 1,000,000.00 TOYOTA MTR CR CP DISC 0.63 P-1 99.99 999,582 3.03 0.03 89233GKC9 10/12/2016 999,582 1.72 1,290,000.00 BANK TOKYO-MITSUB DISC 0.74 0.74 P-1 99.75 1,286,818 3.91 0.34 06538BKS1 10/26/2016 1,286,818 2.22 1,000,000.00 COOPERAT CENT DISC 0.84 0.84 P-1 99.59 995,753 3.02 0.50 21687AMK6 12/19/2016 995,753 1.72 OTHER 5,266,222.23 DREYFUS TREAS&AGY CSH CSH MG - Asa 5,266,222 15.98 0.08 996085247 VAR RT 12/31/2049 DO 04/09/97 5,266,222 9.08 1011712016 4:04:45PM FAT 1 Source:The Bad::of New York Mellon CoMom6on Yield Analysis Report ID: RAM234 Base Currency: USD BNY MELLON MSM7511102 9/30/2016 ugald Oper P1. Units Held YTM/ Curren Moody's Market Total Cost %Type Option Security ID Security Description Call)EOP) t Quality Price Market Value %Market Adj Yield Rating Value Duration TOTAL:CASH It TEMPORARY 0.51 0.07 32,937,880 100.00 0.07 33,084,657 FIXED INCOME AGENCIES&OTHER OOW GEL 3,225,000.00 FEDERAL HOME LN MTG CORP 0.44 0.87 Asa 100.02 3,229,248 12.88 0.04 3137EADS5 0.875% 10/14/2016 DD 08/16/13 3,225,548 5.56 4,137,000.00 FEDERAL NATL MTG ASSN 0.46 1.37 Aaa 100.11 4,152,296 16.54 0.13 3135GOES8 1.375% 11/15/2016 DD 10/20/11 4,141,716 7.14 BANKS&FINANCE 1,000,000.00 JOHN DEERE CAPITAL CORP 0.95 1.05 A2 100.00 1,001,070 3.99 0.03 24422ESD2 1.050% 10/11/2016 DD 10/11/13 1,000,030 1.72 1,000,000.00 AMERICAN HONDA FINANCE CORP 1.07 1.12 Al 100.00 1,001,660 3.99 0.02 02665WAB7 1.125% 10/07/2016 DO 10/10/13 1,000,010 1.72 1,000,000.00 JPMORGAN CHASE&CO 1.22 1.35 A3 100.05 1,000,470 4.00 0.37 46623EJY6 1.350%02/15/2017 DD 02/18/14 1,000,480 1.73 1,000,000.00 WELLS FARGO&CO 1.38 2.09 A2 100.43 1,008,550 4.01 0.60 94974BFD7 2.100%05/08/2017 DD 05/07/12 1,004,320 1.73 1,000,000.00 BANK OF NEW YORK MELLON CORP/T 1.45 2.39 Al 100.28 1,008,120 4.01 0.25 06406HCAS 2.400%01/17/2017 DO 11/23/11 1,002,800 1.73 1,000,000.00 US BANCORP 1.90 2.20 Al 100.04 1,009,900 4.00 0.12 91159HHB9 2.200% 11/15/2016 DD 11/03/11 1,000,360 1.73 INDUSTRLIL6 1,000,000.00 APPLE INC 0.85 1.05 Aal 100.12 1,002,590 4.00 0.59 037833AM2 1.050%05/05/2017 DD 05/06/14 1,001,200 1.73 1011712016 4:04:45PM EDT 2 Source:The BUNG of New York Mellon CoMomdon Yield Analysis Report ID: RAM234 Base Currency: USD BNY MELLON MSM7511102 9/30/2016 Liquid Oper R. Units Held YTM/ Curren Moody's Market Total Cost %Type Option Security ID Security Description Call)EOP) t Quality Price Market Value %Market Adj Yield Rating Value Duration 1,500,000.00 PEPSICO INC 0.86 0.95 Al 1W04 1,501,765 5.99 0.39 713448CLO 0.950%02/22/2017 DO 02/28/14 1,500,540 2.59 1,000,000.00 CISCO SYSTEMS INC 1.01 1.10 Al 100.04 1,002,660 4.00 0.42 17275RAT9 1.100%03/03/2017 DD 03/03/14 1,000,400 1.73 1,000,000.00 ELI MLLY&CO 1.06 5.10 A2 101.89 1,027,930 4.07 0.46 532457BB3 5.200%03/15/2017 DD 03/14/07 1,019,860 1.76 1,000,000.00 INTEL CORP 1.94 1.95 Al 100.00 1,002,470 3.99 0.00 458140AR3 1.950% 10/01/2016 DO 09/19/11 1,000,000 1.72 TREASURIES 3,000,000.00 U S TREASURY NOTE 0.22 0.62 A. 100.05 3,003,291 11.99 0.13 912828WF3 0.625% 11/15/2016 DD 11/15/13 3,001,530 5.18 3,000,000.00 U S TREASURY NOTE 0.41 3A2 A. 100.23 3,029,893 12.01 0.08 912828LU2 3.125% 10/31/2016 DD 10/31/09 3,006,840 5,19 TOTAL:FIRED INCOME 0.77 1.63 24,981,913 100.00 0.19 24,904,634 TOTAL:Liquid Oper.Hosea 0.64 0.S5 $7,919,793 100.00 0.12 57,999,291 1011712016 4:04:45PM EDT 3 Source:The Bad::of New York Mellon CoMomdon Yield Analysis Report w: RAM23a Base Currency: BNY MELLON MSM7522202 9/30/2016 Long Term Oper-Plmco Units Held YTM/ Curren Moody's Market Total Cost %Type Option Security ID Security Description Call)EOP) t Quality Price Market Value %Market Adj Yield Rating Value Duration CASH &TEMPORARY Sum of Account Receivables 0.00 SUMRECV 1,022,773 CERTIFICATES OF DEPOSIT 4,075,000.00 TORONTO DOMINION BANK C/D 1.13 1.19 - 100.03 4,075,000 23.20 0.45 89113WHP6 1.190%03/13/2017 DO 08/23/16 4,075,000 1.25 COMMERCW PAPER 6,630,000.00 BANK TOKYO-MnSUB DISC 0.74 074 P-1 99.75 6,613,646 37.65 0.34 06538BKS1 10/26/2016 6,613,646 2.03 5,000,000.00 TOYOTA MTR CR CP DISC 4.83 P-1 99.42 4,978,261 28.34 0.13 89233GW3 11/18/2016 4,978,261 1.53 OTHER 60,641.49 SLH PROXY LONG EXPOSURE - - 93,295 0.15 - 99VVAEU30 SLHOPNTA4 25,621 0.01 1,841,283.62 DREYPUS TREAS&AGY CSH CSH MG - Asa 1,841,294 10.48 0.08 996085247 VAR RT 12/31/2049 DD 04/09/97 1,841,294 0.56 US CASH 1.00 USD(UNITED STATES DOLLAR) - - 0 0.00 - NA9123459 GL PAYABLES RECEIVABLES 0 0.00 1.00 US CASH - - 0 0.00 - 999999USD GL PURE CASH -607 0.00 US CASH FUNDS 0.00 SHY MELLON CASH RESERVE 0.43 0.43 - 100.00 0 0.00 0.08 996087094 0.010% 12/31/2049 DO 06/26/97 0 0.00 1011712016 4:04:45PM EDT 4 Source:The BaN of New York Mellon CoMom6on Yield Analysis Report ID: RAM234 Base Currency: USD BNY MELLON MSM7522202 9/30/2016 Long Term Oper-Plmco Units Held YTM/ Curren Moody's Market Total Cost %Type Option Security ID Security Description Call)EOP) t Quality Price Market Value %Market Adj Yield Rating Value Duration TOTAL:CASH It TEMPORARY 2.14 0.62 17,601,485 100.00 0.28 18,555,977 FIXED INCOME AGENCIES 6 OTHER OOVT GEL 5,000,000.00 FEDERAL HOME LN MTG CORP 0.40 0.50 Asa 100.03 4,991,050 1.62 0.32 3137EADU0 0.500%01/27/2017 DD 01/16/15 5,001,550 1.53 4,000,000.00 FEDERAL NATL MTG ASSN 0.46 1.37 Aaa 100.11 4,044,200 1.30 0.13 3135GOESS 1.375% 11/15/2016 DD 10/20/11 4,004,560 1.23 5,000,000.00 FEDERAL HOME LN BK CONS BD 0.62 1.00 A. 100.26 5,025,100 1.62 0.69 313379FW4 1.000%06/09/2017 DD 05/10/12 5,013,200 1.54 5,000,000.00 FEDERAL HOME LN MTG CORP 0.63 0.75 Asa 100.10 4,994,250 1.62 0.79 3137EADV8 0.750%07/14/2017 DD 05/29/15 5,004,850 1.53 5,000,000.00 FEDERAL HOME LN MTG CORP 0.77 0.75 Aaa 99.97 4,967,500 1.62 1.27 3137EADN6 0.750%01/12/2018 DO 11/21/12 4,998,550 1.53 7,500,000.00 FEDERAL HOME LN BK CONS BD 0.81 1.36 A. 100.82 7,544,850 2.45 1.43 313378A43 I.375%03/09/2018 DD 02/13/12 7,561,125 2.32 5,000,000.00 FEDERAL HOME LN MTG CORP 0.82 0.87 Asa 100.08 4,974,100 1.62 1.43 3137EADP1 0.875%03/07/2018 DD 01/17/13 5,003,900 1.53 5,000,000.00 FEDERAL NATL MTG ASSN 0.90 1.12 Ass 100.48 4,963,950 1.63 2.17 3135GOG72 1.125% 12/14/2018 DO 11/03/15 5,024,000 1.54 7,500,000.00 FEDERAL HOME LN BK CONS BD 0.96 1.48 Aaa 101.31 7,589,190 2.46 2.39 3133782M2 1.500%03/08/2019 DD 02/06/12 7,598,025 2.33 1011712016 4:04:45PM EDT 5 Source:The BaN of New York Mellon CoMomdon Yield Analysis Report ID: RAM234 Base Currency: USD BNY MELLON MSM7522202 9/30/2016 Long Term Oper-Plmco Units Held YTM/ Curren Moody's Market Total Cost %Type Option Security ID Security Description Call)EOP) t Quality Price Market Value %Market Adj Yield Rating Value Duration 5,000,000.00 FEDERAL NATL MTG ASSN 1.00 1.71 Aaa 102A6 5,021,500 1.66 2.88 3135GOM1 1.750%09/12/2019 DD 07/28/14 5,108,100 1.57 7,500,000.00 FEDERAL HOME LN MTG CORP 1.01 1.24 A. 100.71 7,399,650 2.45 2.93 3137EADM8 1.250% 10/02/2019 DO 10/02/12 7,552,950 2.32 5,000,000.00 FEDERAL NATL MTG ASSN 1.08 L48 A. 101.53 4,955,650 1.64 3.62 3135GOD75 1.500%06/22/2020 DO 04/27/15 5,076,500 1.56 5,000,000.00 FEDERAL HOME LN BK CONS BD 1.11 1.71 Aen 102.32 5,008,950 1.66 3.57 313393HUS 1.750%06/12/2020 DD 06/03/13 5,115,800 1.57 7,500,000.00 FEDERAL NATL MTG ASSN 1.17 1.48 Aaa 101.35 7,370,726 2.46 4.03 3135GOF73 1.500% 11/30/2020 DO 10/19/15 7,600,950 2.33 10,000,000.00 FEDERAL NATL MTG ASSN 1.22 L37 A. 100.66 10,040,950 3.26 4.28 3135GOJ20 1.375%02/26/2021 DO 02/05/16 10,066,000 3.09 5,365,000.00 FEDERAL HOME LN BK CONS BD 1.23 1.37 Aaa 100.61 5,343,325 1.75 4.26 3130A7CVS 1.375%02/18/2021 DD 02/18/16 5,397,566 1.65 BARRB 4 Names 600,000.00 BANK OF AMERICA NA 1.01 1.20 Al 100.11 600,000 0.19 0.10 06050TLK8 VAR RT 05/08/2017 DO 05/08/14 600,672 0.18 500,000.00 WELLS FARGO BANK NA 1.14 1.11 As2 99.99 500,000 0.16 0.17 94988J2LO VAR RT 06/15/2017 DD 06/12/14 499,905 0.15 5,000,000.00 GENERAL ELECTRIC CO 1.41 2.15 Al 102.52 5,014,930 1.66 3.15 36962G7MO 2.200%01/09/2020 DO 01/09/15 5,126,050 1.57 5,000,000.00 JOHN DEERE CAPITAL CORP 1.46 2.25 A2 102.43 5,046,984 1.66 2.86 24422ESS9 2.300%09/16/2019 DO 09/15/14 5,121,250 1.57 1011712016 4:04:45PM EDT 6 Source:The BaN of New York Mellon CoMomdon Yield Analysis Report ID: RAM234 Base Currency: USD BNY MELLON MSM7522202 9/30/2016 Long Term Oper-Plmco Units Held YTM/ Curren Moody's Market Total Cost %Type Option Security ID Security Description Call)EOP) t Quality Price Market Value %Market Adj Yield Rating Value Duration 2,120,000.00 BANK OF NEW YORK MELLON CORP/T 1.47 2.25 Al 102.37 2,142,175 0.50 2.85 06406HCW7 2.300%09/11/2019 DD 09/11/14 2,170,286 0.67 3,200,000.00 BEAR STEARNS COS LLC/THE 1.51 4.41 A3 105.42 3,523,520 1.09 1.68 073902CDB 4.650%07/02/2018 DO 06/25/03 3,373,504 1.03 2,900,000.00 AMERICAN EXPRESS CO 1.56 6A9 A3 107.87 3,377,386 1.01 1.41 025816AYS 7.000%03/19/2018 DD 03/19/08 3,129,114 0.96 3,000,000.00 HSBC USA INC 1.59 1.62 A2 100.06 3,003,290 0.97 1.27 40428HPH9 1.625%01/16/2018 DD 12/20/12 3,001,650 0.92 3,800,000.00 BANK OF AMERICA CORP 1.61 5.49 Baal 104.77 4,334,014 1.29 1.12 060505DP6 5.750% 12/01/2017 DD 12/04/07 3,981,412 1.22 600,000.00 GOLDMAN SACHS GROUP INC/THE 1.65 5.64 A3 103.50 692,806 0.21 1.25 381410FG4 5.950%01/18/2018 DD 01/18/08 633,024 0.19 2,000,000.00 JPMORGAN CHASE&CO 1.84 2.22 A3 101.31 1,994,880 0.66 3.18 46625HKA7 2.250%01/23/2020 DD 01/23/15 2,026,280 0.62 5,000,000.00 WELLS FARGO&CO 2.04 2.55 A2 102.03 5,001,650 1.65 3.61 94974BGM6 2.600%07/22/2020 DO 07/22/15 5,101,450 1.56 1,250,000.00 HSBC USA INC 2.09 2.33 A2 100.87 1,222,788 0.41 3.29 40428HPR7 2.350%03/05/2020 DO 03/05/15 1,260,850 0.39 2,800,000.00 MORGAN STANLEY 2.40 4.82 A3 114.05 3,200,848 1.03 4.28 61747WAL3 5.500%07/28/2021 DO 07/28/11 3,193,484 0.98 600,000.00 ESC LEHMAN BRTH HLD ESCROW - - 7.55 362,825 0.02 - 525ESCIB7 0.000% 11/24/2013 DO 01/22/08 47,250 0.01 2,000,000.00 LEHMAN BRTH HLD ESC - - 7.55 1,241,321 0.05 - 525ESCOY6 0.000% 12/30/2016 DD 10/24/05 157,500 0.05 1011712016 4:04:45PM EDT 7 Source:The Bw*of New York Mellon CoMomdon Yield Analysis Report ID: RAM234 Base Currency: USD BNY MELLON MSM7522202 9/30/2016 Long Term Oper-Pimco Units Held YTM/ Curren Moody's Market Total Cost %Type Option Security ID Security Description Call)EOP) t Quality Price Market Value %Market Adj Yield Rating Value Duration CARDS 4,140,000.00 CHASE ISSUANCE TRUST A7 A7 0.63 1.06 - 100.02 4,139,643 1.34 0.04 161571HHO 1.060%09/16/2019 DD 09/13/16 4,140,745 1.27 2,500,000.00 CHASE ISSUANCE TRUST A8 A8 0.79 1.01 A. 100.01 2,499,121 0.81 0.04 161571GC2 1.010% 10/15/2018 DO 10/31/13 2,500,225 0.77 1,810,000.00 HONDA AUTO RECEIVABLES 20 2 A3 1.14 1.38 Aaa 100.43 1,809,965 0.59 1.69 43814QAC2 1.390%04/15/2020 DD 05/31/16 1,817,855 0.56 CARS 1,074,791.53 TOYOTA AUTO RECEIVABLES 2 A A3 0.87 0.67 Aaa 99.95 1,072,566 0.35 0.19 89231MAC9 0.670% 12/15/2017 DD 03/19/14 1,074,211 0.33 832,992.09 HONDA AUTO RECEIVABLES 20 2 A3 0.93 0.77 Asa 99.94 832,406 0.27 0.36 43814GAC4 0.770%03/19/2018 DO 05/21/14 832,501 0.26 2,565,000.00 HONDA AUTO RECEIVABLES 20 1 A2 0.96 L01 - 100.03 2,564,744 0.83 0.53 43814NAB1 1.010%06/18/2018 DO 02/25/16 2,565,718 0.79 1,080,063.49 TOYOTA AUTO RECEIVABLES C A2A 0.98 0.92 Aaa 99.99 1,079,977 0.35 0.20 89231TAB6 0.920%02/15/2018 DD 08/26/15 1,079,945 0.33 3,595,000.00 TOYOTA AUTO RECEIVABLES 2 A A3 1.01 1.12 Asa 100.07 3,594,456 1.17 0.74 89236WAC2 1.120%02/15/2019 DD 03/04/15 3,597,624 1.10 2,085,000.00 NISSAN AUTO RECEIVABLES C A2A 1.17 1.07 A. 99.93 2,084,918 0.68 0.65 65478WAB1 1.070%05/15/2019 DO 08/10/16 2,083,624 0.64 998,914.40 HONDA AUTO RECEIVABLES 20 1 A3 1.38 0.67 Asa 99.86 995,871 0.32 0.21 43813JAC9 0.670% 11/21/2017 DD 02/27/14 997,466 0.31 EQUIPMENT LOANS 1011712016 4:04:45PM BUT 8 Source:The Bad::of New York Mellon CoMomdon Yield Analysis Report ID: RAM234 Base Currency: USD BNY MELLON MSM7522202 9/30/2016 Long Term Oper-Plmco Units Held YTM/ Curren Moody's Market Total Cost %Type Option Security ID Security Description Call)EOP) t Quality Price Market Value %Market Adj Yield Rating Value Duration 2,955,493.72 JOHN DEERE OWNER TRUST 20 B A3 0.93 1.07 Aaa 100.04 2,956,879 0.96 0.30 477877AD6 1.070% 11/15/2018 DO 09/03/14 2,956,735 0.91 2,980,000.00 JOHN DEERE OWNER TRUST 20 B A2 1.11 1.09 Aaa 99.99 2,979,818 0.97 0.49 47788NAB4 1.090%02/15/2019 DD 07/27/16 2,979,732 0.91 2,420,000.00 JOHN DEERE OWNER TRUST 20 A A3 1.29 L36 Aaa 100.09 2,419,619 0.78 1.19 47788MAC4 1.360%04/15/2020 DD 03/02/16 2,422,251 0.74 FARIUE MAE REMIC 40,243.38 FNMA GTD REMIC P/T 07-114 A6 -134.94 0.40 Aaa 99.83 38,282 0.01 0.50 31396X3Q5 VAR RT 10/27/2037 DO 11/30/07 40,173 0.01 363,964.58 FNMA GTD REMIC P/T 11-3 FA 0.98 L 16 Aaa 100.85 363,851 0.12 -2.66 31397QRM VAR RT 02/25/2041 DD 01/25/11 367,069 0.11 FID.MC 2,476.40 FHLMC POOL#78-6064 1.53 2.64 Aaa 103.39 2,416 0.00 0.42 31348SWZ3 VAR RT 01/01/2028 DD 12/01/97 2,560 0.00 FNMA 34,410.55 FNMA POOL#0826090 1.37 4.49 Aaa 111.34 36,991 0.01 1.72 31407BXH7 5.000%07/01/2035 DO 06/01/05 38,312 0.01 361,748.15 FNMA POOL#0466397 1.52 3.18 Aaa 107.01 353,920 0.13 3.70 31381PDM 3.400% 11/01/2020 DD 11/01/10 387,110 0.12 189,489.23 FNMA POOL#0357969 1.54 L49 Aaa 111.33 203,701 0.07 1.74 31376=2 5.000%09/01/2035 DD 09/01/05 211,002 0.06 5,510.49 FNMA POOL#0748678 1.61 4.48 Aaa 111.50 5,924 0.00 2.12 31403GXF4 5.000% 10/01/2033 DO 10/01/03 6,144 0.00 1011712016 4:04:45PM EDT 9 Source:The BaN of New York Mellon CoMomdon Yield Analysis Report ID: RAM234 Base Currency: USD BNY MELLON MSM7522202 9/30/2016 Long Term Oper-Plmco Units Held YTM/ Curren Moody's Market Total Cost %Type Option Security ID Security Description Call(EDP( t Quality Price Market Value %Market Adj Yield Rating Value Duration 182,993.56 FNMA POOL 00745580 1.63 449 Aaa 111.30 196,718 0.07 1.96 31403DJM 5.000%06/01/2036 DO 05/01/06 203,670 0.06 20,660.13 FNMA POOL#0AL0869 1.69 4A1 A. 109.54 21,850 0.01 2.67 3138EG6F6 4.500%06/01/2029 DO 09/01/11 22,631 0.01 363,649.90 FNMA POOL#0898336 1.72 4,49 A. 111.31 390,923 0.13 2.15 31410F4V4 5.000%07/01/2036 DO 04/01/07 404,770 0.12 31,694.79 FNMA POOL#OMA0022 1.72 4.11 Aaa 109.54 33,520 0.01 2.77 31417YAY3 4.500%04/01/2029 DO 03/01/09 34,719 0.01 26,054.38 FNMA POOL#0257179 1.75 4.11 A. 109.54 27,555 0.01 3.04 31371NUC7 4.500%04/01/2028 DO 03/01/08 28,540 0.01 311,382.97 FNMA POOL#0815971 1.83 C51 A. 110.97 334,737 0.11 2.11 31406PQY8 5.000%03/01/2035 DD 03/01/05 345,554 0.11 182,628.02 FNMA POOL#0823358 1.83 3.01 A. 105.71 181,201 0.06 0.47 31406K 3 VARRT 02/01/2035DD04/01/05 193,049 0.06 FREDDIE MAC MULTICLASS 49,510.10 FHLMC MULTICLASS MTG E3 A 1.25 2.94 A. 102.05 49,562 0.02 0.65 3133ME95 VAR RT 08/15/2032 DO 12/01/97 50,523 0.02 900,000.00 FHLMC MULTICLASS MTG K006 A2 1.51 3.93 NR 108.28 951,047 0.32 2.99 31398VJ98 4.251%01/25/2020 DO 04/01/10 974,520 0.30 1,029,097.00 FHLMC MULTICLASS MTG 58 2A 2.31 5.49 Ana 118.47 1,165,495 0.40 1.86 31394JY35 6.500%09/23/2043 DO 09/01/03 1,219,171 0.37 GRMA 91,575.75 GNMA II POOL#0080965 0.73 2.05 A. 104.30 91,519 0.03 0.94 36225DCBB VAR RT 07/20/2034 DO 07/01/04 95,514 0.03 1011712016 4:04:45PM EDT 10 Source:The Bad::of New York Mellon CoMomdon Yield Analysis Report ID: RAM234 Base Currency: USD BNY MELLON MSM7522202 9/30/2016 Long Term Oper-Plmco Units Held YTM/ Curren Moody's Market Total Cost %Type Option Security ID Security Description Call)EOP) t Quality Price Market Value %Market Adj Yield Rating Value Duration 10,868.72 GNMA II POOL#0080395 1.24 2.06 Aaa 10370 10,770 0.00 0.71 36225CNM4 VARRT 04/20/2030DD04/01/00 11,271 0.00 30,443.80 GNMA II POOL#080088M 1.26 2.07 A. 103.33 31,110 0.01 0.95 36225CC20 VAR RT 06/20/2027 DO 06/01/97 31,457 0.01 84,686.66 GNMA II POOL#080408 1.26 2.06 A. 103.64 83,827 0.03 0.85 36225CN28 VARRT 05/20/2030DD05/01/00 87,769 0.03 26,123.14 GNMA II POOL#0080023 1.26 2.07 Asa 103.24 26,556 0.01 0.47 36225CA 9 VAR RT 12/20/2026 DO 12/01/96 26,971 0.01 GNMA REMIC 35,255.80 GNMA GTD REMIC P/T 00-9 FH 0.65 1.00 Aaa 100.50 35,256 0.01 0.03 3837H4M9 VAR RT 02/16/2030 35,432 0.01 HOME EQUITY 133,743.29 AMRESCO RESIDENTUL SECUM 1 A 1.74 Loo - 93.99 100,433 0.04 0.00 03215PFN4 VAR RT 06/25/2029 DO 10/20/99 125,691 0.04 INDUSTRIALS 2,000,000.00 INTEL CORP 1.09 1.35 Al 100.31 2,009,290 0.65 1.19 458140AIR 1.350% 12/15/2017 DO 12/11/12 2,006,240 0.62 2,000,000.00 CHEVRON CORP 1.17 1.10 Aa2 99.93 1,988,600 0.65 1.17 166764AA8 1.104% 12/05/2017 DO 12/05/12 1,998,540 0.61 4,000,000.00 ELI LILLY A CO 1.23 L92 A2 101.73 4,009,675 1.32 2.40 532457BF4 1.950%03/15/2019 DO 02/25/14 4,069,160 1.25 2,000,000.00 OCCIDENTAL PETROLEUM CO" 1.27 1.50 A3 100.31 1,986,340 0.65 1.36 674599CDS 1.500%02/15/2018 DO 06/22/12 2,006,200 0.62 1011712016 4:04:45PM EDT 11 Source:The BaN of New York Mellon CoMomdon Yield Analysis Report ID: RAM234 Base Currency: USD BNY MELLON MSM7522202 9/30/2016 Long Term Oper-Plmco Units Held YTM/ Curren Moody's Market Total Cost %Type Option Security ID Security Description Call)EOP) t Quality Price Market Value %Market Adj Yield Rating Value Duration 4,000,000.00 AMERICAN HONDA FINANCE CORP 1.37 2.20 Al 102.48 4,046,640 1.33 2.78 02665WAH4 2.250%08/15/2019 DO 09/09/14 4,099,240 1.26 3,045,000.00 MICROSOFT CORP 1.64 1.56 Ana 99.59 3,041,385 0.98 4.67 594918BPB 1.550%08/08/2021 DD 08/08/16 3,032,546 0.93 4,000,000.00 APPLE INC 1.64 2A9 Aal 102.58 4,050,840 1.33 4.19 037833BS8 2.250%02/23/2021 DD 02/23/16 4,103,200 1.26 5,000,000.00 QUALCOMM INC 1.65 2.20 Al 102.11 4,995,195 1.65 3.47 747525AD5 2.250%05/20/2020 DO 05/20/15 5,105,350 1.57 3,000,000.00 EMON MOBIL CORP 1.71 2.17 A. 102.18 3,016,097 0.99 4.21 30231GAV4 2.222%03/01/2021 DD 03/03/16 3,065,490 0.94 2,500,000.00 CHEVRON CORP 1.73 2.07 As2 101.65 2,485,350 0.82 4.39 166764BG4 2.100%05/16/2021 DO 05/16/16 2,541,330 0.78 OTHER CMO OOVT AGENCIES 418,964.85 NCUA GUARANTEED NOTES TR R2 lA 1.51 1.62 Ass 100.02 419,963 0.14 0.02 62888UAA8 VARRT 11/06/2017 DO 11/17/10 419,044 0.13 70,644.45 SBA GTD PARTN CTFS 2001-20C 1 1.85 5.93 Asa 106.84 70,644 0.02 1.50 83162CWO 6.340%03/01/2021 75,479 0.02 STUDENT 37,851.81 SLM STUDENT LOAN TRUST 200 9 A 2.08 2.21 A. 100.22 37,698 0.01 0.08 78445JAA5 VAR RT 04/25/2023 DD 08/28/08 37,935 0.01 SUPRANATIONALS 5,000,000.00 INTERNATIONAL FINANCE CORP 0.77 1.00 A. 100.13 5,020,700 1.62 0.56 45950RBS8 1.000%04/24/2017 DO 04/24/12 5,006,600 1.53 1011712016 4:04:45PM EDT 12 Source:The Bad::of New York Mellon CoMomdon Yield Analysis Report ID: RAM234 Base Currency: USD BNY MELLON MSM7522202 9/30/2016 Long Term Oper-Plmco Units Held YTM/ Curren Moody's Market Total Cost %Type Option Security ID Security Description Call(EDP( t Quality Price Market Value %Market Adj Yield Rating Value Duration 5,000,000.00 INTER-AMEMCAN DEVELOPMENT BAN 0.87 1.00 Aaa 100.10 5,019,550 1.62 0.78 4581XOCG1 1.000%07/14/2017 DO 04/30/14 5,005,200 1.53 5,000,000.00 INTERNATIONAL BANK FOR RECONST 0.89 1.00 A. 100.19 4,991,170 1.62 1.69 459058EJ8 1.000%06/15/2018 DO 04/30/15 5,009,700 1.54 3,500,000.00 INTER-AMEWCAN DEVELOPMENT BAN 1.36 L83 A. 102.20 3,590,405 1.16 4.29 4581XOCSS 1.875%03/15/2021 DD 01/14/16 3,577,035 1.10 TIPS 0.00 US TREAS-CPI INFLAT 1.11 1.06 Asa 106.43 0 0.00 2.82 912828PP9 1.125%01/15/2021 DO 0 1/15/11 0 0.00 10,540,816.00 US TREAS-CPI MFLAT 1.51 0.12 Aaa 101.46 10,423,532 3.47 5.24 912828WU0 0.125%07/15/2024 DD 07/15/14 10,694,712 3.28 TREASURIES 3,000,000.00 USTREASURY NOTE 0.21 0.50 A. 100.05 2,993,174 0.97 0.17 912828046 0.500% 11/30/2016 DD 11/30/14 3,001,470 0.92 3,750,000.00 U S TREASURY NOTE 0.54 0.87 Aaa 100.20 3,750,306 1.22 0.58 912828SSO 0.875%04/30/2017 DO 04/30/12 3,757,388 1.15 10,000,000.00 U S TREASURY NOTE 0.70 0.87 A. 100.19 9,948,784 3.25 1.12 91282BG20 0.875% 11/15/2017 DD 11/15/14 10,019,100 3.07 3,500,000.00 U S TREASURY NOTE 0.73 0.75 A. 100.03 3,496,457 1.13 1.41 912828UR9 0.750%02/28/2018 DD 02/28/13 3,501,095 1.07 11,000,000.00 U S TREASURY NOTE 0.83 1.48 Ana 101.54 11,042,439 3.62 2.29 91282SB33 1.500%01/31/2019 DO 01/31/14 11,168,850 3.42 10,000,000.00 U S TREASURY NOTE 0.87 1.59 A. 102.04 9,984,307 3.31 2.68 912828WS5 1.625%06/30/2019 DD 06/30/14 10,203,500 3.13 1011712016 4:04:45PM EDT 13 Source:The BaN of New York Mellon CoMomdon Yield Analysis Report ID: RAM234 Base Currency: USD BNY MELLON MSM7522202 9/30/2016 Long Term Oper-Plmco Units Held YTM/ Curren Moody's Market Total Cost %Type Option Security ID Security Description Call)EOP) t Quality Price Market Value %Market Adj Yield Rating Value Duration 10,000,000.00 U S TREASURY NOTE 0.88 1.59 Aaa 102.09 10,024,777 3.31 2.77 912828WW6 1.625%07/31/2019 DO 07/31/14 10,208,600 3.13 5,900,000.00 US TREASURY NOTE 0.91 1.71 A. 102.49 5,873,187 1.93 2.93 912828F39 1.750%09/30/2019 DD 09/30/14 5,944,536 1.82 7,500,000.00 U S TREASURY NOTE 0.94 L47 A. 101.75 7,449,635 2.47 3.08 912828061 1.500% 11/30/2019 DD 11/30/14 7,631,550 2.34 5,500,000.00 U S TREASURY NOTE 1.08 1.36 Aaa 101.17 5,424,667 1.80 3.96 9128281,99 1.375% 10/31/2020 DO 10/31/15 5,564,240 1.71 1,500,000.00 U S TREASURY NOTE 1.12 1.36 A. 101.09 1,491,626 0.49 4.21 912828N89 1.375%01/31/2021 DD 01/31/16 1,516,410 0.46 US TAXABLE MUNI BONDS 2,440,000.00 PORT AUTH OF NEW YORK&NEW JE 1.38 C73 Aa3 112.13 2,507,634 0.89 2.91 73358WA09 5.309% 12/01/2019 DD 07/01/09 2,735,972 0.84 1,400,000.00 NEW YORK CITY NY TRANSITIONAL 1.48 3.70 Aal 110.24 1,400,000 0.50 3.75 64971115E8 4.075% 11/01/2020 DO 11/03/10 1,543,402 0.47 400,000.00 UNW OF CALIFORNIA CA ROTS MED 1.88 4.42 Aa3 113.93 400,000 0.15 4.13 913366EJ5 5.035%05/15/2021 DD 11/18/10 455,716 0.14 TOTAL:FIXED INCOME 1.08 1.63 306,249,572 100.00 2.36 307,647,402 TOTAL:Long Term Oper-Plmco 1.13 1.58 323,851,057 300.00 2.25 326,203,379 1011712016 4:04:45PM EDT 14 Source:The Bad::of New York Mellon CoMormwn Yield Analysis Report w: RAM234 Base cy: BNY MELLON OCSFO7666602 9/30/2016 O.C.S.Escrow Account Units Held YTM/ Curren Moody's Market Total Cost %Type Option Security ID Security Description Call)EOP) t Quality Price Market Value %Market Adj Yield Rating Value Duration CASH &TEMPORARY Sum of Account Receivables 0.00 SUMRECV 0 TOTAL:CASH&TEMPORARY 0.00 0.00 100.00 0 FIXED INCOME TREASURIES 3,594,000.00 USTREASURYNOTE - Aaa 3,603,596 100.00 - 912828SK7 0.375%03/15/2015 DD 03/15/12 3,594,000 100.00 TOTAL:FIRED INCOME 0.00 0.00 3,603,596 100.00 3,594,000 TOTAL:O.C.S.Escrow Account 0.00 0.00 3,603,596 300.00 3,594,000 1011712016 4:04:45PM EDT 15 Source:The Bank of New York McOon CoMomdon Asset Detail BNY MELLON Acct Base Currency Code : USD OCSD-CONSOLIDATED-OCSG00010000 As Of Date : 9/30/2016 Accounting Status : FINAL ass -� Mellon Security Description ShanslPar Base Price Base Cost Base Market Value Percent of Total Local Unrealized Net Unrealized Security ID Gain/Loss GaiNLoss Base Grand Total 386,543,308.41 387,786,670.74 100.00 1,243,282.33 CASH&CASH EQUIVALENTS 51,708,307.43 51,640,633.87 13.32 -67,673.56 U.S.DOLLAR 51,708,307.43 51,640,633.87 13.32 47,673.56 -67,673.56 08530BK81 BANK TOKYO MITSOB DISC IDl2&2016 ON NO ON 99.]5 Q813,81593 8,81$6JA. 111 0SO A. 065MBK51 BANK TOKYOMRBBB DISC LOSSM16 1290 ON NO W]5 12W,B1aX 1,206818.00 0.33 000 0D3 21WMKB COOPERAT CENT DISC 1 WISS2016 I..NO INS B9.Sa W5153.33 Wfi15333 0. 000 0.00 313304D59 FEDERAL HOME IN BK CONS DICS N IMW16 TOO NO NO AN 699851.11 699,961.11 0.18 000 000 3133041<40 FEDERALHOME IN SKCONSDISC 1IMM016 10,]W,NONO 99.96 10,596,17037 10690,1]03] 276 000 000 3133XICO FEDERAL HOME LN MTG CORP DISC OODD%10MIM016 DO 1011 V15 3.000 NO NO .98 2933,53125 2,93953125 0]] 000 am S JRML3] FEDERAL NATL MTG ASSN DISCOUNT MAT 1W19Y1On 1.,..0 NO 99.92 .,.I.16] 9,991,B0181 258 000 A. 89113WHFB TORONTO DOMINION BANK C IIW%W11WM17 DO W23116 4,075,ON NO 100.00 6,0]S,OW.W 4,075 MOSS 1D5 000 003 Rc.GKCB TOYOTA MTR CR CP DISC 101122016 1...0.NO B9.as AB,.184 MY.184 ON 000 0.00 00233GU3 TOYOTA MTR CR CP DISC 11118IN16 60W,W0 No 99.5] 4,918,261,10 497826110 128 000 000 99W05247 DREYFUS TREAS&AGYCSH CSHMGVARRTI2O12M9 DO M109197 I'",U3JN 100.00 1,841,283,62 1841,28361 047 000 000 99E05247 DREYFUS TREAS&AGY CSH Can MG VAR FT IMIS049 DD 044M7 S..2 DO 1NO,m 52W,2n.23 5266,22223 138 000 am R.UX SLN PROXY LONG EXPOSURE SLHOFNTA4 SO.1090 042 93,294.59 .,.IO3 JIn E]67356 67,673% CASH 0.0 1D0 .7. E0128 0.D0 0D0 0.. RECEIVPBLE FOR INVESTMENTS SOLD 0.ON 1.N is. 1362 000 000 0.00 INTEREST RECENPBIE 0.0 1.00 1022,753.89 10237530B 03fi 000 0.00 INTEREST RECENPBIE_ OXO 100 146,7]].01 146 T]]01 004 _ 000 000 FIXED INCOME SECURITIES _ 334,835,080.98 336,146,036.87 86.68 _ 1,310,955.89 U.S.DOLLAR _ 334,835,080.98 336,146,036.87 86.68 1,310,955.89 1.310,955.89 02.1. AMERICAN EXPRESS COT.OLU%ONWOon DO Ml 9AJR 2,9W,W0.000 107R 1,31.79 3,120114,00 0.81 4AA 2]1]9 -M,271.79 02665WABT AMERICAN HONDA FINANCE CORP 1,125%IDN72016 DD 10110113 1...0.NO 100.00 Lual WOW 1NO Oln 00 03fi -165000 _-i.6WD0 02KSWAH4 AMERICAN HONDA FINANCE CORP 2250%OWIW2019 DO 0I 4JX0.0 NO 1=,48 4,046,644.00 4,099 24000 1.re 52W000 _52,600.00 03215PFW AMRESCO RESIDENTIAL SECURI t A VAR RT OWSR029 DO 102N89 _133743NO 9398 10043285 125,69061 0.03 25,25]]6 25,257,76 SI0 IWl 037833AM2 APPLE INC 105D%D52D1]ODDS14 1,000 NO NO 100A2 I'm 590.00 W1200 2B 1, 00 0 -139000 _1390.OD 03]BM. APPLE INC 22W%nNoW21 DO OSON16 4,OW,OW.ON 1025E 60W,840W 4,10,20000 1AS .,.0. 523W.00 06051 BANK OF AMERICA CORP E.]50%1MUCO17 DO DJJV 3,80YONOO 104.77 4,334010W 3,96101200 1.03 -3.,.200 .352NOr O60WTLXa BANKOFAMERICANAVARRT OSN&T017DDOS08114 NONO.NO 1N.fl 6W,000W ON 67200 0.15 61200 6]2.00 06408HCA5 BANK OF NEW YORK MELLON CORP?2400%011171N17 DO 11/23111 I'M.0 No 100.28� 1.000,12000 1W2W000 O.Z6 5 32, 000 _5,3WIN 0641 BANK OF NEW YORK MELLON CORPR 2.NX%09111IM19 DD OWL 1114 2,120000 NO 10237 2,1421751ID 2,170,28640 0.% 2811120 28,11120 R O 073902CO5 BEAR STEARNS COS LLCHEWO%0710 2N 2001B DO OW503 3, ,NO ON 1D542 3'an,more 3,373,504 _ 00 08] :name On .1560160, 181571GU CHASE ISSUANCE TRUST AS AS 1010%HolSOB1 B DD 1001113 2500 NOON imun 24.121,10 250Q22500 0. 1,10390 i'luo. 161571HHO CHASE ISSUANCE TRUST AT AT1Du%0911812018 DO 0911Y18 4,140,ON NO 103.02 413B,643.13 4,14Q74520 1.07 1,10207 1,10207 166T64AA0 CHEVRON COW 1.104%1 MESSO17 DD 12NY12 ...NO 000 99.83 19SHMSW 1Sea,54000 052 994000 ..81 N 1661 CHEVRON COW 2.100%0511841021 DD 0&16116 2,500,W0 No 101.65 2.485,350.00 2,541,M000 006 56M000 55,003.00 9275RAT9 CISCO SYSTEMS INC 1100%OMM017 DD 0303114 1,0W,000 NO 100.04 1,002WOW 1 NI W 026 116000 -2,2W OD 24421ESD2 JOHN DESIRE CAPITAL CORP 1,050%10112016 DO LOD 1113 1,000,000.NO 1WOO I,DDI,=,an I,OWENO0 026 -1M000 -11040.OD 24422E559 JOHN DEERE CAPITAL CORP 23N%OWLV019 DD NUE114 SON AN NO 1.43 S.NS4.W 5,121,25000 132 74,28800 ]4,2W.00 30231. EXXON MOBIL CORP 2.222%0310$021 DO OMW16 3,0W,WO.WO ID218 $01Q09)40 3,06509000 0.79 49.,so 49,382W 31WA7CV5 FEDERAL HOME W BK CONS SO 1.375%02118 1DO O&18I 5365,NO NO 1N.61 S.34 .40 59W,HEN 1.39 5424010 Km 15 3133781 FEDERAL HOME IN BK CONS BD 1.600%03,0842019 DD ONOS'12 7,500,W0 NO 10131 7,689,150W 7,598,@500 1.Be 881500 8,835.00 313378.3 FEDERAL HOME IN BK CONS BD I375%DWNI2010 DI 0211 V12 7,5X,000 NO 100.62 7,544,850.00 7,56LO5W 1.95 16,21500 16,27500 313379. FEDERAL HOME IN SK CONS RDIOX%AANV2017 DO NRIOM2 Rare NO NO 1W. 51025,100.00 5,013,.000 1H -1"FULOO .1119X.00 313M3HUB FEDERAL HOME IN BK CONS ED I7W M11212NO DD O&X113 SON ANNO 101 S00Ranou 5,115'.000 132 1OFER000 1DSBW.X 313310E85 FHLMC MULTICLASS MTG E3 A VAR HT O&152032 DD 12ONM7 HE Sit DO ID205 4B,56189 W,52308 On W1.19 98119 Recent TlmeAem,Men ON 17 201601:36:32 PM Page 1 of 3 Asset Detail BNY MELLON Acct Base Currency Code : USD OCSD-CONSOLIDATED-OCSG00010000 As Of Date : 9/30/2016 Accounting Status : FINAL Mellon security Description Shams/Par Base Price Base Cost Base Market Value Percent of Total Local Unrealiurl Net Unrealized Security to "W Gain/Loss GaiNLose Base 313485I FHLMC POOL p]68084 VAR RT 01 M112028 DD 12NLAG 2476400 10339 241808 256035 000 14029 1M.20 3135G00]5 FEDERAL NATL MTG ASSN I SW%OOCOO GO DO M127115 SOW,000.000 10153 4955850,. 59]850000 1.31 1.,.000 1211,850.00 3135GOES8 FEDERAL NATL MTG ASSN I375%11I1A2015 DO 10I20111 SAN 900.000 100.11 4p0 .,. 4,W15600r Ino -IN..0 -396i0Dr 3135GOES8 FEDERAL NATL MTG ASSN 1375%11115GO16 DD 10120111 4,137,W0.000 100.11 4.15229592 4,14171618 1.0] -105]9]4 -10,67974 3135GOFI3 FEDERAL NATL MTG ASSN I50054 1 IIMW20 DO 10119115 7rSW,000 no 101.35 73]0]26.00 7W095000 1.96 23022400 230.22600 313531 FEDERAL NATL MTG ASSN 1125%12/144018 DO t IM115 S,OW,000.Lou lNOA8 4,983,950.00 5,024,00000 I. Soon or W,OW.00 313MOJM FEDERAL NATL MTG ASSN 1375%0212BI2021 D002105116 1QOW.0 No in. 1Q040,950.CU 10,W6W0.Or 2. 25050 or 2SO.. 31MG.1 FEDERAL NATL MTG ASSN I]W%GV2Ol90007120114 SOW,W0.000 ID218 noin W.W 5,108,10000 1.32 BSW000 W,fiO3D0 313]1NUC] FNMA POGLW25]1]94.WO%04N1202SDD0111N8 26054.380 109.54 ZNcoc 20,54033 0.01 98517 9a51] 313761<722 FNMA POOL p03519696.000%01 DO 01 1SOln 230 11135 2OG 7OO 3 211 G0194 0D5 7,A1191 7,301.01 3131 FEDERAL HOME IN MTG CORP 1250%IMM019 DD 1MV12 7rSW,000 no 100.11 7,399,650.00 ],552,950 Or 1.95 153,30000 153.300.00 3137EADN5 FEDERAL HOME MTG CORP 0,750%01/12Y1018 DO 1 lR1/12 SIAN No No POST 4,967,YA.W 4,93455000 129 31,05000 31,050.00 3137EADP1 FEDERAL HOME MTG CORP 0875%03T]R018 Do 01 S,OW,0n No 10U.OB 49]41W.W S,W390000 129 .'.000 29,BW.W 3137EADSS FEDERAL HOME LN MTG CORP 0.875%1iflCoO8 DO 08118113 3,225,NO WO 1W.O2 $22B,248.W 3,225,54825 0.83 $69975 -30.71 3137EADUO FEDERAL HOME LN MTG CORP 0.500%D1=01]DD 01/15115 SAN W0900 1No 03 4,B91P50.W 5.1 No 00 1,28 10,W000 10,sW.W 3137EADYS FEDERAL HOME IN MTG CORP 0]50%017DO 01 5.000,W0 no 100.10 4.K4250.00 5GOO MOLD 1.29 10W000 106N.00 31UIPDM FNMA POOLMOW39]3400%11N1Y10200D11101/10 361748 in 107,01 353,919ID038I,110 31 0.1a 33190 61 33,190.81 3135EGW5 FNMA POOL XOALp89945W%C8p112029 DD%ptltt 20,W0130 lW54 21,SW12 22,63L31 001 781 IS 78119 31391. FHLMC MULTICIASS MTG 582AeMon 09ID5 3DO SNOW 1,.N7 No 11BO 1,18546520 121%17122 031 ESNA 02 53,BPB.02 3139SX3G5 FNMAGTDREMICP?07-l14M8 ARRT IOR]203TDDllARSh DO$43.380 a9.83 ..l' 2 4017336 0.01 1.104 1,89184 31397ORED FNMA GOOD REMIC PTI-3 FA VAR RT O=GcO41 DO 01I25/11 363,954.580 1W.85 .1 a.. W7 We20 10O 32nN 3.219.36 V3WVJW PHONIC MULTICIASS MTG HOOK AD 4,251%01125ONO DD M01110 9W,W0 no 109.2S 951 On as 974,52000 035 23,47312 23A7312 31403DI FNMA POOL 07455805000%OBN1Y1036 DO01 1 w IN No 11130 1%718U WI Or 0.05 6,95192 _6,95192 3144DWF4 FNMA POOL X0]488]85000%1010loW33 DO 10101103 5Sir 49c 11150 5,SGG78 6,14420 0W 21042 220.A2 3ANIDY8 FNMA POOL W81 M715000%01 Do 01 311382 970 11097 3.1.11 345,55414 009 10,817,43 1%1!1743 31406XW15 FNMA POOL WISDOM VAR RT 01 Do MOSS 182,828.020 10511 181,NOw 1B3 OAR]7 095 11,847.52 11,84]52 314WBXH7 FNMA POOL Ifteno05.000%0]N$035 DD 0611N5 34410.110 ill. as dal'. 3a 112O2 0.01 1,52069 _1.320.69 31410F4V4 FNM4 POOL MM366.000%0]NcOW DO 04 W 3W,on.0 11131 390=5S 4C4T032 0.10 _13,54]]4 13,M7,74 31417YAY3 FNMA POOL OMM0224.500%04/OGON DD OWOIA9 31,6NnO 109.54 33,520.33 34]18]9 0.01 1198,46 1.198.46 38225CA29 GNMAIIPOOLWOBW23VARRT IWOoO26D01L01198 M123.140 10124 2555581 269]O1] 001 41476 41418 38225CC211 GNMA II POOL 008WB8M VAR RT 0621 DD OMLAD 30443 W0 1033 31,1ORM 3145667 LIn 34691 315oi 38225CN28 GNMA II POOL ANOLLI VAR RT 05Y10Y2030 DO Ocelne M,One.0 1O3.M 85826.57 67,1431 0.02 5B42S6 59C288 38225CNM4 GNMA II POOL 00OW395 VAR RT 04cOcOW DD MNINO 10,INS IN 103]0 10T]020 11271,19 0.00 _ 50N. No. 362250CB8 GNMA II POOL NOM66 VAR RT ODGOCOM DO ODAUM 915]5]50 lGL30 91,518,53 95,51442 0.IN _3,995.09 3,99589 36932G]MD GENERAL ELECTRIC CO 2,200%01XW020 DO 01N9/15 5.030,000.000 10252 5.014950.00 512605000 1.32 111,10000 111.101 38141GFG4 GIXLMANSACHS GROUP INCITHE 5950%01NWOl 8 DO OINW8 NoonN0 1D550 MOSS W (US.4,00 0.16 MI 00 -59,762.0) 383]X4N%9 GNMA GTO REMIC PIT 00-9 FH VAR RT 0216ORS 35211 on lro5. 352S. 35431]3 0In 17E. 17593 4M20HPH9 HSSC USA INC 1.625%01 DO 1MW12 3,WOOrO.WO 1W.W 3'wM;Gc'oL 3,0LUNG OO 0.]] -1 non -1,610.W 4M20HPR7 HSSC USA INC 2.350%OLOVNW DD GAGl5 1.250,D' . 1W.S7 1,222707.50 1,SonOno0 0.31 Is.2,. ...No 43SINAC9 HONDA AUTO RECEIVABLES 201 AS 0.670%1 IGVW17 DD 02OU14 WES,9144W wSO NEED& W),4659] 0.26 1,595.13 1,59513 43814GAT4 HONDA AUTO RECEIVABLES 202 A30]]0%=1 M018 DD OW1114 832962.090 AS 94 am 406 40 832,50062 021 94.22 94.22 43814NAM HONDA AUTO RECEIVABLES 201 A21.010%Wl=018 DO 01 2,565 W0.W0 tan IC 2W474S. 2Nell .20 0as 97444 01 430DOAD2 HONDA AUTO RECEIVABLES 202 A31390%M/152020 DO NOGU16 1,810 on 000 1W43 1,W9,984.59 1,817,M540 047 7,590.51 7,1scen 4581443 INTEL CORP 1B50%lyelGO16 DO ORION 1 1,OW9W.W0 1W.W 1,W24]OW 1,WO,W090 026 Iloon -2170.W 4.14OAL4 INTEL CORP1N0%1215I DD 1211112 Zurn W0900 1W.31 2W8,290.W 2No b4000 052 1.000 -2.MOD0 45S1X0CG1 INTER-AMERICPN DEVELOPMENT BAN 1.000%017DO0 ONS 5.000,W0 no 100.10 5,019,550.00 5005,200.00 1.29 -14 NON 14.350.0O 4581XOCS5 INTER-AMERICAN DEVELOPMENT RAN 1,875%03/15Y1021 DD 01 3.500 ON No 10220 3.590405.W 3,57,03500 092 -13,37000 -13,370.Or Roped reasons:Men CHI 1]201601:36:32 PM Page 2 of 3 Asset Detail BNY MELLON Acct Base Currency Code : USD OCSD-CONSOLIDATED-OCSG00010000 As Of Date : 9/30/2016 Accounting Status : FINAL Mq Mellon Security Deuripeonswom Shams/Par Base Price Base Cost Base market Value Percent of Total Local Unrealiva Net unrealized Security ID Gain/Loss Gain1ass Base 459058EJ8 INTERNATIONAL BANK FOR RECCNST INO%a llel2018 OD 04I30115 SOW,000.000 100.1E 6991,P000 IMe 7r 00 129 1663000 1653000 45950KBSB INTERNATIONAL FINANCE CORP 1.000%NUOI DO 0404112 SODU Orr 000 lJOA3 K.To.BU 5,W6 W000 129 -10,10000 -14,100.00 4W23EJY6 JPMORGAN CHASE&CO1SW%02MENO17 DO OWHV14 1'.UUM.J00 1ND5 1.0.N,00W 1N000000 1OF _ Run _ 10D0 465251 JPMORGAN CHASE&CO2250%01D312020 DD OW3115 20W,000.01r 101.31 1.99N w,O0 2,02620000 052 314JOXM _31A00D0 q7877AD6 JOHN DEERE OWNER TRUST 211 B M 1070%11I15CAS DO MM14 2,955la110 1W.04 2.9%8/910 295693503 076 _ -14407 -144.07 4]]081 JOHN DEERE OWNER TRUST20 AM1390%ON15IDIID 03IMI16 2420,MLLOU an. 2419,61E--I 24.,O5080 062 2,631 el _263151 4]]BB1. JOHN DEERE OWNER TRUSTM BA21JI00%tlLlecOn On 07127116 2,0.LOU W0 93.9E 2,.Ma. 2,9]9)31,M 0]] Afi 42 -88.42 525ESCOY6 LEHMAN BIRTH HLD ESCO.000%lWJO2016DD 10I 20W,Orr 000 7.66 1241,321.10 157MKOU C.. -1,06382110 -1,083,821.10 525ES0I87 ESC LEHMAN BIRTH HLD ESCROW 011 IOAOO13 DD Unclose SOL OLL.000 7.B6 362,0S5.27 47,2W.00 0.01 315,5]5.2] 315,57527 53245IBB3 ELI LILLY&C05100%03/1 W017 DD 03114N) 1.OW,000.000 1018E 1.02 m,00 I Ole&W O 036 -e W010 -au.Or 532457BF4 ELI LILLY&CO1950%0311 W019 DO=5114 4.00li,W0.000 101]3 4.0096)500 4069,16000 1.05 59,40500 59,485.00 59491eBP8 MICROSOFT CORP 1550%OMM021 DO 0&1 31045 MLLOU an. a,W1385.15 3,M2,54595 0]8 -083920 __LN.20 61]4]WAL3 MORGAN STANLEY 5500%0728Y1021 Do 07R8111 2L.LOU LOU 114ne 3Oocalao, 3,193A84cu 0B2 "eIor ],384.00 0.0. NCUA GUARANTEED NOTES TR R2 IA VAR RT 1 1N&2017 DO 1117110 418,964.850 100.M 418,96293 419 M4.45 Oil el 10 al SO fi4W1M5E0 NEW YORKCITY NY TRANSITIONAL4.075%11NINOW DD HNYIO I..AM.LOU 11024 1A0],CCU.W 1543A0200 040 14340200 143A0200 MOOSWAB1 NISSAN AUTO RECEIVABLES C ASk 1070%0511612019 DO 08110116 2U..0.000 W93 2.084,91785 200362390 0.54 -I.2 Y5 -1.2W.95 674599CD5 OCCIDENTAL PETROLEUM CORP 1.500%OZ15IX18 DO OW2112 2.00li,W0.000 l00.31 I'M 340.00 2006,20000 0.52 lawoor 19,860.00 713148CLO PEPSICO INC 0101 DO 01 1Mr MLLOU 101 1,501)BS.W 1 San 54r PU 039 -122500 122111 733SWAG9 FORT AUTH OF NEW YORK B NEWJE 5903%12AI12019 DO 010E 2440,LOU.LOU 11213 25M,&13.09 2735,97200 0]1 .,...11 228,338A1 TO525AD5 OVALCOMM INC 2250%KOKIM0 DD 0520I15 S.Orr Orr lull 4,.lB500 5,105D5000 1.32 110,15460 110154.60 7841 A5 SW STUDENT LOAN TRUST2009 A VAR RT O@SI2023DDUSQVOB 37811.810 Inc. 376W34 37 W546 0.O1 237,22 23]35 83162CLJO SBA DID PARTN CTFS 2MI-20C 16340%03101I2021 70,OPP 410 1W.84 70644M 7547665 O.W 4,.420 483420 891 TOYOTA AUTO RECEIVABLES 2 A M OaT0%12115COW DO WIIW14 1,074 791 530 99.95 1.M2,56I 1074,21114 028 1,644 T] 1,644,77 89231TAB8 TOYOTA AUTO RECEIVABLES C MA 0920%OM152018 DO ONOWI5 Ilow 1 U 93.9E LON,91684 1,07%a44eA 028 31 Or 3198 89238WAC2 TOYOTAAUTO RECEIVABLES 2 AM 1120%M/1512019 OO 031 3,595 WO.W0 1W.M 3,594458.M 3,B9],82435 093 3,16791 3,18]91 91159HHB9 US BANCORP 2.2UO%1111 W016 DO 11NY11 LOW,Orr Orr l.. LOM,Ep.W 1,"no 00 0.26 -9,64000 -9540.00 .12028B33 U S TREASURY NOTE 1.500%OIMIO019 DD 01131R4 11'.W0.000 10154 11p4243BA. 11,16305000 2BB 12641001 126A10.B1 912828F39 U S TREASURY NOTE I.750%OWS12019 DD 09130/N Sew.0.000 1024E 5,8)3186.8] 5W4,SOM 153T )1,'913 )1,349.11 91 man,20 U S TREASURY NOTE 0.875%1111 SAM7 DO 1111 Ml4 10,001 Or 000 10DA9 9,948,)N.50 10019,10000 258 90,31650 70,31650 912828G16 U S TREASURY NOTE OSOD%1 V302016 DO I IW14 OAK,MLLOU 100.05 2993,174,11 3,00111000 OTr 52958E 62958E 912B28.l U S TREASURY NOTE 1.500%1 lOO12019 DO 1lOON4 T,SW,LOU MI 1M]5 7,M9,& ,. 7,&31,55000 197 181,91550 18191560 9128281.99 U B TREASURY NOTE 1.375%1.11.DO 1.1/15 S.Orr Orr 1U1.1) 5424,TAB B] 5,SO24000 143 139573.13 139,573.13 91MBLUZ U S TREASURY NOTE 3.125%IOGIOO16 DO IMJIN9 3'.AM LOU 1N83 SU29,0Y1R6 3Nfi B4000 01. 3305286 13U5266 912828N88 U S TREASURY NOTE 1.3)5%01131/O21 DD 01131/16 1.5W,000.000 101.08 1.491626.12 1,51641000 0.3E 2470300 24,783.as 9 MKsK] U S TREASURY NOTE 0.375%0311 BR016 DD 03/1 M12 3,594,W0.000 1W.00 3.603,596.m 3,5&,00000 0.93 3596.33 _-9.596.33 912828850 U B TREASURY NOTE 0675%01 DO 01 3,T%MLLOU 1An 20 3750 NEBO 3)9,38T50 097 ],0819] 7,0819] 912828UR9 U B TREASURY NOTE 0.750%OL262018 DO 022L13 a.LOU LOU local 3,4%457,04 3,an,.,00 0. 4627,98 _462]96 912828WF3 U B TREASURY NOTE 0.825%111 W016 DO fl11&13 3UW,Orr OLO 1U0.05 3,UW,R1.]0 3,W1,53000 0P -1,76130 1,761.30 91S028WS5 U S TREASURY NOTE 1.625%U6^JM2019 DO 0&'3N14 I...W0.000 1.04 ...sa" 0 10,20350000 26] 21%nZen 219.1W.90 912828WUO US TREAS-CPI I10,126%0711512024 DD 07/16114 low O16.000 101. 10.423,53189 10 MR 71191 276 271,18002 271.1 SO O0 9128MUNW) U S TREASURY NOTE 1.625%M131R019 DD M131/14 10,000,W0.000 102,09 10,024,171.40 10,20ORM 00 263 183,82260 183,822.80 9133MCE UNIV OF CALIFORNN CA RGTS MED5035%OVIcl021 DO 11118,10 401 MLLU 110. 400,030W 455,71600 OA2 55]1800 55,71600 W9)4BFD) WELLS FARGO B CO 2AOU%OSIOBINII]DO 050]712 1'..Lou 1.43 1'.a.,. 1,.,.0 00 028 -J,23000 <e.. ...CM6 WELLS FARGO&CO 2.63O%MOccee DO M122115 S.Orr Orr 10203 Knol 0.Or 5,10145000 1.32 se.000 998W.Uo McNN21-0 WELLSFARGOBANKNAVARRT O&IO2(n7DDO&12114 SW,W0.000 99.8E We DO 4W,W5.00 013 -9500 -E5.03 Report Teener,Men ON 17 201601:36:32 PM Page 3 of 3 Transaction Report BNY MELLON 0CSD-CONSOLIDATED-OCSG00010000 EHeilive Contrail Trade Date Base Investment Base In"Honl Base Security ID Desdription Date Settle Data Shares/Par Amount Amount GaiNLasc Settle Base Amount GRANDTOTAL 476,856.39 652,382.50 4,081.89 476,875.01 MATURITIES 18,317,554.32 -18,3*1,491 -26,938.10 18,317,554.32 CASH S CASH EQUIVALENTS 4,597,554.32 4,597,51 0.00 4,597,554.32 U.S.DOLLAR 4,597,554.32 41,597,554.32 0.00 4,597,554.32 31XH4G70 FEDERAL HOME LN BK CONS DISC 09111Y1016 02112016 MIM16 -4.600,003.000 4,597554.M dEW,55C.32 am 4,597,554,32 FIXED INCOME SECURITIES 13,720,000.00 -13,146,938.10 -26,938.10 13,720,000.00 U.S.DOLLAR 13720,000.00 -13,1 O6,93840 -26,939.10 13,720,000.00 191216A 4 COCA-COLA CO/THE 18W%09I01IW16 IS 00 loll VoU6 &16m8 -1,0DoNVDX LOOK OJ 0 -1,Wu,4.uD -SAS0IN 1,000003.00 3135G0CM3 FEDERAL NATL MTG ASSN I3W%WOSCONG DO 9Nt&I1 ..016 ..We $]2QON. 2,]20 NO TO -2.725.56510 S.M.1. 2.720.000.03 45S1XOCJ5 INTER-AMERICAN DEVELOPMENT BAN 0625%0911212016 DO 09112114 9tl212016 1911=016 -2.500,00J.000 2,600,000.00 2A99,1W.00 B50.00 2.600,000.00 JEWESS, INTERNATIONAL BANK FOR RECONSTIW3%WI152016 DO WWI 1 911SOO16 91152016 -2.500,003.000 2,NK NO 00 -2.606,22500 -6,225W 2,500,000.00 N TA20VW] U 6 TREASURY NOTE 0075%OWIW016 DO 09115,I3 911SR016 91152018 -3,000OCd-0e 3AW,NO. -3SKSE8005 3,]8005 31000,003.00 91SHMPul U S TREASURY NOTE 1000%OMM016000996T 1 PE.D8 d9012016 1,000,000O.A 2J.Deer. -2,005,]8]95 -5,]8]95 2UaOJW.O3 PRINCIPAL PAYMENTS 1,100,422.19 -1,101,749.41 -1,32732 1,100,403.57 FIXED INCOME SECURITIES 1,1DO,423.19 -1,101,749.41 -1,327.22 1,100,403.57 U.S.DOLLAR 1,100,422.19 -1,101,749.41 -1,327.22 1,100,403.57 31.1 FHLMC POOLp78AOB4VPA RT 01KNIND800 LWOW 91112016 &12m8 -18.H. 180 -18.17 D45 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Piles 9112016 .6n 440 632. -62750 4. an. 3140]BXH] FNMA POOL N0828000 5 001 07701OW35 DO OSNINS 91V2016 9/12m8 -848.230 81823 69585 4.2 848.23 3141C. FNMA POOL MORMIN651G0%07NV2O38 DO CATNAP B112016 &12018 d,949.190 8,949.11 -9520.38 H71.19 8,94E 19 31NEG6F6 FNMA POOLAVLAMI NOHO028DDWI0I/fl &VID15 Wi C.16 -394.590 394.59 -41T.32 -2273 3Ou sa 31417YAY3 FNMA POOL ftMAOC24JW0%M12029 DO 0101109 91112015 911,2016 955.9W MAN -1,012.01 55.11 956.90 313WM05 FNMAGTDREMICPU07-114MVARRT lW7f2037DDIll30N7 911"016 MW016 4195.6X 7195.88 6,64506 350.60 7,19586 31397ORE0 FNMA GTE REMIC POT 113 FA VAR RT OWS2041 DO OIOS11 92S2016 9232016 d11213W 11,121 VI -11,117JIS 348 11.121S3 3837WNM GNMA GTD REMIC PRWA FH VAR RT 0211&2030 911612m8 N182m8 I'l.NO 1194.03 -1194.03 000 1,1.ue 36225CP29 GNMA II POOL AJOBW23 VAR HT 1MM026 DD 120198 9112015 &12m8 -309.6W NO. J14.73 -5.13 WAR WURCNM4 GNMA II POOL W080395 VAR RT 0420203O DO 04AIAA W12016 &I2m6 -151170 16147 -16001 145 161 AT 362250CB8 GNMA II POOL W0809613 VAR RT 0]2012034 DO 07N1X4 91112016 9112016 d03.940 I. A0369 0.25 403.94 36225CC20 GNMA II POOL M80MM VAR RT OWNTID2]DO0610119] _ 9I12016 91112016 333.W0 TO 54 -23665 -5.11 23354 36225CN26 GNMA II POOL#OBWMX VAR RT MOSCOW EO 0501I00 9112016 9112016 d39040 T.04 d34.58 4.48 43904 43813JAC9 HONDA AUTO RECEIVABLES 201 A308]0%11212017 OO 0L2]tl4 9212m8 9212m8 -2B9,I00290 OFF 40029 268,57446 820.83 289,IW.29 43814G4G HONDA AUTO RECEIVABLES 202 AS 0.770%01 DOOW1114 9TVAN. &182018 -109,881.M0 1..109 -109,80383 ]].25 109,881 W 477877AD6 JOHN DEERE OWNER TRUST W B A3I.070%flR NA10 DO WTY14 Wl K2016 &t Y1016 -204J.1700 2W,60271 =204ANS.SH -95.91 OMAN To (OWUPAS NCUAGUARANTEEDNOTESTRR2IAVARRT 11MM017DD11117110 915`2016 &52016 -8.462]W 8,.TO _ -8A6165 0. 8.482.70 83162CLJO FDA GTD PARTN CORE 2001-20C 1 6 340%OWIM21 911,016 WlSO16 -20,465.6ID TO.561 _-20.485 61 0.00 20,48551 O311&14 8ACU.AC9 TOYOTA AUTO RECEIVABLES 2 A As 0.870%12H W017 EE 9/152016 911 W016 334,3430W 2.34308 233,85792 48516 234,34308 RAOUTAB8 TOYOTA AUTO RECEIVABLES C ATA 0 WO%oOlFO018 DO CWW15 91152m8 91 .194,I072W 194,40T25 AP4,39182 Is H3 194,I0725 Round lE TX8355 Report Tlmenamp:Mon Oct 17 20160124:23 PM Pagel of Transaction Report BNY MELLON OCSD-CONSOLIDATED-OCSG00010000 Effective Contrail Trade Date Base Investment Base Investment Base Security ID Description Date Settle Data Shares/Par Amount Amount GaiNLasc Settle Base Amount PURCHASES 48,019,669.83 48,019,669.83 0.00 48,019,669.83 CASH&CASH EQUIVALENTS 43,880,026.70 43,880,026.70 0,00 43,880,026.70 U.S.DOLLAR 43,880,026.70 43,880,026.70 0.00 43,880,026.70 an.m. SHY MFLLON CASH RESERVE EOHM 12I31tRA9 DD OsDFIW 9O/2OlF M2m6 uAll O10 IalS Sall 91 000 -861191 986C6T09i BNY MELLON CASH RESERVE OHM 12311NO 00 MCIOT 9/1.um I.H. es.NO MS,BE090 M5,860.90 ODO MS,BE0.9O BBFA052/] DREYFUS TREA58 AGY CSH CSH MG VAR FIT 1 Ml 0009 DO Mean 9/1/2016 .11016 1.009,OW 000 -1..ON 00 1.009.0eau 000 -1.009,00OD0 996085247 DREYFUS TREASB AGY CSH CSH MG VAR FIT 12J31/2009 DO ON00/9] 9/112016 SHOWS 56,3%.1W _-55,33<10 W.334]0 0.00 -56.336.10 996085247 DREYFUS TREAS&AGY DISH CSH MG VAR FIT 1 W1Y1049 DD 0409197 9/2I2018 FWN16 671.521 -61151 67152 000 -671.52 99EC6524] DREYFUS TREA66 AGY DISH CSH MG VAR FIT 1L312049 DO SWWO SAX16 922018 48O.1W -0%ll 45A18 1. -0W.IS 998OBSM7 DREYFUSTREA56AGYCSHCSHMGVMt RTlMlJ D49DDM1099] 9/fi12OlF 9162m6 S,S000OO -1COOM S'anonO 0or -SAW OO 98Y.`6520 DREYFUS TREA38 AGY CSH CSH MG VAR FIT 12 lOM DO 011 em ..is &fiRm6 14,66].5. -14,6B7 50 14,887.10 000 -14,687.50 98FA05247 DREYFUS TREAS&AGY CSH CSH MG VAR FIT 1 DOHOO49 DO Mean BOrz016 9/]rz016 7.S6O852820 -],MN F.ED 7.51N.S., 2 000 7.50,B5282 99608520 DREYFUS TREAS&AGY CSH CSH MG VAR FIT 12J31/2049 DO ON09R7 902016 9A12016 "'Sul 910 6 86191 &.861.81 0.00 -64,861.91 996005247 DREYFUS TREAS&AGY DISH CSH MG VAR FIT 1231Y1049 DD 0409197 9/122016 Wines 2,507,8125W -2,5DT,BID 50 2.507,81250 000 -2,507,812SO 9 ROSS24] DREYFUS TREA6&AGY CSH CSH MG VAR FIT 1 L312049 DD D41SWO Simla 91 66,130.a. -68130.D0 86,13D.OD 0.00 $6,130.pD 998005M7 DREYFUS TREA56 AGY CSH CSH MG VAR FIT 1Z312049 DD m/099] 9/14/2018 91l. US9W.9W J45,9609D 445,9e0.90 00O A45,9W.90 98606520 DREYFUS TREA36 AGY CSH CSH MG VAR FIT 12 lOM DO Mean M.H. ..is 5,551,625.ON -5,551,San On 5,551,B25.00 000 -5,5S1,62SW BBfA85247 DREYFUS TREAS&AGY CSH CSH MG VAR FIT 12311.DO WNBIW W15rzm6 &15rzm6 72CCl.340 -7.ON 34 72S.61O34 0A0 729610.3f 99W8520 DREYFUS TREAS&AGY CSH CSH MG VAR FIT 12J312049 DO 04N99] WIWO16 91162016 58,724.610 -58)24.61 58.724.61 0.01 -68,724.61 996005247 DREYFUS TREAS&AGY DISH CSH MG VAR FIT 1 W12049 DD 0409197 9/190016 9/190016 214,144.980 -214144W 214,144.98 000 214,144.98 996065247 DREYFUS TREA6&AGY DISH CSH MG VAR FIT 1L312049 DD D41SWO W202016 92D2m6 1,9599W -1,95995 1,959S5 000 -1,9599, 998005M7 DREYFUS TREA56 AGY CSH CSH MG VAR FIT 12,31,Dom DD OV099] 9/21/2m8 NOCO16 4,8000000. A,BW,WOW 4,M3aWOoO 0or <,80000000 98Y.`6520 DREYFUS TREA36 AGY CSH CSH MG VAR FIT 12 lOM DO 0V em 9212m6 .11m6 270,108.430 -90,1.41 2ID,1OSA3 000 -270,106.43 98FA05247 DREYFUS TREAS&AGY CSH CSH MG VAR FIT 123112049 DO Mean 926rzm6 92N2016 62803420 62,W342 S2.XS2 OAO -RAW 996085247 DREYFUS TREAS&AGY CSH CSH MG VAR FIT 12J312049 DO MWW 9282016 WNSOOl6 2.737,W0 ON -2,737 W000 2.737.000.00 0.00 -2.737,003.DO 996085247 DREYFUS TREAS&AGY DISH CSH_MG VAR FIT 1 W12049 DD 0409197 9OW016 MMO16 7.21a SIN -722099 7,22099 000 -7,2W 99 9960,5247 DREYFUS TREA6&AGY CSH CSH MG VAR FIT 1 L312049 DO SWWO SO.016 MOCI 50,7SOOW -50,750.W 50,75AW 100 -50,751 998WSM7 DREYFUS TREAD&AGY CSH CSH MG VAR FIT 12J31,Dom DO OV099] 91302m8 FE.Ols 2,010,OW 000 -DO1.WOW 2,010,000.00 0or -2,111 Or 31336W59 FEDERAL HOME LN BK CONS DICS N 1 b 16 9271016 9/21rzm6 ]W,OW.ON -WE,%1.11 699,961.11 000 ans'Se1.11 31338IX40 FEDERAL HOME LN BK CONS DISC IW1P2016 .016 9/]rzm6 1.20ONE NO -1.1 Se 673.33 1.199.67333 000 -1.188.all.W 3133&0<40 FEDERAL HOME LN BK CONS DISC IWI=016 9/]p016 9fl2018 "a OW.OW -109 SM..] 598.836.6T 0.00 508.8 GT 313WK40 FEDERAL HOME LN SIR CONS DISC 1WIM016 9/13/2018 9/132018 "a ON -2SN 369 25 2.899,3025 000 -2,899,36925 313384.0 FEDERAL HOME LN BK CONS DISC 1WIW016 9/1M2016 911&2m8 2,NoNo NO -I..I2 1,999,BM44 OW 4,999,62444 013... FEDERAL HOME LN BK CONS DISC 10I1 6 9/2]2m8 92]2m6 4,000000.001 -3,999,59660 Ones..HIS 0or -31999,966.S8 313396K3e FEDERAL HOME LN MTG CORE DISC 0.000%1N11rzm8 DO 1 O/1L15 9/1.um WlMol6 3,010. ISSI,531 P5 2,999,531.25 Dun -2,899,531.25 88233GKC8 TOYOTA MIR CR CP DISC lOH2C016 BOrz016 9/]rzm6 L.OuNE 0. -BW,50184 988.58180 O.On ass'.1.SU FIXED INCOME SECURITIES 4,139,643.13 4,139,643.13 0.00 4,139,643.13 U.S.DOLLAR 4,139,643.13 4,139,543.13 0.00 3,139,643.13 161571HHO CHASE ISSUANCE TRUSTA]A]1.W0%011612019 DO 0113116 9MI2016 Wl WD16 4,1400W.OJ0 4,139,64313 4,139,643.13 Ew A,139,643.13 RECEIPTS AND DISBURSEMENT TRANSACTIONS 0.00 .15,392.00 0.00 0.00 MISCELLANEOUS INCOME 0.00 -15,392.00 0.00 0.00 U.S.DOLLAR _ 0.00 -15,392.00 0.00 0.00 m2828WU0 IS INFLATION ADJUSTMENTS US TREASCPI INFtAT 9/12m8 &12m8 ON 1,144.W E. OW 912B28WU0 ILB INFLATION ADJUSTMI US TREASCPI INFLAT BIM2m6 &ZRm6 -1,]W.0.'U ON -1.768.00 O.W O.W 91deswuO ILB INFLATION ADJUSTMENTS US TREASLPI INFIAT 9W2m6 &6Tm6 -1,1H.0.N OOu -1.1HD0 ON OW 9121SWU0 ILB INFLATION ADJUSTMENTS US TREASLPI INFtAT 99Y1016 9]]2016 -520.OW ON 520.00 0.On am Rapm11E TX8355 Report TlmeAemp:Men CI 17 20160124:23 PM Page 2 of Transaction Report BNY MELLON OCSD-CONSOLIDATED-OCSG00010000 Effective Contract Trade Date Base Investment Base Investment Base Security ID Desdri"..a Date Settle Data Stares/Par Amount Amount BeiNLass Settle Base Amount 912B28W00 ILB INFLATION ADJUSTMENTS US TREABCPI INRAT 9/BI2rl6 WB/2016 620 NO 0or AN Or 000 000 912B28WU0 ILB INFLATION ADJUSTMENTS US TREASCGI INFLAT 9/9/2Olu 9I9I2U. -'S.ON 0.00 -1,66M1.00 0.00 000 812828Wu. ILB INFLATION ADJUSTMENTS US TREASLPI INFLAT W12rzm6 wl.,16 -..0W 0.00 62400 0.00 0.00 91=SWUO ILB INFLATION ADJUSTMENTS US TRE4SLPI INFLAT ull. 16 8/132016 5Norr 0.00 5Do.00 0.00 1 Or 912828WU0 ILB INFLATION ADJUSTMENTS US TREMSCPI INFLAT 9/1a0016 9I1M2016 4NOW 0.00 .6.00 000 Or 912520WUO ILB INFLATION ADJUSTMENTS US TREASCPI INRAT 9/15/2018 A152018 320000 000 32000 0or 000 912828WU0 ILB INFLATION ADJUSTMENTS US TREASCPI INRAT 9/l.S. &182m8 -1,]SB.ON 000 -1,78800 000 000 912828WU0 ILB INFLATION ADJUSTMENTS US TREASCGI INFLAT 9/192016 &1912m8 -520.OW 0.00 r20.00 0.On 010 81doswu0 ILS INFLATION ADJUSTMENTS US TREASLPI INFLAT ROM016 SSOI -520.0W 0.00 5Nuo 0.00 000 9128280U0 ILS INFLATION ADJUSTMENTS US TRE4SLPI INFLAT .1Y1016 91 624.ON 000 6.Ou 0.00 0.00 912828WU0 ILE INFLATION ADJUSTMENTS US TREMSCPI INFLAT 9OWO16 R=016 -520.OW 0.00 -52D 00 000 000 W2520WU0 ILB INFLATION ADJUSTMENTS US TREASCPI INFLAT 9/2.W6 9232016 1,7B6.ON 000 -1,78000 0Or SOO 912828WU0 ILB INFLATION ADJUSTMENTS US TREASCPI INRAT 92BRm8 d212 U. -No. 000 r2000 000 OW 912828WU0 ILB INFLATION ADJUSTMENTS US TREASCGI INFLAT W2]2018 A212018 -fi26.0W 0.00 626.00 0.00 0.00 81doswu0 ILS INFLATION ADJUSTMENTS US TREASLPI INFLAT 9rzerz016 9rzSrzm6 -.,.1 0.00 52000 0.00 OOO 91=80AX ILS INFLATION ADJUSTMENTS US TREM9LPI INFLAT SN,22016 9/29/2018 624.0W 0.or 6.Ou 0.00 0.00 912828WU0 ILB INFLATION ADJUSTMENTS US TREMSCPI INFLAT ROW016 MOS2016 SW ON 0on -52D 00 000 OW SALES 27,924,836.93 -27,905,653.50 19,183.43 27,924,836.93 CASH 3 CASH EQUIVALENTS 24,155,34].9] -24,155,347.97 0.00 U,155,34].9] U.S.DOLLAR 24,155,347.97 -24,10,347.97 0.00 24,155,347.97 99EC0]091 BNY MELLON CASH RESERVE OmO%12/31I2049 On 061261 9/e/2016 9RQO16 -8,611 Ru 8,61191 -aml Ol SON 8161191 N.N. BUY MELLON CASH RESERVE SUM 12/31OGn DO OB128197 Al,N2018 wl1 nl8 JONFLALL J05,98090 ."5,96090 0On F'RNA, 99Y.`8520 DREYFUS TREA38 AGY CSX CSH MG VAR FIT 12I316(i90001ASON VNO16 6']2m8 -2,799,091.940 2,799,notW -2,799,09191 0.On 2,799,091al 98FA05247 DREYFUS TREA98 AGY CSH CSH MG VAR FIT 12012049 DO MSA7 SAv2016 9RRm6 -3.717,92fi160 3,]1],We46 -3.717.926.06 0.00 3.711,926A6 9SW0524] DREYFUS TRESS&AGY CSH CSH MG VAR FIT 12J31M049 DD 04A)"n Wi M016 911W2016 -2.80 ,3693W 2,891 -2.899,36825 0.00 2.809369.25 9960052<] DREYFUS TREAS A AGY DISH CSH MG VAR FIT I W1M049 DD MONO 9/13M016 91132016 1,565,6W.030 4,585,WSI 03 d585,604.03 000 4,585,601 99EC0524] DREYFUS TREAB B AGY CSH CSH MO VAR FIT 1 M lRO49 OD WNW 9/160016 911wore -01999,155890 4.999155.89 ARW,15589 SON 4,9911$$89 99800520 DREYFUS TRESS B AGY CSH CAN MG VAR FIT 1 M1M049 DO 040997 9271m8 9272mB <,899,82]]93 4,899,62779 4,699,62]]9 0On 0699,82]]9 FIXED INCOME SECURITIES 3,T89,408.96 J,750,305.53 19,18" 3,759,488.96 U.S.DOLLAR 3,769,48 .96 -3,750,305.53 19,183.43 3,769,488.96 912828SSO U S TREASURY NOTE 0.876%04/302017 DO WOO112 9/]2016 91 -3.750,00D OW 3.769,,18896 3.760,30563 19,18343 3.769ACb.05 Ronan Id TX8355 Report Tlmenamp:Mon Oct 17 20160124:23 PM Page 3 of Callan September 30,2016 Orange County Sanitation District Investment Measurement Service Quarterly Review The following report was prepared by Callan Associates Inc. ('CAI") using 'information from sources that include the following: fund matee(s); fund custodian(s);investment humeri CAI computer software;CAI Investment manager and fund sponsor database;third party data vendors;and other outside sources as directed by the client.CAI assumes no responsibility for the accuracy or completeness of the Information provided,or methodologies employed by any information providers external to CAI.Reasonable care has been taken to assure the accuracy of the CAI database and computer software.Callan does not provide advice regarding, nor shall Callan be responsible for, the purchase, sale, hedge or holding of individual securities, including, without limitation securities of the client(i.e.,company stock)or derivadves In the client's accounts.In preparing the follh ing report,CAI has not reviewed the nsks of individual security holdings m the conformity of individual security holdings with the client's'mvestinent policies and guidelines,nor has it assumed any responsibility to do so.Advice pertaining to the minus of individual securities and derivatives should be discussed with a third party secunties expert Copyright 2016 by Callan Assocates Inc. Table of Contents September 30, 2016 Capital Market Review 1 Active Management Overview Market Overview 8 Domestic Fixed Income 9 Asset Allocation Investment Manager Asset Allocation 11 Investment Manager Returns 12 Asset Class Risk and Return 16 Manager Analysis Chandler-Long Tenn Operating Fund 18 Chandler-Liquid Operating Money 22 Callan Research/Education 24 Definitions 27 Disclosures 32 Callan Orange County Sanitation District Executive Summary for Period Ending September 30, 2016 Asset Allocation September 30, 2016 Market Value Weight Net New Inv. DOmesOc Fixed Incwre Long Term Operating Funtl' 326,203.379 84.91% (7,000,000) Total Fund $3a4,192,571 100.0% $(98,500,000) Performance Last Last Last Last Last 3 5 7 Quarter Year Years Years Years Domestic Fixed Income Long Term Operating FundA 0.09% 2.06% 1.62% 1.43% 2.26% Chandler 0,09% 2,06% - - - BB Barclays Govt/Grad 1-5 Year Idx 0.04% 2.06% 1.73% 1.60% 2.17% ML 1-5 Govt/Corp 0.05% 2.10% 1.78% 1.69% 2.24% Liquid Operating MoniscA 0.10% 0.40% 0.22% 0.20% 0.22% Chandler 0.10% 0.40% - - - Total Fund 0.09% 1.59% 1.36% 1.23% 1.89% Target' 0.05% 1.72% 1.44% 1.36% 1.81% Current Quarter Target=80.0%ML 1-5 GoWCoip and 20.0%3mo T-Bills. Ahssets were transferred in kind to Chandler on 12I1/2014.Previous performance reflects PIMCO. Recent Developments During the quarter, $88.5 million was withdrawn from the total portfolio. $7 million was taken from the Long Term Operating Fund and $81.5 exited the Liquid Operating Monies. Organizational Issues N/A Manager Performance After rates fell in late June and early July, Treasury yields rose across the curve, particularly in short and intermediate maturities. The 10-year hit a record low of 1.37% on July 5" at the height of Brexit-induced worries before trending higher for the remainder of the quarter. As attention shifted away from Brexit, strong U.S. data reignited expectations of a potential future rate hike from the Fed. Although the Fed continued to stay the course this quarter and left the fed funds rate unchanged at a target range of 0.25% - 0.50%, the number of dissenting votes at the September meeting marked a shift in sentiment. Three Federal Reserve officials voted to hike rates; the most since December 2014. As of quarter-end, markets were pricing in a roughly 50% likelihood of a rate hike before the end of the year. Callan Orange County Sanitation District October 31,2016 During the quarter, the 5-year Treasury rose 13 bps to 1.14%, and the 10-year increased 11 bps to 1.60%. The Bloomberg Barclays Aggregate Index gained 0.5%, bringing its year to date return to 5.8%. Government securities trailed the broader market (Barclays Government Index: -0.3%) while Credit securities led the broader market (Barclays Credit Index +1.2%). With the post-Brexit recovery in risk assets, investment grade credit spreads narrowed 18 basis points during the quarter while high yield spreads narrowed 114 basis points. High yield continues to lead other fixed income sectors, gaining 5.5% and 15.2% for the quarter and year to date (ML High Yield CP Index). Inflation protected securities increased 1.0% (Barclays U.S. TIPS Index). The Long Term Operating Fund was up 0.09% in the quarter, beating the ML 1-5 Govt/Corp Index (+0.05%) and ranking in the 61" percentile versus peers. The portfolio was short duration (2.38 versus 2.76 years), which helped as interest rates rose generally, and was underweight the short end of the yield curve (1-3 years). Chandler's allocation to mortgage- backed securities, which benefited from spread tightening, was additive to returns. 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, 2016 (see page 21). The Liquid Operating Portfolio returned 0.06% (after fees) in the quarter, which was slightly lower than the return of the 3-month Treasury (+0.07%). The Portfolio returned 0.25% (after fees)for the trailing year and ranked 2151 percentile versus peers. Cordially, Gordon M. Weightman, CFA Vice President 2 Capital Market Review CA Callan NSTITUTE l CMR Preview Third Quarter 2016 This "Preview" contains excerpts from the upcoming Capital Broad Market Quarterly Returns Market Review (CMR) newsletter, which will be published in several weeks. a S.Equity(Russell 3000) -4,40% Non-U.S.Equity(MSCI ACWI e,USA) -6.91% U.S.Eked Barclays Aggregate) � 0.46% Sell in May? No Way! Non-U.S.Fixed(Gill Non-U.S.) 0.60% U.S. EQUITY I Mark Wood,CFA Cash(90-DayT-Bills) lam% Sources'.Blaombeg Bamisys,Cillgroup Mi Lynch,MSCI,Russell geRtmax Group The S&P 500 Index rose every month of the third quarter, ending up 3.85%. Small-capitalization companies trounced large cap (Russell 2000 Index: +9,05% vs. Russell 1000 Index: +4,03%), while growth outpaced value in all capitalize- Quantity, not Quality tions(Russell 1000 Growth Index: +4.58%vs. Russell 1000 U.S. FIXED INCOME I Full Lama Value Index: +3.48%; Russell 2000 Growth Index: +9.22% During the third quarter, band investors shook off concerns vs. Russell 2000 Value Index:+8.87%). about the economy and developed a strong appetite for risk in The S&P 500 climbed to its all-time high of 2,193 on August their pursuit of yield. Companies took advantage of low rates 15, ending in positive territory for the fourth quarter in pg.2 centin- row. and issued record supplies of new bonds.The Fed continued to Continued on push off a rate hike,citing a desire for further evidence of ued economic recovery. Calm After the Storm Continued on pg.4 NON-U.S. EQUITY I Inna Sushch Short End of the Stick Following two highly volatile quarters, the third quarter of 2016 NON.U.S. FIXED INCOME I Kyle Fakers bucked the trend—volatility was exceptionally low as investors appeared complacent about Continued accommodative central Sovereign bond markets strengthened during the third quarter, bank policies and steady, albeit slow, economic growth.A risk- with emerging market bonds outmuscling the developed mar- on rally led to stock market highs as anxieties about the U.K.'s kets as investors sought yield. Major currencies were mixed as vote to exit the European Union("Brexit")dwindled. the British pound suffered following the Brexit. In this environment,the MSCI ACWI ex USA Index rose 6.91%. In an extraordinary effort to stimulate economic growth and infla- In contrast to the previous quarter, economically sensitive sac, tion,the Bank of Japan introduced a 0%yield-target for 10-year tors fared best, particularly Information Technology (+15.50%) bonds, aiming to exceed its 2% inflation objective. The central and Materials (+12.56%). Health Care was the only sector in bank also intends to maintain its negative short rate stance in an Continued on p9.3 Continued on pg.5 Knowledge. Experience. Integrity. U.S. Equity: Sell in May? No Way! Rolling One-Year Relative Returns (vs. Russell 1000) Continued from pg. 1 •Russell 1000 Grwne •Russell moo Value •Russell 1000 30% - - - - - - The early days of the quarter were characterized by a strong rebound in equity markets following the late June vote in the 20% - - - - - - - - - - - - - - - - - - - - --------- U.K. to leave the European Union ("Brexit"). Market volatil- ity (as measured by VIX) spiked in the immediate aftermath 10% _ _ _ but retreated just as quickly as investors absorbed the shock. 0% The swift pivot, coupled with optimism over U.S. economic prospects and easing fears on China, led to a risk-on envi- -10% - - - - - - - - - - - - - - - - - - - - - - - - --- ronment. July produced the strongest returns of the quarter across market capitalizations;August and September traded in a narrow (but ultimately positive) range as markets antici- pated the Fed's interest rate decision in mid-September,which 97 98 99 00 01 02 03 04 05 08 07 08 09 10 11 12 13 16 18 16 was to forego a rate hike. Foreign developed market indices Source:Russell mvesrmem Group outperformed the S&P 500 and, consistent with the quarter's risk-on theme, emerging markets were the top performers. 1000 Growth minus Russell 1000 Value). Defensive and high- Size was the single biggest determinant of performance. dividend yield exposures sold off during the third quarter but Smaller companies did better—micro, small, and mid-capi- have performed well year-to-date due to the increased global talization companies outpaced large-cap stocks (Russell economic uncertainty earlier in 2016. Microcap Index: +11.25%, Russell 2000 Index: +9.05%, Russell Midcap Index: +4.52%, and Russell 1000 Index: Sector performance reflected the shift in risk attitudes.Among +4.03%). Additionally, after two strong quarters value under- the worst-performing sectors in the S&P 500 during the quarter performed growth in all capitalizations (Russell 2000 Value were Utilities(-0.7%),Consumer Staples(-0.7%),and Telecom Index: +6,67% and Russell 2000 Growth Index: +9,22%). (+1,0)--all sectors associated with lower volatility and higher The dispersion in style returns was narrow across market dividend yields.After a strong performance in the second quar- capitalizalions,with the widest(110 bps)in large cap(Russell ter, Energy retreated, posting a 1.9% loss for the quarter. The more growth-oriented, risk-on sectors, Technology (+7,9%) and Health Care (+4.9%), were the top performers. In a new Quarterly Performance of Select Sectors development, REITs and other listed real estate companies •Russell 1000 •Ruesell 20o0 were extracted from the Financials sector and elevated to a new Real Estate sector in the Global Industry Classification Standard (GICS). The new sector, representing 3.1% of the S&P 500, had a tough start,finishing down 2.1%. The U.S. equity market continued to rise, even as investor assesse sentiment wavered between positive and negative over the I 1e�=i course of the quarter.Activemanagerscontinuetofinditadif - ficult environment to outperform as macro factors dominated Technology Financial Services consumer Utilities rice aCIIVIt and performance 10 equity markets. Staples P Y P Q Y Source:Russell Investment Coup 2 I Callan Non-U.S. Equity: Calm After the Storm Rolling One-Year Relative Returns Continued from pg. 1 (vs.MSCI World ex USA, USD hedged) e MSCI Pacific a MSCI Europa a MSCI Word ex USA the red (-1.96%), although its defensive counterparts, Utilities 40% (+0.20%) and Telecommunications (+0.43%), faltered as well. 30%--A- ------- - - - - - - - - - - - - - - - - - - - Consistent with the quarter's risk-on theme, emerging mar- 20% kets(MSCI Emerging Markets Index: +9,03%)outpaced their 10%--- — --- -------- -- — developed peers (MSCI World ex USA Index: +6.29%), even 0% excluding Canada (MSCI EAFE Index: +6.43%). The MSCI -10%--- — — ———— — ---------- --- ACWI ex USA Value Index (+7,79%) overcame the MSCI -20% ACWI ex USA Growth Index (+6.06%)for the first time since ao% the second quarter of 2014. Small-cap stocks shot up into the -40%1"'1"I"'I'"I...I...I...I 97 90 99 00 01 02 03 O6 OS Ofi 0] OB 09 10 11 12 13 14 1616 black(MSCI ACWI ex USA Small Cap Index: +7,91%),finish- source:MSCI ing near the top among major non-U.S.indices. health care company makes up approximately 20% of the Equity markets across Europe crashed following the unex- country's index, was particularly hard hit, dropping 6.27%. pected vote for Brezit but regained ground quickly as it became clear the aftermath of the referendum was not immediately Southeast Asia and the Pacific enjoyed a buoyant quarter as catastrophic. British Prime Minister David Cameron resigned well;the MSCI Pacific Index was up 8.46%.Japanese equities and was replaced by Theresa May,who pledged that the U.K. rallied during the quarter, ascending 8.60% due to new cen- would go through with exiting the European Union, but not tral bank policies and a fresh stimulus package. Additionally, hastily. The Bank of England sprang into action to support the Consumer Discretionary, IT,and Materials stocks surged due to economy,and the European Central Bank offered reassurance strong earnings growth in several gaming and automobile com- that it too would work to bolster growth. The MSCI Europe panies. Australia (+7,91%) and New Zealand (+12.44%) also Index climbed 5.40%, with the strong performers including performed well as megabanks and commodities gained ground. Austria (+16.66%), Germany (+10.01%), Spain (+9,32%), the Netherlands (+9.11%), and even the U.K. (+3.98%).Their Emerging markets shot up in the accommodative macroeoo- vigor was attributed to better-than-expected earnings from nomic environment(MSCI Emerging Markets Index:+9.03%). Information Technology giants, improving Commodity prices, The top sector was IT, surging 16.08%. The stocks of smart- rallying financial stocks, and a swell of M&A activity. European phone manufacturers and technology Component suppliers Health Care stocks stumbled(-3.09%)due to intensified global soared,boosting the Asian markets,including Taiwan(+11.70%) scrutiny during the U.S. election; Denmark, where a large and South Korea(+10.98%).China was one of the biggest ben- eficiaries (+13.92%), thanks to its burgeoning internet giants. Regional Quarterly Performance (U.S. Dollar) Latin America was relatively sluggish this quarter(+5.37%)but MSCI Chine 13.92% was propped up by Brazil, which shot up another 11.31%, sky- MSCI EnnergingMarkeis-9.03% rocketing 62.90%Year-to-date.Hopes for economic change run MSCI Japan —a60% high under Michel Temer, who replaced the impeached Dilma MSCI Rousseff as president. Russia did not miss out on the rally, up 8.43%. However, Turkey, the Philippines, and Malaysia were MSCI A ACCWI ex USA—6.91%M.ex Japan —8.10% all in the red as political turmoil Continued to afflict the coun- MSCI Word ex USA-6.296 tries (-5.26%, -5.33%, and -1.52%, respectively). Mexico also MSCI Europe—s.aov. dwindled-2.24%as the peso fell 5%against the dollar. Source:MSCI Knowledge. Experience. Integrity. 13 U.S. Fixed Income: Quantity, not Quality outperformed MSS (+0.60%) and CMBS (+0.59%). Industrials Continued from pg. 1 beat Utilities and Financials on a duration-adjusted basis. Treasuries ended the quarter in the red (-0.28%). For the quarter, the Bloomberg Barclays High Yield Index returned 5.55%while the Bloomberg Barclays U.S.Aggregate Investment-grade corporate issuance totaled $340 billion for Index managed to rise a mere 0.46%. the quarter,setting a record.CMBS and municipal markets also demonstrated robust supply. By the end of September,year-to- Driven by Brexit-induced concerns, the yield on the bench- date corporate investment-grade bond issuance was 8%ahead mark 10-year Treasury note hit a record low of 1.37% in July; of last year's pace.And the record supplies in issuances were however, it rose for the remainder of the quarter and closed met with strong demand as investors snapped up bonds. at 1.60%. While the Fed left the federal funds rate unchanged (between 0.25% and 0.50%), its announcement was notewor- Historical 10-Year Yelds thy because of the high level of disagreement; the three dis- senting votes were the most since December 2014. Based on •Us,10 Year Treasury Yleld 1010-Year TIPS Yield •Breakeyen Inflation Rate federal funds futures contracts, traders are betting there is a 6% 17%chance of a rate hike at the next meeting in November but 5% _ _____________________________ a 67%chance at the meeting after that, in December. Yields varied across the maturity spectrum during the quarter: 3% ------ —-- — ------- -------- While Treasury rates rose along the entire yield curve in August, 2% —— —— —— — — —— ——— —— thecurvesteepenedinSeptemberasthe2-year fell by 4 basis 1% ---- — ——— ————————————————— points to 0.76%and the 30-year rose by 8 basis points to end o% at 2.32%. Intermediate Treasuries (-0.26%)outperformed long Treasuries(-0.36%)during the quarter. 07 08 09 10 11 12 13 14 15 16 Souce:Bloomberg Credit spreads tightened during the quarter and yields inched toward historic lows. High-yield corporates were the stron- gest performer with a 5.55%jump. Despite record issuances U.S.Treasury Yeld Curves in August, the credit sector gained 1.23% for the quarter and •September 30,2016 •June 30,2016 •September 30,2015 5% Fixed Income Index Quarterly Returns 4% Bloomberg Barclays Aggregate .OAS% 3% 4.28%' Bloomberg Barclays Treasury Bloomberg Barclays Agencies 10.14% 2% _________ Bloomberg Barclays CMBS ■ 0.59% Bloomberg Barclays ASS '0.20Y. Bloomberg Bards,MBS ■ 0.60% 1% Bloomberg Barclays Credit _ 1.23% Bloomberg Barclays Corp.High Yield —5.55% 0% . I I . . . . I . . . . I Bloombcrg Barclays US TIPS -0.96% 0 5 10 15 20 25 30 Matunry(years) Source:Bloomberg Barclays Source:Bloomberg 4 I Callan Non-U.S. Fixed Income: Short End Emerging Spreads Over Developed (By Region) of the Stick Emeging Americas a Emerging EMEA IEanse,Midae EZM 4rzl a Emeging Asia Continued from pg. 1 9% - effort to steepen the yield curve and thus help increase proft- 5% _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ ability for banks.The bank's governor termed the new policy a "reinforcement"of its quantitative easing(QE)program.Central 4% banks have typically targeted short-term rates in QE programs, - - - - - - - - - - - - - - - - - - - - - - - - - focusing on maturities of less than a year.Yield on the 10-year 2% _ government bond settled at-0.09%at the end of the quarter. 0% Overall, the European sovereign bond market was flat as the 12 13 14 13 16 European Central Bank left interest rates unchanged. The Source:Bloomberg Bloomberg Barclays Global Aggregate Index rose 0.82% (+0.53% hedged). The ECB committed to a monthly QE pro- gram of buying E80 billion in government bonds, asset-backed 10-Year Global Government Bond Yields securities, and corporate debt through March 2017; however, •U.S.Treasury •Germany U.K •Canada Japan President Mario Draghi announced a review of the program to s% ensure investable assets would not dry up.Yield on the German 5% 10-year bund notched up a basis point to-0.12%.There is now a% __ ____________________- over $12 trillion of negative-yielding debt globally, with Japan accounting for nearly half and Western Europe amely Fmnce, 3% ___ Germany, and the Netherlands—the other half. Investors sus- 2%_________ tained hunt for yield was evident in European bond pricing as 1%----------- -- ------ ----- periphery government Treasuries tended to decline more than 0% their core euro zone counterparts. The Spanish and Italian -1%1 10-year yields declined 28 bps and 7 bps to 0.88%and 1.91%, W 08 09 10 11 12 13 14 15 15 respectively.The euro increased 1.16%against the U.S. dollar. Change In 10-Year Yields from 2016 to 3Q16 US.Treasury 12 bps The Brexit vote loomed over the market—the British pound Garmany 1 1 bps plummeted 2.83%—but despite the economic and politi- 12 bps - U.K. cal uncertainty the "leave" vote left in its wake, data released 8 bps- Canada showed no immediate negative effect on confidence or produc- Japan 13 bps tivity.Yield on the 10-year gilt fell 12 bps to 0.75%. Source:Bloomberg The developing markets advanced for the fourth straight quar- ter in spite of multiple political headwinds. The hard currency J.P. Morgan EMBI Global Index climbed 4.04%. In Brazil, a downgrade by Moody's to junk status, which cited Turkey's Michel Tamer took the office of president after the impeachment heavy reliance on external financing. Loral currency debt, as and removal of his predecessor, Dilma Rousseff,for budgetary measured by the J.P. Morgan GBI-EM Global Diversified indiscretions. Turkey endured a failed coup attempt as well as Index,ticked up 2.68%. Knowledge. Experience. Integrity. I 5 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 first 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 30,2016 1a% 12% to% (25) is E 8% 6% N 62) 4% (66) 2% ® 33)� 0% 84 ® 82) Large Cap Small Cap Non Equity Domestic Non-US Real Equity Equity Equity Fixed Income Fixed Income Estate v s a S&P 300 Russell 2000 MSCI EAFE Be Barclays Aggr CIU NomU3 Gov[ NCREIF Index 10th Percentile 690 10.78 8.96 1,15 2Y0 3.06 25th Percentile 5.60 9.04 7.80 0,94 2A1 2.48 Median 4.51 7.69 6.]] 0.70 1A6 1.62 75th Percentile 3.41 6.44 5.]] 0.52 0.8] 1.05 90th Percentile 2.05 5.41 4.47 0.33 o23 0.28 Index ♦ 3.85 9.05 6.43 0.46 0.59 2.03 Range of Separate Account Manager Returns by Asset Class One Year Ended September 30, 2016 zs% z0% 16% (14) (35) is K 5% (62) ♦ (83)� 0% (5%) Large Cap Small Cap Non-US Domestic Non-US Real Eqt Equity Equity Fixed Income Fixed Income Estate vs vs vs vs ve S&P Soo Russell 2000 MSCI SAFE Be Barclays Aggr CIS Non-US Govt NCREIF Index 10th Percentile 16,19 19.80 13.33 6.72 14.15 1694 25th Percentile 1445 16.74 10.74 6.11 1&24 1206 Median 12.15 13.49 TM 5.65 11Al 9.34 ]5[h Percentile 1059 8.]8 5.40 5.29 1o03 5.98 10th Percentile 8.32 5.40 3.92 4.96 5.53 (0.M) Intlex • 15.43 15.47 6.52 5.19 12.60 9.51 Callan Orange County Sanitation Dial 8 Domestic Fixed Income Active Management Overview Yields in the US moved modestly higher during the 3rd quarter with the 10-year US Treasury yield rising 11 bps to close at 1.60%. However, the Treasury note did hit a record low of 1.37% on July 8th at the height of the Brexit-induced worries before trending higher through the remainder of the quarter. The yield curve continued its flattening trend in anticipation of eventual Fed rate hikes. Spread sectors outperformed US Treasuries with corporates, and especially high yield, being the strongest. The Bloomberg Barclays US Aggregate returned +0.5% for the quarter and is up 5.8% year-to-date. The BB Barclays High Yield Index gained 5.6% and is up over 15% year-to-date. The median Core and Core Plus Fixed Income managers outperformed the Barclays Aggregate Index. Separate Account Style Group Median Returns for Quarter Ended September 30,2016 Be Barclays Aggregate: 0.46% 7% Be Barclays High Yield. 5.55% Be Barclays Lang Gov/Creel: 1.24% 6% 5.08 5% _________________________________ is4% _________________________________ E d 2% ____________________________ 1.36 1.51 1% __________________ 0.]0 0.15 0.26 0% Defensive Inteoned Core Core Plus Extended Bank High Yield Bond Maturity Loans Separate Account Style Group Median Returns for One Year Ended September 30,2016 Be Barclays Aggregate: 5.19% 20% Be Barclays High Yield. 12.73% Be Barclays Lang Gov/Creel: 14.66% 15% ----------------------- 15.14 E 10.86 3 10% ---- --- m ----------------------- 6.55 6.66 5.]0 5% _____________ 3.83 1.]2 0% Defensive Inteoned Core Core Plus Extended Bank High Yield Bond Matunty Loans Callan Orange County Beginning DisVict g Asset Allocation Investment Manager Asset Allocation The table below contrasts the distribution of assets across the Fund's investment managers as of September 30, 2016, with the distribution as of June 30, 2016. 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 30,2016 June 30,2016 Market Value Weiaht Net New Inv. Inv. Return Market Value Weli Domestic Fixed Income Long Tenn Operating Funi 328,203,379 84.91% (7,000,0001 307,934 332,895p45 70A8% Licuid OperimingM ni ) 2 1 15.09% (81,500,0001 88,050 139,401,241 2 . 2 Total Fund $3KI92,671 100.0% $(88,500,000) $395,985 $472,286,686 100.0% 'Chandler ordered PIMCO during the 4U quarter of 2014.Assets were transferred In-kind as of IV01/2014. Callan Orange County Sanitation Dior st 11 Investment Manager Returns The table below details the rates of return for the Fund's investment managers over various time periods ended September 30, 2016. 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, 2016 Last Last Last Last Last 3 5 7 Quarter Year Years Years Years Domestic Fixed Income Long Term Operating Fund^ 0.09% 2.06% 1.62% 1.43% 2.26% Chandler 0.09% 2.06% - - - BB Barclays Govt/Cred 1-5 Year Idx 0.04% 2.06% 1.73% 1.60% 2.17% MIL 1-5 Govt/Corp 0.05% 2.10% 1.78% 1.69% 2.24% Liquid Operating MoniesA 0.10% 0.40% 0.22% 0.20% 0.22% Chandler 0.10% 0.40% - - - CitiarouD 3-Month Treasury Bill 0.07% 0.20% 0.09% 0.08% 0.09% Total Fund 0.09% 1.59% 1.36% 1.23% 1.89% Target* 0.05% 1.72% 1.44% 1.36% 1.81% "Current Quarter Target=80.0% ML 1-5 Govt/Corp and 20.0%3mo T-Bills. AAssets were transferred in kind to Chandler on 12/1/2014. Previous performance reflects PIMCO. Callan orange County sanitation Distnot 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, 2016. 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, 2016 Last Last Last 10 15 21 Years Years Years Domestic Fixed Income Long Term Operating Fund^ 3.43% 3.60% 4.57% BB Barclays GovVCred 1-5 Year Idx 3.26% 3.39% 4.38% MIL 1-5 GovttCorp 3.29% 3.39% 4.41% Liquid Operating Monies^ 1.09% 1.54% 2.72% CitiarouD 3-Month Treasury Bill 0.84% 1.30% 2.39% Total Fund 2.99% 3.24% 4.28% Target' 2.80% 2.97% 4.01% "Current Quarter Target=80.0% ML 1-5 Govt/Corp and 20.0%3mo T-Bills. AAssets were transferred in kind to Chandler on 12/1/2014. Previous performance reflects PIMCO. Callan orange County sanitation Distract is 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. 12/2015- 9/2016 2015 2014 2013 2012 Domestic Fixed Income Long Term Operating FundA 2.40% 0.85% 1.98% (1.77%) 3.06% Chandler 2.40% 0.85% - - - BB Barclays Govt/Cred 1-5 Year Idx 2.64% 0.97% 1.42% 0.28% 2.24% MIL 1-5 Govt/Corp 2.66% 1.05% 1.51% 0.32% 2.47% Liquid Operating MoniW 0.35% 0.22% 0.09% 0.13% 0.17% Chandler 0.35% 0.22% - - - Citigroup3-Month Treasury Bill 0.19% 0.03% 0.03% 0.05% 0.07% Total Fund 1.86% 0.80% 1.73% (1.49%) 2.70% Target* 2.16% 0.85% 1.21% 0.26% 1.99% "Current Quarter Target=80.0% MIL 1-5 Govt/Corp and 20.0%3mo T-Bills. AAssets were transferred in kind to Chandler on 12/1/2014. Previous performance reflects PIMCO. Callan orange County 5annation oistnot ty 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. 2011 2010 2009 2008 2007 Domestic Fixed Income Long Term Operating FundA 4.59% 4.42% 5.52% 5.37% 7.21% BB Barclays Govt/Cred 1-5 Year Idx 3.14% 4.08% 4.62% 5.12% 7.27% MIL 1-5 Govt/Corp 3.10% 4.17% 4.88% 4.65% 7.27% Liquid Operating MoniesA 0.24% 0.25% 0.58% 2.40% 5.25% Citigroup 3-Month Treasury Bill 0.08% 0.13% 0.16% 1.80% 4.74% Total Fund 3.70% 3.68% 4.65% 4.61% 6.84% Target* 2.49% 3.36% 3.93% 4.08% 6.76% "Current Quarter Target=80.0% MIL 1-5 Govt/Corp and 20.0%3mo T-Bills. AAssets were transferred in kind to Chandler on 12/1/2014. Previous performance reflects PIMCO. Callan orange County 5annation piav ct is 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 2.5% 2.0% 1.5% E E d K 1.0% 0.5% 0.0% 0.0% 0.2% 0.4% 06% 0.8% 1.0% 1.2% 1.4% 1.6% Standard Deviation Seven Year Annualized Risk vs Return Asset Classes vs Asset Class Median 2.5% 2,0% r: : 1.5% E E d K 1.0% 0.5% 0.0% 00% 0.2% 0.4% 06% 0.8% 1.0% 1.2% 14% 1.6% Standard Deviation Callan orange County sanitation DiWd 1a Manager Analysis Chandler-Long Term Operating Fund Period Ended September 30, 2016 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 12/1/2014. Previous performance reflects PIMCO. Quarterly Summary and Highlights Quarterly Asset Growth • Long Term Operating Fund's portfolio posted a 0.09%return Beginning Market Value $332,895,445 for the quarter placing it in the 61 percentile of the CAI Net New Investment $-7,000,000 Defensive Fixed Income group for the quarter and in the 31 percentile for the last year. Investment Gains/(Losses) $307,934 • Long Term Operating Fund's portfolio outperformed the ML Ending Market Value $326,203,379 1-5 GovtfCorp by 0.04%for the quarter and underperformed the MIL 1-5 Govt/Corp for the year by 0.04%. Performance vs CAI Defensive Fixed Income(Gross) 6% 5% 4% -a1z i 25,®elz 1 3% 2% 29)MC �5)®A�3 2)®^f3 j7)®B�4 J9)®B�3 1% 0% A6 (1%) Laat pr Las[ Chandler Last 3 Yrs Last 5 Yrs Last 7 Yrs Last 10 Yrs Last 20.5 Yrs Yr Inception 101h Percentile 0.59 2.68 2.25 2.06 2.43 2.93 3.67 4,62 25th Percentile 0.M 2.18 1.98 1.74 1.86 2.32 3.31 4.41 Median 0.15 1.72 1.67 1.47 1.48 1.95 2.89 4,09 75th Percentile 0.03 1.35 1.34 1.18 1.13 1.49 2.57 3.94 901h Percentile (0.02) 1.14 1.24 1.06 0.98 1.32 2.34 3,76 Long Term Operating Fund •A 0.09 2.06 1.85 1.62 1.43 2.26 3.43 4,57 as 6ardays GOWCrad 1-5 Year ldx as 0.04 2.06 2.06 1.73 1.60 2.17 3.26 4,38 ML1-5G0VVC0ry ♦ 0.05 2.10 2.12 1.78 1.69 2.24 3.29 441 CAI Defensive Fixed Income(Gross) Relative Return vs MIL 1.5 Govt/Corp Annualized Seven Year Risk vs Return 2.0% 3.5% 1.5% -- -- -- -- -- -- - 3.0% m 1.0% E 2.5% •• dJ 2.0% of In qr (1.5%) 0.5% 09 2010 2011 2012 2013 2014 2015 2016 0.0 0.5 1.0 L5 2.0 2.5 Long Term Operating Fund Standard Deviation Callan Orange County Samation Diemd 18 Long Term Operating Fund Return Analysis Summary Return Analysis The graphs below analyze the managers 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 two charts illustrate the managers ranking relative to their style using various risk-adjusted return measures. Assets were transferred in kind to Chandler on 12/112014. Previous performance reflects PIMCO. Performance vs CAI Defensive Fixed Income(Gross) 20% 15% ( 15%115,1116 6eiea,B A lei ]®A 14"A 1 j]5"�A� ®A� B A( 0�5�A1 ) (5%) A 0 ) (10%) 12/1S 9116 2015 2014 M13 2012 2011 2010 moo 2008 2007 10th Pargai 2. 18 1.50 1.20 4.4 2.]2 4.]1 13.74 6s3 7.03 25M1 nte 1 .60 56 6.88POme 29 Metlian 1.94 000 1 6 ] 1.9 .11 0. 5 181 1.8 3. 9 5.91 388 645 ]Sth Percentile 1.51 0.76 0.87 0.41 1.48 1.65 2.72 2.53 (0.1]) 5.66 901M1 Percentile 1.46 0.64 0.70 0.31 0.92 1.44 2.41 1.82 (3.4] 3.75 Long Term Operating Fund •A 2.40 0.85 1.98 (1]]) 3.06 4.59 4.42 5.52 5.37 7.21 Be Sam. s GOWCod I5Yiarltlx ■B 2.64 0.97 1.42 0.28 2.24 3.14 4.08 4.62 5A2 ].2] ML 1-5 GOWC01 ♦ 2.66 1.05 1.51 0.32 2.47 3.10 4.17 4.88 4.65 ].2] Cumulative and Quarterly Relative Return vs ML 1.5 GoWCorp 6% 4% in E 2% -`J 0% N > (2%) (4%) (6%) (8%) 06 2007 2008 2009 2010 2011 2012 2013 2014 2015 416 Long Term Operating Fund 0 Be Barclays GovVCred 1-5 Year W.0 CAl Defensive Fixetl Inc Risk Adjusted Return Measures vs ML 1.5 GoWCorp Rankings Against CAI Defensive Fixed Income(Gross) Seven Years Ended September 30,2016 541 3sp I) 2 •A198� 1.0 �A189 (0.0 0 O}({71 511 1 B 88 B(82 (1) Alpha A99 Tzynor 12.0 Information Sharpe Excess Return Ratio Ratio Raul Ratio 10th Perwnlile 1.18 3.94 101h Percentile 2.02 2.38 0.69 25tM1 Percentile 0.85 3.47 251M1 Percentile 150 2.15 0.10 Medium 0.43 2.89 Median 1.2] 1.98 75th Percentile 0.19 2.51 751h Percentile 070 1.71 (1.us 90th Percentile (0.00) 2.12 90h Percentile 0.02 1.54 Long Term Lung Term Operating Fund •A (0.34) 1.83 Opemting Fund eA (0.40) 1.23 0.03 Be Barclays BB Barclays GOWCred 1-5 Year Itlx e8 (0.07) 2.06 GOWCred 1-5 Year Itlx eB (0.78) 1.57 (crag) Callan Orange County Sanitation District 19 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 CAI Defensive Fixed Income as of September 30, 2016 3.5 3.0 (1) ♦ (9) 2.5 (8) P(16) (37) 2.0 1.5 ® •(38) (82) 1.0 (64) 0.5 0.0 (0.5) Average Effective coupon OA Duration LIN Yield Raw Convexly loth Percentle 2.19 2.79 2.51 3.05 0.09 25th Percentile 1.91 2.11 1.65 2.41 0.05 Median 1.80 1.98 1.34 1.92 0.04 75[h Percentile 1.63 1.84 1.14 1.70 0.01 90th Percentle 1.52 1.58 0.96 1.36 (0.02) Long Tom Operating Fund • 2.38 2.47 1.48 1.61 - BB Barclays Gov/Cr 1-5 Yr ♦ 2.76 2.89 1.21 2.21 0.07 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 managers weighted average quality rating with the range of quality ratings for the style. Sector Allocation Quality Ratings September 30,2016 vs CAI Defensive Fixed Income as, 1' Tray RMBS th AAA US Tray Corp(incl 144A) s unit AAt 91 Other AA (8T) ABS AA Tax-Exempt US Muni A* CMOs A Welghted Average CMBS Quality Rating Cash loth Percentile AAA 25th Percentile AA Median AA Gov Related s' 758t Percentile AA- 80U Percentile At 0% 10% 20% 30% 40% 50% 60% 70% Long Term Lang Term Operating Fund 0CAI Defensive Fixed Income Operating Fund • AA BB Barclays Go dCr 1-5 Yr BB Barclays Gov/Cr 1-5 Yr ♦ M+ Callan Orange County Sanitation D eprot 20 Long Term Operating Fund Portfolio Characteristics Summary As of September 30, 2016 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 RMBS US Tray 29% 59% Cash Ass 9% 9% Tax-Exempt US Muni M111W 2% US Tray %� Other 10% CMOs Gov Related 3% nd Corp and 144A) 1%S Corp 28%144A) 22% Long Term Operating Fund BB Barclays Govt/Credit 1-5 Year LWeightedge: Duration Duration Distribution Operating Fund. 2.3650% s GovVCrede l-5 Year. 2.]6 0 — 41.4 40% ____ __________ ____ _ _ _____O — —24.]1% toe _1 _ _do a% < 0-1 1-2 2-3 15 5-7 7-10 I10 Years Duration fiWeighted Quality Quality Distribution as g Fund80% VCiedd 1-5 YearO ]0% —a]2 �q_________ ___ ___ __ _r g0a4 _ _________ ___ ___ __ __ ___ a° So% — ------- — — — -- --- W%20% s3a 10% �.a1oo1z.1 1z.6 a.a --- --- -- -- --- a% AAA AA A BBB BB B CCC CC C D WR Quality Rating Callan Orange County Sanitation D"prip 21 Chandler-Liquid Operating Money Period Ended September 30, 2016 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 0.06% Beginning Market Value $139,401,241 return for the quarter placing it in the 29 percentile of the CAI Net New Investment S-81,500,000 Money Markel Funds group for the quarter and in the 21 percentile for the last year. Investment Gains/(Losses) $88,050 • Liquid Operating Money Net's portfolio underperformed the Ending Market Value $57,989,291 Citigroup 3-Month Treasury Bill by 0.01%for the quarter and outperformed the Citigroup 3-Month Treasury Bill for the year by 0.05%. Performance vs CAI Money Market Funds(Net) 3.0% 2.596 9) (15 2.0% 1.5% 1.0% 50)®(25 0.5% 0.0% 24 29 25) (21 26) (19 23) 26 20 17) 21 Last Otr Last Chandler Last 3 Yrs Last 5 Yes Last 7 Yes Last 10 Yrs Last 2eli Yrs Yr Inception 101h Percentile 0.16 0.50 0.32 0.20 0.15 0.14 1.08 2.0 25th Percentile 0.07 0.20 0.13 0.08 0.05 0.05 0.94 2.47 Median 0.03 0.06 0.04 0.03 0.02 0.02 0.84 2.32 75th Percentile 0.00 0.01 0.01 0.01 0.01 0.01 0.74 2.20 90th Pecedie 0.00 0.00 0.00 0.00 0.00 0.00 0.66 2.04 Liquid Operating Money Net • 0.06 0.25 0.17 0.07 0.05 0.07 0.94 2.57 Citigroup 3-Month Treasury Bill ♦ 0.07 0.20 0.12 0.09 0.08 0,09 0,84 2,39 Relative Returns vs CAI Money Market Funds(Net) Citigroup 3-Month Treasury Bill Annualized Seven Year Risk vs Return 0.10% 5% 0.01 -- -- -- -- -- -- - 0% . . . •. E 8 o04% -- -- -- -- -- -- - w (10%) K 0.02% > of m 0.01 (20%) N K (0.04%) -- -- -- -- -- -- - (30%) (0.06%) (35%) 09 2010 2011 2012 2013 2014 2015 2016 (10) 0 10 20 30 40 Liquid Operating Money Net Standard Deviation Callan Orange County Serration Diarad 22 Liquid Operating Money Net Return Analysis Summary Return Analysis The graphs below analyze the managers 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 two charts illustrate the managers ranking relative to their style using various risk-adjusted return measures. Assets were transferred in kind to Chandler on 12/112014. Previous performance reflects PIMCO. Performance vs CAI Money Market Funds(Net) 6% 5% 48®16 4% 3% 2% 61®3] 0% 4 0% (t%) 12/1S oil 2016 2014 M13 2012 2011 2010 moo 2000 2007 lour Percentile 0.51 0.11 0.07 0.08 0A8 0.08 0.15 0.52 2.T] 5.20 25th Percentile 0.19 0.03 0.02 0.02 0.03 0.02 0.05 0.28 2.46 4.99 Median 0.06 0.01 0.01 0.01 o.01 0.01 0.01 0.12 2.03 4.71 75th Percentile 0.01 0.00 0.01 0.00 o.01 0.00 0.01 0.03 1.46 4.34 901h Percentile 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.01 1.08 3.89 Liquid Operating Money Net • 0.23 0.07 (0.06) 10.02) 0.02 0.09 0.10 0.43 2.25 5.09 Citigroup 3-Month Treani ll ♦ 0.19 0.03 0.03 0.0 0.07 0.08 0.13 0.16 1.80 4.74 Cumulative and Quarterly Relative Return vs Citigroup 3-Month Treasury Bill 1.5% w 1.0% c K N � 0.0% N 0.0%) 06 2007 2008 2009 2010 2011 2012 2013 2014 2015 416 10 Liquid Operating Money Net 0CAI Money Marker Funde Risk Adjusted Return Measures vs Citigroup 3-Month Treasury Bill Rankings Against CAI Money Market Funds(Net) Seven Years Ended September 30,2016 0.10 2 0.05 1 0.00 (0.05) (387 0 (0.10) (1) (26) •t18) •(19) (0.15) (0.20) 12) (0.25)(0.30) •(99) 13) (0.35) Alpha Twor (4) IMormation Sharpe Eaeass Return RM10 Ratio Radio Ratio 10th Percentile 0.05 0.02 101h Percentile 1.10 0.48 Us 25th Percentile 0.03) (0.04) 25th Percentile (0.9] ((1.85) (126 Medic 0.05) 0.05) Metlian (1.54 (8.60) (2.09 75th Percentile 0.05) 0.05)) 75th Percentle ((1.81 (32.75) (2.3] 90b Percentile 0.06) 0.0]) "Percentile (2.33 - (2.86 Liquid Operating Liquid Operating Mon..,Net It (0.04) (0.28) Money Net a (lu3) (0]4) (0.48) Cana' 1 Orange County Sanitation Deal 23 Callan Research/Education CA AN LL Callan INSTITUTE 3rd Quarter 2016 Education Research and Educational Programs The Callan Institute provides research that updates clients on the latest industry trends while helping them learn through carefully struc- tured educational programs.Visit www.callan.com/research to see all of our publications, or for more information contact Anna West at 415,974.5060/institute@callan.com. New Research from Callan's Experts Built to Last: Strategic Guidance for Effective Invest- 2016 Nuclear Decommissioning Funding Study I Areport ment Committees I Callan offers our high-level strategic by Julia Moriarty, CFA, covers advice for investment committees,touching on membership, ® 27 investor-owned and 27 public investment policy statements, review processes, and fdu- power utilities with an ownership ciary training and ongoing education. _ _ interest in the 99 operating nucle- ar reactors(and 10 of the non-op- 10 Tips From Successful Investment Committees I Cal- stating reactors)in the U.S. Ian Chairman and CEO Ron Peyton and Consultant Brady O'Connell, CFA, CAIA,offer 10 tips based on their work with How Green Is Your Bond? I Callan Analyst Rufash Lama successful investment committees. tackles the area of green bonds, which are fixed income in- struments issued specifically to support or finance environ- Risky Business I Callan re Aft- mental initiatives. search that found investors over the last 20 years have 00 Periodicals had to take on three times as much risk to earn the same return electrified the institutional investing community.We in- Real Assets Reporter,Summer/Fall 20161 This edition ex- terviewed Jay Kloepfer and Julia Moriarty, CFA, about how plores if the boom in commercial real estate may be ending. the research was done and its implications. Private Markets Trends,Summer 2016 1 Author Gary Rob- Managing DC Plan Investments:A Fiduciary Handbook ertson discusses the recent surge in private equity fundrais- Lori Lucas, CFA, covers responsibilities for DC plan fidu- ing, an indication that some investors are establishing a de- ciaries, including investment structure, investment policy fensive hedge as the five-year bull market pulls in its horns. statements, QDIA oversight, and manager performance. DC Observer, 2nd Quarter 2016 1 Callan's Defined Contd- Ethics 101 for Investment Professionals I Callan Chair- bution Practice Team outlines a framework to evaluate DC man and CEO Ron Peyton outlines his thoughts on how to transaction fees. We explain how common they are, what create, instill, and maintain ethical standards for investment they typically cost, and how they are generally paid. professionals. His advice: the right culture creates the best Hedge Fund Monitor, 2nd Quarter 2016 1 Jim McKee, di- environment to maintain these standards. Firms should de- rector of Callan's Hedge Fund Research group, discusses velop ethical guidelines that are based on principles, not the appeal of momentum-based investing strategies in the rules, since the former offer better guidance for employees current climate of considerable economic uncertainty. across the organization. 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 ries and speakers' presentations are available on our website: College; provides a foundation of knowledge for industry profes- https://w ..callan.com/education/Cil/ sionals who are involved in the investment decision-making pro- Mark your calendars for our fall Regional Workshop, October cess.It was founded in 1994 to provide clients and non-clients alike 25 in New York and October 26 in Chicago, and our National with basic-to intermediate-level instruction.Our next session is: Conference, January 23-25, 2017, at the Palace Hotel in San Introduction to Investments Francisco. San Francisco,April 18-19, 2017 San Francisco,July 25-26, 2017 For more information about events, please contact Barb Chicago, October24-25, 2017 Gerraty: 415.274.3093/gerraty@callan.com This session familiarizes fund sponsor trustees, staff, and asset management advisors with basic investment theory,terminology, 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 once. Learn more at https:/tw .callan.com/education/college/ or contact Kathleen Cunnie:415.274.3029/cunnie@callan.com Education: By the Numbers 500 Attendees(on average)of the 50+ Unique pieces of research the Institute's annual National Conference Institute generates each year 3 500 Total attendees of the"Callan 980 Year the Callan Institute f 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." Ron Peyton,Chairman and CEO Callan V @CallanAssoc ® Callan Associates 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). Alpha measures a portfolio's return in excess of the market return adjusted for risk. It is a measure of the manager's contribution to performance with reference to security selection. A positive alpha indicates that a portfolio was positively rewarded for the residual risk which was taken for that level of market exposure. Beta measures the sensitivity of rates of portfolio returns to movements in the market index. A portfolio's beta measures the expected change in return per 1% change in the return on the market. If a beta of a portfolio is 1.5, a 1 percent increase in the return on the market will result, on average, in a 1.5 percent increase in the return on the portfolio. The converse would also be true. Downside Risk stems from the desire to differentiate between "good risk" (upside volatility) and "bad risk" (downside volatility). Whereas standard deviation punishes both upside and downside volatility, downside risk measures only the standard deviation of returns below the target. Returns above the target are assigned a deviation of zero. Both the frequency and magnitude of underperformance affect the amount of downside risk. Excess Return Ratio is a measure of risk adjusted relative return. This ratio captures the amount of active management performance (value added relative to an index) per unit of active management risk (tracking error against the index.) It is calculated by dividing the manager's annualized cumulative excess return relative to the index by the standard deviation of the individual quarterly excess returns. The Excess Return Ratio can be interpreted as the manager's active risk/reward tradeoff for diverging from the index when the index is mandated to be the"riskless"market position. Information Ratio measures the manager's market risk-adjusted excess return per unit of residual risk relative to a benchmark. It is computed by dividing alpha by the residual risk over a given time period. Assuming all other factors being equal, managers with lower residual risk achieve higher values in the information ratio. Managers with higher information ratios will add value relative to the benchmark more reliably and consistently. 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. Callan 28 Risk/Reward Statistics Sharpe Ratio is a commonly used measure of risk-adjusted return. It is calculated by subtracting the 'risk-free" 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)risk and residual (diversifiable or unsystematic)risk. The purpose of portfolio diversification is to reduce the residual risk of the portfolio. 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 29 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 identify 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 Slated 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 30 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 ("bulletness"). 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 31 Disclosures Callan Quarterly List as of September 30, 2016 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 that it is our responsibility to manage those conflicts 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 on-going basis. The list below is an important component of our conflicts management and disclosure process. It identifes those investment managers that pay Callan fees for educational,consulting,software,database or reporting products and services. We update the list quarterly because we believe that our Pond sponsor clients should know the investment managers that do business with Callan,particularly those investment manager clients that the fund sponsor clients may be using or considering using.Please refer to Callan's ADV Part 2A for a more detailed description of the services and products that 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 film relationships are not indicated on our list. Fund sponsor dients may request a copy of the 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 Bmndes Investment Partners,L.P. Aberdeen Asset Management PLC Brandywine Global Investment Management,LLC Acadian Asset Management LLC Brown Brothers Harriman&Company ACR—Alpine Capital Research Brown Investment Advisory&Trust Company AEGON USA Investment Management Cambiar Investors,LLC AEW Capital Management Capital Group Affiliated Managers Group,Inc. CastleArk Management,LLC AllianceBernstein Causeway Capital Management Allianz Global Investors Chartwell Investment Partners Allianz Life Insurance Company of North America ClearBridge Investments,LLC American Century Investment Management Cohen&Steers Capital Management,Inc. Amundi Smith Breeden LLC Columbia Threadneedle Investments Analytic Investors Columbia Wanger Asset Management Angelo,Gordon&Co. Columbus Circle Investors Apollo Global Management Conestoga Capital Advisors AOR Capital Management Corbin Capital Partners,L.P. Area Management LLC Cornerstone Capital Management Adel Investments,LLC Cramer Rosenthal McGlynn,LLC Aristotle Capital Management,LLC Credit Suisse Asset Management Artisan Holdings Crestline Investors,Inc. ASS Capital Management Inc. D.E.Shaw Investment Management,LLC Ativa Capital Management Delaware Investments Atlanta Capital Management Cc.,LLC DePdnce,Race&Zollo,Inc. Aviva Investors Americas Deutsche Asset Management AXA Investment Managers Diamond Hill Investments Babson Capital Management Duff&Phelps Investment Mgmt Co. Sallie Gifford Overseas Limited Eagle Asset Management,Inc. Baird Advisors EARNEST Partners,LLC Bank of America Eaton Vance Management Baring Asset Management Epoch Investment Partners,Inc. Baron Capital Management,Inc. Fayez Sarofm&Company Barrow,Hanley,Mewhinney&Strauss,LLC Federated Investors BlackRock Fidelity Institutional Asset Management BMO Asset Management,Corp. Flom Capital Global Asset Management BNP Paribas Investment Partners First Eagle Investment Management,LLC BNV Mellon Asset Management First Hawaiian Bank Wealth Management Division Boston Partners Fisher Investments CZ11an I Knowledge.Experience.Integrity. Page 1 of 2 Manager Name Manager Name Fort Washington Investment Advisors,Inc. O'Shaughnessy Asset Management,LLC Franklin Templeton Institutional Pacific Alternative Asset Management Co. Fred Alger Management,Inc. Pacific Current Group Fuller&Thaler Asset Management,Inc. Pacific Investment Management Company GAM(USA)Inc. Parametric Portfolio Associates GE Asset Management PIE Investments GMO Peregrine Capital Management,Inc. Goldman Sachs Asset Management PGIM Grand-Jean Capital Management PineBridge Investments Guggenheim Investments Pinnacle Asset Management L P. GW&K Investment Management Pioneer Investments Harbor Capital Group Trust PNC Capital Advisors,LLC Hartford Funds Principal Global Investors Hartford Investment Management Co. Private Advisors, LLC Henderson Global Investors Putnam Investments,LLC Holchkis&Wiley Capital Management,LLC QMA(Quantitative Management Associates) HSBC Global Asset Management BBC Global Asset Management lial Asset Management Limited Regions Financial Corporation Income Research+Management,Inc. Ridgewrorth Capital Management, Inc. Insight Investment Management Limited Riverbridge Partners LLC Institutional Capital LLC Rockefeller&Co.,Inc. INTECH Investment Management,LLC Rothschild Asset Management,Inc. Invesco Russell Investments Investec Asset Management Santander Global Facilities Investment Counselors of Maryland,LLC Schroder Investment Management North America Inc. Janus Capital Management,LLC Scout Investments Jarislowsky Fraser Global Investment Management SEI Investments Jensen Investment Management Shenkman Capital Management,Inc. J.P.Morgan Asset Management Smith,Graham&Co.Investment Advisors,L.P. KeyCorp Smith Group Asset Management Lazard Asset Management Standard Life Investments Limited Legal&General Investment Management America Standish Lincoln National Corporation Stale Street Global Advisors LMCG Investments,LLC Stone Harbor Investment Partners,L.P. Longview Partners Systematic Financial Management Loomis,Sayles&Company,L.P. T.Rowe Price Associates,Inc. Lord Abbett&Company Taplin,Carl&Habacht Los Angeles Capital Management The Boston Company Asset Management,LLC LSV Asset Management The Hartford MacKay Shields LLC The London Company Man Investments Inc. The TCW Group,Inc. Manulife Asset Management Tn-Star Trust Bank Martin Currie Inc. UBS Asset Management McDonnell Investment Management,LLC Van Eck Global MFS Investment Management Versus Capital Group MidFirst Bank Victory Capital Management Inc. Mondrian Investment Partners Limited Vontobel Asset Management,Inc. Montag&Caldwell,LLC Voya Financial Morgan Stanley Investment Management Voya Investment Management(Ma ING) Mountain Lake Investment Management LLC Waddell&Reed Asset Management Group MUFG Union Bank,N A. WCM Investment Management Neuberger Berman Wasatch Advisors, Inc. Newton Investment Management uka Newton Capital Management) WEDGE Capital Management _ Nikko Asset Management Co.,Ltd. Wellington Management Company,LLP Northern Trust Asset Management Wells Capital Management Nuveen Investments,Inc. Western Asset Management Company OR Global Asset Management William Blair&Company Old Mutual Asset Management Opus Capital Management Inc. Callan I Knowledge. Experience.Integrity. Page 2 of 2 Investment Report Orange County Sanitation District Period Ending September 30, 2016 Diego, 0 All Table of Contents SECTION 1 Economic Update SECTION 2 Account Profile SECTION 3 Consolidated Information SECTION 4 Portfolio Holdings SECTION 1 . Economic Update 011 Economic Update ■ The Federal Open Market Committee(FOMC)kept the fed funds rate unchanged at a range of 0.25%-0.50% in September. However, there were three dissenting votes (out of ten), as Esther George (Kansas City), Loretta Mesler (Cleveland), and Eric Rosengren (Boston) preferred to raise the target range by a quarter percent. The Fed's overall assessment of the economy was little changed from July. In the policy statement, the Committee noted the labor market has continued to strengthen but inflation remains below target. In deciding whether or not to raise the fed funds target rate, the Committee said"the case for an increase in the federal funds rate has strengthened but decided,for the time being,to wad for further evidence of continued progress toward its objectives" In her press conference, Fed Chair Yellen remarked that the next meeting on November 1-2 is a "live' meeting but given its proximity to the US Presidential election on November 8,we think the Fed is likely to keep monetary policy on hold until December. 9 economic data remains modestly favorable over the next few months, we expect the Fed will hike the fed funds rate range by 25 basis points in December. ■ The global economy continues to face headwinds, but domestic economic data points toward ongoing slow growth. The U.S. labor market remains healthy.The unemployment rate was 5.0% in September, and payrolls have increased by an average of 192,000 on a trailing 3-month moving average basis. Wage growth is inching higher. Consumer confidence remains strong. Housing trends remain favorable even though home price appreciation has softened. Oil prices have rebounded from earlier this year. The manufacturing sector, though still under pressure, has slightly improved. Second quarter 2016 GDP grew 1.4%, following growth of 0.8%in the first quarter.The consensus forecast calls for a pick-up in GDP growth in the second half of the year to 2.9%and 2.4%in the third and fourth quarters, respectively. ■ In September, the 2-year Treasury yield decreased four basis points and the 10-year Treasury yield increased one basis point. Leading up to the FOMC meeting in September, the yield curve steepened slightly. After the FOMC meeting in September, yields modestly declined. The market-implied probability of a fed funds rate hike before year-end (reflected in fed funds futures prices) is now greater than 60%.According to the Fed's most recent projections, 14 out of 17 policymakers project at least one rate hike before year-end. The Fed's longer-run fed funds rate forecast is now 2.9%. The Fed's "dot ploC of fed funds rate projections has drifted lower over the last few years and we believe the projected terminal fed funds rate of 2.9% remains unrealistically high. We expect it will continue to move down closer to 2.0%.At least over the near-term, we believe multiple global and domestic factors will create an effective cap on rates across the yield curve. s CiIII Employment Nonfarm Payroll (000's) Unemployment Rate 15.0% 14.0% —UndeR�ry�rymant Rare a5) 300 13.0% L —Unemptrymant Rare(U3) 250 2.0% 200 = 10.0% m 50 9.0% 8.0% 100 7,0% 50 8.0% 5.0% 0 4.0% A y 0 fin, S `Se O ,(, "Y ��.` it a4 4'7,, �S �qs %7 mt�e 2�s `Yt�s 441 m441 .�S al.�s %A1& �:75 •1& 19 76 So 2e US Dep donnl of Labor SWooe:US Department of Labor Nonfarm payrolls were lower than expected in September, up 156,000 versus the consensus forecast of 172,000. July and August payrolls were revised down by a net total of 7,000. On a trailing 3-month and 6-month basis, payrolls increased by an average of 192,000 and 169,000 per month, respectively. The unemployment rate inched up in September to 5.0%from 4.9%in August, as the participation rate increased to 62.9%from 62.8%.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, remained unchanged in September at 9.7%.Wages increased 0.2%in September,following a 0.1% increase in August. On a year-over-year basis,wages were up 2.6%in September,versus 2.4%in August. llll� GRI Inflation Consumer Price Index(CPI) Personal Consumption Expenditures(PCE) 3.0% 3.0% CPI YOT%CM1enge 2.5% —Care CPI TOY%Change 2.5% PCE Pow Oelelar YOY%Cnge PCE C.bAslg.TOT%LhaM1aye 2.0% y 2.0% Z p s' 1.5% ' 1.5% u_ `u X 7.0% 1.0% > i 0.5% O 0.5% 0.0% 0.0% -05% 11 ryOkIf 47$ 441, 1S IS ryes �70 1fh76 9G906 S..:Usoapanna nrLeba source:USNartn td Laeor The Consumer Price Index (CPI)was up 1.1%year-over-year in August, versus up 0.8%year-over-year in July. Core CPI (CPI less food and energy)was up 2.3%year-over-year in August, vs. 2.2% in July. The Personal Consumption Expenditures (PCE) index was up 1.0% year-over-year in August,versus 0.8% in July. Core PCE (excluding food and energy) was up 1.7% year-over-year in August vs. up 1.6% year-over-year in July. Although Core CPI is trending above 2.0%,the Fed's primary inflation gauge is PCE which remains below the Fed's 2.0%target. IIII© CIR I Consumer Retail Sales YOY % Change Consumer Confidence 6.0% 110 5.0% 105 m 4.0% 100 c 95 K 3.0% X 90 2.0% c 85 1.0% 80 a0% g y� 75 sec§ �3;75 ��,75 `xi Is ��le 1s 1@ `A" ry9; ��.7s ,7s h s`�i7s 2.f,70 7s��,7e'7e 7676 7e Sw US Oep qnt W Commertn Sourte:Fetlerel Reserve On a year-over-year basis, total retail sales were solid, up 2.7% in September compared with a 2.1% increase in August. On a month-over-month basis, retail sales were up 0.6% in September, in line with expectations. Excluding autos and gas, retail sales rose 0.3% in the month. Meanwhile, consumer confidence remains strong.The consumer confidence index rose to 104.1 in September from 101.8 in August. s ORS Economic Activity Leading Economic Indicators (LEI) Chicago Fed National Activity Index(CFNAI) 0.8% 0.40 0.6% 0.30 0.20 0.4% R 0.10 0.2% a' 0.00 L Lo 0.10 0.0% ` -0.20 a 0 0.2% VV 0.40 9f.7s -®fc7s 5,S \ 'kt76 %76 �At? `&{ �q��9 �,�5 %1, �7, 'b", ya'76 70 soe�e:me G.me ce eoen S..Me reeeai Re:erysereacnteeo The Index of Leading Economic Indicators (LEI) declined 0.2% in August, below expectations. tvleanwhile,the Chicago Fed National Activity Index(CFNAI) improved to-0.07 in August on a 3-month moving average basis,from-0.09 in July. Both broad economic indices point to weak economic growth ahead. C11% I Housing Housing Starts S&P/CaseShiller20 City Composite Home Price Index 8.0% •MUHiFamiN Hou9 gSlatls 1400 •sireie FamiN rouvng Smrn - 7.0% '0 1200 8.0% 1000 & 5.0% 0 c 800 0 4.0% f $ m 600 3.0% m O 400 2.0% u 200 1.0% x 4F7 q "I& M`1S >S 4F7S "16 `76. �@ Sou .US Census Bureau Scuan:SB Total housing starts fell 5.8% in August, following growth of 1.4% in July. Single-family starts fell 6.0% in August while multi-family starts declined 5.4%. Housing starts tend to be volatile on a month-to-month basis but the underlying trend remains favorable. Notably, single-family permit growth was strong in August.According to the Case-Shiller 20-City home price index, home prices were up just 5.0%year-over-year in July, vs. up 5.1%year-over-year in June. This index suggests that home price appreciation continues to soften. iiiii� C1111 Manufacturing Institute of Supply Management Purchasing Capacity Utilization Manager Index 80v% so pantling 58 79.0% % 78.0% 54 r.0% 52 a 8.0% so 48 75.0% cpnvapune 48 y y 74.0% 16 Q6. Q 1141,76 y 1DkIs �.1 "E", `b. `� p 7 RL� 4i;7 �p `x{ s s 1 s >x >A s s s s a s 10 Source:InslRNe lw Supply A4snag W Source:Fuceal Reserve The Institute for Supply Management(ISM)manufacturing index increased to 51.5 in September from 49.4 in August, suggesting that manufacturing activity is improving. New orders grew solidly in September. A reading above 50.0 suggests the manufacturing sector is expanding, and a reading above 43.1 is generally indicative of broad economic expansion, based on the historical relationship between the index and GDP growth. Meanwhile, capacity utilization, which is production divided by capacity, decreased to 75.5%in August from 75.9%in July.The capacity utilization rate remains below the long-run average of 80.0%(1972-2015), suggesting there is still excess capacity in the industrial sector. �jjjj Gross Domestic Product (GDP) Gross Domestic Product(GDP) 6.0% Personal Consumption Expenditures 1.8% 1.5% 1.1% 2.9% 5.0% Grass Private Domestic Investment 0.4% -0.4% -0.6% -1.3% 4.0% 3.0% Net Exports and Imports -0.5% -0.5% 0.0% 0.2% 2.0% 1.0% Federal Government Expenditures 0.1% 0.3% -0.1% 0.0% 0.0% State and Local(Consumption and Gross .1.0% 0=�GDPQ�%ChwgeInvestment) 0.3% 0.1% 0.4% 0.3% Taal 2.0% 0.9% 0.8% 1.4% �n'vO O%'0 141.7,11 %11 I'll.7? Itk70 10 22a I%hxs�22S IlkvS 22B Source: USDepanmentacommcme Source: US Dejca , tof�rce Second quarter real GDP growth was revised up to an annualized rate of 1.4% from the second estimate of 1.1%, slightly exceeding expectations. This follows growth of 0.8%in the first quarter and 0.9%in the fourth quarter. Nonresidential investment,exports, and inventories were the primary drivers of the revision. Growth from Personal Consumption Expenditures (PCE)was strong in the second quarter and continued to be the biggest overall contributor to economic growth. Market participants are forecasting GDP growth of 2.9%in the third quarter. GIII Bond Yields US Treasury Note Yields US Treasury Yield Curve IWA 3.0% —sap-s iareary- =Jun16 2.5%2.5% — �StP-15 2.0% 2.0% X X 0 1.5% Y' 1.0% 0.5% 0.5% 0.0% 0.0% O 'q -'9 'S Ilk" "I'll 's ''° Ilk" ° 3J°J 2r S^ 'O l °O i souRa:arownner¢ sourceeoarwerp Over the past three months, the yield curve shifted upward with the 2-year Treasury yield up 18 basis points and the 10-year Treasury yield up nearly 13 basis points. However, on a year-over-year basis the yield curve flattened with the 2-year Treasury yield up about 13 basis points and the 10-year Treasury yield down more than 44 basis points. Over the past year, financial market volatility has been elevated due to weak global economic growth, volatile commodity prices, political uncertainty, and divergent global central bank monetary policy. IIIIIIIII� SEA Account Profile so � 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 CA Orange County Sanitation District Long Term September 30,2016 COMPLIANCE • Assets managed by ChandlerAsset Management are in full compliance mith State lawand with the investment policy Category Comment Treasury Issues 5 years maximum maturity Complies" Suprenational "AA"or better by l of 3 NRSR0s; 30%mabmum; 5%max issuer, 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 tens rating by l of 3 NRSROs; 30%mabmum;5%max issuer; 5 Complies years max maturity Municipal Securities "A"or higher by 1 of 3 NRSR0S; 10%mabmum; 5%max issuer; 5 years maximum Complies maturity Asset Backed/CMOs/ "AA"or better by l of 3 NRSR0s; "A"or higher issuer rating by l of 3 NRSROs; 20% Cont Mortgage-backed maximum; 5%max issuer excludi MBS/ ovtagency);5 ars max maturity Negotiable CDs "A"or better on its long tens debt by 1 of 3 NRSROs; "A1/P1"or highest short term Complies ratings by l of 3 NRSR0s; 30%mabmum;5%max issuer; 5years max maturity CDs/TDS 5%maxissuer; 5yearsmaxmatunty Complies Bankers Acceptances A-1,or equivalent highest short term rating by l of 3 NRSROS; 40%mabmum; 5% Complies max issuer; 180 days max aturity Commercial Paper A-1,or equivalent by l of 3 NRSR0S; "A"or better by l of 3 NRSR0s,if long term Complies debt issued; 25%maximum' 5%max issuer, 270 days max maturity Money Markel Fund Highest rating by 2 of 3 NRSROs; 20%maxi mum; 10%max issuer Complies Repurchase Agreements 102%collateralization Complies Reverse Repurchase 5%maximum,90 days max maturity Complies Agreements LAIF Not used by investment adviser Complies Avg Duration Not to exceed 60 months - (80%to 120%of the benchmark) Complies Maximum Maturity 15 years maximum maturity Complies* 'The portfolio has twenty-four(24)securities with maturities greater than 5 years including one(1)Ass,fire(5)CMOs,seventeen(17)MBS and one(1)treasury. All securities were inherited from the previous manager and complied at time of purchase. S,`I Account Profile Portfolio Characteristics Orange County Sanitation District Long Term 09/30/2016 06/30/2016 Benchmark' Portfolio Portfolio Average Maturity(yrs) 2.73 2.80 2.87 Modified Duration 2.62 2.38 2.45 Average Purchase Yield n/a 1.48 % 1.43 Average Market Yield 1.07 % 1.05 % 0.92 % Average Quality— AAA AA+/Aar AA+/Aal Total Market Value 325,949,886 332,689,558 'BAML 1-5 Yr US CorporatelGovt Rated AAA-A Index Benchmark is a blended rating of S&P,Moody's,and Fitch.POMolio is S&P and Mcody's respectively. Several securities were purchased across the Supranational,Asset Backed, Negotiable CD, and Corporate sectors of the market to keep the portfolio structure in-line with Chandler objectives. Several Treasury notes were sold to facilitate the additions to the portfolio and to accommodate a $7 million withdrawal in August. �-J" Sector Distribution Orange County Sanitation District Long Term September 30, 2016 June 30, 2016 foul us Commercial paper Corporate paper us 3.6% 22.0% 3s% corporate 20.8% Muredpal Municipal Bantls Mortgage Bonds 1.5% Pass 1.4% /Thru Mortgage Money 03% Money pass Markel Market Tbru Fund! Fund Ol% FI FI 0.6% us 0.8% .Treasury 25.6% CMO CIAO 1.0% 1.0% us Treasury Negotiable 31.7% CD ABS 1 3% ABS 9.0% TO% sugmussal Agencysupranatkmal Agenoy -4.5% 29.3% 5.]% 28.8% The sector allocation changed moderately. Notably the Treasury allocation was reduced by 6.1%, to 25.6% of the portfolio, partially offset by the 2.0% increase in the Asset Backed allocation, and the 1.2% increase in both the Corporate and Supranational allocation. Issuers «TAOrange County sanitation Distiiel Long Term Issuer Report Accounl810268 As019/302016 Government of United States US Treasury 25.60% Federal National Mortgage Association Agency 11.35% Federal Home I.oan Bank Agency 9A3% Federal l lome Loan Mortgage Corp Agency 8.48% Inmr-American Day Bank Supmnmional 2.64% John Douro ABS ABS 2.57% JP Mmgan ABS ABS 2.04 Bank of Tokyr-Mit UFJ Cmomerelal Paper 2.03% [fond.AILS AHS 1.91 % Toyota ABS ABS 1.77% Wells Fargo Corp US Corporate 1.73% JP Morgan Chase&Co US Corporate 1.67% General Electric Co US Comorele 1.58% Qualcnmm Inc US Corporate 1.59% Caere&Company US Corporate 1.57% Intcmational Finance Corp Suprenational 1.54% In0 Bank Reco t and Development Suprensional 1.54% 1 yoca Motor Carp Commercial Paper 1.53% Bank ofAmerut,Corp US Corporate 1.43% Chevron'I'exaeo Corp US Corporate 1.40% HSBC USA Corp US Corporate 1.31% Apple Inc Its Corporate 1.26% Ilonda Motor Corporation US Corporate 1.26% Toronto Dentition Holdings Negotiable CD 1.25% Eli Lilly&Cc US Corporate 1.25% Morgan Stanley US Corporate 0.0% American Express Credit IIS Co rate 0.%% Exxon Mobil Cory US Corporate 0.94% Microsoft US Corpnram 0.93% Pon Authority of New York and New Jersey Municipal Bonds 0.85% Federal Home Loan Mortgage Corp CMD 0.70% Bank of New York US Corporate 0.67% Nissan ABS ABS 0.64% KI Issuers Continued C." Orange County Sanitation District Long Term Issuer Report Account#10268 As of 9/302016 Intel Cory US Corporate 0.62% Occidental Petroleum Corporation US Corporate 0.62% Federal National Mortgage Association Mortgage Pass Thru 0.59% Drefus Treasury Money Market Fund Money Market Fund FI 0.56% New York City Transitional Finance Authority Municipal Bonds 0A8% Goldman Sachs lrc. US Corporate 0.20% University ofCalifomia Municipal Bonds 0.14% NCUA Guaranteed Notes CMO 0.13% Federal National Mortgage Association CMO 0.12% GNMA Mortgage Pass Thru 0.08% AMRESCO Residemal Securities Corp Mortgage Pass Thru 0.04% Small Busirsss Administration ASS 0.02% SLM Corp ASS O.OI% 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, 2016 vs. June 30, 2016 100.0% 60.0% 60.0% — 40.0% 20.0% 0.0% AAA AA A <A NR 9/30116 6/30/16 AAA AA A <A NR 9/30/16 15.3% 66.2% 10.0% 3.4% 5.1 % 6/30116 11.1 % 71.7% 9.9% 3.4% 4.0% Source:S&P Ratings " Duration Distribution Orange County Sanitation District Long Term September 30, 2016 vs. June 30, 2016 30.0% 25.0% 20.0% 15.0% 10.0% 5.0% 0.0% 0-0.25 025-0.50 0.50-1 1 2 2-3 3-4 6-5 5, 9I3U2016 6 12016 0-0.25 0.25-0.50 0.50-1 1 -2 2-3 3-4 4-5 5+ 9/30116 8.6% 4.8% 11.3% 18.6% 25.2% 14.0% 13.7% 3.7% 6/30116 4.3% 10.7% 9.8% 20.8% 17.2% 20.8% 13.2% 3.2 % " Duration Distribution Orange County Sanitation District Long Term Portfolio Compared to the Benchmark as of September 30, 2016 30.0% 25.0% 20.0% 15.0% 10.0% 5.0% 0.0%- jib 0-0.25 0.25-0.50 0.50-1 1-2 2-3 3-4 4-5 5+ �Palblb � BYMhnafk' 0-0.25 0.25-0.50 0.50-1 1 -2 2-3 3-4 4-5 5+ Portfolio 8.6% 4.8% 11.3% 18.6% 25.2% 14.0% 13.7% 3.7% Benchmark' 0.7% 0.0% 3.9% 29.9% 27.9% 22.8% 14.7% 0.0% `BAML 1-5 Vr US Corp..WG.v Reted AAA-A Index The duration of the portfolio contracted moderately, currently 2.38 versus 2.45 at the end of the prior reporting period. The Chandler team will continue to keep the overall duration of the portfolio below the benchmark as in our judgment the market is underpricing the risk of a tightening to monetary policy later this year. Investment Performance Orange County Sanitation District Long Term Period Ending September 30,2016 Total Rate of Return Annualized Since Inception November 30,2014 2.00% 1.50% 1 Mile 0.50% 0.W%- L 12 menthe 2years 3years 5years 10 years Since inception Orange County Sanitation District Lang Term = SAME 1-5 Yr US Corperate/Govt Rated AAA-A Index Annualized 3 months 12 months 2 years 3 years 5 years 10 years Since Inception Orange County Sanitation District Long Term 0.06% 2.00% N/A N/A N/A N/A 1.61 % BAML 1-5 Yr US Corporate/Gout Rated AAA-A Index -0.07% 1.81 % N/A N/A N/A N/A 1.70% 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 earnings,realized and unrealized gains and losses in the portfolio. Compliance CA Orange County Sanitation District Liquid September 30,2016 COMPLIANCE • Assets managed by ChandlerAsset Management are in full compliance Wth State lawand with the investment policy Category Standard Comment Treasury Issues 1 year maximum maturity, Minimum allocation of 10% Complies Supmnational "AA"or better by l of 3 NRSROs; 30%maximum; 5%max issuer, lyear Complies maturity, includes only, IADB IBRD and IFC 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%maximurn;5%max issuer; Complies 1 year max maturity Asset Backed/CMOs "AA"or better by l of 3 NRSROs; "A"or higher issuer rating by l of 3 NRSROs; Complies 20%maximum; 5%max issuer; 1 year max maturity Negotiable CDs "A"or better on its longterm debt by l of 3 NRSROs: "A1/P1"or highest short Complies term ratings by 1 of 3 NRSROs; 30%maximum;5%max issuer,1 year max maturity CDs/TDS 5%max issuer, 1 year max maturity Complies Bankers Acceptances A-1,or equivalent short tens rating by l of 3 NRSROS; 40%maximum; 5%max Complies issuer' 180 days max maturity Commercial Paper A-1,or equivalent by l of 3 NRSROS; "A"or better by l of 3 NRSROs,if long Complies tens debt issued; 25%maximum; 5%max issuer, 270 days max maturity Money Market Fund Highest ratinto by 2of3 NRSROs' 20%maximum; 10%max issuer Complies Repurchase Agreements 102%collaterali¢afion Complies Reverse Repurchase 5%maximum,90 days max maturity Complies Agreements LAIF Not used by investment adviser Complies Prohibited Municipal Securities Complies Prohibited Mortgage Securities Complies Avg Duration Not to exceed 180 days; Max duration of 1/2 year Complies Maximum Maturity 1 year maximum maturity Complies 'Complies in the aggregate portfolio;Liquidity portfolio has U%max issuer concerrtretiou on Federal National Mortgage Assoc(FNMAs). 11% Account Profile Portfolio Characteristics Orange County Sanitation District Liquid 09/30/2016 06/30/2016 Benchmark' Portfolio Portfolio Average Maturity(yrs) 0.15 0.11 0.13 Modified Duration 0.15 0.10 0.13 Average Purchase Yield n/a 0.45 % 0.40 Average Market Yield 0.17 % 0.51 % 0.38 % Average Quality— AAA AA+/Aar AAA/Aai Total Market Value 57,988,854 139,402,771 'BAML 3-Month US Treasury BIII Index Benchmark is a blended rating of S&P,Moody's,and Fitch.Portfolio is S&P and Mwdy's respectively. Many securities were purchased across the Treasury, Agency, Commercial Paper, and Corporate sectors of the market to reinvest maturing notes and offset upcoming liquidity needs. A large number of securities matured to offset the $81.5 million withdrawn from the portfolio during the quarter; one security was sold. �-J" Sector Distribution Orange County Sanitation District Liquid September 30, 2016 June 30, 2016 Marcy us M.&M Corporate Fund 11.2% FI 9.1% Commercial - uS Agency Comm .I Pap r�� Treasury 5q,g oo Pa r 4.2% 4e_0% 5.T% Money us Market caryorate Fund 20.0% 1.4%% us jAgency - sugsrudio0el Tre.." 21.8% - 9.5% 10A% The sector allocation changed materially driven by the large cash flows out of the portfolio during the quarter. The higher than normal cash balance was driven by a maturity on September 30. Issuers Orange County Sanitation District Liquid Issuer Report Account p10282 As of 9/30f7016 Federal National Mongage Association Agenq 24.42% Federal Home Loan Bank Agency 19.66% Federal Home Loan Mortgage Corp Alum, 10.76% Govemmem of U.itd States US Treasury 10.44% Daf.Treasury Money Market Fund Money Market Fund FI 9.09% Pepsi.Inc US Corporate 2.59% Bank of Tokyo-Mil UFJ Commercial Paper 2.22% Eli Lilly&Co US Corporate 176% Welk Fargo Corp US Corporate 1.75% Intel Corp US Corporete 1.74% US Bancorp US Corporate 174% Bank of New York US Corporate 174% Honda Motor COWmtion US Corporate 1.73% Apple Inc US Corporate 1.73% Deere&Company US Corporate 1.73% JP Mmllmo Chase&Co US Corporate 1.73% Cis.Systems US Corporate 173% Toyota Motor Corp Commercial Paper 1.72% Rabobank Nederiad NV NY Commercial Paper 1.72% Total 100.00% Quality Distribution Orange County Sanitation District Liquid September 30, 2016 vs. June 30, 2016 1n0.M 80.0% 60.0° 40.0% 20.0% 0.0%; qqp AA A <A NR 9130116 0 6/30/16 AAA AA A <A NR 9/30/1 6 52.9% 32.4% 14.8% 0.0% 0.0% 6/30/16 67.6% 26.2% 6.1 % 0.0% 0.0% Source:S&P Ratings Duration Distribution Orange County Sanitation District Liquid September 30, 2016 vs. June 30, 2016 100.0% 80.0% 60.0% 40.0% 20.0% 0.0% 0-0.25 0.25-0.50 0.50-1 1-1.5 1.5-2 2-2.5 2.5-3 3+ 9130/2016 � 8l8WL016 0-0.25 0.25-0.50 0.50-1 1 -1.5 1.5-2 2-2.5 2.5-3 3+ 9/30116 88.7% 7.8% 3.5% 0.0% 0.0% 0.0% 0.0% 0.0% 6/30116 81.1 % 15.6 % 3.3% 0.0% 0.0% 0.0 % 0.0% 0.0% GKI Duration Distribution Orange County Sanitation District Liquid Portfolio Compared to the Benchmark as of September 30, 2016 120.0% 100.0% MID% 60.0% a0.o% 20.0% - 0.0% 0-0.25 0.25-050 0.50-1 1-1.5 1.5-2 2-2.5 2.5-3 3+ m Pomblin saichnvk' 0-0.25 0.25-0.50 0.50-1 1 -1.5 1.5-2 2-2.5 2.5-3 3+ Portfolio 88.7% 7.8% 3.5% 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 The duration of the portfolio contracted slightly, currently 0.10 versus 0.13 at the end of the prior reporting period. The large liquidity need in mid-October is a contributing factor to the relatively short duration of the portfolio. Investment Performance Orange County Sanitation District Liquid Period Ending September 30,2016 Total Rate of Return Annualized Since Inception November 30,2014 0.50% a.4D% 0.30% 0.20% 0.10% 0.00% 12 manNa 2 yearn 3 years 5 years 10 years Since Inception Orange County Sanitation District Liquid BAML 3Monih US Treasury Bill Index Annualized 3 months 12 months 2 years 3 years 5 years 10 years Since Inception Orange County Sanitation District Liquid 0.10% 0.41 % N/A N/A N/A N/A 0.32% BAML 3-Month US Treasury Bill Index 0.10% 0.27% N/A N/A N/A N/A 0.16% Total rate of relum: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 earnings,realized and unrealized gains and losses in the portfolio. C1111 Compliance C1" OCSD Lehman Exposure September 30,2016 COMPLIANCE • Assets mana ed by Chand/erAsset Management am in full compliance wth State lawand vdth the investment alit Category Standard Comment Treasury Issues 5 years maximum maturity Complies Supranational "AA"or better by l of 3 NRSROs; 30%maximum; 5%max; 5yeam Complies maturi ; hcludes only, LADS,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 rah g by 1 of 3 NRSROs; 30%maximum;5%max Complies* issuer, 5 years max maturity 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 rating by l of 3 Complies Mortgage-backed NRSROs; 20%maximum; 5%max issuer(excluding MBS/gout agency):5 ars max maturity Negotiable CDs "A"or betteron its longterm debt by l of 3 NRSROs; "Al/P1"or highest Complies short term ratings by 1 of 3 NRSROs; 30%maximum;5%max issuer; 5 years max maturi CDs/TDS 5%max issuer; 5 years max maturity Complies Bankers Acceptances A-1,or equivalent highest start term rating by l of 3 NRSROS; 40% Complies maximum; 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 Complies long tens debt issued; 25%maximum; 5%max issuer; 270 days max maturity Money Market Fund Highest rating by 2of 3 NRSROs; 20%maximum; 10%max issuer Complies Repurchase A reements 102%collat2relization Complies Reverse Repurchase 5%maximum,90 days max maturity Complies A reements LAIF Not used by investment adviser Com lies A Duration I Not to exceed 60 months - 80%to 120%of the benchmark Com lies Maximum Maturity 5 years maximum maturity Complies 'Account holds$2 million face value(cusip 525ESCOV6)and$600.000 face value(cusip 525ESC1 W)of defaulted Lehman Bros Holdirgs that were purchased by the pmJous manager. Complied at time of purchase. S,`I Account Profile Portfolio Characteristics OCSD Lehman Exposure 09/30/2016 06/30/2016 Portfolio Portfolio Average Maturity(yrs) 22.68 22.17 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 Total Market Value 230,371 226,784 Portfolio is S&P and Mows respectively. SECTION 3 i Consolidated Information S,`I Account Profile Portfolio Characteristics Orange County Sanitation District Consolidated 09/30/2016 06/30/2016 Portfolio Portfolio Average Maturity(yrs) 2.41 2.07 Modified Duration 2.04 1.77 Average Purchase Yield 1.32 % 1.12 % Average Market Yield 0.97 % 0.76 % Average Quality— AA+/Aai AA+/Aa1 Total Market Value 384,169,111 472,319,114 Portfolio is S&P and Mows respectively. C�" Sector Distribution Orange County Sanitation District Consolidated September 30, 2016 June 30, 2016 c°anrr°jai us us Corporate Mott 3P 9%_ 21%ram 18.o% Pass age Thru Commercial 0S% Municipal Mortgage Paper Bantle Pass Th. 3.]% 1.2% 0.8% Municipal us Money Bontla Treasu Market u5 1.0% ry Funtl Treasury 35 9% FI 23.3% Money 1.8% Market FuM CMO NegoBable FI 0.8% CO common 1.1 % CMO Stack 0.7% 0.0% ABS Common ].6% 0�% ABS a� 4.9% Sueanelonal Agency `Supranaoonal Agency 5.9% 33.1% 4.9% 28.5% SECTION 4 1 IN _'==- Portfolio Holdings ��" Orange County Sanitation District Long Term Holdings Report Account 010268 As of 9/30116 Purchase Da:o Cost Va:u Mid Price Market Value %of Pod. MoodyIS&P Maturity CUSIP Security Description Par Value/Units Book Yie d Book Va u: Mkt YTM Accrued Ind. Gain/Loss Fitch Duration ABS 111111 43813JAC9 Honda Auto Receivables 2014-1 A3 998,914.40 01/22/2015 995,870.84 99.85 997,464.98 0.31 % Aaa/NR 1.14 0.67%Due 11/21/2017 0.90% 998,559.17 L54% 185.91 (1,094.19) AAA 0.17 89231 MAC9 Toyota Auto Receivables Owner 2014-A 1,074,791.54 0112112015 1,072,566.38 99.95 1,074,209.00 0.33% Aaa I AAA 1.21 0.67%Due 1211512017 0.90% 1,074,458.69 0.96% 320.05 (249.69) NR 0.18 89231TAB6 Toyota Auto Receivables Owner,2015-C 1,080,063.49 0811812015 1,0]9,9]6.64 99.99 1,079,940.36 0.33% Aaa/AAA 1.38 0.92%Due 2/1512018 0.93% 1,080,015.26 0.97% 441.63 (74.90) NR 0.23 43814GAC4 Honda Auto Receivables 2014-2 A3 832,992.17 04/N/2015 832,406.48 99.94 832,504.04 0.26% Aaa I AAA 1.47 0.77%Due 311912018 0.83% 832,817.07 0.95% 231.62 (313.03) NR 0.34 43814NAB1 Honda Auto Receivables 2016-1 A2 2,565,000.00 0211612016 2,564,743.76 1W.W 2,565,718.20 0.79% NR/AAA 1.72 1.01%Due 6/18/2018 1.02% 2,564,810.25 0.95% 935.51 907.95 AAA 0.49 161571GC2 Chase CHAT Pool#2013-A8 2,500,000.00 01/07/2016 2,499,121.10 1N.01 2,500,227.50 O.n% Aaa IAAA 2.04 1.01%Due 10/15/2018 1.03% 2,499,350.64 0.85% 1,122.22 876.86 AAA 0.02 4778nAD6 John Deere Owner Trust 2014-B A3 2,955,493.72 02/0412015 2,956,879.10 1W.04 2,956,740.94 0.91Is Aaa/NR 2.13 1.07%Due 11/15/2018 1.05% 2,956,056.10 0.99% 1405.SO 684.84 AAA 0.48 89236WAC2 Toyota Auto Receivables Owner 2015-A 3,595,000.00 0212412015 3,594,456.44 100.07 3,597,609.97 1.10% Aaa IAAA 2.38 1.12%Due 211512019 1.13% 3,594,747.11 1.01% 1,789.51 2,862.86 NR 0.64 47780NAM John Deere Owner Trust 2016E A2 2,980,000.00 07/19/2016 2,979,818.22 99.99 2,979,734.78 0.91 % Aaa INR 2.38 1.09%Due 211 512 01 9 IAG% 2,979,831.08 1.10% 1,443.64 (96.30) AAA 0.92 654T8WAB1 Nissan Auto Receivables Owner 2016-C 2,085,000.00 0810212016 2,084,917.85 99.93 2,083,619.73 0.64% Aaa/NR 2.62 A2A 1.08% 2.084,922.09 1.14% 991.53 (1,302.36) AAA 1.00 1.07%Due 511 512 01 9 161571HHO Chase CHAT Pool#2016-A7 4,140,000.00 W/0612016 4,139,643.13 1W.02 4,140,732.78 1.27% Aaa I AAA 2.96 1.06%Due 9/1612019 1.08% 4,139,660.63 1.04% 2,194.20 1,072.15 AAA 0.93 47788MA04 John Deere Owner Trust 2016-A A3 2,420,000.00 0212312016 2.419,619.09 100.0 2,422,243.34 0.74% Aaa INR 3.54 1.36%Due 411512020 1.37% 2.419,673.00 1.31% 1,462.76 2,570.34 AAA 1.65 438140AC2 Honda Auto Receivables 2016-2 A3 1,810,000.00 0512412016 1,809,964.89 1M.43 1,817,8W.83 0.56% Aaa INR 3.54 1.39%Due 411512020 1.40% 1,809,967.94 lA6% 1,118.18 7,892.89 AAA 1.82 83162CUO Small Business Administration 2001-20C 70,644.46 031M12001 70,644.46 105.95 74,849.92 0.02% Aaa/AA- 4.42 6.34%Due 3I1=1 6.34% 70,6"A6 3.80% 373.24 4,205.46 AAA 2.30 78445JAA5 SLMA20069A 37,851.84 MI22I2008 37,698.27 100.22 37,935.38 0.01 % Aaa/AA+ 6.57 2.234%Due 4/25/2023 2.33% 37,833.98 2.38% 159.69 101AI) AAA 0.06 29,138,326.65 29,161,391.75 8.95% Aaa I AAA 2.40 Total ABS 29,145,751.62 1.11% 29,143,347.47 1.05% 14,175.19 18,044.28 Aaa 0.76 AGENCY 3135GOES8 FNMA Note 4,000,000.00 06/11/2015 4,044,200.00 100.11 4,OO ,576.00 1.23% Ann/AA- 0.13 1,375%Due 11/15/2016 0,60% 4,003,810.34 046% 20,777.78 765,66 AAA 0.12 3137EADUO FHLMC Note 5,000,000.00 0111612015 4,991,050.00 100.03 5,001,545.00 1.54% Aaa/AA+ 0.33 0.5%Due 1Wl 017 0.59% 4,998,56897 0.40% 4,44444 2,976.03 AAA 0.32 313379FW4 FHLB NO. 5,000,000.00 0512212015 5.025,100,00 100.26 5,013,190.00 1.54% Aaa/AA+ 0.69 1%Do.619/2017 0.75% 5,008,456.51 0.62% 15,555.66 4,733.49 AAA 0.69 Chandler Asset Mane9ement-CONFIDENTIAL 37 '" Orange County Sanitation District Long Term Holdings Report Account#10268 As of 9/30116 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 Y7M Accrued Int. Gain/Loss Fitch Duration �IMCy 3137EADVB FHLMC Note 5,000,000.00 06/25/2015 4,994,250.00 100.10 5,OO ,825.00 1.54% Ann/AA+ 079 0J5%Due 7/14/2017 0.81 % 4,997,804.41 0.63% 8,020.83 7,020.59 AAA 0.78 3137EADN6 FHLMC Note 5,000,000.00 0112312015 4,967,500.00 99.97 4,998,525.00 1.54% Aaa/AA+ 1.28 0.75%Due 1n212018 0.97% 4,985,942.70 O.TT% 8,229.17 12,582+30 AAA 1.27 3137EADPI FHLMC Note 5,000,000.00 0111312015 4.974,100.00 100.08 5,003,920.00 1.54% Aee/AA+ 1.43 0.875%Due W12018 1.04% 4,988,223.17 0.82% 2,916.67 15,696.83 AAA 1.42 313378A43 FHLB Note 7,500,000.00 02/11/2015 7,544,850.00 100.82 7,561,147.50 2.32% Ass/AA+ 1.44 1.375%Due 3M/2018 1.10% 7,520,964.67 0.80% 6,302.08 40,182.83 AAA 1.43 3135GOG72 FNMA Note 5,000,000.00 1211812015 4,963,950+00 100.48 5,023,985.00 1.MIs Aaa/AA+ 2.21 1.125%Do.IVI412018 1.37% 4.973,384.57 0.90% 16,918.75 50,600.43 AAA 2.19 3133782102 FHLB Note 7,600,000.00 Various 7,589,190.00 101.31 7,598,025.00 2.33% Aaa/AA+ 2.44 1.5%Due 3/8/2019 1.14% 7,563,476.27 Me% 7,187.50 34,548.73 AAA 2.39 3135GOZGI FNMA Note 5,000,000.00 12/15 014 5,021,500.00 102.16 5,108,075.00 1.57% Aaa/AA+ 2.95 1.75%Due 9/12/2019 1.66% 5,013,364.53 1.00% 4,618A6 94,710+47 AAA 2.87 3137EADM8 FHLMC Note 7,500,000.00 Various 7,399,650.00 100.71 7,552,950.00 2.33% Aee/AA+ 3.01 1.25%Due 10/212019 1.61 % 7,420,939.99 1.01% 46,614.58 132,010.01 AAA 2.93 313383HU8 FHLB Note 5,000,000.00 08/1312015 5,008,950.00 102.32 5,115,795.00 1.58% Ass/AA+ 3.70 1.75%Due 611212020 1.71 % 5,006,849.49 1.11% 26,493.06 108,945.51 NR 3.56 3135GOD75 FNMA Note 5,000,000.00 1111612015 4,955,650+00 101.53 5,076,500.00 1.56Is Aaa/AA+ 3.73 1.5%Due W2212020 1.70% 4,964,076.24 1.08% 20,625.00 112,423.76 AAA 3.61 3135GOR3 FNMA Note 7,500,000.00 Various 7,370,726.00 101.35 7,600,927.50 2.34% Aaa/AA+ 4.17 1.5%Due 1113012020 1.87% 7,391,401.51 1A7% 37,812.50 209,525.99 AAA 4.01 3130A7CV5 FHLB Note 5,365,000.00 0211712016 5,343,325.40 100.61 5,397,565.55 1.66% Aaa/AA+ 4.39 1.375%Due V1812021 1.46% 5,346,006+55 1.23% 8,811.27 51,559+00 AAA 4.24 3135GOJ20 FNMA Note 10,000,000.00 Various 10.040,950.00 100.66 10,065,950.00 3.09% Aas/AA+ 4.41 1.375%Due 212612021 1.28% 10,039,31 y.66 1.22% 13,368.06 26,632.34 AAA 4.26 94,234,941.40 95,127,501.55 29.26% Aaa I AA+ 2.51 Total Agency 94,366,000.00 1,27% 94,222,587.58 0.92% 248,495.31 904,913+97 Aaa 2.44 Ct40 62888UAA8 NCUA Guaranteed Note CMO 2010-R2 419,136.76 11/10/2010 419,134.86 100.02 419,215.56 0.13% Ann/AA+ 1.10 CAN%Due 11/6/2017 0.00% 419,134.86 0s8% 260.00 8030 NR 0.08 31390VJ98 FHLMC FHMS K006 A2 900,000.00 1112312010 951,046.88 108.28 974,520.90 0.w Is Aaa/AA+ 3.32 4.251%Due 1/2512020 3.54% 918,486+18 1.48% 3,188.25 56,034.72 AAA 2.96 3837H4NX9 GNMA PooI#2000-9 35,255.74 0112412000 35,25514 100.54 35,465]1 0.01 % Aee/AA+ 13.39 1.032%Due 211612030 1.04% 36,255.74 0.66% 29.96 190.03 AAA 0.03 3133TCE95 FHLMC FSPC E3A 49,510.10 03/11/1998 49,56189 104.26 51,618.29 0.02% Aaa/AA+ 15.88 3.039%Due 811512032 3.01 % 49,534.05 1.55% 125.38 2,084.24 AAA 1.68 3139BX305 FNMA FNR 2007-114 A6 40,243.38 0111012008 38,281+52 99.83 40,173.44 0.01Is Me/AA. 21.09 0.927%Due 1 OQ712037 1.07% 38,855A0 1.00% 3.25 1,318.04 AAA 0.75 Chandler Aseel Management-CONFIDENTIAL 38 '" Orange County Sanitation District Long Term Holdings Report Account#10268 As of 9/30116 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 u: Mkt YTM Accrued Int. Gain/Loss Fitch Duration CMO 31397QREO FNMA FNR 2011-3 FA 363,964.60 12/20/2010 363,850.86 100.66 366,366.77 0.11 % Asa/AA- 24.42 1.202%Due 2/25/2041 1.20% 363,872.32 L01 % 72.93 2,494.45 AAA 0.07 313WY35 FHLMC FSPC TS82A 1,029,097.01 06/0912011 1,165,452.34 120.21 1,237,087.81 0.WIs Aaii 2700 6.5%Due 9/25/2043 540% 1143,063 75 335% 1,114.86 94,024.06 AAA 6.15 3,022,584.09 3,124,428.54 0.96% Ann I AA+ 15.41 Total CMO 2,837,207.59 3.40% 2,968,202,30 2.07% 4,794.63 156.22624 Asa 3.42 COMMERCIAL PAPER 06538BKS1 Bank of Tokyo Mitsubishi NY Discount 6,630,000.00 0612712016 6,613,645,98 99.95 6,626,592.91 2.03% P-1 I A-1 OD] CP 0.75% 6,626,592.91 015% 0.00 0.00 F-1 OL] 0.74%Due 10/26/2016 89233GLd3 Toyota Motor Credit Discount CP 5,000,000.00 05/19/2016 4,978,261.10 99.89 4,994,266.66 1.53% P-1IA-1+ 0,13 0,86%Due 1111812016 0.88% 4,994,266+66 0.88% 0.00 0.00 F-1 0,13 11,591,907.08 11,620,859.57 3.57% P-1 IA-0 0.10 Total Commercial Paper 11,630,000.00 0.01% 11,620,859.57 0.81% 0.00 0.00 F-1 0.10 MONEY MARKET FUND Fit 261908107 Dreyfus Trsy/Agcy Cash Management 1,840,702.86 Various 1,840,702+86 1.00 1,840,702.86 0.56% Aaa I AAA 000 521 0.21 % 1,840,702+86 0.21% 0.00 0.00 AAA 000 1,040,702.86 1,840,702.86 0.56% Asa I AAA 0.00 Total Money Market Fund Fit 1,840,702.86 0.21% 1,040,702.86 0.21% 0.00 0.00 Asa 0.00 MORTGAGE PASS THRU _ 31381PDA3 FNMA FN 466397 361,748.13 1210112010 353,919+68 107.01 387,109.57 0.12% Asa/AA- 4.09 3.4%Due 11/112020 3,80% 358,519.81 1.56% 239.16 28,589.76 AAA 3.69 36225CAZ9 GNMA Pooh G280023 26,123.20 0810811997 26,555.87 103.24 26,970.64 0.01 % Aiiii 10.23 1.625%Due 12I20Y2026 1.52% 26,273.98 1.56% 35.38 696.66 AAA 4.22 36225CC20 GNMA Pi G280088 30,443.87 OS/11/1997 31,109.84 103.33 31,456.71 0.01Is Aaa/AA+ M 73 2.1%Due 6/20/2027 1.96% 30,683+21 1.66% 53.28 773.50 AAA 4.92 31348SVVZ3 FHLMC FH 786064 2,495.40 0211812000 2,434.64 103.39 2,580.00 0.00% Asa/AA+ 11.26 2.737%Due 1/1/2028 2.93% 2,470.86 2.21% 5.69 109.14 AAA 0.26 31371NUC7 FNMA FN 257179 26,054.42 12/05/2011 27,555.10 109.54 28,540.35 0.01 % Aaa/AA+ 11.51 4.5%Due 4/1/2028 3.72% 27,112S3 1A8% 97.70 1,427.52 AAA 3A6 3141TYAY3 FNMA Pooh FN MA0022 31,694.78 121OWN11 33,520+32 109.54 34718.87 0.01Is Asa/AA+ 12.51 4.5%Due 4/1/2029 3.76% 33.013+39 1.48% 118.86 1,705.48 AAA 3.27 3138EG6F6 FNMA FN AL0889 20,660.16 12I05I2011 21,850.15 109.54 22,631.41 0.01 % Aiiii 12.68 4.5%Due 6/1/2029 3.77% 21,522.86 1.32% 18.08 1,108.55 AAA 3.04 03215PFN4 AMRESCO Residential Securdes 1999-1 133,743.29 05 OI2011 100,432.86 Sege 117,777.60 0.04% NR I AA+ 12.74 A 4.98% 110,299.44 2.83% 32.59 7,478.24 BBB 9.58 1.462%Du0 612512029 Chandler Asset Management-CONFIDENTIAL 39 ��" Orange County Sanitation District Long Term Holdings Report Account 010268 As of 9/30116 DescriptionPurchase Da:o Cost Va:u Mkt Price Market Value %of Pod. MoodyIS&P Maturity CUSIP Security MORTGAGE PASS THRU 36225CNM4 GNMA Pool#G280395 10,86871 03/15/2000 10,770.19 103.70 11,271.20 0.00% Asa/AA- 13.56 2.1%Due 4/20/2030 2.16% 10,824J07 1.68% 19.02 447.13 AAA 6.00 36225CN28 GNMA Pool#G280408 84,686.67 03/15/2000 83,826.58 103.64 87,769.43 0.03% Aaa/AA+ 13.64 2.1%Due 5/20/2030 2.17% 84,295+69 1.39% 148.20 3,473.74 AAA 3.66 31403GXF4 FNMA Pool#FN 748678 5,510.48 0611012013 5,92377 111.50 6,144.21 0.00% Aaa/AA+ 17.01 5%Due 10/1/2033 4.16% 6,868.05 1.58% 22.96 286.16 AAA 3.43 36225DCB8 GNMA Pooht G280965 91,575.75 07/19/2004 91,518S3 104.30 95,514.42 0.03% Asa/AA+ i7.81 1.875%Due 7120120M 1.80% 91,541+69 1.54% 143.09 3,972.73 AAA 5.48 31406X1NT5 FNMA Pool#FN 8233M 182,628.00 01/1112006 181,201+23 105.71 193,049.12 0.06% Aaa/AA+ 18.35 2.535%Due 2/l/2035 2.59% 181,926.58 2.62% 385.80 11,322.54 AAA 0.40 31406PQYB FNMA P.I#FN 816971 311,382.99 W/10/2013 334,]36.]3 110.97 345,653.54 0.11 % Aaa/AA+ 18.43 5%Due 3/1/2035 4.21 % 331,265.75 1A3% 1,297.43 14,287]9 AAA 3A1 31407BXH7 FNMA P.I#FN 826080 34,410.57 M/10/2013 36,991.35 111.34 38,311.97 0.01 % Aaa/AA+ 18.76 5%Due 111W35 422% 36,613+61 1.84% 143.38 1,698.36 AAA 3.63 31376KTU FNMA FN 359969 189,489.28 06/10/2013 203700.98 111.35 211,002.19 0.06% Aaa/AA+ 18.93 5%Due 9/1/2035 4.22% 201,636.83 1.84% 184.23 9,365.36 AAA 3.63 31403DJZ3 FNMA Pool#745580 182,993.55 06/10/2013 196,718.07 111.30 203,669.63 0.06% Asa/AA+ 19.68 5%Due 6/1/2036 4.26% 194,790.04 1.86% 762.47 8,879.59 AAA 3.65 31410F4V4 FNMA P.I#FN 888336 363,648.91 MIIO12013 39092259 111.31 404777.42 0.12% Asa/AA+ 19.76 5%Due 7/V2036 4.25% 387,104.86 185% 1,515.20 17666.56 AAA 3.64 2,133,688.47 2,248,842.38 0.69% Asa I AA+ 15.38 Total Mortgage Pass Thou 2,090,158.16 3.78% 2,135,553.55 1.86% 5,222.52 113,288.81 Asa 3.77 MUNICIPAL BONDS 73358WAG9 Port Authonty of NY&NJ TE-REV 2,440,000.00 Vanous 2,507,633,89 11179 2,727,773.60 0.85% Aa3/AA- 3.17 5.309%Due 12/1/2019 4.97% 2,460,556.24 1.49% 43,179.87 267,217.36 AA- 2.91 64971MSE8 New York NY TE-REV 1,400,000.00 10/27/2010 1,400,000.00 10976 1,536,668.00 0.48% Act IAAA 4.09 4.075%Due 11/112020 4.08% 1,400,000.00 1.60% 23,770.83 136,668.00 AAA 3.73 913366EJ5 Univ of Califomia Rgts Med TE-REV 400,000.00 11IM12010 400,000.00 113.94 455,772.00 0,14% Aa3/AA- 4.62 5,035%Due 511512021 Shut% 400,000A0 1.89% 7,608.44 55,772.00 NR 4.11 4,307,633.89 4,720,213.60 1.47% Aa2/AA 3.61 Total Municipal Bonds 4,240,000.00 4.68% 4,260,556.24 1.56% 74,559.14 459,657.36 AA 3.29 NEGOTIABLE CO i 89113WHFG Taranto Dominion NY Yankee CD 4,075,000.00 08IZ212016 4.075,000.00 100.00 4,075,000.00 1.25% P-1/A-1+ 0.45 1.19%Due 3/13/2017 1.19% 4,075,000.00 1.19% 5,253.35 0.00 F-1+ 0.45 4,075,000.00 4,075,000.00 1.25% P-1/A-1+ a." Total Negotiable CD 4,076,000.00 1.19% 4,075,000.00 1.19% 5,253.35 0.00 F-1+ a." Chandler Ae uManagement-CONFIDENTIAL 40 CAROrangeCounty Sanitation District Long Term Holdings Report Account#10268 As of 9/30116 Purchase Da:o Cost Va:u: Mut Price Market Value %of Pod. MoodypS&P Maturity CUSP Security Description Par Value/Units Book Yie d Book Va Mut)CrM Accrued Int. Gain/Loss Fitch Duration SUPRANATIONAL IM 4595OKBS8 International Finance Corp Note 5,000,000.00 03/16/2015 5,020,700.00 100.13 5,006,615.00 1.54% Aaa I AAA 0.56 1%Due 4/24/2017 0.80% 5,005,518.21 017% 21,805.56 1,096.79 NR 0.56 4581XOCGI Inter-American Dev Bank Note 5,000,000.00 O6I22I2015 5,019,550.00 100.10 5,005,205.00 1.54% Aaa I AAA 0.79 1%Due 7/14/2017 0.81 % 5,007,435.24 0.87% 10,694.44 (2,230.24) AAA 0.78 459058EJB Il Bank Recon B Development Note 5,000,000.00 Various 4,991,170.00 100.19 5,009,705.00 1.54% Aaa/AAA 1.71 1%Do.6/15/2018 1.07% 4,994,354.10 0.89% 14,722.22 16,350.90 AAA 1.69 4581XOCS5 Inter-American Dev Bank Note 3,500,000.00 07/25/2016 3,590,405.00 102.20 3,577,042.00 1.10% sea I AAA 4.46 1.875%Due 311512021 1.30% 3,586,827.25 1.36% 2,916.67 (9,785.25) AAA 4.27 18,621,825.00 18,598,567.00 5.T2% Aaa I AAA 1.68 Total Supranational 18,500,000.00 0.97% 18,594,134.80 0.94% 50,138.09 4,432.20 Asa 1.64 UB CORPORATE 06050TLX8 Bank of America Note 600,000.00 05/01/2014 600,000.00 100.11 600,672.60 0.18% Al/A 0.60 1.226%Due 51812017 1.23% 600,000.00 1.04% 1,083.41 672.60 NR 0.11 94988021.0 Wells Fargo Bank Callable None Carly, 500,000.00 0610512014 500,000.00 99.98 499,905.50 0.15% As2/AA- 071 6/16(2016 1.12% 500,000.00 1.14% 248.12 (94.50) AA 0.21 1.11]%Due 611512017 060505DP6 Bank of America Corp Note 3,800,000.00 0111512014 4,334,014.00 104.1] 3,981,423.40 1.24% Baal IBBB+ 1.17 5.75%Due 12/1/2017 1.95% 3,961,340.40 1.61% 72,833.33 20,083+00 A 1.12 166764AA8 Clb vmn Corp Callable Note Cant 2,000,000.00 12I04I2016 1.988,600.00 99.93 1,998,544.00 0.62% Aa2/AA- 1.18 11I6(17 1.30% 1,996,510.99 1.17% 7,114.67 3,033.01 NR 1.08 1.104%Due 12I512017 458140AL4 Intel Corp Note 2,000,000.00 0112612015 2,008,280+00 100.31 2,005244.00 0.62% Al/A+ 1.21 1.35%Due 12/15/2017 1.20% 2,003,466A1 1.09% 7,950.00 2,777.59 A+ 1.19 40428HPH9 HSBC USA Inc None 3,000,000.00 Various 3,003,290.00 100.05 3,001,641.00 0.92% A2I A 1.30 1.625%Due 1/16/2018 1.59% 3,001,424.71 1.58% 10,156.25 216.29 AA- 1.27 38141 GFG4 Goldman Sachs Group Inc Note 600,000.00 Various 692,806.00 105.50 633,021.60 0.20% A3/BBB+ 1.30 5.95%Due 111812018 2.73% 623,277.15 1.65% 7,239.17 9,744.45 A 1.25 674599CD5 Occidental Petroleum Callable Note Cone 2,000,000.00 0110612015 1.986,340.00 100.31 2,006,198.00 0.62% A3I A 1.38 1/15/18 1.73% 1,993,947.64 1.26% 3,833.33 12,250.36 A 1.27 1.5%Due 2/16(2018 025816AYS American Express Coach Note 2,900,000.00 Various 3,377,385.79 107.07 3,128,119.W 0.96% A31 BBB+ 1.47 7%Due 311912018 4.28% 2,998,404.21 1.56% 6,766.65 129,715+59 A 1.41 073902CD8 Bear Stearns Note 3,200,000,00 011IW2014 3,523,520.00 105.42 3,373,507.20 1.05% A3I NR 1.75 4.65%Due VD2018 2.25% 3.327,374.79 1.51% 36,786.67 46,132.41 A+ 1.68 532457BF4 Eli Lilly B CO Note 4,000,000.00 Various 4,009,675.00 101.73 4,069,148.00 1.25% A2/AA- 2.45 1.95%Due 311512019 1.89% 4,005,564.25 1-23% 3,466.67 63,583.75 A 2.40 02665WAH4 American Honda Finance Note 4,000,000.00 Various 4,046,640.00 102.48 4,099,248A0 1.26% Al/A+ 2.87 2.25%Due 8/15/2019 1.93% 4,035,144.80 1.37% 11,500.00 64,103.20 NR 2.78 Chandler Aeeel Management-CONFIDENTIAL 41 CAROrangeCounty Sanitation District Long Term Holdings Report Account#70268 As of 9/30116 Purchase Da:o Cost Va:u: Mut Price Market Value %of Pod. MoodyIS&P Maturity CUSP Security Description Par Value/Units Book Yie d Book Va Mut Y7rM Accrued Ind. Gain/Loss Fitch Duration US CORPORATE 06406HCM Bank of New York Callable Note Cont 2,120,000.00 02/10/2016 2,142,175.20 102.37 2,170,277.92 0.67% Al/A 2.95 &11/2019 1.99% 2,138,200.40 1A5% 2,708.89 32,077.52 AA- 2.11 2.3%Due all 112019 24422ESS9 John Deere Capital Corp Note 5,000,000.00 Various 5.046,984.00 102.42 5,121,245.00 1.57% A2/A 2.96 2.3%Due 9/16/2019 2.07% 5.031,709.99 1.46% 4,791.67 89,535.01 NR 2.86 36962G7MO General Eledric Capital Corp Callable 5,000,000.00 Various 5,014,960.00 102.52 5,126,065.00 1.58% At/AA- 3.28 Note 1X 12/9I2019 2.13% 5,010,O76.12 1.39% 25,055.55 115,988.88 AA- 3.O7 2.2%Due 1/9/2020 46625HKA7 JP Morgan Chase Callable Note Cant 2,000,000.00 0210612015 1,994,880.00 101.31 2,026,276.00 0.62% A3/A- 3.32 1212312019 2.30% 1.996,574.39 1.83% 8,5D0.D0 29,701.61 A+ 3.09 2.25%Due 112312020 40428HPR7 HSBC USA Inc Note 1,250,000.00 02I0&2016 1,222,787.50 100.87 1,260,853.75 0.39% A21 A 3.43 2.35%Due 31WO20 2,92% 1,227,O75.53 2.09% 2,121.53 33,778.22 AA- 3.28 747525AD5 Oualcomm Inc Note 5,000,000.00 0511912015 4,995,195AO 102.11 5,105,355.00 1.58% Al/A-, 3.64 2.25%Due 512012020 2.27% 4,996,506A6 1.66% 40,937.51 108,848.54 NR 3.46 94974BGM6 Wells Fargo Corp Note 5,000,000.00 07/1612015 5,001,650.00 102.03 5,101,4W.00 1.57% A2/A 3.81 2.6%Due 7/22/2020 2.59% 5,001,255.34 2.04% 24,916.67 100,194.66 AA- 3.60 037833BS8 Apple Inc Callable Note Cant 1123/2021 4,000,000.00 O&23IN16 4,050,840.00 102.58 4,103,196,00 1.26% Aat/AA+ 4.40 2.25%Due 2/23/2021 1.96% 4.047,01879 1.64% 9,500.00 56,197.21 NR 4.19 30231 GAV4 Exxon Mobil Corp Callable Note Cant 3,000,000.00 Various 3,016,097.40 102.18 3,065,490.00 0.94% Aaa/AA+ 4.42 2/1/2021 2.10% 3,014,921AI) 171% 5,655.01 50,568.20 NR 4.19 2.222%Due 31112021 166T64BG4 Chevron Corp Callable NOW Cant 2,500,000.00 OWNIN16 2,485,350.00 101.65 2,5I,331.50 0.79% Aa2/AA- 4.63 4/15/2021 2.23% 2.486,390.09 1.72% 19,687.50 54,947.41 NR 4.29 2.1%Due&16/2021 6174TWAL3 Morgan Stanley Nate 2,800,000.00 06l 3,200,848.00 114.05 3,193,475.60 ON Is A3/BBB+ 4.83 5.5%Due 7/28/2021 3.24% 3,O71,080+39 2.40% 26,950.00 122,395+21 A 4.26 594918BP8 Microsoft Callable Note Cont 7I8/21 3,045,000.00 Various 3.041,385.15 0.59 3,032,555.09 0.93% Aaa IAAA 4.86 1.55%Due Bl&2021 1.57% 3,041,492.05 1.64% 6,948.52 (8,936.96) AA+ 4.65 71,383,693.44 71,245,249.96 21.96% At/A+ 2.96 Total US Corporate 69,315,000.00 2.17% 90,107,756.70 1.59% 346,651.13 1,137,493.26 A+ 2.79 US TREASURY 91282SG46 US Treasury Note 3,000,000.00 Various 2,993,174.11 100D5 3,001,473.00 0.92% Ann/AA+ 0.17 0.6%Due 1113012016 0.62% 2,999,426.83 0.20% 5,040.98 2,046.17 AAA 0.17 912828SSO US Treasury Note 3,750,000.00 1212212015 3,750,305.53 100.20 3,757,398.75 1.16% Me/AA+ 0.58 0.875%Due 4130/2017 0.87% 3,750,130+50 0.54% 13,731.32 7,268.25 AAA 0.58 912828G20 US Treasury Note 10,000,000.00 Various 9,948783.50 100.19 10,019,140.00 3.08% Aaa/AA+ 1.13 0.875%Due 1111 5Y201 7 1.05% 9,960,273.04 0.70% 33,050.27 38,866.96 AAA 1.11 91282BUR9 US Treasury Note 3,500,000.00 04122/2016 3,496,457.04 100.03 3,501,092.00 1.07% Aaa/AA+ 'Al 0.75%Due 212812018 0.81 % 3,497,292.84 0.73% 2,247.93 3,799.16 AAA 1.41 Chandler Aseer Manegemed-CONFIDENTIAL 42 CAROrangeCounty Sanitation District Long Term Holdings Report Account#10268 As of 9/30116 Purchase Da:o Cost Va:u: Mkt Price Market Value %of Pod. MoodyIS&P Maturity CUSP Security Description Par Value/Units Book Yie d Book Va Mkt YTM Accrued Int. Gain/Loss Fitch Duration US TREASURY 111111 91282BB33 US Treasury Note 11,000,000.00 Various 11,042,439.19 101.54 11,168,872.00 3.44% Ads/AA- 2.34 1.5%Due 1/31/2019 1.37% 11,031,921.38 0.83% 27,798.91 136,950.62 AAA 2.29 912828WS5 US Treasury Note 10,000,000.00 Various 9,984,307.21 102.04 10,203,520.00 3.14% Aaa/AA+ 2.75 1.625%Due 613012019 1.66% 9,991,271.94 0.87% 41,066.57 212,248+06 AAA 2.68 912828WW6 US Treasury Note 10,000,000.00 Various 10,024,777.40 102.09 10,208,590.00 3.14% Aaa/AA+ 2.83 1.625%Due 7/31/2019 1.57% 10,014,130.35 0.88% 27,377.73 194,459.65 AAA 276 91282BF39 US Treasury Note 5,800,000.00 10/27/2014 5,873,186.87 102.49 5,944,!ATW 1.82% Aaa/AA+ 3.00 1.75%Due 913012019 1.48% 5,844,530.83 0.91% 278.84 100,016.77 AAA 2.92 912828G61 US Treasury Note 7,500,000.00 12/1912014 7,449.634.50 101.75 7,631,542.50 2.MIs Aaa/AA+ 3.17 1.5%Due 11/30/2019 1.64% 7,467,753.80 0.94% 37,807.38 163788.70 AAA 3.08 91282BL99 US Treasury Note 6,600,000.00 Various 5,424,666.87 101.17 5,564,240.00 1.72% Aaa/AA+ 4.09 1.375%Due 10/31Y2020 1.67% 5,437,371.93 1.08% 31,647.42 126,868.07 AAA 3.94 9128281,189 US Treasury Note 1,500,000.00 03/1512016 1,491,626.12 101A9 1,516,407.00 0.47% Aaa/AA+ 4.34 1.375%Due 113112021 1.49% 1,492,561+25 1.12% 3,474.66 23,845.75 AAA 4.19 912828WUO US Treasury Inflation Index Note 10,UG,816.00 Various 10,426,82171 101.46 10,694,701.35 3.28% Aaa/AA+ 779 0.125%Due 7/1512024 0.23% 10,451,676.67 -0.06% 2,792.73 243,024.68 AAA 7.76 81,906,180.06 83,211,524.20 25.60% Aaa 1 AA+ 3.08 Total US Treasury 82,090,816.00 1.23% 81,958,341.36 0.71% 226,314.94 1,253,182.84 Aaa 3.03 322,156,482S3 324,974,281.39 100.00% Art I AA+ 2.80 TOTAL PORTFOLIO 320,129,636.23 1.48% 320,927,042.43 1.05% 975,605.10 4,047,238.96 Aaa 2.38 TOTAL MARKET VALUE PLUS ACCRUED 325,949,81WA9 Chandler Aseel Management-CONFIDENTIAL 43 C�" Orange County Sanitation District Liquid Holdings Report Account 010282 As of 9/30116 Purchase Da:o Cost Va:u: Mkt Price Market Value %of Pod. Ithi Maturity CUSIP Security Description Par Value/Units Book Yie d Book Va Mkt YTM Accrued Ind. Gain/Loss Fitch Duration AGENCY 111111 313384,159 FHLB Discount Note 700,000.00 09/27/2016 699,961.11 100.00 699,980.56 1.21 % P-1 I A-1+ 0.01 0.25%Due 1015/2016 0.25% 699,980.56 0.25% 0.00 0.00 F-1+ 0.01 3133NK36 FHLMC Discount Note 3,000,000.00 N/1612016 2,999,531.25 99.99 2,999,812.50 5.17% P-11A-1+ 0.03 0.22%Due 1011112016 0.23% 2,999,812+50 0.23% 0.00 0.00 F-1+ 0.03 3133UK40 FHLB Discount Note 10700,000.00 Various 10,698,170.37 99.99 10,699,203.43 18.45% P-1 I A-1+ 0.03 0.244%Due 10/12/2016 0.25% 10,699,203.43 0.26% 0.00 0.00 F-1+ 0.03 3137EADS5 FHLMC Note 3,225,000.00 Various 3,229,248.00 100.02 3,225,557.93 5.58% Aaa/AA+ 0.04 0.875%Due 10/14/2016 0.45% 3,225,486.57 0.43% 13,090.36 71.36 AAA 0.04 3135ML37 FNMA Discount Note 10,000,000.00 0712212016 9,891,841.6] 99.96 9,998,350.00 17.24% P-1IA-1+ 0.05 0.33%Due 10/19/2016 0.33% 9.998,350.00 0.33% 0.00 0.00 F-1+ 0.05 3135GOESS FNMA Note 4,137,000.00 Various 4,152,295.92 100.11 4,141,73273 7.18% Ass IAA+ 0.13 1.375%Due 11/152016 0.49% 4,141,48L27 0.46% 21,489.42 25IA6 AAA 0.12 31,771,048.32 31,764,637.15 54.84%, P-1/A-1+ 0.05 Total Agency 31,762,000.00 0.33% 31,764,314.33 0.32% 34,579.78 322.82 F-0+ 0.05 COMMERCIAL PAPER = 89233GKC9 Toyota Motor Credit Discount CP 1,000,000.00 09/07/2016 999,581.94 99.99 999,868.61 172% P-11A-1+ 0.03 043%Due 1011212016 0PI% 999,868,61 044% 0.00 0,00 F-1 0.03 06538BKS1 Bank 0Tokyo Mitsubishi NY Diswunt 1,290,000.00 M12712016 1,286,818.00 99.95 1,289,337.08 2.22% P-1/A-1 0.07 CP 0.75% 1.289,337.08 0.75% 0.00 0.00 F-1 0.07 0.74%Due 10/26/2016 21687AMK6 Rabol ank Nederland NV NY Discount 1,000,000.00 061 995753.33 99.82 998,156.67 172% P-1/A-1 0.22 CP 0.86% 998,156+67 0.86% 0.00 0.00 NR 0.22 0.84%Due 1211912016 3,282,153.27 3,287,362.36 5.67% P-1IA-1 0.10 Total Commercial Paper 3,290,000.00 0.69% 3,297,362,36 0,69% 0.00 0,00 F-1 0.10 MONEY MARKET FUND FI 261908107 Dreyfus Tray/Agcy Gash Management 5,266,222.23 Various 5,266,222,23 1,00 5266,222.23 9.08% Aaa I AAA 000 521 0.21 % 5,266,222.23 021 % 0.00 0,00 AAA 000 5,266,222.23 5,266,222.23 9.08% Arm I AAA 0.00 Total Money Market Fund FI 5,266,222.23 0.21% 5,266,222.23 0.21% 0.00 0.00 Area 0.00 US CORPORATE 10000E-- 458140AH3 Intel Carp Note 1,000,000.00 0712112016 1.002,470.00 100.00 1,000,000.00 1.74% At/A+ 0.00 1.95%Due 10/112016 0.58% 1,000,000.00 1.95% 9,750.00 0.00 A+ 0.00 02665WAB7 American Honda Finance Note 1,000,000.00 12/21I2015 1,001,660.00 100.00 1,000,006.00 1.73% Al/A+ 0.02 1.125%Due 10912016 0.91% 1,000,034.58 1.09% 5,431.50 (28.58) NR 0.02 24422ESD2 John Deere Capital Corp Note 1,000,0w.w 1212112015 1,001,070.00 100.00 1,000,021.00 1.73% A2I A 0.03 1.05%Due 1011112016 0.91% 1,000,036.64 0.96% 4,958.33 (9.64) NR 0.03 Chandler Asset Mane9emenl-CONFIDENTIAL 44 CAROrangeCounty Sanitation District Liquid Holdings Report Account As of 9/30116 Purchase Da:o Cost Va:u: Mut Price Market Value %of Pod. Moody]S&P Maturity CUSIP Security Description Par Value/Units Book Yie d Book Va Mut YTM Accrued Int. Gain/Loss Fitch Duration US CORPORATE IC 91159HHB9 US Bancorp Callable Note Cent 1,000,000.00 12/21/2015 1,009,900.00 100.04 1,000,356.00 1.74% AI IA- 0.13 10/14/2016 0.96% 1,000,436.27 1M% 8,311.11 (80.27) AA 0.12 2.2%Due 1111 512 01 6 06406HCA5 Bank of New York Callable Note Cont. 1,000,000.00 0612112016 1.008,120.00 100.28 1,002,798.00 1.74% Ai/A 0.30 12/18/16 0.71 % 1.003,578.31 1.10% 4,933.33 (780.31) AA- 0.22 2.4%Due 1/17/2017 46623EJY6 JP Morgan Chase Note 1,000,000.00 0212612016 1,000,470.00 100.05 1,000,479.00 1.73% A3/A- 0.38 1.35%Due 211512017 1.30% 1,000,183+97 1.22% 17250 295.03 A+ 0.37 713448CLO Pepsin Inc.Note 1,500,000,00 Various 1,501,765.00 100.04 1,500,537.00 2.59% At/A 0.40 0.95%Due 2/22/2017 0.75% 1.501,140.29 0.86% 1,543]5 (603.29) A 0.39 17275RAT9 Cisco Systems Note 1,000,000.00 06108/2016 1,002,660.00 100.04 1,000,401.00 1.73% At/AA- 0.42 1.1%Due W312017 0.73% 1,001,547.45 1.00% 855.56 (1,146.45) NR 0.42 532457BB3 Eli Lilly&CO Note 1,000,000.00 0712112016 1,027,930+00 101.89 1,018,861.00 1.76Is A2/AA- 0.45 5.2%Due 311512017 0.79% 1,019,864.01 1.06% 2,311.11 (1,003.01) A 0.46 03]833AM2 Apple Inc Note 1,000,000.00 0610812016 1,002,590.00 100.12 1,001,200.00 1.73% Apt/AA+ 0.59 1.05%Due 515/2017 0.76% 1,001,716.07 0.85% 4,229.17 (516.07) NR 0.59 94974BFD7 Wells Fargo Cory Note 1,000,000.00 06/0212016 1,008,550.00 100.43 1,004,321.00 1.75% A2/A 0.60 2.1%Due 5/8(2017 1.16% 1,005,589+40 1.38% s341.67 (1,268.40) AA- 0.60 11,567,185.00 11,528,986.00 19.97% At/A+ 0.31 Total US Corporate 11,500,000.00 0.87% 11,534,126.99 1.20% 52,396.53 (5,140.99) A+ 0.30 US TREASURY 91282BLU2 US Treasury Note 3,000,000.00 06/17/2016 3.029,892.86 10023 3,006,831.00 525% Ass IAA+ 0.08 3,125%Due 10/31/2016 0,36% 3,006,742,75 042% 39,232.34 88,25 AAA 0.08 912828WF3 US Treasury Note 3,000,000.00 W/39/2016 3,003,291.30 100.05 3,001,524.00 5.19% Aaa/AA+ 0.13 0.625%Due 1111M016 0.33% 3,001,073.25 0.22% 7,082.20 460.75 AAA 0.12 6,033,184.16 6,008,355.00 10.4 Is Aaa I AA+ 0.11 Total US Treasury 6,000,000.00 0.35% 6,007,816.00 0.32% 46,314.54 539.00 Aaa 0.10 57,919,792.98 57,855,562.74 100.00% P-2I A-1 0.11 TOTAL PORTFOLIO 57,818,222.23 OAS% 57,859,841.91 0.51% 133,290.85 (4,279.17) F-1+ 0.10 TOTAL MARKET VALUE PLUS ACCRUED 57,988,853.59 Chandler Aseel Management-CONFIDENTIAL 45 CAROCSDLehman Exposure Holdings Report Account 010284 As of 9/30116 Purchase D :a Cost V :u: Mid Price Market Value %of Pon Ma.d,IS&P Maturity CUSIP Security Description Par Value/Units Book YI:d Book Va Mkt YTM Accrued Int. Gain/Loss Fitch Duration COMMON STOCK SLHOPNTA4 Lehman Brothers,Inc Open Position 60,641.49 11/21/2014 57,842.64 0.42 25,621.03 11.12% NR/NR 0.00 Lang Exposure 0.00% 57,842.64 0.00% 0.00 (32,221.61) NR 0.00 Due 9/30/2016 57,842.64 25,621.03 11.12% NR/NR 0.00 Total Common Stock 60,641.49 NIA 57,842.64 0.00% 0.00 (32,221.61) NR 0.00 US CORPORATE 525ESC167 Lehman Brothers Note-Defaulted 600,000,00 09/19/2008 362,825,27 7.88 47,250,00 20.51 % NRINR 0,32 Due 112412017 0.00% 362,82527 000% 0.00 (315,57527) NR 000 525ESCOV6 Lehman Brothers Note-Defaulted 2,000,000.00 09/18/2008 1,1]3,493.59 7.88 157,500.00 68.37% NR/NR 33D8 Due 10/2212049 0.00% 1,173,493.59 0.00% 0.00 (1,015,993.59) NR 0.00 1,06,318.86 204,750.00 88.88% NR/NR 25.52 Total US Corporate 2,600,000.00 N/A 1,536,318.86 0.00% 0.00 (1,331,568.86) NR 0.00 1,594,161.50 230,371.03 100.00% NRINR 22.68 TOTAL PORTFOLIO 2,660,641.49 NIA 1,594,161.50 0.00% 0.00 (1,363,790.47) NR 0.00 TOTAL MARKET VALUE PLUS ACCRUED 230,371.03 Chandler Ae cManagement-CONFIDENTIAL 46 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. 2016-17 First Quarter Review This Page Intentionally Left Blank 'e? Op October 31, 2016 STAFF REPORT Certificates of Participation (COP) Quarterly Report for the Period Ended September 30, 2016 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 2007, the District issued $95.18 million of fixed rate COPs, Series 2007A refunding a portion of the Series 2003 fixed rate debt. The true interest cost for the issue is 4.5 percent. In December 2007, the District issued $300 million of fixed rate COPS, Series 2007B at a true interest cost of 4.71 percent for the issue. In September 2008, the District issued $27.8 million of fixed rate CON, Series 2008B refunding the Series 1993 variable rate debt. The true interest cost for the issue is 2.96 percent. Series 2008B matured on August 1, 2016. In May 2009, the District issued $200 million of fixed rate CON, 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. ODSD ♦ P.0.Box8127 ♦ Foun in Valley,O 9272M127 ♦ (714)%2-2411 Quarterly COP Report For the Three Months Ended September 30, 2016 Page 2 of 2 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 2012B 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. In August 2014, the District issued $85.090 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 October 2014, the District issued $120.850 million of fixed rate CANS, Series 201413, refunding the Series 2013A CANS. The true interest cost for the issue is 0.41 percent. In February 2015, the District issued $127.510 million of fixed rate COPS, Series 2015A, refunding $152,990,000 of the Series 2007B debt. The true interest cost for the issue is 3.30 percent. In March 2016, the District issued $145.880 million of fixed rate CANS, Series 2016A, refunding the Series 2009A fixed rate debt. The true interest cost for the issue is 3.02 percent. Additional Information The graph entitled, "OCSD COP Rate History Report,' shows the various fixed interest rates of the District's thirteen debt issues. Attachments 1. Graph - OCSD COP Rate History Report Prepared by Finance,10/11/2016,1:31 PM OCSD COP RATE HISTORY REPORT SEPTEMBER 2016 6.00 5.00 4.00 X w 3.00 2.00 1.00 0.00 DATE & a$ 3 R 7 ? a Sera 2007A Fixed —Sere 2007B Fired �Senes2008BFixn —Series 2003A Fixed —Senes2woAFxeE .Sers 2010C Fixed �Sers2011AFixed +Sanes2WMFixed —Series 2012E Fixed Seres 2014A Fixed �Sen520148 Fixed �Sers2015AFixed —Senes2016AFixr HAdepAasdl220\Common\Monthly and Quarterly Treasurer's Report\COP Rate History Report FV 16-17 2016-17 First Quarter Review This Page Intentionally Left Blank ORANGE COUNTY SANITATION DISTRICT FINANCIAL MANAGEMENT DIVISION 10844 Ellis Avenue Fountain Valley, California 92708-7018 714.962.2411 www.ocsewers.com 09/30/16 ADMINISTRATION COMMITTEE Meeting Date TOBE.Or .Dir. 11/09/16 11/16/16 AGENDA REPORT ItemNumber Item Number s Orange County Sanitation District FROM: James D. Herberg, General Manager Originator: Lorenzo Tyner, Director of Finance and Administrative Services SUBJECT: WASTEWATER REFUNDING REVENUE OBLIGATIONS, SERIES 2017A GENERAL MANAGER'S RECOMMENDATION Authorize the General Managerto issue newfixed rate Certificates of Participation (COP), to be referred to as Wastewater Refunding Revenue Obligations, Series 2017A, in an amount sufficient to refund up to $91,620,000 of COP Series 2007A. BACKGROUND Tax-exempt interest rates have decreased over recent years due to the lack of municipal new issuance volume, in addition to greater bond redemptions, along with the reversal of outflows from (inflows to) municipal bond funds. This drop in interest rates can be seen below in the recent history for the AAA GO Municipal Market Data Index for 11-year tax- exempt maturities (reflecting the average life of the potential refunding candidates described below): 11-Year Maturities AAA MMD January 3, 2014 to Present 3.50% 3.00% 2.50 2.00% 1.50 1.00% — V_ V V Y1 O_ N f0 f0 f0 CJ M CJ (h CJ Cl (1 N1 EJ O O O O O O O O O O O O O O O O O O Since the COP Series 2007A advance refunded previous debt, Federal tax regulations prohibit a second advance refunding with tax-exempt debt. However, since the 2007A COPs are callable on February 1, 2017,the Orange County Sanitation District(Sanitation District) can conduct a current refunding. With the decline in interest rates, there is a potential opportunity to refinance the outstanding 2007A COP maturities to reduce interest costs for the Sanitation District. Page 1 of 4 Under current market conditions, up to $91,620,000 of the 2007A COPS may be current refunded, generating in excess of 3.0% present value savings (the minimum percentage required by the Sanitation District's debt policy). The savings are contingent on market conditions at the time of the refunding sale. RELEVANT STANDARDS • OCSD Debt Policy - Financial Management Policy and Procedures 201.3.1 • Easy access to low cost credit PROBLEM The 2007A COPS are accruing interest at rates ranging from 4.00-4.50%, which are higher than current market yields. PROPOSED SOLUTION The 2007A COPs are subject to optional redemption on February 1, 2017. The Sanitation District can refund up to $91,620,000 of the 2007A COPS for present value debt service savings of approximately$17 million with a matching refunding amortization structure. TIMING CONCERNS The 2007A COPS advance refunded the 2003 COPs; therefore, the 2007A COPS cannot be advance refunded (more than 90 days prior to the optional redemption date) due to Internal Revenue Service limitations. However, the Sanitation District can now conduct a current refunding since the 2007A COPs can be optionally redeemed within 90 days of the February 1, 2017 optional redemption date. RAMIFICATIONS OF NOT TAKING ACTION The Sanitation District will continue to pay above market interest costs on the 2007A COPS. PRIOR COMMITTEE/BOARD ACTIONS September 2016 - The Board adopted Resolution No. OCSD 16-16, authorizing the execution and delivery by the District of an Installment Purchase Agreement, a Trust Agreement, and a Continuing Disclosure Agreement in connection with the execution and delivery of Orange County Sanitation District Revenue Refunding Certificate Anticipation Notes, Series 2016B, authorizing the execution and delivery of such Notes, evidencing principal in an aggregate amount of not to exceed $120,000,000, approving a Notice of Intention to Sell, authorizing the distribution of an Official Notice Inviting Bids and an Official Statement in connection with the offering and sale of such Notes and authorizing the execution of other necessary documents and related actions. July 2016 - The Board authorized the General Manager to issue Revenue Refunding Certificate Anticipation Notes, Series 2016B, as two-year fixed-rate obligations, subject Page 2 of 4 to market conditions, in an amount not to exceed $120,000,000 to replace the $120,850,000 Revenue Refunding Certificate Anticipation Notes, Series 2014B maturing on November 15, 2016. ADDITIONAL INFORMATION The Sanitation District currently has twelve series of debt issuances outstanding in the par amount of $1,081,125,000. The following table lists each issuance, the outstanding amount, and the interest rate mode. Outstanding Interest Rate Par Amounti'I Mode eries 2016B CANS $ 109,875,000 Fixed Rate(two-year) eries 2016A Refunding 145,880,000 Fixed Rate eries 2015A Refunding 127,510,000 Fixed Rate eries 2014A Refunding 85,090,000 Fixed Rate eries 2012E Refunding 66,395,000 Fixed Rate eries 2012A Refunding 100,645,000 Fixed Rate eries 2011A Refunding 96,330,000 Fixed Rate eries 2010C 157,000,000 Fixed Rate eries 2010A 80,000,000 Fixed Rate eries 2009A Refunding 13,405,000 Fixed Rate eries 2007E 7,110,000 Fixed Rate eries 2007A Refunding 91,885,000 Fixed Rate otal: $1,081,125,000 (1) Asof Nmemberl,2016 Refunding Strategy Depending on market conditions, staff is proposing to refund up to $91,620,000 of 2007A COPs maturing in years 2018 through 2030 with annual coupon rates ranging between 4.00-4.50%, as shown in the table below. A refunding of these maturities would produce approximately $16.8 million in present value savings (18.3% refunded par) in the current market. Maturity Princi al Amount Coupon Call Date 2/1/2018 $ 275,000 4.000% 2/1/2017 2/1/2019 285,000 4.000% 2/1/2017 2/1/2020 295,000 4.000% 2/1/2017 2/1/2021 4,800,000 4.125% 2/1/2017 2/1/2022 270,000 4.200% 2/1/2017 2/1/2023 280,000 4.250% 2/1/2017 2/1/2024 290,000 4.300% 2/1/2017 2/1/2025 305,000 4.350% 2/1/2017 2/1/2026 320,000 4.375% 2/1/2017 Page 3 of 4 Maturity Principal Amount Coupon Call Date 2/1/2027 19,595,000 4.500% 2/1/2017 2/1/2028 20,435,000 4.500% 2/1/2017 2/1/2029 21,315,000 4.500% 2/1/2017 2/1/2030 23,155,000 4.500% 2/1/2017 Total: $ 91,620,000 Timeline Since the proposed refunding is a fixed-rate debt issuance, staff is proposing to issue the refunding through a competitive sale because it is the most expeditious way to access the market and it is expected to provide the lowest interest cost for this given structure. ➢ Board considers legal and disclosure documents December ➢ Financing Corporation considers legal and disclosure documents ➢ Rating Agency discussions, if any January ➢ Publish Notice of Intention to Sell ➢ Marketing and Sale through a Competitive Sale Process February ➢ Closing ➢ Begin debt administration All costs involved with the refunding, including costs for Public Resources Advisory Group, Financial Advisor, and Norton Rose Fulbright, Special Counsel and Disclosure Counsel, will be paid from the proceeds of the new refunding issue. CEQA N/A FINANCIAL CONSIDERATIONS N/A ATTACHMENT The following attachment(s) may be viewed on-line at the OCSD website (wwwocsd.com) with the complete agenda package: N/A Page 4 at 4 ADMINISTRATION COMMITTEE Meeting Date TOBE.Or .Dir. 11/09/16 11/16/16 AGENDA REPORT Item Item Number 6 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 (CAFR) FOR THE YEAR END JUNE 30, 2016. 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, 2016, 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. BACKGROUND The Comprehensive Annual Financial Report for the year ended June 30, 2016 is enclosed for the Committee's consideration. Included within the report are the Orange County Sanitation District's financial statements for the year ended June 30, 2016 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.corn 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, 2016 (Separately bound document) Page 1 of 1 Certified cenrya Public n- Accountants cos Angeles laewpoao each oauand Sacramento October 31,2016 San Diego San Francisco To the Board of Directors wawa Creek Orange County Sanitation District woodland Hill, Fountain Valley,California We have audited the basic financial statements of the Orange County Sanitation District(the District)for the year ended June 30, 2016. 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 May 20, 2016. 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. As described in Note 1 to the basic financial statements, the District implemented Governmental Accounting Standards Board (GASB) Statement No. 72, Fair Value Measurement and Application (GASB 72) and GASB Statement 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(GASB 73). As a result of the implementation of GASB 72,Note 2 to the financial statements was revised to include the new definition of fair value and the measurement and application methodology management used to value investments. The implementation of GASB 73 resulted in a restatement of net position as listed in Note 9 to the basic financial statements. The application of existing policies was not changed during 2016. 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 estimate(s)affecting the District's financial statements were: is Management's estimates of the net pension liability and other postemployment benefit are based on actuarial studies which consider assumptions adopted by the plans. • 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 Gin,&O'Connell LLP 0675 MaaMM1ur Court.Sake 600 Newport Bea,r.Cagnia, 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. 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,are based on actuarial valuations. 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 our audit. Management Representations We have requested certain representations from management that are included in the management representation letter dated October 31,2016. 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. 2 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, 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, i 3 Orange County Sanitation District Independent Accountant's Report on Applying Agreed-Upon Procedures Related to Appropriations Limit Calculation Year Ended June 30,2016 O Certified Public Accountants Certifier cenwrya:y Public Accountants Has Angel,, laewpoao each Callers! Sacramento Independent Accountant's Report on n oleso Applying Agreed-Upon Procedures San Francisco walnut Creek Woodland Hill, 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 30,2016.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:No exceptions were noted as a result of our procedures. Macias Gin,&O'Connell LLP 0675 MacArthur Court.Suite 600 aeupocr Bearl,.Ca91660 www.mgocpa.com 1 We were not engaged to, and did not, conduct an examination, the objective of which would be the expression of an opinion on the accompanying Appropriations Limit Calculation of the District. Accordingly, we do not express such an opinion. 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 31,2016 2 Orange County Sanitation District Appropriations Limit Calculation Year Ended June 30, 2016 Amount Sauce A. Last year's Emit $ 91,303,931 B. Adjustment factors: 1. Population change 1.00940000 State Finance 2. Per capita change 1.03820000 State Finance Total adjustments I(B.1 x B.2)-1.0] 0.04795908 C. Amwaladjustment 4,378,853 (BxA) D. Other adjustments: 1. Lost responsibility(-) - 2. Transfer to private(-) - 3. Transfer to fees (-) - 4. Assumed responsibility(+) Subtotal E. Total adjustments 4,378,853 (C+D) F. This year's limit $ 95,682,784 (A+E) 3 OL -Wilk M. Orange County Sanitation District Comprehensive Annual Financial Report for the year ended June 30, 2016 Orange County,California ORANGE COUNTY SANITATION DISTRICT ORANGE COUNTY, CALIFORNIA COMPREHENSIVE ANNUAL FINANCIAL REPORT FOR THE YEAR ENDED JUNE 30, 2016 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, 2016 Pace INTRODUCTORY SECTION: Letterof Transmittal..................................................................................................................... i-vii GFOA Certificate of Achievement............................................................................................... vill Boardof Directors........................................................................................................................ ix OrganizationChart...................................................................................................................... x Mapof Service Area.................................................................................................................... A FINANCIAL SECTION: Independent Auditor's 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.................................................................................. 15-47 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 Schedule of Funding Progress—Other Postemployment Benefits.................................... 53 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—Prior 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—Prior Fiscal Year and Nine Years Ago........................... 78 OperatingIndicators.................................................................................................................... 79 OTHER DATA S 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 Insurance in 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 31, 2016 CY Fountain Vai 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, 2016. This report includes the Huntington B financial position and activity of individual revenue areas, as described within the Governmental Structure below,as of June 30,2016 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, 2016. 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, 2016. County of Ora Management's discussion and analysis(MD&A)immediately follows the independent auditor's 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 Dills 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 Da 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 570 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. Both plants are master-planned for a future primary and secondary treatment capacity of 235 mgd for a combined total of 470 mgd by the year 2070. 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 ouffall 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 Chapman University's June 2016 Economic & Business Review forecasts that the real U.S. gross domestic product will grow 2.1 percent in 2016 as compared to 2.4 percent in 2015. The declines forecasted in consumer and investment spending growth overwhelm the relatively smaller positive effects from government and international trade. According to the California Employment Development Department (EDD), Orange County generated an increase of approximately 2.5 percent in payroll jobs from August 2015 to August 2106. During this same time period, unemployment in Orange County decreased to 4.4 percent from 4.6 percent while the unemployment in California as a whole decreased to 5.6 percent from 6.1 percent. Chapman University's June 2016 forecast also calls for Orange County's unemployment rate to decrease from to 4.0 percent by the end of 2016. The county's economy is expected to add 40,600 payroll jobs in 2016, an increase of 2.6 percent. According to Chapman University, residential permit valuation in the County is forecasted to decrease from 11.2 percent growth in 2015 to 4.5 percent growth in 2016. Continued positive, albeit slower,growth will bring residential valuation in 2016 above the$3 billion level for the first time ever. Low mortgage rates and higher median family income coupled with a tight housing supply will keep upward pressure on housing prices. Housing appreciation in Orange County is forecasted to increase from 2.7 percent in 2015 to 4.6 percent in 2016. Since the beginning of the recession-recovery period, the County's housing prices have increased 4.3 percent as compared with a decrease of 5.3 percent in California and an increase of 5.8 percent in the nation. However, Chapman University further notes that the current average price of$712,883 in Orange County compares to the significant lower average prices of$465,187 in California and $217,600 in the U.S.. MAJOR INITIATIVES Following are the District's current major initiatives as outlined in the General Manager's work plan for FY 2016-17: 1. Safety and Security • Cyber Security—Address the top ten longer-term cyber security items/projects. • Safety Engineering Solutions and Physical Site Security—Retain a contractor to begin addressing the 75 high priority items identified in the Safety Study. Implement outstanding high priority physical site security improvements and conduct training for all employees. • Voluntary Protection Plan (VPP)Certification— Implement the recommendations from the feasibility analysis report for obtaining VPP certification from California OSHA. 2. Succession Planning • Labor Negotiations — Complete negotiations with all represented bargaining units and develop a performance based pay structure for unrepresented employees. • Employee Engagement—Conduct follow-up actions to address issues identified during the employee engagement survey and the 2015 EMT/manager leadership training. • Workforce Planning and Development — Address key vulnerabilities identified in the workforce vulnerability and talent readiness assessments conducted during 2015-16 by implementing focused job shadowing, job assignments, training and mentoring. Implement streamlined policies and procedures to more quickly fill vacancies and ensure adequate staffing levels. 3. Resource Recovery • Water Recycling — Execute a new agreement with Orange County Water District (OCWD) for the ultimate expansion of the Groundwater Replenishment System. Work with OCWD to secure grant funding and complete preliminary engineering and environmental work on the expanded facilities to recycle effluent from OCSD's Treatment Plant No. 2. • Research— Present findings and recommendations on Super Critical Water Oxidation to the Board of Directors. iii • Monitoring Program — Evaluate the nature and frequency of all of OCSD's current environmental monitoring for the protection of OCSD's collection system and treatment plants;water recycling; ocean discharge;and biosolids recycling. Prepare a plan based on the future monitoring needs of OCSD. 4. Reliability • Planned Maintenance — Complete a gap analysis and implement measures to fully deploy planned maintenance using Maximo and process improvements to improve reliability. • Civil Assets Maintenance— Implement the operational housekeeping program, and develop a multi- year program for condition assessment and maintenance of civil assets. • Operational Resiliency—Present the results of the business continuity plan to the Board of Directors. Identify the most critical functions to keep OCSD operating in the event of a major event. • Seismic—Conduct an updated study of the seismic safely needs of OCSD's Plant Facilities. 5. Operational Optimization • Rates—Conduct planning studies including the Odor Control, Biosolids, and Facilities Master Plans to develop updated 20 year cost projections. The outcomes of these studies will be used next fiscal year to complete a rate study to determine the proper allocation of costs among user types and a recommended future rate structure. • OCSD Headquarters Building — Study site location options and make final site selection to begin preparing environmental documentation to comply with CECA. 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, 2016: • Wastewater Conveyance Project of the Year for the Santa Ana Regional Interceptor Line by the American Society of Civil Engineers • Certificate of Achievement for Excellence in Finance Reporting by the Government Finance Officers Association • Excellence in Environmental Engineering and Science - Environmental Sustainability, Honor Award for Central Generation Emissions Control by the American Academy of Environmental Engineers&Scientists • Excellence in Environmental Engineering and Science - Design Honor Award for the Groundwater Replenishment System Initial Expansion by the American Academy of Environmental Engineers&Scientists • Excellence in Environmental Engineering and Science - Research Honor Award for the Sanitation District's Critical Assessment of Process Odorants by the American Academy of Environmental Engineers&Scientists • Gold Peak Performance Award for Plant No. 1 and Plant No. 2 for Excellence in Permit Compliance by the National Association of Clean Water Agencies • American In-House Graphic Design Award -Annual Report by Graphic Design USA • Membrane Facility Award by Membrane Technology Association/American Water Works Association • 2015 Collection System of the Year by the California Water Environment Association • Recycled Water Agency of the Year by the Water Reuse Association • Golden Hub of Innovation Award for the Newport Beach Outreach Program by the Association of California Cities-Orange County 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 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 v 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-term 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 2020. 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, 2016 was $25.0 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$117 million at June 30,2016. 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. vi As of June 30, 2016, the Sanitation District was in compliance with the Accumulated Funds and Reserves Policy with designated cash and investments totaling $545 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 $181 million Designated For Self-Insurance 57 million Designated For Capital Improvements 190 million Designated For Debt Service Requirements 117 million Total Designated Cash and Investments $ 545 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, 2015. This was the twenty-first 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, A& 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, 2015 Executive Director/CEO viii ORANGE COUNTY SANITATION DISTRICT Board of Directors As of June 30, 2016 Aaencv Active Director Alternate Director Cities: Anaheim Lucille Kring James Vanderbilt Brea Glenn Parker Cecilia Hupp Buena Park Fred Smith Virginia Vaughn Cypress Mariellen Yarc Stacy Barry Fountain Valley Steve Nagel Cheryl Brothers Fullerton Gregory Sebourn Doug Chaffee Garden Grove Steve Jones Kris Beard Huntington Beach Jim Katapodis Erik Peterson Irvine Steven Choi Lynn Schott La Habra Tom Beamish Tim Shaw La Palma Peter Kim Michele Steggell Los Alamitos Richard Murphy Shelley Hasselbrink Newport Beach Keith Curry Scott Peotter Orange Teresa Smith Mark Murphy Placentia Chad Wanks Constance Underhill Santa Ana Sal Tinajero David Benavides Seal Beach Ellery Deaton Sandra Massa-Lavitt Stanton David Shawver Carol Warren Tustin John Nielsen Allan Bernstein Villa Park Greg Mills Diana Fascenelli Sanitary Water Districts: Costa Mesa Sanitary District James M. Ferryman Robert Ooten Midway City Sanitary District Joy Neugebauer Al Krippner Irvine Ranch Water District John Withers Douglas Reinhart Yorba Linda Water District Robert Kiley Michael Beverage County Areas: Member of the Board Michelle Steel Shawn Nelson of Supervisors ix ORANGE COUNTY SANITATION DISTRICT Organizational Chart As of June 30, 2016 - cenerel counsel ors EM WD M n oam� Erg ahtiy Fia�oal M2mt Falio3 Sup ��bv Plaaig RbIic ARais Contraar. Epaprred- p W.2 Rod PucM1asin98 p w opn !mimed Malenals Maragemenl RMSesirn phmNo.f a, .ga Mai,tavre Cnnlnvlion T-hm im TecM1ndo3y GA. Emimnrra,W ,a..sisi I� r g dv aya Ganpla,o 0—Xbribnug CW 8 fnnmv� CdecEma X ORANGE COUNTY SANITATION DISTRICT Map of Service Area As of June 30, 2016 LA HABRA BREA } FULLER YORBA Orange County LINDA . e`�.„°eW� PLAC TIA LA B IENA PL K RE ANANEIM VILLA PA NTO A MITOS gRDE ORANGE � ROSEAL V BEACH MINS ER Pc� m AN UNTA " ANA USFIN ALLE NUBTI GTO �/. �,. IRVINE COSTA P2 MESA Ereo,o,owmi N ,.5 mile lay A ssloo,a�ame,e� NEWPORT N BEACH o 1 2 < Service area boundary OffshoreP(e- 5mileslong duauM[n:Mappeparmduc Sewer pipelines mrad eiame,er aensecwmysanlauon om�ar.me man e imageora�aenn�irewese�ueo�w+,. SReclamation Plant No.I(Pi) noierneras��aryrser��m.a. Treatment Plant No.2(P ) wnakmm.aamee waeunw,an ¢e^8•Mirermmmeum xgn�,na 4 Pump and lit stations sera uoxRro ..MXV5 a�...ee. flFa5f6.C&2018 O unincorporated Orange County(white areas) XI (THIS PAGE LEFT INTENTIONALLY BLANK) xii Certified cenwyan- Public Accountants Has Arco,, laewpooa acn Oakland Sacramento San Oleo Independent Auditor's Report San Francisco walnut Creek To the Board of Directors woodland Mlle Orange County Sanitation District Fountain Valley,California Report on the Financial Statements We have audited the accompanying financial statements of the Orange County Sanitation District (the District)m of and for the year ended June 30,2016,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 oar opinion,the financial statements referred to above present fairly,in all material respects,the financial position of the District,as of June 30, 2016,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 Cini&O'Connell LLP 0675 MacArthur Court,SuRe 600 session Beady.CA92560 www.mgocpa.com t Emphasis of Matter As discussed in Note 1 to the financial statements, the District implemented Governmental Accounting Standards Board(GASB) Statement No.73,Accounting and Financial Reportingfor 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, effective July 1, 2015. The implementation of this Statement resulted in a restatement of net position as of July 1, 2015, in the amount of$6,840,809. Our opinion is not modified with respect to this matter. 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 Net Pension Liability, Schedule of District Contributions, Schedule of Net Pension Liability — Additional Retiree Benefit Plan, 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 GASB, 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 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 taken 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. /'V// t / 'atLlars �h� C�'Cal�ell t Newport Beach,California October 31,2016 2 Management Discussion and Analysis June 30,2016 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, 2016. 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, 2016, the District's assets and deferred outflows of resources exceeded its liabilities and deferred inflows of resources by $1,918.6 million (net position). Of this amount, $489.3 million represents unrestricted net position, which may be used to meet the District's ongoing obligations to citizens and creditors. • Total net position increased$156.7 million,or 8.9 percent over the prior year. • Net Capital Assets, consisting of non-depreciable capital assets and depreciable capital assets net of accumulated depreciation, increased $64.5 million, or 2.6 percent over the prior year. • Net investment in capital assets increased $101.9 million, or 7.7 percent. • Unrestricted Net Position increased $54.8 million,or 12.6 percent from the prior year. • Total outstanding bonded debt decreased by$46.3 million over the prior year to$1.116 billion. • The FY 2015-16 beginning net position of $1,755.0 million has been restated from the FY 2014-15 ending net position of $1,761.8 million due to the implementation of GASB Statements No. 73, and the recognition of an additional net pension liability of$6.8 million as of June 30, 2015, restated. 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 accrual 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 (GASB)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 all of 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. As indicated in Note 1 of the accompanying financial statements, the District implemented GASB Statement 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 in its financial statements for the year ended June 30, 2016 that required the reporting of an 3 additional net pension liability of$6.8 million as of June 30, 2015 and the restatement of the District's net position from$1,761.8 million to$1,755.0 million on this date. Net Position As previously noted, net position increased $156.7 million, or 8.9 percent over the net position for FY 2014-15, to$1,918.6 million in Fiscal Year 2015-16. (Dollars in thousands) Percentage June 30, June 30, Increase Increase 2016 2015 (Decrease) (Decrease) Assets and deferred outflow of resources Assets Current and other assets $ 609,676 $ 604,005 $ 5,671 0.9% Net Capital assets 2,569,440 2,504,980 64,460 2.6% Total assets 3,179,116 3,108,985 70,131 2.3% Deferred outflows of resources 90,762 52,949 37,813 71.4% Total Assets and deferred outflows of resources 3,269,878 3,161,934 107,944 3.4% Liabilities Current liabilities 102,319 105,031 (2,712) -2.6% Noncurrent liabilities 1,225,948 1,269,553 (43,605) -3.4% Total liabilities 1,328,267 1,374,584 (46,317) -3.4°/, Deferred inflows of resources 23,039 25,506 (2,467) -9.7% Total Liabilities and deferred inflows of resources 1,351,306 1,400,090 (48,794) 3.5% Net position: Net investment in capital assets 1,429,269 1,327,384 101,885 7.7% Unrestricted 489,303 434,460 54,843 12.6% Total net position $ 1,918,572 $ 1,761,844 $ 156,728 8.9% Current and other assets increased $5.7 million, or 0.9 percent, due primarily to net cash provided by operations of $89.3 million, proceeds from property taxes of $84.5 million, receipt of capital facilities rapacity charges of $15.6 million, contributions from other governments of $13.1 million, investment income of $9.2 million, and other government repayments of $6.4 million offset by capital outlays of $123.0 million, interest expense of$51.5 million, and bonded debt retirements of$37.5 million. Net Capital assets increased $64.5 million, or 2.6 percent, due mostly to the ongoing capital improvement program construction in progress additions of$153.4 million less depreciation of$90.5 million. Included in total capital outlay additions is the Sludge Dewatering and Odor Control Project at Plant No. 1 and Plant No. 2 with total project budgets of $172.0 million and $86.5 million, respectively. These projects 4 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 2015-16, the District incurred project costs of$44.7 million at Plant No. 1 and $10.2 million and Plant No. 2 bringing the total cost-to-date to $152.1 million and $26.0 million, respectively, with completion scheduled in FY 2017-18. Another solids handling project underway is the Solids Thickening and Processing Upgrades at Plant No. 2. This project consists of the rehabilitation and upgrades to the four existing dissolved air flotation thickeners (DAFTs) to treat the current activated sludge plant solids as well as the additional solids that will be generated from the new secondary trickling filter/solids contractor process. In FY 2015-16, $5.7 million of the total project budget of$51.2 million was incurred bringing the cost-to-date to$46.8 million with completion scheduled in FY 2017-18. One large collection system project, Newport Force Main Rehabilitation, with total project budget of$64.0 million, incurred outlays of$15.2 million in FY 2015-16. This project will rehabilitate approximately 28,000 feet of the Newport Force Main system located on Pacific Coast Highway in Newport Beach between the Bitter Point Pump Station and Dover Drive. The force main system consists of two parallel, interconnected pipelines, varying in size from 22 to 36 inches. More than half of the force main system will be rehabilitated rather than replaced to minimize impacts to the community, businesses, tourism, and the environment with completion scheduled for FY 2016-17. See page 8 for the Schedule of Capital Assets and listing of other major capital additions for FY 2015-16. Deferred Outflows of Resources increased $37.8 million, or 71.4 percent over the prior year primarily due to pension investment earnings underperforming the actuarial valuation projection by $26.7 million and the difference between the acquisition price of Certificates of Participation (COP) Series 2016A and carrying amount of the retired debt, COP Series 2009A, in the amount of$14.9 million. Deferred Inflows of Resources decreased $2.5 million, or 9.7 percent over the prior year is primarily due to the decrease in pension expense resulting from the change in actuarial assumptions. Net Investment in capital assets increased $101.9 million, or 7.7 percent over the prior year primarily as a result of the net increase in capital assets of $64.5 million coupled with the $37.4 million decrease in related debt. The net increase in capital assets consists mostly of the $153.4 million increase in construction in progress offset by capital asset depreciation for the year of$90.5 million. Unrestricted net position increased $54.8 million, or 12.6 percent due to the overall increase in net position of$156.7 million offset by the increase in net investment in capital assets of$101.9 million. Changes in Net Position Net position increased $156.7 million in FY 2015-16, or 8.9 percent over the prior year. 5 (Dollars in thousands) Percentage June 30, June 30, Increase Increase 2016 2015 (Decrease) (Decrease) Revenues: Operating revenues Service Charges $ 314,477 $ 301,549 $ 12,928 4.3% Permit and inspection fees 951 902 49 5.4% Total operating revenues 315,428 302,451 12,977 4.3% Non-operating revenues Property taxes 84,407 79,835 4,572 5.7% Investment and interest income 9,183 4,806 4,377 91.1% Contrib. from other government 13,103 8,555 4,548 53.2% Other 1,555 1,441 114 7.9% Total non-operating revenues 108,248 94,637 13,611 14.4% Total revenues 423,676 397,088 26,688 6.7% Expenses: Operating expense other than depreciation and amortization 153,501 149,227 4,274 2.9% Depreciation and amortization 90,502 94,186 (3,684) -3.9% Non-operating expense 34,078 37,280 (3,202) -8.6% Total expenses 278,081 280,693 (2,612) -0.9% Income before capital contributions 145,595 116,395 29,200 25.1% Capital facilitites capacity charges 17,974 17,656 318 1.8% Increase in net position 163,569 134,051 29,518 22.0% Beginning net position (1) 1,755,003 1,627,793 127,210 7.8% Ending net position 1,918,572 1,761,844 $ 156,728 8.9% (1)-The FY 2015-16 beginning net position of$1,755,003 million has been restated from the FY 2014-15 ending net position of $1,761,844 million due to the implementation of GASS Statements No.73,and the recognition of an increase in net pension liability of$6.8 million as of July 1,2015. As previously stated, 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 determine 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 2015-16, operating revenues increased $13.0 million, or 4.3 percent over the prior year that is reflective of a $16.2 million increase in service charges paid to the District from property owners. Of this increase, $11.7 million, or 3.8 percent is reflective of the decrease in rebates to property owners. In FY 2015-16, $15.2 million was rebated to property owners as opposed to $26.9 million in FY 2014-15. This increase from the decline in rebates made to property owners was supplemented by the 1.9 percent increase in the average sewer user fee rate over the prior year. 6 Sources of Revenue Functional Expenses ■Collections June 30, 2016 June 30, 2016 19% 10% 3% % ■Treatment& 7'" 2% ■Interest Disposal ■User Fees ❑Depreciation& Amortization ❑Other ❑Interest []Taxes Levied a4°� 44% Expense 72 ■Other The $13.6 million, or 14.4 percent increase in non-operating revenues primarily consists of a $4.6 million, or 5.7 percent increase in property tax revenues, a $4.5 million, or 53.2 percent increase in contributions from other governments, and a $4.4 million, or 91.1 percent increase in investment and interest income. The increase in property tax revenue is primarily the result of the increase in total assessed valuation of over the prior year of 6.2 percent over the prior year. The increase in contributions from other governments is reflective of the increase in capital contributions from the Irvine Ranch Water District. The increase in investment and interest income is attributable to higher yields earned on investments offset somewhat by lower cash and investments balances. Yields earned on investments increased from a 0.8 percent in FY 2014-15 to a 1.7 percent in FY 2015-16 while cash and investment balances decreased from $556.9 million at June 30, 2015 to$544.8 million at June 30, 2016. Operating expense before depreciation and amortization increased $4.3 million or 2.9 percent over the prior year. The majority of this increase is attributable to the $3.4 million, or 55.7 percent increase in feasibility studies, a $3.1 million, or 61.4 percent in other operating expenses, and a $1.1 million, or 4.3 percent increase in contractual services that were somewhat offset by the 54.2 million, or 5.3 percent decrease in salaries and benefits. Feasibility studies are done to determine the necessity and the preferred designs of future potential construction projects. The increase in other operating expenses is attributable to the negative adjustment in the Irvine Business Complex wastewater flows of $1.3 million recorded in FY 2014-15 against the FY 2015-16 actual expenses of$255,000, and the increase to claims and adjustments of $1.4 million. The increase in Contractual Service is attributable to the increase in manhole rehabilitation projects, sewer line cleanings,and CCTV inspections. Operating salaries and benefits decreased by $4.2 million to $75.6 million, a 5.3 percent decrease from the prior year. The operating salaries and benefits costs are part of the overall decrease of$1.2 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 $93.0 million, a 1.3 percent decrease from the prior year total of$94.2 million. This decrease is reflective of the $3.1 million, or 14.5 percent decrease in retirement premiums as a result of the $125 million pay down against the District's unfunded actuarial accrued pension liability (UAAL) in November 2014. This pay down resulted in a UAAL premium rate decrease from 25.6 percent in FY 2014-15 to 7.86 percent in FY 2015-16. Non-operating expense decreased $3.2 million, or 8.6 percent, and is primarily reflective of the decrease in interest expense of $6.5 million to $27.6 million, a 19.1 percent decrease from the prior year as the District continues to pay down on its long-term bonded debt; and to the decrease in the loss on disposal of assets of $3.1 million from the prior year. Conversely, the District recognized pollution remediation expenses of$6.4 million due to contamination within its underground storage fuel tanks. Capital Facility Capacity Charges increased a modest$0.3 million, or 1.8 percent over the prior year due to the slowdown in the economy and the modest increase activity in construction as total the total building permit valuation in Orange County increased 6.3 percent in Calendar Year 2015 over the prior year. 7 Capital Assets At June 30, 2016, the District had a net investment of$2.569 billion in capital assets. This represents a net increase(including additions and deletions)of$64.5 million or 2.6 percent over the prior year. (Dollars in thousands) Percentage June 30, June 30, Increase Increase 2016 2015 (Decrease) (Decrease) Land $ 15,960 $ 15,960 $ - 0.0% Construction in Progress 499,376 392,209 107,167 27.3% Sewage collection facilities 447,377 442,183 5,194 1.2% Sewage treatment facilities 1,496,469 1,536,861 (40,392) -2.6% Effluent disposal facilities 36,155 37,726 (1,571) -4.2% Solids disposal facilities 307 316 (9) -2.8% General and administrative facilities 73,549 78,820 (5,271) -6.7% Assets acquired in excess of book value 248 905 (657) -72.6% Capital assets, net $ 2,569,441 $ 2,504,980 $ 64,461 2.6% Major capital asset additions for the current fiscal year included the following: • $44.7 million—Sludge Dewalering and Odor Control at Plant No. 1 • $15.2 million—Newport Force Main Condition Assessment • $10.2 million—Sludge Dewatering and Odor Control at Plant No. 2 • $ 7.5 million—Newhope-Placentia Trunk Replacement • $ 7.3 million—Effluent Sampler and Building Area Upgrades • $ 5.7 million—Solids Thickening and Processing Upgrades at Plant No.2 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, 2016, the District had $1.116 billion outstanding in bonded debt, a net decrease of $46.3 million, or 4.0 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 partial refunding of $162.8 million of Series 2009A Certificates of Participation (COP) with Series 2016A Wastewater Refunding Revenue Obligations in the amount of$145.9 million issued in March 2016. Both Standard and Poor's Corporation and Fitch Ratings reaffirmed their AAA rating of the Orange County District in the past fiscal year. The District's long-range financing plan is designed to maintain this high rating. Over the next five years, the District is projecting over$900 million in future treatment plant and collection system 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. 8 Economic Factors and Next Year's Budgets and Rates • The unemployment rate within the County of Orange is currently 4.4 percent, a slight increase from the rate of 4.0 percent a year ago. • Inflation for Orange County in 2015 increased 1.9 percent over the prior year based on the actual percentage change in the consumer price index according to the June 2016 Economic and Business Review report prepared by Chapman University. • The actual rate of return on investments increased from the 0.8 percent earnings rate in FY 2014-15 to 1.7 percent for FY 2015-16. All of these factors were considered in preparing the District's biennium budget beginning July 1, 2016. The District's user fee schedule was increased by 1.6 percent for FY 2016-17 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 $5.00, from $322.00 to $327.00. This rate increase was necessary to finance the District's cash flow needs as capital improvement outlays alone are projected to be $171.3 million in FY 2016-17 and are projected to total $2.4 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, 2016 2016 Current assets: Cash and cash equivalents $ 125,552,927 Investments 394,422,940 Accounts receivable,net of allowance for uncollectibles$98,917 19,365,166 Accrued interest receivable 1,492,193 Connection fees receivable 2,982,914 Property tax receivable 1,060,830 Inventories 6,853,403 Due from other governmental agency 5,770,279 Prepaid expenses 1,464,651 Total current assets 558,965,303 Noncurrent assets: Restricted: Cash and cash equivalents 10,394,727 Investments 14,442,500 Accrued interest receivable 218,957 Unrestricted: Non-depreciable capital assets 515,335,618 Depreciable capital assets,net of accumulated depreciation 2,054,105,261 Prepaid insurance on outstanding debt payable 182,452 Due from other governmental agency 24,730,127 Net OPEB asset 731,700 Other noncurrent assets, net 10,344 Total noncurrent assets 2,620,151,686 Total assets 3,179,116,989 Deferred outflows of resources: Deferred losses on defeasances 41,494,547 Deferred outflows related to pensions 49,267,156 Total deferred outflow of resources 90,761,703 Total assets and deferred outflows of resources 3,269,878,692 Current liabilities: Accounts payable 9,523,100 Accrued expenses 15,610,020 Retentions payable 5,067,902 Interest payable 18,107,550 Current portion of long-term obligations 54,010,437 Total current liabilities 102,319,009 Noncurrent liabilities: Noncurrent portion of long-term obligations 1,165,194,834 Net pension liability 60,752,882 Total noncurrent liabilities 1,225,947,716 Total liabilities 1,328,266,725 Deferred inflows of resources: Deferred inflows related to pensions 23,039,510 Total liabilities and deferred inflows of resources 1,351,306,235 Net position: Net investment in capital assets 1,429,269,263 Unrestricted 489,303,194 Total net position $ 1,918,572,457 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, 2016 2016 Operating revenues: Service charges $ 314,477,433 Permit and inspection fees 950,802 Total operating revenues 315,428,235 Operating expenses other than depreciation and amortization: Salaries and benefits 75,576,332 Utilities 7,245,613 Supplies, repairs and maintenance 25,320,733 Contractual services 27,823,896 Feasibility studies 9,410,726 Other 8,123,628 Total operating expenses other than depreciation and amortization 153,500,928 Operating income before depreciation and amortization 161,927,307 Depreciation and amortization 90,502,342 Operating income 71,424,965 Non-operating revenues: Property taxes 84,407,129 Investment and interest income 9,182,807 Contributions from other government 13,103,035 Other 1,555,440 Total non-operating revenues 108,248,411 Non-operating expenses: Interest 27,596,931 Pollution remediation 6,356,904 Other 80,650 Loss on disposal of assets 44,121 Total non-operating expenses 34,078,606 Income before capital contributions 145,594,770 Capital contributions; Capital facilities capacity charges 17,974,042 Change in net position 163,568,812 Total net position-beginning, as restated 1,755,003,645 Total net position-ending $ 1,918,572,457 See Accompanying Notes to Basic Financial Statements. 13 ORANGE COUNTY SANITATION DISTRICT Statement of Cash Flows For the Year Ended June 30, 2016 2016 Cash flows from operating activities: Receipts from customers and users $ 291,895,424 Payments to employees (118,716,990) Payments to suppliers (83,871,604) Net cash provided by operating activities 89,306,830 Cash flows from noncapital financing activities: Proceeds from property taxes 84,467,857 Payments for pollution remediation and other obligation (4,881,665) Net cash provided by noncapital financing activities 79,586,192 Cash flows from capital and related financing activities: Capital facilities capacity charges 15,609,869 Additions to capital assets (123,016,534) Interest paid (51,538,331) Principal payments on debt obligation (29,405,000) Proceeds released to escrow account on defeased debts (162,780,000) Proceeds from debt issuances 155,481,198 Debt issuance costs (834,338) Net cash used in capital and related financing activities (196,483,136) Cash flows from investing activities: Proceeds from the sale of investments 389,293,257 Purchases of investments (313,097,922) SARI project payments 6,350,808 Interest received 6,628,427 Net cash provided by investing activities 89,174,570 Net increase in cash and cash equivalents 61,584,456 Cash and cash equivalents,beginning of year 74,363,198 Cash and cash equivalents,end of year $ 135,947,654 Reconciliation of operating income to net cash provided by operating activities: Operating income $ 71,424,965 Adjustments to reconcile operating income to net cash provided by operating activities: Depreciation and amortization 90,502,342 Bad debt expense(net recoveries) 66,073 (Increaseydecrease in operating assets: Accounts receivable (14,893,203) Inventories (109,855) Prepaid and other assets (247,567) Increase/(decrease)in operating liabilities: Accounts payable (14,513,135) Accrued expenses 6,524,017 Due to other governmental agency (8,639,608) Net pension liability (32,647,071) Pension/OPEB/accrued leave payable (10,454,905) Compensated absences 186,736 Other payable 87,581 Claims and judgments 2,020,460 Net cash provided by operating activities $ 89,306,830 Noncash activities: Unrealized gain on the fair value of investments $ 2,533,731 Receivable from non-operating activities 2,771,980 Capital assets acquired through accounts payable 4,577,212 See Accompanying Notes to Basic Financial Statements. 14 ORANGE COUNTY SANITATION DISTRICT Notes to Basic Financial Statements For the Year Ended June 30, 2016 (11 Summary of Significant Accountina Policies Reoortina 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, 2016, 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. Measurement Focus and Basis of Accountina 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 15 ORANGE COUNTY SANITATION DISTRICT Notes to Basic Financial Statements For the Year Ended June 30, 2016 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. Ooeratina 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 Investment", 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 $98,917 at June 30, 2016. Unbilled sewer services through June 30, 2016 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. 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. 16 ORANGE COUNTY SANITATION DISTRICT Notes to Basic Financial Statements For the Year Ended June 30, 2016 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, 2016, net interest costs of$13,786,670 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 Controller's 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 defamed charges on the refunding debt at June 30,2016 are$41,494,547. 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, 17 ORANGE COUNTY SANITATION DISTRICT Notes to Basic Financial Statements For the Year Ended June 30, 2016 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, deferred inflows related to pensions, and net pension liability for OCERS at June 30, 2016 are $48,088,910, $23,039,510, and $42,439,760, respectively. OCSD's deferred outflows related to pensions, deferred inflows related to pensions, and net pension liability for ARBA at June 30, 2016 are $1,178,246, $0, and $18,313,122, respectively. 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, 2016 are $49,267,156, $23,039,510, and $60,752,882, 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 18 ORANGE COUNTY SANITATION DISTRICT Notes to Basic Financial Statements For the Year Ended June 30, 2016 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, 2016, the outstanding commitments with contractors totaled$100,566,972. Self-Insurance Plans For the year ended June 30, 2016, 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 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 30,2016. 19 ORANGE COUNTY SANITATION DISTRICT Notes to Basic Financial Statements For the Year Ended June 30, 2016 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, 2016 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. Accounting Changes The accompanying financial statements reflect the implementation of GASB Statement 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 retroactive effect of implementing this change in reporting pension expenses and obligations resulted in a restatement of the beginning net position as described further in Note 9. The effect on the previously issued financial statement as of June 30, 2015 resulted in an adjustment to ending net position from$1,761,844,454 to$1,755,003,645. (2) Cash and Investments Cash and investments as of June 30, 2016 are classified within the accompanying Statement of Net Position as follows: Statement of Net Position: Current, Unrestricted: Cash and cash equivalents $125,552,927 Investments 394,422,940 Subtotal -current, unrestricted 519,975,867 Restdcted: Cash and cash equivalents 10,394,727 Investments 14,442,500 Subtotal - restricted 24,837,227 Total cash and cash equivalents and investments $544,813,094 20 ORANGE COUNTY SANITATION DISTRICT Notes to Basic Financial Statements For the Year Ended June 30, 2016 Cash and investments consist of the following as of June 30, 2016: Cash on hand $ 3,000 Deposits with financial institutions (426,695) Managed portfolio-cash and investments 520,399,562 Subtotal - unrestricted cash and investments 519,975,867 Monies held by trustees: Cash and cash equivalents $ 10,394,727 Investment contracts 14,442,500 Subtotal - monies held by trustees 24,837,227 Grand total cash and investments $544,813,094 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 in of Portfolio(p Issuer(p 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 N/A 20% 20% Mortgage Pass-Through Securities/ CMO/Asset-Backed Securities Yes 5 years 20% 5% (2) County Investment Pools Yes N/A 15% (2) 15% (2) Local Agency Investment Fund (LAIF) Yes N/A 15% (2) 15% (2) Supranational Obligations Yes 5years 30% 5% (2) Notes (p Restrictions are in accoNence Wth the CalHomia Govemment Code unless indloated othemise. (2)The restriction Is in acco mane eith OCSD's Investment Pollcyehich Is more restrictive than the CalBornia Govemment Code. (3)As allowed by California Government Code Section W1,the Board of Directors has adopted ape licy of a imamate maturity of 5 years for Investments purchased by OCSD's internal monsymanagerforthe long-tem,investment portfolio. The duration of the long-termimestmentportfolio can never emesd6g months.lmestments Wrehasedfortheshort-term portfolio ate subject to the matudtyrestrictlon,noted In this table. 21 ORANGE COUNTY SANITATION DISTRICT Notes to Basic Financial Statements For the Year Ended June 30, 2016 Investments Authorized by Debt Aareements 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 Banker's 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-Tenn Notes 5 years 30% 30% Mutual Funds N/A 20% 10°% Money Market Mutual Funds N/A 20% 20% Local Agency Investment 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 term 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 the US Bank Money Market Fund are daily liquid funds available on demand. 22 ORANGE COUNTY SANITATION DISTRICT Notes to Basic Financial Statements For the Year Ended June 30, 2016 Following is a table which summarizes OCSD's managed portfolio investments by purpose with the modified duration as of June 30,2016. Modified Modified Duration Duration Investment Type Fair Value (in years) (in months) Short-Term Portfolio: U.S. Treasury Bills $ 50,079,810 0.041 0.49 Local Agency Investment Fund 45,928,514 0.458 5.49 U.S. Agency Securities 38,664,264 0.128 1.54 Corporate Medium-Tenn Notes 15,534,495 0.345 4.13 U.S. Treasury Notes 14,037,510 0.241 2.90 Supmnationals 12,999,219 0.114 1.36 Commercial Paper 5,876,610 0.206 2.47 Money Market Mutual Funds 2,002,201 0.083 1.00 Short-term portfolio subtotal $ 185,122,623 0.214 2.57 Long-Term Portfolio: U.S. Treasury Notes $ 98,225,722 1.993 23.92 U.S. Agency Securities' 97,433,624 2.702 32.42 Corporate Medium-Tenn Notes 68,706,425 2.947 35.36 Asset Backed Securities/CMO" 26,488,906 1.095 13.14 Suprenationals 15,048,600 1.259 15.11 Commercial Paper 11,591,907 0.358 4.30 U.S. Treasury Inflation-Protected Securities (TIPS)" 10,583,199 7.943 95.32 Taxable Municipal Bonds 4,761,833 3.538 42.45 Money Market Mutual Funds 2,175,126 0.082 0.98 U.S. Govt. Backed Mortgage Pools (GNMA)' 261,597 3.696 44.36 Long-term portfolio subtotal $335,276,939 2.433 29.20 Total Portfolio $520,399,562 Includes highly sensitive securities. The investments duration in excess offive years was permitted b y OCSO's Investment Policy atthe lime itwas purchased. 23 ORANGE COUNTY SANITATION DISTRICT Notes to Basic Financial Statements For the Year Ended June 30, 2016 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, 2016. Fair Value Maturities Cash equivalents held by fiscal agents: US Bank Cash $ 26 N/A Money Market Mutual Funds: US Bank Money Market Fund 45,471 N/A Federated Govemment Obligations Fund 23,863 38 days First American Govemment Obligations Fund 23,240 26 days Blackrock Institutional Funds 1,406 42 days Local Agency Investment Fund (LAIF) 10,300,721 167 day average Investments held by fiscal agents: Guaranteed Investment Agreements: FSA Capital Management Services LLC-2007A COP 9,518,000 January 30, 2030 Bayerische Landesbank Girozentrale-2009A COP 4,924,500 August 1, 2016 Total Fair Value of Investments Held by Fiscal Agents $ 24,837,227 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 $5,727,914 including $3,475,796 of mortgage pass-through securities, $1,990,521 of U.S. agency securities, and $261,597 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. 24 ORANGE COUNTY SANITATION DISTRICT Notes to Basic Financial Statements For the Year Ended June 30, 2016 At June 30, 2016, OCSD had the following fair value measurements for its managed investment portfolio: Quoted Prices in Active Significant Other Markets for Cleanable Unobservable Identical Assets Inputs Inputs Investment Type Fair Value Leee11 Lesel2 Le�el3 Investments in Short-Term Portfolio: U.S.Treasury Bills $ 50.079,810 $ - $ 50,079,810 $ - U.S.Agency Securities 38,664,264 - 38,664,264 - Corporate Medium-term Notes 15.534,495 - 15,534,495 - U.S.Treasury Notes 14,037,510 - 14,037,510 Supmrationals 12,999,219 - 12,999,219 - Commercial Paper 5.876,610 - 5.876,610 Money Market Mutual Funds 2,002,201 - 2,002,201 - In%stments in Long-Term Portfolio: U.S.Treasury Notes 98,225,722 - 98,225,722 - U.S.Agency Securities 97,433,624 - 97,433,624 - Corporate Medium-term Notes 68,706,425 - 68,706,425 - Asset Backed Securities/CMO 26,488,906 - 26,488,906 - Supmnationals 15,048,600 - 15,048,600 Commercial Paper 11,591,907 - 11,591,907 - US Treasury Inflation Protected Securities(TIPS) 10.583,199 - 10.583,199 Taxable Municipal Bonds 4,761,833 - 4,761,833 - Money Market Mutual Funds 2,175,126 - 2,175,126 - U.S. Go emment Backed Mortgage Pools 261,597 - 261,597 Fair Value Hierarchy Totals $ - $ 474,4 11,048 $ - Investments Not Subject To Fair Value Hierarchy Local Agency Investment Fund(LAIF)` 45,928,514 Total Portfolio $520.399,562 -Invesfedio Short-Term Pordblio The Bank of New York Mellon is the custodial bank for all of OCSD's investments shown above in the managed portfolio, except for LAIF. 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 cash accounts, money market mutual funds and LAIF are reported at carrying cost. Monies held by trustees that are invested in guaranteed investment agreements are exempt from fair value reporting and are reported based on the face value of the contracts. 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. 25 ORANGE COUNTY SANITATION DISTRICT Notes to Basic Financial Statements For the Year Ended June 30, 2016 Investment Type and the Lowest Rating Reported at Year End Fair Value Investments with no legal minimum rating&no required disclosure: U.S.Treasury Obligations $172,926,241 U.S.Agency Securities-GNMA 261,597 Subtotal $173,187,838 Investments with no legal minimum rating: U.S.Agency Securities(other than GNMA): Rating of AA-(Standard&Poor's) 136,097,888 Municipal Bonds: Rating ofAal (Moodys) 1,537,046 Rating ofAa3(Moodys) 3,224,787 Local Agency Investment Fund(LA1F): Not rated 56,229,235 Investments with fiscal agents-Guaranteed Investment Contracts: Not rated 14,442,500 Subtotal 211,531,456 Investments with a legal minimum rating(or its equivalent)of A Corporate Medium-Term Notes: Rating ofAal (Moodys) 5,117,880 Rating ofA4+(Standard&Poor's) 3,093,150 Rating of AA-(Standard&Poor's) 5,050,375 Rating of At (Moodys) 20,441,950 Rating ofA+(Fitch) 4,004,880 Rating ofA(Standard&Poor's) 5,272,216 Rating ofA2(Moodys) 21,641,078 Rating ofA3(Moodys)' 8,416,874 Rating of Baal (Moodys)' 4,022,072 Rating of BBB+(Standard&Poofs)" 7,004,195 Not rated 176,250 Money Market Mutual Funds: Rating ofAaa(Moodys) 4,148,543 Not rated 28,784 Invested with fiscal agents: Rating of Aaa-mf(Moodys) 48,509 Rating of P-1 (Moodys) 45,497 Subtotal 88,512,253 Investments with a legal minimum rating(or its equivalent)ofM Asset Backed Securities/CMO: Rating of Ass(Moodys) 22,973,531 Rating ofA4+(Standard&Poor's) 3,391,430 Rating of BBB(Fitch)' 123,945 Supranational Obligations: Rating ofAaa(MDodys) 20,052,875 Rating of P-1 (Moodys) 7,994,944 Subtotal 54,536,725 Investments with a legal minimum rating(or its equivalent)of"Prime": Commercial Paper: Rating of P-1 (Moodys) 8,896,217 Rating ofA-1 (Standard&Poor's)' 1,796,783 Rating of A(Fitch)' 6,775,517 Subtotal 17,468,517 Total $545,236,789 Ineestnent was in compliance with legal requirements at the time it was purchased. 26 ORANGE COUNTY SANITATION DISTRICT Notes to Basic Financial Statements For the Year Ended June 30, 2016 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, 2016, 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) $ 89,941,364 16.50% Federal National Mortgage Association(FNMA) $ 48,920,090 8.97% 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 counterparty (e.g., broker-dealer) to a transaction, a government will not be able to recover the value of its investment or collateral securities that are in the possession of another party. The California Government Code 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, 2016, in accordance with OCSD's investment policy, none of OCSD's investments were held with a counlerparty. 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, 2016. 27 ORANGE COUNTY SANITATION DISTRICT Notes to Basic Financial Statements For the Year Ended June 30, 2016 (31 Capital Assets Capital asset activity for the year ended June 30, 2016 is as follows: Beginning Ending Balance at Additions/ Deletions/ Balance at July 1,2015 Transfers Transfers June 30,2016 Capital assets not depreciated: Cost: Land $ 15,959,559 $ - $ - $ 15,959,559 Construction in progress 392,209,225 153,408,102 (46,241,268) 499,376,059 Total nondepreciable assets 408,168,784 153,408,102 (46,241,268) 515,335,618 Depreciable capital assets: Cost: Sewage collection facilities 758,158,102 22,980,656 - 781,138,758 Sewage treatment facilities 2,255,777,614 22,862,744 (504,354) 2,278,136,004 Effluent disposal facilities 97,014,820 - - 97,014,820 Solids disposal facilities 3,463,236 - - 3,463,236 General and administrative facilities 227,945,470 2,149,095 (648,121) 229,446,444 Excess purchase price over book value on acquired assets 19,979,000 19,979,000 Subtotal 3,362,338,242 47,992,495 (1,152,475) 3,409,178,262 Accumulated depreciation: Sewage collection facilities (315,974,770) (17,787,222) - (333,761,992) Sewage treatment facilities (718,917,465) (63,253,514) 504,354 (781,666,625) Effluent disposal facilities (59,288,947) (1,571,107) - (60,860,054) Solids disposal facilities (3,146,534) (9,718) - (3,156,252) General and administrative facilities (149,125,455) (7,223,072) 451,719 (155,896,808) Excess purchase price over book value on acquired assets (19,073,561) (657,709) - (19,731,270) Subtotal (1,265,526,732) (90,502,342) 956,073 (1,355,073,001) Netdepreciable assets 2,096,811,510 (42,509,847) (196,402) 2,054,105,261 Net capital assets $2,504,980,294 $110,898,255 $(46,437,670) $2,569,440,879 Capdal essotadMonsforthe fiscal yeersnded Jone 30,2016 are$1.]million more than the amount tlelefed Imm ConsW coon in Pmgmwdue focapitalequpmentpumhasesof$19mdlbn,padi ffyoffsetby$0.2mil4on ofpbrcapdalpmpcfexpenses thatw re w Hen off asexpense. 28 ORANGE COUNTY SANITATION DISTRICT Notes to Basic Financial Statements For the Year Ended June 30, 2016 (4) Lona-Term Liabilities The following is a summary of the changes in long-term liabilities for the year ended June 30,2016: Beginning Ending Duewbin Long-term Balance,July1 Additions Deletions Balance,June 30 one year amount Arbitrage payable $ 274,948 $ 87,581 $ - $ 362,529 $ 362,529 $ Ccopensated absences 7,362,602 7,344,126 (7,157,390) 7,549,338 6,914,502 634,836 Clain¢and judgments 2,550,597 2,713,076 (692,616) 4,571,057 540,640 4,030,417 Certdicates of participation, revenue obligations¬es 1,162,355,000 M5,880,000 (1)2,185,000) 1,116,050,000 35,575,000 1,080,475,000 Unannrdzeci previum(discount) 78.785,357 28,988,588 (17,101,598) 90,672,347 10,617,766 80,054.581 Totals $1,251,328,504 $185,013,371 $(211,136,604) $1,219,205,271 $54,010,437 $1,165,194,834 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. OCSD's liability at June 30, 2016 is $362,529. Compensated Absences OCSD's policies related to compensated absences are described in Note 1. OCSD's liability at June 30, 2016 is$7,549,338 with an estimated $6,914,502 to be paid or used within the next fiscal year. Claims and Judaments 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, 2016 and 2015: 2015-16 2014-15 Claims and judgments payable at July l $2,550,597 $1,896,152 Claims incurred during the fiscal year 2,713,076 1,286,106 Payments on claims during the fiscal year (692,616) (631,661) Claims and judgments payable at June 30 4,571,057 2,550,597 Less: current portion (540,640) (467,110) Total long-term claims and judgments payable $4,030,417 $2,083,487 29 ORANGE COUNTY SANITATION DISTRICT Notes to Basic Financial Statements For the Year Ended June 30, 2016 Certificates of Participation/Revenue Obligations 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 30,2016 are summarized as follows: Amount 2007A refunding certificates of participation $ 91,885,000 2007E certificates of participation 7,110,000 20088 refunding certificates of participation 8,815,000 2009A certificates of participation 13,405,000 2010A wastewater revenue obligations 80,000,000 2010C wastewater revenue obligations 157,000,000 2011A wastewater refunding revenue obligations 111,465,000 2012A wastewater refunding revenue obligations 100,645,000 2012E wastewater refunding revenue obligations 66,395,000 2014A wastewater refunding revenue obligations 85,090,000 2014E revenue refunding certificate anticipation notes 120,850,000 2015A wastewater refunding revenue obligations 127,510,000 2016A wastewater refunding revenue obligations 145,880,000 Total certificates of participation, revenue obligations, and notes $1,116,050,000 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, 2016, the coverage ratio for senior lien debt was 3.39. May 2007 Refunding Certificates of Participation. Series 2007A On May 22, 2007, OCSD completed the sale of $95,180,000 of refunding certificates of participation. The certificates were issued to refund $88,500,000 of the outstanding principal balance of the 2003 Series certificates of participation. The interest rate on the refunding certificates is fixed and will range from 4.00 percent to 4.5 percent. Annual principal payments are due on February 1, beginning February 1, 2008 through February 1, 2030. The trust agreement for the certificates requires the establishment of a reserve which was funded from certificate proceeds. The June 30, 2016 reserve of$9,518,026 is held by Union Bank, the trustee,and meets the reserve requirement. December 2007 Certificates of Participation. Series 2007E On December 20, 2007, OCSD completed the sale of $300,000,000 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 refunding certificates is fixed and will range from 4.00 percent to 5.25 percent. Annual principal payments are due on February 1, beginning February 1, 2008 through February 1, 2017. 30 ORANGE COUNTY SANITATION DISTRICT Notes to Basic Financial Statements For the Year Ended June 30, 2016 On August 7, 2014, $93,930,000 of the outstanding principal balance of the 2007 Series B certificates was advance-refunded with the proceeds of the August 7, 2014 wastewater refunding revenue obligations Series 2014A (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, 2016, this $93,930,000 represents the amount still outstanding on bonds considered defeased. On February 12, 2015, $152,990,000 of the outstanding principal balance of the 2007 Series B certificates was advance-refunded with the proceeds of the February 12, 2015 wastewater refunding revenue obligations Series 2015A (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, 2016, this $152,990,000 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, 2016 reserve of$7,518,822 is held by Union Bank,the trustee,and meets the reserve requirement. September 2008 Refunding Certificates of Participation. Series 2008B On September 11, 2008, OCSD completed the sale of$27,800,000 of refunding certificates of participation. The certificates were issued to refund the $26,900,000 outstanding principal balance of the 1993 Series certificates of participation. The interest rate on the refunding certificates is fixed and will range from 2.80 percent to 3.0 percent. Annual principal payments are due on August 1, beginning August 1, 2009 through August 1, 2016. The trust agreement for the certificates requires the establishment of a reserve which was funded from certificate proceeds. The June 30, 2016 reserve of $2,785,786 is held by US Bank, the trustee,and meets the reserve requirement. 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, 2016, 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, 2016 reserve of $4,967,336 is held by US Bank,the trustee, and meets the reserve requirement. 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 31 ORANGE COUNTY SANITATION DISTRICT Notes to Basic Financial Statements For the Year Ended June 30, 2016 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 201 OC 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 stated 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 Refundina 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. August 2012 Wastewater Refunding Revenue Obligations, Series 2012B 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 32 ORANGE COUNTY SANITATION DISTRICT Notes to Basic Financial Statements For the Year Ended June 30, 2016 outstanding principal balance of the Series 2000A and 2000E 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 Refunding 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 Trost agreement for the revenue obligations does not require the establishment of a reserve. October 2014 Revenue Refunding Certificate Anticipation Notes, Series 2014B On October 8, 2014, OCSD completed the sale of $120,850,000 of revenue refunding certificate anticipation notes. The notes were issued to fully refund the $129,625,000 outstanding principal balance of the 2013 Series A revenue refunding certificate anticipation notes. The interest rate on the notes is fixed at 4 percent. The notes will mature on November 15, 2016. 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. The trust agreement for the certificates does not require the establishment of a reserve. February 2015 Wastewater Refunding 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 Refunding 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 aggregate difference in debt service between the refunding debt and the refunded debt is a positive amount of approximately$18.7 million. The total future payments for the new debt provide a net present value gain of approximately$18.8 million to refund the old debt. 33 ORANGE COUNTY SANITATION DISTRICT Notes to Basic Financial Statements For the Year Ended June 30, 2016 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, 2016, including the Revenue Refunding Certificate Anticipation Notes, Series 2014E that currently matures in November 2016, are as follows: Year Ending June 30, Principal Estimated Interest Total 2017 $ 156,425,000 $ 45,181,495 $ 201,606,495 2018 32,415,000 42,379,797 74,794,797 2019 31,940,000 41,285,797 73,225,797 2020 33,025,000 39,691,647 72,716,647 2021 34,675,000 38,043,347 72,718,347 2022-2026 157,455,000 167,656,716 325,111,716 2027-2031 217,555,000 125,903,445 343,458,445 2032-2036 263,540,000 72,253,679 335,793,679 2037-2041 164,315,000 22,128,077 186,443,077 2042-2046 24,705,000 1,641,536 26,346,536 Total $1,116,050,000 $ 596,165,534 $ 1,712,215,534 (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 34 ORANGE COUNTY SANITATION DISTRICT Notes to Basic Financial Statements For the Year Ended June 30, 2016 retirement allowance at age 52. Members attaining age 70 are eligible to retire regardless of credited service. Benefits are determined by plan formula, age, years of service and final average salary (FAS) as follows: Plan G Plan H Plan S Plan U After 9121/79 Prof/Sup:After 10/1/10 Hire Date Prior to 9121/79 ProUSup':Before 10/1/10 OCEA:After 811/11 On or after 1/1/2013 OCEA': Before 8/1111 601:A8er7/1/11 501': Before 7/1/11 All Before 1/1/2013 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 Service 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%per year of 2.5%per year of year of service for for every year of FAS for awry year of FAS for awry year of FAS for every year normal retirement age service credit seMce credit seMce credit of seMce credit Benefit Adjustments Reduced before age Reduced before age Reduced before age Reduced before age 55 55 57.5 67 Public Employees Intemal Revenue Code Internal Revenue Code Internal Revenue Code Pension Reform Act FAS Limitation Section 401(aX17) Section 401(aX17) Section 401(a)(17) (PEPRA): 120%of Social Security wage base per year Prof/Sup:Professional and SupeMsor employee groups,bargaining unit SPMO. OCEA Administratiw,Clerical,Engineering,and Technical SerNces employee groups,bargaining unit OCEA '501:Operaflons and Maintenance employee groups,bargaining unit International 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 30,2016, the following employees were covered by the benefit terms: Inactive Employees or Beneficiaries currently receiving benefits 410 Inactive Employees entitled to but not yet receiving benefits 99 Active Employees 572 Total 1,081 35 ORANGE COUNTY SANITATION DISTRICT Notes to Basic Financial Statements For the Year Ended June 30, 2016 (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 $12,222,849 for the year ended June 30, 2016. An additional$50,000,000 was contributed to pay down OCSD's Net Pension Liability. Contribution rates in effect for the fiscal year ended June 30, 2016 are as follows: Plan G Plan H Plan B Plan U Employer Contribution Rate, 7/1/15-6/30/16 120.75% 20.75% 18.39% 1 17.52% Employee Contribution Rate, 7/1/15-6/30116(2) 7.07-12.53%(1) 6.60-12.53%(1) 7.40-12.62% 7.21-13.14% Paid by Employer for Employee 3.50% 3.50% 0.00% 1 0.00% (1)Net of employer paid portion of 3.5% (2)Employee rates are determined bythe age of entryinto the retirement system. For the measurement period ended June 30, 2016, the contributions and average employer's contribution rate as a percentage of annual payroll were as follows: Average Employee (Paid Employer Employer by Employer) Contribution Plans Contributions Contributions Rate (%) Plan G $ 23,830 $ 4,020 0.05% Plan H 10,086,350 1,690,059 19.43% Plan B 925,955 - 1.53% Plan U 1,186,713 - 1.96% Total $ 12.222,849 $ 1,694,079 (C) Pension Liabilities: As of June 30, 2016, OCSD reported net pension liability of$42,439,760 for its proportionate share of OCERS' net pension liability. The net pension liability was measured as of December 31, 2015 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, 2015, OCSD's proportion of the net pension liability was 0.742%, which was a decrease of 0.388% from its proportion measured as of December 31, 2014. The change in OCSD's proportion of the net pension liability during the fiscal year ended June 30, 2016 was caused by the contributions and projections noted above and an additional contribution of $50,000,000 in September 2015 by OCSD to the plan. 36 ORANGE COUNTY SANITATION DISTRICT Notes to Basic Financial Statements For the Year Ended June 30, 2016 (D) Pension Expense and Deferred Outflows/Inflows of Resources Related to Pensions For the year ended June 30, 2016, OCSD recognized pension expense of $14,823,759 for its proportionate share of the pension expense. At June 30, 2016 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 of Resources Resources Difference between expected and actual experience $ - $ 14,164,115 Net difference between projected and actual investment earnings on pension plan investments 33,392,920 - Changes of Assumptions (1) - 8,661,357 Changes in proportion and differences between employer contributions and proportionate share of contributions 2,143,993 214,038 Employer contributions paid to OCERS subsequent to the measurement date 12,551,997 Total $ 48,088,910 $ 23,039,510 (1) The monetary effects of changes in actuarial assunptions and method totals$8,661,357. These changes include: • adjustments to the=daliry tables. • retirement assmrptions for deferred vested members(age at retirement 58,increase of 4.25%in reciprocity,and an increase in compensation increases), • %in the rate of oerriage for«ale and female menters at relienenl or pre-retirement death, • au increase in the Consumer Rice Index of 3.0%per year,maxinumincrease is 3%, • and a slight increase of.50%in salaries per year. Detail for these changes is available in the Segal Actuarial Valuation for Decanter 31,2015,Section 3. This report is available on the OCERS w abate at ww w.ocers.org. The amount $12,551,997 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, 2017. 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 2017 $ 3,730,264 2018 3,730,264 2019 3,730,264 2020 2,339,161 2021 (1,023,092) 2022 (9,458) Thereafter 37 ORANGE COUNTY SANITATION DISTRICT Notes to Basic Financial Statements For the Year Ended June 30, 2016 (E) Actuarial Assumptions and Methods: The total pension liability in the December 31, 2015 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, 2015 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-Temt Expected Real Rate of Return The long-term expected rate of return on pension plan investments was determined using a building-block method in which expected future real rates of return (expected returns, net of 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. 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 31,2015: 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% 38 ORANGE COUNTY SANITATION DISTRICT Notes to Basic Financial Statements For the Year Ended June 30, 2016 (G) Discount Rate: The discount rate used to measure the total pension liability was 7.25% for the year ended December 31, 2015. 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, 2015. (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, 2015 $ 123,781,728 $ 42,439,759 $ (24,490,282) (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 267 retirees. The ARBA plan is not subject to the reporting requirements of GASB 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 20, 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 2%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. 39 ORANGE COUNTY SANITATION DISTRICT Notes to Basic Financial Statements For the Year Ended June 30, 2016 Benefits are determined by hire date, bargaining unit and years of service as follows: Hire date All: Prior to 7/1/88 All: After 7/1/88 OCEA': Before 8/1/11 Benefit amount per $10 per month x years of service up to $10 per month x years of serNce up to year of seMce for a maximum of 25 years a maximum of 25 years normal retirement age Service requirement Age 50 or over with 10 or more years Age 50 or over with 10 or more years Any age with 30 or more years Any age with 30 or more years eligibility 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 Immediately upon retirement insurance coverage ends 'OCEA: AdmnisbaMe,Clerical,Engineering,and Technical services er ployee groups,bargaining unit OCEA. No cost of living adjustment is provided to benefit recipients. At June 30,2016, the following employees were covered by the benefit terms: Inactive Employees or Beneficiaries currently receiving benefits 267 Inactive Employees entitled to but not yet receiving benefits 66 Active Employees 546 Total 879 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$565,380 for the year ended June 30, 2016. Pension Liabilities: As of June 30, 2016, OCSD reported net pension liability of$18,313,122 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. 40 ORANGE COUNTY SANITATION DISTRICT Notes to Basic Financial Statements For the Year Ended June 30, 2016 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, 2015 $ 16,680,614 $ - $ 16,680,614 Changes in the year: Service Cost 270,223 - 270,223 Interest on Total Pension Liability 626,386 - 626,386 Changes of Benefit Terms - - - Changes of Assumptions 1,230,327 - 1,230,327 Benefit Payments(1) (494,428) - (494,428) Net changes 1,632,508 - 1,632,508 Ending Balance at June 30, 2016 $ 18,313,122 $ $ 18,313,122 (1)As part of the July 1,2015 actuarial valuation report,Denney,Filliger 8 Associates prepared a projection of the expected annual cost to the District to pay ARBA benefits. Pension Expense and Deferred Outflows/Inflows of Resources Related to Pension: For the year ended June 30, 2016, OCSD recognized pension expense of $1,019,642 for its ARBA plan. At June 30, 2016 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 $ - $ - ChangesofAssumptions (1) 1,107,294 Net difference between projected and actual investment earnings on pension plan imuestments - - Employer contributions over actuary projections 70,952 Total $ 1,178,246 $ (1)The monetary effects of changes in actuarial assunplions and method totals$1,107,294. These changes include a change in the discount rate from 3.75%as of the valuation date to 3.25%as of the statement data. 41 ORANGE COUNTY SANITATION DISTRICT Notes to Basic Financial Statements For the Year Ended June 30, 2016 The amount of $70,952 reported as deferred outflows of resources related to pensions resulting from OCSD's contributions over actuary projections as of July 1, 2015 valuation date will be recognized as a reduction of the net pension liability in the year ended June 30, 2017. Other amounts reported as deferred outflows of resources related to ARBA pensions will be recognized in pension expense as follows: Year ended June 30 Amount 2017 $ 123,033 2018 123,033 2019 123,033 2020 123,033 2021 123,033 2022 123,033 2023 123,033 2024 123,033 2025 123,033 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 Dale 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- 2014 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 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, 2016 $ 21,203,622 $ 18,313,122 $ 15,972,636 42 ORANGE COUNTY SANITATION DISTRICT Notes to Basic Financial Statements For the Year Ended June 30, 2016 (61 Other Postemolovment 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 (711/15), 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, 2016, premiums ranged between $181 and $3,749 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 2015-16, OCSD contributed $1,176,887 and retirees contributed$785,101 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. The following OPEB cost and net OPEB obligation/(asset) was determined for the year ended June 30, 2016: June 30, 2016 Annual required contribution $ 559,620 Interest on net OPEB obligation (4,373) Adjustment to annual required contribution 6,540 Annual OPEB cost 561,787 Contributions made (1,176,887) Increase (decrease) in net OPEB obligation (615,100) Net OPEB obligation, beginning of year (116,600) Net OPEB obligation/(asset), end of year $ (731,700) 43 ORANGE COUNTY SANITATION DISTRICT Notes to Basic Financial Statements For the Year Ended June 30, 2016 OCSD's annual OPEB cost contributed and the net OPEB obligafion/(asset) for the years ended June 30, 2014, 2015, and 2016 are shown in the following table. Annual OPEB Cost Fiscal Year Annual Actual Percentage of OPEB Net OPEB Ended OPES Cost Contributions Cost Contributed Obligation/(Asset) 6130114 $ 744,667 $ 1,123,961 150.9% $ 204,614 6/30/15 751,430 1,072,643 142.7% (116,600) 6/30/16 561,787 1,176,887 209.5% (731,700) 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 June 30, 2016 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 of the 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 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. 44 ORANGE COUNTY SANITATION DISTRICT Notes to Basic Financial Statements For the Year Ended June 30, 2016 (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, 2016, after recognizing current year amortization of$657,709, the unamortized amount of the excess of purchase price over the assets' book value was$247,730. 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 $2,993,946 were recorded as contribution from other government during the fiscal year ended June 30, 2016. 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 $10,109,089 to Revenue Area 14 were recognized and reported as contributions from other government during the fiscal year ended June 30, 2016. 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, $2,086,136 in annual solids capital handling charges were reported as operating revenue in Consolidated Revenue Area, and $8,393,851 in solids quarterly operating and maintenance charges were reported as operating revenue in Revenue Area No. 14 during the fiscal year ended June 30,2016. 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 $15,949,118 was reported in accounts receivable and due from other governmental agency as of June 30, 2016. Annual Cash Reserve Requirement The rash reserve contribution requirement from IRWD at June 30, 2016; in accordance with Amendment No. 2 to the Agreement between IRWD and OCSD Acquiring Ownership Interests, 45 ORANGE COUNTY SANITATION DISTRICT Notes to Basic Financial Statements For the Year Ended June 30, 2016 Assigning Rights, and Establishing Obligations; is $10.7 million. This cash 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, 2016, OCSD received loan repayments totaling $7,075,547, leaving an outstanding loan receivable balance of $24,005,387 which is included in the due from other governmental agency balance of$24,730,127 on the statement of net position. 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 limeframes and term of the original agreement, to provide for a disbursement of $25 million of accumulated 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 date 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. As of June 30, 2016, no transactions have occurred. 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, 2016, OCSD initialed and completed a project to develop a remediation plan for the contaminated soil. Alternatives were reviewed with the Orange County Health Care Agency, and based upon their feedback a recommended remediation plan was identified. This remediation plan calls for the excavation of 2,400 cubic feet of soil, removal and disposal of contaminated soil, and some limited groundwater treatment. This work is anticipated to begin in the spring of 2017 and be completed by June 30, 2017. As of June 30, 2016, actual costs of $99,904 were incurred. Total remaining costs are estimated not to exceed $6,257,000, including post-remediation monitoring costs for a five-year period and a normal project contingency of 30 percent for the remediation effort. This estimated remaining cost 46 ORANGE COUNTY SANITATION DISTRICT Notes to Basic Financial Statements For the Year Ended June 30, 2016 has been recorded as a current liability as of June 30, 2016, and the total cost of $6,356,904 is reported as an "Other Non-operating expense." 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. (9) Restatement-Adoption of New Accounting Standard During the year ended June 30, 2016, OCSD implemented GASB Statement No. 73. The implementation of GASB Statement No. 73 required to recognize pension expense and report deferred outflows of resources and deferred inflows of resources and unfunded pension obligations related to pensions for its proportionate share of collective pension expenses and collective deferred outflows and inflows for resources. The net position was not restated for deferred inflows and defamed outflows because they were not determinable at the time of implementation of GASB 73. The retroactive effect of implementing this change in reporting pension costs resulted in a restatement of the beginning net position. The following is a summary of the effect of this adjustment: Beginning net position as previously reported at June 30, 2015 $1,761,844,454 Net pension liability (measurement date as of July 1, 2015) (6,840,809) Total adjustment (6,840,809) Net position as restated, July 1, 2015 $1,755,003,645 An amount of $510,427 represents Revenue Area 14's proportionate share of the restatement of the beginning net position and is included in the total restatement at June 30, 2016. The amount is calculated based on Revenue Area 14's average proportionate share of the total salaries and benefits costs over a 15 years period. (10) Subsequent Events As described in Note 8, 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). On August 1, 2016, the local sewers transfer was officially completed. Although the book value of the transferred assets is believed to be insignificant as most of the assets have been fully depreciated; the agreement also provides that the cash reserves previously collected from rate payers and held for the repair and replacement of these local sewers be transferred to the EOCWD. The agreement provides for the transfer of the cash reserves in two installments; the first $25 million was transferred on August 5, 2016 and the remaining balance, estimated to be between $10 and $15 million, will be transferred within six months of the first disbursement following a reconciliation of OCSD's records. 47 (THIS PAGE LEFT INTENTIONALLY BLANK) 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) June 30, 2014 June 30, 2015 June 30, 2016 District's proportion of the net pension liability 3.83% 1.13% 0.74% District's proportionate share of the net pension liability $202,747,516 $ 57,418,760 $ 42,439,759 District's covered-employee payroll (2)(3) $ 58,954,754 $ 68,641,163 $ 69,789,927 District's proportionate share of the net pension liability as a percentage of its covered-employee payroll 343.90% 97.92% 70.98% OCERS'fiduciary net position as a percentage of the total pension liability 63.14% 89.61% 92.74% (1) The amounts presented for each fiscal year were determined as of December 31. Data for fiscal years ended June 30, 2007 through 2013 is not available in a comparable format. (2) Covered payroll represents compensation earnable and pensionable compensation. Only compensation eamable and pensionable compensation that would possibly go into the determination of retirement benefits are included. (3) As directed by OCERS on the December 31, 2015 actuarial valuation report, Segal Consulting used the updated covered payroll provided by OCERS for fiscal year ended June 30, 2014 and June 30, 2015. 50 ORANGE COUNTY SANITATION DISTRICT Schedule of District Contributions Orange County Employees Retirement System (OCERS) Pension Plan Last 10 fiscal Years (1) June 30, 2014 June 30, 2015 June 30, 2016 Contractually required contribution $ 18,920,212 $ 17,201,569 $ 12,222,849 Contributions in relation to the contractually required contribution $ (18,920,212) $ (17,201,569) $ (12,222,849) Contribution deficiency (excess) $ $ $ District's covered-employee payroll (2)(3) $ 58,954,754 $ 58,641,163 $ 59,789,927 Contributions as a percentage of covered-employee payroll 32.09% 29.33% 20.44% (1) The amounts presented for each fiscal year were determined as of December 31. Data for fiscal years ended June 30, 2007 through 2013 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. (3) As directed by OCERS on the December 31, 2015 actuarial valuation report, Segal Consulting used the updated covered payroll provided by OCERS for fiscal year ended June 30, 2014 and June 30, 2015. 51 ORANGE COUNTY SANITATION DISTRICT Net Pension Liability Additional Retiree Benefit Account(ARBA) Last 10 fiscal Years (1) June 30, 2015 June 30, 2016 District's net pension liability $ 16,680,614 $ 18,313,122 District's covered-employee payroll (2) $ 60,025,942 $ 60,695,474 District's net pension liability as a percentage of its covered-employee 27.79% 30.22% payroll (1) The amounts presented for each fiscal year were determined as of July 1. Data for fiscal years ended June 30, 2007 through 2014 is not available in a comparable format. (2) Covered payroll represents compensation eamable and pensionable compensation. Only compensation eamable and pensionable compensation that would possibly go into the determination of retirement benefits are included. 52 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 Funded Covered Percentage of Date" Liability (AAL) Assets AAL (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 - 10,650,711 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. 53 (THIS PAGE INTENTIONALLY LEFT BLANK) 54 ORANGE COUNTY SANITATION DISTRICT SUPPLEMENTARY INFORMATION 55 ORANGE COUNTY SANITATION DISTRICT Combining Area Schedule of Net Position June 30,2016 Revenue Consolidated Totals Area No.14 Revenue Area Eliminations 2016 Current assets: Cash and cash equivalents $ - $ 125,552,927 $ - $ 125,552,927 Investments - 394,422,940 - 394,422,940 Accounts receivable,net of allowance for uncellectibles$98,917 10,178,839 9,186,327 - 191 Accrued interest receivable - 1,492,193 - 1,492,193 Connection fees receivable - 2,982,914 - 2,982,914 Properly tax receivable - 1,060,830 - 1,060,830 Inventories - 6,853,403 - 6,853,403 Due from other revenue area - 14,864,096 (14,864,096) - Duefromothergovernmentalagency 5,770,279 - - 5,770,279 Prepaid expenses 1,464,651 1,464,651 Total current assets 15,949,118 557,880,281 (14,864.096) 558,965,303 Noncurrent assets: Restricted: Cash and cash equivalents - 10,394,727 - 10,394,727 Investments - 14,442,500 - 14,442,500 Accrued interest receivable - 218,957 - 218,957 Unrestricted: Non-depreciable capital assets 11,913,218 503,422,400 - 515,335,618 Depreciable capital assets,net of accumulated depreciation 59,455,604 1,994,649,657 - 2.054,105,261 Prepaid insurance on outstanding debt payable - 182,452 - 182,452 Due from other governmental agency - 24,730,127 - 24,730,127 Net OPEB asset 731,700 731,700 Other noncurrent assets,net 10,344 10,344 Total noncurrent assets 71,368,822 2,548,782,884 2,620,151,686 Total assets 87,317,940 3,106.663,145 (14,W.0%) 3.179,116,989 Deferred outflows of resources: Deferred losses on defeasances - 41,494,547 - 41,494,547 Deferred outflows related to pensions 1,507,404 47,759,752 49,267,156 Total deterred outflow of resources 1,507,404 89.254,299 90,761,703 Total assets and deferred outflows of resources 88,825,344 3,195,917,444 (14,864,096) 3,269,878,692 Current liabilities: Accounts payable - 9,523,100 - 9,523,100 Accrued expenses - 15.610,020 - 15,610,020 Due to other revenue area 14,864,096 - (14,864,096) - Retentions payable - 5,067,902 - 5,067,902 Interest payable - 18,107,550 - 18,107,550 Current portion of long-term obligations 54,010,437 54,010,437 Total current liabilities 14,864,096 102,319,009 (14,864,096) 102,319,009 Noncurrent iabilities: Noncurrent portion of long-tens obligations - 1,165,194,834 - 1,165,194,834 Net pension liability 1,887.417 58,865,465 60,752,882 Total noncurrent liabilities 1,887,417 1,224.060,299 1,225,947,716 Total liabilities 16,751,513 1,326.379,308 (14,864.096) 1.328,266,725 Deferred inflows of resources: Deferred inflows related to Pensions 705,009 22,334,501 23,039,510 Total liabilities and deferred inflows of resources 17,456,522 1,348,713,809 (14,864.096) 1.351,306,235 Net position: Net investment in capital assets: Collection system 17,816,698 510,923,329 - 528,740,027 Treatment and disposal-land 406,846 4,01 - 4,475,751 Treatment and disposal system 53,145,278 1,983,079,823 - 2,036,225,101 Capital assets related debt (1140,171,616) (1,140,171616) Subtotal 71,368,822 1,357,900,441 - 1.429,269,263 Unrestricted: 489,303,194 489,303,194 Total net position $ 71,368,822 $ 1,847,203,635 $ $ 1,918,572,457 56 ORANGE COUNTY SANITATION DISTRICT Combining Area Schedule of Revenues, Expenses,and Changes in Net Position For the Year Ended June 30, 2016 Revenue Consolidated Totals Area No. 14 Revenue Area 2016 Operating revenues: Service charges $ 11,408,052 $ 303,069,381 $ 314,477.433 Permit and inspection fees 13,703 937,099 950,802 Total operating revenues 11,421,755 304,006,480 315,428,235 Operating expenses other than depreciation and amortization: Salaries and benefits 2,053,300 73,523,032 75,576,332 Utilities 231,430 7,014,183 7,245,613 Supplies, repairs and maintenance 1,196,952 24,123,781 25,320,733 Contractual services 8,922,101 18,901,795 27,823,896 Feasibility studies 233,952 9,176,774 9,410,726 Other 436,025 7,687,603 8,123,628 Total operating expenses other than depreciation and amortization 13,073,760 140,427,168 153,500,928 Operating income(loss)before depreciation and amortization (1,652,005) 163,579,312 161,927,307 Depreciation and amortization 2,971,121 87,531,221 90,502,342 Operating income(loss) (4,623,126) 76,048,091 71,424,965 Non-operating revenues: Property taxes 2,439,960 81,967,169 84,407,129 Investment and interest income 3,397 9,179,410 9,182,807 Contributions from other government 13,103,035 - 13,103,035 Other 10,037 1,545,403 1,555,440 Total non-operating revenues 15,556,429 92,691,982 108,248,411 Non-operating expenses: Interest 122,831 27,474,100 27,596,931 Pollution remediation 168,554 6,188,350 6,356,904 Other 2,145 78,505 80,650 (Gain)loss on disposal of assets (3,389) 47,510 44,121 Total non-operating expenses 290,141 33,788,465 34,078,606 Income before capital contributions 10,643,162 134,951,608 145,594,770 Capital contributions: Capital facilities capacity charges 17,974,042 17,974,042 Change in net position 10,643,162 152,925,650 163,568,812 Total net position-beginning,as restated 60,725,660 1,694,277,985 1,755,003,645 Total net position-ending $ 71,368,822 $ 1,847,203,635 $ 1,918,572,457 57 ORANGE COUNTY SANITATION DISTRICT Combining Area Schedule of Cash Flows For the Year Ended June 30,2016 Revenue Consolidated Totals Area No.14 Revenue Area Eliminations 2016 Cash flows from operating activities: Receipts from customers and users $ 7,467,404 $ 284,428,020 $ - $ 291,895,424 Payments to employees (3,352,792) (115,364,198) - (118,716,990) Payments to suppliers (11,016.650) (72,854,954) (83,871,604) Net cash provided by(used in)operating activities (6,902,038) 96,208,868 89.306,830 Cash flows from noncapital financing activities: Proceeds from property taxes 2.439.960 82,027,897 - 84,467,857 Payments for pollution remediation and other obligation (160.212) (4,721,453) (4,881,665) Net cash provided by noncapital financing activities 2,279,748 77,306,444 79.586,192 Cash flows from capital and related financing activities: Capital facilities capacity charges - 15,609,869 - 15,609,869 Additions to capital assets (13,100.917) (112,637,166) 2,721,549 (123.016,534) Disposal of capital assets - (10,381,486) 10.381,486 Interest paid (122,831) (51,415.500) - (51,538,331) Principal payments on debt obligation - (29.405.000) - (29,405,000) Proceeds released to escrow account on defeased debts (162,780,000) - (162.780,000) Proceeds from debt issuances - 155,481,198 - 155.481,198 Debt issuance costs - (834,338) - (834,338) Contribution from other government 13,103,035 (13,103,035) Net cash used in capital and related financing activities (120713) (196,362,423) (196,483,136) Cash flows from investing activities: Proceeds tram the sale of investments 4,211,888 385,081,369 - 389.293,257 Purchases of investments - (313,097,922) - (313.097,922) SARI project payments - 6.350,808 - 6,350,808 Interest received 3,398 6,625.029 6,628,427 Net cash provided by investing activities 4,215,286 84,959,284 89.174,570 Net Increase(decrease)In cash and cash equivalents (527,717) 62,112,173 - 61,584,456 Cash and cash equivalents,beginning of year 527717 73,835,481 74,363,198 Cash and cash equivalents,end of year $ $ 135,947,654 $ $ 135,947,654 Reconciliation of operating income(loss)to net cash provided by(used in)operating activities: Operating income(loss) $ (4,623,126) $ 76,048,091 $ - $ 71,424,965 Adjustments to reconcile operating income(loss) to net cash provided by operating activities: Depreciation and amortization 2,971.121 87,531.221 - 90,502,342 Bad debt expense(net recoveries) - 66,073 - 66,073 (Incresseydecrease in operating assets: Accounts receivable (10,178,839) (4,714,364) - (14,893,203) Inventories - (109.855) - (109,855) Prepaid and other assets - (247,567) - (247,567) Increasegdecrease)in operating liabilities: Accounts payable - (14,513,135) - (14,513,135) Accrued expenses - 6.524,017 - 6,524,017 Due to other governmental agency 6,224,488 (14,864,096) - (8,639,608) Net pension liability (1,295,682) (31,351.389) - (32,647,071) Pension/OPEB/accrued leave payable - (10,454,905) - (10,454,905) Compensated absences - 186,736 - 186,736 Other payable - 87,581 - 87,581 Claims and judgments 2.020,460 2,020,460 Net cash provided by(used In)operating activities $ (Q902,038) $ 96,208,868 $ $ 89,306,830 Noncash activities: Unrealized gain on the fair value of investments $ - $ 2,533,731 $ - $ 2,533,731 Receivable from non operating activities - 2.771,980 - 2,771,980 Capital assets acquired through accounts payable - 4,577,212 - 4,577,212 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 $2,000,000 $1,800,000 $1,600,000 $1,400,000 $1,200,000 $1,000,000 $800,000 $600,000 $400,000 $200,000 $0 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 ONet investment in capitalAssets ■Restnctetl for DebttSe Sernce&Capital Acquisition OUnrestrictetl Restricted for Debt Service Net Investment In &Capital Fiscal Year Capital Assets Acquisition Unrestricted Total Net Position 2006-07 $ 886,463 $ 3,904 $ 299,370 $1,189,737 2007-08 B47,426 - 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 t'1 2012-13 1,180,298 - 520,427 1,700,725 2013-14 1,204,706 - 617,589 1,822,295 2014-15 1,327,394 - 434,460 1,761,844 (sl 2015-16 1,429,269 - 489,303 1,918,572 tat I'1 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 GASS 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 $5o,00o $25,000 $o -$25,000 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 GOperating Revenue ■Non-Opeating Revenue SCapital Contributions Operating Revenue Non-Operating Revenue Permit R Total Fiscal Service Inspection Total Property Non- Capital Year Charges Fees Operating Taxes Interest Other Operating Contributions 2006-07 $ 167,790 $ 1,866 $ 169,656 $ 60,565 $ 22,244 $ 1,068 $ 83,877 $50,207 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 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 $50,000 $25,000 $0 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 201&14 2014-15 201516 ■Operating Expense ■Non-Opeating Expense Operating Expense Non-Operating Expense Fiscal Salaries& Maint& Depr& Total Interest Total Non- Year Benefits Utilities Other Amort Operating Expense Other Operating 2006-07 $ 57,802 $ 8,072 $ 46,281 $ 53,111 $ 165,266 $ 21,747 $ 16,089 $ 37,836 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 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 $2,000,000 $1,800,000 $1,600,000 $1,400,000 $1,200,000 $1,000,000 $800,000 $600,000 $400,000 $200,000 $0 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 Ending Net Position by Fiscal Year Fiscal Total Total Changein Beginning Ending Year Revenues Expenses Net Position Net Position Net Position 2006-07 $303,740 $ 203,102 $100,638 $1,089,099 $ 1,189,737 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 01 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 (11 Beginning net position restated due to implementation of GASS 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 DistricPs 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 2006-07 $ 132 $ 57 $ 104 $ 79 $ 372 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 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 through the year 2020. 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 2007-08 $ 182.00 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 Annual Sewer Service Fees Single Family Residence 400 350 u 300 LL 250 Q� 200 K y 150 100 50 0 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 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 2006-07 $ 871,586 $ 144.5 92% 531 $ 13.4 8% 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% $350,000,000 $300,000,000 $250,000,000 $200,000,000 $150,000,000 Pi $100,000,000 $50,000,000 $0 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 ■Residential/Commercial Users ■Industrial Users Source: Orange County Sanitation District's Financial Management Division. 66 ORANGE COUNTY SANITATION DISTRICT Principal Sewer Service Customers For the Prior Fiscal Year and Nine Years Ago Fiscal Year Ended 6130115 Fiscal Year Ended 6130107 Industrial Industrial Permittee %to Total Pennittee %to Total Service Service Charge Service Service Charge Customer Charges Rank Revenue Charges Rank Revenue House Foods America Corp. $ 1,055,843 1 0.359/6 $ 410,059 7 0.24% Kimberly-Clark Worldwide, Inc. 1,047,510 2 0.35% 1,114,920 1 0.66% Stremicks Heritage Foods, LLC 811,061 3 0.27% 974,474 3 0.58% MCP Foods, Inc. 738,346 4 0.24% 921,317 4 0.55% Pulmuone Wildwood, Inc. 571,057 5 0.19% Jazz Semiconductor 521,890 6 0.17% Amerlpec Inc. 517,583 7 0.17% 278,478 10 0.17% Nor-Cal Beverage Co. Inc(NCB) 461,589 8 0.15% Alta Dena Certified Dairy, LLC 457,496 9 0.15% Nor-Cal Beverage Co. Inc(Main) 387,579 10 0.13% Alstyle Apparel-A&G Inc. 1,049,362 2 0.63% Disneyland Resort 791,747 5 0.47% Disneyland Resort--DCA 567,485 6 0.34% Pepsi-Cola Bottling Group 374,306 8 0.22% Seven-Up Bottling Company 335,178 9 0.20% $ 6,5 99,954 2.17% $ 6,817,326 4.06% 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% 2006-07 200708 2988-09 2909-10 2010-11 2011-12 2012-13 2013-14 2014-15 291516 Ratio of Debt Total Service to Total Fiscal Principal Total Debt Operating Operating Year (1) Interest Service(3) Expenses(2) Expenses 2006-07 $ 13,465 $ 32,673 $ 46,138 $ 112,155 41.14% 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 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 Distinct 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 2,50 2,00 1.50 1.00 0.50 2006-07 2007-08 200T09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-16 2016-16 Fiscal Year Ending June 30, M07 2008 20M 2010 oil 2012 2013 M14 2015 2016 Operating 8 Nonopereting Revenues: Service Charges,Net of Refunds-Regional $ 144.5 $ 160.2 $ 178.3 $ 194.5 $ 214.3 $ 233.4 $259.8 $ 269.0 $ 2WE $ 278.0 Service Charges,Net of Refunds-Local - - 5.6 5.6 5.7 5.7 5.8 5.7 5.5 5.7 Industrial Sewer service Charges 13.4 12.1 9.9 10.8 10.1 9.5 10.8 14.4 14.2 12.6 SAWPA Assessment 4.2 4.4 3.7 6.5 4.8 3.5 2.7 2.3 2.7 3.1 IRWDAssessment 6.2 8.2 10.3 10.3 21.4 18.0 27.2 22.1 28.6 29.1 Ad valorem Taxes 58.9 63.3 64.2 62.6 62.4 %.a 77.3 72.8 7).6 82.0 Interest Earnings 22.1 20.2 14.4 17.8 8.9 13.9 (3.6) 6.1 4.8 9.2 Other Revenues 4.2 2.5 3.8 8.5 3.0 2.6 3] 3.1 3.2 4A Total Revenues 253.5 270.9 290.2 316.6 330.6 352.6 383.7 395.5 397.1 423.7 Operating Expenses(1) 112.2 131.9 164.6 136.1 143.4 1M.3 149.8 146.4 149.2 153.5 Net Revenues $ 141.3 $ 139.0 $ 125.6 $ l7&5 $ 187.2 $ 180.3 $233.9 $ 249.1 $ 247.9 $ 270.2 Debt Service Requirements Principal Payments 13.5 11.0 21.3 24.0 25.9 14.4 24.0 39.6 27.9 29.4 Interest Payments 35.3 31.8 36.3 43.1 46.5 51.0 53.6 53.2 53.6 50.3 Total Debt Service Requirements $ 48.8 $ 42.8 $ 57.6 $ 67.1 $ 72.4 $ 65.4 $ 77,6 $ 92a $ 81.5 $ 79.7 Coverage Ratios 2.90 3.25 2.18 2.66 2.59 2.76 3.01 268 3.04 3.39 Ending Reserves(2) $ 293.0 $ 425.0 $ 401.0 $ 344.0 $ 420.0 $ 439.0 $465.0 $ 542.0 $ 428a $ 428.0 Notes 11)-Operating expenses exclude depreciation and amorUcatlon expenses. (2)-Excludes debt service reserves In accordance with the rathers reserve policy. Source:Orange County Sanitation Districts Financial Management Division. 69 ORANGE COUNTY SANITATION DISTRICT Computation of Direct and Overlapping Debt June 30,2016 Total Debt District's Share 613012016 %Applicable ltl of Debt W30116 OVERLAPPING TAX AND ASSESSMENT DEBT Eased on all chmertv assessed valuation of$374 550 262 458) Metropolitan Water Dlddct of Southern Callfomia $ 92,865,000 15,265% $ 14,115,842 Coast Community College District 498,864,504 99.358 495,661,794 North Orange County Joint Community College District 271,561 97A59 264,663,560 Rancho Santiago Community College District 332.292,899 98S91&101 329,615,051 Brea-Olinda and Laguna Beach Unified School Districts 42,639,029 99,983&14,923 20,439,627 Garden Grove Unified School District 240,640,160 100.000 240,640,160 Las Alamitos Unified School District School Facilities Improvement Could No,1 100,90,124 91 97,20,856 Newport Mesa Unified School District 224,859,150 100.000 224,859,150 Placenw-Vorba Linda Unified School District 246]99,202 98,952 244,212,746 Rowland Unified Schad Deli 252,439,843 0.147 371,087 Saddleback Valley United School District 117,270,000 11.592 13,593,938 Santa Ana Unified Street District 274,001,882 100.000 274,001,882 Tustin Unified School District School Facilities Improvement District No.2002-1 48,068,292 99.956 48,047,142 Tustin Unified School DisMct School Facilities Improvement District No.2008-1 90,085,000 99.955 90,044,462 Tustin Unified School District School Facilities Improvement District No.2012-1 29,630,000 99.970 29,821,051 Anaheim Union High Schod District 14418031955 100.000 14418031955 Fullerton Joint Union High School District 88,W1,910 91,652 81.458,382 Huntington Beach Union High Schad Deal 198,629,998 99.037 196,717,191 School Districts 445,237,392 9].]71-100.000 444,701,163 Cilvof Anaheim 700,000 99.203 61 Irvine Ranch Water Distinct Improvement plunder 4891 Various 433,299,544 Ransomer Community Services Deal Special Tax Obligations 156000 100.000 156000 Bonita Canyon Community Families District No.98-1 33,335,000 100.000 33,335,000 Irvine Unified School District Community Facilities Districts 619,423,023 100.000 619,423,023 Tustin Unified School District Community Facilities Diduc s 238.53Q000 100.000 238,530,000 Coy of Tustin Community Facilities Districts 103,590,000 100.000 103,59Q000 Other Community Facilities Districts 367,8]],991 99.993-100.000 36],9]],01] Orange County Assessment Districts 68,430,000 100.000 68,430,000 City of lrece 1915 Ad Bonds 846.435,000 100.000 846,436,000 Other 1915 Act bonds 12,829,270 100.000 12,829.2 TOTAL OVERLAPPING TAX AND ASSESSMENT DEBT $5,979,718,414 DIRECT AND OVERLAPPING GENERAL FUND DEBT Orange County General Fund Obligations $ 124,614,000 75.056% $ 93,530,284 Orange County Pension Obligation Bonds 353,417,058 75.056 265,261,308 Orange County Board of Education Certificates of Participation 14,840,000 75,056 11,138,310 Coast Community College Disinct Certificates of Participation 3,765,000 99.358 3,74g829 Brae-Ofinda Unified School District Certificates of Participation 20,035,000 99.983 20,031,594 Orange Unified School District Certificates of Participation and Benefit Obligations 110,802,063 97.912 10 ,488,516 Plecentia-Vorba Linda Unified School District Certificates of Participation 99,075,355 96.952 98,037,045 Saute Ana Unified School District Certificates of Participation 70,982,229 10(1 70,982,229 Other Unified Strool District Certificates of Participation 57,193,327 Various 50,732,736 Union High School District CMlficates of Padiclpatlon 9o,136,090 Various 81.800,458 School District CeMOcates of Participation 102,993,805 Various 102,564,395 City of Anaheim General Fund Obligations 662,117p65 99.203 656940,399 City of Costa Mesa General Fund Obligations 23,25(1 100.000 23,250,000 City of Garden Grove General Fund Obligations 24,010,000 100.000 24,010,000 City of Huntington Beach General Fund and Judgment Obligation Bonds 52,00 ,382 96.739 51,344,657 City of La Habra General Fund Obligations 22,60),000 100.000 22,a0Q000 City of Santa Ana General Fund Obligations 66,082,500 100.000 66,082,500 Other City General Fund Obligations 207,653,812 Various 191 Orange County Sanitation District 0 100.000 0 (2) Municipal Water District of Orange County Water Facilities Corporation 2,770,000 70,32 1947860 TOTAL GROSS OVERLAPPING GENERAL FUND DEBT $1,948.828,563 Less: City of Anaheim supported obligations 656,M,389 MWDOC Water Facilities Corporation(100%supported) 1.947.864 TOTAL NET OVERLAPPING GENERAL FUND DEBT $1,290,040,310 OVERLAPPING TAX INCREMENT DEBT: $1,121,2]8,44] 99801-100.000% $1,116,297,606 TOTAL DIRECT DEBT $0 GROSS OVERLAPPING&COMBINED TOTAL DEBT $9,044,844,583 (3) NET OVERLAPPING&COMBINED TOTAL DEBT $0 386 056,330 (1) The percentage of avedapping debt applicable to the district is estimated using taxable assessed propeM value. Applicable percemages were estimated by determining the pMlm of Me ovedapping d inner.assessed value that is within the boundaries 0 the sanitation distinct divided by Ire district's total taxable assessed value. (2) Excludes wastewater revenue cedificdes of participation. Pre0oudyclasitedcedi(Wd o(padcipadonhevebeenr lass?Wesdistnctrevenuesuppodedissues and are no forger Induced as dead debt in Me debt statement. (3) Excludes tax and revenue anticipation notes,awriewe revenue,mortgage revenue and non-bonded capital lease obligations.Qualified Zane Academy Banda are inclutletl based on principal due at memory. Taal Ovedapping Tax Gross Combined Net Combined Total Overapping Rados to: and Assessment Debt Total Debt Total Debt Tax Increment Debt Land and Improvement Assessed Valuation ($3]A204,61],889) 181% 243% 225% All Property Assessed Valuation ($3]4,55Q26$458) 241% 2.24% Redevelopmentlncremental Valuation ($49,887,609,411) 2.24% 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 2006-07 $ 801,389,769 $ 78,700 0.010% 2,505,180 319.89 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 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) 2006-07 229 1,268.38 $ 165,266 $ 37,836 $ 169,656 $ 83,877 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 Total expenses in FY 2015-16 increased $74.9 million, or 36.9 percent since FY 2006-07, primarily as a result of 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. Maintenance, chemicals, utilities, and other operating costs represent 31.4 percent of the increase, primarily due to the increase in the levels of treatment referred to above. Depreciation expense represents another 49.9 percent of the increase as a result of the previous expansion in capital facilities and the financing associated with the expansion. In FY 2015-16, personnel expenses decreased 5.1 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 two years.The full-time equivalent positions authorized have not changed in FY 2015-16. As depicted from the chart above, actual wastewater treatment Flows were 229 mgd in FY 2006-07. Due to unusual dry weather conditions during the last several years due to California's record-breaking drought, FY 2015-16 had flows of only 183 mgd, a decrease of 46 mgd or 20%since FY 2006-07. 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 50 -ail 0 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 GGeneml Management(1) ■Human Resources (2) DMministmlive Services (2) ■Facilities auppon Services sTechnicel Services •Engineering •Operations and Maintenance Fiscal Year Ending June 30, 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 General Management(1) 25 26 26 13 13 13 12 12 14 15 Human Resources (2) 19 16 16 17 27 17 16 18 16 27 Administrative Services (2) 83 82 81 92 85 111 111 110 111 98 Facilities Support Services 51 57 68 71 70 84 81 78 76 63 Technical Services 119 109 107 105 102 - - - - - Engineering 98 93 98 96 112 128 125 123 123 127 Operations and Maintenance 249 247 241 245 230 281 281 283 284 294 Total FTE's 644 630 637 639 639 634 626 624 624 624 Notes (1)- Management Discretion positions used on a temporary basis have been excluded from FTE count. (2)- Beginning in 2016, Risk Management moved from Administrative Services to Human Resources Department. 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 A] 011ie] III] if 1111 so,000 2006-07 2007-08 2000-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 oWet Tonnage •Dry Tonnage Fiscal Year Wet Tonnaae Dry Tonnace 2006-07 236,460 49,184 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 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) 2006-07 581 16 376 200 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 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(1) 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 2006-07 3,090,000 $ 153,446,641 (3) $ 49,659 $ 78,700 503,955 3.9% 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 3,056,000 164,971,000 (4) 53,983 85,300 502,195 7.9% 2012-13 3,082,000 165,858,000 (4) 53,815 84,100 501,801 6.1% 2013-14 3,114,000 173,306,000 (4) 55,654 84,900 500,487 5.2% 2014-15 3,148,000 181,496,000 (4) 57,654 85,900 497,116 4.3% 2015-16 3,183,000 190,978,000 (4),(s) 59,999 85,000 493,030 4.4% 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: 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, 2016 Population as of January 1,2016 Anaheim 358,136 Brea 43,710 Buena Park 83,347 Costa Mesa 114,603 Cypress 49,743 Fountain Valley 56,714 Fullerton 142,457 Garden Grove 177,303 Huntington Beach 195,212 Irvine 258,386 La Habra 62,064 La Palma 16,057 Los Alamitos 11,738 Newport Beach 84,270 Orange 141,420 Placentia 52,263 Santa Ana 342,930 Seal Beach 25,078 Stanton 39,751 Tustin 82,717 Villa Park 5,948 Westminster 94,073 Yorba Linda 67,637 Subtotal Cities I'I 2,505,557 Estimated Population Served in Unincorporated Areas(2) 73,124 2,578,681 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 Prior Fiscal Year and Nine Years Ago Fiscal Year Ended 6130/15 Fiscal Year Ended 6130107 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. 27,000 1 1.76% 20,000 1 1.30% University of Califomia, Irvine 22,385 2 1.46% 17,579 3 1.15% County of Orange 18,135 3 1.18% 18,301 2 1.19% St.Joseph Health System 12,227 4 0.80% 10,047 4 0.65% Kaiser Permanents 7,000 5 0.46% Boeing Co. 6,890 6 0.45% 9,961 5 0.65% Walmart 6,000 7 0.39% Memorial Care Health System 5,650 8 0.37% Bank of America Corp. 5,500 9 0.36% 5,000 10 0.33% Target Corp. 5,400 10 0.35% Yuml Brands Incorporated 7,200 6 0.47% AT&T Incorporated 6,000 7 0.39% California State University, Fullerton 5,634 8 0.37% Home Depot, Incorporated 5,450 9 0.36% Total 116,187 7.58% 105,172 6.86% 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 1,530,800 as of June 2015. (4)-Data Source:State of California, Employment Development Department. -Percentage is calculated by dividing employees by total employment of 1,535,200 as of June 2007. 78 ORANGE COUNTY SANITATION DISTRICT Operating Indicators June 30, 2016 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: 624 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): 570 miles Number of Pumping Stations: 17 Wastewater System Treatment Capacities (Million Gallons per Day) Actual Flows Existing Primary Existing Secondary FY15-16 Treatment Capacity Treatment Capacity Plant 1 117 208 182 Plant 2 66 168 150 Total 1$3 376 332 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 30,2016 Net Umealized Cost Market Value GaIN(Loss) Shares Par Base Base %of Total Base INVESTMENT PORTFOLIO: CASH&CASH EQUIVALENTS(U.S.DOLLAR): CASH EQUIVALENTS $ 68,128 $ 104,813 $ 28,784 0.01% $ (76,029) COMMERCIAL PAPER-DISCOUNT 17,520,000 17,468,517 17,468,517 4.03% - FEDERAL HOME LOAN BANK-1 YR OR LESS 21,497,000 21,483,725 21,483,725 5.95% - FEDERAL HOME LOAN MORTGAGES-1 YR OR LESS 2,500,000 2,498,340 2,498,340 3.19% - FNMA ISSUES-1 YR OR LESS 3,350,000 3,348,299 3,348,299 2.12% - SHORTTERMINVESTMENTFUNDS(US REGULATED) 4,148,544 4,148,544 4,148,544 0.85% - SUPRANATIONAL-1 YR OR LESS 8,000,000 7,994,944 7,994,944 0.85% - U.S.TREASURY BILLS-1 YR OR LESS 50,100,000 50,079,810 50,079,810 0.85%PENDING TRADES 17 17 0.00% SUBTOTAL-CASH&CASH EQUIVALENTS 107.183,672 107,127,009 107,050,980 22.56% (76,029) FIXED INCOME SECURITIES(U.S.DOLLAR): ABS-CARLOANS 14,403,804 14,392,765 14,423,393 2.89% 30,628 ABS-CREDIT CARDS 2,500,000 2,499,121 2,501,675 1.91% 2,554 ABS-EQUIPMENT 6,038,061 6,039,376 6,048,462 1.48% 9,086 ABS-HOME EQUITY 133,743 100,433 123,945 0.05% 23,512 ABS-SMALL BUSINESS ADMINISTRATION 91,130 91,130 98,476 0.01 7,346 ABS-STUDENT LOANS 39,606 39,444 39,579 0.01% 135 BANKING&FINANCE 47.370,000 48,331,527 46,565,079 11.69% (1,766,448) CAPITAL GOODS 6,000,000 6,022,240 6,163,710 0.21% 131,470 FHLMC MULTICLASS 2,012,372 2,203,581 2,304,333 0.02% 100,752 FHLMC POOLS 2,532 2,470 2,620 0.51% 150 FNMA POOLS 1,810,382 1,894,260 1,987,884 0.01 93,624 FNMA REMIC 456,018 452,916 459,233 0.54% 6,317 FOOD BEVERAGE&TOBACCO 1,500,000 1,507,165 1,502,475 0.15% (4,690) GNMA MULTI FAMILY POOLS 251,656 251,729 261,598 0.38% 9,869 GNMA REMIC 38,571 38,571 38,770 0.07% 199 HEALTHCARE 4,000,000 4,009,675 4,093,840 0.01% 81 INSURANCE 1,000,000 1,014,170 1,001,860 1.14% (12,310) OIL&GAS %W0,000 9,476,387 9,651,455 0.11% 175,068 SUPRANATIONAL ISSUES 20,000,000 20,036,795 20,052,875 1.51% 16,080 TAXABLE MUNICIPALS 4,240,000 4,307,634 4,761,833 0.23% 451 TECHNOLOGY 14,000,000 14,063,785 14,270,020 0.43% 206,235 U.S.TIPS 10,477,896 10,360,612 10,583,199 2.T1% 222,687 US AGENCIES 105,672,000 105,573,002 106,777,003 2.12% 1,204,001 US GOVERNMENTS 110,894,000 110,856,378 112,263,232 1."% 1,401 UTILITY-TELEPHONE 1,000,000 1,002,660 1,002,480 2.84% (180) WHOLE LOAN-CMO-COLLATERALIZED MTG OBLIG 450,940 450,938 451,039 0.12% 101 SUBTOTAL-FIXED INCOME SECURITIES 363,882,710 365,017,764 367,420,068 71.44% 2,402,304 TOTAL INVESTMENT PORTFOLIO $ 471,066,382 472,144,773 474,471,048 100.00% $ 2,326,275 DEMAND DEPOSITS AND CASH ON HAND (423,695) (423,695) MONIES HELD WITH FISCAL AGENTS 24,837,227 24,837,227 MONIES WITH THE LOCAL AGENCY INVESTMENT FUND 45,900,000 45,928,614 TOTAL CASH AND INVESTMENTS $ 542,458,305 $ 544,813,094 Source: BNY Mellon Trust and Orange County Sanitation Disaids 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 2006-07 1.00% 0.00% 1.00% 1.65% 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% 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 1111110,011 as0,aoo 000 moo00o0 az5oo0o 000 EIOO,000000 a 15oUOUDD 110,00001, 2006-07 2007-06 2008-09 2009-10 20ID-11 2011-12 2012-13 2013-14 201445 2015-16 es0wr0a oo060r.0r0a Percent Changein Fiscal Assessed Year Secured Unsecured Total Value 2006-07 $ 264,241,033 $ 6,452,111 $ 270,693,144 11.93% 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% 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 respell 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 $- 2006-0T 2007-08 2006-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 Drool Tm and uw,Fee Lr Root Taa and uw,Fe..1.0.n (1) Total Tax Current Tax Percent Total Tax %of Total Y of Pass. Fiscal and User and User Fee of Levy Delinquent and User Fee Collection O/S Delinquencies Through Year Fee Levy Collection Collected Collection Collection to Levy Delinquencies to Levy Payments 2006-07 $209,766 $ 209,206 99.73 $ 215 $ 209,421 99.84 $ 560 0.27 $ - 2001-08 228,622 228,635 100.01 329 228,964 100.15 (13) (0.01) - 2008-09 254,092 254,106 100.01 395 254,501 100.16 (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) 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 201415, the County stopped billing 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$4.5 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) 2006-07 $ 381,007,391 2007 $ 2,005,198 7,072 $ 1,792,270 $ 3,797,468 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 1,987,903 11,510 2,935,626 4,923,529 2015-16 504,650,360 2016 2,311,910 11,859 3,068,285 5,380,195 (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, 2016 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 f VV iXE ORANGE COUNTY SANITATION DISTRICT FINANCIAL MANAGEMENT DIVISION 10844 Ellis Avenue Fountain Valley, California 92708-7018 714.962.2411 www.ocsewers.com 06/30/16 ADMINISTRATION COMMITTEE Meeting Date To Bd.of Dir. 11/09,16 -- AGENDA REPORT Item Number 1em Number Orange County Sanitation District FROM: James D. Herberg, General Manager Originator: Ed Torres, Director of Operations and Maintenance SUBJECT: ORANGE COUNTY SANITATION DISTRICT TREATMENT PLANT OVERVIEW GENERAL MANAGER'S RECOMMENDATION Information Only. BACKGROUND Each month, staff provides an informational presentation on topics of interest to the Board of Directors. This month's topic is an overview of the Orange County Sanitation District's Treatment Plant. RELEVANT STANDARDS • Protection of Orange County Sanitation District assets ATTACHMENT The following attachment(s) may be viewed on-line at the OCSD website (wwwocsd.com) with the complete agenda package: N/A Page 1 of 1 ADMINISTRATION COMMITTEE Meeting Date To Bd.of Dir. 11/09,16 -- AGENDA REPORT Item Number 1em Number 8 Orange County Sanitation District FROM: James D. Herberg, General Manager Originator: Lorenzo Tyner, Director of Finance and Administrative Services SUBJECT: ORANGE COUNTY SANITATION DISTRICT SEWER SERVICE CHARGES - REBATES GENERAL MANAGER'S RECOMMENDATION Information Only. BACKGROUND Staff will provide an informational presentation on the application process to the Orange County Sanitation District for a rebate of paid Sewer Service Charges. RELEVANT STANDARDS • Orange County Sanitation District Ordinance No. OCSD-46 ATTACHMENT The following attachment(s) may be viewed on-line at the OCSD website (wwwocsd.corn with the complete agenda package: N/A Page 1 of 1 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 CARB 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 U.S. Environmental Protection Agency FOG Fats, Oils, and Grease gpd Gallons per day GWR System Groundwater Replenishment System (also called GWRS) ICS Incident Command System IERP Integrated Emergency Control 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 and Maintenance OCCOG Orange County Council of Governments OCHCA Orange County Health Care Agency OCSD Orange County Sanitation District OCWD Orange County Water District COBS Ocean Outfall Booster Station OSHA Occupational Safety and Health Administration PCSA Professional Consultant Services Agreement POTW Publicly Owned Treatment Works ppm Parts per million PSA Professional Services Agreement RFP Request For Proposal Glossary of Terms and Abbreviations RWQCB Regional Water Quality Control Board SARFPA Santa Ana River Flood Protection Agency SARI Santa Ana River Inceptor SARWQCB Santa Ana Regional Water Quality Control Board SAWPA Santa Ana Watershed Project Authority SCADA Supervisory Control and Data Acquisition system SCAP Southern California Alliance of Publicly Owned Treatment Works SCAQMD South Coast Air Quality Management District SOCWA South Orange County Wastewater Authority SRF State Revolving Fund SSMP Sanitary Sewer 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 WERF Water Environment Research Foundation WIFIA Water Infrastructure Financing and Innovation 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. Blogas — 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 farm land or further processed as an earth-like product for commercial and home gardens to improve and maintain fertile soil and stimulate plant growth. 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. coil are the most common bacteria in wastewater. Glossary of Terms and Abbreviations 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 (D/T) — the dilution at which the majority of the people detect the odor becomes the D/T for that air sample. Greenhouse gases — 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 (GWR) System — 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 a day of drinking quality water to replenish the local groundwater supply. Levels of Service(LOS)—Goals to support environmental and public expectations for performance. NDMA— N-Nitrosodimethylamine is an N-nitrosoamine 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 (NACWA) and Water Environment Federation (WEF), with advisory support from the U.S. Environmental Protection Agency (EPA). NBP is committed to developing and advancing environmentally sound and sustainable biosolids management practices that go beyond regulatory compliance and promote public participation in order 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. Publicly-owned Treatment Works(POTW)— 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 run-off. 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. Glossary of Terms and Abbreviations 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. OCSD's service area is in the Santa Ana River Watershed.