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Comppehensive Annual •
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for the year ended June 30, 2018 Orange County, California
ORANGE COUNTY SANITATION DISTRICT
ORANGE COUNTY, CALIFORNIA
COMPREHENSIVE ANNUAL FINANCIAL REPORT
FOR THE YEAR ENDED JUNE 30, 2018
Prepared By:
Administrative Services Department
Financial Management Division
Lorenzo Tyner
Assistant General Manager&
Director of Finance and Administrative Services
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ORANGE COUNTY SANITATION DISTRICT
Comprehensive Annual Financial Report
Table of Contents
For the Year Ended June 30, 2018
Paqe
INTRODUCTORY SECTION:
Letterof Transmittal..................................................................................................................... i-vii
GFOA Certificate of Achievement............................................................................................... viii
Boardof Directors........................................................................................................................ ix
OrganizationChart ...................................................................................................................... x
Mapof Service Area.................................................................................................................... A
FINANCIAL SECTION:
Independent Auditors' Report...................................................................................................... 1-2
Management Discussion and Analysis— Required Supplementary Information ........................ 3-9
Basic Financial Statements:
Statement of Net Position................................................................................................... 12
Statement of Revenues, Expenses, and Changes in Net Position .................................... 13
Statement of Cash Flows.................................................................................................... 14
Notes to Basic Financial Statements.................................................................................. 15-48
Required Supplementary Information:
Proportionate Share of the Net Pension Liability(Asset)—OCERS Pension Plan............ 50
Schedule of District Contributions—OCERS Pension Plan ............................................... 51
Total Pension Liability—Additional Retiree Benefit Account.............................................. 52
Changes in Total Pension Liability—Additional Retiree Benefit Account........................... 53
Total OPEB Liability—Post-Employment Medical Benefits Plan......................................... 54
Changes in Total OPEB Liability—Post-Employment Medical Benefits Plan ..................... 55
Supplementary Information:
Combining Area Schedule of Net Position.......................................................................... 58
Combining Area Schedule of Revenues, Expenses, and Changes in Net Position .......... 59
Combining Area Schedule of Cash Flows.......................................................................... 60
STATISTICAL SECTION:
Net Position by Component— Last Ten Fiscal Years.................................................................. 62
Revenues and Gross Capital Contributions by Source— Last Ten Fiscal Years........................ 63
Expenses by Type— Last Ten Fiscal Years................................................................................ 64
Change in Net Position— Last Ten Fiscal Years......................................................................... 65
Cash and Investment Reserve Balances—Last Ten Fiscal Years............................................. 66
Sewer Service Fees— Last Nine Fiscal Years and Next Fiscal Year.......................................... 67
Number of Accounts and Revenues by Customer Class—Last Ten Fiscal Years..................... 68
Principal Sewer Service Customers—Prior Fiscal Year and Nine Years Ago............................ 69
Ratio of Annual Debt Service to Total Expenses—Last Ten Fiscal Years................................. 70
Debt Coverage Ratios—Last Ten Fiscal Years.......................................................................... 71
Computation of Direct and Overlapping Debt.............................................................................. 72
Ratios of Outstanding Debt—Last Ten Fiscal Years .................................................................. 73
Comparison of the Volume of Wastewater Treated —Last Ten Fiscal Years............................. 74
Authorized Full-time Equivalents by Function — Last Ten Fiscal Years...................................... 75
Biosolids Produced —Last Ten Fiscal Years............................................................................... 76
Capital Asset Statistics—Last Ten Fiscal Years......................................................................... 77
Demographic Statistics— Last Ten Fiscal Years......................................................................... 78
Estimated Population Served by Orange County Sanitation District .......................................... 79
Principal Orange County Employers—Current Fiscal Year and Nine Years Ago....................... 80
OperatingIndicators.................................................................................................................... 81
OTHER DATA&TRENDS:
Cash and Investment Portfolio ................................................................................................... 84
Property Tax Rates— Direct and Overlapping Governments—Last Ten Fiscal Years............... 85
Assessed and Estimated Actual Value of Taxable Property— Last Ten Fiscal Years................ 86
Property Tax and User Fee Levies and Collections— Last Ten Fiscal Years............................. 87
Property Value and Construction—Last Ten Fiscal Years ......................................................... 88
Insurancein Force....................................................................................................................... 89
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Serving: Orange County Sanitation District
Anaheim 10844 Ellis Avenue,Fountain Valley,CA 92708
714.962.2411 • www.ocsd.com
Brea
Buena Park
October 29, 2018
Cypress
Fountain Valley The Board of Directors of the
Orange County Sanitation District,
Fullerton Orange County, California
Garden Grove Submitted herewith is the Comprehensive Annual Financial Report of the Orange County Sanitation
District, Orange County, California for the fiscal year ended June 30, 2018. This report includes the
Huntington Beach financial position and activity of individual revenue areas, as described within the Governmental
Structure below, as of June 30, 2018 and was prepared by the Financial Management Division of the
Irvine Sanitation District's Administrative Services Department.
La Habra 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 Palma and belief,the enclosed data is accurate in all material respects and is reported in a manner designed
Los Alamitos 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 Beach activities have been included.
Orange 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
Placentia 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 Ana 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 Beach 1 of the financial statements.
Stanton 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
Tustin firm of Macias Gini & O'Connell LLP to perform the audit for the year ended June 30, 2018. The
auditors' report on the Sanitation District's basic financial statements and supplementary information
Villa Park 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, 2018.
County of Orange
Management's discussion and analysis (MD&A) immediately follows the independent auditors' report
Costa Mesa and provides a narrative introduction, overview, and analysis of the basic financial statements. The
Sanitary District MD&A complements this letter of transmittal and should be read in conjunction with it.
Midway City
Sanitary District GOVERNMENTAL STRUCTURE
Irvine Ranch The Orange County Sanitation District encompasses the Northern section of Orange County. The
Water District
Sanitation District provides wastewater treatment for an area of the County covering 479 square miles
Yorba Linda and serving a population of approximately 2.6 million, or 81 percent of the County's population. The
Water District 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
OJ,SN SANI)',yrOH 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
= 9 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
9of�cr'"�yTHE E Our Mission: To protect public health and the environment b
P P y
providing effective wastewater collection, treatment, and recycling.
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collecting sewer user fees at the previously established rate schedules, and were referred to as nine
individual revenue areas through June 30, 2000. Effective July 1,2003, all Revenue Areas, except
Revenue Area 14, consolidated user fee rates and all enterprise fund accounting and budgeting activities
and are now known as the Consolidated Revenue Area.
The Sanitation District is managed by an administrative organization composed of directors appointed by
the agencies or cities which are serviced by the Sanitation District. Each of the two remaining Revenue
Areas, the Consolidated Revenue Area and Revenue Area 14, has its own budget and is responsible for
the construction and maintenance of its own collection system. All Revenue Areas, except Revenue Area
14 and the portion of the Consolidated Revenue Area previously known as Revenue Area 13, receive
their own share of the one-percent ad valorem property tax levy. In addition, all Revenue Areas except
Revenue Area 14, collect user fees from property owners. Revenue Area 14 receives all of its revenues
from service charges to the Irvine Ranch Water District.
The purpose of the Sanitation District's wastewater management program is to protect the public's health,
preserve the beneficial uses of the coastal waters, and maintain air quality. The objectives of operating
the treatment plants are to process and dispose of the treated wastewater and the separated solids in
accordance with Federal, state, and local laws including the Environmental Protection Agency.
The Sanitation District sewerage system includes approximately 396 miles of sewers that convey
wastewater generated within the Sanitation District's boundaries to the Sanitation District's two
wastewater treatment plants, Reclamation Plant No. 1 located in the City of Fountain Valley, and
Treatment Plant No. 2 located in the City of Huntington Beach.
Plants No. 1 and No. 2 have secondary treatment capacities of 182 million gallons per day(mgd) and 150
mgd, respectively. In fiscal year 2018-19, both plants are projected to receive a combined average daily
wastewater flow of 183 million gallons per day from residential, commercial, and industrial sources.
After wastewater receives secondary treatment at Plant No. 1, it flows to the Groundwater Water
Replenishment System (GWRS) at the Orange County Water District, located adjacent to the Sanitation
District, where it undergoes a state-of-the-art purification process consisting of microfiltration, reverse
osmosis, and ultraviolet light with hydrogen peroxide. The product water is near-distilled quality.
Approximately 35 million gallons (132,500 cubic meters) per day of the GWRS water are pumped into
injection wells to create a seawater intrusion barrier. Another 65 million gallons (246,000 cubic meters)
are pumped daily to Orange County Water District's percolation basins in Anaheim where the GWRS
water naturally filters through sand and gravel to the deep aquifers of the groundwater basin.
Remaining outflows of treated wastewater from Plants 1 and 2 are combined and discharged to the
ocean off the Huntington Beach coast through an outfall pipe that is 120 inches in diameter and
approximately five miles long. The last mile of the outfall pipe is a diffuser that dilutes the wastewater with
seawater in a ratio of 148 parts seawater to one part treated wastewater at an average depth of 185 feet.
ECONOMIC CONDITIONS AND OUTLOOK
According to the California Employment Development Department (EDD), Orange County generated a
slight decrease of approximately 0.2 percent in payroll jobs from August 2017 to August 2018. During this
same time period, unemployment in Orange County decreased to 3.1 percent from 3.8 percent while the
unemployment in California as a whole decreased to 4.3 percent from 4.9 percent. In June 2018,
Chapman University forecasted Orange County's 2018 total payroll employment to increase 2.4 percent
over the prior year, or the addition of 38,000 payroll jobs in 2018.
The four sectors generating the most new jobs in Orange County are construction, professional &
business, education & health, and leisure & hospitality. Of these categories, construction is clearly a
standout with a 6.9 percent annual average growth, or roughly double that of the other three sectors.
Coupled with the powerful multiplier effects that building activity has on other job sectors, the growing
importance of the construction sector in shaping the county's economic outlook should be clear.
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Chapman's forecast calls for construction to pick up even more steam in 2018, growing at a 5.8 percent
rate versus the 4.5 percent increase in 2017. This will help fuel overall job growth of 2.4 percent in
Orange County in 2018, roughly the same as the 2.3 percent growth Chapman is forecasting for
California and significantly higher than the forecast of 1.5 percent growth for the U.S.
Orange County's job growth is being fueled by housing permit activity. Although total permits are
expected to hit a post-recession high of 11,200 units, it should be noted that single-family permits have
helped offset the sharp decline in multi-family units. It is too early to tell whether that decline is related in a
significant way to concerns over mounting political pressure to institute rent controls in Orange County.
Housing affordability, which measures a family's ability to afford a median-priced home, is projected to
continue a steady decline that started in late 2016, when the affordability index hit 72.6. By the fourth
quarter of 2017, the index dropped to 68.3, with a further drop projected to near 60.0 by year-end 2018.
Despite decreasing housing affordability in the county, there is a tight supplies of homes available for
sale, contributing to another year of relatively high housing price appreciation.
MAJOR INITIATIVES
Following are the District's current major initiatives as outlined in the General Manager's work plan for FY
2018-19:
1. Safety and Security
• Emergency Preparedness — Develop and conduct an external emergency response and recovery
drill by June 30, 2019 that tests the Integrated Emergency Response Plan (IERP).
• Safety Engineering Solutions — Continue the 11 Safety Improvement Construction Projects and
implement physical site security enhancements as needed to ensure all facilities remain secure. All
identified safety improvement contracts and task orders are awarded by May 30, 2019.
• Voluntary Protection Plan (VPP) Certification - Complete a full review and audit of all Safety and
Health policies, conduct a third-party VPP readiness assessment, and draft a VPP implementation
plan by June 30, 2019.
• Safety Help Desk — Create a Safety Help Desk Program by June 30, 2019 with software and in-
house telephone extension monitored by Risk Management staff, intended to provide internal
customers with prompt information and support related to health and safety services. Services
include but are not limited to: troubleshooting safety problems, scheduling contractor orientation, or
getting policy guidance.
• Security Committee & Plan — Reconvene the Security Committee to facilitate development and
implementation of a Physical and Cyber Security Plan by March 31, 2019.
2. Succession Planning
• Realignment of Operations, Maintenance & Engineering (Maintenance Mode)—Assess the roles
and responsibilities of each department and workgroup within the Operation and Maintenance and
Engineering Departments and adjust the structure and roles to more efficiently support delivery of
services to operate, maintain, refurbish, and replace Orange County Sanitation District (OCSD)
assets by November 30, 2018. Make the necessary adjustments to the organization by March 31,
2019.
• Labor Negotiations — Complete successful negotiations with all represented bargaining units by
June 30, 2019.
• Leadership Development — Provide at least two specialized trainings tailored to the Supervisory
Level by June 30, 2019.
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3. Resource Recovery
• Water Quality for Water Recycling — Update OCSD's wastewater ordinance to reflect necessary
discharge regulations resulting from alkaline hydrolysis to protect water quality by June 30, 2019.
4. Reliability
• Asset Management Plan — Develop an Asset Management Plan by October 31, 2018 that includes
an inventory of critical assets for each process area, the collection system and fleet; an evaluation of
their condition and performance; and a budgeting and implementation plan to maintain, rehabilitate,
and replace these assets to meet the required levels of service at the lowest life cycle cost and at an
acceptable level of risk.
5. Operational Optimization
• OCSD Headquarters Building — Create a final concept plan for the new building complex north of
Ellis Avenue by February 28, 2019.
• Board Meeting Agenda Management Software System — Select and install a new Board Meeting
Agenda Management Software System by June 30, 2019.
• Document Management— In preparation for creating a more digital workplace and reducing physical
record storage, develop a Scope of Work by November 30, 2018 to issue a Request for Proposals for
a Trusted System Needs Assessment and award a contract by February 28, 2019. Present the
records retention schedule to the Board of Directors for approval by December 31, 2018.
• Sludge Dewatering and Odor Control Plant No. 1 — Begin production of dewatered biosolids cake
by March 31, 2019.
• American Society of Civil Engineers Peer Review — Complete a peer review of the Engineering
Department's Capital Improvement Program delivery system by the American Society of Civil
Engineers by May 31, 2019.
• Communications Audit — Develop scope of work and issue RFP by June 30, 2019 to select firm to
conduct a communications audit to review effectiveness of OCSD's communication efforts to redefine
and rescope the program.
• Lobbyist Contract— Complete selection and contract implementation of legislative lobbyist contracts
by December 31, 2018.
• Return to Work Program — Develop a formal Return to Work Program to communicate expectations
of what is expected of all parties (employees, supervisors, physicians, etc.) by June 30, 2019.
Strategic Planning
In December 2017, the Board of Directors approved the biennium update to the rolling five-year strategic
plan for 2014-2019. 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 process began
with a consultant retained by OCSD conducting confidential Board Interviews with interested Board
members to identify issues of concerns. Next the consultant led a Strategic Planning Workshop for
employees and attended the Executive Management Team's annual retreat to provide feedback from the
Board members and employees. The update concluded with five Strategic Goals being identified as
completed, no new goals being adopted and a few minor modifications being made to OCSD's levels of
service.
Driven by our Mission, Vision and Core Values, the 2017 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.
iv
Since implementation of the first comprehensive strategic plan in 2007, 40 strategic goals have been
established and completed. In December 2017, 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.
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, 2018:
• Platinum Peak Performance Award from the National Association of Clean Water Agencies
(NACWA)
• Silver Award of Distinction- 2016-2017 Annual Report, Communicator Award from the
Academy of Interactive &Visual Arts (AIVA)
• Silver Award of Distinction-OCSD CIP Annual Report, Communicator Award from AIVA
• Silver Award of Distinction-The Flushable 3, Communicator Award from AIVA
• Environmental Communications Award- OCSD's and OCWD's GWRS Bottled Water
Campaign from the American Academy of Environmental Engineers and Scientists
• Certificate of Achievement for Excellence in Financial Reporting from the Government
Finance Officers Association (GFOA)
• Distinguished Budget Presentation Award from GFOA
• National Environmental Achievement Award (NEAA), Urban Runoff Program from NACWA
• Honorable Mention- Urban Runoff Program from Orange County Business Council's Turning
Red Tape into Red Carpet
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
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exceed the benefits likely to be derived; and (2) the evaluation of costs and benefits requires estimates
and judgments by management. We believe that the Sanitation District's internal accounting controls
adequately safeguard assets and provide reasonable assurance of proper recording of financial
transactions.
Each year the Sanitation District's Board of Directors adopts an annual operating plan. A joint works
budget is first prepared that identifies the specific capital projects and operating activities to be
undertaken by the Sanitation District during the year. The budgetary level of control, the level at which
expenses cannot exceed budget, is exercised at the individual district, or fund level. The Sanitation
District has adopted a Uniform Purchasing Policy that identifies the agreed upon purchasing standards.
ACCUMULATED FUNDS AND RESERVES POLICY
The Board of Directors of the Orange County Sanitation District has established the criteria below to
determine the total funds required as listed in the Accumulated Funds and Reserves Policy:
Cash Flow Reserve Criteria: 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 Criteria: 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 Criteria: 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 over the next ten years. Levels higher and lower than the target can be
expected as a result of outlay variability in the annual capital improvement programs.
Catastrophic Loss or Self-Insurance Reserve Criteria: are established for property damage including
fire, flood and earthquake; for general liability; and for workers' compensation. These reserves are
intended to supplement purchased insurance policies, FEMA disaster reimbursements and State disaster
reimbursements. The potential infrastructure loss from a major earthquake has been estimated at $495
million. The level of this reserve has been set to fund the District's non-reimbursed costs, estimated to be
$57 million.
Capital Replacement/Renewal Reserve Criteria: 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 $10.8 billion. The
initial criterion 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 over the next 20 years.
Debt Service Reserve Criteria: 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, 2018 was $5.0 million. In addition, the District's Debt
Service Reserve policy requires total debt service reserves to be ten percent of the total outstanding COP
debt, or$100 million at June 30, 2018.
vi
Accumulated funds exceeding the levels specified by District policy will be maintained in a rate
stabilization fund. These funds will be applied to future years' needs in order to maintain rates or to
moderate annual fluctuations. There is no established target for this reserve.
As of June 30, 2018, the Sanitation District was in compliance with the Accumulated Funds and Reserves
Policy with designated cash and investments totaling $680 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 $173 million
Designated For Self-Insurance 57 million
Designated For Capital Improvements 350 million
Designated For Debt Service Requirements 100 million
Total.Designated Cash and Investments $680 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, 2017. This
was the twenty-third 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 Lina Hsiao,
Accounting Supervisor, who assisted in its preparation. I would also like to thank the Sanitation District's
Board of Directors and the General Manager for their interest and support in conducting the financial
operations of the Sanitation District in a responsible and progressive manner.
Respectfully submitted,
Lorenzo Tyn r
Assistant General Manager&
Director of Finance and Administrative Services
vii
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, 2017
a&tj- �. P. Arw�a
Executive Director/CEO
viii
ORANGE COUNTY SANITATION DISTRICT
Board of Directors
As of June 30, 2018
Agency Active Director Alternate Director
Cities:
Anaheim Denise Barnes Lucille Kring
Brea Glenn Parker Cecilia Hupp
Buena Park Fred Smith Virginia Vaughn
Cypress Mariellen Yarc Stacy Berry
Fountain Valley Steve Nagel Cheryl Brothers
Fullerton Greg Sebourn Jesus Silva
Garden Grove Steve Jones Kris Beard
Huntington Beach Erik Peterson Mike Posey
Irvine Donald P. Wagner Lynn Schott
La Habra Tim Shaw Michael Blazey
La Palma Peter Kim Marshall Goodman
Los Alamitos Richard Murphy Warren Kusumoto
Newport Beach Scott Peotter Brad Avery
Orange Teresa Smith Mark Murphy
Placentia Chad Wanke Ward Smith
Santa Ana Sal Tinajero David Benavides
Seal Beach Ellery Deaton Sandra Massa-Lavitt
Stanton David Shawver Carol Warren
Tustin Allan Bernstein Chuck Puckett
Villa Park Robert Collacott Robert Pitts
Sanitary Water Districts:
Costa Mesa Sanitary District James M. Ferryman Robert Ooten
Midway City Sanitary District Charlie Nguyen Al Krippner
Irvine Ranch Water District John Withers Douglas Reinhart
Yorba Linda Water District Phil Hawkins Brooke Jones
County Areas:
Member of the Board Michelle Steel Shawn Nelson
of Supervisors
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ORANGE COUNTY SANITATION DISTRICT
Organizational Chart
As of June 30, 2018
Board of Directors General Counsel
Office
�•
Environmental Engineering
GMAdmin D•p Department
FM
Department
artmei Services
Environmental
Administrative Engineering
Board Services Human Resources Services Services Administration O&M Administration
Administration
Risk Management/ Financial Collection Facilities
Public Affairs Safety Management Resource Protection Planning Ops&Maintenance
Contracts,Purchasing Lab and Ocean Project Management
&Materials Monitoring Office Fleet Services
Management
Information Civil&Mechanical Plant No. t
Technology Engineering Operations
Electrical&Control Plant No.2
Systems Engineering Operations
Plant No, t
Maintenance
Maintenance
Reliability&Planning
Plant No.2
Maintenance
X
ORANGE COUNTY SANITATION DISTRICT
Map of Service Area
As of June 30, 2018
OCSD
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xii
OCertified
Public
Accountants
Independent Auditor's Report
To the Board of Directors
Orange County Sanitation District
Fountain Valley,California
We have audited the accompanying financial statements of the Orange County Sanitation District (the
District)as of and for the year ended June 30,2018,and the related notes to the financial statements,which
collectively comprise the District's basic financial statements as listed in the table of contents.
Management's Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation of these financial statements in
accordance with accounting principles generally accepted in the United States of America;this includes the
design,implementation,and maintenance of internal control relevant to the preparation and fair presentation
of financial statements that are free from material misstatement,whether due to fraud or error.
Auditor's Responsibility
Our responsibility is to express an opinion on these financial statements based on our audit. We conducted
our audit in accordance with auditing standards generally accepted in the United States of America.Those
standards require that we plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the
financial statements. The procedures selected depend on the auditor's judgment, including the assessment
of the risks of material misstatement of the financial statements, whether due to fraud or error. In making
those risk assessments,the auditor considers internal control relevant to the District's preparation and fair
presentation of the financial statements in order to design audit procedures that are appropriate in the
circumstances,but not for the purpose of expressing an opinion on the effectiveness of the District's internal
control.Accordingly,we express no such opinion.An audit also includes evaluating the appropriateness of
accounting policies used and the reasonableness of significant accounting estimates made by management,
as well as evaluating the overall presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our
audit opinion.
Opinion
In our opinion,the financial statements referred to above present fairly,in all material respects,the financial
position of the Orange County Sanitation District, as of June 30, 2018, and the changes in its financial
position and its cash flows for the year then ended in accordance with accounting principles generally
accepted in the United States of America.
Macias Gini&O'Connell LLP
4675 MacArthur Court,Suite 600
Newport Beach,CA 92660 www.mgocpa.com
1
Emphasis of Matter
As discussed in Note 1 to basic financial statements, effective July 1, 2017, the District adopted the
provisions of Governmental Accounting Standards Board (GASB) Statement No. 75, Accounting and
Financial Reporting for Postemployrnent Benefits Other Than Pensions. 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 the Net Pension Liability (Asset)—OCERS
Pension Plan, Schedule of District Contributions, Schedule of Total Pension Liability—Additional Retiree
Benefit Account, Schedule of Changes in Total Pension Liability — Additional Retiree Benefit Account,
Schedule of Total OPEB Liability—Post-Employment Medical Benefits Plan,and Schedule of Changes in
Total OPEB Liability — Post-Employment Medical Benefits Plan, as listed in the table of contents, be
presented to supplement the basic financial statements. Such information, although not a part of the basic
financial statements, is required by the Governmental Accounting Standards Board,who considers it to be
an essential part of financial reporting for placing the basic financial statements in an appropriate
operational, economic, or historical context. We have applied certain limited procedures to the required
supplementary information in accordance with auditing standards generally accepted in the United States
of America, which consisted of inquiries of management about the methods of preparing the information
and comparing the information for consistency with management's responses to our inquiries, the basic
financial statements, and other knowledge we obtained during our audit of the basic financial statements.
We do not express an opinion or provide any assurance on the information because the limited procedures
do not provide us with sufficient evidence to express an opinion or provide any assurance.
Other Information
Our audit was conducted for the purpose of forming an opinion on the financial statements that collectively
comprise the District's basic financial statements. The separate "Combining Area" financial statements,
introductory section, statistical section, and other data and trends are presented for purposes of additional
analysis and are not a required part of the basic financial statements.
The"Combining Area" financial statements are the responsibility of management and were derived from,
and relate directly to, the underlying accounting and other records used to prepare the basic financial
statements. Such information has been subjected to the auditing procedures applied in the audit of the basic
financial statements and certain additional procedures, including comparing and reconciling such
information directly to the underlying accounting and other records used to prepare the basic financial
statements or to the basic financial statements themselves, and other additional procedures in accordance
with auditing standards generally accepted in the United States of America. In our opinion,the"Combining
Area" financial statements are fairly stated, in all material respects, in relation to the basic financial
statements as a whole.
The introductory and statistical sections and other data and trends have not been subjected to the auditing
procedures applied in the audit of the basic financial statements, and accordingly, we do not express an
opinion or provide any assurance on them.
i
�Pots 94VZ
Newport Beach,California
October 29,2018
2
Management Discussion and Analysis
June 30, 2018
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,
2018.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, 2018,the District's assets and deferred outflows of resources exceeded its liabilities and
deferred inflows of resources by $2,194.8 million (net position). Of this amount, $626.7 million
represents unrestricted net position, which may be used to meet the District's ongoing obligations to
citizens and creditors.
■ Total net position increased $153.6 million, or 7.5 percent over the prior year. This amount includes
the impact of the restatement of beginning net position in the amount of $7.6 million due to
implementation of the Governmental Accounting Standards Board (GASB) Statement No.75.
■ Net Capital Assets, consisting of non-depreciable capital assets and depreciable capital assets net of
accumulated depreciation, increased $22.6 million, or 0.9 percent over the prior year.
■ Net investment in capital assets increased $63.2 million, or 4.2 percent over the prior year.
• Unrestricted Net Position increased $90.3 million, or 16.8 percent over the prior year.
■ Total outstanding bonded debt decreased by$32.1 million from the prior year to$1.0 billion.
Overview of the Basic Financial Statements
The District operates as a utility enterprise and presents its financial statements using the economic
resources measurement focus and the full 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 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 the
District's assets, deferred outflow of resources, liabilities, and deferred inflows of resources; and provides
information about the nature and amounts of investments in resources (assets) and the obligations to
District creditors(liabilities). It also provides the basis for computing the rate of return, evaluating the capital
structure of the District, and assessing the liquidity and financial flexibility of the District.
The Statement of Revenues, Expenses, and Changes in Net Position accounts for the current year's
revenues and expenses. This statement measures the success of the District's operations over the past
year and can be used to determine the District's creditworthiness. It also highlights the District's
dependency on property tax revenues in supplementing user fees and other charges for recovering total
cost.
The final required financial statement, the Statement of Cash Flows, reports cash receipts, cash payments,
and net changes in cash resulting from operations, investments, and financial activities of the reporting
period.
3
Net Position
As previously noted, net position increased$153.6 million, or 7.5 percent over the net position for FY 2016-
17, to $2,194.8 million in FY 2017-18.
(Dollars in thousands)
Percentage
June 30, June 30, Increase Increase
2018 2017 (Decrease) (Decrease)
Assets and deferred outflow
of resources
Assets
Current and other assets $ 750,084 $ 610,450 $ 139,634 22.9%
Net capital assets 2,626,015 2,603,458 22,557 0.9%
Total assets 3,376,099 3,213,908 162,191 5.0%
Deferred outflows of
resources 83,940 74,510 9,430 12.7%
Total assets and deferred
outflows of resources 3,460,039 3,288,418 171,621 5.2%
Liabilities
Current liabilities 117,665 99,376 18,289 18.4%
Noncurrent liabilities 1,083,311 1,118,146 (34,835) -3.1%
Total liabilities 1,200,976 1,217,522 (16,546) -1.4%
Deferred inflows of
resources 64,274 29,671 34,603 116.6%
Total liabilities and deferred
inflows of resources 1,265,250 1,247,193 18,057 1.4%
Net position
Net investment in
capital assets 1,568,118 1,504,898 63,220 4.2%
Unrestricted* 626,671 536,327 90,344 16.8%
Total net position $ 2,194,789 $ 2,041,225 $ 153,564 7.5%
* The amount for FY 2016117 does not include the impact of the restatement of beginning net position in the amount of$7.6
million due to implementation of the Governmental Accounting Standards Board(GASB)Statement No.75.
Current and other assets increased $139.6 million, or 22.9 percent, due primarily to net cash provided by
operations of$220.6 million, proceeds from property taxes of$94.3 million, other government repayments
of $20.5 million, receipt of capital facilities capacity charges of $17.9 million, contributions from other
governments of $3.5 million, interest received of $7.4 million, offset by capital outlays of $112.8 million,
bonded debt retirements of$32.1 million, interest paid of $44.2 million, and net investment activities and
other items of$35.5 million.
Net Capital assets increased $22.5 million, or 0.9 percent, due mostly to the ongoing capital improvement
program construction in progress additions of $112.7 million, land additions of $4.5 million, and capital
equipment of $3.0 million, offset by depreciation of $97.4 million, and $0.3 million of prior capital project
expenses that were written off as expense. 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$188.3
million and $90.5 million, respectively. These projects construct primary sludge thickening facilities to
4
improve solids handling capacity, replace aging sludge dewatering facilities, reduce biosolids handling and
disposal, and rehabilitate obsolete solids handling odor control equipment. In FY 2017-18, the District
incurred project costs of$9.0 million at Plant No. 1 and $22.2 million at Plant No. 2 bringing the total cost-
to-date to $174.8 million and $68.8 million, respectively.
Collection system projects includes the Newhope-Placentia Trunk Replacement. The Newhope-Placentia
Trunk Replacement incurred outlays of $4.1 million in FY 2017-18 with a total project budget of $116.3
million through the projected completion in FY 2021-22. This project will increase the size of approximately
35,000 feet of the trunk line from Yorba Linda Boulevard to Orangewood Avenue. The upsized sewer will
accommodate flows from the newly abandoned Yorba Linda Pump Station and the newly interconnected
Atwood Sub-trunk.
The Gisler-Redhill System Improvements (Reach "B") is another collection system project that incurred
outlays of $5.0 million in FY 2017-18 with a total project budget of $25.2 million through projected
completion in FY 2018-19. This project will replace a section of the existing sewer and rehabilitate other
reaches in the Gisler-Redhill System. This will include installing a larger diameter pipelines, providing
interties, new diversion settings, and sliplining and relining manholes.
See page 8 for the Schedule of Capital Assets and listing of other major capital additions for FY 2017-18.
Deferred Outflows of Resources increased $9.4 million, or 12.7 percent from the prior year primarily due to
$13.6 million increase in pension deferred outflows due to the changes of actuarial assumptions and other
inputs, and a decrease of$4.2 million for the difference between carrying amount of the retired debt and
the acquisition price of COP Series.
Deferred Inflows of Resources increased $34.6 million, or 116.6 percent over the prior year is primarily due
to the decrease in pension expense as a result of the change in projected and actual earnings on pension
plan investments and changes of assumptions or other inputs.
Net Investment in capital assets increased $63.2 million, or 4.2 percent over the prior year primarily due to
the result of the net increase in capital assets of $22.6 million coupled with a $40.6 million decrease in
related debt.
Unrestricted net position increased $90.3 million, or 16.8 percent due to the overall increase in net position
of$161.1 million and a decrease in the beginning net position of $7.6 million for implementing GASB 75
related to Other Postemployment Benefits(OPEB), offset by the increase in net investment in capital assets
of$63.2 million.
5
Changes in Net Position
Net position increased $38.5 million in FY 2017-18, or 31.4 percent over the prior year's increase in net
position.
(Dollars in thousands)
Percentage
June 30, June 30, Increase Increase
2018 2017 (Decrease) (Decrease)
Revenues:
Operating revenues
Service charges $ 316,329 $ 312,237 $ 4,092 1.3%
Permit and inspection fees 1,170 1,045 125 12.0%
Total operating revenues 317,499 313,282 4,217 1.3%
Non-operating revenues
Property taxes 94,188 88,284 5,904 6.7%
Investment and interest income 3,230 3,081 149 4.8%
Contrib. from other government 6,802 24,388 (17,586) -72.1%
Other 809 2,757 (1,948) -70.7%
Total non-operating revenues 105,029 118,510 (13,481) -11.4%
Total revenues 422,528 431,792 (9,264) -2.1%
Expenses:
Operating expense other than
depreciation and amortization 145,556 150,252 (4,696) -3.1%
Depreciation and amortization 97,399 96,320 1,079 1.1%
Non-operating expense 36,494 78,918 (42,424) -53.8%
Total expenses 279,449 325,490 (46,041) -14.1%
Income before capital
contributions 143,079 106,302 36,777 34.6%
Capital facilities capacity charges 18,077 16,351 1,726 10.6%
Increase in net position 161,156 122,653 38,503 31.4%
Beginning net position, as restated* 2,033,633 1,918,572 115,061 6.0%
Ending net position $ 2,194,789 $ 2,041,225 $ 153,564 7.5%
* The amount for FY 2016117 does not include the impact of the restatement of beginning net position in the amount of$7.6
million due to implementation of the Governmental Accounting Standards Board(GASB)Statement No.75.
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 2017-18, operating revenues increased $4.2 million, or 1.3 percent from the prior year primarily due
to a 1.2 percent increase in the average sewer user fee rate and a decrease in user fee rebates issued
over the prior year.
6
Sources of Revenue Functional Expenses
June 30, 2018 June 30, 2018
OCollections
0 2% 10%
o 22%Interest 2% 35 /o 1% 13 /o
■Treatment&
■User Fees Disposal
o Depreciation&
o Taxes Levied Other Amortization
0 10 40% p Interest Expense
75% ■Other
The$13.5 million, or 11.4 percent decrease in non-operating revenues primarily consists of a$17.5 million,
or 72.1 percent decrease in contributions from other governments, a $1.9 million, or 70.7 percent in other
expenses, somewhat offset by a $5.9 million, or 6.7 percent increase in property tax. The decrease in
contributions from other governments is reflective of the decrease in integration adjustment of Revenue
Area 14's equity share in OCSD's Joint Works Treatment Facilities based on the flows discharged to OCSD.
The increase in property tax revenue is primarily the result of the increase in total assessed valuation of 6.7
percent over the prior year. The decrease in other revenue is mainly attributable to a $1 million decrease
in non-federal grant reimbursement relative to project 2-72 Newhope-Placentia trunk sewer replacement
project in the prior year and a $1 million decrease in project FE14-05 pollution remediation estimates.
Operating expense before depreciation and amortization decreased $4.7 million or 3.1 percent from the
prior year. The majority of this decrease is attributable to the $6.9 million, or 9.3 percent decrease in
salaries and benefits and the $2.0 million, or 26.6 percent decrease in feasibility studies, that were
somewhat offset by a $2.8 million, or 10.8 percent increase in supplies, repairs and maintenance, and the
$1.2 million, or 19.3 percent increase in utilities. The increase in supplies, repairs and maintenance
expenses is mostly attributable to repairs such as digester cleaning services and engine components
purchased to remedy gas leaks. The increase in utilities is attributable to an increase of$880,000 in power
charges as a result of higher electricity rates, increased consumption from facility-related demand, and a
Plant 2 Central Generation (CenGen) shutdown. Feasibility studies are done to determine the necessity
and the preferred designs of future potential construction projects and fluctuate from year-to-year, as
required.
Operating salaries and benefits decreased by$6.8 million to$67.4 million, a 9.3 percent decrease from the
prior year. The operating salaries and benefits costs are part of the overall decrease of$8.0 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 $84.0 million, an 8.2 percent decrease from the
prior year total of$91.6 million. This decrease is reflective of the$10.7 million, or 72.9 percent decrease in
retirement premiums as a result of the $214.1 million pay down against the District's unfunded actuarial
accrued pension liability(UAAL)over the current and previous three fiscal years, that was somewhat offset
by a$3.1 million,or 4.7 percent increase in salaries and wages. This pay down resulted in a UAAL premium
rate decrease from 7.86 percent in FY 2015-16 to 1.42 percent in FY 2017-18.
Non-operating expense decreased $42.4 million, or 53.8 percent, and is primarily reflective of the $50.0
million reduction in transfer of local sewer service fee assets and replacement funds to East Orange County
Water District (EOCWD), a $2.2 million, or 91.9 percent decrease in loss on disposal of capital assets,
somewhat offsetting this decrease is the increase in interest expense of $9.4 million, or 36.5 percent
increase from the prior year total of$25.6 million.
7
Capital Facility Capacity Charges increased $1.7 million, or 10.6 percent from the prior year due to an
increase in rates and connection fees collected from cities as well as more supplemental capital facilities
capacity charges assessed to industrial dischargers than last year.
Capital Assets
At June 30, 2018, the District had a net investment of$2.6 billion in capital assets. This represents a net
increase (including additions and deletions) of$22.6 million or 0.9 percent over the prior year.
Schedule of Capital Assets
(Net of Depreciation and Amortization)
(Dollars in thousands)
Percentage
June 30, June 30, Increase Increase
2018 2017 (Decrease) (Decrease)
Land $ 29,741 $ 25,247 $ 4,494 17.8%
Construction in progress 427,996 461,833 (33,837) -7.3%
Sewage collection facilities 494,171 482,558 11,613 2.4%
Sewage treatment facilities 1,557,473 1,515,969 41,504 2.7%
Effluent disposal facilities 33,178 34,636 (1,458) -4.2%
Solids disposal facilities 288 297 (9) -3.0%
General and administrative facilities 83,168 82,918 250 0.3%
Capital assets, net $ 2,626,015 $ 2,603,458 $ 22,557 0.9%
Major capital asset additions for the current fiscal year included the following:
• $22.2 million—Sludge Dewatering and Odor Control at Plant No. 2
• $16.2 million—Ocean Outfall System Rehabilitation
• $ 9.9 million— Mt Langley Property
• $ 9.0 million—Sludge Dewatering and Odor Control at Plant No. 1
• $ 7.7 million—Consolidated Demolition & Utility Improvements at Plant No. 2
• $ 6.4 million— Headworks Rehabilitation at Plant No. 1
• $ 5.2 milliion -A-Side Primary Clarifiers Repl. at P2
• $ 5.0 million - Gisler-Redhill System Improvements, Reach "B"
More detailed information about the District's capital assets is provided in Notes 1 and 3 of Notes to Basic
Financial Statements.
Debt Administration
At June 30, 2018, the District had $1.0 billion outstanding in bonded debt, a net decrease of$32.1 million,
or 3.1 percent from the prior year.This reduction consisted of the accumulation of principal payments made
in accordance with the schedule of debt service payments.
During the Sanitation's most recent debt refunding, Moody's, Standard and Poor's, and Fitch Ratings all
reaffirmed their AAA rating of the Orange County Sanitation District.The District's long-range financing plan
is designed to maintain this high rating. Over the next five years, the District is projecting over$1.3 billion
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. 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. However, the 2016B
8
Certificate Anticipation Notes Series (CANs) are due and payable on December 15, 2018, therefore, the
Board of Directors of the Sanitation District has authorized and adopted Resolution No. OCSD 18-17 to
issue the 2018A CANs of up to $109,875,000 in November 2018 which would allow the Sanitation District
to repay the 2016B CANs and avoid using $110 million of reserves for such purpose. For more information
on long-term debt activities, see Note 4 of the Notes to Basic Financial Statements.
Economic Factors and Next Year's Budgets and Rates
■ The unemployment rate within the County of Orange is at 3.3 percent in June 2018, a slight decrease
from the rate of 3.8 percent a year ago.
■ Inflation for the Los Angeles-Riverside-Orange County area increased 2.2 percent in 2017 over the
prior year based on the actual percentage change in the consumer price index according to the U. S.
Department of Labor, Bureau of Labor Statistics.
■ The actual rate of return on investments decreased from the 0.6 percent earnings rate in FY 2016-17
to 0.5 percent for FY 2017-18.
All of these factors are considered in preparing the District's biennium budget.
As part of the District's recently approved five-year rate schedule, user fees were increased by 1.2 percent
for FY 2018-19 over the prior year. The Single Family Residential (SFR)fee, which is the underlying for all
other user rates, is applicable to the District's largest customer base:the SFR fee, increased by$4.00,from
$331.00 to $335.00. This rate increase is necessary to finance the District's cash flow needs including
$161.0 million in operating costs, $80.0 million in debt service costs and $175.0 million in capital
improvement outlays in 2018-19. Capital Improvement costs are projected to total$2.7 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
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10
ORANGE COUNTY SANITATION DISTRICT
BASIC FINANCIAL STATEMENTS
11
ORANGE COUNTY SANITATION DISTRICT
Statement of Net Position
June 30, 2018
2018
Current assets:
Cash and cash equivalents $ 135,978,533
Investments 539,521,972
Accounts receivable, net of allowance for uncollectibles$455,979 13,202,940
Accrued interest receivable 2,851,382
Connection fees receivable 3,871,076
Property tax receivable 1,227,135
Inventories 7,243,823
Prepaid expenses 1,645,412
Total current assets 705,542,273
Noncurrent assets:
Restricted:
Cash and cash equivalents 4,953,800
Accrued interest receivable 6,855
Unrestricted:
Non-depreciable capital assets 457,737,093
Depreciable capital assets, net of accumulated depreciation 2,168,277,734
Other noncurrent assets, net 10,344
Net pension asset-OCERS 39,571,100
Total noncurrent assets 2,670,556,926
Total assets 3,376,099,199
Deferred outflows of resources:
Deferred losses on defeasances 32,880,203
Deferred outflows related to pensions 51,059,589
Total deferred outflows of resources 83,939,792
Total assets and deferred outflows of resources 3,460,038,991
Current liabilities:
Accounts payable 13,365,974
Accrued expenses 15,404,746
Retentions payable 2,147,719
Interest payable 17,113,450
Due to other governmental agency 18,888,270
Current portion of long-term obligations 50,744,930
Total current liabilities 117,665,089
Noncurrent liabilities:
Noncurrent portion of long-term obligations 1,057,454,621
Total OPEB liability 5,025,395
Total pension liability-ARBA 20,831,172
Total noncurrent liabilities 1,083,311,188
Total liabilities 1,200,976,277
Deferred inflows of resources:
Deferred inflows related to pensions 64,273,306
Total liabilities and deferred inflows of resources 1,265,249,583
Net position:
Net investment in capital assets 1,568,118,074
Unrestricted 626,671,334
Total net position $ 2,194,789,408
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, 2018
2018
Operating revenues:
Service charges $ 316,328,764
Permit and inspection fees 1,170,329
Total operating revenues 317,499,093
Operating expenses other than depreciation
and amortization:
Salaries and benefits 67,418,039
Utilities 7,298,104
Supplies, repairs and maintenance 28,237,502
Contractual services 29,520,286
Feasibility studies 6,094,056
Other 6,988,024
Total operating expenses other than
depreciation and amortization 145,556,011
Operating income before depreciation
and amortization 171,943,082
Depreciation and amortization 97,399,234
Operating income 74,543,848
Non-operating revenues:
Property taxes 94,188,353
Investment and interest income 3,229,756
Contributions from other government 6,802,282
Other 809,076
Total non-operating revenues 105,029,467
Non-operating expenses:
Interest 35,011,026
Other 1,287,728
Loss on disposal of assets 195,780
Total non-operating expenses 36,494,534
Income before capital contributions 143,078,781
Capital contributions:
Capital facilities capacity charges 18,077,353
Change in net position 161,156,134
Total net position - beginning, as restated 2,033,633,274
Total net position - ending $ 2,194,789,408
See Accompanying Notes to Basic Financial Statements.
13
ORANGE COUNTY SANITATION DISTRICT
Statement of Cash Flows
For the Year Ended June 30, 2018
2018
Cash flows from operating activities:
Receipts from customers and users $ 374,435,755
Payments to employees (73,967,137)
Payments to suppliers (79,896,248)
Net cash provided by operating activities 220,572,370
Cash flows from noncapital financing activities:
Proceeds from property taxes 94,280,270
Payments for other obligations (478,516)
Net cash provided by noncapital financing activities 93,801,754
Cash flows from capital and related financing activities:
Capital facilities capacity charges 17,918,938
Additions to capital assets (112,829,813)
Interest paid (44,240,870)
Principal payments on debt obligation (32,141,018)
Contribution from other government 3,538,879
Net cash used in capital and related financing activities (167,753,884)
Cash flows from investing activities:
Proceeds from the sale of investments 181,547,334
Purchases of investments (309,468,552)
SARI project payments 20,472,023
Interest received 7,393,886
Net cash used in investing activities (100,055,309)
Net increase in cash and cash equivalents 46,564,931
Cash and cash equivalents, beginning of year 94,367,402
Cash and cash equivalents, end of year $ 140,932,333
Reconciliation of operating income to net cash provided by operating activities:
Operating income $ 74,543,848
Adjustments to reconcile operating income to net cash provided by operating activities:
Depreciation and amortization 97,399,234
Bad debt expense (net recoveries) 219,792
(Increase)/decrease in operating assets:
Accounts receivable 32,257,047
Inventories (75,275)
Prepaid and other assets 87,640
Increase/(decrease) in operating liabilities:
Accounts payable (2,012,182)
Accrued expenses 150,961
Due to other governmental agency 24,679,615
Net pension/OPEB liability (8,463,282)
Pension/OPEB/accrued leave payable 1,192,318
Compensated absences 209,235
Claims and judgments 383,419
Net cash provided by operating activities $ 220,572,370
Noncash activities:
Unrealized (loss)on the fair value of investments $ (5,074,806)
Receivable from non-operating activities 4,085,372
Capital assets acquired through accounts payable 5,377,210
Capital facilities capacity charges acquired 158,415
See Accompanying Notes to Basic Financial Statements.
14
ORANGE COUNTY SANITATION DISTRICT
Notes to Basic Financial Statements
For the Year Ended June 30, 2018
(1) Summary of Significant Accounting Policies
Reporting 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 (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, 2018, 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 (GASB)
Codification of Governmental Accounting and Financial Reporting Standards.
15
ORANGE COUNTY SANITATION DISTRICT
Notes to Basic Financial Statements
For the Year Ended June 30, 2018
Measurement Focus and Basis of Accounting
OCSD operates as an enterprise activity. Enterprise funds account for operations that are financed
and operated in a manner similar to private business enterprises, where the intent of the Board of
Directors is that the costs (expenses, including depreciation and amortization) of providing services
to the general public on a continuing basis be financed or recovered primarily through user
charges.
Basis of accounting refers to when revenues and expenses are recognized in the accounts and
reported in the financial statements. Enterprise funds are accounted for on the flow of economic
resources measurement focus and use the accrual basis of accounting, whereby revenues are
recognized when earned and expenses are recognized when incurred, regardless of the timing of
related cash flows.
The accounting policies of OCSD conform to accounting principles generally accepted in the
United States of America (GAAP) as applicable to governments. The GASB is the accepted
standard-setting body for establishing governmental accounting and financial reporting principles in
the United States.
Operating 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
mutual 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 agents as disclosed in Note 2, section "Fair
Value of Investments", all other investments are stated at fair value (the price that would be
received to sell an asset in an orderly transaction between market participants acting in their
economic best interest at the measurement date). Changes in fair value that occur during the
fiscal year are reported as part of investment and interest income. Investment and interest income
includes interest earnings and realized and unrealized gains or losses in fair value. Investment
and interest income are recorded as revenues and receivables when declared and realized gains
or losses are recorded when the investment is sold.
Accounts Receivable
Accounts receivable is reported net of the allowance for uncollectible receivables. Uncollectible
receivables were $455,979 at June 30, 2018. Unbilled sewer services through June 30, 2018 are
recorded as revenue and receivables. Management determines the allowance for uncollectible
receivables by evaluating individual accounts receivable at least one year past due and
considering a customer's financial condition, credit history and current economic conditions.
Accounts receivables are written off when deemed uncollectible. Recoveries of accounts
receivables previously written off are recorded when received.
16
ORANGE COUNTY SANITATION DISTRICT
Notes to Basic Financial Statements
For the Year Ended June 30, 2018
Inventories
Inventories, which are held for consumption and not resale, are stated at cost on a weighted-
average basis, and then is expensed when used.
Capital Assets
Outlays for property, plant, equipment, and construction in progress are recorded in the revenue
area which will use the asset. Such outlays may be for individual revenue area assets or for a
revenue area's share of joint assets.
Capital assets of property, plant, and equipment are defined as assets with an initial, individual
cost of more than $5,000 and an estimated useful life of at least three years. Such assets are
recorded at cost, except for donated capital assets, donated works of art and similar items, and
capital assets received in a service concession arrangement, which are recorded at acquisition
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, have been capitalized on
projects prior to fiscal year 2017-2018. Commencing with fiscal year 2017-2018, OCSD early
implemented GASB Statement No. 89, where interest costs incurred before the end of the
construction period are no longer 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.
17
ORANGE COUNTY SANITATION DISTRICT
Notes to Basic Financial Statements
For the Year Ended June 30, 2018
Deferred Charges on Defeasances
For advance refundings resulting in defeasance of debt, the difference between the reacquisition
price and the net carrying amount of the old debt (i.e. deferred charges) is reported as a deferred
outflow of resources and amortized to interest expense based on the effective interest method over
the remaining life of the old debt or the life of the new debt, whichever is shorter. OCSD's deferred
charges on the refunding debt at June 30, 2018 are $32,880,203.
Net Position
Net position represents the total of assets and deferred outflows of resources less liabilities and
deferred inflows of resources, and is classified into two categories:
Net Investment in Capital Assets — This amount consists of capital assets, net of accumulated
depreciation, reduced by the outstanding balances of any borrowings used for the acquisition,
construction or improvement of those assets and excludes unspent debt proceeds. Deferred
outflows of resources that are attributable to the acquisition, construction or improvement of those
assets or related debt also are included in this component of net position.
Unrestricted —This amount represents the residual of amounts not classified in the other category
and represents the net equity available for OCSD.
Compensated Absences
OCSD's employees, other than operations and maintenance personnel, are granted vacation and
sick leave in varying amounts with maximum accumulations of 200 hours and 560 hours for
vacation and sick days earned but unused, respectively. Operations and maintenance personnel
accrue between 80 and 250 personal leave hours per year depending on years of service.
Personal leave can be accumulated up to a maximum of 440 hours.
Vacation and sick leave benefits and personal days are recorded as an expense and liability when
earned by eligible employees. The distribution between current and long-term portions of the
liability is based on historical trends.
Claims and Judgments
OCSD records estimated losses when it is probable that a claim liability has been incurred and
when the amount of the loss can be reasonably estimated. Claims payable includes an estimate
for incurred but unreported claims. The distribution between current and long-term portions of the
liability is based on historical trends.
Pensions
OCSD has two defined benefit pension plans for retirees: the 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
asset, deferred outflows of resources related to pensions, 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 plan (Plan) and additions to/deductions from the
Plan's 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 terms. 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 (Note 5).
18
ORANGE COUNTY SANITATION DISTRICT
Notes to Basic Financial Statements
For the Year Ended June 30, 2018
Property Taxes
The County is permitted by State law (Proposition 13) to levy taxes at one percent of full market
value (at time of purchase) and can increase the assessed value no more than two percent per
year. OCSD receives a share of this basic levy, proportionate to what was received in the 1976 to
1978 period.
Property taxes are determined annually and attached as enforceable liens on real property as of
January 1 and are payable in two installments which become delinquent after December 10 and
April 10. The County bills and collects the property taxes and remits them to OCSD in installments
during the year. Property tax revenues are recognized when levied. The Board of Directors has
designated property tax revenue to be used for the annual debt service requirements prior to being
used as funding for current operations.
Capital Facilities Capacity Charges
Capital facilities capacity charges represent fees imposed at the time a structure is newly
connected to OCSD's system, directly or indirectly, or an existing structure or category of use is
increased. This charge is to pay for District facilities in existence at the time the charge is imposed
or to pay for new facilities to be constructed that are of benefit to the property being charged.
Operating and Non-operating Revenues and Expenses
Operating revenues and expenses result from collecting, treating, and disposing of wastewater and
inspection and permitting services. OCSD's operating revenues consist of charges to customers
for the services provided. Operating expenses include the cost of providing these services,
administrative expenses, and depreciation and amortization expenses. All revenues and expenses
not meeting these definitions and which are not capital in nature are reported as non-operating
revenues and expenses.
Construction Commitments
OCSD has active construction projects to add additional capacity, improve treatment, or replace/
rehabilitate existing assets. At June 30, 2018, the outstanding commitments with contractors
totaled $96,474,802.
Self-Insurance Plans
For the year ended June 30, 2018, 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 $500,000 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
19
ORANGE COUNTY SANITATION DISTRICT
Notes to Basic Financial Statements
For the Year Ended June 30, 2018
exposure is the deductible ranging from $75,000 to $250,000 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, 2018.
During the past three fiscal years there have been no settlements in excess of covered amounts.
Claims against OCSD are processed by General Counsel or an outside claim administrator. 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, 2018 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 GASB Statement 32, the plan's assets and liabilities are not included within OCSD's financial
statements.
New GASB Pronouncements
The accompanying financial statements reflect the implementation of GASB Statement No. 75,
Accounting and Financial Reporting for Postemployment Benefits Other Than Pensions. The
purpose of this statement is to improve accounting and financial reporting by state and local
governments for postemployment benefits other than pensions (other postemployment benefits or
OPEB). This statement replaces the requirements of Statement No. 45, Accounting and Financial
Reporting by Employers for Postemployment Benefits Other Than Pensions, as amended, and No.
57, OPEB Measurements by Agent Employers and Agent Multiple-Employer Plans, for OPEB. The
retroactive effect of implementing this change in reporting other postemployment benefits 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, 2017 resulted in an adjustment to ending net
position from $2,041,225,032 to $2,033,633,274. In addition, GASB Statement No. 85, Omnibus
2017 resulted in revisions to the presentation of payroll-related measures in certain OPEB
schedules presented as required supplementary information. The requirements of these
Statements that are applicable to OCSD are effective for reporting periods beginning after June 15,
2017 and have been implemented in fiscal year 2017-2018.
The accompanying financial statements also reflect the implementation of GASB Statement No.
89, Accounting for Interest Cost Incurred before the End of a Construction Period. This Statement
requires that interest cost incurred before the end of a construction period be recognized as an
expense in the period in which the cost is incurred for financial statements prepared using the
economic resources measurement focus. As a result, interest costs incurred before the end of a
construction period are no longer included in the historical cost of capital assets reported. The
requirements of this Statement that are applicable to OCSD are effective for reporting periods
beginning after December 15, 2019 and has been early implemented in fiscal year 2017-2018.
20
ORANGE COUNTY SANITATION DISTRICT
Notes to Basic Financial Statements
For the Year Ended June 30, 2018
(2) Cash and Investments
Cash and investments as of June 30, 2018 are classified within the accompanying Statement of
Net Position as follows:
Statement of Net Position:
Current, Unrestricted:
Cash and cash equivalents $135,978,533
Investments 539,521,972
Subtotal -current, unrestricted 675,500,505
Restricted:
Cash and cash equivalents 4,953,800
Total cash and cash equivalents and investments $680,454,305
Cash and investments consist of the following as of June 30, 2018:
Cash on hand $ 3,000
Deposits with financial institutions 2,411,045
Managed portfolio -cash and investments 673,086,460
Subtotal - unrestricted cash and investments 675,500,505
Monies held by trustees:
Cash and cash equivalents 4,953,800
Grand total cash and investments $680,454,305
21
ORANGE COUNTY SANITATION DISTRICT
Notes to Basic Financial Statements
For the Year Ended June 30, 2018
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 identify
certain provisions of either the California Government Code or OCSD's investment policy
(whichever is more restrictive)that address interest rate risk, credit risk, and concentration of credit
risk.
Authorized Maximum
by OCSD's Maximum Investment
Investment Type-Authorized by Investment Maximum Percentage in a Single
the California Government Code Policy? Maturity (1)(3) of Portfolio (1) Issuer(1)
Local Agency Bonds Yes 5 years 10% (2) 5% (2)
U.S. Treasury Obligations Yes 5 years No limit No limit
California State Treasury Obligations Yes 5 years No limit No limit
U.S. Agency Securities Yes 5 years No limit 20% (2)
Banker's Acceptances Yes 180 days 40% 5% (2)
Commercial Paper Yes 270 days 25% 5% (2)
Negotiable Certificates of Deposit Yes 5 years 30% 5% (2)
Repurchase Agreements Yes 1 year 20% (2) 5% (2)
Reverse Repurchase Agreements Yes 90 days (2) 5% (2) 5% (2)
Corporate Medium-Term 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 5 years 30% 30%
Notes
(1) Restrictions are in accordance with the California Government Code unless indicated otherwise.
(2) The restriction is in accordance with OCSD's Investment Policywhich is more restrictive than the California Government Code.
(3)As allowed by California Government Code Section 53601,the Board of Directors has adopted a policyof a maximum
maturity of 5 years for investments purchased by OCSD's external money manager fo r the long-term investment portfolio.
The duration of the long-term investment portfolio can never exceed 60 months. Investments purchased forthe short-term
portfolio are subject to the maturity restrictions noted in this table.
22
ORANGE COUNTY SANITATION DISTRICT
Notes to Basic Financial Statements
For the Year Ended June 30, 2018
Investments Authorized by Debt Agreements
The investment of debt proceeds held by trustees is governed by provisions of the debt covenant
agreements, rather than the general provisions of the California Government Code or OCSD's
investment policy. The following table identifies the investment types that are authorized for
investments held by OCSD's debt trustees. This table and the subsequent tables identify 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-Term 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 First American Government Obligations Fund
are daily liquid funds available on demand.
23
ORANGE COUNTY SANITATION DISTRICT
Notes to Basic Financial Statements
For the Year Ended June 30, 2018
Following is a table which summarizes OCSD's managed portfolio investments by purpose with the
modified duration as of June 30, 2018.
Modified Modified
Duration Duration
Investment Type Fair Value (in years) (in months)
Short-Term Portfolio:
U.S. Treasury Bills $ 59,851,200 0.135 1.62
Local Agency Investment Fund 55,104,678 0.529 6.35
U.S. Treasury Notes 30,957,000 0.169 2.03
U.S. Agency Securities 24,218,123 0.082 0.99
Commercial Paper 10,058,827 0.183 2.19
Certificates of Deposit 9,939,086 0.368 4.42
Corporate Medium-Term Notes 8,014,233 0.224 2.69
Supranationals 7,994,655 0.087 1.04
Money Market Mutual Funds 4,727,642 - -
Short-term portfolio subtotal $ 210,865,444 0.249 2.99
Long-Term Portfolio:
U.S. Treasury Notes $ 137,436,984 2.788 33.46
Corporate Medium-Term Notes 105,957,676 2.773 33.28
U.S. Agency Securities* 103,508,844 2.214 26.56
Asset Backed Securities/CMO* 34,763,432 0.965 11.57
Supranationals 32,064,683 3.119 37.42
Commercial Paper 16,905,320 0.243 2.91
U.S. Treasury Inflation-Protected Securities (TIPS)** 10,665,636 6.000 72.00
Money Market Mutual Funds 10,528,215 - -
Certificates of Deposit 5,821,913 0.110 1.32
Taxable Municipal Bonds 4,382,355 1.764 21.17
U.S. Govt. Backed Mortgage Pools (GNMA)* 185,958 4.273 51.28
Long-term portfolio subtotal $462,221,016 2.417 29.00
Total Portfolio $ 673,086,460
* Includes highly sensitive securities.
**The investment's duration in excess of five years was permitted by OCSD's Investment Policy
at the time it was purchased.
24
ORANGE COUNTY SANITATION DISTRICT
Notes to Basic Financial Statements
For the Year Ended June 30, 2018
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,
2018.
Fair Value Maturities
Cash equivalents held by fiscal agents:
Money Market Mutual Funds:
First American Government Obligations Fund 4,953,382 20 days
Blackrock Institutional Funds 418 39 days
Total fair value of investments held by fiscal agents $ 4,953,800
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 $3,763,829
including $2,294,752 of mortgage pass-through securities, $1,283,119 of U.S. agency
securities, and $185,958 of U.S. government backed mortgage pools.
Fair Value of Investments
OCSD measures and records its investments using fair value measurement guidelines established
by generally accepted accounting principles. These guidelines recognize a three-tiered fair value
hierarchy, as follows:
Level 1: Quoted prices for identical investments in active markets;
Level 2: Observable inputs other than quoted market prices; and
Level 3: Unobservable inputs.
25
ORANGE COUNTY SANITATION DISTRICT
Notes to Basic Financial Statements
For the Year Ended June 30, 2018
At June 30, 2018, OCSD had the following fair value measurements for its managed investment
portfolio:
Quoted Prices
in Active Significant Other
Markets for Observable Unobservable
Identical Assets Inputs Inputs
Investment Type Fair Value Level 1 Level 2 Level 3
Investments in Short-Term Portfolio:
U.S. Treasury Bills $ 59,851,200 $ $ 59,851,200 $
U.S. Treasury Notes 30,957,000 30,957,000
U.S.Agency Securities 24,218,123 24,218,123
Commercial Paper 10,058,827 10,058,827
Certificates of Deposits 9,939,086 9,939,086
Corporate Medium-term Notes 8,014,233 8,014,233
S upranationals 7,994,655 7,994,655
Investments in Long-Term Portfolio:
U.S. Treasury Notes 137,436,984 137,436,984
Corporate Medium-term Notes 105,957,676 105,957,676
U.S.Agency Securities 103,508,844 103,508,844
Asset Backed Securities/CMO 34,763,432 34,763,432
S upranationals 32,064,683 32,064,683
Commercial Paper 16,905,320 16,905,320
US Treasury Inflation Protected Securities (TIPS) 10,665,636 10,665,636
Certificates of Deposits 5,821,913 5,821,913
Taxable Municipal Bonds 4,382,355 4,382,355
U.S. Government Backed Mortgage Pools 185,958 185,958
Fair Value Hierarchy Totals $ $ 602,725,925 $
Investments Not Subject To Fair Value Hierarchy:
Local Agency Investment Fund(LAIF)* 55,104,678
Money Market Mutual Funds" 4,727,642
Money Market Mutual Funds— 10,528,215
Total Portfolio $673,086,460
Invested in Short-Term Portfolio
**Invested in Long-Term Portfolio
US Bank 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 US Bank's fair value
hierarchy matrix based on the asset type classification. The fair value hierarchy level matrix is
based on discussions with (1) pricing vendors, (2) broker/dealers, (3) investment managers, (4)
industry groups, and (5) independent accounting firms.
Monies held by trustees (fiscal agents) that are invested in money market mutual funds are
reported at carrying cost.
Disclosures Relating to Credit Risk
Generally, credit risk is the risk that an issuer of an investment will not fulfill its obligation to the
holder of the investment. This is measured by the assignment of a rating by a nationally
recognized statistical rating organization. The following table presents the minimum rating as
required by the California Government Code, OCSD's investment policy, or debt agreements, and
the actual rating as of year-end for each investment type.
26
ORANGE COUNTY SANITATION DISTRICT
Notes to Basic Financial Statements
For the Year Ended June 30, 2018
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 $238,910,820
U.S.Agency Securities -GNMA 185,958
Subtotal $239,096,778
Investments with no legal minimum rating:
U.S.Agency Securities (other than GNMA):
Rating of AA+(Standard&Poor's) 94,520,544
Rating of P-1 (Moodys) 33,206,423
Municipal Bonds:
Rating ofAa1 (Moodys) 1,436,512
Rating ofAa3(Moodys) 2,945,843
Certificates of Deposits;
Rating ofA 1 (Standard and Poor's) 8,765,689
Rating of P-1 (Moodys) 5,997,200
Not rated 998,110
Local Agency Investment Fund(LAIF):
Not rated 55,104,678
Subtotal 202,974,999
Investments with a legal minimum rating (or its equivalent)of A:
Corporate Medium-Term Notes:
Rating ofAa1 (Moodys) 3,930,440
Rating of AA+(Standard and Poor's) 2,944,800
Rating of AA+(Fitch) 2,919,881
Rating ofAa2(Moodys) 3,908,867
Rating of AA(Standard &Poor's) 2,441,500
Rating of All (Moodys) 13,297,646
Rating of A+(Fitch) 6,444,285
Rating ofA2(Moodys) 39,846,414
Rating ofA(Standard&Poor's) 10,949,431
Rating of A3(Moodys)* 16,481,401
Rating ofA(Standard&Poor's)* 7,826,040
Rating of BBB+(Standard &Poor's)* 2,962,904
Not rated 18,300
Money Market Mutual Funds:
Rating of P-1 (Moodys) 15,255,857
Invested with fiscal agents:
Rating of Aaa-mf(Moodys) 4,953,800
Subtotal 134,181,566
Investments with a legal minimum rating (or its equivalent)of AA:
Asset Backed Securities/CMO:
Rating ofAaa(Moodys) 24,098,386
Rating of AAA(Standard&Poor's) 8,341,682
Rating of AA+(Standard and Poor's) 2,167,755
Rating of BBB(Fitch)* 126,997
Rating of B(Fitch)* 28,612
Supranational Obligations:
Rating of Aaa(Moodys) 28,837,318
Rating of AAA(Fitch) 6,224,920
Rating of P-1 (Moodys) 4,997,100
Subtotal 74,822,770
Investments with a legal minimum rating (or its equivalent)of"Prime":
Commercial Paper:
Rating of P-1 (Moodys)* 10,458,370
Rating of A 1 (Standard&Poor's)* 16,505,777
Subtotal 26,964,147
Total $678,040,260
*Investment was in compliance with legal requirements at the time it was purchased.
27
ORANGE COUNTY SANITATION DISTRICT
Notes to Basic Financial Statements
For the Year Ended June 30, 2018
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, 2018, OCSD had the following investments representing five percent or more of
total investments:
Name of Issuer Fair Value % of Total
Federal Home Loan Bank System (FHLB) $ 54,686,653 8.12%
Federal National Mortgage Association (FNMA) $ 48,561,145 7.21%
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, 2018, in
accordance with OCSD's investment policy, none of OCSD's investments were held with a
counterparty. All of OCSD's investments were held with an independent third party custodian bank
registered in the name of OCSD. OCSD uses US Bank 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, 2018.
28
ORANGE COUNTY SANITATION DISTRICT
Notes to Basic Financial Statements
For the Year Ended June 30, 2018
(3) Capital Assets
Capital asset activity for the year ended June 30, 2018 is as follows:
Beginning Ending
Balance at Additions/ Deletions/ Balance at
July 1, 2017 Transfers Transfers June 30, 2018
Capital assets not depreciated:
Cost:
Land $ 25,247,046 $ 4,494,197 $ - $ 29,741,243
Construction in progress 461,833,450 112,729,390 (146,566,990) 427,995,850
Total nondepreciable assets 487,080,496 117,223,587 (146,566,990) 457,737,093
Depreciable capital assets:
Cost:
Sewage collection facilities 830,551,347 30,159,021 - 860,710,368
Sewage treatment facilities 2,366,129,584 111,241,674 (13,749) 2,477,357,509
Effluent disposal facilities 97,014,820 - - 97,014,820
Solids disposal facilities 3,463,236 - - 3,463,236
General and administrative facilities 246,051,157 7,899,118 (820,503) 253,129,772
Excess purchase price over book
value on acquired assets 19,979,000 - - 19,979,000
Subtotal 3,563,189,144 149,299,813 (834,252) 3,711,654,705
Accumulated depreciation:
Sewage collection facilities (347,993,364) (18,546,029) - (366,539,393)
Sewage treatment facilities (850,160,711) (69,737,183) 13,749 (919,884,145)
Effluent disposal facilities (62,379,493) (1,457,559) - (63,837,052)
Solids disposal facilities (3,165,971) (9,719) - (3,175,690)
General and administrative facilities (163,132,772) (7,648,744) 819,825 (169,961,691)
Excess purchase price over book
value on acquired assets (19,979,000) - - (19,979,000)
Subtotal (1,446,811,311) (97,399,234) 833,574 (1,543,376,971)
Net depreciable assets 2,116,377,833 51,900,579 (678) 2,168,277,734
Net capital assets $ 2,603,458,329 $ 169,124,166 $ (146,567,668) $ 2,626,014,827
For the fiscal year ended June 30, 2018, capital asset additions of$149.3 million in depreciable capital assets are$2.7 million more than the
$146.6 million transferred from Construction in Progress due to capital equipment purchases of$3.0 million,partially offset by$0.3 million of
prior capital project expenses that were written off as expense.
29
ORANGE COUNTY SANITATION DISTRICT
Notes to Basic Financial Statements
For the Year Ended June 30, 2018
(4) Long-Term Liabilities
The following is a summary of the changes in long-term liabilities for the year ended June 30, 2018:
Beginning Ending Due w ithin Long-term
Balance,July 1 Additions Deletions Balance,June 30 one year amount
Compensated absences $ 7,817,373 $ 7,252,711 $ (7,044,230) $ 8,025,854 $ 7,334,828 $ 691,026
Claims and judgments 4,052,668 941,417 (557,998) 4,436,087 732,040 3,704,047
Certificates of participation,
revenue obligations¬es 1,044,250,000 - (32,140,000) 1,012,110,000 31,655,000 980,455,000
Unamortized premium 96,429,773 - (12,802,163) 83,627,610 11,023,062 72,604,548
Totals $1,152,549,814 $ 8,194,128 $ (52,544,391) $ 1,108,199,551 $50,744,930 $1,057,454,621
Compensated Absences
OCSD's policies related to compensated absences are described in Note 1. OCSD's liability at
June 30, 2018 is $8,025,854 with an estimated $7,334,828 to be paid or used within the next fiscal
year.
Claims and Judgments Payable
OCSD is self-insured in a number of areas as described in Note 1. The following is a summary of
the change in claims and judgments payable for the years ended June 30, 2018 and 2017:
2017-18 2016-17
Claims and judgments payable at July 1 $4,052,668 $4,571,057
Claims incurred during the fiscal year 941,417 497,501
Payments on claims during the fiscal year (557,998) (1,015,890)
Claims and judgments payable at June 30 4,436,087 4,052,668
Less: current portion (732,040) (752,880)
Total long-term claims and judgments payable $3,704,047 $3,299,788
30
ORANGE COUNTY SANITATION DISTRICT
Notes to Basic Financial Statements
For the Year Ended June 30, 2018
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, 2018 are summarized as follows:
Amount
2009A certificates of participation $ 4,690,000
2010A wastewater revenue obligations 80,000,000
2010C wastewater revenue obligations 157,000,000
2011A wastewater refunding revenue obligations 75,370,000
2012A wastewater refunding revenue obligations 100,645,000
2012B wastewater refunding revenue obligations 66,395,000
2014A wastewater refunding revenue obligations 78,375,000
2015A wastewater refunding revenue obligations 127,510,000
2016A wastewater refunding revenue obligations 145,880,000
2016E revenue refunding certificate anticipation notes 109,875,000
2017A wastewater refunding revenue obligations 66,370,000
Total certificates of participation, revenue obligations, and notes $1,012,110,000
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, 2018, the
coverage ratio for senior lien debt was 3.66.
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, 2018, 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, 2018 reserve of $4,952,817 is held by US
Bank, the trustee, and meets the reserve requirement.
31
ORANGE COUNTY SANITATION DISTRICT
Notes to Basic Financial Statements
For the Year Ended June 30, 2018
May 2010 Wastewater Revenue Obligations, Series 2010A
On May 18, 2010, OCSD completed the sale of $80,000,000 of wastewater revenue
obligations under the federally taxable Build America Bonds program. The obligations were
issued to finance and to reimburse OCSD for the acquisition, construction, and installation of
additional improvements made to the wastewater system. The stated interest rate on the
obligations is fixed and will range from 5.56 percent to 5.58 percent, however, in accordance
with their designation as Build America Bonds, OCSD expects to receive a cash subsidy from
the United States Treasury equal to 35 percent of the interest payable with respect to these
revenue obligations. The expected net interest rate on the obligations is fixed and will range
from 3.614 percent to 3.627 percent. Annual principal payments are due on February 1,
beginning February 1, 2034 through February 1, 2040.
The trust agreement for the revenue obligations does not require the establishment of a
reserve.
December 2010 Wastewater Revenue Obligations, Series 2010C
On December 8, 2010, OCSD completed the sale of $157,000,000 of wastewater revenue
obligations under the federally taxable Build America Bonds program. The obligations were
issued to finance and to reimburse OCSD for the acquisition, construction, and installation of
additional improvements made to the wastewater system. The stated interest rate on the
obligations is fixed and will range from 6.35 percent to 6.40 percent, however, in accordance
with their designation as Build America Bonds, OCSD expects to receive a cash subsidy from
the United States Treasury equal to 35 percent of the interest payable with respect to these
revenue obligations. The expected net interest rate on the obligations is fixed and will range
from 4.1275 percent to 4.16 percent. Annual principal payments are due on February 1,
beginning February 1, 2031 through February 1, 2044.
The trust agreement for the revenue obligations does not require the establishment of a
reserve.
October 2011 Wastewater Refunding Revenue Obligations, Series 2011A
On October 3, 2011, OCSD completed the sale of $147,595,000 of wastewater refunding
revenue obligations. The obligations were issued to refund $89,800,000 of the outstanding
principal balance of 2000 Series A and B refunding certificates of participation, and
$83,320,000 of the outstanding principal balance of 2003 certificates of participation. The
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 Refunding Revenue Obligations, Series 2012A
On March 22, 2012, OCSD completed the sale of $100,645,000 of wastewater refunding
revenue obligations. The obligations were issued to refund the $108,180,000 outstanding
principal balance of the 2003 certificates of participation. The stated interest rate on the
obligations is fixed and will range from 3 percent to 4 percent. Annual principal payments are
due on February 1, beginning February 1, 2031 through February 1, 2033.
The trust agreement for the revenue obligations does not require the establishment of a
reserve.
32
ORANGE COUNTY SANITATION DISTRICT
Notes to Basic Financial Statements
For the Year Ended June 30, 2018
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
outstanding principal balance of the Series 2000A and 2000B refunding certificates of
participation. The stated interest rate on the obligations is fixed and will range from 3 to 5
percent. Annual principal payments are due on February 1, beginning February 1, 2019
through February 1, 2026.
The trust agreement for the revenue obligations does not require the establishment of a
reserve.
August 2014 Wastewater 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 trust agreement for the revenue obligations 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 trust agreement for the revenue obligations does not require the establishment of a
reserve.
November 2016 Revenue Refunding Certificate Anticipation Notes, Series 2016B
On November 1, 2016, OCSD completed the sale of $109,875,000 of revenue refunding
certificate anticipation notes. The notes were issued to fully refund the $120,850,000
outstanding principal balance of the 2014 Series B revenue refunding certificate anticipation
notes. The interest rate on the notes is fixed at 2 percent. The notes will mature on December
15, 2018. OCSD expects the principal and interest on the notes to be paid from proceeds of
the sale, prior to the maturity date, of a future series of certificates of participation, notes or
other obligations. OCSD has a non-cancellable agreement with its lender to refinance the
notes with future obligations that will not be expired until August 2021.
33
ORANGE COUNTY SANITATION DISTRICT
Notes to Basic Financial Statements
For the Year Ended June 30, 2018
The trust agreement for the certificates does not require the establishment of a reserve.
February 2017 Wastewater Refunding Revenue Obligations, Series 2017A
On February 1, 2017, OCSD completed the sale of $66,370,000 of wastewater refunding
revenue obligations. The obligations were issued to refund $91,620,000 of the outstanding
principal balance of 2007 Series A certificates of participation. The stated interest rate on the
obligations is fixed at 5 percent. Annual principal payments are due on February 1, beginning
February 1, 2021 through February 1, 2030.
The 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, 2018, including the Revenue Refunding
Certificate Anticipation Notes, Series 2016B that currently matures in December 2018, are as
follows:
Year Ending June 30, Principal Estimated Interest Total
2019 $ 31,655,000 $ 41,616,369 $ 73,271,369
2020 32,730,000 38,934,869 71,664,869
2021 140,305,000 37,298,369 177,603,369
2022 28,405,000 35,776,869 64,181,869
2023 29,805,000 34,371,619 64,176,619
2024-2028 167,225,000 150,221,096 317,446,096
2029-2033 252,370,000 105,320,725 357,690,725
2034-2038 225,075,000 49,285,704 274,360,704
2039-2043 102,060,000 10,467,303 112,527,303
2044-2048 2,480,000 103,168 2,583,168
Total $ 1,012,110,000 $ 503,396,091 $ 1,515,506,091
34
ORANGE COUNTY SANITATION DISTRICT
Notes to Basic Financial Statements
For the Year Ended June 30, 2018
(5) Pension Benefits
OCSD has two defined benefit pension plans for retirees: the plan maintained through and by the
Orange County Employees' Retirement System (OCERS) and the Additional Retiree Benefit
Account(ARBA)administered directly by OCSD.
A summary of pension amounts for OCSD's plans at June 30, 2018 is presented below:
OCERS ARBA Total
Net pension asset - OCERS $ 39,571,100 $ - $ 39,571,100
Deferred outflows - pensions 48,595,341 2,464,248 51,059,589
Total pension liability -ARBA - 20,831,172 20,831,172
Deferred inflows - pensions 64,273,306 - 64,273,306
Pension expenses 2,785,617 1,612,274 4,397,891
A. Orange County Employees' Retirement System (OCERS)
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 CERL, the California Public
Employees' Pension Reform Act of 2013 (PEPRA), and the regulations, procedures and policies
adopted by OCERS' Board of Retirement. The Plan's authority to establish and amend the benefit
terms are set by the CERL and PEPRA and may be amended by the California state legislature.
The Plan is a tax qualified plan under Section 401(a)of the Internal Revenue Code
Benefits Provided: OCERS provides service retirement, disability, death and survivor benefits to
plan members who may be public employees or beneficiaries. The CERL and PEPRA establish
benefit terms. Benefits are based on years of credited service equal to one year of full time
employment. Members of plans B, G and H with ten years of service credit are entitled to receive a
retirement allowance beginning at age 50; members of plan U with 5 years of service are eligible to
receive a retirement allowance at age 52. Members attaining age 70 are eligible to retire
regardless of credited service.
35
ORANGE COUNTY SANITATION DISTRICT
Notes to Basic Financial Statements
For the Year Ended June 30, 2018
Benefits are determined by plan formula, age, years of service and final average salary (FAS) as
follows:
Plan G Plan H Plan B Plan U
After 9/21/79 Prof/Sup: After 10/1/10
Prof/Sup*: Before 10/1/10 OCEA: After 8/1/11
Hire Date Prior to 9/21/79 On or after 1/1/2013
OCEA*: Before 8/1/11 501: After 7/1/11
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 every year of FAS for every year of FAS for every year
normal retirement age service credit service credit service credit of service credit
Benefit Adjustments Reduced before age Reduced before age Reduced before age Reduced before age
55 55 57.5 67
Public Employees
Internal Revenue Code Internal Revenue Code Internal Revenue Code Pension Reform Act
FAS Limitation Section 401(a)(17) Section 401(a)(17) Section 401(a)(17) (PEPRA): 120% of
Social Security
wage base per year
*Prof/Sup:Professional and Supervisor employee groups,bargaining unit SPMG.
*OCEA Administrative,Clerical,Engineering,and Technical Services employee groups,bargaining unit OCEA.
*501:Operations 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 the December 31, 2017 measurement date, the following employees were covered by the
benefit terms:
Inactive employees or beneficiaries currently receiving benefits 474
Inactive employees entitled to but not yet receiving benefits 113
Active employees 592
Total 1,179
36
ORANGE COUNTY SANITATION DISTRICT
Notes to Basic Financial Statements
For the Year Ended June 30, 2018
Contributions: Participating employers and active members are required by statute to contribute a
percentage of covered salary to the Plan. CERL requires that the employer contribution rates for all
public employers be determined on an annual basis by the actuary and be effective on the July 1
following notice of a change in rate. Funding contributions are determined annually on an actuarial
basis as of December 31 by OCERS. The actuarially determined rate is the estimated amount
necessary to finance the costs of benefits earned by employees during the year, with an additional
amount to finance any unfunded accrued liability.
Contributions to the Plan from OCSD were $7,525,655 for the year ended June 30, 2018.
Contribution rates in effect for the fiscal year ended June 30, 2018 are as follows:
Plan G Plan H Plan B Plan U
Employer Contribution Rate, 7/1/17-6/30/18 12.33% 12.33% 10.30% 9.25%
Employee Contribution Rate, 7/1/17-6/30/18(2) 6.35-12.22% (1) 5.88-12.22% (1) 6.78-12.39% 6.44-13.68%
Paid by Employer for Employee 3.50% 3.50% 0.00% 0.00%
(1)Net of employer paid portion of 3.5%.
(2)Employee rates are determined bythe age ofentryinto the retirement system.
For the year ended June 30, 2018, the contributions and average employer's contribution rate as a
percentage of covered payroll were as follows:
Average
Employee (Paid Employer
Employer by Employer) Contribution
Plans Contributions Contributions Rate (%)
Plan G $ 16,815 $ 4,773 0.03%
Plan H 5,534,624 1,556,280 10.84%
Plan B 644,683 - 0.99%
Plan U 1,329,533 - 2.03%
Total $ 7,525,655 $ 1,561,053
Pension Assets / Liabilities: As of June 30, 2018, OCSD reported a net pension asset of
$39,571,100 for its proportionate share of OCERS' net pension asset. The net pension asset was
measured as of December 31, 2017 and the total pension asset used to calculate the net pension
asset was determined by an actuarial valuation as of that date. OCSD's proportion of the net
pension asset 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, 2017, OCSD's proportion of the net pension liability was (0.799%), which was a
decrease of 0.599% from its proportion measured as of December 31, 2016. The change in
OCSD's proportion of the net pension liability during the fiscal year ended June 30, 2018 was
caused by an additional contribution made in November 2016 and projections noted above.
37
ORANGE COUNTY SANITATION DISTRICT
Notes to Basic Financial Statements
For the Year Ended June 30, 2018
Pension Expense and Deferred Outflows/Inflows of Resources Related to Pensions: For the year
ended June 30, 2018, OCSD recognized pension expense of $2,785,617 for its proportionate
share of the pension expense. At June 30, 2018 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 $ - $ 15,393,406
Net difference between projected and actual investment
earnings on pension plan investments 16,000,909 44,251,106
Changes of assumptions (1) 20,491,177 4,517,168
Changes in proportion and differences between employer
contributions and proportionate share of contributions 1,296,565 111,626
Employer contributions paid to OCERS subsequent to
the measurement date 10,806,690 -
Total $ 48,595,341 $ 64,273,306
(1) The monetary effects of changes in actuarial assumptions and method totals$20,491,177 for deferred outflows
and$4,517,168 for deferred inflows of resources. These changes include:
• adjustments to the mortality tables,
• retirement assumptions for deferred vested members (age at retirement 59, increase of 4.25%in reciprocity,
and an increase in compensation increases),
• % in the rate of marriage for male and female members at retirement or pre-retirement death,
• an increase in the Consumer Price Index of 2.75%per year, maximum increase is 3%,
• and a slight increase of.50%in salaries per year.
Detail for these changes is available in the Segal Actuarial Valuation for December 31,2017,Section 3.This report is
available on the OCERS w ebsite at w w w.ocers.org.
The $10,806,690 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, 2019. 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
2019 $ (5,465,917)
2020 (6,857,020)
2021 (10,219,274)
2022 (7,151,750)
2023 3,177,532
2024 31,774
Total $ (26,484,655)
38
ORANGE COUNTY SANITATION DISTRICT
Notes to Basic Financial Statements
For the Year Ended June 30, 2018
Actuarial Assumptions and Methods: The total pension liability in the December 31, 2017 actuarial
valuation was determined using the following actuarial assumptions, applied to all periods included
in the measurement:
Investment rate of return 7.00% of net pension plan investment expenses, including inflation
Discount rate 7.00%
Inflation rate 2.75%
Projected salary increases 4.25% to 12.25%
Cost of living adjustment 2.75% of retirement income
OCERS Economic and Demographic Assumptions: On October 16, 2017, the OCERS Board
adopted the following significant changes to the economic and demographic actuarial
assumptions, which will be used to establish retirement contribution rates effective July 1, 2019:
• Reduced the assumed investment rate of return from 7.25% to 7%
• Reduced the assumed rate of price inflation from 3.00% to 2.75%
• Adopted the use of generational tables, which have identified reduced rates of mortality for
members
Additionally, the OCERS Board adopted a three-year phase-in of the impact to the contribution
rates associated with the Unfunded Actuarially Accrued Liability. The cumulative effect of these
changes will have the impact of increasing contribution rates for members and plan sponsors.
The mortality assumptions used in the total pension liability at December 31, 2017 were based on
the Headcount-Weighted RP-2014 Healthy Annuitant Mortality Table as a starting point, projected
generationally using the two-dimensional Scale MP-2016, with age adjustments, and adjusted
separately for healthy and disabled members. The basis for determining the mortality assumptions
used were based on the results of the actuarial experience study for the period January 1, 2014
through December 31, 2016.
Further details of the experience study can be found in the OCERS CAFR, available on their
website at www.ocers.org.
Long-Term 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.
39
ORANGE COUNTY SANITATION DISTRICT
Notes to Basic Financial Statements
For the Year Ended June 30, 2018
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, 2017:
Target Long-Term Expected Real
Asset Class Allocation Rate of Return (Arithmetic)
Global Equity 35.00% 6.38%
Core Bonds 13.00% 1.03%
High Yield Bonds 4.00% 3.52%
Bank Loan 2.00% 2.86%
TIPS 4.00% 0.96%
Emerging Markets Debt 4.00% 3.78%
Real Estate 10.00% 4.33%
Core Infrastructure 2.00% 5.48%
Natural Resources 10.00% 7.86%
Risk Mitigation 5.00% 4.66%
Mezzanine/Distressed Debts 3.00% 6.53%
Private Equity 8.00% 9.48%
Total 100.00%
Discount Rate: The discount rate used to measure the total pension liability was 7.00% for the
year ended December 31, 2017. 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, 2017.
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 7.00%, 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 (6.00%)
or 1 percentage point higher(8.00%)than the current rate:
1% Decrease Current Discount Rate 1% Increase
Net Pension Liability (Asset) (6.00%) (7.00%) (8.00%)
December 31, 2017 $ 57,945,374 $ (39,571,100) $ (118,791,140)
40
ORANGE COUNTY SANITATION DISTRICT
Notes to Basic Financial Statements
For the Year Ended June 30, 2018
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).
B. Additional Retiree Benefit Account (ARBA)
Plan Description: 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 325 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 30, 2016. The plan is a funded on a pay-as-you-go plan from general funds and
is administered by OCSD. Stand-alone financial statements are not issued for the plan.
Benefits Provided: 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'/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.
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
OCEAN: Before 8/1/11
Benefit amount per
year of service for $10 per month x years of service up to $10 per month x years of service up to
normal retirement age a maximum of 25 years a maximum of 25 years
Age 50 or over with 10 or more years Age 50 or over with 10 or more years
Service requirement 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: Administrative,Clerical, Engineering,and Technical Services employee groups,bargaining unit OCEA.
No cost of living adjustment is provided to benefit recipients.
41
ORANGE COUNTY SANITATION DISTRICT
Notes to Basic Financial Statements
For the Year Ended June 30, 2018
At June 30, 2018, the following employees were covered by the benefit terms:
Inactive employees or beneficiaries currently receiving benefits 325
Inactive employees entitled to but not yet receiving benefits 53
Active employees 558
Total 936
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 $728,450 for the year ended June 30, 2018.
Pension Liabilities: As of June 30, 2018, OCSD reported total pension liability of$20,831,172 for
its ARBA plan. The total pension liability was determined by an actuarial valuation as of July 1,
2017. OCSD funds benefits on a "pay as you go" basis and elected not to pre-fund its pension
obligation. As a result, there are no plan assets and the total pension liability is equal to the net
pension liability. Standard actuarial update procedures were used to project/discount from July 1,
2017 to the measurement date of June 30, 2018.
The actuarial valuation performed as of July 1, 2017, used the entry age, level percent of pay cost
method. This method represents the present value of all benefits accrued through the valuation
date assuming that each employee's liability is expensed from hire date until retirement date as a
level percentage of pay.
The following table shows the changes in the total pension liability:
Total Pension Liability
Increase (Decrease)
Beginning balance at July 1, 2017 $ 18,467,361
Changes in the year:
Service cost 553,795
Interest on total pension liability 649,192
Changes of benefit terms -
Difference between expected and actual experience 1,889,274
Changes of assumptions -
Benefit payments (1) (728,450)
Net changes 2,363,811
Ending balance at June 30, 2018 $ 20,831,172
(1)As part of the July 1,2017 actuarial valuation report, Demsey, Filliger&Associates prepared
a projection of the expected annual cost to the District to pay ARBA benefits.
42
ORANGE COUNTY SANITATION DISTRICT
Notes to Basic Financial Statements
For the Year Ended June 30, 2018
Pension Expense and Deferred Outflows/Inflows of Resources Related to Pension: For the year
ended June 30, 2018, OCSD recognized pension expense of $1,612,274 for its ARBA plan. At
June 30, 2018 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 $ 1,603,020 $ -
Changes of assumptions (1) 861,228 Net difference between projected and actual investment
earnings on pension plan investments - -
Employer contributions over actuary projections - -
Total $ 2,464,248 $ -
(1)The monetary effects of changes in actuarial assumptions and method totals$861,228. These changes include
passage of time,a change in the discount rate from 3.75%to 3.25%,change in actuarial system,census and
other losses.
Amounts reported as deferred outflows of resources related to ARBA pensions will be recognized
in pension expense as follows:
Year ended June 30 Amount
2019 $ 409,287
2020 409,287
2021 409,287
2022 409,287
2023 409,287
2024 294,783
2025 123,030
Total $ 2,464,248
Actuarial Assumptions and Methods: The total pension liability in the July 1, 2017 actuarial
valuation was determined using the following actuarial assumptions, applied to all periods included
in the measurement:
Investment rate of return 3.25% per annum
Discount rate 3.25% per annum as of July 1, 2017 (valuation date)
3.25% per annum as of June 30, 2018 (measurement date)
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, 2017 were based on the RP-
2014 Employee Mortality and Health Annuitant Mortality Tables for Males or Females, as
appropriate, without projection.
43
ORANGE COUNTY SANITATION DISTRICT
Notes to Basic Financial Statements
For the Year Ended June 30, 2018
Discount Rate: The discount rate used to measure the total pension liability was 3.25% as of the
valuation date, July 1, 2017, and 3.25% as of the measurement date, June 30, 2018. Because
there are no assets held in a trust that meets GASB 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
Total Pension Liability (2.25%) (3.25%) (4.25%)
June 30, 2018 $ 23,803,120 $ 20,831,172 $ 18,384,011
(6) Other Postemployment Benefits (OPEB)
Plan Description: The post-employment medical benefits plan is a single-employer defined benefit
plan administered by OCSD. This plan was established and may be modified only by action of the
OCSD Board of Directors. Stand-alone financial statements are not issued.
Benefits Provided: OCSD offers medical insurance to active and retired employees, as well as
their qualified dependents. 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. For the fiscal year
ended June 30, 2018, premiums ranged between $360 and $3,918 per month, depending on the
plan and number of dependents covered.
At June 30, 2018, the following employees were covered by the benefit terms:
Inactive employees or beneficiaries currently receiving benefits
(includes 106 paying premiums and 53 with premiums paid by OCSD) 159
Inactive employees entitled to but not yet receiving benefits 0
Active employees (includes 7 eligible for premiums paid by OCSD) 596
Total 755
Contributions: 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).
OCSD utilizes a pay-as-you-go method for funding the plan. Contributions to the plan from OCSD
were $953,656 and the estimated implicit subsidy was $519,941, resulting in total payments of
$1,473,597, and retirees contributed $1,023,232 for the year ended June 30, 2018.
OPEB Liabilities: As of June 30, 2018, OCSD reported total OPEB liability of $5,025,395 for its
post-employment retiree medical benefits plan. The total OPEB liability was determined by an
actuarial valuation as of July 1, 2017. OCSD funds benefits on a "pay as you go" basis and
44
ORANGE COUNTY SANITATION DISTRICT
Notes to Basic Financial Statements
For the Year Ended June 30, 2018
elected not to pre-fund its OPEB obligation. As a result, there are no plan assets and the total
OPEB liability is equal to the net OPEB liability. Standard actuarial update procedures were used
to project/discount from July 1, 2017 to the measurement date of June 30, 2018.
The actuarial valuation performed as of July 1, 2017 used the entry age, 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 following table shows the changes in the total OPEB liability:
Total OPEB Liability
Increase (Decrease)
Beginning balance at July 1, 2017 $ 6,398,694
Changes in the year:
Service cost 18,182
Interest on total OPEB liability 177,395
Changes of benefit terms -
Changes of assumptions (95,279)
Benefit payments (1) (1,473,597)
Net changes (1,373,299)
Ending balance at June 30, 2018 $ 5,025,395
(1)As part of the July 1,2017 actuarial valuation report,Demsey,Filliger&Associates
prepared a projection of the expected annual cost to the District to pay OPEB benefits.
OPEB Expense and Deferred Outflows/Inflows of Resources Related to OPEB: For the year
ended June 30, 2018, OCSD recognized OPEB expense of $100,298 for its post-employment
retiree medical benefits plan. At June 30, 2018 OCSD reported $0 for its share of deferred
outflows/inflows of resources related to OPEB.
Actuarial Assumptions and Methods: The total OPEB liability in the July 1, 2017 actuarial valuation
was determined using the following actuarial assumptions, applied to all periods included in the
measurement:
Investment rate of return 4.00% per annum
Discount rate 3.13% per annum as of July 1, 2017 (valuation date)
3.62% per annum as of June 30, 2018 (measurement date)
Healthcare cost trend rate 6.00% for 2017, 5.00% for 2018 and later
Projected salary increases 3.00% per annum
The mortality assumptions used in total OPEB liability at July 1, 2017 were based on the RP-2014
Employee Mortality Table for Males or Females, as appropriate, without projection for pre-
retirement mortality rates and RP-2014 Health Annuitant Mortality Table for Males or Females, as
appropriate, without projection for post-retirement mortality rates.
45
ORANGE COUNTY SANITATION DISTRICT
Notes to Basic Financial Statements
For the Year Ended June 30, 2018
Actuarial assumptions used in the July 1, 2017 valuation were based on a review of plan
experience during the period July 1, 2015 through June 30, 2017.
Discount Rate: The discount rate used to measure the total OPEB liability was 3.13% as of the
valuation date, July 1, 2017, and 3.62% as of the measurement date, June 30, 2018. Because
there are no assets held in a trust, for GASB 75 reporting purposes, the discount rate is based on
a yield or index rate for 20-year, tax-exempt general obligation municipal bonds with an average
rating of AA/Aa or higher.
Sensitivity of the Total OPEB Liability to Changes in the Discount Rate: The following table
represents the total OPEB liability calculated using the discount rate of 3.62% as of the
measurement date, as well as what total OPEB liability would be if it were calculated using a
discount rate that is 1 percentage point lower (2.62%) or 1 percentage point higher (4.62%) than
the current rate:
1% Decrease Current Discount Rate 1% Increase
Total OPEB Liability (2.62%) (3.62%) (4.62%)
June 30, 2018 $ 5,222,788 $ 5,025,395 $ 4,839,538
Sensitivity of the Total OPEB Liability to Changes in the Healthcare Cost Trend Rates: The
following table represents the total OPEB liability calculated using the healthcare cost trend rate of
6.00% decreasing to 5.00% as of the measurement date, as well as what total OPEB liability would
be if it were calculated using a healthcare cost trend rate that is 1 percentage point lower (5.00%
decreasing to 4.00%) or 1 percentage point higher (7.00% decreasing to 6.00%) than the current
rate:
1% Decrease Current Trend Rate 1% Increase
(5.00% decreasing (6.00% decreasing (7.00% decreasing
Total OPEB Liability to 4.00%) to 5.00%) to 6.00%)
June 30, 2018 $ 4,797,343 $ 5,025,395 $ 5,271,841
(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 was amortized over useful lives of the original assets
acquired. As of June 30, 2018, the excess of purchase price over the assets' book value was fully
amortized.
46
ORANGE COUNTY SANITATION DISTRICT
Notes to Basic Financial Statements
For the Year Ended June 30, 2018
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 $3,840,791 were recorded as contribution from
other government during the fiscal year ended June 30, 2018. 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 credited to
IRWD of ($632,465) to Revenue Area 14 were recognized and reported as reductions to
contributions from other government during the fiscal year ended June 30, 2018. 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, $1,242,436 in annual solids capital handling charges were
reported as operating revenue in Consolidated Revenue Area, and $2,935,007 in quarterly solids
operating and maintenance charges were reported as operating revenue in Revenue Area No. 14
during the fiscal year ended June 30, 2018.
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$483 was reported in accounts receivable and $18,888,270 in due
to other governmental agency as of June 30, 2018.
Annual Cash Reserve Requirement
The cash reserve contribution requirement from IRWD at June 30, 2018; in accordance with
Amendment No. 2 to the Agreement between IRWD and OCSD Acquiring Ownership Interests,
Assigning Rights, and Establishing Obligations; is $15.4 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, 2018, OCSD received loan repayments totaling $20,472,023, leaving
an outstanding loan receivable balance of$0.
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
47
ORANGE COUNTY SANITATION DISTRICT
Notes to Basic Financial Statements
For the Year Ended June 30, 2018
were present. During the fiscal year ended June 30, 2017, OCSD completed an analysis of
remediation alternatives resulting in a less costly remediation plan for the contaminated soil than
the plan developed during the previous fiscal year. The new remediation plan received approval
from the Orange County Health Care Agency, and based upon their feedback a final design will
now be completed. This new remediation plan calls for removal and disposal of approximately
2,200 tons of contaminated soil, and some limited groundwater treatment. This work is anticipated
to begin in the spring of 2019 and be completed by January 2020. As of June 30, 2018, actual
costs of $290,896 were incurred. Total remaining costs are estimated not to exceed $5,000,000,
including post-remediation monitoring costs for a five-year period and a project contingency of 50
percent for the remediation effort.
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, 2018, OCSD implemented GASB Statement No. 75. The
implementation of GASB Statement No. 75 requires recognizing and measuring OPEB liabilities,
deferred outflows of resources, deferred inflows of resources, and expense. The net position was
not restated for deferred inflows and deferred outflows because they were not determinable at the
time of implementation of GASB 75. The retroactive effect of implementing this change in reporting
OPEB 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, 2017 $2,041,225,032
Total OPEB liability (measurement date as of July 1, 2017) (7,591,758)
Net position as restated, July 1, 2017 $2,033,633,274
48
ORANGE COUNTY SANITATION DISTRICT
REQUIRED SUPPLEMENTARY INFORMATION
49
ORANGE COUNTY SANITATION DISTRICT
Proportionate Share of the Net Pension Liability (Asset)
Orange County Employees Retirement System (OCERS) Pension Plan
Last 10 Fiscal Years (1)
Fiscal Year Ended June 30,
2015 2016 2017 2018
District's proportion of the net pension
liability (asset) 1.13% 0.74% (0.20%) (0.80%)
District's proportionate share of the net
pension liability(asset) $ 57,418,760 $ 42,439,759 $ (10,384,508) $ (39,571,100)
District's covered payroll (2) $ 58,641,163 $ 59,789,927 $ 60,000,017 $ 62,341,796
District's proportionate share of the net
pension liability(asset)as a percentage
of its covered payroll 97.92% 70.98% (17.31%) (63.47%)
OCERS'fiduciary net position as a
percentage of the total pension liability 89.61% 92.74% 101.70% 105.96%
(1) The amounts presented were determined as of the measurement date December 31.
Data for fiscal years ended June 30, 2009 through 2014 is not available in a comparable format.
(2) Covered payroll represents compensation earnable and pensionable compensation for the measurement
period ended December 31. Only compensation earnable and pensionable compensation that would
possibly go into the determination of retirement benefits are included.
50
ORANGE COUNTY SANITATION DISTRICT
Schedule of District Contributions
Orange County Employees Retirement System (OCERS) Pension Plan
Last 10 Fiscal Years (1)
Fiscal Year Ended June 30,
2015 2016 2017 2018
Contractually required contribution $ 17,201,569 $ 12,222,849 $ 7,709,734 $ 7,525,655
Contributions in relation to the
contractually required contribution $ (17,201,569) $ (12,222,849) $ (7,709,734) $ (7,525,655)
Contribution deficiency (excess) $ - $ - $ - $ -
District's covered payroll (2) $ 60,025,942 $ 60,595,474 $ 62,266,907 $ 65,390,144
Contributions as a percentage of
covered payroll 28.66% 20.17% 12.38% 11.51%
(1) Data for fiscal years ended June 30, 2009 through 2014 is not available in a comparable format.
(2) Covered payroll represents compensation earnable and pensionable compensation for the fiscal year
ended June 30. Only compensation earnable and pensionable compensation that would possibly go
into the determination of retirement benefits are included.
51
ORANGE COUNTY SANITATION DISTRICT
Total Pension Liability(3)
Additional Retiree Benefit Account(ARBA)
Last 10 Fiscal Years (1)
Fiscal Year Ended June 30,
2015 2016 2017 2018
District's total pension liability $ 16,680,614 $ 18,313,122 $ 18,467,361 $ 20,831,172
District's covered-employee payroll (2) $ 62,139,375 $ 62,977,577 $ 65,120,945 $ 68,126,103
District's total pension liability as a
percentage of its covered-employee
payroll 26.84% 29.08% 28.36% 30.58%
(1) The amounts presented for each fiscal year were determined as of July 1. Data for fiscal
years ended June 30, 2009 through 2014 is not available in a comparable format.
(2) Covered-employee payroll represents total payroll of employees that are provided benefits
through the pension plan for the fiscal year ended June 30.
(3) There are no assets in a trust compliant with GASB codification P22.101. OCSD funds benefits on a "pay
as you go" basis and elected not to pre-fund its pension obligation. As a result, there are no plan assets
and the total pension liability is equal to the net pension liability.
52
ORANGE COUNTY SANITATION DISTRICT
Changes in Total Pension Liability(3)
Additional Retiree Benefit Account(ARBA)
Last 10 Fiscal Years (1)
Fiscal Year Ended June 30,
2016 2017 2018
Beginning balance at July 1 $ 16,680,614 $ 18,313,122 $ 18,467,361
Changes in the year:
Service cost 270,223 278,330 553,795
Interest on total pension liability 626,386 593,711 649,192
Changes of benefit terms - - -
Changes of assumptions 1,230,327 (70,952) 1,889,274
Benefit payments (2) (494,428) (646,850) (728,450)
Net changes 1,632,508 154,239 2,363,811
Ending balance at June 30 $ 18,313,122 $ 18,467,361 $ 20,831,172
(1) The amounts presented for each fiscal year were determined as of July 1. Data for fiscal
years ended June 30, 2009 through 2015 is not available in a comparable format.
(2) As part of the July 1, 2017 actuarial valuation report, Demsey, Filliger&Associates prepared
a projection of the expected annual cost to the District to pay ARBA benefits. The District
elected to use actual costs rather than the projected annual costs to pay ARBA benefits.
(3) OCSD funds benefits on a "pay as you go" basis and elected not to pre-fund its pension
obligation. As a result, there are no plan assets and the total pension liability is equal to the net
pension liability.
53
ORANGE COUNTY SANITATION DISTRICT
Total OPEB Liability(3)
Post-Employment Medical Benefits Plan
Last 10 Fiscal Years (1)
Fiscal Year Ended June 30,
2017 2018
District's total OPEB liability $ 6,398,694 $ 5,025,395
District's covered-employee payroll (2) $ 65,120,945 $ 68,126,103
District's total OPEB liability as a percentage
of its covered-employee payroll 9.83% 7.38%
(1) The amounts presented for each fiscal year were determined as of July 1. Data for
fiscal years ended June 30, 2009 through 2016 is not available in a comparable format.
(2) Covered-employee payroll represents total payroll of employees that are provided benefits
through the OPEB plan for the fiscal year ended June 30.
(3) There are no assets in a trust compliant with GASB codification P52.101. OCSD funds benefits
on a "pay as you go" basis and elected not to pre-fund its OPEB obligation. As a result, there
are no plan assets and the total OPEB liability is equal to the net OPEB liability.
54
ORANGE COUNTY SANITATION DISTRICT
Changes in Total OPEB Liability(3)
Post-Employment Medical Benefits Plan
Last 10 Fiscal Years (1)
Fiscal Year Ended June 30,
2018
Beginning balance at July 1 $ 6,398,694
Changes in the year:
Service cost 18,182
Interest on total OPEB liability 177,395
Changes of benefit terms -
Changes of assumptions (95,279)
Benefit payments (2) (1,473,597)
Net changes (1,373,299)
Ending balance at June 30 $ 5,025,395
(1) The amounts presented for each fiscal year were determined as of July 1. Data for
fiscal years ended June 30, 2009 through 2016 is not available in a comparable format.
(2) Benefit payments include implicit subsidy associated with benefits paid.
(3) OCSD funds benefits on a "pay as you go" basis and elected not to pre-fund its OPEB
obligation. As a result, there are no plan assets and the total OPEB liability is equal to the
net OPEB liability.
55
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56
ORANGE COUNTY SANITATION DISTRICT
SUPPLEMENTARY INFORMATION
57
ORANGE COUNTY SANITATION DISTRICT
Combining Area Schedule of Net Position
June 30,2018
Revenue Consolidated Totals
Area No. 14 Revenue Area 2018
Current assets:
Cash and cash equivalents $ 3,802,119 $ 132,176,414 $ 135,978,533
Investments 15,085,667 524,436,305 539,521,972
Accounts receivable, net of allowance
for uncollectibles$455,979 483 13,202,457 13,202,940
Accrued interest receivable - 2,851,382 2,851,382
Connection fees receivable - 3,871,076 3,871,076
Property tax receivable - 1,227,135 1,227,135
Inventories - 7,243,823 7,243,823
Prepaid expenses - 1,645,412 1,645,412
Total current assets 18,888,269 686,654,004 705,542,273
Noncurrent assets:
Restricted:
Cash and cash equivalents - 4,953,800 4,953,800
Accrued interest receivable - 6,855 6,855
Unrestricted:
Non-depreciable capital assets 13,862,535 443,874,558 457,737,093
Depreciable capital assets, net of accumulated depreciation 78,375,231 2,089,902,503 2,168,277,734
Other noncurrent assets, net - 10,344 10,344
Net pension asset-OCERS - 39,571,100 39,571,100
Total noncurrent assets 92,237,766 2,578,319,160 2,670,556,926
Total assets 111,126,035 3,264,973,164 3,376,099,199
Deferred outflows of resources:
Deferred losses on defeasances - 32,880,203 32,880,203
Deferred outflows related to pensions 51,059,589 51,059,589
Total defered outflows of resources - 83,939,792 83,939,792
Total assets and deferred outflows of resources 111,126,035 3,348,912,956 3,460,038,991
Current liabilities:
Accounts payable - 13,365,974 13,365,974
Accrued expenses - 15,404,746 15,404,746
Retentions payable - 2,147,719 2,147,719
Interest payable - 17,113,450 17,113,450
Due to other governmental agency 18,888,270 - 18,888,270
Current portion of long-term obligations - 50,744,930 50,744,930
Total current liabilities 18,888,270 98,776,819 117,665,089
Noncurrent liabilities:
Noncurrent portion of long-term obligations - 1,057,454,621 1,057,454,621
Total OPEB liability 5,025,395 5,025,395
Net pension liability-OCERS - -
Totalpensionliability-ARBA - 20,831,172 20,831,172
Total noncurrent liabilities - 1,083,311,188 1,083,311,188
Total liabilities 18,888,270 1,182,088,007 1,200,976,277
Deferred inflows of resources:
Deferred inflows related to pensions - 64,273,306 64,273,306
Total liabilities and deferred inflows of resources 18,888,270 1,246,361,313 1,265,249,583
Net position:
Net investment in capital assets:
Collection system 16,234,789 517,005,841 533,240,630
Treatment and disposal-land 954,499 18,649,788 19,604,287
Treatment and disposal system 75,048,477 1,998,121,432 2,073,169,909
Capital assets related debt - (1,057,896,752) (1,057,896,752)
Subtotal 92,237,765 1,475,880,309 1,568,118,074
Unrestricted: - 626,671,334 626,671,334
Total net position $ 92,237,765 $ 2,102,551,643 $ 2,194,789,408
58
ORANGE COUNTY SANITATION DISTRICT
Combining Area Schedule of Revenues, Expenses, and Changes in Net Position
For the Year Ended June 30, 2018
Revenue Consolidated Totals
Area No. 14 Revenue Area 2018
Operating revenues:
Service charges $ 5,418,027 $ 310,910,737 $ 316,328,764
Permit and inspection fees 8,245 1,162,084 1,170,329
Total operating revenues 5,426,272 312,072,821 317,499,093
Operating expenses other than depreciation
and amortization:
Salaries and benefits 2,593,403 64,824,636 67,418,039
Utilities 220,445 7,077,659 7,298,104
Supplies, repairs and maintenance 1,377,135 26,860,367 28,237,502
Contractual services 3,673,256 25,847,030 29,520,286
Feasibility studies 119,025 5,975,031 6,094,056
Other 234,054 6,753,970 6,988,024
Total operating expenses other than
depreciation and amortization 8,217,318 137,338,693 145,556,011
Operating income (loss) before
depreciation and amortization (2,791,046) 174,734,128 171,943,082
Depreciation and amortization 3,615,330 93,783,904 97,399,234
Operating income (loss) (6,406,376) 80,950,224 74,543,848
Non-operating revenues:
Property taxes 2,781,080 91,407,273 94,188,353
Investment and interest income 44,113 3,185,643 3,229,756
Contributions from other government 3,263,403 3,538,879 6,802,282
Other 13,995 795,081 809,076
Total non-operating revenues 6,102,591 98,926,876 105,029,467
Non-operating expenses:
Interest 100,319 34,910,707 35,011,026
Other 3,043 1,284,685 1,287,728
Loss on disposal of assets 5,178 190,602 195,780
Total non-operating expenses 108,540 36,385,994 36,494,534
Income (loss)before capital contributions (412,325) 143,491,106 143,078,781
Capital contributions:
Capital facilities capacity charges - 18,077,353 18,077,353
Change in net position (412,325) 161,568,459 161,156,134
Total net position - beginning, as restated 92,650,090 1,940,983,184 2,033,633,274
Total net position -ending $ 92,237,765 $ 2,102,551,643 $ 2,194,789,408
59
ORANGE COUNTY SANITATION DISTRICT
Combining Area Schedule of Cash Flows
For the Year Ended June 30, 2018
Revenue Consolidated Totals
Area No. 14 Revenue Area Eliminations 2018
Cash flows from operating activities:
Receipts from customers and users $ 24,314,059 $ 350,121,696 $ $ 374,435,755
Payments to employees (2,593,403) (71,373,734) (73,967,137)
Payments to suppliers (5,623,915) (74,272,333) (79,896,248)
Net cash provided by operating activities 16,096,741 204,475,629 220,572,370
Cash flows from noncapital financing activities:
Proceeds from property taxes 2,781,080 91,499,190 94,280,270
Payments for other obligations 11,095 (489,611) (478,516)
Net cash provided by noncapital financing activities 2,792,175 91,009,579 93,801,754
Cash flows from capital and related financing activities:
Capital facilities capacity charges - 17,918,938 17,918,938
Additions to capital assets (3,208,326) (113,517,355) 3,895,868 (112,829,813)
Disposal of capital assets - 632,465 (632,465)
Interest paid (100,319) (44,140,551) (44,240,870)
Principal payments on debt obligation - (32,141,018) (32,141,018)
Contribution from other government 3,263,403 3,538,879 (3,263,403) 3,538,879
Net cash used in capital and related financing activities (45,242) (167,708,642) (167,753,884)
Cash flows from investing activities:
Proceeds from the sale of investments (5,943,508) 187,490,842 181,547,334
Purchases of investments (9,284,057) (300,184,495) (309,468,552)
SARI project payments - 20,472,023 20,472,023
Interest received 186,010 7,207,876 7,393,886
Net cash used in investing activities (15,041,555) (85,013,754) (100,055,309)
Net increase in cash and cash equivalents 3,802,119 42,762,812 46,564,931
Cash and cash equivalents, beginning of year - 94,367,402 94,367,402
Cash and cash equivalents, end of year $ 3,802,119 $ 137,130,214 $ $ 140,932,333
Reconciliation of operating income(loss)to net cash provided
by(used in)operating activities:
Operating income(loss) $ (6,406,376) $ 80,950,224 $ $ 74,543,848
Adjustments to reconcile operating income(loss)
to net cash provided by operating activities:
Depreciation and amortization 3,615,330 93,783,904 97,399,234
Bad debt expense(n\et recoveries) - 219,792 219,792
(Increase)/decrease in operating assets:
Accounts receivable 33,893,622 (1,636,575) 32,257,047
Inventories - (75,275) (75,275)
Prepaid and other assets - 87,640 87,640
Increase/(decrease)in operating liabilities:
Accounts payable - (2,012,182) (2,012,182)
Accrued expenses - 150,961 150,961
Due to other governmental agency (15,005,835) 39,685,450 24,679,615
Net pension/OPEB liability - (8,463,282) (8,463,282)
Pension/OPEB/accrued leave payable - 1,192,318 1,192,318
Compensated absences - 209,235 209,235
Claims and judgments - 383,419 383,419
Net cash provided by(used in)operating activities $ 16,096,741 $204,475,629 $ $220,572,370
Noncash activities:
Unrealized(loss)on the fair value of investments $ (141,898) $ (4,932,908) $ (5,074,806)
Receivable from non-operating activities 4,085,372 4,085,372
Capital assets acquired through accounts payable - 5,377,210 5,377,210
Capital facilities capacity charges acquired - 158,415 158,415
60
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 context 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. 62 - 66
Revenue Capacity
These schedules contain information to help the reader assess OCSD's most
significant revenue source of sewer service fees. 67 - 69
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 70 - 73
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. 74 - 77
Demographic and Economic Factors
These schedules offer demographic information to help the reader understand the
environment within which OCSD's financial activities take place. 78 - 81
61
ORANGE COUNTY SANITATION DISTRICT
Net Position by Component
(Dollars in Thousands)
Last Ten Fiscal Years
$2,500,000
$2,000,000
$1,500,000
$1,000,000
$500,000
$0
2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18
oNet Investment in Capital Assets oUnrestricted
Net Investment in
Fiscal Year Capital Assets Unrestricted Total Net Position
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 (1)
2012-13 1,180,298 520,427 1,700,725
2013-14 1,204,706 617,589 1,822,295
2014-15 1,327,384 434,460 1,761,844 (2)
2015-16 1,429,269 489,303 1,918,572 (3)
2016-17 1,504,898 536,327 2,041,225
2017-18 1,568,118 626,671 2,194,789 (4)
(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 GASB 73.
(4) Beginning net position restated due to implementation of GASB 75.
Source: Orange County Sanitation District's Financial Management Division.
62
ORANGE COUNTY SANITATION DISTRICT
Revenues and Gross Capital Contributions by Source
(Dollars in Thousands)
Last Ten Fiscal Years
$325,000
$300,000
$275,000
$250,000
$225,000
$200,000
$175,000
$150,000
$125,000
$100,000
$75,000
$50,000
$25,000
$0
-$25,000
2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18
OOperating Revenue ■Non-Operating Revenue 0Capital Contributions
Operating Revenue Non-Operating Revenue
Permit& Total
Fiscal Service Inspection Total Property Non- Capital
Year Charges Fees Operating Taxes Interest Other Operating Contributions
2008-09 $ 206,422 $ 895 $ 207,317 $ 66,427 $ 14,836 $ 1,634 $ 82,897 $17,937
2009-10 225,059 629 225,688 64,759 19,166 6,939 90,864 (2,406)
2010-11 244,465 784 245,249 64,307 10,092 11,015 85,414 9,800
2011-12 259,491 1,030 260,521 67,882 15,747 8,486 92,115 8,936
2012-13 303,400 1,176 304,576 79,240 (3,913) 3,781 79,108 12,797
2013-14 300,611 848 301,459 74,944 6,498 12,595 94,037 14,093
2014-15 301,548 902 302,450 79,835 4,806 9,996 94,637 17,656
2015-16 314,477 951 315,428 84,407 9,183 14,658 108,248 17,974
2016-17 312,237 1,045 313,282 88,284 3,081 27,146 118,511 16,351
2017-18 316,329 1,170 317,499 94,188 3,230 7,611 105,029 18,077
Source: Orange County Sanitation District's Financial Management Division.
63
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
2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18
■Operating Expense oNon-Operating Expense
Operating Expense Non -Operating Expense
Fiscal Salaries& Maint& Depr& Total Interest Total Non-
Year Benefits Utilities Other Amort Operating Expense Other Operating
2008-09 $ 67,498 $ 7,242 $ 89,816 $ 32,520 $ 197,076 $ 24,899 $ 13,842 $ 38,741
2009-10 69,652 6,934 61,499 52,036 190,121 27,537 13,736 41,273
2010-11 73,112 6,948 63,328 49,288 192,676 29,129 39,245 68,374
2011-12 75,642 7,405 89,272 56,051 228,370 28,700 8,433 37,133
2012-13 76,878 6,403 66,536 63,907 213,724 42,315 37,335 79,650
2013-14 79,179 6,381 60,887 99,805 246,252 40,450 1,317 41,767
2014-15 79,657 7,246 62,323 94,186 243,412 34,112 3,168 37,280
2015-16 75,576 7,246 70,679 90,502 244,003 27,597 6,482 34,079
2016-17 74,291 6,119 69,843 96,320 246,573 25,648 53,270 78,918
2017-18 67,418 7,298 70,840 97,399 242,955 35,011 1,483 36,494
Source: Orange County Sanitation District's Financial Management Division.
64
ORANGE COUNTY SANITATION DISTRICT
Change in Net Position
(Dollars in Thousands)
Last Ten Fiscal Years
$2,500,000
$2,000,000
$1,500,000
$1,000,000
$500,000
$0
2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18
Ending Net Position by Fiscal Year
Fiscal Total Total Change in Beginning Ending
Year Revenues Expenses Net Position Net Position Net Position
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 (1) 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 (2) 1,761,844
2015-16 441,650 278,082 163,568 1,755,004 (3) 1,918,572
2016-17 448,144 325,491 122,653 1,918,572 2,041,225
2017-18 440,605 279,449 161,156 2,033,633 (4) 2,194,789
(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 GASB 73.
(4) Beginning net position restated due to implementation of GASB 75.
Source: Orange County Sanitation District's Financial Management Division.
65
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
2008-09 $ 172 $ 57 $ 172 $133 $ 534
2009-10 185 57 102 129 473
2010-11 187 57 176 141 561
2011-12 196 57 186 138 577
2012-13 174 57 234 135 600
2013-14 189 57 296 131 673
2014-15 177 57 194 129 557
2015-16 181 57 190 117 545
2016-17 174 57 173 107 511
2017-18 173 57 350 100 680
Notes:
The Board of Directors of the Orange County Sanitation District has established the criteria below to determine the total
funds required as listed in the Accumulated Funds and Reserves Policy:
The Cash Flow Contingency Reserve is to fund operations, maintenance, and certificates of participation debt service
expenses for the first half of the fiscal year, prior to the receipt of the first installment of the property tax allocation and
sewer service user fees.
The Self-Insurance Reserve is to provide requirements for property damage including fire, flood and earthquake, general
liability and workers'compensation.
The Capital Improvement Program Reserve is to fund annual increments of the capital improvement program with a
target level at one half of the average annual capital improvement program over the next 10 years.
The Debt Service Required Reserves are monies held and controlled by a trustee pursuant to the provisions of
certificates of participation issues, and the monies are not available for the general needs of the District.
Source: Orange County Sanitation District's Financial Management Division.
66
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
2009-10 $ 221.00
2010-11 244.00
2011-12 267.00
2012-13 294.00
2013-14 308.00
2014-15 316.00
2015-16 322.00
2016-17 327.00
2017-18 331.00
2018-19 335.00
Annual Sewer Service Fees
Single Family Residence
400
350
d 300
LL
3 250
c
Q 200
LL
in 150
100
50
0
2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19
Fiscal Year
Source: Orange County Sanitation District's Financial Management Division.
67
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
2008-09 887,290 $ 178.3 95% 515 $ 9.9 5%
2009-10 880,213 194.5 95% 487 10.8 5%
2010-11 878,408 214.3 95% 479 10.1 5%
2011-12 874,008 233.4 96% 516 9.5 4%
2012-13 883,477 259.8 96% 527 10.8 4%
2013-14 873,308 269.0 95% 489 14.4 5%
2014-15 824,465 260.5 95% 467 14.2 5%
2015-16 863,317 278.0 96% 450 12.6 4%
2016-17 859,869 281.2 95% 466 13.8 5%
2017-18 871,338 288.4 94% 473 17.9 6%
$350,000,000
$300,000,000
$250,000,000
$200,000,000
$150,000,000
$100,000,000
$50,000,000
$0
2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18
■Residential/Commercial Users ■Industrial Users
Source: Orange County Sanitation District's Financial Management Division.
68
ORANGE COUNTY SANITATION DISTRICT
Principal Sewer Service Customers
For the Prior Fiscal Year and Nine Years Ago
Fiscal Year Ended 6/30/17 Fiscal Year Ended 6/30/09
Industrial Industrial
Permittee %to Total Permittee %to Total
Service Service Charge Service Service Charge
Customer Charges Rank Revenue Charges Rank Revenue
House Foods America Corp. $ 1,328,551 1 0.43% $ 543,277 5 0.26%
Kimberly-Clark Worldwide, Inc. 1,139,233 2 0.36% 1,091,757 1 0.51%
Pulmuone Wildwood, Inc. 749,655 3 0.24%
Stremicks Heritage Foods, LLC 678,705 4 0.22% 573,353 4 0.27%
MCP Foods, Inc. 676,563 5 0.22% 1,045,850 2 0.49%
Ameripec Inc. 593,679 6 0.19% 459,905 6 0.22%
Jazz Semiconductor 549,292 7 0.18%
Nor-Cal Beverage Co. Inc(Main) 538,242 8 0.17% 357,354 8 0.17%
Van-Law 528,980 9 0.17%
Cargill, Inc. 427,204 10 0.14%
Alstyle Apparel-A&G Inc. 849,942 3 0.40%
Pepsi-Cola Bottling Group 391,780 7 0.18%
Favorite Foods 324,637 9 0.15%
Orange City Mills Ltd Partnership 346,794 10 0.16%
$ 7,210,104 2.32% $ 5,984,649 2.81%
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.
(1) Current fiscal year information not yet available. Prior year information shown has been revised.
Source: Orange County Sanitation District's Financial Management Division.
69
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%
2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18
Ratio of Debt
Total Service to Total
Fiscal Principal Total Debt Operating Operating
Year (1) Interest(4) Service (3) Expenses(2) Expenses
2008-09 $ 21,305 $ 40,840 $ 62,145 $ 164,556 37.77%
2009-10 24,030 46,052 70,082 138,085 50.75
2010-11 25,895 49,426 75,321 143,388 52.53
2011-12 14,370 50,975 65,345 172,319 37.92
2012-13 23,965 53,640 77,605 149,817 51.80
2013-14 39,590 53,163 92,753 146,447 63.34
2014-15 27,875 53,586 81,461 149,226 54.59
2015-16 29,405 50,301 79,706 153,501 51.93
2016-17 35,575 47,143 82,718 150,252 55.05
2017-18 32,140 43,466 75,606 145,556 51.94
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.
(4) - Excludes amortization of premium/discount and deferred amount.
Source: Orange County Sanitation District's Financial Management Division.
70
ORANGE COUNTY SANITATION DISTRICT
Debt Coverage Ratios
(Dollars in Millions)
Last Ten Fiscal Years
The Orange County Sanitation District has no legal debt limits as imposed by State legislation. The District does have contractual covenants
within the existing Certificates of Participation indenture agreements which require minimum coverage ratios of 1.25. The coverage ratio is
calculated as the ratio of net annual revenues available for debt service payments to total annual debt service requirements.
4.00
3.50
3.00
2.50
2.00
1.50
1.00
0.50
2007-08 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18
Fiscal Year Ending June 30,
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Operating&Non-operating Revenues:
Service Charges,Net of Refunds-Regional $ 178.3 $ 194.5 $ 214.3 $ 233.4 $ 259.8 $ 269.0 $260.5 $ 278.0 $ 281.2 $ 288.4
Service Charges,Net of Refunds-Local(3) 5.6 5.6 5.7 5.7 5.8 5.7 5.5 5.7 1.3 (0.1)
Industrial Sewer Service Charges 9.9 10.8 10.1 9.5 10.8 14.4 14.2 12.6 13.8 17.9
SAW PA Assessment 3.9 6.6 4.9 3.6 2.7 2.4 2.7 3.2 3.3 2.7
IRWD Assessment 7.7 6.7 18.2 14.2 25.6 19.6 26.4 26.6 36.0 9.9
Ad Valorem Taxes 66.4 64.8 64.3 67.9 79.2 74.9 79.8 84.4 88.3 94.2
Interest Earnings 14.8 19.2 10.1 15.7 (3.9) 6.5 4.8 9.2 3.1 3.2
Other Revenues 3.6 8.4 3.0 2.5 3.7 3.0 3.2 4.0 5.0 6.4
Total Revenues 290.2 316.6 330.6 352.5 383.7 395.5 397.1 423.7 432.0 422.6
Operating Expenses(1) 164.6 138.1 143.4 172.3 149.8 146.4 149.2 153.5 150.3 145.6
Net Revenues $ 125.6 $ 178.5 $ 187.2 $ 180.2 $ 233.9 $ 249.1 $247.9 $ 270.2 $ 281.7 $ 277.0
Debt Service Requirements
Principal Payments 21.3 24.0 25.9 14.4 24.0 39.6 27.9 29.4 35.6 32.1
Interest Payments 36.3 43.1 46.5 51.0 53.6 53.2 53.6 50.3 47.1 43.5
Total Debt Service Requirements $ 57.6 $ 67.1 $ 72.4 $ 65.4 $ 77.6 $ 92.8 $ 81.5 $ 79.7 $ 82.7 $ 75.6
Coverage Ratios 2.18 2.66 2.59 2.76 3.01 2.68 3.04 3.39 3.41 3.66
Ending Reserves(2) $ 401.0 $ 344.0 $ 420.0 $ 439.0 $ 465.0 $ 542.0 $428.0 $ 428.0 $ 404.0 $ 580.0
Notes
(1)-Operating expenses exclude depreciation and amortization expenses.
(2)-Excludes debt service reserves in accordance with the District's reserve policy.
(3)-Local Sewer transferred to East Orange County Water District in FY2016-17.
Source:Orange County Sanitation District's Financial Management Division.
71
ORANGE COUNTY SANITATION DISTRICT
Computation of Direct and Overlapping Debt
June 30, 2018
Total Debt District's Share
6/30/2018 %Applicable(1) of Debt 6/30/18
OVERLAPPING TAX AND ASSESSMENT DEBT(Based on all property assessed valuation of$418,360,472,026):
Metropolitan Water District of Southern California $ 60,600,000 15.253% $ 9,243,318
Coast Community College Districl 781,334,504 99.382 776,505,857
North Orange County Joint Community College Distric 206,054,001 97.477 200,855,259
Rancho Santiago Community College District and School Facilities Improvement Dist.No.' 368,129,249 99.019&100.000 365,708,786
Garden Grove Unified School District 328,540,160 100.000 328,540,160
Irvine Unified School District School Facilities Improvement District No.1 95,000,000 100.000 95,000,000
Los Alamitos Unified School District School Facilities Improvement District No.1 103,895,227 96.602 100,364,867
Newport Mesa Unified School Districl 266,335,606 99.995 266,322,289
Orange Unified School District 188,000,000 97.921 184,091,480
Placentia-Yorba Linda Unified School Districl 236,974,879 98.979 234,555,365
Saddleback Valley Unified School Districl 113,365,000 11.579 13,126,533
Santa Ana Unified School Districl 247,026,073 100.000 247,026,073
Tustin Unified School District School Facilities Improvement District No.2002-1 45,094,043 99.958 45,075,104
Tustin Unified School District School Facilities Improvement District No.2008-1 86,860,000 99.957 86,822,650
Tustin Unified School District School Facilities Improvement District No.2012-1 45,410,000 99.970 45,396,377
Other Unified School Districts 273,876,624 0.146-99.985 16,948,510
Anaheim Union High School Districl 200,528,955 100.000 200,528,955
Fullerton Joint Union High School Districl 169,665,000 91.701 155,584,502
Huntington Beach Union High School Districl 187,014,998 99.026 185,193,472
School Districts 621,258,502 97.384-100.000 619,508,763
Irvine Ranch Water District Improvement Districts 563,322,680 Various 500,987,763
City of Anaheim Community Facilities Districts 66,960,000 100.000 66,960,000
Irvine Unified School District Community Facilities Districts 635,755,000 100.000 635,755,000
Tustin Unified School District Community Facilities Districts 230,815,000 100.000 230,815,000
City of Tustin Community Facilities Districts 99,155,000 100.000 99,155,000
Other Community Facilities Districts 470,131,990 99.989-100.000 470,131,337
Orange County Assessment Districts 37,850,000 100.000 37,850,000
City of Irvine 1915 Act Bonds 808,032,000 100.000 808,032,000
Other 1915 Act Bonds 9,612,735 100.000 9,612,735
TOTAL OVERLAPPING TAX AND ASSESSMENT DEBT $7,035,697,155
DIRECT AND OVERLAPPING GENERAL FUND DEBT:
Orange County General Fund Obligations $ 210,347,000 75.026% $ 157,814,940
Orange County Pension Obligation Bonds 383,564,389 75.026 287,773,018
Orange County Board of Education Certificates of Participation 13,990,000 75.026 10,496,137
Coast Community College District Certificates of Participatior 3,285,000 99.382 3,264,699
North Orange Regional Occupation Program Certificates of Participatior 9,610,000 99.499 9,561,854
Los Alamitos Unified School District Certificates of Participation 41,431,230 96.891 40,143,133
Orange Unified School District Certificates of Participation and Benefit Obligations 110,343,225 97.921 108,049,190
Placentia-Yorba Linda Unified School District Certificates of Participatior 94,175,355 98.979 93,213,825
Santa Ana Unified School District Certificates of Participation 69,817,854 100.000 69,817,854
Other Unified School District General Fund Obligations 21,680,000 Various 16,684,798
Union High School District Certificates of Participation 121,456,090 Various 119,235,762
School District Certificates of Participation 106,498,253 Various 106,090,325
City of Anaheim General Fund Obligations 606,340,522 99.215 601,580,749
City of Costa Mesa General Fund Obligations 46,500,000 100.000 46,500,000
City of Garden Grove General Fund Obligations 23,175,000 100.000 23,175,000
City of Huntington Beach General Fund Obligations 43,268,254 98.728 42,717,882
City of La Habra General Fund Obligations 20,890,000 100.000 20,890,000
City of Newport Beach Certificates of Participation 107,410,000 99.994 107,403,555
City of Santa Ana General Fund Obligations 52,325,000 100.000 52,325,000
Other City General Fund Obligations 93,339,428 Various 80,029,718
Orange County Sanitation District 0 100.000 0 (2)
TOTAL GROSS OVERLAPPING GENERAL FUND DEBT $1,996,767,439
Less: City of Anaheim supported obligations 601,580,749
TOTAL NET OVERLAPPING GENERAL FUND DEBT $1,395,186,690
OVERLAPPING TAX INCREMENT DEBT(Successor Agencies): $968,560,375 58.495-100.000% $965,136,241
TOTAL DIRECT DEBT $0
GROSS OVERLAPPING&COMBINED TOTAL DEBT $9,997,600,835 (3)
NET OVERLAPPING&COMBINED TOTAL DEBT $9,396,020,086
(1) The percentage of overlapping debt applicable to the district is estimated using taxable assessed property value. Applicable percentages were estimated by determining
the portion of the overlapping district's assessed value that is within the boundaries of the sanitation district divided by the district's total taxable assessed value.
(2) Excludes wastewater revenue certificates of participation. Previously classified certificates of participation have been reclassified as district revenue supported issues
and are no longer included as direct debt in the debt statement.
(3) Excludes tax and revenue anticipation notes,enterprise revenue,mortgage revenue and non-bonded capital lease obligations.Qualified Zone Academy Bonds are
included based on principal due at maturity.
Total Overlapping Tax Gross Combined Net Combined Total Overlapping
Ratios to: and Assessment Debt Total Debt Total Debt Tax Increment Debt
Land and Improvement Assessed Valuation ($416,300,856,879' 1.69% 2.40% 2.26%
All Property Assessed Valuation ($418,360,472,026; 2.39% 2.25%
Redevelopment Incremental Valuation ($58,409,937,717' 1.65%
Source: California Municipal Statistics 72
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
2008-09 $ 1,262,936,747 $ 86,100 0.007% 2,522,820 500.61
2009-10 1,306,255,753 87,200 0.007% 2,539,990 514.28
2010-11 1,427,792,453 84,200 0.006% 2,563,170 557.04
2011-12 1,376,404,782 85,300 0.006% 2,457,571 560.07
2012-13 1,325,928,512 84,100 0.006% 2,472,122 536.35
2013-14 1,278,998,124 84,900 0.007% 2,491,268 513.39
2014-15 1,241,140,357 85,900 0.007% 2,521,803 492.16
2015-16 1,206,722,347 85,000 0.007% 2,548,745 473.46
2016-17 1,140,679,773 88,000 0.008% 2,578,681 442.35
2017-18 1,095,737,610 92,700 0.008% 2,609,419 419.92
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 premiums.
73
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)
2008-09 211 $ 1,576.67 $ 197,076 $ 38,741 $ 207,317 $ 82,897
2009-10 196 1,588.72 190,121 41,273 225,688 90,864
2010-11 207 1,816.62 192,676 68,374 245,249 85,414
2011-12 201 1,871.47 228,370 37,133 260,521 92,115
2012-13 200 1,906.01 213,724 79,650 304,576 79,108
2013-14 198 1,936.64 246,252 41,767 301,459 94,037
2014-15 187 2,070.97 243,412 37,280 302,450 94,637
2015-16 183 2,110.43 244,003 34,079 315,428 108,248
2016-17 188 2,054.56 246,573 78,918 313,282 118,511
2017-18 185 2,069.30 242,955 36,494 317,499 105,029
Total expenses in FY 2017-18 increased $43.6 million, or 18.5 percent since FY 2008-09, primarily as a result of
expansion of the Capital Improvement Program (CIP) and increase in operational services levels with OCSD's decision
beginning in FY 2002-03 to maximize existing secondary treatment facilities as OCSD moved from a 50/50 mix of
primary and secondary effluent treatment to meeting secondary treatment standards as of December 31, 2012.
Depreciation expense represents 148.7 percent of the increase as a result of the expansion in capital facilities and the
financing associated with the expansion. This increase is offset by a decrease in maintenance, chemicals, other
operating and non-operating costs. In FY 2017-18 personnel expenses decreased 9.3 percent over the prior year. This
decrease is mainly caused by a reduction in the OCERS retirement contribution rate as a result of paying down the
unfunded actuarial accrued liability over the previous three years. The full-time equivalent positions authorized
increased by 8 in FY 2017-18.
As depicted from the chart above, actual wastewater treatment flows were 211 mgd in FY 2008-09. The last several
years of California's record-breaking drought and water conservation efforts have resulted in FY 2017-18 flows of only
185 mgd, a decrease of 26 mgd or 12.3 percent since FY 2008-09.
Source: Orange County Sanitation District.
74
ORANGE COUNTY SANITATION DISTRICT
Authorized Full-time Equivalents by Function
Last Ten Fiscal Years
300
250
200
150
i ,
100
50
0
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
oGeneral Management(1) ■Human Resources (2) oAdministrative Services (2)
oEnvironmental Services (3) ■Facilities Support Services(3) ■Technical Services
Engineering Operations and Maintenance
Fiscal Year Ending June 30,
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
General Management(1) 26 13 13 13 12 12 14 15 15 15
Human Resources (2) 16 17 27 17 16 18 16 27 27 27
Administrative Services (2) 81 92 85 111 111 110 111 98 99 99
Environmental Services (3) - - - - - - - - 91 91
Facilities Support Services (3) 68 71 70 84 81 78 76 63 - -
Technical Services 107 105 102 - - - - - - -
Engineering 98 96 112 128 125 123 123 127 116 116
Operations and Maintenance 241 245 230 281 281 283 284 294 279 287
Total FTE's 637 639 639 634 626 624 624 624 627 635
Notes
(1) - Management Discretion positions used on a temporary basis have been excluded from FTE count.
(2) - In 2016, Risk Management moved from Administrative Services to Human Resources Department.
(3) - In 2017, District reorganization created Environmental Services and eliminated Facilities Support Services.
Source: Orange County Sanitation District's Financial Management Division.
75
ORANGE COUNTY SANITATION DISTRICT
Biosolids Produced
Last Ten Fiscal Years
300,000
250,000
200,000
150,000
100,000
50,000
2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18
oWet Tonnage ■Dry Tonnage
Fiscal Year Wet Tonnage Dry Tonnage
2008-09 249,202 51,342
2009-10 245,668 50,799
2010-11 253,557 49,133
2011-12 280,572 47,556
2012-13 274,957 43,365
2013-14 279,362 50,764
2014-15 275,943 45,515
2015-16 283,052 50,439
2016-17 288,771 50,641
2017-18 284,039 58,325
Source: Orange County Sanitation District's Environmental Compliance Division.
76
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)
2008-09 582 17 376 212
2009-10 579 17 376 212
2010-11 587 17 376 212
2011-12 572 17 376 332
2012-13 572 17 376 332
2013-14 580 17 376 332
2014-15 580 17 376 332
2015-16 570 17 376 332
2016-17 396 (2) 17 376 332
2017-18 396 17 376 332
Notes
(1) -Capacity is presented as million gallons treated per day.
(2) - In FY 2016-17, local sewers were transferred to East Orange County Water District.
Source: Orange County Sanitation District
77
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 (7)
Fiscal Population Income Personal Family School Unemployment
Year Estimates (in thousands) Income Income Enrollment Rate
2008-09 3,135,000 $ 145,247,447 (3) $ 46,331 $ 86,100 504,136 9.3%
2009-10 3,166,000 147,138,449 (3) 46,475 87,200 502,239 9.5%
2010-11 3,030,000 154,131,535 (3) 50,868 84,200 502,903 9.2%
2011-12 3,056,000 169,584,000 (4) 55,492 85,300 502,195 7.9%
2012-13 3,082,000 166,370,000 (4) 53,981 84,100 501,801 6.1%
2013-14 3,114,000 174,586,000 (4) 56,065 84,900 500,487 5.2%
2014-15 3,148,000 188,472,000 (4) 59,870 85,900 497,116 4.3%
2015-16 3,183,000 196,921,000 (4) 61,866 85,000 493,030 4.4%
2016-17 3,194,000 205,389,000 (4) 64,305 88,000 490,430 3.8%
2017-18 3,221,000 215,479,000 (4),(8) 66,898 92,700 485,835 3.3%
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.
78
ORANGE COUNTY SANITATION DISTRICT
Estimated Population Served by the
Orange County Sanitation District
June 30, 2018
Population
as of
January 1, 2018
Anaheim 357,084
Brea 44,890
Buena Park 83,995
Costa Mesa 115,296
Cypress 49,978
Fountain Valley 56,920
Fullerton 144,214
Garden Grove 176,896
Huntington Beach 202,648
Irvine 276,176
La Habra 62,850
La Palma 15,948
Los Alamitos 11,863
Newport Beach 87,182
Orange 141,952
Placentia 52,755
Santa Ana 338,247
Seal Beach 25,984
Stanton 39,470
Tustin 82,344
Villa Park 5,951
Westminster 94,476
Yorba Linda 69,121
Subtotal Cities 2,536,240
Estimated Population Served in
Unincorporated Areas(2) 73,179
2,609,419
Data Sources:
(1) Demographic Research Unit, State of California Department of Finance
(2) Center for Demographic Research, California State University, Fullerton.
79
ORANGE COUNTY SANITATION DISTRICT
Principal Orange County Employers (1)
For the Current Fiscal Year and Nine Years Ago
Fiscal Year Ended 6/30/18 Fiscal Year Ended 6/30/09
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. 30,000 1 1.93% 20,000 1 1.35%
University of California, Irvine 23,605 2 1.52% 17,500 3 1.18%
County of Orange 17,146 3 1.11% 18,668 2 1.26%
St. Joseph Health 13,786 4 0.89% 10,656 4 0.72%
Kaiser Permanente 7,800 5 0.50%
Boeing Co. 6,103 6 0.39% 8,100 5 0.55%
Albertsons Southern California 6,057 7 0.39%
Wal-Mart Stores Inc. 6,000 8 0.39%
Hoag Memorial Hospital 5,680 9 0.37%
Target Corp. 5,400 10 0.35% 6,100 7 0.41%
Yum! Brands Incorporated 7,000 6 0.47%
SuperValu, Inc. 6,082 8 0.41%
California State University, Fullerton 5,768 9 0.39%
Bank of America Corp. 5,500 10 0.37%
Total 121,577 7.84% 105,374 7.11%
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 1,551,100 as of June 2018.
(4)- Data Source: State of California, Employment Development Department.
- Percentage is calculated by dividing employees by total employment of 1,477,500 as of June 2009.
80
ORANGE COUNTY SANITATION DISTRICT
Operating Indicators
June 30, 2018
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: 635
Operational Date: July 1, 1954
Authority: California Health & Safety Code Section 4700 et. seq.
Services: Wastewater collection, treatment, and disposal
Service Area: 479 square miles
Population Served: 2.6 million
Total Miles of Sewers (including force mains): 396 miles
Number of Pumping Stations: 17
Wastewater System Treatment Capacities (Million Gallons per Day)
Actual Flows Existing Primary Existing Secondary
FY17-18 Treatment Capacity Treatment Capacity
Plant 1 121 208 182
Plant 2 64 168 150
Total 1 332
Source: Orange County Sanitation District's Financial Management Division.
81
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82
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 District's debt
covenants beyond what is allowed to be reported in the Statistical Section.
83
ORANGE COUNTY SANITATION DISTRICT
Cash and Investment Portfolio
As of June 30, 2018
Net Unrealized
Cost Market Value Gain/(Loss)
Shares Par Base Base %of Total Base
INVESTMENT PORTFOLIO:
CASH &CASH EQUIVALENTS (U.S. DOLLAR):
FINANCE $ 2,000,000 $ 2,003,880 $ 2,000,730 0.32% $ (3,150)
FIRST AMERICAN SHORT TERM FDS 15,255,857 15,255,857 15,255,857 2.47% -
SHORT TERM FUNDS 2,000,000 1,998,300 1,999,700 0.32% 1,400
SUPRANATIONAL 5,000,000 4,979,075 4,997,100 0.81% 18,025
U. S. GOVERNMENT 21,000,000 20,932,717 21,000,000 3.40% 67,283
US AGY-SHORT TERM CASH EQUIV 33,255,000 33,194,553 33,206,423 5.37% 11,870
SUBTOTAL-CASH &CASH EQUIVALENTS 78,510,857 78,364,382 78,459,810 12.70% 95,428
FIXED INCOME SECURITIES (U.S. DOLLAR):
COMMERCIAL PAPER 27,100,000 26,893,589 26,964,147 4.36% 70,558
CONSUMER DISCRETIONARY 5,500,000 5,544,240 5,476,800 0.89% (67,440)
CONSUMER STAPLES 3,880,000 3,878,991 3,908,867 0.63% 29,876
ENERGY 8,850,000 8,856,037 8,661,562 1.40% (194,475)
FINANCE 62,008,000 61,419,298 58,744,606 9.51% (2,674,692)
FIXED INCOME FUNDS OTHER 2,950,000 2,941,423 2,943,775 0.48% 2,352
HEALTH CARE 4,000,000 4,009,675 3,981,040 0.64% (28,635)
INDUSTRIAL 9,860,000 9,883,495 9,820,463 1.59% (63,032)
INFORMATION TECHNOLOGY 20,715,000 20,582,925 20,178,517 3.27% (404,408)
INVESTMENT GRADE-MUNI REVENUE 4,240,000 4,307,634 4,382,355 0.71% 74,721
MATERIALS TRANSPORTATION 1,205,000 1,198,514 1,199,324 0.19% 810
MTG RELATED SECURITY 36,310,853 36,260,363 36,224,006 5.86% (36,357)
SHORT TERM FUNDS 10,825,000 10,817,731 10,817,523 1.75% (208)
SUPRANATIONAL 36,005,000 35,739,638 35,062,238 5.67% (677,400)
U. S. GOVERNMENT 210,908,222 208,980,724 207,253,688 33.54% (1,727,036)
U.S. GOVERNMENT TIPS 10,972,312 10,827,592 10,665,636 1.73% (161,956)
US AGY-LONG TERM ISSUES 94,865,000 94,552,136 93,237,425 15.09% (1,314,711)
SUBTOTAL- FIXED INCOME SECURITIES 550,194,387 546,694,005 539,521,972 87.30% (7,172,033)
TOTAL INVESTMENT PORTFOLIO $ 628,705,244 625,058,387 617,981,782 100.00% $ (7,076,605)
DEMAND DEPOSITS AND CASH ON HAND 2,414,045 2,414,045
MONIES HELD WITH FISCAL AGENTS 4,953,800 4,953,800
MONIES WITH THE LOCAL AGENCY INVESTMENT FUND 55,208,090 55,104,678
TOTAL CASH AND INVESTMENTS $ 687,634,322 $ 680,454,305
Source: US Bank and Orange County Sanitation District's Financial Management Division.
84
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
2008-09 1.00% 0.00% 1.00% 1.64%
2009-10 1.00% 0.00% 1.00% 1.63%
2010-11 1.00% 0.00% 1.00% 1.64%
2011-12 1.00% 0.00% 1.00% 1.64%
2012-13 1.00% 0.00% 1.00% 1.64%
2013-14 1.00% 0.00% 1.00% 1.65%
2014-15 1.00% 0.00% 1.00% 1.63%
2015-16 1.00% 0.00% 1.00% 1.62%
2016-17 1.00% 0.00% 1.00% 1.61%
2017-18 1.00% 0.00% 1.00% 1.59%
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.
85
ORANGE COUNTY SANITATION DISTRICT
Assessed and Estimated Actual Value of Taxable Property
(Dollars In Thousands)
Last Ten Fiscal Years
$450,000,000
$400,000,000
$350,000,000
$300,000,000
$250,000,000
$200,000,000
$150,000,000
$100,000,000
$50,000,000
$0
2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18
■Secured OU—cured
Percent
Changein
Fiscal Assessed
Year Secured Unsecured Total Value
2008-09 $ 301,717,479 $ 5,894,003 $ 307,611,482 5.08%
2009-10 299,038,654 6,116,530 305,155,184 -0.80%
2010-11 298,099,034 6,238,834 304,337,868 -0.27%
2011-12 302,526,970 6,163,979 308,690,949 1.43%
2012-13 310,451,986 5,901,040 316,353,026 2.48%
2013-14 323,064,994 6,220,505 329,285,499 4.09%
2014-15 343,102,030 7,378,643 350,480,673 6.44%
2015-16 365,267,850 6,936,768 372,204,618 6.20%
2016-17 385,137,024 6,642,312 391,779,336 5.26%
2017-18 409,310,248 6,990,609 416,300,857 6.26%
In 1978, the voters of the State of California passed Proposition 13 which limited property taxes to a total maximum
rate of 1% based upon the assessed value of the property being taxed. Each year, the assessed value of property
may be increased by an inflation factor which is limited to a maximum increase of 2%. With a few exceptions,
property is only reassessed at the time that it is sold to a new owner. At that point, the new assessed value is
reassessed at the purchase price of the property sold. The assessed valuation data shown above represents the
only data currently available with respect to the actual market value of taxable property and is subject to the
limitations described above. Consequently,the assessed and estimated values are the same.
Source: Orange County Auditor-Controller's Office.
86
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
$-
2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18
OTotal Tax and User Fee Levy 8Total Tax and User Fee Collection
(1)
Total Tax Current Tax Percent Total Tax %of Total %of Pass-
Fiscal and User and User Fee of Levy Delinquent and User Fee Collection O/S Delinquencies Through
Year Fee Levy Collection Collected Collection Collection to Levy Delinquencies to Levy Payments
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)
2016-17 381,226 380,078 99.70 608 380,686 99.86 1,148 0.30 9,751
2017-18 386,538 385,673 99.78 741 386,414 99.97 865 0.22 11,353
Notes
(1) Upon dissolution of California redevelopment agencies during fiscal year 2011-12, property tax increment formerly
remitted to OCSD by its member city redevelopment agencies was instead deposited into the newly formed
Redevelopment Property Tax Trust Fund (RPTTF)from which the Auditor/Controller makes disbursements on behalf of the
successor agencies. There is no tax levy associated with these collections; thus, they have been excluded from the"%of
Total Collection to Levy"calculation.
(2) In fiscal year 2014-15 and 2015-16,the County did not bill user fees for wholly exempt agencies not subject to property
taxes. In fiscal year 2014-15 and 2015-16, OCSD internally billed user fees of$5 million and $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.
87
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)
2008-09 $ 428,809,224 2009 $ 952,480 2,200 $ 855,193 $ 1,807,673
2009-10 422,965,596 2010 1,151,929 3,091 1,029,407 2,181,336
2010-11 420,751,575 2011 1,300,019 4,807 1,236,973 2,536,992
2011-12 424,769,642 2012 1,265,430 6,163 1,560,509 2,825,939
2012-13 432,902,274 2013 1,521,280 10,453 2,653,728 4,175,008
2013-14 447,749,156 2014 1,993,154 10,636 2,640,484 4,633,638
2014-15 476,303,290 2015 2,196,000 10,897 2,834,000 5,030,000
2015-16 504,650,360 2016 2,487,000 12,134 3,160,000 5,647,000
2016-17 531,052,158 2017 2,284,000 9,593 3,321,000 5,605,000
2017-18 563,662,044 2018 2,787,000 11,204 3,908,000 6,695,000 (4)
Notes and Data Sources
(1) - The Orange County Sanitation District services 479 square miles or 60% of the total 799 square miles
that make up the boundaries of the County of Orange.
(2) - Data Source: Orange County Auditor-Controller's Office.
(3) - Data Source: A. Gary Anderson Center for Economic Research, Chapman University.
(4) - Forecasted numbers.
88
ORANGE COUNTY SANITATION DISTRICT
Insurance in Force
As of June 30, 2018
Type Insurer Deductible Limit
All-Risk Property
Fire and Other Perils Public Entity Property $500,000 per $1 billion/occurrence
Insurance Program occurrence
(multiple insurers)
Flood Public Entity Property $100,000 per $300 million/occurrence
Insurance Program occurrence
Earthquake Three insurers 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
(multiple insurers)
Crime Insurance National Union Fire $25,000 $5 million
Cyber Insurance Lloyd's of London (Beazley) $100,000 $2 million
Excess Great American $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 employer's liability
Pollution Liability CSAC Excess Insurance $75,000 to $10,000,000 per loss
Authority Program $250,000
Watercraft
Liability Atlantic Specialty $10,000 $10 million
Hull & Machinery Atlantic Specialty $10,000 $1.3 million
Pollution Liability Great American Ins. Co, None $5 million
Source: Orange County Sanitation District's Risk Management Office.
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ORANGE COUNTY SANITATION DISTRICT
FINANCIAL MANAGEMENT DIVISION
10844 Ellis Avenue
Fountain Valley, California 92708-7018
714.962.2411
www.ocsd.com
06/30/18