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2012

CLEVELAND WATER

ANNUAL REPORT

Quality Water. Quality Service. Quality People.

Cleveland Water will

protect, treat, deliver, and

promote high quality

water through total water

stewardship.

Mission StatementCleveland Water delivers a reliable supply of high quality water and customer services to promote public health and safety, economy, and quality of life of Greater Cleveland.

Contents2 ............Mission Statement

3 ............Cleveland Water 2012 Accomplishments

4 ............From The Mayor

5 ............From Cleveland City Council

6 ............To Our Customers

8 ............Quality Water

12 .........Quality Service

16 .........Quality People

19 .........Financial Reports

30 .........Directory of Officials

2

Cleveland Water2012 Acomplishments• Awarded $13 million and expended $75.9 million for capital improvement projects in 2012.

• Executed amendments to existing water service agreements and economic development agreements with three additional suburbs where Cleveland Water takes ownership of distribution mains as well as the capital improvement responsibilities associated with ownership.

• Nine capital improvement projects totaling $7.1 million were undertaken in conjunction with the suburban water main renewal program in 2012.

• The Customer Service Turnaround Project, which addressed the many issues associated with Cleveland Water’s new Customer Care and Billing (CC& B) system, was completed in 2012.

• In the fall of 2012, issued approximately $50 million long term revenue bonds to continue funding of the on-going capital improvement program for projects during 2013 through 2015.

• Moody’s and Standard & Poor’s reaffirmed Cleveland Water’s bond ratings of Aa1 and AA respectively for its senior lien debt.

• In 2012, Cleveland Water continued work on its Automatic Meter Reading (AMR) project and sold $93 million in water revenue bonds specifically for this project.

• Completed the re-organization of Cleveland Water’s operations to represent its core mission of delivering high quality, safe, and clean water and to provide for greater efficiencies.

• Implemented an employee training program to improve employees’ skills and professionalism in providing quality service to our customers.

Operating Highlights• Maintained Partnership for Safe Water status• Produced 82.0 billion gallons of drinking water • Repaired 1,592 water main breaks• 2,953 water meters were repaired and/or replaced in 2012 • In 2012, Cleveland Water employees experienced a safer workplace with reduced injury rates over the previous year

Capital ProjectsCompleted• Morgan Pre-Treatment and Residuals

• Morgan Chemical Facility• Crown Filter Rehabilitation• Morgan Raw Water Pump Station• Crown Chemical Facility

On-Going• Cleaning and lining program in the city of Cleveland

• Suburban Water Main Renewal program

This past year, Cleveland Water has demonstrated why it remains one of our greatest regional assets and a dedicated provider of quality service for a million and a half Northeast Ohioans.

In 2012, Cleveland Water successfully completed its Customer Service Turnaround Project. In doing so, they not only achieved a number of their goals, but surpassed expectations. I am proud to say that Cleveland Water has significantly reduced customers’ call wait times and improved service. In addition, and partially as a result, they have also dramatically increased collection of delinquent accounts.

The new process improvements, additional training for Cleveland Water employees, and new technology have increased efficiencies and aided in the division’s success.

I believe this is just the beginning. Cleveland Water will continue to grow, building on the top priorities for the City of Cleveland: Quality Service, Customer Service, and Efficiency through Technology.

I want to thank and recognize the great work done by the staff at Cleveland Water. As we move forward, let’s continue to focus on what is truly important – providing our residents and businesses continued access to clean, reliable, and a safe supply of water.

Sincerely,

Frank G. Jackson

From the Mayor

4

Frank G. Jackson MayorCity of Cleveland

From ClevelandCity Council In 2012, Cleveland City Council worked with the Department of Public Utilities and Cleveland Water to implement important changes via the Customer Service Turnaround Project. By implementing the recommendations of consultants, Cleveland Water employees were able to stabilize operations, enhance customer service and yield important financial improvements.

Cleveland Water made significant increases in its collections of delinquent accounts in 2012, achieving a 98% collections rate. The accounts receivable declined more than $15 million between August 2011 and December 2012.

In addition, 99% of customer bills are now being received “on-time” due to data clean-up and more consistent and accurate billing. This has led to a $14 million dollar annual baseline revenue increase.

Cleveland City Council is pleased with the results garnered by Cleveland Water. The steps that were taken in 2012 are reflected in proven results for not only Cleveland Water, but for stakeholders throughout the region. ith CWD to build upon these improvement

Sincerely,

Martin J. Sweeney Kevin J. Kelley

Martin J. SweeneyPresident Cleveland City Council

Kevin J. KelleyChairman Public Utilities Committee

Barry A. WithersDirectorDepartment of Public Utilities

To Our CustomersCleveland Water stands apart as a provider of quality water to more than 1.5 million people in 70 different communities. Our main goal is to ensure clean, safe, and drinkable water will be there for you every time you turn on your faucet-a goal Cleveland Water has always met.

In addition, Cleveland Water works to improve critical infrastructure, provide quality services, and assist our customers and our neighbors in times of need. Nowhere was this more evident than in our response to the effects of Hurricane Sandy on our community.

This past year, Cleveland Water also worked diligently to implement new and updated business processes to serve you more efficiently and with greater accountability on our part. Installing Automated Vehicle Locators (AVL) in our vehicles and investing in more and better training for our employees via the Department of Public Utilities (DPU) Academy were key to our success in 2012.

Projects such as Clear Reads, Get Acquainted community fairs, and a new design for our bills were aimed to improve and create new opportunities for you to interact and do business with Cleveland Water.

Our reorganization efforts have demonstrated systematic improvements throughout our customer service department. We have established standard operating and billing procedures and continued to produce quality water – all of which are being provided at some of the lowest water rates in the Midwest.

All of these improvements in service and operations could not have been achieved without the support of our employees, the City of Cleveland Administration, Cleveland City Council, and the Suburban Regional Council of Governments. And most of all, we could not have made the significant strides needed to sustain and move our organization forward without you – thank you.

Barry A. Withers Alex MargeviciusAlex MargeviciusInterim Commissioner Cleveland Water 6

Delivering a reliable supply

of high quality water to our

customers 24 hours-a-day, 7

days-a-week, 365 days-a-year.

Cleveland Water

Quality Water

Why is quality water so important?

Quality water is necessary to sustain life and for good health. Our bodies need water on a daily basis because they are made up of 90% water/fluid. It has always been said that we need at least 64 ounces of water a day, which will help keep us from dehydrating. Good quality water also helps grow our local economy and is great for our families and businesses.

How do you create quality water?

Our skilled workforce starts with a quality source of water they take great care to treat, filter, and deliver to our customers. Water quality tests are performed to assure a high quality product and then daily delivered to our customers, clean and clear.

Ask the Expert:Ossie Vason Superintendent of Distribution

8

uring 2012, we faced a significant challenge in Hurricane Sandy. The storm made landfall along the New Jersey/New York coast on

October 29, 2012. While the East Coast took the brunt of the storm, the surrounding region was not spared. Sandy was a very large storm with hurricane force winds extending 175 miles from the center. It covered such a large geographical area that Cleveland also experienced winds near hurricane strength. Meteorologists tell us that a cold front stalled over Cleveland and joined up with the western edge of Sandy. The winds traveled across the expanse of Lake Erie with no trees or buildings to slow them down and battered the Cleveland area resulting in downed trees and power lines, and leaving thousands of Northeast Ohio residents in the dark.

Several of our facilities also lost power, including our Crown Plant, Pleasant Valley Pump Station, Brecksville Tower, and several service facilities. However, thanks to our backup power generators, we were able to resume treatment and pumping operations immediately and none of our customers lost water service

In addition to causing the widespread electrical outages, the 68-mile per hour winds generated 20 foot waves on Lake Erie. These waves not only forced the close of parts of the shoreway, they also stirred up sediment in the lake. The clarity of

Cleveland Water takes great pride in delivering a reliable supply of high quality water to our customers 24 hours-a-day, 7 days-a-week, 365 days-a-year. It is Cleveland Water’s mission to accomplish this, no matter what conditions develop.

water is measured by turbidity (NTU). Under normal lake conditions, the turbidity is less than 20 NTU. However, during Sandy, the lake turbidity spiked to nearly 400 NTU, 20 times higher than normal. Our water plant operators met this challenge and quickly made the necessary adjustments to the treatment process so there was no impact on our treated water delivered to customers.

In addition to changes in the lake water quality, Sandy also caused damage to several of our facilities including fences, windows, and roofs. This damage was quickly noted and repaired, but there was other damage that was not immediately obvious. Uponour next routine inspection of our intake structures, it became evident that Sandy had wreaked havoc there too. Three of our four intakes sustained damage during the storm. The severity ranged from piled up ruble, to sections of collapsed screens, to structural undermining. Upon discovery, our diving contractor was able to remedy the damage without any impact on treatment operations.

While the Cleveland area was not hit as hard as the East Coast, Hurricane Sandy’s wrath was felt by many in Northeast Ohio. Due to the exceptional efforts of our staff, Cleveland Water is pleased to report we weathered the storm well and are proud of our employees’ performance under these challenging conditions.

D

Cleveland Water

Quality Water

9

During Huricane Sandy, the lake turbidity spiked to nearly 400 NTU.

The 400 NTU reading was nearly 20 times higher than the normal reading of 20 NTU.

The clarity of water is measured by turbidity (NTU). Under normal lake conditions, the turbidity is less than 20 NTU.

400 20x20

Striving to engage our

customers with courtesy

and timely service.

Cleveland Water

Quality Service

What does quality service mean to you?

Quality service means being responsive to customers’ needs in a timely manner, providing accurate information, and treating customers with professional courtesy.

How does technology help you provide quality service for Cleveland Water customers?

With the AMR meter upgrade, we will be able to provide customers with accurate information and minimal estimated bills. With the system capability to allow customer interface with the information collected, both residential and commercial customers will be able to access information on their own usage in a way that makes sense to them. There is also the ability to notify residential customers of potential leaks in their plumbing. This could save the customer significant money in not having to pay for the water and sewer costs for the leakage.

Ask the Expert:Gregg Faust AMR Project Lead

12

Cleveland Water

Quality ServiceItron, Inc. of Liberty Lake, Washington serves as the prime contractor for the Clear Reads program, utilizing their ChoiceConnect 100 Fixed Network system. Throughout much of 2011 and into 2012, they worked to prepare for deployment of the system. Itron designed and installed the data collection system, including 36 data collectors at various Cleveland Water facilities, communication towers, and third-party sites. Itron also worked closely with management consultants, Black and Veatch, to develop and test software interfaces between the AMR system, the AMR work management system, and Cleveland Water’s Customer Care and Billing system. In conjunction with Cleveland Water Communication staff, Itron prepared information for our customers and for suburban officials.

Quite simply, the Clear Reads program is designed to improve service through more accurate meter reading. The program will eliminate several outdated meter reading technologies and replace older, less accurate water meters adding to our customers’ peace of mind with more accurate and on-time billing.

The AMR technology works by attaching small radio transmitters known as endpoints to each meter. These endpoints periodically broadcast meter readings to a series of data collectors and repeaters located throughout the Cleveland Water system. The data is then transmitted back to dedicated servers that store the data and make it available to the billing system, Customer Service Representatives and Business Analysts.

Cleveland Water’s Automatic Meter Reading (AMR) program, Clear Reads, took off in earnest in 2012 after more than a year of preparation behind the scenes.

METER

ENDPOINT

On May 9, 2012, the Clear Reads program began installations, starting with a number of commercial and industrial customers in Brooklyn Heights and Cleveland but quickly expanding system-wide. Installations for residential customers began on June 6, 2012. During the year, residential installations primarily focused on Twinsburg, Reminderville, Mayfield, Pepper Pike, Gates Mills, Hunting Valley, Parma Heights, Parma, and Cleveland. However, once installations began, customers in every city started being converted to the Clear Reads program during normal meter maintenance activities. More cities will receive focused deployment as installations continue. During the year, a total of 26,983 accounts were upgraded with AMR technology. Installations will continue to ramp up in the coming years, with more than 200,000 to be completed in 2013 and the vast majority of installations to be completed by the end of 2014.

The data collected through the Clear Reads program has been invaluable. Customers with Clear Reads can now be assured of accurate billing and timely assistance from Cleveland Water representatives. As needed, daily and hourly consumption can be available for the customer, so that they can fully understand their water use and rates.

The new state-of-the-art AMR meters are being installed in the homes and businesses of all Cleveland Water customers as a way to allow for better customer service, accurate bills based on actual consumption, early leak detection, and overall improved efficiency.

Endpoints are being placed on customers’ homes and businesses to send a radio signal to a collector which will collect data on an hourly basis.

14

Our people are committed

to providing our customers

with excellent service and

quality water.

Cleveland Water

Quality People

What does it mean to have quality people?

Having quality people means more than just what our people know.

It is about keeping ourselves current on things like technology and

industry best practices. It’s about learning and quality service. It is

also about empowering people, supporting people, and ensuring

that they have the training and resources to do their jobs effectively

and helping others to do the same. At Cleveland Water, we’ve

been working hard to do this for our staff, for each other, and most

importantly, for the people we serve.

Why are quality people so important to the organization? ?

The people are the face of the organization. Having empowered,

educated, and engaged employees and customers alike helps

to ensure that we are all working toward the same goals and

continuously moving forward.

Ask the Expert:Diane Hamilton Customer Account Manager

16

Cleveland Water

Quality PeopleCustomer Service Improvements Improving our customer service in 2012 meant making a significant commitment to understanding not only what our customers’ needs are, but learning and re-educating ourselves on the basics and the new trends in customer service.

As a result, we worked hard to curtail excessive wait times on customer service lines, to provide increased training for Customer Account Services staff, and to provide systematic upgrades in software and hardware affecting our customer accounts and billing services.

Great Customer Service is exemplified by the ability of an organization to continuouslyand consistently exceed the customer’s expectations.

17

We also made a systemic change in our organization. Every employee at Cleveland Water now works toward strengthening and building their relationships, understanding how important they are to everything we do.

We know that Cleveland Water stakeholders are not just customers. They are families. They are communities. They are employees. And they are businesses of all shapes and sizes. They are quality people who deserve the best service we can provide.

Get Aquainted FairsThe “Get Aquainted” fairs that we conducted in 2012 demonstrated Cleveland Water’s continuing efforts to educate and engage customers throughout the 70 different communities that we serve. Our goals were to give customers a venue for addressing concerns and hold ourselves accountable for providing updates on Cleveland Water’s initiatives and goals.

By embracing advanced technology and innovative management practices typically used in the corporate world, Cleveland Water was also able to handle customer complaints while out in the field. Not only does this help correct errors and ensure customer accounts are updated and accurate, it is also an opportunity to better serve our customers.

DPU Academy The Department of Public Utilities (DPU) Academy has allowed Cleveland Water employees access to additional training and resources to help them do their jobs, grow personally and professionally, and streamline the processes that provide you with a quality product. After assessing the needs of Cleveland Water employees, a partnership was developed with Cuyahoga Community College to provide staff with courses such as: leadership, health & safety, effective communications, sustainability, and technical & computer networking.

The benefits of additional training have already been seen in the milestones Cleveland Water has achieved. Most notably the improvements made surrounding customer service and operations efficiency.

Y.O.U. ProgramMayor Frank G. Jackson’s Youth Employment Program contracts each year with Youth Opportunities Unlimited (Y.O.U.) to hire young people to work in Cleveland Water’s summer program. Teenagers from across the region have the opportunity to learn about the science and engineering aspects of providing clean, safe, and drinkable water.

In 2012, more than 200 students were welcomed by Cleveland Water employees in every facet of the organization. Students also contributed to the construction and development of rain gardens that help protect our environment and water supply.

Organization Improvements In 2012, Cleveland Water set out to make important improvements to our customer service operations, but we also wanted to go a step further. We realized in order to improve the services we provide to our customers we had to improve and hold ourselves more accountable.

As an organization, we wanted to provide opportunities to our employees, our customers, our youth, and the communities we serve. We understand we have a role in providing a better quality of life, but we can also have a vested interest in the lives of the people in our region. So we embarked on a mission of education. Not just about what Cleveland Water does, but also how we do it. Why we do it. And what that means for all of us in Northeast Ohio.

Cleveland Water

Financial Reports2012 audited financial statements for Cleveland Water can be found at: www.auditor.state.oh.us

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Cleveland Water Service Area

Largest Customers of the Cleveland Water system 2012

Consumer Number of Accounts

Consumption (MCF)

Metered Sales Revenue

% Total Revenue

Mittal Steel Company 50 259,318 $7,095,137 3.3Cuyahoga Metropolitan Housing Authority 769 82,264 2,383,214 1.1Stouffer Corporation 3 32,261 1,790,468 0.8Cleveland Clinic Foundation 103 45,703 1,286,769 0.6Alcoa Aluminum Company 8 30,437 1,276,352 0.6Northeast Ohio Regional Sewer District 15 29,164 1,148,969 0.5General Cinema 8 16,177 900,290 0.4Case Western Reserve University 95 30,814 889,381 0.4Charter Steel Corporation 4 20,474 833,505 0.4University Hospitals Health System 34 21,148 634,093 0.3Totals 1,089 567,760 $18,238,177 8.4

Cleveland

Direct Service Bay VillageBeachwoodBedford HeightsBentleyvilleBoston HeightsBratenahlBrecksvilleBroadview HeightsBrooklynBrooklyn HeightsBrook ParkBrunswickBrunswick Hills TownshipCuyahoga HeightsEast ClevelandEuclidFairview ParkGarfield HeightsGates MillsGlenwillowHighland Heights

Highland HillsHinckley TownshipHudson VillageHunting ValleyIndependenceLinndaleLyndhurstMacedoniaMaple HeightsMayfieldMayfield HeightsMiddleburg HeightsMoreland HillsNewburg HeightsNorthfieldNorthfield Center TownshipNorth OlmstedNorth RandallNorth RoyaltonOakwoodOlmsted FallsOlmsted TownshipOrangeParma

Parma HeightsPepper PikeRemindervilleRichfield VillageRichfield TownshipRichmond HeightsRocky RiverSagamore HillsSeven HillsShaker HeightsSolonSouth EuclidStrongsvilleTwinsburgTwinsburg Township

University HeightsValley ViewWalton HillsWarrensville HeightsWestlakeWoodmere

Master Meter BedfordChagrin FallsCleveland HeightsLakewoodGeauga CountyPortage County

Emergency StandbyLake CountyMedina CountyBereaHudson

Cleveland

Solon

Hudson

Parma

StrongsvilleBrecksville

Euclid

Westlake

Portage CountyNorth Royalton

Twinsburg

Richfield

Berea

BRUNSWICK

Macedonia

Gates Mills

North Olmsted

Hinckley- B

Broadview Heights

Brook Park

North Hills Water District

Bedford

Independence

Pepper Pike

Walton Hills

Hunting ValleyLakewood

Moreland HillsOrange

Brooklyn

Mayfield

Lyndhurst

Beachwood

Garfield Heights

Middleburg Heights

Shaker HeightsBay Village

Rocky River

South Euclid

Oakwood

Maple Heights

Fairview Park

Richfield Twp.

Glenwillow

Bainbridge

Bentleyville

Olmsted TownshipValley View

Boston Heights

Cleveland Heights

Seven Hills

Twinsburg Township

Highland Heights

Olmsted Falls

Bedford Heights

Parma Heights

Mayfield Heights

Richmond Heights

East Cleveland

Warrensville Heights

Reminderville

Cuyahoga Heights Chagrin Falls

Highland Hills

Brooklyn Heights

University Heights

Geauga County

Cleveland

Solon

Hudson

Parma

StrongsvilleBrecksville

Euclid

Westlake

Portage CountyNorth Royalton

Twinsburg

Richfield

Berea

BRUNSWICK

Macedonia

Gates Mills

North Olmsted

Hinckley- B

Broadview Heights

Brook Park

North Hills Water District

Bedford

Independence

Pepper Pike

Walton Hills

Hunting ValleyLakewood

Moreland HillsOrange

Brooklyn

Mayfield

Lyndhurst

Beachwood

Garfield Heights

Middleburg Heights

Shaker HeightsBay Village

Rocky River

South Euclid

Oakwood

Maple Heights

Fairview Park

Richfield Twp.

Glenwillow

Bainbridge

Bentleyville

Olmsted TownshipValley View

Boston Heights

Cleveland Heights

Seven Hills

Twinsburg Township

Highland Heights

Olmsted Falls

Bedford Heights

Parma Heights

Mayfield Heights

Richmond Heights

East Cleveland

Warrensville Heights

Reminderville

Cuyahoga Heights Chagrin Falls

Highland Hills

Brooklyn Heights

University Heights

Geauga County

Operating Results in Brief

The Division of Water was created in 1853 and charged with the responsibility for collecting, treating, pumping, and distributing water and providing related water service to customers within its service areas. The Division operates a major public water supply system, which serves not only the city of Cleveland, but also 70 suburban municipalities in Cuyahoga, Medina, Summit, and Geauga Counties. The Division is an emergency standby provider for systems in 3 other counties. The present service area covers over 640 square miles and serves over 1.5 million people.

In 2012, the aggregate metered consumption of water in the city constituted 31% of the total metered consumption in the service area, while consumption in the direct service

communities and master meter communities constituted 58% and 11% respectively.

Operating revenues in 2012 increased 18.5% to $280.3 million from $236.6 million in 2011. A raise in water rates attributed to this increase. Total operating expenses in 2012, exclusive of depreciation, increased 2.1% to $149.2 million compared to $146.2 million in 2011. The overall $3.0 million increase in operating expenses in 2012 reflects a $3.5 million increase in operations expenses offset by a $0.5 million decrease in maintenance expenses.

Summary of Historical Revenues, Expenses and Debt Service Year Ended December 31(dollars in thousands) 2012 2011 2010 2009 2008Operating Revenues $280,323 $236,626 $237,271 $228,235 $242,181Non-operating Revenues 1,965 2,349 4,007 4,122 10,479Total Revenues Operating Expenses (exclusive of depreciation): 282,288 238,975 241,278 232,357 252,660Operations 103,687 100,221 99,610 92,905 92,866Maintenance 45,482 46,011 49,904 54,811 50,967 Total Operating Expenses (exclusive of depreciation) 149,169 146,232 149,514 147,716 143,833Net Revenues 133,119 92,743 91,764 84,641 108,827Debt Service on Outstanding Bonds 57,740 64,276 69,597 65,145 65,424Balance Available after Payment of Debt Service 75,379 28,467 22,167 19,496 43,403Coverage of Debt Service on Outstanding Bonds by Net Revenues 2.31 1.44 1.32 1.30 1.66

Breakdown of Revenue Breakdown of ExpensesTotal Water Sales Revenue %

cleveland $41,230,953 19.52direct service $133,965,298 63.41master meter $20,102,536 9.51

total water sales $211,276,830 100.00

Breakdown of Revenue

Breakdown of Expenses

Total Water Sales Revenue %

cleveland

$41,230,953

19.52

direct service

$133,965,298

63.41

master m

eter

$20,102,536

9.51

total water sales

$211,276,830

100.00

Breakdown of Revenues and Expenses for 2012Revenue: %Metered Sales-Direct Service Suburbs 53Metered Sales-Cleveland 17Metered Sales-Master Meters 7Interest 1Service Fees 21Miscellaneous 1Total 100.0

Expenses: %Personnel 31Utilities 9Chemicals 2Maintenance 6Interest 11Depreciation 28Supplies & Services 13Total 100.0

53

31

13

28

11

9

6

21

17

7

22

Financial Operating HighlightsSelected Financial Information

(dollars in thousands) 2012 2011Restated

2010 2009 2008Operating Revenue (metered sales and other) $280,323 $236,626 $237,271 $228,235 $242,181Operations and Maintenance Expenses 149,169 146,233 149,514 147,716 143,833Depreciation 67,455 61,611 55,715 49,782 41,857Total Operating Expenses 216,624 207,844 205,228 197,498 185,690Operating Income 63,699 28,782 32,042 30,737 56,491Income Before Extraordinary Item 41,611 6,742 10,829 10,084 40,608Net Assets 1,259,472 1,197,743 1,022,666 1,006,836 996,292Total Assets 2,239,725 2,136,443 2,009,411 1,964,501 1,979,550Property, Plant and Equipment, net 1,686,939 1,660,653 1,469,558 1,415,809 1,360,889Current Assets 308,093 271,720 276,285 291,679 308,050Accounts Receivable, net 48,868 54,175 49,341 51,226 37,137Current Liabilities 83,514 145,205 149,843 92,285 85,740Long-Term Debt 869,040 765,540 819,238 852,303 897,518

Selected Operating Information 2012 2011 2010 2009 2008

Total Metered Sales Revenue ($ in thousands) $247,643 $211,277 $218,089 $224,385 $222,285 Annual Metered Consumption (1,000 mcf*) 6,175 5,915 6,236 6,792 7,070Total Metered Accounts 416,032 414,007 402,975 401,054 412,583 Total Annual Water Produced (billion gallons) 82 82 82 81 85Average Daily Pumpage (million gallons per day) 220 228 225 220 233Maximum Daily Pumpage (million gallons per day) 303 286 291 279 291Peak per Hour Pumpage Rate (million gallons per day) 441 422 424 412 421Minimum per Hour Pumpage Rate (million gallons per day) 190 175 134 113 185Number of Employees 1,042 1,084 1,093 1,090 1,134Annual Precipitation 42 65 35 36 45

* MCF equals one thousand cubic feet of water

Collection Performance Information - Cash Basis

(in thousands of dollars where applicable) 2012 2011 2010 (3) 2009 2008Customer Billings (1) $254,128 $216,225 $215,602 $230,455 $226,900Account Collections 246,047 211,303 210,264 203,466 218,286Accounts Receivable Balance at year end, net (Active Accounts Only) 52,549 54,175 51,189 51,226 35,076

Average Daily Billing 696.2 592.4 590.7 631.4 621.6Account Receivable Outstanding over 90 days at Year End (Active Accounts Only) (2) 27,761 32,085 30,000 26,638 18,285

Accounts Receivable Turnover (times) 4.8 4.0 4.2 4.5 6.5Billing Days Outstanding at Year End (Days) 75.5 91.4 86.7 81.1 56.4

(1) Includes flat rate charges for fire lines that are not metered. (2) Active accounts do not include finals, prior owners and turnoffs. (3) The new billing system no longer differentiates between active and inactive accounts. The 2009 figure represents the total Water A/R balance at year end, net of allowance for doubtful accounts.

23

Capital Facilities

Main Stations Crown Morgan Baldwin NottinghamRaw Water Pumps 6 6 6 8Low Service Pumps 4 5 - 4First High Service Pumps 5 6 3 4Second High Service Pumps - - 4 4Raw Water Intake 1 1 1 1Filters 12 28 20 18Reservoirs 2 1 1 1Capacities (mgd) Raw Water Intake 140 200 200 200Raw Water Pumping 190 340 *240 264Water Treatment 130 150 165 92Potable Water Pumping 173 346 150 248Reservoir (mg) 32.5 15 135 25

* Kirtland

Secondary Storage Facilities Type Capacity Low ServiceBassett West Elevated Tower 0.5First High ServiceDover West Elevated Tower 2.0Parma West Concrete Res. 23.0Independence East Steel Tank 3.0Second High ServicePearl Road West Steel Tank 1 10.0

Steel Tank 2 5.0Strongsville West Elevated Tower 1.0Pleasant Valley West Concrete Res. 5.0Brecksville West Elevated Tower 0.8Green Road East Steel Tank 1 10.0

Steel Tank 2 10.0North Royalton West Concrete Res. 2.0

Concrete 3.0Third High ServiceKeller West Elevated Tower 1.0Blossom Hill West Elevated Tower 1 3.0

Elevated Tower 2 0.5Darrow Road East Elevated Tower 3.0Ledge East Elevated Tower 0.5Kinsman East Elevated Tower 2.0South Twinsburg East Elevated Tower 1.0

Total 86.3

Secondary Pump Stations Pumps Capacities Second High ServiceEngle Road 5 45.00Independence 4 11.50Parma 6 123.90Third High ServiceCedar-Winchester 5 27.50North Royalton 8 38.40Darrow Road 4 8.00Green Road 4 23.60Pearl Road 4 20.60Pleasant Valley 5 24.00Shepard 4 6.20Booster Pump StationsBroadway 5 47.90

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Water Production Summary (2008 - 2012)2012 Water Processed by Main Facilities

2012 2011 2010 2009 2008

Total Water Production (Billion Gallons) 82.0 82.2 82.0 80.4 85.3

Maximum Daily Production (Million Gallons) 302.8 286.2 290.5 278.7 290.8Average Daily Production (Million Gallons) 220.2 228.1 219.4 220.1 233.1Peak Per Hour Pumpage Rate (Million Gallons Per Day) 441.0 422.0 424.0 412.4 420.8 Minimum Per Hour Pumpage Rate (Million Gallons Per Day) 190.0 175.0 134.0 112.5 184.7

Total Production Per Treatment Plant (Billion Gallons)

- Crown Waterworks Plant 16.3 15.1 17.4 18.8 18.9 - Garrett A. Morgan Waterworks Plant 16.7 19.0 17.1 16.4 19.9 - Baldwin Waterworks Plant 27.1 24.8 23.6 22.0 22.1 - Nottingham Waterworks Plant 21.9 23.3 23.9 23.2 24.4

Total Water Delivered Per Service District (Billion Gallons)

- Low Service District 23.1 23.3 23.8 20.8 23.5 - First High Service District 22.0 22.3 21.6 21.6 23.3 - Second High Service District 26.2 25.8 26.5 28.4 27.8 - Third High Service District 10.7 10.8 10.1 9.6 10.7

2012 Water Processed by Secondary Facilities

Secondary Facility Net Water Processed (Billion Gallons)

Second High ServiceEngle 1.4Independence 0.5 Parma 10.7 SubTotal 12.6 Third High ServiceCedar/Winchester 2.9 North Royalton 2.0 Pearl 1.6 Pleasant Valley 1.7 Shepard 0.5 Darrow 0.2 Green 1.8 SubTotal 10.7Totals 23.3







Percentage of Total Production Per Treatment Plant

Percentage of Total Water Delivered Per Service District

Crown, 19.9%

Morgan, 20.4%

Nottingham, 26.7%

Low, 28.2%

Third, 13%

First, 26.8%

Second, 32%

Baldwin, 33%

2012 Metered Sales Revenue, Metered Consumption and Number of Accounts

Municipality Metered Sales Revenue

% of Revenue

Metered Consumption

(MCF)

% of Consumption Total accounts % of Accounts

Cleveland $45,884,473 21.16 1,901,137 30.79 124,390 29.90

Direct ServiceParma $11,149,244 5.14 268,610 4.35 30,096 7.23Cuyahoga Heights 7,530,901 3.47 233,930 3.79 328 0.08Strongsville 7,529,666 3.47 169,804 2.75 15,832 3.81Solon 7,505,398 3.46 158,070 2.56 8,159 1.96Euclid 6,740,366 3.11 180,487 2.92 16,046 3.86Westlake 6,525,924 3.01 170,590 2.76 10,814 2.60Brunswick 5,397,985 2.49 112,050 1.81 11,696 2.81Shaker Heights 4,962,368 2.29 111,347 1.80 8,554 2.06North Royalton 4,524,321 2.09 98,469 1.59 9,865 2.37North Olmsted 4,415,626 2.04 120,905 1.96 11,289 2.71Twinsburg 4,111,491 1.90 82,420 1.33 6,267 1.51Beachwood 3,995,919 1.84 77,129 1.25 2,626 0.63Mayfield Heights 3,835,055 1.77 77,601 1.26 5,733 1.38Garfield Heights 3,643,327 1.68 90,261 1.46 11,160 2.68Rocky River 3,392,758 1.56 90,263 1.46 6,795 1.63Middleburg Heights 3,302,605 1.52 76,480 1.24 5,712 1.37Broadview Heights 3,249,343 1.50 66,602 1.08 6,314 1.52Brookpark 3,226,405 1.49 85,835 1.39 7,651 1.84Brecksville 2,727,588 1.26 58,574 0.95 5,155 1.24Maple Heights 2,711,832 1.25 68,654 1.11 9,720 2.34Warrensville Hts. 2,693,515 1.24 57,314 0.93 3,828 0.92South Euclid 2,644,611 1.22 66,751 1.08 8,832 2.12Parma Heights 2,644,319 1.22 63,454 1.03 6,485 1.56East Cleveland 2,45,257 1.13 58,954 0.95 4,433 1.07Northfield Ctr. Twp. 2,433,993 1.12 51,128 0.83 5,547 1.33Lyndhurst 2,400,343 1.11 55,565 0.90 5,875 1.41Bedford Heights 2,206,875 1.02 48,152 0.78 2,886 0.69Independence 2,081,171 0.96 49,529 0.80 3,073 0.74Fairview Park 2,080,677 0.96 58,023 0.94 6,177 1.48Brooklyn Village 2,034,910 0.94 54,589 0.88 4,063 0.98Bay Village 2,028,244 0.94 56,697 0.92 6,255 1.50Macedonia 1,816,676 0.84 38,576 0.62 4,491 1.08Richmond Heights 1,797,046 0.83 42,199 0.68 3,577 0.86Pepper Pike 1,715,612 0.79 34,002 0.55 2,279 0.55Highland Heights 1,660,337 0.77 38,934 0.63 3,400 0.82University Heights 1,593,629 0.73 35,902 0.58 3,567 0.86Seven Hills 1,573,188 0.73 37,811 0.61 5,579 1.22Olmsted Twp. 1,480,818 0.68 39,575 0.64 3,145 0.76Twinsburg Twp. 1,293,462 0.60 24,512 0.40 916 0.22Olmsted Twp. 1,480,818 0.68 39,575 0.64 3,145 0.76Mayfield Village 1,057,908 0.49 23,365 0.38 1,279 0.31Walton Hills 913,452 0.42 20,390 0.33 1,047 0.25Orange Village 834,236 0.38 16,149 0.26 853 0.20Moreland Hills 828,908 0.38 16,306 0.26 1,050 0.25Olmsted Falls 788,699 0.36 22,053 0.36 2,434 0.58Newburgh Heights 710,861 0.33 18,128 0.29 830 0.20Oakwood 685,134 0.32 15,943 0.26 1,372 0.33Richfield Twp. 680,467 0.31 13,055 0.21 658 0.16Gates Mills 619,790 0.29 12,362 0.20 908 0.22Valley View 533,457 0.25 13,864 0.22 902 0.22Northfield 507,421 0.23 10,944 0.18 1,305 0.31Reminderville 467,798 0.22 10,300 0.17 1,374 0.33Brooklyn Heights 406,233 0.19 10,685 0.17 706 0.17North Randall 398,446 0.18 8,486 0.14 199 0.05

MunicipalityMetered

Sales Revenue

Metered

Consumption

(MCF)

% of Consumption Total accounts Percentage

of Accounts

Hinckley Twp. 379,318 0.17 7,803 0.13 750 0.18Hunting Valley 378,006 0.17 7,065 0.11 187 0.04Highland Hills 373,838 0.17 16,721 0.26 180 0.04Bratenahl 353,383 0.16 9,136 0.15 509 0.12Woodmere 294,841 0.14 5,564 0.09 172 0.04Boston Heights 208,654 0.10 4,069 0.07 227 0.05Glenwillow 171,053 0.08 3,831 0.06 242 0.06Hudson 139,506 0.06 2,864 0.05 263 0.06Brunswick Hills Twp. 85,214 0.04 1,337 0.02 286 0.07Bentleyville 78,014 0.04 1,775 0.03 118 0.03Berea 45,777 0.02 1,102 0.02 3 0.00Chester Township 36,488 0.02 687 0.01 21 0.01Liverpool Township 24,517 0.01 999 0.02 0 0.00Linndale 12,295 0.01 361 0.01 51 0.01Novelty 715 0.00 14 0.00 1 0.00Sub-Total $151,122,230 69.68 3,584,640 58.05 291,642 70.10

Master Meter and Emergency StandbyCleveland Heights $8,873,582 4.09 281,701 4.56 N/A 0.00Lakewood 6,532,103 3.01 241,037 3.90 N/A 0.00Bedford 2,511,760 1.16 79,637 1.29 N/A 0.00Chagrin Falls 820,667 0.38 22,949 0.37 N/A 0.00Geauga County 629,560 0.29 16,259 0.26 N/A 0.00Hudson 8,207 0.00 180 0.00 N/A 0.00Portage County 493,895 0.23 47,719 0.77 N/A 0.00Lake County 7,760 0.00 202 0.00 N/A 0.00Medina County 183 0.00 4 0.00 N/A 0.00Berea 79 0.00 2 0.00 N/A 0.00Sub-Total $19,877,795 9.17 689,691 11.17 N/A 0.00

Total Metered Sales $216,884,499 100.00 6,175,468 100.00 416,032 100.00

26




Total Water Sales Revenue %

l Cleveland, 18.5%x Direct Service, 61%n Master Meter, 8%u Customer Service and Fixed Charges, 12.5%

n

x

u

l

61%

18.5%

12.5

%

8%

Customer Service Charge Revenue:

Cleveland $35,755 Direct Service Suburbs 167,369

Total Customer Service Charge Revenue

$203,124

Flat Rate Fixed Fee Revenue:Cleveland $9,143,193Direct Service Suburbs 21,411,794Total Flat Rate Fixed Fee Revenue $30,554,987

Total Water Sales Revenue $247,642,609

Outstanding Debt

Series Issued Original Principal Amount Purpose Outstanding

as of 12/31/12Series A 1977 $80,000,000 Waterworks Improvements $0Series B 1983 50,000,000 Waterworks Improvements 0Series C 1985 57,500,000 Waterworks Improvements 0

Series D 1986 119,065,000 Refunded Series B Bonds and Series C Bonds subject to optional redemption 0

Series E 1987 153,315,000 Waterworks Improvements 0Series F 19921992A 172,100,000 Waterworks Improvements 01992B 118,550,000 Refunded a portion of Series E Bonds subject to optional 0

Series G 1993 228,170,000 Refunded a portion of Series A Bonds, Series D Bonds, Series E Bonds and Series F, 1992A Bonds $66,860,000

Series H 1996 204,885,000 Waterworks Improvements and refunded portion of the Series E Bonds, Series F, 1992A and Series F, 1992B Bonds 0

Series I 1998 305,650,000 Waterworks Improvements and refunded a portion of the Series E Bonds, Series F, 1992A Bonds and Series H, 1996 Bonds 0

Series J 2001 92,595,000 Refunded all of the outstanding Series F, 1992A and Series F 1992B Bonds as well as a portion of Series G Bonds and Series H 0

Series K 2002 138,050,000 Waterworks Improvements and refunded the Series D Bonds 0Series L 2002 90,000,000 Waterworks Improvements 0

Series M 2004 175,000,000 Refunded portions of the Series H Bonds, Series I Bonds and Series K Bonds 0

Series N 2005 64,480,000 Refunded portions of the Series H Bonds and Series I Bonds 28,015,000Series O 2007 143,570,000 Waterworks Improvements 130,610,000Series P 2007 134,510,000 Refunded portions of the Series I Bonds 113,280,000Series Q 2008 90,800,000 Refunded all of the outstanding Series L Bonds 90,800,000Series R 2009 54,735,000 Refunded portions of the Series M Bonds 0Series S 2009 26,295,000 Refunded portions of the Series M Bonds 0Series T 2009 84,625,000 Refunded portions of the Series M Bonds 71,330,000Series U 2010 54,935,000 Refunded all of the outstanding Series R Bonds 54,935,000Series V 2010 26,495,000 Refunded all of the outstanding Series S Bonds 26,495,000

Series W 2011 82,090,000 Refunded all of the outstanding Series H Bonds, Series J Bonds and the Series K Bonds 82,090,000

Series X 2012 44,410,000 Waterworks Improvements 44,410,000Second Lien Series A 2012 76,710,000 Waterworks Improvements 76,710,000OEPA/OWDA Loans OEPA/OWDA Loans payable annually through 2032 107,404,000

Total $892,939,000

2013 122,240,764.80 2014 79,184,297.892015 78,659,097.892016 76,706,347.892017 77,041,310.392018 64,311,460.392019 64,147,322.882020 63,986,977.892021 63,612,119.39

2022 51,161,805.012023 51,129,758.762024 50,668,366.322025 51,225,097.632026 47,430,009.632027 34,938,842.532028 32,455,168.642029 25,346,131.702030 24,320,402.12

2031 23,160,516.982032 22,337,399.742033 21,605,232.502034 9,268,3752035 9,259,3752036 9,250,3752037 9,240,375

Annual Debt Service Schedule (dollars)Year Debt Service Year Debt Service Year Debt Service

* Includes $50 million bond anticipation note for the AMR project

27

2012 Average Chemical Values for Cleveland WaterResults and Maximum Contaminant Levels (MCLs) in milligrams per Liter (mg/L) except as noted.

Contaminant MCL Cleveland Water Contaminant MCL Cleveland WaterVolatile Organics Synthetic Organics Benzene 0.005 ND Alachlor 0.002 ND Bromobenzene NR ND Atrazine 0.003 ND Bromochloromethane NR ND Simazine 0.004 ND Bromomethane NR ND Inorganics Carbon tetrachloride 0.005 ND Aluminum NR ND Chlorobenzene 0.1 ND Antimony 0.006 ND Chloroethane NR ND Arsenic 0.01 ND Chloromethane NR ND Barium 2 ND 2-Chlorotolulene NR ND Berylium 0.004 ND 4-Chlorotoluene NR ND Cadmium 0.005 ND Dibromomethane NR ND Chromium 0.1 ND 1,2-Dichlorobenzene 0.6 ND Copper (90th percentile)5 1.3 0.1 1,3-Dichlorobenzene 0.6 ND Cyanide 0.2 ND 1,4-Dichlorobenzene 0.6 ND Fluoride 4 1 Dichlorodifluoromethane NR ND Iron NR ND 1,1-Dichloroethane NR ND Lead (90th percentile)5 0.015 0.004 1,2-Dichloroethane 0.005 ND Manganese NR ND 1,1-Dichloroethene 0.007 ND Mercury 0.002 ND cis-1,2-Dichloroethene 0.07 ND Molybdenum NR ND trans-1,2-Dichloroethene 0.1 ND Nickel 0.1 ND Dichloromethane 0.005 ND Nitrate 10 1.0 1,2-Dichloropropane 0.005 ND Potassium NR ND 1,3-Dichloropropane NR ND Selenium 0.05 ND 2,2-Dichloropropane NR ND Silica NR 1.8 1,1-Dichloropropene NR ND Silver NR ND 1,3-Dichloropropene NR ND Sodium NR 10.7 Ethylbenzene 0.7 ND Strontium NR 0.16 Hexachlorobutadiene NR ND Thallium 0.002 ND Isopropylbenzene NR ND Vanadium NR ND 4-Isopropyltoluene NR ND Zinc NR ND Napthalene NR ND Miscellaneous n-Propylbenzene NR ND Chloride 250 22 Styrene 0.1 ND Total Dissolved Solids 500 160 1,1,1,2-Tetrachloroethane NR ND Odor 3 1 1,1,2,2-Tetrachlorethane NR ND Magnesium NR 7.1 Toluene 1 ND Calcium NR 33 1,1,1-Trichloroethane 0.2 ND Total Organic Carbon TT4 1.9 Tetrachloroethene 0.005 ND pH >7.0 7.0 - 7.6 1,2,3-Trichlorobenzene NR ND Alkalinity NR 81 1,2,4-Trichlorobenzene 0.07 ND Orthophosphate >0.8 0.8 - 1.3 Trichloroethene 0.005 ND Hardness (as CaCO3) NR 120 1,1,2-Trichloroethane 0.005 ND Turbidity (NTU)3 0.3 0.05 Trichlorofluoromethane NR ND Total Coliform2 <5% 0.3% 1,2,3-Trichloropropane NR ND Disinfection By-Products Vinyl chloride 0.002 ND Total Trihalomethanes 0.08 0.043 Xylenes, total 10 ND Haloacetic Acids 5 0.06 0.029 m-Xylene NR ND Radionuclides o-Xylene NR ND Beta Emitters (pCi/L)1 50 ND p-Xylene NR ND Alpha Emitters (pCi/L) 15 ND

28

29

Quarterly Water Rate Schedule for Direct Service Accounts

Fixed Charge (expressed in dollars per quarter)Description / All Accounts 2011 2012 2013 2014 2015Homestead (all meter sizes) $12.50 $12.50 $14.00 $15.50 $17.00

5/8” to 1” Meter 18.00 18.00 21.00 24.00 27.00 1 1/2” to 2” Meter 36.00 36.00 41.00 47.00 53.00 3” to 4” Meter 120.00 120.00 140.00 160.00 180.00 6” Meter 220.00 220.00 250.00 290.00 320.00 8” Meter 330.00 330.00 380.00 430.00 480.00 10” Meter 410.00 410.00 480.00 540.00 610.00 12” Meter 500.00 500.00 570.00 650.00 730.00

Water Consumption Charges (expressed in dollars per MCF)

City of Cleveland—Regular Rates

0 to 1 MCF $12.580 to .6 MCF N/A $13.76 $15.51 $17.34 19.26Additional MCFs 26.90 27.52 29.48 31.22 32.74

Homestead All MCFs $5.59 6.88 $8.53 10.41 12.52Low and 1st High Service Suburbs— Regular Rates

0 to 1 MCF 19.500 to .6 MCF N/A 20.47 22.11 23.63 25.04Additional MCFs 41.70 41.70 42.01 42.53 42.56

Homestead All MCFs 8.66 10.23 12.16 14.18 16.272nd High Service Suburbs— Regular Rates


Homestead All MCFs 10.06 12.04 14.51 17.17 20.033rd High Service Suburbs— Regular Rates


Homestead All MCFs 11.52 13.81 16.68 19.80 23.16

Monthly Master Meter Water Rate ScheduleWater Consumption Charges by Community (expressed in dollars per MCF) 2011 2012 2013 2014 2015Bedford $31.54 $31.54 $31.54 $32.53 $33.35Chagrin Falls 35.76 35.76 36.14 37.51 38.56Cleveland Heights 31.50 31.50 31.50 32.53 33.35Lakewood 27.10 27.10 27.10 27.10 27.10Geauga County 38.72 38.72 38.72 38.72 38.72

Emergency Stand-By Water Rate ScheduleWater Consumption Charges by Community (expressed in dollars per MCF) 2011 2012 2013 2014 2015Berea $39.44 $39.44 $39.44 $39.44 $39.44Lake County 38.36 38.36 38.36 38.36 38.36Lorain County 39.44 39.44 39.44 39.44 39.44North Ridgeville 31.41 31.41 31.41 31.41 31.41Medina County 45.72 45.72 45.72 45.72 45.72Summit County 45.72 45.72 45.72 45.72 45.72Hudson 45.72 45.72 45.72 45.72 45.72Portage County 45.72 45.72 45.72 45.72 45.72

1 MCF = 1,000 cubic feet = 7,500 gallons. All rates effective January 1 of each year, except for 2011 which was effective July 16, 2011.

30

Directory of Officials

City of ClevelandFrank G. Jackson MayorKen Silliman Chief of StaffDarnell Brown Chief Operating OfficerValarie J. McCall Chief of Government AffairsChris Warren Chief of Regional

DevelopmentJenita McGowen Chief of SustainabilityMaureen R. Harper Chief of CommunicationsNatoya Walker Minor Chief of Public AffairsMonyka Price Chief of EducationSharon Dumas Director of FinanceBarbara Langhenry Director of LawMartin L. Flask Director of Public Safety

Cleveland City CouncilMartin J. Sweeney President of CouncilPatricia J. Britt Clerk of CouncilTerrell H. Pruitt Ward 1Zachary Reed Ward 2Joe Cimperman Ward 3Kenneth L. Johnson Ward 4Phyllis E. Cleveland Ward 5Mamie J. Mitchell Ward 6TJ Dow Ward 7Jeffrey D. Johnson Ward 8Kevin Conwell Ward 9Eugene R. Miller Ward 10Michael D. Polensek Ward 11Anthony Brancatelli Ward 12Kevin J. Kelley Ward 13Brian J. Cummins Ward 14

Matthew Zone Ward 15Jay Westbrook Ward 16Dona Brady Ward 17Martin J. Sweeney Ward 18Martin J. Keane Ward 19

Department of Public UtilitiesBarry A. Withers DirectorOllie Shaw Assistant DirectorJason Wood Chief of Public AffairsBarbara Grier Chief of Human ResourcesFrank Badalamenti Chief Financial OfficerIsaac Khoury Chief Information Officer

Division of WaterAlex Margevicius Interim Commissioner of WaterPierre Haddad Interim Deputy Commissioner

of Water Systems Kim Thompson Chief of Water Distribution

Rolfe Porter Assistant Admin. of Plant Operations

Maggie Rodgers Water Quality Manager

Cleveland Water | 1201 Lakeside Avenue, Cleveland, Ohio 44114 | clevelandwater.com

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