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COMPREHENSIVE ANNUAL FINANCIAL REPORT FOR THE FISCAL YEAR ENDED JUNE 30, 2019 (WITH COMPARATIVE INFORMATION FOR 2018)

HELIX WATER DISTRICT


ANNUAL FINANCIAL STATEMENTS

FOR THE FISCAL YEAR ENDED JUNE 30, 2019

(WITH COMPARATIVE INFORMATION FOR 2018)

TABLE OF CONTENTS

Page I. Introductory Section

Directory of Officials i Organizational Chart ii Letter of Transmittal iii Certificate of Achievement for Excellence in Financial Reporting ix

II. Financial Section

Independent Auditor’s Report 1 Management’s Discussion and Analysis 3

Basic Financial Statements

Statement of Net Position 11 Statement of Revenues, Expenses and Changes in Net Position 13 Statement of Cash Flows 14 Notes to the Basic Financial Statements 16

Required Supplementary Information

Schedule of Changes in the Net Pension Liability and Related Ratios 41 Schedule of Contributions-Pension 42 Schedule of Changes in the Net Other Postemployment Benefits and Related Ratios 43 Schedule of Contributions-Other Postemployment Benefits 44

III. Statistical Section

Contents 45 Net Position – Last Ten Fiscal Years 46 Changes in Net Position – Last Ten Fiscal Years 47 Water Sold by Type of Customer – Last Ten Fiscal Years 49 District Water Rates – Last Ten Fiscal Years 50 District Funds – Last Ten Fiscal Years 51 Ten Largest Water Customers – Last Ten Fiscal Years 52 Ratios of Outstanding Debt – Last Ten Fiscal Years 53 Debt Coverage Ratio – Last Ten Fiscal Years 54 Economic Statistics – Last Ten Fiscal Years 55 Local Area Employment Profile for the Years 2010 and 2000 56 Operational Information – Employees – Last Ten Fiscal Years 57 Active Meters by Size – Last Ten Fiscal Years 58 Operational Information – Assets – Last Ten Fiscal Years 59 Water Production & Consumption – Last Ten Fiscal Years 60 Capital Assets – Last Ten Fiscal Years 61

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INTRODUCTORY SECTION

i

Helix Water District Directory of Officials

Board of Directors

(as of date of report)

Daniel H. McMillan - President Mark A. Gracyk - Vice President

DeAna R. Verbeke Joel A. Scalzitti

Kathleen Coates Hedberg

Management

Carlos V. Lugo - General Manager Jennifer C. Bryant - Director of Administrative Services

Brian M. Olney - Director of Water Quality/System Operations Kevin D. Miller - Director of Operations

James A. Tomasulo - Director of Engineering

Legal Counsel

Elizabeth Hull - Best Best & Krieger LLP

Additional information can be found at www.hwd.com

7811 University Avenue La Mesa, California 91942‐0427

619‐466‐0585 [email protected] hwd.com

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Setting Standards of Excellence in Public Service

December 5, 2019

Board of Directors Helix Water District La Mesa, California

We are pleased to submit the Comprehensive Annual Financial Report of the Helix Water District for the fiscal year ended June 30, 2019, with comparative information for 2018. The purpose of this report is to provide the board of directors, the public and other interested parties with reliable financial information about the district. This report has been prepared in conformity with the reporting and accounting standards promulgated by the Governmental Accounting Standards Board and the Financial Accounting Standards Board, and with the accounting and reporting standards for enterprise funds set out by the Government Finance Officers Association of the United States and Canada.

Management assumes complete responsibility for the completeness and reliability of the information contained in the report, which is based upon a comprehensive framework of internal controls established for this purpose. The district maintains an internal control structure designed to ensure that assets of the district are protected from loss, theft or misuse, and to ensure adequate accounting data is compiled to allow for the preparation of financial statements in conformity with generally accepted accounting principles. Because the costs of internal controls should not exceed the anticipated benefits, the objective is to provide reasonable, rather than absolute, assurance that the financial statements are free of any material misstatements.

District policy requires that an independent certified public accounting firm, selected by the board, audit the basic financial statements on an annual basis. Eide Bailly LLP (successor in interest to Vavrinek, Trine, Day & Co. LLP) has issued an unmodified (or clean) opinion on the district’s basic financial statements for the fiscal year ended June 30, 2019, with comparative information for 2018. The independent auditor’s report is presented as the first component of the financial section of this report.

Management’s discussion and analysis immediately follows the independent auditor’s report in the financial section and provides an overview, summary and analysis of the basic financial statements. The MD&A complements and should be read in conjunction with this letter of transmittal.

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District Profile

The district operates as a public agency under Irrigation District Laws of the state of California. Its history dates back to 1885 when the San Diego Flume Company built Cuyamaca Dam, a diverting dam on the San Diego River, and 33 miles of wooden flume to bring water to the people of San Diego County. Subsequently, the San Diego Flume Company was sold to the Cuyamaca Water Company. In 1913, the La Mesa, Lemon Grove and Spring Valley Irrigation District was organized. In 1926, the district purchased the Cuyamaca Water Company and became a publicly owned water agency operating today under the name Helix Water District.

The district’s service area encompasses nearly 50 square miles, serving a population of almost 276,000 within the cities of La Mesa, El Cajon, Lemon Grove and parts of Spring Valley, Lakeside, Santee and unincorporated San Diego County. The district collects and stores water in several local reservoirs, however, it purchases the majority of the water that it sells to its customers from the San Diego County Water Authority. The SDCWA primarily obtains water from the Metropolitan Water District of Southern California, which imports its supply from the Colorado River and the California State Water Project. The SDCWA also obtains water through its long‐term agreements with the Imperial Irrigation District and through water treated at the Carlsbad Desalination Plant.

Helix Water District is a progressive industry leader, providing high‐quality water through an efficient and reliable system. The district’s innovative and dedicated employees and board members maximize human and technological resources, providing excellent service to its customers and supporting the environment for a sustainable future.

Board of Directors and Organizational Structure

The district is governed by a board of five directors elected to four‐year terms by registered voters in the divisions in which they live. The district is managed by a general manager directing four major departments: water quality and system operations, operations, engineering and administrative services.

Economic Conditions and Outlook

The San Diego area is in the ninth year of expansion after the great recession. At fiscal year 2018‐19 year‐end, unemployment in the region was 3.3 percent. San Diego’s economy is driven by military, innovation and tourism sectors along with population‐driven areas of healthcare and education. The district’s service area has little remaining room for future housing growth. However, due to the rising cost of imported water and the real need for increased reliability and diversification of imported water supplies, the district supports local efforts to improve the region’s plan for alternative sources of water supply.

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After experiencing an exceptionally dry year in fiscal year 2017‐18, the district received significant rainfall in fiscal year 2018‐19, capturing 9,994 acre‐feet of local rainfall. Although Governor Brown lifted mandatory water restrictions for California residents, he also emphasized water conservation must now become a way of life. The long‐term effect of continued sustainable water use habits translates into lower volumes of water sold to each customer, coupled with the need to continue to maintain the district’s distribution infrastructure, which has put continued upward pressure on water rates. The district’s primary operating revenue source is from the sale of water. Water sales are budgeted to generate $85.5 million in fiscal year 2019‐20. The district remains in excellent financial health with solid reserves. The fiscal year 2019‐20 expense budget of $90.8 million includes an operating budget of $79.5 million and a PayGo capital budget of $11.3 million, funded through revenue collections. Long‐Range Planning The Government Finance Officers Association recommends that all governmental entities use some form of strategic planning to provide a long‐term perspective for service delivery and budgeting. In 2014, the district worked with an outside consultant to formalize its strategic plan and will update this plan during fiscal year 2019‐20. A key piece of this plan is financial integrity, and one tool the district uses to assess and maintain that integrity is its five‐year projection. The five‐year projection provides the platform which integrates the current year departmental and capital budgets and reserve requirements with future plans. The district prepares a five‐year projection of expenditures and revenues to ensure financial strength and adequate resources to operate and maintain the district. As a result of this process, the district projects that its reserves will be adequate for the next five years and has anticipated necessary rate increases to ensure the long‐term financial health of the district. A key component of the five‐year projection is the district’s budget, which it prepares, reviews and adopts annually. Every spring, district staff from each department prepares a preliminary budget which is presented to the board for approval prior to the beginning of the next fiscal year. This process includes budgeted amounts for district revenues, operating expenditures and capital expenditures. During fiscal year 2014‐15, the district worked with an outside consultant to complete an updated cost of service study. The intent of the study was to independently assess and perform a comprehensive review of the district’s existing water rates and charges and provide recommendations. The broad objective of the study was to ensure that the district’s rate structure adequately covered revenue requirements in compliance with industry best practices, legal parameters, debt service rate covenants and district policies. The district’s water rates and charges include fixed charges, variable charges and fees. The study was completed in October 2015 and confirmed that the district’s rate structure is fair, equitable and in compliance with all applicable laws and regulations.

vi

The district board also approved a five‐year rate notice on October 7, 2015. This notice established water rates for fiscal year 2015‐16 and set rate ceilings for the remaining four years of the notice. The notice also established a ceiling for the district to pass‐through increases in the cost of water charged to the district by the district’s water wholesaler, the San Diego County Water Authority. The five‐year rate notice helped provide the district with enhanced financial stability amidst variations in rainfall conditions, and allows customers to have better insight into the potential future cost of water during the five year cost of service period. Fiscal year 2018‐19 was the fourth year of this five‐year rate notice.

Financial Policies

The district has adopted a comprehensive set of financial policies. During the current year several of these policies were relevant. The district has an investment policy that is in compliance with the California Government Code, Sections 53600 et seq. The investment of funds is delegated by the board to the district’s treasurer, who assumes full responsibility for the transactions of the investment program. The objectives of the investment policy are safety, liquidity, yield and public trust. The district’s investments are in compliance with the adopted investment policy. See Notes 2D and 5 to the financial statements for detailed investment information.

Annually, the board approves the district’s reserve fund guidelines. These guidelines are established to ensure that: the district has adequate reserves for its operations; its customers experience stable rates for service; the district has a reliable and well‐maintained infrastructure; and the district can respond to emergencies, especially regarding water quality issues. Additionally, the reserve fund guidelines indicate that the district will maintain the general fund at a level prescribed in the annual five‐year projection. They state that the general fund should be targeted to maintain a reserve equivalent of 10 percent of net operating revenues in the fifth year of the financial projection. The guidelines acknowledge that water rates are set annually to achieve this targeted minimum ending balance; however, also recognizes that fund balances will fluctuate from month to month and year to year. Since water rates are updated and set once a year, the 10 percent goal in the fifth year serves as both a minimum and maximum figure and leads to smooth rate changes.

Also within the district’s reserve fund guidelines is guidance that indicates the district’s rate stabilization reserve fund should be maintained at a target balance that is between 5 percent and 10 percent of the district’s projected water billing revenue. The purpose of the fund is to provide for the incremental and orderly adjustment of the annual water rate, so as to offset large increases in rates from extraordinary circumstances (drought, lawsuits or other unbudgeted occurrences). The district’s board approved the use of $1.5 million from this fund in fiscal year 2015‐16 to partially mitigate rate increases caused mainly by the recent five‐year drought. Additionally, the board directed staff to maintain this reserve at 4 percent in fiscal year 2018‐19 and brought the reserve to within the target reserve thresholds in the fiscal year 2019‐20 budget.

vii

The region and the state of California emerged from a five‐year drought in 2017 as the district experienced significant rainfall and Northern California recorded the wettest year on record. After a dry 2017‐18 fiscal year, the district experienced a rainy 2018‐19 fiscal year. In fiscal year 2018‐19, the district captured 9,994 acre‐feet of local water runoff, 9,523 more acre‐feet than the local water runoff collected in the 2017‐18 fiscal year. The district records the value of local water runoff received during the year at replacement cost. The amount of net local water runoff collected is a major driver in the amount of imported water that the district must purchase to meet customer demand, and therefore, it affects the cost of water purchases.

This report also contains a statistical section, which provides both financial and nonfinancial trend data about the district and its operations.

Major Initiatives

The district’s ten‐year capital improvement program reflects a comprehensive approach to addressing maintenance and capital needs of the district. This program addresses the district’s infrastructure needs and reinforces existing programs such as cast‐iron pipeline replacement, valve replacement, tank and pump station upgrades, distribution system and treatment plant improvements, the district’s fleet and funding for the district’s three main facilities. In fiscal year 2018‐19, the district primarily completed Phase 2 of its $6 million to $7.2 million project to replace its 30‐year‐old computer system which will update the financial, human resources and payroll systems.

The district has always recognized the importance of maintaining and replacing the infrastructure essential in treating, storing and conveying reliable, high‐quality drinking water to its customers. Maintenance programs coupled with the district’s capital improvement program address the district’s aging infrastructure using a thoughtful, planned approach. Over time, this saves the district’s ratepayers money by avoiding costly emergency pipe breaks and unplanned expenditures and supports regulatory compliance and the delivery of safe, high‐quality water. Programs such as valve maintenance and turning, cast‐iron and steel replacement programs, large and small valve replacement programs, distribution pipe and transmission line inspections, and treatment plant equipment and maintenance programs all minimize system outages, enhance reliability and control costs. To accomplish this important objective, the district continues to cost‐effectively maintain its $1.5 billion of infrastructure.

The Future

The cost of wholesale imported water will continue to rise in years ahead as the region continues to develop sources of alternate and diversified supply and to position the region to withstand unplanned emergency disruptions. Cyclical drought conditions and new water conservation legislation challenge long‐term planning of capital improvements. Maintenance of infrastructure for reliable delivery of water is necessary at all volumes of demand.

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FINANCIAL SECTION

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1

Independent Auditor’s Report

Board of Directors

Helix Water District

La Mesa, California

Report on the Financial Statements

We have audited the accompanying financial statements of the Helix Water District (District), as of and for the

year ended June 30, 2019, 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 and the

standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller

General of the United States. 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 entity'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 entity'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 District, as of June 30, 2019, and the changes in financial position and cash flows thereof for the

year then ended in accordance with accounting principles generally accepted in the United States of America.

2

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 changes in the net pension liability and related ratios, schedule of

pension contributions, schedule of changes in the net OPEB liability and related ratios, and the schedule

of OPEB contributions, 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 opinions on the financial statements that

collectively comprise the District’s basic financial statements. The introductory section and statistical

section are presented for purposes of additional analysis and are not a required part of the basic

financial statements. The introductory section and statistical section have not been subjected to the

auditing procedures applied in the audit of the basic financial statements and, accordingly, we do not

express an opinion or provide any assurance on them.

Prior-Year Comparative Information

The financial statements include partial prior-year comparative information. Such information does not

include all of the information required or sufficient detail to constitute a presentation in accordance

with accounting principles generally accepted in the United States of America. Accordingly, such

information should be read in conjunction with the District’s financial statements for the year ended

June 30, 2018, from which such partial information was derived. The financial statements of the District,

as of and for the year ended June 30, 2018, were audited by Vavrinek, Trine, Day & Co., LLP, who joined

Eide Bailly LLP on July 22, 2019, and whose report dated October 5, 2018, expressed an unmodified

opinion on those statements.

Other Reporting Required by Government Auditing Standards

In accordance with Government Auditing Standards, we have also issued our report dated October 11,

2019, on our consideration of the District’s internal control over financial reporting and on our tests of

its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other

matters. The purpose of that report is solely to describe the scope of our testing of internal control over

financial reporting and compliance and the results of that testing, and not to provide an opinion on the

effectiveness of the District’s internal control over financial reporting or on compliance. That report is

an integral part of an audit performed in accordance with Government Auditing Standards in considering

the District’s internal control over financial reporting and compliance.

San Diego, California

October 11, 2019


Management's Discussion and Analysis

June 30, 2019 and 2018

3

The following management’s discussion and analysis provides a narrative overview and analysis of the financial performance of the Helix Water District during the fiscal year ended June 30, 2019. Please read this analysis in conjunction with the independent auditor’s report located in the introductory section, and the district’s basic financial statements and accompanying notes immediately following this section.

Overview of the Financial Statements

The district operates under California Irrigation District Law as a utility enterprise. As such, the district presents its financial statements using the economic resources measurement focus and the full accrual basis of accounting, similar to methods used by private sector companies. These financial statements are designed to provide readers with a broad overview of the finances and also present changes in cash balances, and information about both short-term and long-term activities of the district. There are three required components to these statements; the financial statements, the notes to the financial statements and the required supplementary information. As an enterprise fund, the district’s financial statements include four components:

1) Statement of Net Position presents information on all of the district’s assets, deferred outflows, liabilities and deferred inflows with the difference reported as net position. The statement of net position provides the basis for evaluating the capital structure of the district and assessing its liquidity and financial flexibility. Over time, increases or decreases in net position may serve as a useful indicator of whether the financial position of the district is improving or deteriorating. Net position is displayed in three categories: net investment in capital assets; restricted and unrestricted.

2) Statement of Revenues, Expenses and Changes in Net Position presents information which

shows how the district’s net position changed during the year. All of the current year’s revenues and expenses are recorded on an accrual basis, meaning when the underlying transaction occurs, regardless of the timing of the related cash flows. This statement measures the success of the district’s operations over the past year and determines whether the district has recovered its costs through water sales, user fees and other charges.

3) Statement of Cash Flows provides information regarding the district’s cash receipts and cash

disbursements during the year. The statement reports cash activity in three categories: operating; capital and related financing; and investing. The statement differs from the statement of revenues, expenses, and changes in net position in that it accounts only for transactions that result from cash receipts and cash disbursements. As in the past, the statement of cash flows continues to reconcile the reasons why cash from operating activities differ from operating income.

4) Notes to the Basic Financial Statements provide a description of the accounting policies used to

prepare the financial statements and present material disclosures required by generally accepted accounting principles that are not otherwise present in the financial statements. The notes are located immediately following the financial statements.



June 30, 2019 and 2018

4

Financial Highlights

During the year ended June 30, 2019, the district generated income before contributions of $13.3 million,

which is $10.7 million more than income before contributions in fiscal year 2017-18. The increased income

was primarily the result of a $15.4 million decrease in water purchases expense driven by a $0.8 million

decrease in customer demand, and a $14.6 million decrease in water inventory change due to $8.9 million

being added to water inventory in fiscal year 2018-19 and $5.7 million being used from water inventory in

fiscal year 2017-18.

This large change is due to a record wet year in fiscal year 2018-19 and a very dry year in fiscal year 2017-18. The decrease in water purchases expense was partially offset by a $1.9 million reduction in other, non-operating revenue assigned to capital assets due to an accounting treatment change for overhead assignedto capital assets. In addition, the district received $1 million from land sales in fiscal year 2017-18 that didnot continue in fiscal year 2018-19. Lastly, the depreciation expense for fiscal year 2018-19 was $1 millionhigher than fiscal year 2017-18 due to depreciation timing on completed capital asset projects.

In fiscal year 2018-19, the district experienced a wet, rainy winter, capturing 9,994 acre-feet of local water runoff, which is almost double that of the district’s 30-year average of 5,089 and 9,523 acre-feet more than the local water runoff collected in the 2017-18 fiscal year. The district records the value of local water runoff received during the year at replacement cost. The amount of net local water runoff collected reduces the amount, and therefore, cost of water purchases.

Financial Analysis of the District

Statement of Net Position – The district’s net position between fiscal years 2017-18 and 2018-19 increased from $237.8 million to $253.4 million. The change can be seen in the condensed Statement of Net Position on the next page as a $15.6 million increase in net position.

The district’s capital assets, net of depreciation, grew to $252.5 million in fiscal year 2018-19 from $247.8 million in fiscal year 2017-18. The district’s capital asset improvement program includes the extensive water system pipeline replacement project, which is targeted to replace all of the district’s remaining cast-iron pipes by 2027. The district also constructs pipeline and other capital projects that are funded by outside sources. Once these construction projects are complete, the resulting assets are considered contributed to the district. Contributions to capital projects from customers, developers and other public agencies of $0.6 million were recorded in fiscal year 2018-19.



June 30, 2019 and 2018

5


Condensed Statement of Net Position

(Millions of Dollars)

Changes in Revenues, Expenses and Net Position – The district’s $10.7 million increase in income before

contributions in fiscal year 2018-19 was the result of a $15.4 million decrease in the water purchases

expense driven by a $0.8 million decrease in water purchases due to lower customer demand and a $14.6

million change in the water inventory adjustment due to $8.9 million being added to water inventory in

fiscal year 2018-19 and $5.7 million being used from water inventory in fiscal year 2017-18. This large

change is due to a record wet year in fiscal year 2018-19 and a very dry year in fiscal year 2017-18. The

decrease in water purchases expense was partially offset by a $1.9 million reduction in other, non-operating

revenue assigned to capital assets due to an accounting treatment change for overhead assigned to capital

assets. In addition, the district received $1 million from land sales in fiscal year 2017-18 that did not

continue in fiscal year 2018-19. Lastly, the depreciation expense for fiscal year 2018-19 was $1 million

higher than fiscal year 2017-18 due to depreciation timing on completed capital asset projects.

In fiscal year 2018-19, the district completed Phase 2 of a multi-year project to replace its enterprise-wide

computer system. Phase 2 included a new information system to support the financial, purchasing, payroll

2019 2018

Current and other assets 82.6$ 71.0$

Capital assets 252.5 247.8

Total assets 335.1 318.8

Total deferred outflows of resources 15.3 12.5

Total assets and deferred outflows

of resources 350.4$ 331.3$

Current liabilities 15.2$ 9.1$

Long term liabilities 80.2 83.1

Total liabilities 95.4 92.2

Total deferred inflows of resources 1.6 1.3

Net investment in capital assets 244.1 237.9

Restricted 1.9 1.9

Unrestricted 7.4 (2.0)

Total net position 253.4 237.8

Total liabilities, deferred inflows

of resources and net position 350.4$ 331.3$



June 30, 2019 and 2018

6

and human resource functions. The district took this opportunity to evaluate and allocate its expenditures

to appropriate cost centers in fiscal year 2018-19. Historically, due to system limitations, a large component

of the district’s expenditures were grouped in the administrative and general category. As part of the new

information system implementation, expenditures are more accurately reflected in their respective

departments.

The main source for the district’s water supply to its customers comes from water purchases from the San Diego County Water Authority, which increased its variable charge for wholesale water per acre foot to the district by 2.9 percent from fiscal year 2017-18 to fiscal year 2018-19.

The 6.6 percent increase in net position, end of the year, is driven by the factors discussed on the previous page. This table is shown below and provides a summary of the Statement of Revenues, Expenses and Changes in Net Position.


Condensed Statement of Revenues, Expenses and Changes in Net Position

(Millions of Dollars)

2019 2018

Operating revenues

Water sales 84.5$ 85.2$

Other 0.6 0.6

Non-operating revenues

Interest 1.0 0.6

Other 2.5 5.0

Total revenues 88.5 91.4

Operating expenses 73.7 87.7

Non-operating expenses 1.6 1.2

Total expense 75.2 88.9

Income (loss) before contributions 13.3 2.6

Contributions by customers,

developers and public agencies 2.3 2.6

Increase in net position 15.6 5.1

Net position, beginning of year (as restated) 237.8 232.6

Net position, end of year 253.4$ 237.8$



June 30, 2019 and 2018

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The district’s revenue from water sales decreased to $84.5 million in fiscal year 2018-19 from $85.2 million in fiscal year 2017-18. The $0.7 million decrease was due to a combination of factors, including a rate increase that was offset by lower water sales as the district experienced a wet, rainy winter.

Total operating and non-operating expenses decreased to $75.2 million in fiscal year 2018-19 from $88.9 million in fiscal year 2017-18. This $13.7 million decrease was driven mainly by: the $15 million decrease in water purchases expense versus the previous year, offset by the $1 million increase in depreciation expense.



June 30, 2019 and 2018

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Capital Assets

As of June 30, 2019, the district had $252.5 million in capital assets net of $180.9 million of accumulated depreciation. This represents a net increase in capital assets of $4.7 million over the prior year. The largest increases in capital assets were the addition and replacement of the district’s pipelines, as well as improvements to pump stations and equipment. The district recorded the replacement of 26,989 feet of pipeline for the year ending June 30, 2019. For more detailed information on capital assets please see Note 6 to the Basic Financial Statements following this analysis.

Debt Administration

On October 20, 2009, the district retired the 1999 Certificates of Participation with outstanding principle of $22.3 million by issuing $21.4 million in 2009 Water Revenue Bonds. The refinancing of the 1999 Certificates of Participation reduced the district’s annual debt payment by 18%. No additional debt was issued during the year and the district has no immediate need to issue additional debt.

At June 30, 2019, the district had $8.2 million in 2009 Water Revenue Bonds outstanding and $0.2 million of the deferred refunding balance. The district’s debt coverage ratio is 6.5 for fiscal year 2018-19, exceeding the 1.2 debt coverage ratio required by the district’s 2009 Water Revenue bond covenant. In 2015, Fitch affirmed their rating of AA+, with a stable outlook for the 2009 Water Revenue Bonds. More detailed information about the district’s long-term debt is presented in Note 7 to the basic financial statements.

Defined Benefit Pension and Other Post Employment Benefit Plans

District employees participate in the CalPERS defined benefit plan, as well as upon retirement, another post-employment benefit plan (OPEB) that provides retiree medical benefits based upon hire date and years of service. During the last several years, the Government Accounting Standards Board has released new standards that have changed the way that the assets, liabilities and expenses for both of these plans are reflected on financial statements. The treatment for both are similar and are described below.

2019 2018

Land 5.1$ 5.1$

Reservoirs and pipelines 364.0 347.3

Autos and trucks 4.9 3.0

Building and equipment 53.2 54.1

Construction in progress 6.3 9.7

Total capital assets 433.5 419.2

Less: accumulated depreciation (180.9) (171.3)

Capital assets net 252.5$ 247.8$

Capital Assets



June 30, 2019 and 2018

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In June 2012, the Governmental Accounting Standards Board issued a new standard that made significant changes to how state and local governments account for the cost of pension benefits in their financial statements. This new standard, as detailed in GASB No. 68, Accounting and Financial Reporting for

Pensions – an Amendment of GASB Statement No. 27, required state and local governments to adopt this new standard beginning in fiscal year 2014-15. Similarly, as of July 1, 2017, the district adopted the Governmental Accounting Standards Board Statement No. 75, Accounting and Financial Reporting for

Postemployment Benefits Other Than Pensions. Among the many changes that these pronouncement required, two impact the presentation of the financial statements beginning in fiscal year 2014-15 for the pension plan and fiscal year 2017-18 for the OPEB plan, and beyond. These changes, as summarized by the Government Finance Officers Association, impact the amount that an employer reports as a liability in its financial statements and change the amount an employer reports as pension and as OPEB expense. As a result, state and local governments are now required to record the net pension and OPEB liabilities for its defined benefit and OPEB plans as liabilities on its statement of net position (balance sheet). Also, the pension and OPEB expenses that an agency records is no longer equal to the annual required or determined contributions that the agency pays to its pension plan and OPEB administrators. The expenses now also includes the impact of annual fluctuations in the market value of the assets of each of the plans. As a result, the district is reporting $12.4 million in deferred outflows of resources from pension contributions made after the measurement date and amortization. Additionally, the district has reflected $2.9 million in deferred outflows of resources for its OPEB. These account balances reflect pension and OPEB contributions made subsequent to the measurement date. Additionally, the deferred outflows related to pensions reflect the additional costs related to the plan’s change in assumptions, as well as the differences between actual and expected experience, and the net difference between projected and actual earnings on plan investments. Next, the district has recorded a net pension liability of $42.7 million and a $28.3 million net OPEB liability. These balances represent the differences between the plans total pension and OPEB liabilities and fiduciary net positions. The district’s funded status for its pension and OPEB plans as of the most recent valuations at June 30, 2018 were 68 percent and 33 percent, respectively. It is important to highlight that these are not new liabilities for the district and every employer with a qualifying pension and/or OPEB plan will record these liabilities on their balance sheets. The last accounts that were created when the district adopted GASB 68 and 75 are the deferred amount on pensions and deferred amount related to other post-employment benefits recorded as deferred inflows of resources just after the liability section of the statement of net position. These accounts show the remaining, unamortized balance of the impact of changes in the market value of the assets in the district’s pension and OPEB plans and of any changes in assumptions. GASB 68 requires that any gains be amortized over five years and be recalculated on a yearly basis. Due to the fluctuations of market returns on assets, this amount will change in future fiscal years. Note 8 – Retirement Plan (Defined Benefit Pension Plan) and Note 12 – Other Post-Employment Benefits (OPEB) – further provide greater detail regarding the assumptions included in the plan valuations as well as a schedule that shows the changes in balances in the net pension liability from June 30, 2018 to June 30, 2019.



June 30, 2019 and 2018

10

Economic Factors

Following the hot and dry year of above average temperatures that the district experienced in fiscal year 2017-18, the 2018-19 fiscal year was a wet and rainy year with above average rainfall. The district’s customers continue to practice sustainable water use habits and have cumulatively reduced their water use by 17 percent compared to 2013. Together with the above average rainfall, this had led to a decrease in water sales versus the prior year.

Over the past decade, the district’s cost to purchase wholesale water has continued to increase. Unfortunately, based on projections provided by the San Diego County Water Authority, wholesale water costs are projected to continue to increase, resulting in additional water rate increases to its customers. To reduce the impact from rising wholesale water costs, changing demand from dry years and decreased customer usage, the district has implemented a variety of cost-cutting measures within its operating and capital budgets to minimize retail water rate increases. The district also has used local water runoff which reduces the amount of water purchased from San Diego County Water Authority.

Many of the district’s costs are fixed, such as debt service on bonds, maintenance, system operations, labor, benefits, and administrative costs. Although the district’s customers conserve water, these costs do not decrease. All of these costs must be recovered in the rates. The district has cut costs and reduced staff to baseline levels required for operations and maintenance and achieving appropriate customer service. Little opportunity exists for further staff reductions, without affecting customer service or infrastructure maintenance.

Contacting the District’s Financial Management

This financial report is designed to provide our citizens, rate payers, and creditors with a general overview of the district’s finances and to demonstrate the district’s accountability for the financial resources it manages. If you have questions about this report or need additional financial information, contact the Helix Water District’s Administrative Services Department at 7811 University Avenue, La Mesa, California, 91942 or (619) 466-0585.


STATEMENT OF NET POSITION

JUNE 30, 2019

(with Comparative Information for 2018)

The accompanying notes are an integral part of these financial statements.

11

2019 2018

ASSETS

Current assets:

Cash and cash equivalents (Note 5) 29,799,172$ 29,953,243$

Water receivables (Note 2H):

Billed 3,615,540 3,957,464

Unbilled 8,415,204 7,044,373

Other receivables 212,349 462,819

Water inventory (Note 2F) 25,462,142 16,581,306

Supplies inventory and prepaid expenses 706,956 768,658

Total Current Assets 68,211,363 58,767,863

Non-current assets:

Restricted - debt service:

Cash and cash equivalents (Note 5) 1,906,776 1,913,356

Investments (Note 5) 12,462,140 10,302,670

Capital assets (Note 6)

Land 5,067,807 5,067,807

Reservoirs and pipelines 364,048,246 347,250,441

Automobiles and trucks 4,872,090 3,012,300

Buildings and equipment 53,227,726 54,141,322

Less: accumulated depreciation (180,944,068) (171,345,958)

Construction in progress 6,259,302 9,704,002

Total Non-Current Assets 266,900,019 260,045,940

Total Assets 335,111,382 318,813,803

DEFERRED OUTFLOWS OF RESOURCES

Deferred amount related to pensions (Note 8) 12,402,458 9,707,753

Deferred amount related to other post-employment benefits (Note 12) 2,924,510 2,801,176

Total Deferred Outflows of Resources 15,326,968 12,508,929

Total Assets and Deferred Outflows of Resources 350,438,350$ 331,322,732$

(continued)


STATEMENT OF NET POSITION (CONTINUED)

JUNE 30, 2019



12

2019 2018

LIABILITIES

Current liabilities:

Accounts payable 8,601,823$ 4,505,362$

Accrued expenses 550,792 3,661

Compensated absences (Note 2G) 551,655 318,613

Deposits 3,950,138 2,826,778

Current portion of bonds payable (Note 7) 1,530,000 1,480,000

Total Current Liabilities 15,184,408 9,134,414

Non-current liabilities:

Compensated absences (Note 2G) 2,456,216 2,699,306

Bonds payable after one year (Note 7) 6,700,000 8,230,000

Net pension liability (Note 8) 42,745,263 43,517,747

Net other post-employment benefits liability (Note 12) 28,315,434 28,598,306

Total Non-Current Liabilities 80,216,913 83,045,359

Total Liabilities 95,401,321 92,179,773

DEFERRED INFLOWS OF RESOURCES

Deferred amount on refunding of debt 183,943 220,732

Deferred amount related to pensions (Note 8) 1,217,882 879,121

Deferred amount related to other post-employment benefits (Note 12) 257,488 264,022

Total Deferred Inflows of Resources 1,659,313 1,363,875

NET POSITION

Net investment in capital assets 244,117,160 237,899,182

Restricted: debt service 1,906,776 1,913,356

Unrestricted 7,353,780 (2,033,454)

Total Net Position 253,377,716 237,779,084

Total Liabilities, Deferred Inflows of Resources and Net Position 350,438,350$ 331,322,732$


STATEMENT OF REVENUES, EXPENSES AND

CHANGES IN NET POSITION

FOR THE FISCAL YEAR ENDED JUNE 30, 2019



13

2019 2018

OPERATING REVENUES

Water sales 84,470,826$ 85,212,560$

Other charges 590,103 604,167

Total Operating Revenues 85,060,929 85,816,727

OPERATING EXPENSES

Cost of water 28,524,683 43,956,171

Depreciation (Note 6) 10,076,023 8,983,961

Administrative and general 9,522,242 22,617,634

Transmission and distribution 6,612,711 3,024,696

Water treatment 5,672,667 3,416,564

Operations 4,555,818 2,161,604

Pumping 3,190,219 2,348,009

Engineering and inspection 2,924,827 -

Customer services 2,582,386 1,162,085

Total Operating Expenses 73,661,576 87,670,724

OPERATING INCOME (LOSS) 11,399,353 (1,853,997)

NON-OPERATING REVENUES (EXPENSES)

Other income 2,319,176 5,044,918

Interest income 1,168,415 577,149

Other expense (1,052,470) (766,953)

Interest expense (515,973) (415,258)

Total Non-Operating Revenues (Expenses) 1,919,148 4,439,856

INCOME (LOSS) BEFORE CONTRIBUTIONS 13,318,501 2,585,859

CONTRIBUTIONS BY CUSTOMERS,

DEVELOPERS AND PUBLIC AGENCIES 2,280,131 2,565,650

Increase in net position 15,598,632 5,151,509

Net position, beginning of year 237,779,084 232,627,575

Net position, end of year 253,377,716$ 237,779,084$


STATEMENT OF CASH FLOWS

FOR THE YEAR ENDED JUNE 30, 2019



14

2019 2018

CASH FLOWS FROM OPERATING ACTIVITIES

Receipts from customers 84,282,492$ 84,698,695$

Payments to suppliers and vendors (57,644,839) (62,985,463)

Payments to employees (12,417,086) (11,932,810)

Other income 2,319,176 5,044,918

Other expenses (1,052,470) (766,953)

Net Cash Provided by Operating Activities 15,487,273 14,058,387

CASH FLOWS FROM CAPITAL AND

RELATED FINANCING ACTIVITIES

Purchase and construction of capital assets (14,203,358) (12,246,889)

Principal payments on bonds (1,480,000) (1,435,000)

Interest paid (679,788) (452,043)

Cash contributions by customers and developers 1,656,132 670,499

Cash contributions by public agencies 50,145 56,768

Net Cash (Used) for Capital and

Related Financing Activities (14,656,869) (13,406,665)

CASH FLOWS FROM INVESTING ACTIVITIES

Purchase of investments (2,976,000) (5,523,133)

Sales/maturities of investments 993,000 1,360,673

Interest on investments 991,945 577,149

Net Cash (Used) for for Investing Activities (991,055) (3,585,311)

NET INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS (160,651) (2,933,589)

CASH AND CASH EQUIVALENTS

AT BEGINNING OF YEAR 31,866,599 34,800,188

CASH AND CASH EQUIVALENTS

AT END OF YEAR 31,705,948$ 31,866,599$

RECONCILIATION TO THE STATEMENT

NET POSITION

Cash and cash equivalents - current 29,799,172$ 29,953,243$

Cash and cash equivalents - non-current 1,906,776 1,913,356

Total Cash and cash equivalents 31,705,948$ 31,866,599$

(continued)


STATEMENT OF CASH FLOWS, (CONTINUED)

FOR THE YEAR ENDED JUNE 30, 2019



15

2019 2018

RECONCILIATION OF OPERATING INCOME (LOSS)

TO NET CASH PROVIDED BY OPERATING ACTIVITIES

Operating income (loss) 11,399,353$ (1,853,997)$

Adjustments:

Depreciation 10,076,023 8,983,961

Other income and expense 1,266,706 4,277,965

Change in operating assets and liabilities:

(Increase) decrease in water receivables (1,028,907) (796,037)

(Increase) decrease in other receivables 250,470 (321,995)

(Increase) decrease in water inventory (8,880,836) 5,673,288

(Increase) decrease in supplies inventory

and prepaid expenses 61,702 7,028

(Increase) decrease in deferred outflows related to pensions (2,694,705) (1,713,346)

(Increase) decrease in deferred outflows related to other

postemployment benefits (OPEB) (123,334) (371,411)

Increase (decrease) in accounts payable 4,096,461 (3,383,446)

Increase (decrease) in accrued expenses 674,157 (1,328,348)

Increase (decrease) in compensated absences (10,048) 167,860

Increase (decrease) in deposits 1,123,360 -

Increase (decrease) in deferred inflows related to pensions 338,761 (228,381)

Increase (decrease) in deferred inflows related to OPEB (6,534) 264,022

Increase (decrease) in net pension liability (772,484) 4,880,220

Increase (decrease) in net OPEB liability (282,872) (198,996)

Net Cash Provided by Operating Activities 15,487,273$ 14,058,387$

SUPPLEMENTAL DISCLOSURES OF NONCASH

INVESTING AND FINANCING ACTIVITIES

Contributions of water system assets by

customers and developers 573,854$ 1,838,383$

Amortization of deferred amount on refunding debt 36,789$ 36,786$


NOTES TO THE BASIC FINANCIAL STATEMENTS

JUNE 30, 2019


16

NOTE 1 – ORGANIZATION

Helix Water District (district) was organized in 1913 and operates under the provisions of the Irrigation District Law, per Division 11 of the California State Water Code. The district supplies water to the cities of La Mesa, El Cajon, Lemon Grove and surrounding unincorporated areas. It is governed by a board consisting of five directors, each of whom is elected by divisions of the district for a four-year term.

The district’s operations are located as follows:

Administration Office – 7811 University Avenue, La Mesa, California Operations Center – 1233 Vernon Way, El Cajon, California Treatment Plant – 9550 Lake Jennings Park Road, Lakeside, California

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

A. Basis of Accounting

The accounting methods and procedures adopted by the district conform to generally accepted accountingprinciples as applied to governmental enterprise funds.

As an enterprise fund, the district accounts for its operations in a manner similar to private business enterprises.The enterprise fund is accounted for using the economic resources measurement focus and the accrual basis ofaccounting. Revenues are recognized when earned and expenses are recognized when the liability is incurred,regardless of the timing of related cash flows. The intent of the governing body is that the costs (includingdepreciation and amortization) of providing goods or services to the general public on a continuing basis befinanced or recovered primarily through user charges. The focus of enterprise fund measurement is based upondetermination of operating income, changes in net position, financial position and cash flows.

When both restricted and unrestricted resources are available for use, it is the district’s policy to use restrictedresources first and then unrestricted resources as they are needed.

B. Water Systems

Water systems contributed to the district are recorded at acquisition value as of the date received. Water systemcontributions are typically reimbursable in nature which includes construction first paid by the district andreimbursed by the property owner. The board of directors approves major contributions prior to recordingthem.



JUNE 30, 2019


17

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, (continued)

C. Implementation of New Pronouncement

Effective in Future Fiscal Years

GASB Statement No. 84 – In January 2017, GASB issued Statement No. 84, Fiduciary Activities. The objectiveof this statement is to improve guidance regarding the identification of fiduciary activities for accounting andreporting purposes and how those activities should be reported. The requirements of this statement are effectivefor reporting periods beginning after December 15, 2018. The district has not determined the effect on thefinancial statements.

GASB Statement No. 87 – In June 2017, GASB issued Statement No. 87, Leases. The objective of thisStatement is to better meet the information needs of financial statement users by improving accounting andfinancial reporting for leases by governments. The requirements of this statement are effective for reportingperiods beginning after December 15, 2019. The district has not determined the effect on the financialstatements.

GASB Statement No. 89 – In June 2018, GASB issued Statement No. 89, Accounting for Interest Cost Incurred

before the End of a Construction Period. The objectives of this Statement are to enhance the relevance andcomparability of information about capital assets and the cost of borrowing for a reporting period and to simplifyaccounting for interest cost incurred before the end of a construction period. The requirements of this statementare effective for reporting periods beginning after December 15, 2019. The district has not determined theeffect on the financial statements.

GASB Statement No. 90 – In August 2018, GASB issued Statement No. 90, Majority Equity Interests – An

Amendment of GASB Statements No. 14 and No. 61. The objectives of this statement are to improve theconsistency and comparability of reporting a government’s majority equity interest in a legally separateorganization and to improve the relevance of financial statement information for certain component units. Therequirements of this statement are effective for reporting periods beginning after December 15, 2018. Thedistrict has not determined the effect on the financial statements.

GASB Statement No. 91 – In May 2019, GASB issued Statement No. 91, Conduit Debt Obligations. Theobjectives of this statement are to provide a single method of reporting conduit debt obligations by issuers andeliminate diversity in practice associated with (1) commitments extended by issuers, (2) arrangementsassociated with conduit debt obligations, and (3) related note disclosures. The requirements of this statementare effective for reporting periods beginning after December 15, 2020. The district has not determined theeffect on the financial statements.



JUNE 30, 2019


18


D. Capital Assets

Capital assets are those purchased or acquired with an original cost of $10,000 or more and with a useful lifeof greater than one year. They are reported at historical cost or estimated historical cost. Contributed assetsare reported at acquisition value as of the date received. Additions, improvements and other capital outlays thatsignificantly extend the useful life of an asset are capitalized. The costs of normal maintenance and repairs thatdo not add to the value of the assets or materially extend the lives of the assets are not capitalized, but areexpensed as incurred.

Depreciation is charged to expense for all capital assets (including assets contributed to the district) and iscomputed using the straight-line method over the estimated useful asset lives as follows:

Reservoirs and Pipelines 10 – 75 years Buildings and Equipment 10 – 75 years Equipment 5 – 10 years Automobiles and Trucks 6 years

E. Investments

Investments are reported at fair value which is the amount at which financial instruments could be exchangedin a current transaction between willing parties. All fair values are determined by external consultants.Investments are measured at fair value on a recurring basis. Recurring fair value measurements are those thatGovernmental Accounting Standards Board (GASB) Statements require or permit in the statement of netposition at the end of each reporting period. Fair value measurements are categorized based on the valuationinputs used to measure an asset’s fair value: Level 1 inputs are quoted prices in active markets for identicalassets; Level 2 inputs are significant other observable inputs; Level 3 inputs are significant unobservable inputs.Management reviews investments for events that might affect fair value measurements of investments on amonthly basis. The evaluation is performed at the lowest level of identifiable unit of account.

F. Inventory

The value of water inventory is determined based upon the quantity of water in storage at the current year'scommodity rate and a 3-year average of fixed cost rates. Supplies inventory consists of materials primarilyused in the construction and maintenance of the water system and is valued at FIFO.

A summary of the change in water inventory is as follows at June 30:

2019 2018

Water inventory (beginning) 16,581,306$ 22,254,594$

Water purchases 37,405,519 38,282,883

Cost of water (28,524,683) (43,956,171)

Water inventory (ending) 25,462,142$ 16,581,306$



JUNE 30, 2019


19


G. Compensated Absences

The district combines vacation and floating holiday leave into “paid time off”. At June 30, 2019 and 2018, thedistrict's policy is to record a liability equal to 100 percent of paid time off available to all employees.

Balance BalanceJune 30, 2018 Earned Used June 30, 2019

Current Compensated absences 318,613$ 501,458$ (268,416)$ 551,655$

Non-current Compensated absences 2,699,306 1,160,592 (1,403,682) 2,456,216

3,017,919$ 1,662,050$ (1,672,099)$ 3,007,871$

Balance BalanceJune 30, 2017 Earned Used June 30, 2018

Current Compensated absences 300,690$ 111,625$ (93,702)$ 318,613$

Non-current Compensated absences 2,549,369 1,261,206 (1,111,269) 2,699,306

2,850,059$ 1,372,831$ (1,204,971)$ 3,017,919$

H. Water Receivables

Water receivables consist of both billed and unbilled water sales provided to district customers. No allowancefor doubtful accounts is provided because management believes all receivables are collectible. The unbilledreceivable is an estimate of the water usage for each meter based upon the period from the last meter billing toyear-end.

I. Tax Status

Helix Water District is exempt from income taxes of the Internal Revenue Code and California Tax Law.The district pays state and local sales and use taxes.

J. Restricted Net Position

Constraints placed on net position that are externally imposed by creditors, grantors, contributors or laws orregulations of other governments imposed by law through constitutional provisions or enabling legislation areclassified as restricted net position.



JUNE 30, 2019


20


K. Cash and Cash Equivalents

For purposes of the statements of cash flows, cash and cash equivalents consist of short-term highly liquidinvestments with maturities of ninety days or less from the date of purchase. These include cash on hand, cashheld in the restricted assets accounts, and the Local Agency Investment Fund.

L. Operating and non-operating revenues and expenses

Operating revenues and expenses generally result from providing services and producing and delivering goodsin connection with the district’s principal ongoing operations (water delivery and related services). Operatingexpenses include the cost of water delivery and related services, administrative expenses and depreciation oncapital assets. All revenues and expenses not meeting this definition are reported as non- operating.

M. Pension

For purposes of measuring the net pension liability and deferred outflows/inflows of resources related topensions, and pension expense, information about the fiduciary net position of the district’s California PublicEmployees Retirement System (CalPERS) Plan and additions to/deductions from the plan’s fiduciary netposition have been determined on the same basis as they are reported by CalPERS. For this purpose, benefitpayments (including refunds of employee contributions) are recognized when due and payable in accordancewith the benefit terms. Investments are reported at fair value.

N. Other Postemployment Benefits (OPEB)

For purposes of measuring the net OPEB liability, deferred outflows of resources and deferred inflows ofresources related to OPEB, and OPEB expense, information about the fiduciary net position of the district’splan (OPEB plan) and additions to/deductions from the OPEB plan’s fiduciary net position have beendetermined on the same basis. For this purpose, benefit payments are recognized when currently due andpayable in accordance with the benefit terms. Investments are reported at fair value.

O. Deferred Outflows and Inflows of Resources

The district reports deferred outflows and inflows of resources. A deferred outflow of resources is aconsumption of net position by the district that is applicable to a future reporting period. A deferred inflow ofresources represents an acquisition of net position by the government that is applicable to a future period.Examples of deferred outflows and inflows of resources include unamortized losses and gains on refunding oflong-term debt and pension and OPEB related deferrals. Pension and OPEB related deferred outflows andinflows of resources include employer contributions to the pension plan subsequent to the measurement date,changes in actuarial assumptions, differences between actual and expected experience in measurement of thetotal pension and OPEB liability, and net differences between projected and actual earnings on planinvestments. Refunding of debt related deferred inflows are recognized over the remaining life of the refundeddebt.



JUNE 30, 2019


21

NOTE 3 – USE OF ESTIMATES IN PREPARING BASIC FINANCIAL STATEMENTS

The district uses estimates and assumptions in preparing financial statements in accordance with generally accepted accounting principles. These estimates and assumptions affect the reported amounts of assets, deferred outflows of resources, liabilities, deferred inflows of resources, and the reported amounts of revenues and expenses. Actual results could vary from the estimates that were used.

NOTE 4 – PRIOR YEAR DATA

Selected information regarding the prior year has been included in the accompanying financial statements. This information has been included for comparison purposes only and does not represent a complete presentation in accordance with generally accepted accounting principles. Accordingly, such information should be read in conjunction with the district’s prior year financial statements, from which this selected financial data was derived.

NOTE 5 – CASH, CASH EQUIVALENTS AND INVESTMENTS

The primary goals of the district’s investment policy are to assure compliance with all Federal, State, and Local laws governing the investment of funds under the control of the organization, protect the principal of investments entrusted and generate income under the parameters of such policies.

The district’s investment policy and state statutes authorize the district to invest in obligations of the U.S. Treasury, its agencies and instrumentalities, certificates of deposit with national and state-licensed or chartered banks or federal or state savings and loan associations, money market and mutual funds whose portfolios consist of one or more of the foregoing investments and the Local Agency Investment Fund (LAIF).

A summary of cash, cash equivalents and investments is as follows at June 30:

2019 2018

Cash and cash equivalents

Unrestricted cash and cash equivalents

Cash 2,319,755$ 2,196,231$

Cash equivalents 27,479,417 27,757,012

Total unrestricted cash and cash equivalents 29,799,172 29,953,243

Restricted cash and cash equivalents 1,906,776 1,913,356

Total cash and cash equivalents 31,705,948 31,866,599

Investments 12,462,140 10,302,670

Total cash, cash equivalents and investments 44,168,088$ 42,169,269$

Investment amounts included in the following tables include cash equivalents, restricted cash and cash equivalents, and investments.



JUNE 30, 2019


22

NOTE 5 – CASH, CASH EQUIVALENTS AND INVESTMENTS, (continued)

Investments Authorized by the California Government Code and the District’s Investment Policy

For June 30, 2019 and 2018, the table below identifies the investment types that are authorized for the district by the California Government Code (or the district’s investment policy, where more restrictive). The table also identifies certain provisions of the California Government Code (or the district’s investment policy, where more restrictive) that address interest rate risk, credit risk, and concentration of credit risk. This table does not address investments of debt proceeds held by bond trustees that are governed by the provisions of debt agreements of the district, rather than the general provisions of the California Government Code or the district’s investment policy.

Maximum Maximum

Maximum Percentage Investment

Authorized Investments Maturity of Portfolio (1) in Issuer

Local Agency Investment Fund (LAIF) N/A None 65,000,000$

U.S. Treasury (bills, notes and bonds) 36 months None None

Government National Mortgage Association (GNMA) 36 months None None

Small Business Administration (SBA) 36 months None None

General Services Administration (GSA) 36 months None None

Federal National Mortgage Association (FNMA) 36 months None None

Federal Home Loan Bank (FHLB) 36 months None None

Federal Home Loan Mortgage Corporation (FHLMC) 36 months None None

Bank Certificates of Deposit 36 months 30% None

Money Market Mutual Funds 36 months 20% None

(1) Excluding amounts held by the bond trustee that are not subject to California Government Code Restrictions

Investments Authorized by Debt Agreements

Investment of debt proceeds held by the bond trustee are governed by provisions of the debt agreements, rather than the general provisions of the California Government Code or the district’s investment policy.



JUNE 30, 2019


23


Disclosures Relating to Interest Rate Risk

Interest rate risk is the risk that changes in market interest rates will adversely affect the fair value of an investment. Generally, the longer the maturity of an investment, the greater the sensitivity of its fair value will be to changes in market interest rates. One of the ways that the district manages its exposure to interest rate risk is by purchasing a combination of shorter term and longer term investments and by timing cash flows from maturities, so that a portion of the portfolio is maturing or coming close to maturity evenly over time, as necessary, to provide the cash flow and liquidity needed for operations. Information about the sensitivity of the fair values of the district’s investments (including investments held by the bond trustee) to market interest rate fluctuations is provided by the following tables that show the distribution of the district’s investments by maturity.

As of June 30, 2019:

Investment Type Amount 12 or less 13 to 24 25 to 36

Local Agency Investment Fund 27,479,417$ 27,479,417$ -$ -$

Federal Agency Securities 1,000,720 - 1,000,720 -

Certificates of Deposit 11,461,420 3,460,394 3,722,611 4,278,415

Held by Fiscal Agent:

Money Market Funds 74,014 74,014 - -

US Treasury Notes 1,832,762 1,832,762 - -

Total Investments 41,848,333$ 32,846,587$ 4,723,331$ 4,278,415$

Remaining maturity (in months)


Investment Type Amount 12 or less 13 to 24 25 to 36

Local Agency Investment Fund 27,757,012$ 27,757,012$ -$ -$ Federal Agency Securities 994,910 - - 994,910 Certificates of Deposit 9,307,760 2,717,010 3,177,345 3,413,405 Held by Fiscal Agent: Money Market Funds 81,203 81,203 - - US Treasury Notes 1,832,153 1,832,153 - -

Total Investments 39,973,038$ 32,387,378$ 3,177,345$ 4,408,315$

Remaining maturity (in months)



JUNE 30, 2019


24


Disclosures Relating to Credit Risk

Generally, credit risk is the risk that an issuer of an investment will not fulfill its obligation to the holder of the investment. This is measured by the assignment of a rating by a nationally recognized statistical rating organization. Presented below is the minimum rating required by (where applicable) the California Government Code or the district’s investment policy, or debt agreements, and the actual Moody's rating as of year-end for each investment type.


Minimum

Legal

Investment Type Amount Rating Aaa Not Rated

Local Agency Investment Fund 27,479,417$ N/A -$ 27,479,417$

Federal Agency Securities 1,000,720 N/A 1,000,720 -

Certificates of Deposit 11,461,420 N/A - 11,461,420


Money Market Funds 74,014 N/A 74,014 -

US Treasury Notes 1,832,762 N/A 1,832,762 -

Total Investments 41,848,333$ 2,907,496$ 38,940,837$

Rating as of year-end


Minimum

Legal

Investment Type Amount Rating Aaa Not Rated

Local Agency Investment Fund 27,757,012$ N/A -$ 27,757,012$ Federal Agency Securities 994,910 N/A 994,910 -

Certificates of Deposit 9,307,760 N/A - 9,307,760


Money Market Funds 81,203 N/A 81,203 - US Treasury Notes 1,832,153 N/A 1,832,153 -

Total Investments 39,973,038$ 2,908,266$ 37,064,772$

Rating as of year-end

Concentration of Credit Risk

The investment policy of the district contains no limitation on the amount that can be invested in any one issuer beyond that stipulated by the California Government Code, Sections 53600 through 53692.



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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 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 the district’s investment policy do not contain legal or policy requirements that would limit the exposure to custodial credit risk for deposits or investments, other than the following provision for deposits: The California Government Code requires that a financial institution secure deposits made by state or local government 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 percent 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 percent of the secured public deposits. Of the district's deposits with financial institutions as of June 30, 2019 and 2018, $1,744,955 and $2,682,483, respectively, were in excess of federal depository insurance limits and subject to custodial credit risk described above.

Local Agency Investment Fund (LAIF)

The district is a voluntary participant in the Local Agency Investment Fund (LAIF) that is regulated by California Government Code under the oversight of the Treasurer of the State of California. The fair value of the district’s investment in this pool is reported in the accompanying financial statements at amounts based upon district’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 deposited by the district and available for withdrawal is based on the accounting records maintained by LAIF, which are recorded on an amortized cost basis. Deposits and withdrawals are made on the basis of $1 and not fair value. Accordingly, under the fair value hierarchy, the value of the district’s participation in LAIF is measured based upon uncategorized inputs not defined as Level 1, Level 2, or Level 3 inputs. LAIF is not registered with the Securities and Exchange Commission and is not rated.



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Fair Value Hierarchy

The district categorizes its fair value measurements within the fair value hierarchy established by generally accepted accounting principles. The district has the following recurring fair value measurements as of year-end.


Investments by Fair Value Level Amount

Quoted Prices

in Active

Markets for

Identical

Assets

(Level 1)

Significant

Other

Observable

Inputs

(Level 2)

Significant

Unobservable

Inputs

(Level 3)

Federal Agency Securities 1,000,720$ -$ 1,000,720$ -$

Negotiable Certificates of Deposit 11,461,420 - 11,461,420 -

US Treasury Notes 1,832,762 - 1,832,762 -

Total Investments by Fair Value Level 14,294,902 -$ 14,294,902$ -$

Uncategorized measurements

Local Agency Investment Fund 27,479,417

Money Market Funds 74,014

Total Investments 41,848,333$

Fair Value Measurements Using


Investments by Fair Value Level Amount

Quoted Prices

in Active

Markets for

Identical

Assets

(Level 1)

Significant

Other

Observable

Inputs

(Level 2)

Significant

Unobservable

Inputs

(Level 3)

Federal Agency Securities 994,910$ -$ 994,910$ -$

Negotiable Certificates of Deposit 9,307,760 - 9,307,760 - US Treasury Notes 1,832,153 - 1,832,153 -

Total Investments by Fair Value Level 12,134,823 -$ 12,134,823$ -$

Uncategorized measurements

Local Agency Investment Fund 27,757,012

Money Market Funds 81,203

Total Investments 39,973,038$

Fair Value Measurements Using



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27


In determining fair value, the district’s custodians use various methods including market and income approaches based on quoted prices for similar assets. Based on these approaches, the district’s custodians utilize certain assumptions that market participants would use in pricing the asset or liability. The district’s custodians utilize valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs.

Various inputs are used in determining the value of the district’s investments and other financial instruments. The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities. These inputs are summarized in the three broad levels: Level 1 - quoted prices in active markets for identical investments, Level 2 - other significant observable inputs (including quoted prices for similar securities, interest rates, credit risk, etc.) and Level 3 - significant unobservable inputs (including the district’s own assumptions in determining the fair value of investments).

NOTE 6 – WATER SYSTEM – CAPITAL ASSETS

A schedule of changes in water system – capital assets and accumulated depreciation for the year ended June 30, 2019 is shown as follows:

Summary of Changes in Water System – Capital Assets

Balance Balance

June 30, 2018 Reclassification Additions Deletions June 30, 2019

Capital assets, not being depreciated:

Construction in progress 9,704,002$ (8,877,013)$ 5,806,736$ (374,423)$ 6,259,302$

Land 5,067,807 - - - 5,067,807

Total capital assets, not being depreciated 14,771,809 (8,877,013) 5,806,736 (374,423) 11,327,109

Capital assets, being depreciated:

Reservoirs and pipelines 347,250,441 8,593,251 8,461,998 (257,444) 364,048,246

Automobiles and truck 3,012,300 1,623,817 464,999 (229,026) 4,872,090

Buildings and equipment 54,141,322 (1,340,055) 426,459 - 53,227,726

Total capital assets, being depreciated 404,404,063 8,877,013 9,353,456 (486,470) 422,148,062

Less accumulated depreciation for:

Reservoirs and pipelines (139,415,835) 11,223 (6,981,461) 248,885 (146,137,188)

Automobiles and trucks (2,590,360) (1,210,304) (249,425) 229,028 (3,821,061)

Buildings and equipment (29,339,763) 1,199,081 (2,845,137) - (30,985,819)

Total accumulated depreciation (171,345,958) - (10,076,023) 477,913 (180,944,068)

Total capital assets being depreciated, net 233,058,105 8,877,013 (722,567) (8,557) 241,203,994

Capital assets, net 247,829,914$ -$ 5,084,169$ (382,980)$ 252,531,103$



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NOTE 6 – WATER SYSTEM – CAPITAL ASSETS, (continued)

A schedule of changes in water system – capital assets and accumulated depreciation for the year ended June 30, 2018 is shown as follows:

Summary of Changes in Water System – Capital Assets

Balance BalanceJune 30, 2017 Additions Deletions June 30, 2018

Capital assets, not being depreciated:Construction in progress 8,652,802$ 18,111,182$ (17,059,982)$ 9,704,002$ Land 5,067,807 - - 5,067,807

Total capital assets, not being depreciated 13,720,609 18,111,182 (17,059,982) 14,771,809

Capital assets, being depreciated:Reservoirs and pipelines 339,615,788 7,677,975 (43,322) 347,250,441 Automobiles and truck 3,093,945 52,790 (134,435) 3,012,300 Buildings and equipment 49,112,961 5,358,102 (329,741) 54,141,322

Total capital assets, being depreciated 391,822,694 13,088,867 (507,498) 404,404,063

Less accumulated depreciation for:Reservoirs and pipelines (133,019,875) (6,420,986) 25,026 (139,415,835) Automobiles and trucks (2,562,840) (125,455) 97,935 (2,590,360) Buildings and equipment (27,231,984) (2,437,520) 329,741 (29,339,763)

Total accumulated depreciation (162,814,699) (8,983,961) 452,702 (171,345,958)

Total capital assets being depreciated, net 229,007,995 4,104,906 (54,796) 233,058,105

Capital assets, net 242,728,604$ 22,216,088$ (17,114,778)$ 247,829,914$

NOTE 7 – BONDS PAYABLE

The following is a summary of bonds payable for the year ended June 30, 2019:

Balance Balance Due within

Bonds Payable June 30, 2018 Proceeds Payments June 30, 2019 One Year

2009 Water Revenue Bonds

1.00%-4.25%, due 2024 9,710,000$ -$ (1,480,000)$ 8,230,000$ 1,530,000$



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NOTE 7 – BONDS PAYABLE, (continued)

The following is a summary of bonds payable for the year ended June 30, 2018:

Balance Balance Due within

Bonds Payable June 30, 2017 Proceeds Payments June 30, 2018 One Year

2009 Water Revenue Bonds

1.00%-4.25%, due 2024 11,145,000$ -$ (1,435,000)$ 9,710,000$ 1,480,000$

The aggregate principal and interest payments of bonds payable is summarized as follows:

Year ending

June 30, Principal Interest Total

2020 1,530,000$ 315,781$ 1,845,781$

2021 1,585,000 262,231 1,847,231

2022 1,640,000 202,794 1,842,794

2023 1,705,000 141,294 1,846,294

2024 1,770,000 75,225 1,845,225

Total 8,230,000$ 997,325$ 9,227,325$

The proceeds of the 2009 Water Revenue Refunding Bonds, with installments ranging from $1,180,000 to $1,770,000 and interest rates ranging from 1.0 percent to 4.25 percent, were issued to: (1) refund outstanding certificates of participation, (2) pay certain costs incurred in connection with the issuance of the Bonds, and (3) fund a debt service reserve fund. The refunding resulted in a deferred amount of $515,041, which is being amortized over the remaining life of the refunded debt.

The installment payments of the 2009 Water Revenue Bonds are secured by a first lien on net revenues of the water system. The district must also fix and collect rates, fees, and charges for water service which will produce gross revenue in each fiscal year sufficient to: (1) pay the operating and maintenance costs, the Bond installment payments and any other district obligations, (2) restore the required balance in the reserve fund, and (3) yield net revenues of at least 120 percent of annual installment payments. Net revenues are defined in the bond documents as gross revenues, less specified operation and maintenance costs, plus specified non-operating income. The total principal and interest remaining to be paid on the bonds is $9,227,325. Principal and interest paid for the current year and total customer net revenues were $1,843,881 and $24,962,967, respectively.



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NOTE 8 – RETIREMENT PLAN (DEFINED BENEFIT PENSION PLAN)

Plan Description

District employees are eligible to participate in the district's plan, an agent multiple-employer public employee defined benefit pension plan administered by the California Public Employees Retirement System (CalPERS). CalPERS acts as a common investment and administrative agent for its participating member employers. Benefit provisions under the plan are established by State statute and may be amended by district resolution. CalPERS issues publicly available reports that include a full description of the pension plans regarding benefit provisions, assumptions and membership information that can be found on the CalPERS website.

Benefits Provided

CalPERS provides retirement and disability benefits, annual cost of living adjustments and death benefits to plan members, who must be public employees and beneficiaries. Benefits are based on years of credited service, equal to one year of full time employment with the retirement formula of 2.5 percent at 55 for existing “classic” members and 2 percent at 62 for “new” members. The cost of living adjustments for each plan are applied as specified by the Public Employees’ Retirement Law.

Hire Date

Classic - Prior to

January 1, 2013

New - On or after

January 1, 2013

Formula 2.5% @ 55 2% @ 62

Benefit vesting schedule 5 years of service 5 years of service

Benefit payments monthly for life monthly for life

Retirement age 50-55 52-67

Monthly benefits, as a % of annual salary 2.0% to 2.5% 1.0% to 2.5%

Required employee contribution rates 8% 5.5%

Required employer contribution rates 26.501% 26.501%

Miscellaneous

The total required employer contribution rate is the sum of the plan’s employer normal cost rate of 8.635% plus the district’s unfunded accrued liability contribution amount.

Employees Covered

At June 30, 2017, the date of the most recent actuarial valuation, the following employees were covered by the benefit terms for the plan:

Miscellaneous

Inactive employees or beneficiaries currently receiving benefits 170

Inactive employees entitled to but not yet receiving benefits 66

Active employees 140

Total 376



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NOTE 8 – RETIREMENT PLAN (DEFINED BENEFIT PENSION PLAN), (continued)

Contributions

Section 20814(c) of the California Public Employees’ Retirement law requires that the employer contribution rates for all public employers are determined on an annual basis by the actuary and shall be effective on the July 1 following notice of a change in rate. Funding contributions for both plans are determined annually on an actuarial basis as of June 30 by CalPERS. 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. The district is required to contribute the difference between the actuarially determined rate and the contribution rates of employees. Contributions to the plan from the district were $8,429,189 for the year ended June 30, 2019.

Net Pension Liability

The district’s net pension liability is measured as the total pension liability, less the pension plan’s fiduciary net position. The net pension liability is measured as of June 30, 2018, using an annual actuarial valuation as of June 30, 2017. A summary of principal assumptions and methods used to determine the net pension liability is shown below.

Actuarial Assumptions

The total pension liabilities in the June 30, 2018 actuarial valuation was determined using the following actuarial assumptions:

Miscellaneous

Valuation Date June 30, 2017

Measurement Date June 30, 2018

Actuarial Cost Method Entry-Age Normal Cost Method

Actuarial Assumptions:

Discount Rate 7.15%

Inflation 2.75%

Payroll Growth 3.00%

Projected Salary Increase 0.4% - 8.50% (1)

Investment Rate of Return 7.50%

Mortality (2)

(1) Depending on age, service and type of employment

(2) Derived using CalPERS Membership Data for all Funds

The underlying mortality assumptions and all other actuarial assumptions used in the June 30, 2017 valuation were based on the results of a January 2014 actuarial experience study for the period of 1997 to 2011. Further details of the Experience Study can be found on the CalPERS website.



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Discount Rate

The discount rate used to measure the total pension liability was 7.15 percent for each plan. The projection of cash flows used to determine the discount rate assumed that employee contributions will be made at the current contribution rate and that the district’s contributions will be made at rates equal to the difference between actuarially determined contributions rates and the employee rate. Based on those assumptions, each pension plan’s fiduciary net position was projected to be available to make all projected future benefit payments of current active and inactive employees. 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.

In determining the long-term expected 7.15 percent rate of return on pension plan investments, CalPERS took into account both short and long-term market return expectations as well as the expected pension fund cash flows. Such cash flows were developed assuming that both members and employers will make their required contributions on time and as scheduled in all future years. Using historical returns of all the pension funds’ asset classes, expected compound (geometric) returns were calculated over the short-term (first 10 years) and the long-term (11-60 years) using a building-block approach. Using the expected nominal returns for both short-term and long-term, the present value of benefits was calculated for each fund. The expected rate of return was set by calculating the single equivalent expected return that arrived at the same present value of benefits for cash flows as the one calculated using both short-term and long-term returns. The expected rate of return was then set equivalent to the single equivalent rate calculated above and rounded down to the nearest one quarter of one percent.

The table below reflects long-term expected real rate of return by asset class. The rate of return was calculated using the capital market assumptions applied to determine the discount rate and asset allocation.

Asset Class Target Allocation

Real Return

Years 1 - 10

Real Return

Years 11+

Global Equity 47.0% 4.90% 5.38%

Global Fixed Income 19.0% 0.80% 2.27%

Inflation Sensitive 6.0% 0.60% 1.39%

Private Equity 12.0% 6.60% 6.63%

Real Estate 11.0% 2.80% 5.21%

Infrastructure and Forestland 3.0% 3.90% 5.36%

Liquidity 2.0% -0.40% -0.90%

Total 100%



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Changes in the Net Pension Liability

The changes in the net pension liability as follows:

Total Pension

Liability

Plan Fiduciary

Net Position

Net Pension

Liability/(Asset)

Balance at June 30, 2018 131,960,730$ 88,442,983$ 43,517,747$

Changes in the year:

Service Cost 2,124,895 - 2,124,895

Interest on the total pension liability 9,178,999 - 9,178,999

Changes in assumptions (865,092) - (865,092)

Differences between expected and actual experience (331,399) - (331,399)

Plan to plan resource movement - (215) 215

Contribution - employer - 2,889,949 (2,889,949)

Contribution - employee - 957,188 (957,188)

Net investment income - 7,432,504 (7,432,504)

Benefit payments, including refunds of employee contributions (6,898,153) (6,898,153) -

Administrative expenses - (137,819) 137,819

Other Miscellaneous Income/(Expense) - (261,720) 261,720

Net changes 3,209,250 3,981,734 (772,484)

Balance at June 30, 2019 135,169,980$ 92,424,717$ 42,745,263$

Increase (Decrease)

Change of Assumptions

The discount rate was reduced from 7.65 percent to 7.15 percent in the June 30, 2017 actuarial valuation report.

Sensitivity of the Net Pension Liability to Changes in the Discount Rate

The following presents the net pension liability of the district, calculated using the discount rate as well as what the district’s net pension liability would be if it were calculated using a discount rate that is 1-percentage point lower or 1-percentage point higher than the current rate:

Miscellaneous

1% Decrease 6.15%

Net Pension Liability 60,819,437$

Current Discount Rate 7.15%


1% Increase 8.15%


Pension Plan Fiduciary Net Position

Detailed information about the district's pension plan's fiduciary net position is available in the separately issued CalPERS financial reports.



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Pension Expense and Deferred Outflows/Inflows of Resources Related to Pensions

For the year ended June 30, 2019, the district recognized pension expense of $5,300,761. At June 30, 2019, the district reported deferred outflows of resources and deferred inflows of resources related to pensions from the following sources:

Deferred Outflows

of Resources

Deferred Inflows of

Resources

Pension contributions subsequent to measurement date 8,429,189$ -$

Changes in assumptions 3,742,433 798,550

Differences between actual and expected experience 52,631 419,332

Net difference between projected and actual earnings on

plan investments 178,205 -

Total 12,402,458$ 1,217,882$

The amount of $8,429,189 reported as deferred outflows of resources related to contributions subsequent to the measurement date will be recognized as a reduction of the net pension liability during the next measurement period. Amounts reported as deferred outflows and inflows of resources related to changes in assumptions, differences between actual and expected experience, and net differences between projected and actual earnings on plan investments will be amortized as a component of pension expense as follows:

Year ended

June 30, Amortization

2020 2,521,456$

2021 1,737,904

2022 (1,225,886)

2023 (278,087)

Total 2,755,387$

NOTE 9 – DEFERRED COMPENSATION PLAN

The district offers its employees deferred compensation plans created in accordance with Internal Revenue Code Section 457 and 401(a). The plans permit deferment of a portion of current salary to future years. Benefits from the plans are not available to employees until termination, retirement, disability, death or unforeseeable emergencies.

All assets and income of the plans are held in trust for the exclusive benefit of the participants and their beneficiaries. The district does not meet the criteria for fiduciary fund reporting since it does not have either significant administrative involvement (e.g. custody) or perform the investment function. Therefore, the fair market value of the plans assets at June 30, 2019 and 2018, in the amount of $19,555,521 and $18,399,577, respectively, are not included in the district’s basic financial statements.



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NOTE 10 – CONCENTRATION OF SUPPLIERS

During the years ended June 30, 2019 and 2018, the district had one major supplier. Purchases from the San Diego County Water Authority (SDCWA) represent 88 percent and 86 percent of total water produced, respectively.

NOTE 11 – COMMITMENTS AND CONTINGENCIES

In the ordinary course of operations, the district is subject to claims and litigation from outside parties. Although the outcome of these matters is not presently determinable, in the opinion of legal counsel, the resolution of these matters is not expected to have a material adverse effect upon the district’s financial position.

NOTE 12 – OTHER POST-EMPLOYMENT BENEFITS (OPEB)

OPEB Description

The district participates in the California Public Employees’ Retirement System (CalPERS) California Employers’ Retiree Benefit Trust (CERBT) Fund, which is an agent multiple-employer plan available to employers to prefund OPEB benefits. The post-employment healthcare benefits are established by a Memoranda of Understanding with the applicable employee associations, and may be amended by agreement between the district and the employee associations. CalPERS issues a publicly available financial report that can be found on the CalPERS website.

Benefits Provided

The district pays a percentage of the premium for retirees and eligible dependent medical, dental, vision, and life insurance coverage. The percent varies from 0 percent to 100 percent depending on the age and service of the participant at retirement. The district also reimburses the Medicare Part B premiums for retirees (and their spouses) hired before July 1, 1989.

Employees Covered by Benefit Terms

At June 30, 2017, the most recent valuation date, the following current and former employees were covered by the

benefit terms under the OPEB plan:

Active employees 141

Inactive employees or beneficiaries currently receiving benefits 131

Total 272



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NOTE 12 – OTHER POST-EMPLOYMENT BENEFITS (OPEB), (continued)

Contributions

The OPEB plan and its contribution requirements are established by Memoranda of Understanding with the applicable employee associations and may be amended by agreements between the district and the employee associations.

The district contributes an annual contribution determined on an actuarial basis as of June 30. The district pays the portion of the employer related health insurance premiums for current retirees and their spouses/dependents on a pay-as-you-go basis. For the fiscal year ended June 30, 2019, the district contributed $1,885,615 in current premiums. The retiree premiums contain an implied rate subsidy of $301,843 for the pay-as-you-go costs since retiree premium rates are the same as active employee medical premium rates rather than the actual medical cost. For the fiscal year ended June 30, 2019, the district also contributed $714,900 to the CERBT Fund. Employees are not required to contribute to the plan. Contributions recognized by the OPEB plan from the employer for the year ended June 30, 2019 are $2,924,510.

Net OPEB Liability

The district’s net OPEB liability was measured as the total OPEB liability, less the OPEB plan’s fiduciary net position. The net OPEB liability was measured as of June 30, 2018, using an actuarial valuation as of June 30, 2017 rolled forward to June 30, 2018 using standard update procedures. A summary of principal assumptions and methods used to determine the net pension liability is shown below.

Actuarial Assumptions – The total OPEB liability in the June 30, 2017 actuarial valuation was determined using the following actuarial assumptions, applied to all periods included in the measurement:

Actuarial Cost Method Entry-Age Normal Cost Method

Actuarial Assumptions:

Discount Rate 7.14%

Inflation 2.75%

Payroll Growth 3.00% plus merit

Investment Rate of Return 7.14%

Mortality (1)

Medical Trend Rates

Dental and Vision Trend Rate 4.00%

(1) Derived using CalPERS Membership Data for all Funds

6.50% decrease to 5.00% over five

years

Mortality rates were based on the 2017 CalPERS actuarial experience study, which assumed future mortality improvements using Society of Actuaries (SOA) MP 2016 projection table. The Experience Study report can be obtained on the CalPERS website under Forms and Publications.



JUNE 30, 2019


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The actuarial assumptions used in the June 30, 2017 valuation were based on the results of an actuarial experience study for the period June 30, 1997 through June 30, 2015.

Discount Rate – The discount rate used to measure the total pension liability was 7.14 percent for the OPEB plan. The projection of cash flows used to determine the discount rate assumed that the district continues to fully fund for its retiree health benefits though the CERBT under its investment allocation strategy 1. Based on those assumptions, the OPEB plan’s fiduciary net position was projected to be available to make all projected future benefit payments of current active and inactive employees. 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 OPEB liability. The long-term expected rate of return on the OPEB plan investments was determined using a building-block method in which best-estimate ranges of expected future real rates of return (expected returns, net of OPEB plan investment expense and inflation) are developed for each major asset class. These ranges 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. The target asset allocation and most recent best estimates of arithmetic real rates of return for each major asset class are summarized in the following table:

Asset Class Target Allocation

Long-Term Expected

Real Rate of Return

US Equity 30.0% 4.9%

International Equity 27.0% 5.9%

REITs 8.0% 3.7%

US Fixed Income 27.0% 2.4%

Commodities 3.0% 1.8%

Inflation Assets 5.0% 1.5%

Total 100%



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Changes in the Net OPEB Liability

Total OPEB

Liability

Plan Fiduciary

Net Position

Net OPEB

Liability

Balance at June 30, 2018 40,694,155$ 12,095,849$ 28,598,306$

Changes in the year:

Service Cost 585,658 - 585,658

Interest on the total OPEB liability 2,872,937 - 2,872,937

Contribution - employer - 2,801,176 (2,801,176)

Net investment income - 962,741 (962,741)

Benefit payments (2,085,210) (2,085,210) -

Administrative expenses - (6,447) 6,447

Other expenses - (16,003) 16,003

Net changes 1,373,385 1,656,257 (282,872)

Balance at June 30, 2019 42,067,540$ 13,752,106$ 28,315,434$

Increase (Decrease)

Sensitivity of the Net OPEB Liability to Changes in the Discount Rate and Healthcare Cost Trend Rates – The following presents the net OPEB liability of the district, as well as what the district’s net OPEB liability would be if it were calculated using a discount rate that is 1-percentage-point lower (6.14 percent) or 1-percentage-point higher (8.14 percent) than the current discount rate:

1% Decrease Discount Rate 1% Increase

(6.14%) (7.14%) (8.14%)

Net OPEB Liability 33,869,525$ 28,315,434$ 23,734,300$

Sensitivity of the Net OPEB Liability to Changes in the Healthcare Cost Trend Rates – The following presents the net OPEB liability of the district, as well as what the district's net OPEB liability would be if it were calculated using healthcare cost trend rates that are 1-percentage-point lower (5.50 percent decreasing to 4.00 percent) or 1-percentage-point higher (7.50 percent decreasing to 6.00 percent) than the current healthcare cost trend rates:

1% Decrease

Healthcare Cost

Trend Rate 1% Increase

(5.50%

Decreasing to

4.00%)

(6.50%

Decreasing to

5.00%)

(7.50%

Decreasing to

6.00%)

Net OPEB Liability 23,082,331$ 28,315,434$ 34,735,484$

OPEB Plan Fiduciary Net Position – Detailed information about the OPEB plan's fiduciary net position is available in the separately issued CalPERS financial reports.



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OPEB Expense and Deferred Outflows/Inflows of Resources Related to OPEB

For the year ended June 30, 2019, the district recognized OPEB expense of $2,511,770. At June 30, 2019, the district reported deferred outflows of resources and deferred inflows of resources related to OPEB from the following sources:

Deferred Outflows

of Resources

Deferred Inflows of

Resources

OPEB contributions subsequent to measurement date 2,924,510$ -$

Net difference between projected and actual earnings on

plan investments - 257,488

Total 2,924,510$ 257,488$

The $2,924,510 reported as deferred outflows of resources related to contributions subsequent to the measurement date will be recognized as a reduction of the net OPEB liability in the year ended June 30, 2019. Other amounts reported as deferred outflows of resources and deferred inflows of resources related to OPEB will be recognized in OPEB expense as follows:

Year ended

June 30, Amortization

2020 (80,873)$

2021 (80,873)

2022 (80,875)

2023 (14,867)

Total (257,488)$

NOTE 13 – RISK MANAGEMENT

The district is exposed to various risks of loss related to torts; theft of, damage to, and destruction of assets; errors and omissions; injuries to employees; and natural disasters. During the year ended June 30, 2019, the district participated in the Association of California Water Agencies Joint Powers Insurance Authority (JPIA), which was organized for the purpose of providing liability insurance for the member agencies. The JPIA is a risk-pooling self-insurance authority created under the provisions of California Government Code Section 6500. The JPIA is governed by a board consisting of a representative from each member agency. The board controls the operations of the JPIA, including selections of management and approval of operating budgets. The purpose of the JPIA is to arrange and administer programs of insurance for the pooling of self-insured losses and to purchase excess insurance coverage. The accounts and records of ACWA/JPIA are audited by an independent certified public accounting firm. At June 30, 2019, the district’s participation in the JPIA was as follows:



JUNE 30, 2019


40

NOTE 13 – RISK MANAGEMENT, (continued)

Property Loss - Insured up to $500,000,000 per occurrence (total insurable value $82,165,326) with $25,000 deductible for buildings, personal property, fixed equipment, mobile equipment, and licensed vehicles; the pool is self-insured up to $100,000 per occurrence and excess insurance coverage has been purchased.

General Liability - Insured up to $60,000,000 per occurrence; the pool is self-insured up to $5,000,000 and excess insurance coverage has been purchased.

Auto Liability - Insured up to $60,000,000 per occurrence with no deductible for property damage; the pool is self-insured up to $5,000,000 and excess insurance coverage has been purchased.

Workers' Compensation - Insured up to statutory limits per occurrence with no deductible; the pool is self-insured up to $2,000,000 and excess insurance coverage has been purchased.

Public Officials’ Liability - Insured up to $60,000,000 per occurrence; the pool is self-insured up to $5,000,000 and excess insurance coverage has been purchased.

Fidelity - Insured up to $100,000 per occurrence with $1,000 deductible.

The district pays annual premiums for the coverages, which are subject to retrospective adjustments based on claims experience. The nature and amounts of these adjustments cannot be estimated and there were no instances in the past three years where a settlement exceeded the district’s coverage.

NOTE 14 – SUBSEQUENT EVENT

On July 29, 2019, the district signed an Interim Funding Agreement with Padre Dam Municipal Water District, the City of El Cajon and the San Diego County Sanitation District related to the East County Advanced Water Purification Project. In signing this agreement, the district committed to funding its 25 percent share of costs related to the project for additional engineering, legal, environmental, regulatory compliance, financial analysis, project outreach studies and other, related administrative tasks. This agreement covers costs incurred between July 2019 and the final investment decision date for the project, anticipated as December 31, 2021. The district’s maximum liability under this agreement is just under $2.4 million. The potential liability is only due if the project does not move forward.


REQUIRED SUPPLEMENTARY INFORMATION

JUNE 30, 2019

41

Schedule of Changes in the Net Pension Liability and Related Ratios

Last Ten Years*

2019 2018 2017 2016 2015

Total Pension Liability

Service cost 2,124,895$ 2,147,982$ 1,890,125$ 1,879,510$ 1,865,620$

Interest on the total pension liability 9,178,999 8,958,907 8,712,406 8,377,627 8,036,632

Differences between actual and expected experience (331,399) (337,522) 164,586 121,462 -

Changes in assumptions** (865,092) 7,484,867 - (2,070,548) -

Benefit payments, including refunds of employee contributions (6,898,153) (6,743,149) (6,190,966) (5,910,719) (5,296,740)

Net change in total pension liability 3,209,250 11,511,085 4,576,151 2,397,332 4,605,512

Total pension liability - beginning 131,960,730 120,449,645 115,873,494 113,476,162 108,870,650

Total pension liability - ending (a) 135,169,980$ 131,960,730$ 120,449,645$ 115,873,494$ 113,476,162$

Plan fiduciary net position

Contributions - employer 2,889,949$ 3,387,063$ 3,154,575$ 2,962,681$ 2,544,656$

Contributions - employee 957,188 937,532 954,960 959,053 1,309,271

Net investment income 7,432,504 9,170,209 425,143 1,884,678 12,668,966

Benefit payments (6,898,153) (6,743,149) (6,190,966) (5,910,719) (5,296,740)

Administrative expenses (137,819) (120,790) (50,901) (94,037) -

Plan to plan resource movement (215) - - 12,705 -

Other Miscellaneous Income/(Expense) (261,720)

Net change in plan fiduciary net position 3,981,734 6,630,865 (1,707,189) (185,639) 11,226,153

Plan fiduciary net position - beginning 88,442,983 81,812,118 83,519,307 83,704,946 72,478,793

Plan fiduciary net position - ending (b) 92,424,717 88,442,983 81,812,118 83,519,307 83,704,946

Net pension liability - ending (a)-(b) 42,745,263$ 43,517,747$ 38,637,527$ 32,354,187$ 29,771,216$

Plan fiduciary net position as a percentage of the total pension liability 68.38% 67.02% 67.92% 72.08% 73.76%

Covered payroll during measurement period 12,767,245$ 13,339,342$ 12,969,506$ 12,870,264$ 12,559,197$

Net pension liability as percentage of covered payroll 334.80% 326.24% 297.91% 251.39% 237.05%

Notes to Schedule:

* - Fiscal year 2015 was the 1st year of implementation.

** - Change of assumptions: In 2017, the discount rate (without a 0.15 percent reduction for pension plan administrative expense) was reduced from 7.65 percent to 7.15 percent.



JUNE 30, 2019

42

Schedule of Contributions-Pension

Last Ten Years*

2019 2018 2017 2016 2015

Actuarially determined contribution 3,429,189$ 2,890,092$ 2,637,063$ 2,404,575$ 2,212,681$

Contributions in relation to the

actuarially determined contributions 8,429,189 2,890,092 3,387,063 3,154,575 2,962,681 Contribution deficiency (excess) (5,000,000)$ -$ (750,000)$ (750,000)$ (750,000)$

Covered payroll during fiscal year 13,059,438 12,767,245 13,339,342 12,969,506 12,870,264

Contributions as a percentage of

covered payroll 64.54% 22.64% 25.39% 24.32% 23.02%

Notes to Schedule

Valuation date: Actuarially determined contribution rates are calculated as of June 30

two years prior to the end of the fiscal year in which contributions

are reported.

Methods and assumptions used to

determine contribution rates: Actuarial cost method Entry Age Normal Cost Method Amortization method Level percent of payroll Asset valuation method Market value Inflation 2.75% Salary increases 3.2% to 12.20% depending on Age, Service, and type of employment Investment rate of return 7.15%** Retirement age Based on CalPERS Experience Study Mortality Based on CalPERS Experience Study


** - Change of assumptions: In 2017, the discount rate (without a 0.15 percent reduction for pension plan administrative expense) was

reduced from 7.65 percent to 7.15 percent.



JUNE 30, 2019

43

Schedule of Changes in the Net Other Postemployment Benefits (OPEB) Liability and Related Ratios

Last Ten Years*

2019 2018

Total OPEB Liability

Service cost 585,658$ 546,629$

Interest on the total OPEB liability 2,872,937 2,771,122

Benefit payments, including refunds of employee contributions (2,085,210) (1,776,393)

Net change in total OPEB liability 1,373,385 1,541,358

Total OPEB liability - beginning 40,694,155 39,152,797

Total OPEB liability - ending (a) 42,067,540$ 40,694,155$

Plan fiduciary net position

Contributions - employer 2,801,176$ 2,429,765$

Net investment income 962,741 1,092,536

Benefit payments (2,085,210) (1,776,393)

Administrative expenses (6,447) (5,554)

Other expenses (16,003)

Net change in plan fiduciary net position 1,656,257 1,740,354

Plan fiduciary net position - beginning 12,095,849 10,355,495

Plan fiduciary net position - ending (b) 13,752,106 12,095,849

Net OPEB liability - ending (a)-(b) 28,315,434$ 28,598,306$

Plan fiduciary net position as a percentage of the total OPEB liability 32.69% 29.72%

Covered-employee payroll during measurement period 13,067,438$ 12,565,848$

Net OPEB liability as percentage of covered payroll 216.69% 227.59%

Notes to Schedule:




JUNE 30, 2019

44

Schedule of Contributions-Other Postemployment Benefits

Last Ten Years*

2019 2018

Actuarially determined contribution 2,924,510$ 2,801,176$

Contributions in relation to the

actuarially determined contributions 2,924,510 2,801,176 Contribution deficiency (excess) -$ -$

Covered-employee payroll during fiscal year 12,954,050 13,067,438

Contributions as a percentage of

covered payroll 22.58% 21.44%

Notes to Schedule

Valuation date: Actuarially determined contribution rates are calculated as of June 30

two years prior to the end of the fiscal year in which contributions

are reported.

Methods and assumptions used to

determine contribution rates:

Actuarial cost method Entry Age Normal Cost Method

Amortization method Level percent of payroll

Asset valuation method Market value

Inflation 2.75%

Medical Trend Rate 6.50% decrease to 5.00% over five years

Dental and Vision Trend Rate 4.00%

Investment rate of return 7.14%

Retirement age Based on CalPERS Experience Study

Mortality Based on CalPERS Experience Study


STATISTICAL SECTION

This part of the Helix Water District’s comprehensive annual financial report presents detailed information as a context for understanding what the information says about the district’s overall financial health.

Contents

Financial Trends These schedules contain trend information to help the reader understand how the district’s financial performance and well-being have changed over time.

Revenue Capacity These schedules contain information to help the reader assess the district’s primary revenue source, water sales.

Debt Capacity These schedules present information to help the reader assess the affordability of the district’s current levels of outstanding debt and the district’s ability to issue additional debt in the future.

Demographic and Economic Information These schedules offer demographic and economic indicators to help the reader understand the environment within which the district’s financial activities take place.

Operating Information These schedules contain service and infrastructure data to help the reader understand how the information in the district’s financial report relates to the services the district provides and the activities it performs.

Net PositionLast Ten Fiscal Years FY 2018-19 CAFR

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

Net Investment in Capital Assets

$201,617,572 $206,210,260 $209,175,228 $212,569,574 $214,170,118 $219,696,675 $224,327,371 $231,326,086 $237,899,182 $244,117,160

Restricted 1,924,537 1,906,419 1,917,735 1,922,389 1,906,287 1,906,154 1,903,704 1,904,993 1,913,356 1,906,776

Unrestricted 33,975,782 45,508,649 48,361,161 47,707,811 47,107,598 12,523,866 8,584,005 25,764,033 -2,033,454 7,353,780

Total Net Position $237,517,891 $253,625,328 $259,454,124 $262,199,774 $263,184,003 $234,126,695 $234,815,080 $258,995,112 $237,779,084 $253,377,716

Fiscal Year

►The restricted assets for the district are comprised of legally required fund balances per debt covenants. In 1999 a Certificate of Participation (COP) was issued toupgrade and expand the district's existing water treatment plant. In 2009, the district issued Water Revenue Refunding Bonds to refund the balance of the district's1999 Certificates of Participation.

►The district's assets consist primarily of water treatment and distribution facilities.

►The district adopted Governmental Accounting Standards Board Statements No.68 and No.71 as of July 1, 2014, and Statement No.75 as of July 1, 2017. Thesepronouncements resulted in a restatement of the beginning net position to the financial statements.

$0

$50,000,000

$100,000,000

$150,000,000

$200,000,000

$250,000,000

$300,000,000

Unrestricted Restricted Net Investment in Capital Assets

Source: Helix Water District Audited Financial Statements

Changes in Net PositionLast Ten Fiscal Years

FY 2018-19 CAFR

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

Operating Revenues

Water Sales $55,382,131 $59,097,316 $64,762,949 $71,259,638 $76,351,750 $72,694,853 $65,079,938 $75,332,588 $85,212,560 $84,470,826

Local Water 8,598,547 13,527,135 5,144,705 2,368,369 1,325,633 1,320,372 2,868,403 16,828,525 0 * 0

Other 563,412 594,091 668,657 706,750 716,349 605,314 628,939 612,542 604,167 590,103

Total Op. Revenues 64,544,090 73,218,542 70,576,311 74,334,757 78,393,732 74,620,539 68,577,280 92,773,655 85,816,727 85,060,929

Non-Op. Revenues

Interest 318,348 328,082 246,858 93,834 127,097 245,819 310,213 322,092 577,149 1,168,415

Other 3,558,924 3,245,299 5,399,170 3,020,361 2,881,227 4,139,799 3,411,700 11,569,143 5,044,918 2,319,176

Total Non-Op. Revenues 3,877,272 3,573,381 5,646,028 3,114,195 3,008,324 4,385,618 3,721,913 11,891,235 5,622,067 3,487,591

Total Revenues $68,421,362 $76,791,923 $76,222,339 $77,448,952 $81,402,056 $79,006,157 $72,299,193 $104,664,890 $91,438,794 $88,548,520

Operating Expenses

Water Purchases $23,134,309 $20,213,169 $25,937,403 $31,935,458 $37,728,588 $36,042,500 $33,274,446 $25,293,132 $43,956,171 $28,524,683

Local Water 3,010,359 9,979,784 8,457,444 5,934,094 2,570,494 1,320,372 2,868,403 16,828,525 0 0

Depreciation 6,810,218 7,213,870 7,455,579 7,634,080 11,265,085 8,335,886 8,539,576 9,093,269 8,983,961 10,076,023

Administrative & Gen. 17,544,621 16,580,618 17,225,553 17,624,890 17,666,314 17,610,440 18,499,846 20,273,722 22,617,634 9,522,242

Transmission & Dist. 3,158,553 3,313,074 2,737,431 3,017,176 2,803,773 2,909,164 3,026,865 2,914,809 3,024,696 6,612,711

Water Treatment 2,501,995 2,743,809 2,926,470 3,003,500 3,139,919 3,104,291 2,858,235 3,304,543 2,348,009 5,672,667

Operations 2,143,819 2,153,565 2,187,745 2,103,399 2,123,106 2,017,677 1,998,679 2,209,212 2,161,604 4,555,818

Pumping 2,105,453 2,333,039 2,443,377 2,394,273 2,622,680 2,260,170 1,926,249 2,113,134 3,416,564 3,190,219

Engineering and Insp. 0 0 0 0 0 0 0 0 0 2,924,827

Customer Service 1,188,681 871,364 861,464 852,323 1,203,887 1,293,845 1,200,519 1,133,143 1,162,085 2,582,386

Total Op. Expenses 61,598,008 65,402,292 70,232,466 74,499,193 81,123,846 74,894,345 74,192,818 83,163,489 87,670,724 73,661,576

Non-Operating Expenses

Interest 1,256,390 647,031 623,031 584,688 553,124 548,005 517,869 477,369 415,258 515,973

Other 504,723 516,532 543,467 552,310 579,564 677,807 658,351 685,950 766,953 1,052,470

1,761,113 1,163,563 1,166,498 1,136,998 1,132,688 1,225,812 1,176,220 1,163,319 1,182,211 1,568,443

Total Expenses $63,359,121 $66,565,855 $71,398,964 $75,636,191 $82,256,534 $76,120,157 $75,369,038 $84,326,808 $88,852,935 $75,230,019

Fiscal Year

► Beginning FY17-18, the district discontinued the recording of “local water runoff” as an operating revenue and operating expense. Given that these numbers do not reflect actual water billings or waterpurchases, excluding them provides a more accurate total of revenues and expenses.

► In FY18-19, as part of a multi-year project to replace the district's enterprise-wide computer system, the district evaluated and allocated its expenditures to more accurately reflect department expenses.


Changes in Net Position (continued)Last Ten Fiscal Years FY 2018-19 CAFR

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

Change in Net Position

Net Revenues/(Expenses) $5,062,241 $10,226,068 $4,823,375 $1,812,761 ($854,478) $2,886,000 ($3,069,845) $20,338,082 $2,585,859 $13,318,501

Contributions 2,165,758 5,881,371 1,090,047 932,889 1,838,707 2,403,893 3,758,230 3,841,950 2,565,650 2,280,131

$7,227,999 $16,107,439 $5,913,422 $2,745,650 $984,229 $5,289,893 $688,385 $24,180,032 $5,151,509 $15,598,632Total Change in Net Position

►Water Sales are the district's largest source of revenues.Beginning FY17-18, the district discontinued the recordingof “local water runoff” as an operating revenue andoperating expense. Given that these numbers do not reflectactual water billings or water purchases, excluding themprovides a more accurate total of revenues and expenses.

Fiscal Year

$0$10,000,000$20,000,000$30,000,000$40,000,000$50,000,000$60,000,000$70,000,000$80,000,000$90,000,000

Change in Net Position - REVENUES

Interest Local Water Water Sales

$0$10,000,000$20,000,000$30,000,000$40,000,000$50,000,000$60,000,000$70,000,000$80,000,000$90,000,000

Change in Net Position - EXPENSES

Interest Transmission & Distribution Depreciation Administrative & General Local Water Water Purchases


Water Sold by Type of CustomerLast Ten Fiscal Years FY 2018-19 CAFR

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

Domestic $30,401,691 $31,072,554 $33,706,749 $37,212,911 $40,016,189 $38,471,043 $33,483,479 $38,335,569 $44,024,698 $42,617,037

Multi-Family 13,680,129 15,146,308 16,623,440 18,032,140 19,220,065 19,404,032 18,772,967 20,505,981 22,818,958 23,007,624

Commercial 6,270,839 6,548,089 7,011,193 7,515,696 7,994,583 8,164,305 7,767,796 8,351,360 9,238,819 9,477,467

Other Water Sales 5,029,472 6,330,365 7,421,567 8,498,891 9,120,913 6,655,473 5,055,696 8,139,678 9,130,085 9,368,698

Total Water Sales $55,382,131 $59,097,316 $64,762,949 $71,259,638 $76,351,750 $72,694,853 $65,079,938 $75,332,588 $85,212,560 $84,470,826

Water SoldHundred Cubic Feet (HCF)

14,031,112 13,857,307 14,285,066 14,966,345 15,275,455 13,566,666 11,100,073 12,529,598 13,180,298 12,152,369

Direct Rate Per HCF $3.95 $4.26 $4.53 $4.76 $5.00 $5.36 $5.86 $6.01 $6.47 $6.95

►Helix's primary revenue source is retail water sales. The proportion of customer types that make up the revenue base has remained relatively unchanged for the time frame presented. Domestic water customers make up the largest section of the revenue base.

►Although revenue by customer type is not presented separately on the face of the financial statements, these revenues are recorded separately in the district's general ledger for tracking purposes.

Fiscal Year

$0

$10,000,000

$20,000,000

$30,000,000

$40,000,000

$50,000,000

$60,000,000

$70,000,000

$80,000,000

Other Water Sales Commercial Multi-Family Domestic


District Water RatesLast Ten Fiscal Years FY 2018-19 CAFR

Fiscal Year

0-14Units

15-34Units

35+ Units

2019 4.82$ 5.65$ 7.03$ 5.47$ 5.53$ 5.65$

2018 4.65 5.46 6.79 5.28 5.34 5.46

2016 4.42 5.21 6.53 5.04 5.09 5.21

Fiscal Year

0-10Units

11-30Units

31+ Units

Multi-Family /

Gov't Commercial Irrigation

2016 3.97 4.70 5.92 4.54 4.70 4.70

2015 3.31 4.14 5.51 4.14 4.14 4.14

2014 3.13 3.91 5.20 3.91 3.91 3.91

2013 2.94 3.72 4.98 3.72 3.72 3.72

2012 2.74 3.47 4.65 3.47 3.47 3.47

2011 2.36 3.28 4.36 3.28 3.28 3.28

2010 2.10 2.92 3.88 2.92 2.92 2.92

Fiscal Year

5/8" &3/4" 1" 1.5" 2" 2.5" 4" 6" 8"

2019 49.32$ 72.08$ 128.95$ 197.19$ 413.29$ 731.75$ 1,493.81$ 3,199.88$

2018 47.87 69.95 125.15 191.37 401.12 710.20 1,449.81 3,105.64

2017 47.07 68.79 123.07 188.20 394.47 698.44 1,425.82 3,054.26

2016 43.55 63.65 113.88 174.16 365.05 646.35 1,319.48 2,826.48

2015 43.36 80.79 152.76 239.13 440.64 728.52 1,448.24 2,311.89

2014 42.93 79.99 151.25 236.76 436.28 721.31 1,433.90 2,289.00

2013 40.10 78.44 149.42 234.60 433.36 717.30 1,427.15 2,278.96

2012 40.10 78.44 149.42 234.60 433.36 717.30 1,427.15 2,278.96

2011 40.10 78.44 149.42 234.60 433.36 717.30 1,427.15 2,278.96

2010 40.10 78.44 149.42 234.60 433.36 717.30 1,427.15 2,278.96

►The district annually updates water rates for the following fiscal year. Water rates are based on the amount ofrevenue needed and is collected through a base charge for each meter and a commodity charge for the volume ofwater used by each customer. Typically 70-75% of revenue is collected from commodity charges (variable costs)and the remainder from base charges (fixed costs).

►During fiscal year 2014-15, the district worked with an outside consultant to complete an updated cost of servicestudy. The intent of the study was to independently assess and perform a comprehensive review of the district’sexisting water rates and charges and provide recommendations. The broad objective of the study was to ensure thatthe district’s rate structure adequately covered revenue requirements in compliance with industry best practices,legal parameters, debt service rate covenants and district policies. Based on the results of this study, domestic waterusage tiers were changed beginning FY16.

Meter Charge

Commercial / Gov't Irrigation

Domestic

Multi-Family

Commodity Charges

Source: Helix Water District Policies Procedures Manual

District FundsLast Ten Fiscal Years FY 2018-19 CAFR

Fiscal Year Cash

Local Agency Investment

Fund

US Government

Agency

Certificates of Deposit/Money

Market Fund Total Funds

2019 2,319,755$ 27,479,417$ 2,833,482$ 11,535,434$ 44,168,088$

2018 2,196,231 27,757,012 2,827,063 9,388,963 42,169,269

2017 3,465,177 29,430,018 1,842,493 6,202,710 40,940,398

2016 1,557,986 24,194,226 2,341,321 5,260,918 33,354,451

2015 1,623,342 26,455,157 2,847,294 5,676,469 36,602,262

2014 3,169,415 23,543,569 3,348,104 6,007,667 36,068,755

2013 1,451,662 27,552,753 3,863,927 3,292,706 36,161,048

2012 1,334,185 26,207,289 5,963,695 - 33,505,169

2011 1,286,175 17,707,656 5,983,359 - 24,977,190

2010 1,417,857 12,576,909 8,150,381 - 22,145,147

$0

$5,000,000

$10,000,000

$15,000,000

$20,000,000

$25,000,000

$30,000,000

$35,000,000

$40,000,000

$45,000,000

Certificates of Deposit / Money Market Fund Cash US Government Agency LAIF


Ten Largest CustomersCurrent and Ten Years Prior FY 2018-19 CAFR

Customer Water Billings% of Total

HCF Delivered Customer Water Billings

% of Total

HCF Delivered

CALTRANS 636,833$ 0.75% 102,006 CALTRANS 297,996$ 0.80% 158,363

City of La Mesa 500,406$ 0.59% 75,155 City of La Mesa 194,487$ 0.52% 102,889

Cajon Valley Union School Dist. 474,518$ 0.56% 77,847 Cajon Valley Union School Dist. 183,638$ 0.49% 97,882

Grossmont Union High School 369,585$ 0.44% 56,180 Customer 1 179,174$ 0.48% 95,148

L.M.-Spring Valley Sch. Dist. 338,178$ 0.40% 56,267 Grossmont Union High School 172,573$ 0.46% 91,915

City of El Cajon 317,706$ 0.38% 50,235 City of El Cajon 128,731$ 0.35% 68,523

Customer 1 313,658$ 0.37% 55,374 L.M.-Spring Valley Sch. Dist. 117,356$ 0.32% 62,379

Customer 2 306,723$ 0.36% 48,477 Customer 2 82,063$ 0.22% 43,650



Total Ten Largest Customers 3,649,611 4.32% 587,269 Total Ten Largest Customers 1,515,904 4.08% 805,782

All Other Customers 80,821,215 95.68% 11,565,100 All Other Customers 35,625,273 95.92% 15,621,565

Total Water Revenue for District 84,470,826 100.00% 12,152,369 Total Water Revenue for District 37,141,177 100.00% 16,427,347

Fiscal Year 2018-19 Fiscal Year 2008-09

►The district’s service area has been established for many years, and with a relatively stable local economy, it has seen few changes to its customer base. This stability is reflected in the similarities between the current list of the largest government and public education water customers and the list from ten years prior.

►According to Government Code section 6254.16, non-public agencies are exempt from disclosure of utility usage data.

Ten Largest Water Customers

All Other Customers

Fiscal Year 2018-19

95.68%

4.32%

Ten Largest Water Customers

All Other Customers

Fiscal Year 2008-09

95.92%

4.08%

Source: Helix Water District Accounts Receivable Records

Ratios of Outstanding DebtLast Ten Fiscal Years FY 2018-19 CAFR

Outstanding Number of Debt Per Debt perDebt Meters Meter Population Capita

2019 8,230,000$ 56,306 146.17$ 275,910 29.83$

2018 9,710,000$ 56,184 172.83$ 274,526 35.37$

2017 11,145,000$ 56,117 198.60$ 273,142 40.80$

2016 12,540,000$ 56,066 223.66$ 271,759 46.14$

2015 13,890,000$ 56,008 248.00$ 270,375 51.37$

2014 15,205,000$ 55,759 272.69$ 267,922 56.75$

2013 16,490,000$ 55,701 296.04$ 267,922 61.55$

2012 17,745,000$ 55,628 318.99$ 267,922 66.23$

2011 18,965,000$ 55,554 341.38$ 267,922 70.79$

2010 20,165,000$ 55,563 362.92$ 267,922 75.26$

Fiscal Year

►Helix Water District only has Business-type activities and only one debt issue outstanding.

►In 2009, $21,345,000 Water Revenue Bonds were issued to refund the 1999 Certificates of Participation.

►The district does not currently have any General Obligation Bonds.

►The district does not currently have any overlapping debt-only direct debt as displayed above.

►Population figures are estimated by SANDAG for all local governments and special districts in San Diego County.

$0

$5,000,000

$10,000,000

$15,000,000

$20,000,000

$25,000,000

Outstanding Debt

Outstanding Debt

Source: Helix Water District Annual Report

Debt Coverage RatioLast Ten Fiscal Years FY 2018-19 CAFR

Principal Interest Total

2019 88,548,520$ 73,518,859$ 15,029,661$ 1,480,000$ 515,973$ 1,995,973$ 7.5

2018 91,438,794$ 73,780,428$ 17,658,366$ 1,435,000$ 415,258$ 1,850,258$ 9.5

2017 87,836,365$ 67,706,220$ 20,130,145$ * 1,395,000$ 477,369$ 1,872,369$ 10.8

2016 69,430,790$ 63,065,704$ 6,365,086$ 1,350,000$ 517,869$ 1,867,869$ 3.4

2015 77,685,785$ 66,058,412$ 11,627,373$ 1,315,000$ 548,005$ 1,863,005$ 6.2

2014 80,076,423$ 67,867,831$ 12,208,592$ 1,285,000$ 553,124$ 1,838,124$ 6.6

2013 75,080,583$ 61,483,329$ 13,597,254$ 1,254,999$ 584,688$ 1,839,687$ 7.4

2012 71,077,634$ 54,862,910$ 16,214,724$ 1,220,000$ 623,031$ 1,843,031$ 8.8

2011 63,264,788$ 48,725,170$ 14,539,618$ 1,200,000$ 663,651$ 1,863,651$ 7.8

2010 59,822,815$ 51,102,154$ 8,720,661$ 1,180,000$ 1,256,390$ 2,436,390$ 3.6

►The Water Revenue Bonds covenant requires a debt coverage ratio greater than 1.2.

►Total expenses do not include the non-cash depreciation expense or the non-cash change in local water inventory expense.

* 2017 Net revenue available for debt service includes a non-operating litigation settlement of $8,000,000.

Debt Coverage Ratio

Debt Service RequirementsFiscal Year

TotalRevenues

Total Expenses

Net Revenue Available for Debt Service

$0

$5,000,000

$10,000,000

$15,000,000

$20,000,000

$25,000,000

Net Revenue Available for Debt Service Debt Service Requirements

*


Economic StatisticsLast Ten Fiscal Years FY 2018-19 CAFR

Imported Local Population (inches) El Capitan Lake Cuyamaca

2019 87.7% 12.3% 275,910 39.79 4,920 4,602

2018 85.0% 15.0% 274,526 13.08 141 155

2017 86.9% 13.1% 273,142 35.37 5,427 5,822

2016 93.4% 6.6% 271,759 23.26 604 586

2015 99.0% 1.0% 270,375 19.37 134 101

2014 98.0% 2.0% 267,922 20.03 212 117

2013 83.8% 16.2% 267,922 15.71 665 265

2012 73.4% 26.6% 267,922 24.15 2,618 1,330

2011 65.0% 35.0% 267,922 36.10 7,995 5,351

2010 91.4% 8.6% 267,922 38.67 6,257 4,111

Lake Cuyamaca Rainfall

►Demographics on Personal Income, Per Capita Personal Income and Unemployment Rates:The district is unable to obtain these demographic statistics so they are not being included in the CAFR statistical section. Thedistrict’s boundaries include parts of several different cities and unincorporated areas of San Diego County, California. It wouldbe difficult to collect any meaningful data for these demographics from existing data sources.

►Alternatively, rainfall and water runoff data for our geographical area is being included in the statistics. Rain and the resulting water runoff play a large part in the operations of the district. Fiscal years in which the district experiences lower levels of rainfalllead to larger amounts of water that need to be purchased from outside sources, thus increasing district expense. The reverse isalso true when the district receives higher levels of rainfall.

►Population figures are estimated by SANDAG for all local governments and special districts in San Diego County.

Source of WaterLocal Runoff Collected

Fiscal Year

(acre-feet)

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

Local SourceSDCWA

Acre-Feet


Local Area Employment ProfileFor the Years 2010 and 2000

FY 2018-19 CAFR

Employees % of Total Employees % of Total

Total employed civilians age 16+ 79,969 100% 77,195 100%

Agriculture, forestry, mining 208 0% 126 0%

Construction 6,956 9% 6,419 8%

Manufacturing 5,321 7% 6,602 9%

Wholesale trade 2,082 3% 2,407 3%

Retail trade 9,961 12% 10,607 14%

Transportation, warehousing and utilities 2,951 4% 3,190 3%

Finance, insurance, and real estate related 5,311 7% 5,172 7%

Educational, social, and health services 17,097 21% 15,606 20%

Art, entertainment, rec., accommodations, food 9,041 11% 7,249 9%

Other services * 15,928 20% 15,207 20%

Public administration 5,113 6% 4,610 6%

* Includes information, professional, scientific, management and administrative services

►The district's boundary includes, but is not limited to, the following three major cities; El Cajon, La Mesa and Lemon Grove. This Local Area, while not an exact representation of the district, is used to obtain the employment profile data shown above. The employment data available for evaluation for this Local Area comes from the 2000 Census as provided by the San Diego Association of Governments (SANDAG). The data available for 2010 comes from the American Community Survey in the U.S. Census Bureau website.

IndustryLocal Area Profile - 2010 Local Area Profile - 2000

Source: SANDAG

Operational Information - EmployeesLast Ten Fiscal Years FY 2018-19 CAFR

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

Management 5 5 5 5 5 5 5 5 5 5

Water Quality 31 31 31 31 31 32 32 32 31 32

Operations & Maintenance 54 50 49 50 50 50 50 50 50 50

Engineering 22 22 20 20 20 20 19 19 19 19

Administrative Services 43 41 41 41 43 43 43 43 44 43

Total Budgeted Employees 155 149 146 147 149 150 149 149 149 149

Fiscal Year

►As mentioned in previous comments, Helix is an established, mostly built-out water district which is reflected in the relatively small increases in employees over this ten year period.

►The employee counts represent the head count for the full time employees in each department.

-

25

50

75

100

125

150

175

Administrative Services Engineering Operations & Maintenance Water Quality Management

Source: Helix Water District Annual Budget

Active Meters by SizeLast Ten Fiscal Years FY 2018-19 CAFR

Fiscal Year 5/8" 3/4" 1"-2" 3"-8" Total

Total Change

2019 * 206 52,140 3,851 109 56,306 0.2%

2018 2,030 50,237 3,822 95 56,184 0.1%

2017 3,142 49,140 3,795 40 56,117 0.1%

2016 5,283 46,945 3,798 40 56,066 0.1%

2015 8,096 43,964 3,835 113 56,008 -(0.4%)

2014 10,961 40,918 3,839 41 55,759 0.1%

2013 13,510 38,324 3,827 40 55,701 0.1%

2012 13,641 38,140 3,806 41 55,628 0.1%

2011 13,712 38,061 3,741 40 55,554 0.0%

2010 13,841 37,929 3,752 41 55,563 -0.1%

► The District is in the process of discontinuing the use of 5/8" meters and moving toward 3/4" meters as its smallest standard size meter.

* 3"-8" Meter size includes 55 temporary 3" meters.

0

10,000

20,000

30,000

40,000

50,000

60,000

3"-8" 1"-2" 3/4" 5/8"

Source: Helix Water District Accounts Receivable Records

Operational Information - AssetsLast Ten Fiscal Years FY 2018-19 CAFR

2019 122 12,297 47 September 1,016,902,260 90.3

2018 67 26,558 53 November 939,031,720 98.4

2017 51 10,831 44 September 971,932,500 94.0

2016 58 10,215 36 September 832,312,316 89.1

2015 249 3,498 34 September 1,131,515,308 102.8

2014 58 3,053 39 September 1,203,656,168 116.8

2013 73 4,349 55 September 1,221,976,184 114.6

2012 74 2,610 41 September 1,202,962,024 109.3

2011 (9) (518) 40 September 1,161,409,876 106.0

2010 (63) 2,043 35 September 1,199,422,488 112.5

Fiscal Year

Miles of Pipeline

Treatment Plants

Booster Pumps

Hydropneumatic Stations

2019 735 1 21 4

2018 733 1 21 4

2017 728 1 21 4

2016 723 1 21 4

2015 723 1 21 4

2014 723 1 21 4

2013 723 1 21 4

2012 722 1 21 4

2011 719 1 21 4

2010 719 1 21 4

Capital Assets Statistics

Average Daily Consumption in Gallons per Day

Peak Monthly Consumption in

Gallons

Number of Services Added

(Removed)

Net Increase (Decrease) in

Pipeline in Feet

Water Main Breaks

Fiscal Year

Key Operating Indicators

Month of Peak Consumption

Source: Helix Water District Annual Budget

Water Production and ConsumptionLast Ten Fiscal Years FY 2018-19 CAFR

2019 38,672 (14,054) 24,618 3,280 27,898 90.3

2018 43,292 (17,379) 25,913 4,345 30,258 98.4

2017 39,681 (14,771) 24,910 3,854 28,764 94.0

2016 39,412 (14,258) 25,154 1,963 27,117 89.1

2015 48,849 (17,457) 31,392 (247) 31,145 102.8

2014 54,390 (20,052) 34,338 730 35,068 116.8

2013 49,211 (20,443) 28,768 5,636 34,404 114.6

2012 43,695 (19,907) 23,788 9,007 32,795 109.3

2011 34,839 (15,649) 19,190 12,622 31,812 106.0

2010 35,577 (6,655) 28,922 4,289 33,211 112.5

Per Capita Consumption (Gallons/Day)

Net Water Produced for Consumption

(AF)

Less Water treated and Sold

to other Agencies (AF)

Water purchased from SDCWA (AF)

Fiscal Year

Treated Local Water Produced

for Consumption

(AF)

Total Produced for

Consumption (AF)

0

20

40

60

80

100

120

140

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

Net Water Produced for Consumption (AF) Treated Local Water Produced for Consumption (AF)

Per Capita Consumption (Gallons/Day)

ACRE‐FEET

GALLONS/DAY


Capital AssetsLast Ten Fiscal Years FY 2018-19 CAFR

Fiscal Year Land

Reservoirs and Pipelines

Autos and Trucks

Buildings and Equipment

Accumulated Depreciation

Construction in Progress

2019 5,067,807$ 364,048,246$ 4,872,090$ 53,227,726$ (180,944,068)$ 246,271,801$ 6,259,302$

2018 5,067,807$ 347,250,441$ 3,012,300$ 54,141,322$ (171,345,958)$ 238,125,912$ 9,704,002$

2017 5,067,807$ 339,615,788$ 3,093,945$ 49,112,961$ (162,814,699)$ 234,075,802$ 8,652,802$

2016 5,067,807$ 329,949,707$ 3,027,176$ 45,812,485$ (154,148,155)$ 229,709,020$ 7,452,659$

2015 5,067,807$ 321,714,356$ 3,010,422$ 42,832,805$ (146,071,108)$ 226,554,282$ 7,363,491$

2014 5,067,807$ 315,658,550$ 3,010,422$ 38,405,222$ (137,870,324)$ 224,271,677$ 5,471,329$

2013 5,067,807$ 307,568,421$ 3,010,422$ 35,542,882$ (130,311,092)$ 220,878,440$ 8,585,810$

2012 5,067,807$ 301,780,913$ 3,284,802$ 34,698,798$ (123,411,401)$ 221,420,919$ 5,940,773$

2011 5,067,807$ 294,064,280$ 3,219,587$ 32,790,026$ (116,110,235)$ 219,031,465$ 6,622,047$

2010 5,067,807$ 286,009,421$ 3,140,592$ 31,467,881$ (109,206,319)$ 216,479,382$ 5,818,231$

Net Capital Assets (less Construction

in Progress)

$190,000,000

$200,000,000

$210,000,000

$220,000,000

$230,000,000

$240,000,000

$250,000,000

$260,000,000

Construction in Progress Net Capital Assets


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