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HomeMy WebLinkAbout02-10-16 Regular Meeting of the La Porte Area Water AuthorityLA PORTE AREA WATER AUTHORITY AGEN E3A Notice is hereby given of a Regular Meeting of the La Porte Area Water Authority (LPAWA) to be held on Wednesday, Fobruary 10, 2016 beginning at 0:00 pm_ in the E>ownstairs Conference Room of the Public Works Service Center, 2963 North 23rci Street, La Porte, Texas, for the purpose of considering the following agenda items_ All agenda items are subject to action. 1 _ Call to order- 2- Welcome new board member Steven Barr. 3_ Election of officers. Secretary. 4_ Consider approval or other action of minutes from the September 10, 2015 meeting. 5_ Consider acceptance or other action of the LPAWA Financial Report for the Year Ended September 30, 2015. 6_ discussion related City of Houston 2015 True Up and 2016 contested budget related to the Southeast Houston Water Purification Plant expansion. 7_ Genoral Manager's Report. S. Board Comments — Matters appearing on the: Recognition of community members, city employees, and upcoming events; Inquiry of staff regarding specific factual information or existing policy. a. Matters appearing on agenda. b. Inquiry of staff requiring a statement of specific factual information or a recitation of existing policy- 9- Adjournment. In compliance with the American with Disabilities Act, the City of La Porte will provide reasonable accommodations for persons attending public meetings. To better serve attendees, requests should be received 24 hours prior to the meeting_ Please contact Patrica Fogarty, City Secretary, at 281.470-501 9. CERTIFICATION 1 certify t a copy the F�Ry 1 O, 2016, agenda of items to be considered by the La Porte Area Water Autho ty as poste on theall ulletin board onFebruary�y2016. blic Woector 1 certify that the attached notice and agenda of items to be co s dered by the La Porte Area Water Authority was removed byc�me from the City Hail bulletin board on the day of k Otlr l .2016. Signature of per on removin rom bulletin board LA PO1F:;VTE AREA WATER AUTHORITY AGENE3A Notice is hereby given of a Regular Meeting of the La Porte Area Water Authority (LPAWA) - to be held on Wednesday, February 10, 2016 beginning at 6-00 pm. in the downstairs Conference Room of the Public Works Service Center, 2963 North 23rd Street, La Porte, Texas, for the purpose of considering the following agenda items. All agenda items are subject to action_ 1 _ Call to order- 2- Welcome new board member Steven Barr- 3- Election of officers_ Secretary. 4_ Consider approval or other action of minutes from the September 10, 2015 meeting- 5- Consider acceptance or other action of the LPAWA Financial Report for the Year Ended September 30, 2015_ 6_ Eiscussion related City of Houston 2015 True Up and 2016 contested budget related to the Southeast Houston Water Purification Plant expansion. 7_ General Manager's Report. a_ Board Comments — Matters appearing on the: Recognition of community members, city employees, and upcoming events; Inquiry of staff regarding specific factual information or existing policy_ a. Matters appearing on agenda_ b_ Inquiry of staff requiring a statement of specific factual information or a recitation of existing policy- 0— Adjournment_ _ In compliance with the American with Llisabilities Act, the City of La Porte will provide reasonable accommodations for persons attending public meetings. To better serve attendees, requests should be received 24 hours prior to the meeting_ Please contact Patrice Fogarty, City Secretary, at 281 _470.5019_ CERTIFICATION I certify t a copy the February 10,- 2016, agenda of items to be considered by the La Porte Area Water Autho ty as poste on the City Hall uiletin board on February 4, 2016_ Sharo Valiante, Public Works director 1 certify that the attached notice and agenda of items to be considered by the La Porte Area Water Authority was removed by me from the City Hall bulletin board on the day of 2016_ Signature of person removing from bulletin board LA PORTE AREA WATER AUTHORITY MINUTES September 10, 2015 The meeting was called to order at 6:00 PM by President Kenneth Schlather. Members Present: Kenneth Schlather, President; Doug Martin, Vice President; Charlie Perry, Secretary; Randy Woodard Members Absent: Excused absence: Dennis Steger Others Present: Corby Alexander, General Manager; David Mick, La Porte Public Works Director 2. The August 06, 2015 minutes were reviewed and unanimously approved with Doug Martin making the motion to approve and Randy Woodard seconding. 3. David Mick provided the background to the February 28, 2015 invoice submitted by the City of Houston for the Southeast Water Purification Plant (SEWPP) improvement and expansion project bid in 2007 and constructed primarily from 2008 through 2010 with some minor construction and warranty work continuing to 2012. The expansion project true -up invoice is in the amount $293,763.82. The LPAWA share estimated in 2007 was $891,540 less a $304,980 credit for oversized items previously funded by LPAWA recouped from those entities that are participating in the 80 mgd expansion. The project, designed to increase the capacity of the SEWPP from 120 mgd to the current capacity of 200 mgd, was bid at approximately $168-million with a final cost of $171-million. Total change orders amounted to less than 2% of the contract amount. The co -owning entities that participated in the plant expansion portion of the project contributed additional funds at the start of the project equal to a 5% contingency. Those entities are receiving money back. The co -owning entities such as the La Porte Area Water Authority that did not participate in the plant expansion but did participate in the cost of enhancements to the previously existing 120 mgd portion of the plant owed additional funds. Staff received additional information from the City of Houston on several occasions, with the final submittal received September 4, 2015, as needed for staff to be comfortable recommending payment. Motion to approve staffs request to pay the $293,763.82 true -up invoice was made by Randy Woodard with Charlie Perry seconding. Motion was approved unanimously. 4. David Mick presented the background information to the FY 16 Southeast Water Purification Plant (SEWPP) budget dispute. Continuing discussions initiated in the prior meeting. As the Managing Owner, the City of Houston prepares the annual budget for the SEWPP. The contract between the co -owners provides a process for disputing portions of the annual budget provided that: 1) more than 50% of the plant co -owners, with the vote weighted by the percentage of water consumed over a 12-month period, are in agreement with the dispute, and 2) the disputed line items are not necessary for the regulatory compliance, health, safety or security. The board reviewed a summary of budget line items likely to be contested by a majority of the co -owners. The disputed amount may be as high as $0.1102/1000 gallons pending further information from the City of Houston. Staff is recommending joining with other co -owners in disputing the FY 16 budget line items totaling $0.1102/1000 gallons. Staff also recommends increasing the LPAWA FY 16 budget line item for Other Professional Services by $15,000 for a total budget of $25,000 for consulting and legal fees that may be associated with the dispute. Staff's best estimate of the worst -case cost exposure to the LPAWA in terms of legal and consulting fees is $75,000 should the dispute goes through a full trial. Motion to dispute the FY 16 SEWPP budget and to increase the Other Professional Services budget by $15,000 was made by Randy Woodard and seconded by Doug Martin. The motion was unanimously approved. 5. Corby Alexander indicated that he had no additional comments. 6. There were no additional comments concerning the authority from the board. 7. There being no further business, the meeting adjourned at 6:12 PM. September 10, 2015 LPAWA Minutes Page 2/2 Secretary PASSED AND APPROVED ON THIS DAY President DRAFT PATTILLO, BROWN & HILL, L.L.P. CERTIFIED PUBLIC ACCOUNTANTS 4 BUSINESS CONSULTANTS To the Board of Directors of The La Porte Area Water Authority La Porte, Texas We have audited the financial statements of the La Porte Area Water Authority (the "Authority") as of and for the year ended September 30, 2015, and have issued our report thereon dated February 2016. Professional standards require that we advise you of the following matters relating to our audit. Our Responsibility in Relation to the Financial Statement Audit As communicated in our engagement letter dated September 25, 2015, our responsibility, as described by professional standards, is to form and express opinions about whether the financial statements that have been prepared by management with your oversight are presented fairly, in all material respects, in accordance with accounting principles generally accepted in the United States of America. Our audit of the financial statements does not relieve you or management of your respective responsibilities. Our responsibility, as prescribed by professional standards, is to plan and perform our audit to obtain reasonable, rather than absolute, assurance about whether the financial statements are free of material misstatement. An audit of financial statements includes consideration of internal control over financial reporting as a basis for designing 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 over financial reporting. Accordingly, as part of our audit, we considered the internal control of the Authority solely for the purpose of determining our audit procedures and not to provide any assurance concerning such internal control. We are also responsible for communicating significant matters related to the audit that are, in our professional judgment, relevant to your responsibilities in overseeing the financial reporting process. However, we are not required to design procedures for the purpose of identifying other matters to communicate to you. WAC0, TA 401 Wc.1Ifighaay6 Wtwm 9 ixas 76710 25-1.772.490 ux u.pLhl•pn.noni 110UST0N, TX 2131.671.059 RU) GRANDE VA1.14A. TX 956.54 .777R ,rEN11'I.E, 7x 254.791.3460 A1.11UQUEiiQUE, NM 507,,206.591hb AICPA Governmental Audit Quality Center DRAFT Planned Scope and Timing of the Audit We conducted our audit consistent with the planned scope and timing we previously communicated to you. Compliance with All Ethics Requirements Regarding Independence The engagement team, others in our firm, and, as appropriate, our firm have complied with all relevant ethical requirements regarding independence. As a part of the engagement we assisted in preparing the financial statements and related notes to the financial statements of the Authority in conformity with U.S. generally accepted accounting principles based on information provided by you. These nonaudit services do not constitute an audit under generally accepted auditing standards and such services were not conducted in accordance with generally accepted auditing standards. In order to ensure we maintain our independence for performing these nonaudit services certain safeguards were applied to this engagement. Management assumed responsibility for the financial statements and related notes to the financial statements and any other nonaudit services we provided. Management acknowledged in the management representation letter our assistance with the preparation of the financial statements and related notes to the financial statements and that these items were reviewed and approved prior to their issuance and accepted responsibility for them. Further, the nonaudit services were oversaw by an individual within management that has the suitable skill, knowledge, or experience; evaluated the adequacy and results of the services; and accepted responsibility for them. Qualitative Aspects of the Entity's Significant Accounting Practices Significant Accounting Policies Management has the responsibility to select and use appropriate accounting policies. A summary of the significant accounting policies adopted by the Authority is included in Note I to the financial statements. There have been no initial selection of accounting policies and no changes in significant accounting policies or their application during the current fiscal year. No matters have come to our attention that would require us, under professional standards, to inform you about (1) the methods used to account for significant unusual transactions and (2) the effect of significant accounting policies in controversial or emerging areas for which there is a lack of authoritative guidance or consensus. SignificantAccounting Estimates Accounting estimates are an integral part of the financial statements prepared by management and are based on management's current judgments. Those judgments are normally based on knowledge and experience about past and current events and assumptions about future events. Certain accounting estimates are particularly sensitive because of their significance to the financial statements and because of the possibility that future events affecting them may differ markedly from management's current judgments. 2 DRAFT The most sensitive accounting estimates affecting the financial statements are: Management's estimate of the useful lives of capital assets is based on the expected lifespan of the asset in accordance with standard guidelines. We evaluated the key factors and assumptions used to develop the estimate of useful lives in determining that it is reasonable in relation to the financial statements taken as a whole and in relation to the opinion unit. Management's estimate of the allowance for receivables is based on historical collections. We evaluated the key factors and assumptions used to develop the allowance for uncollectible receivables in determining that it is reasonable in relation to the financial statements taken as a whole and in relation to the opinion unit. Financial Statement Disclosures Certain financial statement disclosures involve significant judgment and are particularly sensitive because of their significance to financial statement users. The most sensitive disclosures affecting the Authority's financial statements relate to the net pension liability. The disclosures in the financial statements are neutral, consistent, and clear. Significant Difficulties Encountered during the Audit We encountered no significant difficulties in dealing with management relating to the performance of the audit. Uncorrected and Corrected Misstatements For purposes of this communication, professional standards require us to accumulate all known and likely misstatements identified during the audit, other than those that we believe are trivial, and communicate them to the appropriate level of management. Further, professional standards require us to also communicate the effect of uncorrected misstatements related to prior periods on the relevant classes of transactions, account balances or disclosures, and the financial statements as a whole and each applicable opinion unit. Management has corrected all identified misstatements. In addition, professional standards require us to communicate to you all material, corrected misstatements that were brought to the attention of management as a result of our audit procedures. None of the misstatements identified by us as a result of our audit procedures and corrected by management were material, either individually or in the aggregate, to the financial statements taken as a whole or applicable opinion units. Disagreements with Management For purposes of this letter, professional standards define a disagreement with management as a matter, whether or not resolved to our satisfaction, concerning a financial accounting, reporting, or auditing matter, which could be significant to the Authority's financial statements or the auditor's report. No such disagreements arose during the course of the audit. 3 DRAFT Representations Requested from Management We have requested certain written representations from management, which are included in the management representation letter dated February _, 2016. Management's Consultations with Other Accountants In some cases, management may decide to consult with other accountants about auditing and accounting matters. Management informed us that, and to our knowledge, there were no consultations with other accountants regarding auditing and accounting matters. Other Significant Matters, Findings, or Issues In the normal course of our professional association with the Authority, we generally discuss a variety of matters, including the application of accounting principles and auditing standards, operating and regulatory conditions affecting the entity, and operational plans and strategies that may affect the risks of material misstatement. None of the matters discussed resulted in a condition to our retention as the Authority's auditors. This report is intended solely for the information and use of the Board of Directors and management of the Authority and is not intended to be and should not be used by anyone other than these specified parties. Waco, Texas February _, 2016 4 DRAFT a LA PORTE AREA WATER AUTHORITY HARRIS COUNTY, TEXAS ANNUAL FINANCIAL REPORT September 30, 2015 DRAFT LA PORTE AREA WATER AUTHORITY ANNUAL FINANCIAL REPORT TABLE OF CONTENTS SEPTEMBER 30, 2015 Page Exhibit Number IndependentAuditors' Report................................................................... 1-3 Management's Discussion and Analysis....................................................... 4-7 Basic Financial Statements Statement of Net Position.......................................................................... 8 Statement of Revenues, Expenses and Changesin Net Position .............................................. ............................ 9 Statementof Cash Flows .......... ................ ...................................................... 10 Notes to the Financial Statements.................................................................. 11 —17 Texas Supplemental Information Supplemental Schedules Included Within this Report ................................... 18 Schedule of Service and Rates....................................................................... 1 19 Schedule of Enterprise Fund Expenses.......................................................... 2 20 Schedule of Temporary Investments............................................................. 3 21 Long -Term Debt Service Requirements by Years............ ............................. 5 22 Changes in Long -Term Bonded Debt............................................................ 6 23 Comparative Schedule of Revenues and Expenses — Enterprise Fund— Five Years........................................................................................ 7 24 — 25 Board Members, Key Personnel and Consultants .......................................... 8 26 — 27 Schedule of Revenues, Expenses and Changes in Net Position — Budget and Actual — Budgetary Basis ........................................................ 9 28 . 1 92m w4n!41 PATTILLO, BROWN & HILL, L.L.P_ CERTIFIED PUBLIC ACCOUNTANTS ! BUSINESS CONSULTANTS INDEPENDENT AUDITORS' REPORT To the Board of Directors of The La Porte Area Water Authority La Porte, Texas Report on Financial Statements We have audited the accompanying basic financial statements of the La Porte Area Water Authority (the "Authority"), a component unit of the City of LaPorte, Texas as of and for the year ended September 30, 2015, and the related notes to the financial statements, as listed in the table of contents. Management's Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the. design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor's Responsibility Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. 401 Wc.• [ iligImay 6 \hook. Texas 76710 254.772.490I �� »•»•.hbbrlw.cnm IIOIISTON, TX 2111.671.6259 1410 GRANDE VAMYY, -1'X 956.544.7778 1 TEM1IVIX, TX 254.791.3400 AMMQUEKQUE, NXI 505.266.5cXM AIC Governmental Audit Quality Center Alzam 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 of 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 opinions. Opinion In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the Authority, as of September 30, 2015, and the respective changes in financial position and cash flows thereof for the year then ended in conformity with accounting principles generally accepted in the United States of America. Other Matters Required Supplementary Information Accounting principles generally accepted in the United States of America require that the management's discussion and analysis on pages 4 through 7 be presented to supplement the basic financial statements. Such information, although not 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 operations, 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 Authority's basic financial statements. The Texas Supplementary Information listed in the table of contents, are presented for purposes of additional analysis and are not a required part of the basic financial statements. 2 DRAFT The Texas Supplementary Information listed in the table of contents, is the responsibility of management and was derived from and relate directly to the underlying accounting and other records used to prepare the financial statements. The information, unless marked "unaudited", has been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the financial statements or to the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the information, unless marked "unaudited", is fairly stated in all material respects in relation to the financial statements as a whole. The Texas Supplementary Information that is marked "unaudited" has not been subjected to the auditing procedures applied in the audit of the basic financial statements, and accordingly, we do not express an opinion or provide any assurance on the Supplementary Information that is marked "unaudited". Waco, Texas 12015 7 DRAFT LA PORTE AREA WATER AUTHORITY MANAGEMENT'S DISCUSSION AND ANALYSIS As management of the La Porte Area Water Authority, we offer readers of the Water Authority's financial statements this narrative overview and analysis of the financial activities of the Water Authority for the fiscal year ended September 30, 2015. Financial Highlights • The assets of the La Porte Area Water Authority exceeded its liabilities and deferred inflows of resources at the close of the most recent fiscal year by $8,235,165 (net position). Of this amount, $2,639,726, unrestricted net position, may be used to meet the government's ongoing obligations to citizens and creditors in accordance with the Water Authority's fund designation and fund policies. • The government's total net position increased by $203,125. • The Water Authority's total bonded debt decreased by $650,000 during the current fiscal year. Overview of the Financial Statements This discussion and analysis is intended to serve as an introduction of the Water Authority's basic financial statements. The La Porte Area Water Authority is considered a component unit of the City of La Porte, Texas since the Water Authority provides approximately 86% of its services for the exclusive benefit of the City of La Porte. The Water Authority's basic financial statements are comprised of the fund financial statements and notes to the financial statements. This report also contains other supplementary information in addition to the basic financial statements themselves. Fund financial statements — The operations of the Water Authority are recorded in a proprietary (enterprise) fund. A fund is a grouping of related accounts that is used to maintain control over resources that have been segregated for specific activities or objectives. The Water Authority, like other state and local governments, uses fund accounting to ensure and demonstrate compliance with finance -related legal requirements. The statement of net position presents information on all the Water Authority's assets, liabilities and deferred inflows of resources, with the difference between the three reported as net position. Over time, increases or decreases in net position may serve as a useful indicator of whether the financial position of the Water Authority is improving or deteriorating. The statement of revenues, expenses, and changes in net position presents information showing how the government's net position changed during the fiscal year. All changes in net position are reported when the underlying event giving rise to the change occurs, regardless of the timing of related cash flows. This, revenues and expenses are reported in this statement for some items that will only result in cash flows in future fiscal periods (e.g., uncollected receivables and accounts payable due to suppliers). 4 DRAFT The fund financial statements can be found on pages 8 — 10 of this report. Notes to the Financial Statements — The notes provide additional information that is essential to a full understanding of the data provided in the fund financial statements. The notes to the financial statements can be found on pages 11 —17 of this report. Other Information — In addition to the basic financial statements and accompanying notes, this report also presents certain supplementary information concerning the Water's Authority's operations. Supplementary information can be found on pages 18 — 28 of this report. Financial Analysis of the Government's Funds As noted earlier, net position may serve over time as a useful indicator of a government's financial position. In the case of the La Porte Area Water Authority, assets exceeded liabilities and deferred inflows of resources by $8,235,165 at the close of the fiscal year. The largest portion of the Water Authority's net position $4,864,589 reflects its investment in capital assets (e.g., water production and distribution system), less any related debt used to acquire those assets that are still outstanding. The City uses these capital assets to provide water services to the participants; consequently, these assets are not available for future spending. Although the Water Authority's investment in its capital assets is reported net of related debt, it should be noted that the resources needed to repay this debt must be provided from other sources, since the capital assets themselves cannot be used to liquidate these liabilities. AUTHORITY'S NET POSITION Current and other assets Capital assets Total Assets Current liabilities Noncurrent liabilities Total Liabilities Total Deferred Inflows of Resources Net investment in capital assets Restricted Unrestricted Total Net Position 5 Business -Type Activities 2015 2014 $ 3,756,312 $ 3,423,506 5,879,827 6,344,826 9,636,139 9,768,332 1,052,749 698,711 345,238 1,032,550 1,397,987 1,731,261 2,987 5,031 4,864,589 4,657,245 730,850 1,147,160 2,639,726 2,227,635 $ 8,235,165 $ 8,032,040 DRAFT An additional portion of the Authority's net position (8.87%) represents resources that are subject to external restrictions for debt service. The remaining balance of unrestricted net position of $2,639,726 represents funds available to meet other ongoing obligations to participants and/or creditors. Analysis of the Water Authority's Operations -- the following table provides a summary of the Water Authority's operations for the year ended September 30, 2015. AUTHORITY'S CHANGE IN NET POSITION Revenues Charges for services Total revenues Operating expeneses Supplies Purchased water Services and charges Depreciation Total operating expenses Operating income (loss) Nonoperating revenues (expenses) Income (loss) before contributions Capital contributions Change in net position Net position - beginning Net position - ending Business -Type Activities 2015 2014 $ 1,106,779 1,106,779 $ 1,195,886 1,195,886 7,985 1,015 829,346 850,142 379,535 95,976 464,999 465,000 1,681,865 1,412,133 ( 575,086) ( 216,247) ( 9,074) { 33,784) ( 584,160) ( 250,031) 787,285 784,737 203,125 534,706 8,032,040 7,497,334 $ 8,235,165 $ 8,032,040 Total net position increased by $203,125 in 2015. The actual water revenue for fiscal year ended September 30, 2015, of $1,106,779 was-$77,133 lower than the amount budgeted of $1,183,912. Capital Assets and Debt Administration Capital Assets — The La Porte Area Water Authority's investment in capital assets as of September 30, 2015 amounts to $4,864,589 (net of accumulated depreciation). There were not any additions or retirements of capital assets during the current fiscal year. The only activity is current depreciation in the amount of $464,999. Capital assets at year end consisted of water, sewer and drainage facilities for water production and distribution in the amount of $15,435,810. Additional information of the La Porte Area Water Authority's capital assets can be found in Note V on page 14 of this report. in DRAFT Debt Administration — At the end of the fiscal year, the La Porte Area Water Authority had bonded debt payable of secured solely by water and sewer revenues. The revenue bonds have been rated "AA" by Standard & Poor's, Fitch, and Moody's rating agencies. Additional information on the Water Authority's long-term debt can be found in Note VII on page 15 — 16 of this report. Economic Facts and Next Year's Budgets and Rates The Water Authority has benefited from a strong and expanding economy from the past several years. In the coming fiscal year the Water Authority's budget is expected to remain relatively consistent with the prior year. Request for Information This financial report is designed to provide a general overview of the La Porte Area Water Authority's finances for all those with an interest in the government's finances. Questions concerning any of the information provided in this report of requests for additional information should be addressed to the Director of Finance, 604 West Fairmont Parkway, LaPorte, Texas, 77571. 7 DRAFT LA PORTE AREA WATER AUTHORITY STATEMENT OR NET POSITION SEPTEMBER 30, 2015 Assets Current assets: Cash Investments Accounts receivable, net of allowance for doubtful accounts Accrued interest receivable Total current assets Noncurrent assets: Water production and distribution system Less: accumulated depreciation Total noncurrent assets Total Assets Liabilities Current liabilities: Accounts payable Current liabilities Current portion of revenues bonds Accrued interest Total current liabilities Noncurrent liabilities: Revenue bond, net of current portion Total Liabilities Deferred Inflows of Resources Deferred gain on refunding Total Deferred Inflows of Resources Net Position Net investment in capital assets Restricted for debt service Unrestricted Total Net Position $ 2,023,597 1,568,207 162,898 1,610 3,756,312 15,435,810 9,555,983} 5,979,827 9,636,139 381,378 670,000 1,371 1,052,749 345,238 1,397,987 2,987. 2,987 4,864,589 730,850 2,639,726 $ 8,235,165 The notes to the financial statements are an intergral part of this statement. 8 DRAFT LA PORTE AREA WATER AUTHORITY STATEMENT OF REVENUES, EXPENSES AND CHANGES IN NET POSITION FOR THE YEAR ENDED SEPTEMBER 30, 2015 Operating Revenues Charges for services $ 1,106,779 Total Operating Revenues 1,106,779 Operating Expenses Supplies 7,985 Purchased water 829,346 Other services and charges 379,535 Depreciation 464,999 Total Operating Expenses 1,681,865 Operating income (loss) ( 575,086) Nonoperating Revenues (Expenses) Interest income 12,663 Interest expense and other charges ( 21,737) Total Nonoperating Revenue (Expenses) ( 9,074) Income (loss) before contributions ( 584,160) Capital Contributions 787,285 Change in net position 203,125 Net Position - Beginning 8,032,040 Net Position - Ending $ 8,235,165 The notes to the financial statements are an intergral part of this statement. 9 LA PORTE AREA WATER AUTHORITY STATEMENT OF CASH FLOWS FOR THE YEAR ENDED SEPTEMBER 30, 2015 Cash Flows from Operating Activities Receipts from customers Payments to suppliers and service providers Net Cash Provided by Operating Activities Cash Flows from Capital and Related Financing Activities Payments received from participants for debt service Payments received from participants for capital recovery Principal payments on revenues bonds Interest paid on revenue bonds Net Cash Provided by Capital and Related Financing Activities Cash Flows from Investing Activities Proceeds from sale of investments Interest on investments Net Cash Provided by Investing Activities Net increase in cash and cash equivalents Cash and Cash Equivalents - Beginning of Year Cash and Cash Equivalents - End of Year Reconciliation of Operating Income (Loss) to Net Cash Provided by Operating Activities: Operating income (loss) Adjustments to reconcile operating income to net cash provide (used) by operating activities: Depreciation expense (Increase) decrease in accounts receivable Increase (decrease) in accounts payable Net Cash Provided by Operating Activities The notes to the financial statements are an intergral part of this statement. 10 $ 1,126,432 ( 882,083) 244,349 691,785. 95,500. ( 650,000) ( 41,838) 95,447 124,745 12,726 137,471 477,267 1,546,330 2,023,597 $( 575,086) 464,999 19,653 334,783 $ 244,349 DRAFT LA PORTE AREA WATER AUTHORITY NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30, 2015 I. CREATION OF AUTHORITY The LaPorte Area Water Authority (the "Authority) was created on May 30, 1981 by Chapter 729, Page 2678, Acts of the 67 h Legislature of the State of Texas. This bill authorizes the Authority to purchase, construct or otherwise acquire waterworks systems, sanitary sewer systems, storm sewer systems and drainage facilities or parts of such systems of facilities and to operate and maintain such facilities. The Authority is authorized to set rates for services related to the aforementioned systems and facilities, and issue revenue bonds for the purpose of acquiring and maintaining such systems. The Authority comprises approximately 20,600 acres in Harris County, Texas. II. SUMMARY OF SIGINIFICANT ACCOUNTING POLICIES The accounting policies of the Authority conform with generally accepted accounting principles. The following is a summary of the most significant policies: A. Reporting Entity Generally accepted accounting principles for local governments include those principles prescribed by the Governmental Accounting Standards Board (GASB), the American Institute of Certified Public Accountants in the publication entitled Audits of State and Local Governmental Units and by the Financial Accounting Standards Board (when applicable). GASB Statement 62, Codification of Accounting and Financial Reporting Guidance Contained in Pre -November 30, 1989 FASB and AICPA Pronouncements ("GASB 62"), which incorporates into the GASB's authoritative literature certain accounting and financial reporting guidance that is included in the following pronouncements issued on or before November 30, 1989, which does not conflict on contradict GASB pronouncements: 1) Financial Accounting Standards Board (FASB) Statements and Interpretations; 2) Accounting Principles Board Opinions; 3) Accounting Research Bulletins of the American Institute of Certified Public Accountants' (AICPA) Committee on Accounting Procedure. Implementation of GASB 62 is reflected in the financial statements and notes to the financial statements. Consideration regarding the potential for inclusion for other entities, organizations or functions in the Authority's financial reporting entity is based on criteria prescribed by generally accepted accounting principles. These same criteria are evaluated in considering whether the Authority is a part of any other governmental or other type of reporting entity. Criteria for determining component unit status under generally accepted accounting principles included considerations pertaining to organizations for which the primary government is financially accountable and considerations pertaining to other organizations for which the nature and significance of their relationship with the primary government are such that exclusion would cause the reporting entity's financial statements to be misleading or incomplete. 11 DRAFT The La Porte Area Water Authority is considered a component unit of the City of La Porte, Texas by virtue of meeting the criteria noted above. The primary factor in determining component unit status is that the Authority provides approximately 86% of its services for the exclusive benefit of the City of LaPorte. The Authority's financial operations are included as an Enterprise Fund in the City's Comprehensive Annual Financial Report as a blended component unit. The City of La Porte is referred to as "Primary Government" throughout the Authority's financial statements. B. Fund Accounting The operations of the Authority are recorded in an enterprise fund. Enterprise funds are used to account for operations (a) that are financed primarily through user charges or (b) where the governing body has decided that determination of net income is appropriate. The enterprise fund is a proprietary fund type. C. Basis of Accounting Enterprise Funds are accounting for on a flow of economic resources measurement focus. With this measurement focus, all assets and all liabilities associated with the operation of these funds are presented on the statement of net position is a classified format to distinguish between current and long-term assets and liabilities. Net position is presented in three components: net investment in capital assets; restricted; and unrestricted. Enterprise fund operating statements present increases (e.g., revenues), decreases (e.g., expenses) and changes in net position. D. Cash Equivalents For purposes of the statement of cash flows, the Authority considers cash held in demand accounts and all short-term investments with a maturity date of purchase of three months or less to be cash equivalents. E. Physical Facilities and Depreciation Fixed assets, which consist of a water production and distribution system, are shown at original cost. Interest paid during construction of facilities, if any, is also included in this cost. Depreciation has been provided for the Authority's water production and distribution system using the straight-line method over a 30-year estimated useful life. III. CASH AND CASH EQUIVALENTS Cash and cash equivalents represent the Authority's equity interest in the City's consolidated cash and cash equivalents account consisting of demand accounts and short-term investments with a maturity at date of purchase of three months or less. State statutes require that all fund in depository institutions be covered by federal depository insurance and/or be secured in the manner provided by law for security of funds. Cash and cash equivalent balances held by the City were entirely covered by federal depository insurance or security as required at September 30, 2015. 12 DRAFT IV. TEMPORARY INVESTMENTS Temporary investments represent the Authority's equity interest in the City's investment pool. At year end a portion of the Authority's cash and temporary investments were restricted as follows: The carrying amount for temporary investments, at September 30, 2015, was $1,568,207, which is fair value. This represents 8.03% of the City's total portfolio. Pooled investments with the City consist of obligations of the United States and its agencies and investment pools in accordance with state statutes and the City's investment policies. Securities are registered and held by their agent in the City's name. Interest earnings are allocated on a pro-rata basis. The investment pool is not registered with the SEC or subject to any regulatory oversight. The fair value of the position in the pool is the same as the value of pool shares. The City had adopted GASB Statement No. 31, which establishes accounting and reporting standards for all of the City's investments. In accordance with Statement No. 31, the City reports all investments at fair value, except for "money market investments" and "2a7-like pools." Money market investments, which are short-term highly liquid debt instruments that may include U.S. Treasury and agency obligations, are reported at amortized costs. Investment positions in external investment pools that are operated in a manner consistent with the SEC's Rule 2a7 of the Investment Company Act of 1940, such as TexPool and LOGIC, are reported using the pool's share price. Interest Rate Risk The Authority's investment policy specifies that the maximum stated maturity, from the date of purchase for any individual investment may not exceed 5 years and the maximum dollar -weighted overage maturity for the pooled fund group may not exceed 2 years. At year end, the Authority's dollar -weighted average maturity of the investment portfolio was as follows: Weighted Average Investment Type Maturity (months) Public funds investment pools 1.6 Federal Home Loan Mortgage Corporation (FHLMC) 30.54 Federal Farm Credit Bank (FFCB) 26.3 Federal Home Loan Bank (FHLB) 27.8 Portfolio Weighted Average Maturity 21.6 13 DRAFT Concentration of Credit Risk The Authority's investment policy places no limit on the amount the government may invest in any one issuer. At September 30, 2015, the Authority's investment portfolio consisted of the following investments: Percentage of Investment Type Total Portfolio Public funds investment pools US Agency securities Credit Risk 66.00 % 34.00 % 100.00 % At year end balances in TexPool, a privately managed public fund investment pool, was rated AAAm by Standard & Poor's and balances in LOGIC, a privately managed public funds investment pool was rated AAAM by Standards & Poor's. Federal Home Loan Mortgage Corporation notes, Federal Home Loan Banks bonds, Farmer Mac and Federal Farm Credit Bank notes were rated AA+ by Standard & Poor's. All credit rating met acceptable levels required by legal guidelines prescribed in both the PFIA and the Authority's investment policy. V. CAPITAL ASSETS An analysis of changes in physical facilities for the year ended September 30, 2015 follows: Capital assets being depreciated: Water production and distribution system Less accumulated depreciation: Water production and distribution system Total capital assets being depreciated, net Investment in capital assets from: Contribution by participants Beginning Ending Balance Additions Deletions Balance $ 15,435,810 $ - $ - $ 15,435,810 ( 9,090,984) { 464,999) - { 9,555,983) $ 6,344,826 $L LG4,999 $ - $ 5,879,827 $ 6,3d4,826 $( 464.999) $ - $ 5,879,827 * Depreciation expense of $464,999 charged to water services function/program. 14 DRAFT VI. SOUTHEAST WATER PURIFICATION PLANT The Authority and the City of Houston, Texas have entered into a Cost Sharing Water Project Contract (the "Contract") wherein the Authority, the Cities of La Porte, Morgan's Point, and Shoreacres agree to jointly finance the construction and operation of the Southeast Water Purification Plant (Southeast Plant). Under the terms of the Contract, the Authority purchased 4.2 million gallons per day production and 5.25 million gallons per day pumping capacity. The Cities of La Porte, Morgan's Point, and Shoreacres have agreed to demand and pumping allocations of the Authority's purchase of water from the Southeast Plant. The required funds for the undivided interest in the Southeast Plant and the construction of a transmission and distribution system to transport water from the Southeast Plant were provided by issuance of $9.8 million revenues bonds. The water rate to be set by the Authority will not be less than an amount sufficient to provide for payment of all expenses in producing, treating, and pumping the water in connection with transmission and distribution systems and to provide payment for the interest and principal of all bonds when the bonds become due and payable. VII. CONTRACT REVENUE BONDS PAYABLE, DEBT SERVICE REQUIREMENTS AND BOND RESOLUTION REQUIREMENTS On May 13, 2010, the La Porte Area Water Authority issued $4.085 million in Contract Revenue Refunding Bonds, Series 2010, with an average interest rate of 2.773% to purchase U.S. Government State and Local Government Series securities that were placed in an irrevocable trust for the purpose of generating resources for all future debt service payments for $2.95 million of unlimited tax bonds. As a result, the refunded bonds are considered to be defeased and the liability has been removed from the statement of net position. The bonds are payable from the net revenue of the Authority. The bonds are in $5,000 denominations. Interest is payable on March 15 and September 15 each year to maturity. The Authority is in compliance with all significant requirements and restrictions contained in the bond resolution. None of the Refunded Bonds are outstanding at September 30, 2015. Bonds payable at September 30, 2015, are comprised of the following issue: Amount Interest Maturity Payment Outstanding Rate Date Dates 990,000 2.25-4.00% March 15, 2017 March 151 September 15 15 DRAFT Bonds payable activity for the year ended September 30, 2015 was as follows: Amounts Beginning Retirements & Ending Due Within Bonds Payable Balance Additions Adjustments Balance One Year Contract revenue refunding $ 1,640,000 $ - $ 650,000 $ 990,000 $ 670,000 Premium on bonds 42,550 - 17.312 25,238 - $ 1,682,550 $ - $ 667,312 $ 1,015,238 $ 670,000 As of September 30, 2015, the debt service requirements on contract revenue bonds outstanding are as follows: Fiscal Year Total Ending Principal Interest Requirements 2016 $ 670,000 $ 22,850 $ 692,850 2017 320,000 6,400 326,400 $ 990,000 $ 29,250 $ 1,019,250 VIII. NET POSITION The Authority provides surface water to the City of La Porte, Texas (the "City") and the Cities of Shoreacres and Morgan's Point in order for these entities to comply with certain requirements imposed by the Harris County Subsidence District. The City retains the rights to approximately 86% of the water capacity of the Authority with the Cities of Shoreacres and Morgan's Point retaining the rights to the remaining 14%. The City, Shoreacres, and Morgan's Point have agreed to service the debt on the Authority's contract revenue bonds and to fund operations of the Authority in relation to their capacity rights and to purchase water based on actual consumption. As part of debt service requirements, the participants are billed to build a reserve for future debt service requirements as set forth in the contract revenue bonds of the Authority. During the year, Authority's billings were applied as follows: Water supplied and operating costs (user fees) $ 1,106,779 Debt service billings/charges 691,785 Capital recovery billings 95,500 Total billings $ 1,894,064 16 DRAFT IX. RISK MANAGEMENT The Authority is exposed to various risks of loss related to torts; theft of, damage to and destruction of assets; errors and omissions; and natural disasters for which the Authority participates (through an endorsement on the City of La Porte's contract) along with other entities in the Texas Municipal League's Intergovernmental Risk Pool. The pool purchases commercial insurance at group rates for participants in the pool. Neither the Authority nor the City has additional risk or responsibility to the pool, outside of payment of insurance premiums. Neither the Authority nor the City had significantly reduced insurance coverage or had settlements that exceeded coverage amounts for the post three fiscal years. X. ECONOMIC DEPENDENCY The Authority receives all of its support from three municipalities, with the City of La Porte being the largest contributor at approximately 86%. In addition, the Authority contracts with the City of La Porte to provide administrative oversight and operate the Authority's transmissions system. 17 4 DRAFT LA PORTE AREA WATER AUTHORITY SUPPLEMENTAL SCHEDULES INCLUDED WITHIN THIS REPORT SEPTEMBER 30, 2015 (Schedules included are checked or explanatory notes provided for omitted schedules.) ® 1. Schedule of Services and Rates ® 2. Schedule of Enterprise Fund Expenses ® 3. Schedule of Temporary Investments ❑ 4. Taxed Levied and Receivable (Omitted - no tax levy) ® 5. Long -Term Debt Service Requirements by Years ® 6. Changes in Long -Term Bonded Debt ® 7. Comparative Schedule of Revenues and Expenses — Enterprise Fund — Five Years ® 8. Board Members, Key Personnel and Consultants ® 9. Schedule of Revenues, Expenses and Changes in Net Position — Budget and Actual, Budgetary Basis DRAFT LA PORTE AREA WATER AUTHORITY SCHEDULE OF SERVICE AND RATES YEAR ENDED SEPTEMBER 30, 2015 1. Services provided by the District: Retail Water X Wholesale Water Drainage Retail Sewer Wholesale Sewer Irrigation Parks/Recreation Fire Protection Security Solid Waste/Garbage Flood Control Roads Participants in joint venture, regional system, and/or wastewater service (other than emergency interconnect) Other 2. Total Water Consumption during the Fiscal Year: (You may omit this information if you district does not provide water) Water Accountability Ratio: Gallons pumped into system 1,416,946,00.0 (Gallons billed/Gallons pumped) Gallons billed to customers: 1,393,787,000 98.4% 3. Standby fees: Does the District assess standby fees? Yes No X 4. Location of District County in which the District is located: Harris County Is the District located entirely within one county? Yes X No Is the District located within a City? Entirely Partly X Not at all City in which the District is located: Morgan's Point, Shoreacres, and La Porte Is the Authority located within a city's extra territorial jurisdiction (ETJ)? Entirely Partly X Not at all City in which the Authority is located: Morgan's Point, Shoreacres, and La Porte Is the general membership of the Board appointed by an office outside the Authority? Yes X No If yes, by whom? La Porte City Council 19 LA PORTE AREA WATER AUTHROITY SCHEDULE OF ENTERPRISE FUND EXPENSES FOR THE YEAR ENDED SEPTEMBER 30, 2015 Professional Fees Auditing Other Purchased Service for Resale Bulk water purchase Contracted Services Management/operations (primary government) Administrative Expenses Supplies Other administrative Other Expenses Depreciation Total Expenses Number of persons employed by the Authority 20 DRAFT EXHIBIT 2 $ 6,000 293,764 829,346 68,312 7,985 11,459 464,999 $ 1,681,865 DRAFT EXHIBIT 3 LA PORTE AREA WATER AUTHORITY SCHEDULE OF TEMPORARY INVESTMENTS FOR THE YEAR ENDED SEPTEMBER 30, 2015 Balance Accrued Interest Maturity at End Interest Rate* Date of Year Receivable Equity interest in City of La Porte's investment pool 0.085% Demand $ 1,568,207 $ 1,610 Pooled investments with the City of La Porte consist of obligations of the United States and its agencies and investment pools in accordance with state statues and the City of La Porte's investment policies. * Approximate return for September 2015. 21 DRAFT EXHIBIT 5 LA PORTE AREA WATER AUTHORITY LONG-TERM DEBT SERVICE REQUIREMENTS BY YEARS SEPTEMBER 30, 2015 Due During Fiscal Year Annual Requirement for All Bond Series Ending 9/30 Principal Due Interest Due Total 2016 $ 670,000 $ 22,850 $ 692,850 2017 320,000 6,400 326,400 $ 990,000 $ 29,250 $ 1,019,250 22 DRAFT EXHIBIT 6 LA PORTE AREA WATER AUTHORITY CHANGES IN LONG-TERM BONDED DEBT SEPTEMBER 30, 2015 Series 2010 Total Interest rate 2.24% to 4.0% N/A Dates interest payable 03115; 09/15 N/A Maturity dates 03/15/11-03/15/17 N/A Beginning bonds outstanding $ 1,640,000 $ 1,640,000 Bonds sold during the fiscal year - - Bonds retired during the fiscal year ( 650,000) ( 650,000). Ending bonds outstanding $ 990,000 $ 990,000 Interest paid during the fiscal year $ 41,838 $ 41,838 Paying Agent's Name and City: Refunding Bonds Series 2010 the Bank of New York Mellon Trust Company, N.A.-Dallas, Texas Contract Tax Revenue Refunding Bond Authority Bonds* Bonds Bonds Amount authorized by votes $ - N/A N/A Amount issued - - 4,085,000 Remaining to be issued $ - $ - $ - * Includes all bonds secured with tax revenue. Bonds in this category may also be secured with other revenues in combination with taxes. Cash and temporary investment balances as of September 30, 2015: $ 3,591,804 Average annual debt service payment (principal and interest) for remaining term of all debt: $ 339,750 23 DRAFT LA PORTE AREA WATER AUTHORITY COMPARATIVE SCHEDULE OF REVENUES AND EXPENSES - ENTERPRISE FUND - FIVE YEARS FOR THE YEAR ENDED SEPTEMBER 30, 2015 2015 2014 2013 2012 2011 Operating Revenues User fees $ 1,106,779 $ 1,195,886 $ 1,213,334 $ 1,294,479 $ 1,246,186 Operating Expenses Supplies 7,985 1,015 8,090 4,207 5,343 Purchased water 829,346 850,142 999,647 1,264,050 1,006,229 Services and charges 379,535 95,976 95,106 107,012 81,110 Depreciation 464,999 465,000 464,999 462,938 460,877 - - Total Operating Expenses 1,681,865 1,412,133 1,567,842 1,838,207 1,553,559 Operating Income (Loss) { 575,086) ( 21.6,247) ( 354,508) ( 543,728) ( 307,373) Nonoperating Revenues (Expenses) Interest income 12,663 4,854 4,362 5,945 25,167 Interest expense and other ( 21,737) ( 38,638) ( 53566) ( 128,217) ( 112,713) Total Nonoperating Revenues (Expenses) ( 9,074) ( 33,784) ( 49,2U4) ( 122,272) 87,546) Income (Loss) Before Contributions ( 584,160) ( 250,031) ( 403,712) ( 666,000) ( 394,919) Capital Contributions 787,285 784,737 793,854 752,242 791,435 Net Income (Loss) $�203,1_25 $ 534,706 $�390,142 $ 86,242 $ 3963516 24 DRAFT EXHIBIT 7 2015 2014 2013 2012 2011 100.00 % 100.00 % 100.00 % 100.00 % 100,00 % 0.72 % 8.00 % 0.67 % 0.32 % a 0.43 % 74.93 % 71.09 % 82.39 % 97.65 % 80.74 % 34.29 % 8.03 % 7.84 % 8.27 % 6.51 % 42.01 % 38.88 % 38.32 % 35.76 % 36.98 % 151.96 % 118.07 % 129.22 % 142.00 % 124.67 % ( 51.96)% ( 18.07)% ( 29.22)% ( 42.00)% ( 24.67)% 1.14% 0.41% 0.36% 0.46% 2.02% ( 1.96)% ( 3.23)% ( 4.41)% ( 9.90)% ( 9.04)% ( 0.82)% ( 2.84)% ( 4.06)% ( 9.45)%° ( 7.03)% ( 52.78)% ( 20.19)% ( 33,27)% ( 51.45)% ( 31.69)% 71.13 % 65.62 % 65.43 % 58.11 % 63.51 % 18.35% 44.71% 32.15% 6.66% 31.81% 25 DRAFT EXHIBIT 8 LA PORTE AREA WATER AUTHORITY BOARD MEMBERS, KEY PERSONNEL, AND CONSULTANTS FOR THE YEAR ENDED SEPTEMBER 30, 2015 Authority's Mailing Address: City of La Porte Michael Dolby 604 W. Fairmont Parkway LaPorte, Texas 77571 Authority's Business Phone Number: (281) 471-5020 Term of Office/ Appointed/ Expense Title at Name and Address Expires Reimbursements Year End Board Members Charlie Perry 8/30/2014 $ - President 129 N 4th Street Yes Position 4 LaPorte, TX 77571 8/31/2016 Doug Martin 8/31/2015 - Secretary 1103 Oak Leaf Yes Position 3 LaPorte, TX 77571 8/31/2017 Randy Woodard 8/31/2015 - Member 2601 S. Broadway Yes Position 1 LaPorte, TX 77571 8/31/2017 Ken Schlather 8/30/2014 - Vice President 9811 Catlett Yes Position 5 LaPorte, TX 77571 8/31/2016 Stephen Barr 8/30/2015 - Member 810 Fairfield Yes Position 2 LaPorte, TX 77571 8/31/2017 Key Administrative Personnel Corby Alexander General Manager Michael Dolby Director of Finance Note: No director has any business or family relationship (as defined by the Texas Water Code) with major landowners in the Authority or with any of the Authority's consultants. 26 LA PORTE AREA WATER AUTHORITY BOARD MEMBERS, KEY PERSONNEL, AND CONSULTANTS FOR THE YEAR ENDED SEPTEMBER 30, 2015 Name and Address Date Hired Consultants City of La Porte 604 W. Fairmont Parkway LaPorte, TX 77571 Pattillo, Brown & Hill, L.L.P. 401 West Hwy 6 Waco, Texas 76710 The Bank of New York Global Corporate Trust 2001 Bryan Street, loth Floor Dallas, TX 75201 DRAFT EXHIBIT 8 Fees and Expense Reimbursements Title 1981 $ 67,007 Management/Operator 2015 6,000 Auditor 1999 - Paying Agent 27 DRAFT EXHIBIT 9 LA PORTE AREA WATER AUTHORITY SCHEDULE OF REVENUES, EXPENSES AND CHANGES IN NET POSITION BUDGET AND ACTUAL - BUDGETARY BASIS Revenues Water revenue billing Total Revenues Operating Expenses Supplies Purchased water Other services and charges Depreciation Total Operating Expenses Operating Income (Loss) FOR THE YEAR ENDED SEPTEMBER 30, 2015 Actual Variance From Budget (Budgetary Final Budget Original Final Basis) Over (Under) $ 1,183,912 $ 1,183,912 $ 1,106,779 $( 77,133) 1,183,912 1,183,912 1,106,779 ( 77,133} 8,400 8,400 7,985 415 990,821 990,821 829,346 161,415 108,260 395,524 379,535 15,989 - - 464,999 ( 464,999) 1,107,481 1,394,745 1,681,865 287,120) 76,431 { 210,833) ( 575z086) ( 364,253) Nonoperating Revenues (Expenses) Interest income 5,000 5,000 12,663 7,663 Interest expense and other charges ( 691,839 ( 691,838) ( 21,737) 670,101 Total Nonoperating Revenues (Expenses) ( 686,838) ( 686,838) ( 9,074) 677,764 Income (Loss) Before Contributions ( 610,407) ( 897,671) ( 584,160) 313,511 Capital Contributions 787,285 787,285 787,285 - Change in Net Position 176,878 ( 110,386) 203,125 313,511 Net Position - Beginning 8,032,040 8,032,040 8,032,040 - Net Position - Ending $ 8,208,918 $ 7,921,654 $ 8,235,165 $ 313,511 28 City of Houston Department of Public Works and Engineering Financial Management Branch - Fiscal Services FY 2015 SouthEast Water Treatment Plant 0 & M Expenses Allocation For The Period July 1, 2014 - June 30, 2015 FY 2015 SEWPP - SCHEDULE 2 Adopted Budget YTD A Water taken by the Co -Participant (in Thousand Gallons) 21,900,000 19,046,542 B Total Treated Water Produced by the SouthEast Water Plant (in Thousand Gallons 37,321,250 29,410,320 C Total C&M costs for the SouthEast Water Plant (dollars) $ 15,268,450 $ 14,327,019 D All costs incurred by COH for 0&M of Untreated Water Facilities dollars (includingCWA C&M$ $ 31,596,466 29,171,601 D1 CWAO&M $ 24,834,963 $ 23,741,030 D2 CWA Debt Services - All Others (SEWPP Only) $ 6,761,503 $ 5,430,571 D3 CWA Debt Service - Pasadena (SEWPP Only) $ 5,914,428 $ 4,599,694 E Total amount of untreated surface water sold to Houston's water customers in Thousand Gallons 196,187,886 187,306,322 F Total to be allocated Debt Services of CWA 96" Line (SEWPP Only) $ 2,447,356 $ 2,447,356 G Total Cost of Line Repair Expenses $ - $ - Rate - Baybrook, Gulf Coast, Harris County Mud #55 Raw Water Rate 0&M (D1/ E) Per thousand gallons Raw Water Rate DS (D2/ E) Per thousand gallons 0&M Rate (C / B) per thousand gallons Subtotal Total Rate (including contingency 2.5%) Rate - Friendswood, S. Houston, Webster, Clear Brook, Clear Lake, LaPorte Raw Water Rate 0&M (D1/ E) Per thousand gallons Raw Water Rate DS (D2/ E) Per thousand gallons 0&M Rate (C / B) per thousand gallons Total Rate (excluding contingency 2.5%) Rate - Pasadena Raw Water Rate 0&M (D1/ E) Per thousand gallons Raw Water Rate DS (D3/ E) Per thousand gallons 0&M Rate (C / B) per thousand gallons Total Rate (excluding contingency 2.5%) FYI SEWPP YE - December Accounting (preliminary) 151229 Schedule 2 - Summary $ 0.1266 $ 0.1267 $ 0.0345 $ 0.0290 $ 0.4091 $ 0.4871 $ 0.5702 $ 0.6429 $ 0.5844 $ 0.6590 $ 0.1266 $ 0.1267 $ 0.0345 $ 0.0290 $ 0.4091 $ 0.4871 $ 0.5702 $ 0.6429 $ 0.1266 $ 0.1267 $ 0.0301 $ 0.0246 $ 0.4091 $ 0.4871 $ 0.5658 $ 0.6384 12/29/2015 5:51 PM Page 1 of 3 CITY OF HOUSTON DEPARTMENT OF PUBLIC WORKS & ENGINEERING RESOURCE MANAGEMENT DIVISION FINANCIAL MANAGEMENT BRANCH FISCAL SERVICES SECTION FY 2015 SEWPP - SCHEDULE 3 SOUTHEAST WATER PURIFICATION PLANT EXPENDITURES FROM SAP FOR THE PERIOD JULY 2014 - JUNE 2015 Adopted Budget YTD Plant Operation Personnel Expenditures: $ 2,410,232.00 $ 2,279,724.94 Other Expenditures: Plant Operation 511010 Chem/Gas & Spcl Flui 2,614,500.00 2,633,574.85 511015 Cleaning & Sanitary Supplies 2,000.00 2,113.85 511020 Construction Materials 10,000.00 480.46 511025 Electrical Hardware & Parts 50,000.00 109,132.10 511030 Mechanical Hardware & Parts 80,000.00 66,716.14 511035 Meters, Hydr & Plum 10,000.00 2,824.10 511040 Audiovisual Supplies 300.00 1,118.00 511045 Computer Supplies 200.00 369.97 511050 Paper & Printing Supplies 1,000.00 282.10 511055 Pub & Printed Mated 6,000.00 4,247.50 511060 Postage 300.00 511070 Miscellaneous Office Supplies 5,000.00 3,404.06 511080 General Laboratory Supplies 6,000.00 1,491.15 511090 Medical & Surgical Supplies 500.00 2,292.49 511095 Sm Tech & Scien Equi 5,000.00 511110 Fuel 16,100.00 18,391.07 511115 Veh Repair & Maint S 7,000.00 14,693.48 511120 Clothing 11,000.00 8,226.42 511145 Small Tools & Minor Equipment 10,000.00 9,095.89 511150 Miscellaneous Parts & Supplies 20,000.00 2,479.04 520101 Janitorial Services 72,400.00 59,209.95 520109 Med, Dental & Lab S 1,000.00 952.52 520114 Miscellaneous Support Services 489.73 520118 Refuse Disposal 751,000.00 792,817.26 520121 Application Services 1,200.00 520123 Veh & Motor Equip Sv 5,694.99 520124 Other Equipment ServicesS 21,000.00 29,703.39 520141 Engineering Services 890.22 520147 Mgmt Initiative/Cons 30,806.16 520170 Generator Equipment Services 578,900.00 579,205.88 520510 Mail/Delivery Services 300.00 520515 Print Shop Services 500.00 647.31 520520 Printing & Reprod Sv 1,000.00 520605 Advertising Services 2,000.00 2,309.24 520710 State/Federal Inspection Fees 7,000.00 8,957.64 520765 Membership & Professional Fees 2,900.00 2,050.14 520805 Education & Training 11,200.00 3,285.00 520905 Travel - Training Related 9,800.00 9,132.72 520910 Travel - Non -Training Related 3,700.00 252.04 521405 Building Maintenance Services 81,400.00 37,111.24 521505 Electricity 2,278,800.00 2,390,387.10 521515 Elect Fran Fee Exp 31,800.00 26,435.44 521605 Data Services 800.00 521610 Voice Services 7,200.00 30.34 521620 Voice Equipment 100.00 521625 Voice Labor 500.00 275.40 FYI SEWPP YE - December Accounting (preliminary) 151229 12/29/2015 5:51 PM Schedule 3 - O&M Costs Page 2 of 3 CITY OF HOUSTON DEPARTMENT OF PUBLIC WORKS & ENGINEERING RESOURCE MANAGEMENT DIVISION FINANCIAL MANAGEMENT BRANCH FISCAL SERVICES SECTION FY 2015 SEWPP - SCHEDULE 3 SOUTHEAST WATER PURIFICATION PLANT EXPENDITURES FROM SAP FOR THE PERIOD JULY2014-DUNE 2015 521635 Voice Services - Wireless 521705 Equipment Rental 521715 Office Equipment Rental 521725 Other Rental 521735 Hobby Parking Space Rental 522305 Freight Charges 522405 Management Savings 522430 Misc Other Svcs & Ch 522722 Intfd KRONOS Svc Chr 522795 Other Interfund Services 522845 Interfund Vehicle Services 551015 Non -Capital Computer Equipment 551020 Non -Cap Comm/Electr 551025 Non -Cap Scientific/M 551030 Non -Cap Mach & Equip Property and Terrorism Insurance Premium TCEQ Fees Security Audit Service Subtotal Plant Operation Adopted Budget YTD 7,200.00 7,582.16 12,500.00 1,624.35 3,000.00 3,330.06 1,900.00 707.28 300.00 6,000.00 35.18 2,074.24 1,500.00 1,301.77 500.00 315.59 20,000.00 17,050.74 570.00 69,500.00 32,866.33 4,000.00 6,500.00 9,326.30 134, 62 8.16 111, 609.5 3 101.05 92.45 331,914.67 291,199.04 7,000.00 5,147.00 Direct Operation Support (WQ, WM, ENG,_UCS) Allocated Personnel 1,330,110.49 1,133,485.12 Allocated Supplies & Services 2,010,039.85 1,575,230.98 Subtotal Direct Operation Support Direct Management Support (PUD, DWO) Allocated Personnel 1,090,427.99 711,552.73 Allocated Supplies & Services 415,662.03 574,765.79 Subtotal Direct Management Support Personnel Supplies & Services Total Operation Admin Costs*: Grand Total *Admin cost is calculated at FY14 Admin Cost + 2.8% CPI for 2015. FYI SEWPP YE - December Accounting (preliminary) 151229 Schedule 3 - O&M Costs 4,830,770.48 4,124,762.79 9,751,345.76 9,496,705.17 14, 582,116.23 13,621,467.96 686,333.94 705,551.29 $ 15,268,450.17 $ 14,327,019.25 12/29/2015 5:51 PM Page 3 of 3 CITY OF HOUSTON Annise D. Parker Department of Public Works & Engineering Mayor Date A. Rudick, P.E. Director P.O. Box 1582 Houston, Texas 77251-1562 T. 832 395-2500 F. 832-395-2483 www.houstontx.gov December 10, 2015 Mr. Don Pennel Assistant Director of Public Works City of La Porte 2963 North 23" St La Porte, TX 77571 Via Certified Mail, Return Receipt Requested Re: Official Notice — Non -Renewal of the Addendum to Operations and Maintenance for the Southeast Water Purification Plant Dear Co -Participant: This letter serves as the notification that the City of Houston has decided not to renew the Addendum to Operations and Maintenance for the Southeast Water Purification Plant. Under Section D of the Addendum to the 2006 Cost Sharing Agreement, the Service Term is renewable for successive five year terms unless either the Managing Participant Director or a majority of the Participant Directors gives six months' notice of non -renewal. We appreciate our past working relationship and we look forward to the initiation of a process that will result in a new service agreement for the operation and maintenance of the SEWPP. Sincerely, Dale A. Rudick, P.E. Council Members: Brenda Stardig Jerry Davis Ellen R. Cohen Dwight A. Boykins Dave Marlin Richard Nguyen Oliver Pennington Edward Gonzalez Robert Gallegos Mike Laster Larryv. Green Stephen C. Costello David W: Robinson Michael Kubosh C.Q. 'Brad' Bradford Jack Christie Controller. Ronald C. Green La Porte Area Water Authority PHONE 281.471.5020 • 604 W. FAIRMONT • LA PORTE, TEXAS 77571 September 15, 2015 Mr. Dale A. Rudick, PE, Director City of Houston Public Works 611 Walker St., 25th Floor Houston, Texas 77002 RE: FY 2016 Budget for the Southeast Water Production Plant Dear Mr. Rudick: This letter constitutes official notice on behalf of the. La Porte Area Water Authority (LPAWA) in advising the City of Houston as the "Managing Participant" of the Southeast Water Purification Plant (SEWPP) that the LPAWA hereby objects to the final FY 2016 budget for the SEWPP. The non- compliant portions of the FY 2016 budget are identified in the attachment to this letter. The LPAWA anticipates that the City of Houston and representatives of the SEWPP co -participants will be able to come to a successful resolution concerning the contested budget items in the very near future. In the meantime, the LPAWA will submit payment to the City of IIouston for the entire amount of the LPAWA's September 2015 invoice including the disputed portion of the invoice. The disputed portion of the invoice will be considered by the LPAWA at a later date. Thank you for your consideration of this matter. Sincerely, LA PORTE AREA WATER AUTHORITY CORBY D. ALEXANDER, GENERAL MANAGER David S. Mick Public Works Director, City of La Porte, Texas c: Corby Alexander, City Manager, City of La Porte; General Manager LPAWA L. d tl c O c O U R u to ,i V aEi Qi p A) Z m000000mN LD o o o 0 0 0 Ln N r- co LD et 01 o m tD 00 M O 0rr)000 N N 00°° N M tD O Ln '-' Ln N' f» d:l v O ri O O O d M M ri Cp O N r, Ln N ttoo o 0 0 o LLnn rJ � oo LD O m La ri d L+') r- Lvl 00 tp Ct m 0 00 00LD O Ln d• t\ N LM [t O ri V) a. L 0 = L: O O OU En u° o rl bb..0 N 00 LD o m tto rq M 000 � N co m O O 0 O V) 000 cJ M h = N M - O 0 tQ a+ U H c V w t! 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