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Home My WebLink About08-22-07 La Porte Area Water Authority minutes LA PORTE AREA WATER AUTHORITY MINUTES AUGUST 22, 2007 1. The meeting was called to order at 6:00 PM by President Steve Valerius. Members Present: President Steve Valerius, Secretary Chester Pool, Member Robert Roy and Member Dennis Steger. Members Absent: Vice President Paul Berner. Others Present: Director of Public Works Steve Gillett. 2. The minutes from the meeting held June 6, 2007 were reviewed. Motion by Robert Roy, second by Dennis Steger to approve the minutes as amended. Motion was unanimous. 3. Director of Public Works Steve Gillett reviewed the request to amend the proposed FY 2007-2008 LP A W A Operating Budget and answered questions from the Board. Motion by Chester Pool, seconded by Dennis Steger to approve the proposed budget as amended. Motion was unanimous. 4. Director of Public Works Steve Gillett reviewed the proposed changes to the LP A W A Drought Contingency Plan and answered questions from the Board. Motion by Robert Roy, second by Dennis Steger to approve the changes as presented. Motion was unanimous. 5. No General Manager's Report. 6. No Board comments. 7. There be~O further business, the meeting adjourned at 6:23 PM~ ; &.~ I Chester Pool, Secretary 6 PPROVED / z-I ~ 3> O?:) t LA PORTE AREA WATER AUTHORITY FINANCIAL REPORT FOR THE YEAR ENDED SEPTEMBER 30, 2007 TENTATIVE & PRELIMINARY LA PORTE AREA WATER AUTHORITY SEPTEMBER 30, 2007 TABLE OF CONTENTS Page Number FINANCIAL SECTION Independent Auditors' Report. .... ...... .............. ............................................ ........... ... ....... ...... 1 Management's Discussion and Analysis ............................................................................... 2 - 5 Basic Financial Statements: Statement of Net Assets .................................. ........ .-....... .......... ................ ...... ... ... ....... ...... 6 Statement of Revenues, Expenses and Changes in Fund Net Assets............................................................................................................... 7 Statement of Cash Flows ........ ....................... ........ ....... .................... ....................... ........... 8 Notes to Financial Statements.... .................. ....... ............................................... .................... 9 -15 SUPPLEMENTARY INFORMATION Supplemental Schedules Included With this Report........................................................... 16 Schedule of Service and Rates .......... .................................................................................. 17-19 Schedule of Enterprise Fund Expenses............................................................................... 20 Schedule of Temporary Investments.......................................... ........................................ 21 Schedule of Changes in Capital Assets........ .............. ....................... ...... .............. .............. 22 Long-term Debt Service Requirements by Years ............................................................... 23 Analysis of Changes in Long-term Debt...... ............ ......... ...... ........................................... 24 ( continued) TEN1r ATI VE & PREIJI MI t~ARY LA PORTE AREA WATER AUTHORITY SEPTEMBER 30, 2007 TABLE OF CONTENTS Page Number SUPPLEMENTARY INFORMATION (Continued) Schedule of Revenues and Expenses - Five years............................................................. 25 - 26 Insurance Coverage. .......... ........ ........... ......... ............ ................................ ................ .......... 27 Board Members, Key Personnel and Consultants............................................................... 28 - 29 Schedule of Revenues, Expenses and Changes in Working Capital- Budget and Actual, Non-GAAP Presentation................................... 30 TENTATIVE & PRELIMINARY FINANCIAL SECTION TENTATIVE & PRELIMINARY ----------------"."--""~'_...,-'- PH~ PAT T ILL O. B ROW N & HI L L. L.L.P. CERTIFIED PUBLIC ACCOUNTANTS. BUSINESS CONSULTANTS INDEPENDENT AUDITORS' REPORT To the Board of Directors of La Porte Area Water Authority La Porte, Texas We have audited the accompanying basic financial statements of the La Porte Area Water Authority, a component unit of the City of La Porte, Texas, as of and for the year ended September 30, 2007, which collectively comprise the La Porte Area Water Authority's basic financial statements as listed in the table of contents. These financial statements are the responsibility of the La Porte Area Water Authority's management. 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 of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the La Porte Area Water Authority, as of September 30, 2007, and the respective changes in financial position and cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America. The Management's Discussion and Analysis located in the financial section of this document is not a required part of the basic financial statements but is supplementary information required by the accounting principles generally accepted in the United States of America. We have applied certain limited procedures, which consisted principally of inquiries of management regarding the methods of measurement and presentation of the required supplementary information. However, we did not audit the information and express no opinion on it. Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the La Porte Area Water Authority's basic financial statements. The supplementary information is presented for purposes of additional analysis and is not a required part of the basic financial statements. The supplementary information has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the basic financial statements taken as a whole. ,2008 1 T E ~l1l1i~T!in<iftv.m IiF.' o:'io'llDns · w A~,TX 7670107~5 51i12~o1iT'AX:l~~)''l2-491o'" ~.pD-~mT 1." .J.. ~W;g OM~oWNQLE, TX <S ~ 1!.,.msBoio, ~~2-i5\J .l""l..r\. ~ TEMPLE, TX (254) 791-3460. WHI1NEY, TX (254) 694-4600 .ALBUQUERQUE,'NM (505) i66-~904 MAN^GEl\fEN'f'S DISCUSSION AND ANAL -Y-SIS TENTATIVE & P ELIMINARY LA PORTE AREA WATER SUPPLY MANAGEMENT'S DISCUSSION AND ANALYSIS YEAR ENDED SEPTEMBER 30, 2007 As management of the La Porte Area Water Authority (the "Authority"), we offer readers of the Authority's financial statements this narrative overview and analysis of the financial activities of the Authority for the fiscal year ended September 30,2007. FINANCIAL IDGHLIGHTS · The assets of the La Porte Area Water Authority exceeded its liabilities at the close of the most recent fiscal year by $5,805,557 (net assets). Of this amount, $1,791,280, unrestricted net assets, may be used to meet the government's ongoing obligations to citizens and creditors in accordance with the Authority's fund designation and fund policies. · The government's total net assets increased by $469,533. · The Authority's total bonded debt decreased by $460,000 during the current fiscal year. OVERVIEW OF THE FINANCIAL STATEMENTS This discussion and analysis is intended to serve as an introduction of the 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 Authority provides approximately 86% of its services for the exclusive benefit of the City of La Porte. The 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 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 Authority, like other state and local governments, uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements. The statement of net assets presents information on all the Authority's assets and liabilities, with the difference between the two reported as net assets. Over time, increases or decreases in net assets may serve as a useful indicator of whether the financial position of the Authority is improving or deteriorating. TENTATIVE & PRELIMINARY The statement of revenues, expenses and changes in fund net assets presents information showing how the government's net assets changed during the fiscal year. All changes in net assets are reported when the underlying event giving rise to the change occurs, regardless of the timing of related cash flows. Thus, 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). The fund financial statements can be found on pages 6 - 8 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 9 - 15 of this report. Other Information. In addition to the basic financial statements and accompanying notes, this report also presents certain supplementary information concerning the Authority's operations. Supplementary information can be found on pages 16 - 30 of this report. FINANCIAL ANALYSIS OF THE GOVERNMENT'S FUNDS As noted earlier, net assets 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 by $5,805,557 at the close of the fiscal year. The largest portion of the Authority's net assets (56%) 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 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. LA PORTE AREA WATER AUTHORITY'S NET ASSETS 2007 2006 Current and other assets $ 2,698,496 $ 2,247,990 Capital assets 8,862,724 9,304,637 Total assets 11,561,220 11 ,552,627 Current liabilities 645,663 621,603 Noncurrent liabilities 5,110,000 5,595,000 Total liabilities 5,755,663 6,216,603 Net assets: Invested in capital assets 3,267,724 3,249,637 Restricted 746,553 747,620 Unrestricted 1,791,280 1,338,767 Total net assets $ 5,805,557 $ 5,336,024 TEN AT1IV'E ('" O! f) wELl 1:-11 NARY Analysis of the Authority's Operations. The following table provides a summary of the Authority's operations for the year ended September 30,2007. 2007 2006 Operating revenues Charges for services $ 1,035,062 $ 1,079,126 Total operating revenues 1,035,062 1,079,126 Operating expenses Purchased water 700,831 1,008,765 Services and charges 80,557 81,523 Depreciation 441,913 441,913 Total operating expenses 1,223,301 1,532,201 Operating income (loss) 188,239) 453,075) Nonoperating revenues (expenses) 189,234) 281,572) Income (loss) before contributions 377,473) 734,647) Capital contributions 847,006 858,292 Change in net assets 469,533 123,645 Net assets, beginning 5,336,024 5,212,379 Net assets, ending $ 5,805,557 $ 5,336,024 Total fund net assets increased by $469,533 in 2007. The actual water revenue and capital recovery fees for the fiscal year ended September 30, 2007, $1,121,367, were 22% lower than the amount budgeted for $1,268,916 due to a decrease in consumption as a result of increased rainfall. Interest earned on investments was also up due to an increase in cash held during the year. The Authority has not made any revisions to the original appropriations approved by the City Council for the 2006-2007 budget. CAPITAL ASSETS AND DEBT ADMINISTRATION Capital Assets. The La Porte Area Water Authority's investment in capital assets as of September 30, 2007, amounts to $8,862,724 (net of accumulated depreciation). There were not any additions or retirements of capital assets during the current fiscal year. The only activity is current year depreciation in the amount of $441,913. Capital assets at year-end consisted of the following: Ending Balance Water, sewer and drainage facilities Water production and distribution system $ 8,862,724 Additional information of the La Porte Area Water Authority's capital assets can be found in Note 5 on page 13 of this report. TEl-J"T ATI 'VE & PRELIMINARY Debt Administration. At the end of the fiscal year, the La Porte Area Water Authority had bonded debt payable secured solely by water and sewer revenues. The revenue bonds have been rated "A" by Standard & Poor's, Fitch and Moody's rating agencies. Additional information on the Authority's long-term debt can be found in Note 7 on page 14 of this report. ECONOMIC FACTS AND NEXT YEAR'S BUDGETS AND RATES The Authority has benefited from a strong and expanding economy from the past several years, but in this coming fiscal year, the Authority's budget will be increased to cover the cost of physical plant upgrades. REQUESTS FOR INFORMATJON 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 Assistant Director of Finance, 604 West Fairmont Parkway, La Porte, Texas 77571. mENTAmT \1E' JL '.l ...LJ"". V.' & PRELIMINARY BASIC FINANCIAL STATEMENTS TENTATIVE & PRELIMINARY LA PORTE AREA WATER AUTHORITY STATEMENT OF NET ASSETS SEPTEMBER 30, 2007 ASSETS Current assets Cash Investments Receivables, net Accrued interest receivable Prepaid expenses Restricted assets Restricted cash Total current assets $ 1,072,565 547,022 159,215 12,583 148,580 758,531 2,698,496 Capital assets Water production and distribution system Less: accumulated depreciation Total noncurrent assets 14,725,570 ( 5,862,846) 8,862,724 Total assets 11,561,220 LIABILITIES Current liabilities Accounts payable Current liabilities (payable from restricted assets): Current portion of revenue bonds Accrued interest Total current liabilities 148,685 485,000 11,978 645,663 Noncurrent liabilities Revenue bond, net of current portion 5,110,000 Total liabilities 5,755,663 NET ASSETS Invested in capital assets, net of related debt Restricted for debt service Unrestricted 3,267,724 746,553 1,791,280 Total net assets $ 5,805,557 The accompanying notes are an integral part of these fmancial statements. TENT ATI VE & p ELI r~11 l\Jl\RY LA PORTE AREA WATER AUTHORITY STATEMENT OF REVENUES, EXPENSES AND CHANGES IN FUND NET ASSETS FOR THE YEAR ENDED SEPTEMBER 30, 2007 OPERATING REVENUES Charges for services $ 1,035,062 Total operating revenues 1,035,062 OPERATING EXPENSES Supplies 213 Purchased water 700,831 Services and charges 80,344 Depreciation 441,913 Total operating expenses 1,223,301 OPERATING LOSS ( 188,239) NONOPERATING REVENUES (EXPENSES) Interest income 110,364 Interest expense and fiscal charges ( 299,598) Total nonoperating revenues (expenses) ( 189,234) LOSS BEFORE CONTRIBUTIONS ( 377,473) Capital contributions 847,006 CHANGE IN NET ASSETS 469,533 FUND NET ASSETS, BEGINNING 5,336,024 FUND NET ASSETS, ENDING $ 5,805,557 The accompanying notes are an integral part of these frnancial statements. TEr~T A8J11 'JE (~< l~~~ n .J'l,- ELI~1IN'ARY LA PORTE AREA WATER AUTHORITY STATEMENT OF CASH FLOWS FOR THE YEAR ENDED SEPTEMBER 30, 2007 CASH FLOWS FROM OPERATING ACTIVITIES Receipts from customers Payments to suppliers Net cash provided by operating activities $ ( 1,045,452 929,803) 115,649 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 revenue bonds Interest paid on capital debt Net cash provided by capital and related financing activities 760,701 86,305 ( 460,000) ( 300,700) 86,306 ( 139,597) 110,132 29,465) 172,490 1,658,606 $ 1,831,096 CASH FLOWS FROM INVESTING ACTIVITIES Purchase of investment securities Interest Net cash used by investing activities NET INCREASE IN CASH AND CASH EQUIVALENTS CASH AND CASH EQUIVALENTS, BEGINNING CASH AND CASH EQUIVALENTS, ENDING RECONCILIATION OF OPERATING INCOME (LOSS) TO NET CASH PROVIDED BY OPERATING ACTIVITIES Operating loss Adjustments to reconcile operating income to net cash provided by operating activities: Depreciation expense Change in assets and liabilities: Decrease (increase) in assets: Accounts receivable Prepaid expenses Increase (decrease) in liabilities: Accounts payable Net cash provided by operating activities $( 188,239) 441,913 10,390 ( 148,580) 165 $ 115,649 The accompanying notes are an integral part of these financial statements. ~T'. E. ~ "f\ lT, ?\ rn ]~= '\ rE: . 1\1 .'~ lJ..JL . = V & T) ~.:~ EJ-lI MI NARY LA PORTE AREA WATER AUTHORITY NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2007 1. CREATION OF AUTHORITY The La Porte Area Water Authority (the "Authority") was created on May 30, 1981, by Chapter 729, Page 2678, Acts of the 67th 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. 2. SUMMARY OF SIGNIFICANT 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. Reportin2 Entitv 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). As allowed in Section P80 of GASB's Codification of Governmental Accounting and Financial Reporting Standards, the Authority has elected not to apply to its propriety activities Financial Accounting Standards Board Statements and Interpretations, Accounting Principles Board Opinions and Accounting Research Bulletins of the Committee of Accounting Procedure issued after November 30, 1989. The more significant accounting policies of the Authority are described below. Consideration regarding the potential for inclusion of other entItles, 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 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. (continued) T- '{;l 'i\l'T: 7\ T- T "l: lF~ ,.= .L:~ 1 \j '. "t'"l, , ~,lm \f..LJ & PRELIMINARY 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) A. Reportine Entitv (Continued) 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 La Porte. 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 Accountine GASB allows special purpose governments engaged only in business-type actIVItIes to present only the financial statements required for Enterprise Funds. For the Authority, basic financial statements and required supplementary information consist of the Management's Discussion and Analysis (MD&A), Enterprise Fund financial statements and notes to financial statements. The operations of the Authority are recorded in an Enterpris~ 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 Accountine Enterprise Funds are accounted 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 assets in a classified format to distinguish between current and long-term assets and liabilities. Net assets are presented in three components: invested in capital assets, net of related debt; restricted; and unrestricted. Enterprise Fund operating statements present increases (e.g., revenues), decreases (e.g., expenses) and changes in net total assets. Enterprise Funds are accounted for using the accrual basis of accounting. Revenues are recognized when they are earned and expenses are recognized at the time liabilities are incurred. D. Cash Eauivalents For purposes of the statement of cash flows, the Authority considers cash held in demand accounts and all short-term investments with maturity at date of purchase of three months or less to be cash equivalents. (continued) TEt~J11 ATI VE & PRELl ~1I t~' :y 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) E. Physical Facilities and Depreciation Capital 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. 3. 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 maturity at date of purchase of three months or less. State statutes require that all funds 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, 2007. 4. TEMPORARY INVESTMENTS Temporary investments represent the Authority's equity interest in the City's investment pool. At year-end, a portion ofthe Authority's temporary investments was restricted as follows: Restricted for retirement of current debt service liabilities and reserve requirements per bond covenants $ 758,531 Total restricted temporary investments $ 758,531 The carrying amount for temporary investments at September 30, 2007, was $547,022 and includes the recognition of a gain of $894, which represents the difference between the book value and quoted market value of the temporary investments. Pooled investments with the City consist of obligations of the United States and its agencies, commercial paper 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. The Authority's portion of the investment pool is 8.41 %. Interest earnings are allocated on the same prorate basis. The investment pool is not registered with the Securities Exchange Commission 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 has 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 "2a7-1ike 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 pools' share price. (continued) TENT ATI VE c< 11 '1:.') 1:;' L I 1\ IT I N AR "\7 luf ,f~,^- .J:..~. .... ! .. J. '< :\. ~ 4. TEMPORARY INVESTMENTS 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 five years and the maximum dollar- weighted average maturity may not exceed two years. At year-end, the Authority's dollar- weighted average maturity of the investment portfolio was as follows: Investment Type Weighted Average Maturity (Days) Federal Home Loan Mortgage Corporation Federal Home Loan Bank Bonds Federal National Mortgage Association Public Funds Investment Pools 181 297 127 1 Portfolio weighted average maturity 138 Concentration of Credit Risk The Authority's investment policy places no limit on the amount the government may invest in anyone issuer. At September 30, 2007, the Authority's investment portion consisted of the following investments: Investment Type Percentage of Total Portfolio Federal Home Loan Mortgage Corporation Federal Home Loan Bank Bonds Federal National Mortgage Association Public Funds Investment Pools 4.87% 26.84% 4.87% 63.42% 100.00% Credit Risk At year-end balances in TexPool, a privately managed public funds investment pool was rated AAAm by Standard & Poor's, balances in TexStar, a privately managed public funds investment pool was rated AAAm by Standard & Poor's, and balances in LOGIC, a privately managed public funds investment pool was rated AAA by Standard & Poor's. Federal Home Loan Mortgage Corporation notes, Federal Home Loan Banks bonds and Federal National Mortgage Association notes were rated AAA by Standard & Poor's. All credit ratings met acceptable levels required by legal guidelines prescribed in both the PFIA and the Authority's investment policy. TEt~T ATI V'E & n n. 1= 'T T\1I NARV ~" .1""., OJ ~U ,.1~ 1'" ..L 5. CAPITAL ASSETS An analysis of changes in physical facilities for the year ended September 30,2007, follows: Retirements Beginning and Ending Balance Additions Adjustments Balance Water, sewer and drainage facilities Capital assets, being depreciated Water production and distribution system $ 14,725,570 $ $ $ 14,725,570 Less accumulated depreciation for: Water production and distribution system 5,420,933) ( 441,913) 5,862,846) Total capital assets, being depreciated net 9,304,637 ( 441,913) 8,862,724 Investment in capital assets from: Contributions by participations $ 9,304,637 $( 441,913) $ $ 8,862,724 Depreciation expense of $441 ,913 charged to water services function/program. 6. 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). 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 revenue 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. mv ..l J!~ ATIVE r'" tx. 'n .f5J ELI t1I NARY 7. CONTRACT REVENUE BONDS PAYABLE, DEBT SERVICE REQUIREMENTS AND BONDS RESOLUTION REQUIREMENTS On October 6, 1999, the La Porte Area Water Authority issued $8.08 million in Contract Revenue Refunding Bonds, Series 1999, with an average interest rate of 5.159% to refund $8.08 million in outstanding Water Supply Contract Revenue Bonds, Series I and il, 1998 with an average interest rate of 6.94%. The Authority completed the current refunding to reduce its total debt service payments over the next 18 years by $1.476 million and to obtain an economic gain (difference between the present values of the old and new debt service payments) of $1.048 million. The bonds are payable from the net revenues of the Authority. The bonds are in $5,000 denominations. Interest on all bonds is payable on March 15 and September 15 of each year to maturity. The Authority is in compliance with all significant requirements and restrictions contained in the bond resolution. Bonds payable at September 30,2007, are comprised of the following issue: Interest Amount Interest Maturity Payment Callable Outstanding Rate Date Date Date $ 5,595,000 4.75% - 5.75% March 15, 2017 March 15/ March 15,2010* September 15 * Or any date thereafter at par value plus accrued interest in accordance with redemption provisions of the bond resolution. Bonds payable activity for the year ended September 30,2007, was as follows: Amounts Beginning Ending Due Within Bonds and Notes Payable Balance Additions Retirements Balance One Year Contract Revenue Refunding Bonds, Series 1999 $ 6,055,000 $ $ 460,000 $ 5,595,000 $ 485,000 As of September 30,2007, the debt service requirements on contract revenue bonds outstanding for the next five fiscal years and thereafter through 2017 are as follows: Year Ending Total September 30, Principal Interest Requirements 2008 $ 485,000 $ 273,531 $ 758,531 2009 505,000 245,069 750,069 2010 525,000 215,456 740,456 2011 550,000 185,513 735,513 2012 580,000 156,162 736,162 2013-2017 2,950,000 326,144 3,276,144 Total $ 5,595,000 $ 1,401,875 $ 6,996,875 BJ:i, ""fTl '1\ fT1 I "t iE' J~ rl,L V & PRELl t11 NARY 8. FUND NET ASSETS 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 and the Cities of 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 the 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, the Authority's billings were applied as follows: Water supplied and operating costs (user fees) Debt service billings/charges $ 1,035,062 760,701 Total billings $ 1,795,763 9. 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 had significantly reduced insurance coverage or had settlements that exceeded coverage amounts for the past three fiscal years. 10. ECONOMIC DEPENDENCY The Authority receives all of its support from three municipalities, with the City of La Porte being the largest contributor at approximately 89%. In addition, the Authority contracts with the City of La Porte to provide administrative oversight and operate the Authority's transmissions system. TENTATIVE & PRELl r-11 1'J .v '. .l. SUPPLEMENTARY INFORMATION T, ENTPiTI V,"QJ..:J' & n'[J,;'lG~I" r" ~tfI ])'ARV t;""" "''';, ~', ' , '" I '''-I''(f, J... .d- .1l ~ ,,{~~ U J!" ~ . ~_.. LA PORTE AREA WATER AUTHORITY SUPPLEMENTAL SCHEDULES INCLUDED WITHIN THIS REPORT SEPTEMBER 30, 2007 (Schedules included are checked or explanatory notes provided for omitted schedules.) ~ D. Notes Required by the Water District Accounting Manual See "Notes to Financial Statements." Pages 9 - 15 ~ E. Schedule of Services and Rates ~ F. Schedule of Enterprise Fund Expenses ~ G. Schedule of Temporary Investments D H. Analysis of Taxes Levied and Receivable (No tax levy) ~ 1. Schedule of Changes in Fixed Assets ~ 1. Long-term Debt Service Requirements, by Year ~ K. Analysis of Changes in Long-term Debt ~ L. Statement of Revenues and Expenses, Enterprise Fund - Five Years ~ M. Insurance Coverage ~ N. Board Members, Key Personnel and Consultants ~ O. Statement of Revenues, Expenses and Changes in Fund Net Assets - Budget and Actual, Non-GAAP Presentation TEl\lTA'. TI \71:;F 1 '! """ .- V.L'J ~\C C~. 1=) jib' L'T =-t" 1\1f"'r N' 'ARV l~.~-.r; J~g ~1~ !"!...L.l' J.. LA PORTE AREA WATER AUTHORITY SCHEDULE OF SERVICES AND RATES YEAR ENDED SEPTEMBER 30, 2007 Services provided by the District: Retail Water X Wholesale Water Retail Sewer Wholesale Sewer Parks/Recreation Fire Protection Solid Waste/Garbage Flood Control Participates in joint venture, regional system, and/or wastewater service (other than emergency interconnect) Other Drainage Irrigation Security Roads 1. 2. Retail rates based on 5/8" meter: The most prevalent type ofrneter (if not 5/8"): Retail rates not applicable x Minimum Charge Minimum Usage Flat Rate Y/N Water Rate per 1,000 Gallons Over Minimum Usage Levels Water Sewer $ $ $ $ Surcharge $ Sewer usage employs winter averaging Yes No x Total water and sewer charges per 10,000 gallons usage (including surcharges) $ 3. Retail service providers: Number of retail water and/or wastewater connections within the District as of the fiscal year-end. Provide actual numbers and single family equivalents (ESFC) as noted: Inactive Connections ESFC Active Connections Active ESFC Single family Multi family Commercial Other - recreational centers, Government and VFD Total Number of connections related to water service, if provided. Otherwise, the number of wastewater connections are provided. (continued) T:EI\pr' TI VE K" I["-y ~,~: I?RELI MI N.ARY LA PORTE AREA WATER AUTHORITY SCHEDULE OF SERVICES AND RATES (Continued) YEAR ENDED SEPTEMBER 30, 2007 4. Total water consumption (rounded to the nearest 1,000) during the fiscal year: Gallons pumped into system Gallons billed to customers 1,355,212 1,355,212 5. Standby fees: Does the District assess standby fees? Yes No x For the most recent full fiscal year-end - September 30,2007: Debt Service: Total levy Total collected Percentage collected $ $ $ Operation and maintenance Total levy Total collected Percentage collected $ $ $ Have standby fees been levied in accordance with Water Code Section 49,231, thereby constituting a lien on property: Yes No X 6. Anticipated sources of funds to be used for debt service payments in the District's following fiscal year. a. Debt service tax receipts b. Surplus construction funds c. Water and/or wastewater revenue d. Standby fees e. Beginning Debt Service Fund balances f. Interest revenues g. Other (describe) $ $ $ $ $ $ $ $ $ 758,531 Total Anticipated funds to be Used*** 758,531 *** This total equals the District's total annual debt service for 2008. (continued) rn E. r1WTl . ,'f.' .~t ... ,~>, '\II ~l, TI \lE ~~ DC 1( ELIMINARY LA PORTE AREA WATER AUTHORITY SCHEDULE OF SERVICES AND RATES (Continued) YEAR ENDED SEPTEMBER 30,2007 7. 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 City in which 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 City in which 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 TEt~T ATI VE l?RELIMIN & Not at all Not at all "4If. ';iF v' ~ LA PORTE AREA WATER AUTHORITY SCHEDULE OF ENTERPRISE FUND EXPENSES YEAR ENDED SEPTEMBER 30, 2007 PROFESSIONAL FEES Auditing $ 6,000 Legal 73 Other 1,600 PURCHASED SERVICE FOR RESALE Bulk water purchase 700,831 CONTRACTED SERVICES Management! operation (primary government) 59,454 ADMINISTRATIVE EXPENSES Supplies 213 Other administrative 13,217 OTHER EXPENSES Depreciation 441,913 Total expenses $ 1,223,301 NlUllber of persons employed by the District TENT ATI VE & D R' .~ 'r 'l~ 1\1'"r 1\1 AR' : '~.T 3D J~ "LJ ,~_" 1 ""' ,",l" JL "J ,.... "..L LA PORTE AREA WATER AUTHORITY SCHEDULE OF TEMPORARY INVESTMENTS SEPTEMBER 30, 2007 Accrued Interest Maturity Face Interest Rate* Date Am01Ult Receivable Equity interest in City of La Porte's investment pool 5.10% Demand $ 547,022 $ 12,583 Pool investments with the City of La Porte consist of obligations of the United States and its agencies and investment pools in accordance with state statutes and the City of La Porte's investment policies. * Approximate return for September 2007 T E NT ArTl I. "\ 7E . b . 1.. . V _.j r G....r y~ T}j<R.ET I 1 TI"~ NARY 2..''i.'~ }~< > I ~ ft \1m. ' J. .'." \, u ~ . ... LA PORTE AREA WATER AUTHORITY SCHEDULE OF CHANGES IN CAPITAL ASSETS YEAR ENDED SEPTEMBER 30, 2007 Retirements Beginning and Ending Balance Additions Adjustments Balance Water, sewer and drainage facilities: Capital assets, being depreciated Water production and distribution system $ 14,725,570 $ $ $ 14,725,570 Less accumulated depreciation for: Water production and distribution system ( 5,420,933) ( 441,913) ( 5,862,846) Total capital assets, being depreciated, net $ 9,304,637 $( 441,913) $ $ 8,862,724 Investment in capital assets from: Contributions by participants $ 9,304,637 $( 441,913) $ $ 8,862,724 T l\JU" 1\ T r.' \1.' E" u 1 ~ .L r'i. = .J &: PRELIMINARY LA PORTE AREA WATER AUTHORITY ANALYSIS OF CHANGES IN LONG-TERM DEBT YEAR ENDED SEPTEMBER 30, 2007 Series 1999 Total Interest rate 4.75% to 5.75% Date interest payable 03/15; 09/15 Maturity dates 03/15/05 to 03/15/17 Bonds outstanding At beginning of year $ 6,055,000 460,000 $ 6,055,000 460,000 Retirements Bonds outstanding At end of year $ 5,595,000 $ 5,595,000 Interest paid 300,700 300,700 Paying Agent/Registrar Refunding Bonds Series 1999 J. P. Morgan Chase Bank - Dallas, Texas Bond Authority Tax Bonds* Contract Revenue Bonds Refunding Bonds Amonnt authorized by voters $ N/A N/A Amonnt issued 9,800,000 8,080,000 Remaining to be issued $ $ $ * Includes all bonds secured with tax revenues. Bonds in this category may also be secured with other revenues in combination with taxes. Cash and temporary investment balances as of September 30, 2007: $ 1,619,587 Average annual debt service payment (principal and interest) for remaining term of all debt $ 699,688 TE~JTATIV &: PRELIMINARY LA PORTE AREA WATER AUTHORITY LONG-TERM DEBT SERVICE REQUIREMENTS BY YEARS SEPTEMBER 30, 2007 Due During Fiscal Year Annual Requirement for All Bond Series Ending Total Total Total September 30, Principal Interest Requirements 2008 $ 485,000 $ 273,531 $ 758,531 2009 505,000 245,069 750,069 2010 525,000 215,456 740,456 2011 550,000 185,513 735,513 2012 580,000 156,162 736,162 2013 615,000 126,288 741,288 2014 640,000 95,712 735,712 2015 670,000 64,600 734,600 2016 705,000 31,944 736,944 2017 320,000 7,600 327,600 $ 5,595,000 $ 1,401,875 $ 6,996,875 T- ~ 'NT A- T- 'Y '\ 1'1:;1 - J..~ . . _....L ~/.JL.:.J & PREJ~IMINARY LA PORTE AREA WATER AUTHORITY SCHEDULE OF REVENUES AND EXPENSES LAST FIVE FISCAL YEARS Amounts 2007 2006 2005 2004 2003 OPERATING REVENUES User fees $ 1,035,062 $ 1,079,126 $ 1,019,730 $ 878,880 $ 904,497 Total governmental activities net assets 1,035,062 1,079,126 1,019,730 878,880 904,497 OPERATING EXPENSES Supplies 215 42 173 109 69 Services and charges 781,175 1,090,246 1,020,649 946,947 1,062,817 Depreciation 441,913 441,913 441,913 441,913 437,479 Total operating expenses 1,223,303 1,532,201 1,462,735 1,388,969 1,500,365 OPERATING LOSS 188,241) 453,075) 443,005) 510,089) 595,868) NONOPERA T1NG REVENUES (EXPENSES) Interest income 110,364 44,081 40,926 21,014 24,707 Interest expense 299,598) 325,653) ( 351,084) 374,318) 397,072) Total nonoperating revenues 189,234) 281,572) ( 310,158) 353,304) 372,365) LOSS BEFORE CONTRIBUTIONS ( 377,475) 734,647) 753,163) 863,393) 968,233) CONTRIBUTIONS 847,006 858,292 858,162 866,879 869,511 NET INCOME (LOSS) $ 469,531 $ 123,645 $ 104,999 $ 3,486 $( 98,722) TENT ATI VE & n. )~> <'~..'"' ~';r= <iP'j..'r'~r ''1?''^.lARY ~ ~ ~~. / , tl'~' - J~~ ~L L LJ.,~ J~ \~ _ ' Percent of Total Revenues 2007 2006 2005 2004 2003 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 00.02% 00.00% 00.02% 00.01% 00.01% 75.47% 101.03% 100.09% 107.74% 117.50% 42.69% 40.95% 43.34% 50.28% 48.37% 118.19% 141.99"/0 143.44% 158.04% 165.88% 18.19%) 41.99%) 43.44%) 58.04%) 65.88%) 10.66% 04.08% 04.01% 02.39% 02.73% 28.94%) 30.18%) 34.43%) 42.59%) 43.90%) 18.28%) 26.10%) 30.42%) 40.20%) 41.17%) 36.47%) 68.09%) 73.86%) 98.24%) 107.05%) 81.83% 79.54% 84.16% 98.63% 96.13% 45.36% 1l.45% 10.29% 00.40% 10.92%) TENTATI~JE (" i"'<-,;; ~r'-+ T)'R. zr6~ ., .;,\, LI M.l 1\lAR'V .' . ,.' .L\I'::\.. ..L LA PORTE AREA WATER AUTHORITY mSURANCECOVERAGE SEPTEMBER 30, 2007 Policy Amount of Clause Type of Coverage FrornfI'o Coverage Insurer Name Coinsurance Comprehensive General and Contractual Liability 10/01/06 $ Texas Municipal None Bodily injury and property damage: 10/01/07 League Inter- Per occurrence 2,000,000 governmental Aggregate 4,000,000 Risk Pool >I< Deductible 5,000 Pollution Liability 10/01/06 2,000,000 Texas Municipal None 10/01/07 League Inter- governmental Risk Pool >I< Errors and Omissions*'" 10/01/06 Texas Municipal None 10/01/07 League Inter- Per act 3,000,000 govemmental Aggregate 6,000,000 Risk Pool >I< Deductible 10,000 Automobile Liability 1 % 1/06 Texas Municipal None 10/01/07 League Inter- Each occurrence 3,000,000 governmental Each person 25,000 Risk Pool >I< Deductible 1,000 **Directors are covered under the errors and omission policy. mE..1\:rrr1A.\Ff1r'VE'; .L }, 1\& 1.,. _~L ' C'. h,t' ~"'-6~ PRELl t.11 NARY LA PORTE AREA WATER AUTHORITY BOARD MEMBERS, KEY PERSONNEL AND CONSULTANTS SEPTEMBER 30, 2007 Authority's Mailing Address City of La Porte Michael Dolby P. O. Box l1l5 La Porte, Texas 77572 Authority's Business Telephone Number: (281) 471-5020 Term of Office Appointed and Expires Expense Reimbursements Title at Year-end Resident of Authority Name and Address Board Members Steve Valerius 140 Hazel La Porte, Texas 77571 08/31/07 08/31/09 President Position 3 Yes George Robert Roy 609 Canyon Springs Drive La Porte, Texas 77571 08/31/07 08/31/09 Member Position 1 Yes Chester Pool 171 0 Alvey La Porte, Texas 77571 08/31/06 08/31/08 Secretary Position 4 Yes Paul Berner 3007 Carlisle La Porte, Texas 77571 08/31/06 08/31/08 Vice-President Position 5 Yes Dennis H. Steger 3201 Bayshore Drive La Porte, Texas 77571 08/31/07 08/31/09 Member Position 2 Yes Kev Administrative Personnel John Jeams Interim City Manager Yes Michael Dolby Interim Finance Director, Investment Officer Yes 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. (continued) rr "[."1 l\J' m 7\ rT'~ I \' 71:;'1 , ,', p , , !~" .~ J~oJj = L 1:1. JL =. ,J-.J & PI<1:;11= I MI NARY 21'S )" ." D J.,.,J LA PORTE AREA WATER AUTHORITY BOARD MEMBERS, KEY PERSONNEL AND CONSULTANTS (Continued) SEPTEMBER 30, 2007 Fees and Date Expense Name and Address Hired Reimbursements Title Consultants Pattillo, Brown, & Hill, L.L.P. 2007 $ 6,000 Auditor Certified Public Accountants P.O. Box 20725 Waco, Texas 76702-0725 1. P. Morgan Chase Bank 1988 1,600 Paying Agent P. O. Box 911542 Dallas, Texas 75391-1542 City of La Porte, Texas 1981 57,321 Management! P. O. Box 1115 Operator La Porte, Texas 77572 fr E NT A 'T~ '\ IE .JI= ,./' . ~ & PRELI MI t~AR.Y LA PORTE AREA WATER AUTHORITY SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN WORKING CAPITAL - BUDGET AND ACTUAL - NON-GAAP PRESENTATION YEAR ENDED SEPTEMBER 30, 2007 Variance Favorable Budget Actual (Unfavorable) REVENUES Water revenue billing $ 1,182,342 $ 1,035,062 $( 147,280) Debt billing 760,700 300,701 ( 459,999) Capital recovery billing 86,574 86,305 ( 269) Interest earnings 76,000 110,364 34,364 Total revenues 2,105,616 1,532,432 ( 573,184) EXPENDITURES Current: Supplies 300 215 85 Services and charges 96,058 80,344 15,714 Water 919,752 700,831 218,921 Debt service 760,700 299,598 461,102 Capital improvements 615,000 615,000 Total expenditures 2,391,810 1,080,988 1,310,822 REVENUES OVER (UNDER) EXPENDITURES ( 286,194) 451,444 737,638 WORKING CAPITAL, BEGINNING 1,626,387 1,626,387 WORKING CAPITAL, ENDING $ 1,340,193 $ 2,077,831 $ 737,638 rrE1\~rT' 7\n'r VE' ~ ~..l " ,J:"1...l, . & PRE . I. l\jr<I'= 1\1' AR' ,V };. 1, . .l ~ ~, - .~" ~