The URL can be used to link to this page

Home My WebLink About07-01-09 La Porte Area Water Authority minutes LA PORTE AREA WATER AUTHORITY MINUTES JULY 1, 2009 1. The meeting was called to order at 6:01 PM by President Steve Valerius. Members Present: President Steve Valerius, Vice President David Janda and Secretary Ken Schlather. Members Absent: Members Dennis Steger Member Robert Roy. Others Present: Director of Public Works Steve Gillett and Controller Phyllis Rinehart. 2. The minutes from the meeting held April 22, 2009 were reviewed. Motion by David Janda, second by Steve Valerius to approve the minutes as amended. Motion was unanimous. 3. Director of Public Works Steve Gillett reviewed the proposed 2009-2010 LP A W A Operating Budget and answered questions form the Board. Motion by Ken Schlather, seconded by David Janda to approve the proposed 2009-2010 LPAWA Operating Budget. Motion was unanimous. 3. There were no General Manager's comments. 4. Ken Schlather requested a final copy of the proposed budget as it will be presented to the City Council. Staff will furnish a copy to all Board members. 5. There being no further business, the meeting ~~ . . S retary PASSED AND APPROVED ON THIS DAY t..- "'-;3 -(0 j)a~ ~ President LA PORTE AREA WATER AUTHORITY FINANCIAL REPORT FOR THE YEAR ENDED SEPTEMBER 30, 2009 LA PORTE AREA WATER AUTHORITY SEPTEMBER 30, 2009 TABLE OF CONTENTS FINANCIAL SECTION Page Number Independent Auditors' Report. ...................... .......... .......... .............................. ....................... 1 Management's Discussion and Analysis ............................................................................... 2 - 5 Basic Financial Statements: Statement ofN et Assets ................. .............. ........ ........... ..... ..................................... .......... Statement of Revenues, Expenses and Changes in Fund Net Assets.... ................. ..................................... ................. ..................... ............... Statement of Cash Flows.................... ................. ....... ..... ...... ........... ........................ .......... Notes to Financial Statements........ ................. ............................... ........................ ................ SUPPLEMENTARY INFORMATION Supplemental Schedules Included With this Report........................................................... Schedule of Service and Rates ............................... ..... ................................. ....................... Schedule of Enterprise Fund Expenses........ ........ .............. ...... ................ ................... ........ Schedule of Temporary Investments ............ ......... ........ .......... ................ ................ ........... Schedule of Changes in Capital Assets.......... ..... ..... ................................................ ........... Analysis of Changes in Long-term Debt ............................................................................ Long-term Debt Service Requirements by Years ............................................................... (continued) 6 7 8 9-15 16 17-18 19 20 21 22 23 LA PORTE AREA WATER AUTHORITY SEPTEMBER 30, 2009 TABLE OF CONTENTS SUPPLEMENTARY INFORMATION (Continued) Schedule of Revenues and Expenses - Five years............................................................. Insurance Coverage. ............... ......... ........... ......... ..... ........ ..................... .......... ..... ..... .......... Board Members, Key Personnel and Consultants............................................................... Schedule of Revenues, Expenses and Changes in Working Capital- Budget and Actual, Non-GAAP Presentation................................... ii Page Number 24 - 25 26 27 - 28 29 FINANCIAL SECTION 81m PAT T ILL 0, B ROW N & H ILL, 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, 2009, 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, 2009, 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 fmancial 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. 'P~-\t:J1oJ ~M>wY\ ~ th!() L. L.f. January 19,2010 1 401 WEST HIGHWAY 6. P. O. BOX 20725 . WACO, TX76702-0725. (254)772-4901. FAX: (254)772-4920. www.pbhcpa.com AFFILIATE OFFICES: BROWNSVILLE, TX (956) 544-7778 . HILLSBORO, TX (254) 582-2583 TEMPLE, TX (254) 791-3460. WHITNEY, TX (254) 694-4600 .ALBUQUERQUE, NM (505) 266-5904 MANAGEMENT'S DISCUSSION AND ANALYSIS LA PORTE AREA WATER SUPPLY MANAGEMENT'S DISCUSSION AND ANALYSIS YEAR ENDED SEPTEMBER 30, 2009 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, 2009. FINANCIAL IDGHLIGHTS · The assets of the La Porte Area Water Authority exceeded its liabilities at the close of the most recent fiscal year by $6,407,496 (net assets). Of this amount, $1,621,835, 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 $233,047. · The Authority's total bonded debt decreased by $505,000 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. 2 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 - 29 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 $6,407,496 at the close of the fiscal year. The largest portion of the Authority's net assets (63%) 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 2009 2008 Current and other assets $ 2,447,114 $ 2,432,382 Capital assets 8,659,811 8,997,595 Total assets 11,106,925 11,429,977 Current liabilities 619,429 650,528 Noncurrent liabilities 4,080,000 4,605,000 Total liabilities 4,699,429 5,255,528 Net assets: Invested in capital assets, net of related debt 4,054,811 3,887,595 Restricted 730,850 739,253 Unrestricted 1,621,835 1,547,601 Total net assets $ 6,407,496 $ 6,174,449 3 Analysis of the Authority's Operations. The following table provides a summary of the Authority's operations for the year ended September 30, 2009. 2009 2008 Operating revenues Charges for services $ 962,843 $ 985,972 Total operating revenues 962,843 985,972 Operating expenses Supplies 9 46 Purchased water 818,482 745,775 Services and charges 96,242 85,459 Depreciation 461,465 451,689 Total operating expenses 1,376,198 1,282,969 Operating income (loss) 413,355) 296,997) Nonoperating revenues (expenses) 213,902) 194,499) Income (loss) before contributions 627,257) 491,496) Capital contributions 860,304 860,388 Change in net assets 233,047 368,892 Net assets, beginning 6,174,449 5,805,557 Net assets, ending $ 6,407,496 $ 6,174,449 Total fund net assets increased by $233,047 in 2009. The actual water revenue and capital recovery fees for the fiscal year ended September 30, 2009, $1,064,615, were 10% lower than the amount budgeted for $1,181,202 due to a decrease in consumption as a result of increased rainfall. Interest earned on investments was down due to lower interest rates. The Authority has not made any revisions to the original appropriations approved by the City Council for the 2008-2009 budget. CAPITAL ASSETS AND DEBT ADMINISTRATION Capital Assets. The La Porte Area Water Authority's investment in capital assets as of September 30, 2008, amounts to $8,659,811 (net of accumulated depreciation). There were additions of $123,680 of capital assets during the current fiscal year. The current year depreciation is $461,465. Capital assets at year-end consisted of the following: Ending Balance $ 123,680 8,536,131 $ 8,659,811 Water, sewer and drainage facilities Construction in progress Water production and distribution system Additional information of the La Porte Area Water Authority's capital assets can be found in Note 5 on page 12 of this report. 4 Debt Administration. At the end ofthe 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 pages 13 - 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 corning fiscal year, the Authority's budget will be increased to cover the cost of physical plant upgrades. REQUESTS 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, La Porte, Texas 77571. 5 BASIC FINANCIAL STATEMENTS LA PORTE AREA WATER AUTHORITY STATEMENT OF NET ASSETS SEPTEMBER 30, 2009 ASSETS Current assets Cash Investments Receivables, net Accrued interest receivable Restricted assets Restricted cash Total current assets Capital assets Water production and distribution system Construction in progress Less: accumulated depreciation Total noncurrent assets Total assets LIABILITIES Current liabilities Accounts payable Retainage payable Current liabilities (payable from restricted assets): Current portion of revenue bonds Accrued interest Total current liabilities Noncurrent liabilities Revenue bond, net of current portion Total liabilities NET ASSETS Invested in capital assets, net of related debt Restricted for debt service Unrestricted Total net assets The accompanying notes are an integral part of these financial statements. 6 $ 159,362 1,387,593 158,323 1,380 740,456 2,447,114 15,312,130 123,680 ( 6,775,999) 8,659,811 11,106,925 81,113 3,710 525,000 9,606 619,429 4,080,000 4,699,429 4,054,811 730,850 1,621,835 $ 6,407,496 LA PORTE AREA WATER AUTHORITY STATEMENT OF REVENUES, EXPENSES AND CHANGES IN FUND NET ASSETS FOR THE YEAR ENDED SEPTEMBER 30,2009 OPERATING REVENUES Charges for services $ 962,843 Total operating revenues 962,843 OPERATING EXPENSES Supplies 9 Purchased water 818,482 Services and charges 96,242 Depreciation 461,465 Total operating expenses 1,376,198 OPERATING LOSS ( 413,355) NONOPERATING REVENUES (EXPENSES) Interest income 29,957 Interest expense and fiscal charges ( 243,859) Total nonoperating revenues (expenses) ( 213,902) LOSS BEFORE CONTRIBUTIONS ( 627,257) CAPITAL CONTRIBUTIONS 860,304 CHANGE IN NET ASSETS 233,047 FUND NET ASSETS, BEGINNING 6,174,449 FUND NET ASSETS, ENDING $ 6,407,496 The accompanying notes are an integral part of these financial statements. 7 LA PORTE AREA WATER AUTHORITY STATEMENT OF CASH FLOWS FOR mE YEAR ENDED SEPTEMBER 30,2009 CASH FLOWS FROM OPERATING ACTIVITIES Receipts from customers Payments to suppliers 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 revenue bonds Interest paid on capital debt Acquisition of capital assets Net cash used by capital and related financing activities CASH FLOWS FROM INVESTING ACTIVITIES Purchase of investment securities Interest Net cash used by investing activities NET DECREASE IN CASH AND CASH EQUIVALENTS CASH AND CASH EQUIVALENTS, BEGINNING CASH AND CASH EQUIVALENTS, ENDING RECONCILIATION OF OPERATING 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 Increase (decrease) in liabilities: Accounts payable Net cash provided by operating activities RECONCILIATION OF TOTAL CASH AND CASH INVESTMENTS Current assets - cash and cash equivalents Restricted assets - cash and cash equivalents Net cash provided by operating activities The accompanying notes are an integral part of these financial statements. 8 $ ( 1,103,963 968,333) 135,630 758,532 101,772 ( 505,000) ( 245,069) ( 119,970) ( 9,735) ( 410,578) 31,016 ( 379,562) ( 253,667) 1,153,485 $ 899,818 $( 413,355) 461,465 141,120 ( 53,600) $ 135,630 $ 159,362 740,456 $ 899,818 LA PORTE AREA WATER AUTHORITY NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2009 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. Reoortinl! 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 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 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) 9 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) A. ReDortin!! 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 Accountin!! 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 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 Accountin!! 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) 10 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) E. Phvsical Facilities and Deoreciation 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 EQIDV ALENTS 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, 2009. At year-end, a portion of the Authority's cash was restricted as follows: Restricted for retirement of current debt service liabilities and reserve requirements per bond covenants $ 740,456 Total restricted cash $ 740,456 4. TEMPORARY INVESTMENTS Temporary investments represent the Authority's equity interest in the City's investment pool. The carrying amount for temporary investments at September 30, 2009, was $1,387,593 and includes the recognition of a gain of $1,409, which represents the difference between the book value and quoted market value of the 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 weighted average maturity may not exceed two years. At year-end, the Authority's weighted average maturity of the investment portfolio was as follows: Investment Type Weighted Average Maturity (Days) Federal Home Loan Mortgage Corporation Federal National Mortgage Association 870 548 Portfolio weighted average maturity 708 (continued) 11 4. TEMPORARY INVESTMENTS (Continued) 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, 2009, the Authority's investment portion consisted of the following investments: Investment Type Percentage of Total Portfolio Federal Home Loan Mortgage Corporation Federal National Mortgage Association 50.00% 50.00% 100.00% Credit Risk Federal Home Loan Mortgage Corporation notes 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. 5. CAPITAL ASSETS An analysis of changes in physical facilities for the year ended September 30, 2009, follows: Retirements Beginning and Ending Balance Additions Adjustments Balance Capital assets, not being depreciated: Construction in progress $ $ 123,680 $ $ 123,680 Capital assets, being depreciated: Water production and distribution system 15,312,130 15,312,130 Less accumulated depreciation for: Water production and distribution system 6,314,534) ( 461,465) 6,775,999) Total capital assets, being depreciated net 8,997,596 ( 337,785) 8,659,811 Investment in capital assets from: Contributions by participations $ 8,997,596 $( 337,785) $ $ 8,659,811 Depreciation expense of $461,465 charged to water services function/program. 12 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. 7. CONTRACT REVENUE BONDS PAYABLE, DEBT SERVICE REQUIREMENTS AND BONDS RESOLUTION REQIDREMENTS 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 II, 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 30,2009, are comprised of the following issue: Interest Amount Interest Maturity Payment Callable Outstanding Rate Date Date Date $ 4,605,000 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 ofthe bond resolution. (continued) 13 7. CONTRACT REVENUE BONDS PAYABLE, DEBT SERVICE REQillREMENTS AND BONDS RESOLUTION REQUIREMENTS (Continued) Bonds payable activity for the year ended September 30, 2009, was as follows: Amounts Beginning Ending Due Within Bonds and Notes Payable Balance Additions Retirements Balance One Year Contract Revenue Refunding Bonds, Series 1999 $ 5,110,000 $ $ 505,000 $ 4,605,000 $ 525,000 As of September 30, 2009, 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 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 2015-2017 1,695,000 104,144 1,799,144 Total $ 4,605,000 $ 883,275 $ 5,488,275 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 Capital recovery billings $ 962,843 758,532 101,772 Total billings $ 1,823,147 14 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 86%. In addition, the Authority contracts with the City of La Porte to provide administrative oversight and operate the Authority's transmissions system. 15 SUPPLEMENTARY INFORMATION LAPORTE AREA WATER AUTHORITY SUPPLEMENTAL SCHEDULES INCLUDED WITHIN THIS REPORT SEPTEMBER 30, 2009 (Schedules included are checked or explanatory notes provided for omitted schedules.) [gJ D. Notes Required by the Water District Accounting Manual See ''Notes to Financial Statements." Pages 9 - 15 [gJ E. Schedule of Services and Rates [gJ F. Schedule of Enterprise Fund Expenses [gJ G. Schedule of Temporary Investments D H. Analysis of Taxes Levied and Receivable (No tax levy) [gJ 1. Schedule of Changes in Fixed Assets [gJ J. Long-term Debt Service Requirements, by Year [gJ K. Analysis of Changes in Long-term Debt [gJ L. Statement of Revenues and Expenses, Enterprise Fund - Five Years [gJ M. Insurance Coverage [gJ N. Board Members, Key Personnel and Consultants [gJ O. Statement of Revenues, Expenses and Changes in Fund Net Assets - Budget and Actual, Non-GAAP Presentation 16 LA PORTE AREA WATER AUTHORITY SCHEDULE OF SERVICES AND RATES YEAR ENDED SEPTEMBER 30, 2009 1. Services provided by the District during the Fiscal Year: D Retail Water ~ Wholesale Water D Drainage D Retail Wastewater D Wholesale Wastewater D Irrigation D Parks/Recreation D Fire Protection D Security D Solid Waste/Garbage D Flood Control D Roads D Participates injoint venture, regional system, and/or wastewater service (other than emergency interconnect) D Other (specify): 2. Total Water Consumption during the Fiscal Year (rounded to the nearest thousand): (You may omit this information if your district does not provide water) Gallons pumped into system: 1,496,330 ,000 Water Accountability Ratio: (Gallons billed/Gallons pumped) 97.2% Gallons billed to customers: 1,454,575 ,000 3. Standby Fees: (authorized only under TWC Section 49.231): (You may omit this information if your district does not levy standby fees) Does the District have Debt Service standby fees? YesD No ~ If yes, Date of the most recent Commission Order: Does the District have Operation and Maintenance standby fees? YesD No ~ If yes, Date of the most recent Commission Order: 4. Location of District (required for first audit year or when information changes, otherwise this information may be omitted): County(ies) in which the District is located: Harris Is the District located entirely within one county? Yes~ No D Is the District located within a city? Entirely D Partly ~ Not at all D (continued) 17 LA PORTE AREA WATER AUTHORITY SCHEDULE OF SERVICES AND RATES (Continued) YEAR ENDED SEPTEMBER 30,2009 City(ies) in which the District is located: Morgan's Point. Shoreacres. and La Porte Is the District located within a city's extra territorial jurisdiction (ETJ)? Entirely 0 Partly ~ Not at all 0 ETJs in which the District is located: Morgan's Point. Shoreacres. and La Porte Are Board members appointed by an office outside the District? Yes~ No 0 If yes, by whom? La Porte City Council 18 LA PORTE AREA WATER AUTHORITY SCHEDULE OF ENTERPRISE FUND EXPENSES YEAR ENDED SEPTEMBER 30,2009 PROFESSIONAL FEES Auditing $ 6,000 Legal 58 Other 1,480 PURCHASED SERVICE FOR RESALE Bulk water purchase 818,482 CONTRACTED SERVICES Management/operation (primary government) 62,3 12 ADMINISTRATIVE EXPENSES Supplies 9 Other administrative 19,352 OTHER EXPENSES Depreciation 461,465 Total expenses $ 1,369,158 Number of persons employed by the District 0 19 LA PORTE AREA WATER AUTHORITY SCHEDULE OF TEMPORARY INVESTMENTS SEPTEMBER 30,2009 Accrued Interest Maturity Face Interest Rate* Date Amount Receivable Equity interest in City of La Porte's investment pool 1.12% Demand $ 1,387,593 $ 1,380 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 2009 20 LA PORTE AREA WATER AUTHORITY SCHEDULE OF CHANGES IN CAPITAL ASSETS YEAR ENDED SEPTEMBER 30,2009 Retirements Beginning and Ending Balance Additions Adjustments Balance Water, sewer and drainage facilities: Capital assets, not being depreciated Construction in progress $ $ 123,680 $ $ 123,680 Total capital assets, not being depreciated $ $ 123,680 $ $ 123,680 Capital assets, being depreciated Water production and distribution system $ 15,312,130 $ $ $ 15,312,130 Less accumulated depreciation for: Water production and distribution system ( 6,314,534) ( 461,465) ( 6,775,999) Total capital assets, being depreciated, net $ 8,997,596 $( 461,465) $ $ 8,536,131 Investment in capital assets from: Contributions by participants $ 8,997,596 $( 337,785) $ $ 8,659,811 21 LA PORTE AREA WATER AUTHORITY ANALYSIS OF CHANGES IN LONG-TERM DEBT YEAR ENDED SEPTEMBER 30, 2009 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 $ 5,110,000 505,000 $ 5,110,000 505,000 Retirements Bonds outstanding At end of year $ 4,605,000 $ 4,605,000 Interest paid $( 245,069) $( 245,069) Paying Agent/Registrar Refunding Bonds Series 1999 J. P. Morgan Chase Bank - Dallas, Texas Bond Authority Tax Bonds* Contract Revenue Bonds Refunding Bonds Amount authorized by voters $ N/A N/A Amount issued 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, 2009: $ 2,287,411 Average annual debt service payment (principal and interest) for remaining term of all debt $ 686,034 22 LA PORTE AREA WATER AUTHORITY LONG-TERM DEBT SERVICE REQUIREMENTS BY YEARS SEPTEMBER 30, 2009 Due During Fiscal Year Annual Requirement for All Bond Series Ending Total Total Total September 30, Principal Interest Requirements 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 $ 4,605,000 $ 883,275 $ 5,488,275 23 LA PORTE AREA WATER AUTHORITY SCHEDULE OF REVENUES AND EXPENSES LAST FIVE FISCAL YEARS 24 Percent of Total Revenues 2009 2008 2007 2006 2005 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 00.00% 00.00% 00.02% 00.00% 00.02% 95.00% 84.31% 75.47% 101.03% 100.09% 47.93% 45.81% 42.69% 40.95% 43.34% 142.93% 130.12% 118.19% 141.99% 143.44% 42.93%) 30.12%) 18.19%) 41.99%) 43.44%) 03.11% 07.90% 10.66% 04.08% 04.01% 25.33%) 27.62%) 28.94%) ( 30.18%) 34.43%) 22.22%) 19.73%) 18.28%) ( 26.10%) 30.42%) 65.15%) 49.85%) 36.47%) 68.09%) 73.86%) 89.35% 87.26% 81.83% 79.54% 84.16% 24.20% 37.41% 45.36% 11.45% 10.29% 25 LA PORTE AREA WATER AUTHORITY mSURANCECOVERAGE SEPTEMBER 30,2009 Policy Amount of Clause Type of Coverage From!To Coverage Insurer Name Coinsurance Comprehensive General and Contractual Liability 10/0 lI08 $ Texas Municipal None Bodily injury and property damage: 10/0 lI09 League Inter- Per occurrence 2,000,000 governmental Aggregate 4,000,000 Risk Pool* Deductible 5,000 Pollution Liability 10/0 lI08 2,000,000 Texas Municipal None 10/01/09 League Inter- governmental Risk Pool* Errors and Omissions** 10/01/08 Texas Municipal None 10/0 lI09 League Inter- Per act 3,000,000 governmental Aggregate 6,000,000 Risk Pool* Deductible 5,000 Automobile Liability 1 %lI08 Texas Municipal None 10/0 lI09 League Inter- Each occurrence 1,000,000 governmental Each person 25,000 Risk Pool* Deductible 1,000 **Directors are covered under the errors and omission policy. 26 LA PORTE AREA WATER AUTHORITY BOARD MEMBERS, KEY PERSONNEL AND CONSULTANTS SEPTEMBER 30,2009 Authority's Mailing Address City of La Porte Michael Dolby P. O. Box 1115 La Porte, Texas 77572 Authority's Business Telephone Number: (281) 471-5020 Term of Office Appointed and Expires Name and Address Expense Reimbursements Title at Year-end Resident of Authority 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 David Janda 412 Spencer Landing West La Porte, Texas 77571 08/31/08 08/31/10 Secretary Position 4 Yes Ken Schlather 9811 Catlett La Porte, Texas 77571 08/31/08 08/31/10 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 Ron Bottoms City Manager Yes Michael Dolby 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) 27 LA PORTE AREA WATER AUTHORITY BOARD MEMBERS, KEY PERSONNEL AND CONSULTANTS (Continued) SEPTEMBER 30,2009 Fees and Date Expense Name and Address Hired Fleimbursements Title Consultants Pattillo, Brown, & Hill, L.L.P. 2007 $ 6,000 Auditor Certified Public Accountants P.O. Box 20725 Waco, Texas 76702-0725 J. P. Morgan Chase Bank 1988 1,480 Paying Agent P. O. Box 911542 Dallas, Texas 75391-1542 City of La Porte, Texas 1981 62,312 Management! P. O. Box 1115 Operator La Porte, Texas 77572 28 LA PORTE AREA WATER AUTHORITY SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN WORKING CAPITAL - BUDGET AND ACTUAL - NON-GAAP PRESENTATION YEAR ENDED SEPTEMBER 30, 2009 Variance Favorable Budget Actual (Unfavorable) REVENUES Water revenue billing $ 1,094,628 $ 962,843 $( 131,785) Debt billing 750,069 758,532 8,463 Capital recovery billing 86,574 101,772 15,198 Interest earnings 45,000 29,957 ( 15,043) Total revenues 1,976,271 1,853,104 ( 123,167) EXPENDITURES Current: Supplies 300 9 291 Services and charges 112,716 96,242 16,474 Water 878,222 818,482 59,740 Debt service 750,069 750,069 Capital improvements 14,050 123,680 ( 109,630) Total expenditures 1,755,357 1,788,482 ( 33,125) REVENUES OVER (UNDER) EXPENDITURES 220,914 64,622 ( 156,292) WORKING CAPITAL, BEGINNING 1,805,829 1,836,997 31,168 WORKING CAPITAL, ENDING $ 2,026,743 $ 1,901,619 $( 125,124) 29 February 3, 2010 La Porte Area Water Authority City of La Porte P.O. Box 1115 La Porte, Texas 77572 Attn: Steve Valerius - President LP A W A Steve, Please accept my letter of resignation from the La Porte Area Water Authority. We have recently moved and I am no longer a Resident of the Authority. I have enjoyed participating as a member and working with the other Board members and City Staff over the years. Regards, ~~~. Rob Roy C~'