HomeMy WebLinkAbout1984-07-31 Min - Board ATV
SPECIAL MEETING
July 31, 1984
The special meeting of the Board of Directors of the Truckee Donner
Public Utility District was called to order at 3: 12 P.M. by President Maass
in the TDPUD Board room.
ROLL CALL: Directors Cooley, Corbett and Maass were present; Directors
Hamilton and Duffy arrived during the meeting.
EMPLOYEES PRESENT: Mary Chapman, Roman Gillen, Peter Holzmeister, Kay
Pomponio and Susan Craig.
CONSULTANTS PRESENT: Keith Fukui and Rick Blumenfeld of Arthur Andersen
and Company were present.
WORKSHOP SESSION WITH ARTHUR ANDERSEN & COMPANY TO REVIEW THE 1983 FINANCIAL
STATEMENTS AND AUDIT - POSSIBLE DIRECTION
Mr. Blumenfeld noted that 1983 is the first year the District has had
separate water and electric financial statements; the Board was provided
with copies. He noted that the financial statements present the position
of operations as of December 31, 1983, the results of the District's oper-
ations, and funds provided for additions to its utility plant for the year,
in conformity with generally accepted accounting principles applied on a
basis consistent with that of the preceding year.
Mr. Blumenfeld explained that the FmHA indentures, which secure the
promissory note and bonds, require the District to establish and maintain
rates and charges to produce net revenues equal to not less than 1.2 times
the aggregate amount of the principal and interest due within the next
twelve months. In addition, they require the District to establish separate
special accounting funds. Since the promissory note and bonds were issued,
the District has not met and fulfilled the requirements of certain indenture
covenants. In the event of a default, the holder of the aggregate principal
amount shall be entitled, upon notice in writing to the District, to declare
the principal due and payable immediately. As a result of the District's
failure to meet certain of the indenture covenants, the total amount of these
obligations has been classified as current liabilities in the financial state-
ments. He noted that this situation developed because certain clauses in the
documents prepared by Bond Counsel were incorrect. Amendments to correct the
documents are currently being written by Mr. Sperry.
It was noted that, since the Tahoe Donner suit has been settled, the
audit has not included a related qualification.
Mr. Fukui went over the water and electric balance sheets, statements
of net revenue, statements of funds provided for additions to utility plant
and notes to the financial statements; working capital was explained. Direc-
tor Hamilton arrivwd at 3:25 P.M.
The Jarvis initiative, which affects a district's ability to raise rates
and will be decided at the November election, and its possible unconstitution-
al aspects were discussed.
Director Cooley left the meeting at approximately 4:00 P.M. ; Director
Duffy arrived at about 4:05 P.M.
Briefly discussed was determining the value of the District's assets
and establishing a line of credit, borrowing funds, using debt service, re-
covery of costs, and depreciation.
It was mentioned that different information than that provided in
the audit may be required in order to manage the District efficiently.
8/31/84 Pg. 1
TRUCKEE-DONNER PUBLIC UTILITY DISTRICT
WATER OPERATIONS
FINANCIAL STATEMENTS
AS OF DECEMBER 31, 1983
TOGETHER WITH AUDITORS ' REPORT
50 JUL 54 02
"Tentative & Preliminary"
�^ For Discussion Purposes Only
To the hoard of Directors of
Truckee-Donner Public Utility District:
We have examined the balance sheet of the WATER OPERATIONS
OF TRUCKEE-DONNER PUBLIC UTILITY DISTRICT (a political subdivision of
the State of California) as of December 31 , 1983, and the related
statements of net revenue and funds provided for additions to utility
plant for the year then ended . Our examination was made in accor-
dance with generally accepted auditing standards and, accordingly,
included such tests of the accounting records and such other auditing
procedures as we considered necessary in the circumstances .
In our opinion , the financial statements referred to above
present fairly the financial position of the Water Operations of
Truckee-Donner Public Utility District as of December 31 , 1983 , and
the results of its operations, and funds provided for additions to
its utility plant for the year then ended, in conformity with
generally accepted accounting principles applied on a basis
consistent with that of the preceding year.
San Francisco, California,
April 6, 1984.
"Tentative & Preliminary"
For Discussion Purposes Only
TRUCKEE-DONNER PUBLIC UTILITY DISTRICT
WATER OPERATIONS
BALANCE SHEET -- DECEMBER 31, 1983
G
(
ASSETS CAPITALIZATION AND LIABILITIES
• UTILITY PLANT, at cost:
CAPITALIZATION:
Plant in service $ 2,090,468 Consumers' equity employed in the business-
Less - Accumulated depreciation (1,142,962) Balance, beginning of year 567,858
----------- Net revenue for the year 112,277
Net plant in service $ 947,506
Total consumers' equity f 680,135
Construction work in progress 33,427 "-""-""-"
------ Long-term debt (Note 4)-
Net utility plant $ 980,933 Installment note payable $ 15,
----------- Sewer assessments payable 5,3 1 2
Total long-term debt $ 20,775
t Total capitalization $ 700,910
RESTRICTED FUNDS (Note 3) $ 1,367,786 ""---"
+ ----------- CURRENT LIABILITIES:
Promissory note (Note 5) $ 242,883
Bonds payable (Note 5) 315,000
Accounts payable 25,005
Deferred income - standby fees 14,337
V CURRENT ASSETS: Consumer deposits 32,240
Cash, restricted (Note 3) $ 66,569 Accrued interest 9,695
Accounts receivable - consumer, less Accrued liabilities 98,520
?' bad debt reserves of $14,875 46,360 Current maturities of long-term debt 3,555
-----
t Accounts receivable - standby fees and other,
less bad debt reserves of $1,303 47,043 $ 741,235
Inventory, at average cost
21,255
Interest receivable, prepaid insurance and other 6,904 CONTINGENCIES (Note 6)
OE---188,131 CONSTRUCTION ADVANCES (Note 3) E1_094_705
$ 2,536,850 $2,536,850
O � xxx xsxxscxa sazzsxxxxx
b The accompanying notes are an integral part of these financial statements.
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16?
TRUCKEE-DONNER PUBLIC UTILITY DISTRICT
WATER OPERATIONS
STATEMENT OF NET REVENUE
FOR THE YEAR ENDED DECEMBER 319 1983
OPERATING REVENUES $7379459
OPERATING EXPENSES:
Distribution $3679522
Consumer accounts 289730
Administrative and general 1329984
Depreciation 729702
Other 19699
$6039637
Net operating revenue $1339822
INTEREST INCOME 1209097
Net revenue before
interest expense $2539919
INTEREST EXPENSE 1419642
--------
Net revenue $1129277
The accompanying notes are an integral
part of these financial statements .
"Tentative & Preliminary"
For Discussion Purposes Only
t fD
TRUCKEE-DONNER PUBLIC UTILITY DISTRICT
WATER OPERATIONS
STATEMENT OF FUNDS PROVIDED FOR ADDITIONS TO UTILITY PLANT
FOR THE YEAR ENDED DECEMBER 31 , 1983
FUNDS PROVIDED INTERNALLY :
Operations-
Net revenue $ 1129277
Depreciation expense not requiring a current
use of funds 729702
Other 79483
Funds provided by operations $ 1929462
Deduct-
Reductions in long-term debt (39531 )
Additions to restricted funds .( 1379882)
Net funds provided internally $ 519049
FUNDS PROVIDED FROM EXTERNAL SOURCES - Advances
utilized for construction 2899915
FUNDS USED FROM NET CHANGE IN WORKING CAPITAL
(Note 7) ( 149909)
Funds provided for additions
to utility plant $ 3269055
The accompanying notes are an integral
part of these financial statements .
"Tentative & Preliminary"
For Discussion Purposes Only
lla
TRUCKEE-DONNER PUBLIC UTILITY DISTRICT
WATER OPERATIONS
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31 , 1983
( 1 ) SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES :
Organization-
The Truckee-Donner Public Utility District (the District)
was formed and operates under the State of California Public Utility
District Act to provide electric and water service to a portion of
Nevada and Placer counties described as Truckee and Donner Lake.
These financial statements reflect the water operations of the
District.
To the extent possible, assets , liabilities , equity,
revenues and expenses have been specifically identified as electric
or water operations . All amounts not specifically identified have
been allocated 85% electric and 15% water, reflecting the District ' s
most recent study on the allocated use of shared or common facili -
ties or functions .
Depreciation-
The District provides for depreciation on the historical
cost of water utility plant on . a straight-line basis . The average
annual composite rate was 4. 9% in 1983.
Retirements of water utility plant and the related costs
of removal and salvage are charged to accumulated depreciation . The
costs of replacement of property units are charged to plant. Repair
and maintenance costs are charged to expense.
Revenues-
Revenues consist of billings to consumers as meters are
read on a cycle basis throughout each month .
Income Taxes-
The District is exempt from payment of federal and state
income taxes .
"Tentative & Preliminary"
For Discussion Purposes Only
114
-2
Pension Plan-
The District maintains a noncontributory defined benefit
pension plan covering substantially all employees who have at least
one year of service. It is the District ' s policy to fund pension
costs as accrued . Contributions for 1983 amounted to $7,932 for the
water operations . The present value of accumulated plan benefits
and net assets available for these benefits , last determined as of
December 31 , 1983, is not maintained by individual operations of the
District. The weighted average assumed rate of return used in
determining the present value of accumulated plan benefits for the
District was 7%. The accumulated plan benefits and assets for all
employees of the District are as follows :
Actuarial present value of accumulated
plan benefits :
Vested $1189788
Nonvested 149659
$1339447
Net assets available for benefits $3139684
(2) RELATED PARTY TRANSACTIONS :
During 1983, a director of the District was also a stock-
holder and organizer of a bank with which the District conducts
business . The District ' s transactions with the bank include main-
taining a general checking account and two installment notes
payable. All transactions are at current market rates and con-
ditions . The installment notes payable are described in Note 4.
The above-mentioned director was not reelected to the District ' s
Board in November 1983.
"Tentative & Preliminary"
^ For Discussion Purposes Only
-3-
(3) RESTRICTED FUNDS:
The District has collected and restrictively invested
funds for future uses as follows :
.., December 31, 1983
------------------------
Restricted Construction
Funds Advances
Dart Industries Water Agreement - the District
has collected $40 per lot for future water
source and storage facilities in the
developers' project $ 3199730 $ 3199730
Dart Industries Water Services Settlement -
the District has collected funds for
anticipated future repairs of water lines
constructed by Dart Industries 223,012 2929578
Facilities fees collected from customers for
future procurement of source and storage 2609908 2979403
Portion of connection fees collected from
customers for the future purchase of water
meters 1839946 1849994
---------- ----------
Other restricted funds-
$ 9879596 $190949705
FMHA Revenue, Note and Reserve Funds - water
operating margins plus depreciation held in
reserve in accordance with the loan agreement 317,147 -
Consumer deposits and other 63,043 -
$193679786 $190949705
The promissory note payable to the United States of
America, Farmers ' Home Administration , incorporates Indentures which
require the District to establish certain accounting funds. These
funds essentially encompass all of the cash flows of the water
operations . The Indentures allow use- of the funds for the necessary
and reasonable expense of management, operation, maintenance, repair
and other expenses necessary to maintain and preserve the water
operations , including improvements.
(4) LONG-TERM DEBT:
The District renewed an installment note payable relating
to its computer on December 1, 1982. Terms of the note provide for
monthly installments of principal and interest of $2, 570. The
interest rate is 10%, to be adjusted annually on December 1 based
upon the bank ' s current municipal rate. On December 1 , 1988, the
entire balance of principal and interest will become due and
payable. These financials reflect the water operations ' portion of
the note.
"Tentative & Preliminary"
For Discussion Purposes Only
1f�
. -4-
The sewer assessments are payable to Nevada County,
California, over a 20-year period, with interest at 7%. Final
payment is due in 1990.
_(5) OBLIGATIONS RECLASSIFIED AS CURRENT:
The promissory note payable to the United States of
America, Farmers ' Home Administration is due in 39 annual
installments of principal and interest of $14,800. The interest
rate is 5% per annum. The net revenues (as defined ) of the
District ' s water system are pledged as security.
The bonds payable to the United States of America,
Farmers ' Home Administration are due each October 1 as follows :
Years Amount
1984 through 2003 $ 5 ,000
2004 through 2013 109000
2014 through 2018 159000
2019 and 2020 209000
The interest rate is 5% per annum, payable semiannually.
The net revenues ( as defined ) of the District ' s water system are
pledged as security.
The Indentures , which secure the promissory note and
bonds, require the District to establish and maintain rates and
charges to produce net revenues ( as defined) equal to not less than
1 . 2 times the aggregate amount of the principal and interest due
within the next 12 months. In addition, they require the District
to establish separate special accounting funds . Since the
promissory note and bonds were issued, the District has not met and
fulfilled the requirements of certain Indenture covenants . In the
event of a default, the holder of not less than 66-2/3% of the
aggregate principal amount shall be entitled, upon notice in writing
to the District, to declare the principal ($557,883) due and payable
immediately.
As a result of the District ' s failure to meet certain of
the Indenture covenants, the total amount of these obligations has
been classified as a current liability in the financial statements .
(6) CONTINGENCIES - DART INDUSTRIES WATER
AGREEMENT AND RELATED LAWSUITS:
In 1970, an agreement was signed between the District and
Dart Industries for the purpose of providing water service to a Dart
subdivision . The agreement required Dart to construct water source
and storage facilities at Donner Lake. In December 1975, subsequent
to completion of the facilities , ownership was transferred to the
District for future maintenance and operation . The Attorney General
"Tentative & Preliminary"
^ For Discussion Purposes Only
l2(D
-5-
of the State of California has filed suit against the District and
Dart to restrain them from using Donner Lake as a water source .
Since this action claims no monetary damages , the District has no
liability resulting from this action.
�... In a separate action related to the Dart subdivision, a
homeowners ' group filed suit against Dart, claiming amounts in
excess of $100 million , and Dart, in turn, filed suit against the
District and others , seeking indemnity for all such claims . In
April 1984, Dart was absolved of any responsibility to the plain-
tiffs . In the opinion of legal counsel , the District has been
effectively relieved of any responsibility to respond to Dart .
(7) CHANGES IN NET WORKING CAPITAL :
The changes in accounts classified as current assets and
current liabilities are as follows :
Working capital increase (decrease) in-
Cash $ 669569
Receivables (49480)
Inventory ( 509)
Other current assets (239420)
Accounts payable (149654)
Bonds and notes payable 449441
Accrued interest 411
Deferred income 15778
Consumer deposits (179787 )
Accrued liabilities (373,440)
$ 14, 909
(8) INTERDEPARTMENTAL PURCHASES:
The water operations of the District use electricity in
the pumping stations to transmit the water. Purchases of electric-
ity from the electric operations of $177,532 are at commercial rates
and are primarily included in distribution expense.
"Tentative & Preliminary"
For Discussion Purposes Only