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Home My WebLink AboutSpecial Meeting Truckee Donner Public Utility District Post Office Box 309 • 11570 Donner Pass Road • Truckee, California 95734 (916) 587-3896 )I , SPECIAL MEETING 7:00 P.M. — Monday, May 23, 1988 TDPUD Board Room CORRECTED A G E N D A* 1. Call to order 2. Roll call 3. Audit Workshop 4. Adjournment * The time of the meeting was stated incorrectly on the original agenda CERTIFICATION I hereby certify that the foregoing agenda has been posted in the District office and Government Center, provided to the U. S. Post Office and County Library /fbr post�ng, and mailed to the Directors and interested parties on May 20"988. Susan M. Craig, Deputy DistrW Clerk d7.15 Truckee Donner Public Utility District Post Office Box 309 • 11570 Donner Pass Road • Truckee, California 95734 (916) 587-3896 May 20, 1988 MEMORANDUM TO: Board of Directors ^ FROM: Paul Colburn, Finance Supervisor !rN SUBJECT: 1987 Audit Workshop Attached please find a preliminary draft of the financial statements along with letters from Touche Ross and John Phelps. These address the liability associated with the Dart Funds and Reserve for Future Meters Funds. These financial statements presently classify the Water Reserve for Future Meter Fees as a liability and recognizes as revenue, the Dart Funds and facilities fees. As Mr. Phelps' letter addresses, we may need to clarify some of our present resolutions. PC:kp ' FOR DISCUSSION PURPO-S.ES ONLY REC'D MAY 4 ) RECT 40 T0: BOARD: MANAGER: CONTENTS Page FINANCIAL STATEMENTS: Accountants ' report 1 Balance sheets 2 Statements of earnings and retained earnings 3 Statements of general and restricted fund flows 4 Notes to financial statements 5 ADDITIONAL INFORMATION: Accountants ' report 13 Divisional combining balance sheet 14 Divisional combining statement . of earnings and retained earnings 15 Comparative statements of earnings - Electric operations 16 Water operations 17 FOR DISCUSSION PURPOSES ONLY Board of Directors Truckee Donner Public Utility District Truckee , California We have examined the balance sheet of Truckee Donner Public Utility District (the District) as of December 31 , 1987 , and the related statements of earnings and retained earnings and general and restricted funds flow for the year then ended. Our examina- tion was made in accordance with generally accepted auditing stan- dards and, accordingly, included such tests of the accounting rec- ords and such other auditing procedures as we considered necessary in the circumstances. In our opinion, the 1987 financial statements referred to above present fairly the financial position of Truckee Donner Public Utility District as of December 31 , 1987 , and the results of its operations and the changes in its financial position for the year then ended , in conformity with generally accepted accounting prin- ciples which, except for the changes , with which we concur , in accounting principles as described in Note 6 to the financial statements , have been applied on a basis consistent with that of the preceding year . The individual financial statements of the District ' s electric and water operations for the year ended December 31 , 1986 were examined by other auditors whose reports dated April 29 , 1987 expressed unqualified opinions on those statements . We have re- viewed the adjustments to combine the 1986 electric and water op- erations . In our opinion, such adjustments have been properly ap- plied to the 1987 financial statements . Certified Public Accountants April 15 , 1988 FOR DISCUSSION PURPOSES ONLY TRUCKEE DONNER PUBLIC UTILITY DISTRICT BALANCE SHEETS ASSETS EQUITY AND LIABILITIES December 31, December 31, 1987 1986 1987 1986 UTILITY PLANT (Note 2) $ 9,477,943 $ 7,428,687 RETAINED EARNINGS $ 9,305,339 $ 7,073,092 RESTRICTED FUNDS (Note 3) 3,680,628 4,720,231 LONG-TERM DEBT, less current portion (Note 4) 3,836,085 3,303,409 CURRENT ASSETS: General fund 806,606 1,115,150 CURRENT LIABILITIES: Accounts receivable (including Purchased power payable (Note 6) 1,087,561 789,796 unbilled amounts of $401,000 Accounts payable 437,054 417,492 in 1987), less allowance of Consumer deposits 357,293 352,265 $26,000 and $125,237 for doubt- Accrued interest payable 116,474 99,328 ful accounts (Note 6) 1,206,458 5069079 Deferred standby fees 41,025 50,080 Materials and supplies 251,438 197,545 Accrued compensation and related Purchased power refund 102,496 69,759 costs 184,327 13S,277 Prepaid expenses and other Current portion of long-term debt 140,000 601,4SS current assets 81,676 62,866 TOTAL CURRENT LIABILITIES 2,363,734 2,445,693 TOTAL CURRENT ASSETS 2,448,674 1,951,399 CONSTRUCTION ADVANCES (Note 6) 473,323 1,680,946 PRELIMINARY SURVEY COSTS AND UNAMOR- TIZED DEBT DISCOUNT AND ISSUANCE COSTS 371,236 402,823 $15,978,481 $14.503.140 $15.978.481 $14,503,140 See notes to financial statements. 2 - FOR DISCUSSION PURP".LS ONLY TRUCKEE DONNER PUBLIC UTILITY DISTRICT STATEMENTS OF EARNINGS AND RETAINED EARNINGS Year ended December 31 , 1987 1986 Operating revenues: Sales to customers $7 ,777 ,235 $6 ,686 ,787 Other 367 ,875 S12 ,046 821452110 7 , 198 , 833 Operating expenses : Purchased power S9050 ,701 5 ,031 , 152 Operations and maintenance 933 ,629 823 ,573 Administrative and general 895 ,443 725 , 188 Customer services 359,227 328, 175 Depreciation 3279367 3029OS3 7 ,566 ,367 79210 , 141 EARNINGS (LOSS) FROM OPERATIONS S78 ,743 (11 ,308) Other income (expense) : Interest income 2789769 3271330 Interest expense (1159OS4) (188 ,343) Other 54 ,707 2182422 138 ,987 EARNINGS BEFORE CUMULATIVE EFFECT OF CHANGES IN AC- COUNTING PRINCIPLES 797 , 165 1279679 Cumulative effect of changes in accounting principles (Note 6) 19435 ,082 EARNINGS 292329247 127 ,679 Retained earnings: Beginning of year 7 ,0731,092 6 ,9459413 End of year $9 ,305 339 $7 ,073 ,092 See notes to financial statements . - 3 - FOR DISCUSSION PURPO•SLS ONLY TRUCKEE DONNER PUBLIC UTILITY DISTRICT STATEMENTS OF GENERAL AND RESTRICTED FUNDS FLOW r^- Year ended December 31 , 1987 1986 FUNDS PROVIDED BY OPERATING ACTIVITIES : Earnings $ 2 ,232 , 247 $ 127 ,679 Adjustments to reconcile earnings to funds provided by operating activities - Depreciation 327 ,367 302 ,053 Amortization of debt discount and issuance costs 11 ,069 Preliminary survey costs abandoned 25 ,974 Accounts receivable (700 ,379) 82 ,980 Materials and supplies ( 53 ,893) (33 ,591 ) Purchased power refund (32 ,737) 17 ,198 Prepaid expenses and other current assets (18 , 810) 26 ,774 Purchased power payable 297 ,765 (153 , 283) Accounts payable 19, 562 229 , 333 Consumer deposits 5 ,028 88 ,031 ,.� Accrued interest payable 17 , 146 1 ,278 Deferred standby fees (9,055 ) ( 21 ,486) Accrued compensation and related costs 49 ,OS0 271562 Cumulative effect of changes in accounting principles (1 ,435 ,082 ) Net funds provided by operating activities 7351252 694 ,528 FUNDS USED BY INVESTING ACTIVITIES: Additions to utility plant , net (2 , 376 ,623) ( 1 ,954 ,548) Additions to preliminary survey costs (5 ,456) (271265 ) Net funds used by investing activ- ities (2 ,3821079) ( 1 ,981 ,813) FUNDS PROVIDED (USED) BY FINANCING ACTIVITIES: Proceeds from long-term debt 207 ,659 2 ,981 ,937 Repayments of long-term debt (136 ,438 ) Construction advances 227 ,459 (134 ,323) Debt discount and issuance costs ( 1999241) Net funds provided by financing activities 2989680 21,648 , 373 INCREASE (DECREASE) IN GENERAL AND RESTRICTED FUNDS $(1 ,348 , 147 ) $131361 ,088 See notes to financial statements . - 4 - FOR DISCUSSION PURP".LS ONLY TRUCKEE DONNER PUBLIC UTILITY DISTRICT NOTES TO FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31 , 1987 AND 1986 NOTE 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. The electric and water service operations are maintained and op- erated separately. These financial statements reflect the combined electric and water operations of the District . All significant interdivisional transactions have been eliminated. The District prepares its financial statements in accordance with the Uniform System of Accounts prescribed by the Federal Energy Regulatory Commission. Utility plant - Utility plant assets are stated at cost . Betterments and major renewals , less customer reimbursements , are capitalized while main- tenance and repairs are charged to operations as incurred . Depreciation is determined by the straight-line method over the estimated useful lives of the related assets . Composite rates are used for asset groups and , accordingly, no gain or loss is recorded on the disposition of an asset unless it represents a major retire- ment . Materials and supplies - Materials and supplies are recorded at average cost . Debt discount and issuance costs - Discounts and issuance costs relating to the sale of debt are amor- tized over the lives of the related bonds using the effective in- terest method. Revenues - Revenues consist of billings to consumers as meters are read on a cycle basis throughout each month. For years ending after Janu- ary 1 , 1987 , the District adopted the policy of recording an esti- mate of revenue earned but not billed to customers (see Note 6) . Services provided to municipal entities without charge are not re- flected in operating revenues. - S - FOR DISCUSSION PURPaS.BS ONLY Power purchases - The District purchases all of its power from Sierra Pacific under a power purchase contract which expired in January 1987 . The Dis- trict is being charged for power purchases under a rate schedule approved by the Federal Energy Regulatory Commission. Allowance for funds used during construction - Interest costs incurred to finance major construction projects are capitalized as part of the project . Interest earned during the construction period on related financing proceeds is offset against project costs . Net interest costs incurred for the years ended De- cember 31 , 1987 and 1986 were $131 ,000 and $54 ,000 , respectively. Income taxes - The District is exempt from payment of Federal and state income taxes . Reclassifications - Certain reclassifications have been made to the 1986 financial statements to conform with the 1987 presentation . NOTE 2 - UTILITY PLANT: Utility plant consists of the following - December 31 , 1987 1986 Electric distribution facilities $ 6 ,034 ,986 $5 ,917 ,5SS Water operating facilities 3 ,100 ,681 218293,755 General plant 3,341 ,039 12 ,4761706 8 , 747 ,310 Less accumulated depreciation 3 ,250 ,886 2 ,934 ,901 92225 ,820 5 ., 812 ,409 Construction work in progress 2S2 ,123 1 ,616 ,278 $ 9 ,477 .943 $7 ,428 ,687 6 - FOR DISCUSSION PURP".ES ONLY 100� NOTE 3 - GENERAL AND RESTRICTED FUNDS: General and restricted funds consist of the following - December 31 , 1987 1986 Cash $ 233 , 729 $1 , 351 ,114 State of California Local Agency Investment Fund, at cost , which approximates market value 3 ,825 ,000 2 , 423 , 372 Bank of America Corporate Trust Investment Government Fund, at cost , which approximates market value 354 , 176 11)9939S40 Accrued interest 74 ,329 67 ,355 $4 ,487 ,234 $5 , 835 ,381 The District maintains funds which are restricted pursuant to resolu- tions of the Board of Directors , debt covenants and retentions . The allocation of the above cash and investments between funds is as fol- lows - December 311 1987 1986 Electric: General fund $ 701 ,032 $ 978 , 561 Facilities fees 492 , 548 4179424 Storm damage fund 1S4 ,021 1439263 Building fund 787, 384 682 ,055 Certificates of Participation debt funds - Lease payment fund 69, 108 287 ,661 Reserve fund 285 ,058 279,430 Project fund 10 1 ,422 , 782 REA special reserve fund 191000 191000 Retainage 256 ,673 2 , 764 , 834 49230, 176 Water: General fund 1059574 136, 589 Facilities fees 460,342 3351,301 Reserve for future meters 397 ,806 3579169 Building fund 3689843 3431327 Dart Industries fund 294 , 559 318 ,502 Farmers Home Administration debt service fund 21 , 940 26 ,848 Prepaid connection fees 62 ,000 61 ,772 Other 11 ,336 25 , 697 1 ,722 ,400 1 , 6059205 $4 ,487,234 $5 ,83S .381 - 7 - FOR DISCUSSION PURPOS.FS ONLY General funds - General funds are derived from the operations of the District . General funds not deposited to the restricted or bond funds are unrestricted. Facilities fees - The District charges facilities fees to applicants for new service to cover the pro rata share of the cost of existing supply facili- ties , any expansion or additions thereof , and the cost of future facilities required to serve the applicant . These fees are held as restricted funds pursuant to Board resolutions . Reserve for future meters - Connection fees charged to applicants for water service include an amount which is applied to a restricted fund for future metering of the District . Storm damage fund - The District previously established a restricted fund to provide for future storm damages . Building fund - The District established a building fund to provide funds for the construction of a new District complex. Funds are deposited from power purchase refunds . Dart Industries fund - The District has collected funds for future repairs of water lines constructed by Dart Industries and for future water source and storage facilities . The funds are restricted pursuant to Board resolution. Certificates of Participation debt funds - Resolutions relating to the issuance of the Certificates of Parti- cipation require a lease payment fund to be maintained to provide for each semiannual principal and interest payment as they come due . A reserve fund is maintained for the highest annual debt ser- vice payment over the life of the debt . A project fund was main- tained for payment of construction costs for the new facilities . The construction was completed in 1987 and excess project funds were applied to the lease payment fund . Farmers Home Administration (FmHA) debt funds - r' Bond resolutions require funds to be established to provide for the payment of principal and interest of the water system debt . A debt service fund provides for the upcoming annual and semiannual prin- cipal and interest payments due on the FmHA bonds . A reserve fund - 8 - FOR DISCUSSION PURP".ES ONLY requires monthly deposits equal to 10% of the amounts deposited to the debt service fund until such time that the fund equals 10% of the remaining aggregate debt service due on the bonds . NOTE 4 - LONG-TERM DEBT: Long-term debt consists of the following - December 311, 1987 1986 Certificates of participation , 5 . 3% to 7 .7S% , annual principal payments of $S0 ,000 beginning in 1988 in- creasing annually to $2S5 ,000 at maturity in 2012 $3,050 ,000 $3 ,050 ,000 Rural Electrification Administration bonds : First Series , 2% , annual principal payments of $13 ,000 to $14,000 , due 1994 94 ,000 1079000 Second Series , 2% , annual principal payments of $3 ,000 to $5 ,000 , due 2002 64 ,000 67 ,000 Third Series , 2% , net of undrawn funds of $65 , 426 , annual principal payments of $3 ,000 to $6 ,000 , due 2004 19 ,574 22 , S13 Farmers Home Administration: Note , 5% , 32 remaining annual install- ments of $14 ,800 231 , 113 234 , 218 Bonds , 5% , annual principal payments of $S ,000 to $20 ,000 , due 2020 29S ,000 300 ,000 Department of Energy loan, 7. 375% in- terest, annual principal and interest payments of $4 ,500 , due 1992 16 ,182 202,228 Installment loans and other notes , 7% to 8 .75% , various payment terms , due through 1992 206 ,216 103 ,905 3 ,976 ,085 3 , 904 ,864 Less current portion 140 ,000 601 ,455 $3 ,836 ,085 $3 .303 .409 r^ The Certificates of Participation were issued by Truckee Donner Public Utility District Financing Corporation in order to finance the construction of a new office and warehouse facility for the Dis- trict . The District entered into agreements with the financing cor- poration whereby title to the property is held with the financing - 9 - FOR DISCUSSION PURPOSES ONLY corporation as collateral for the certificates , and the District is obligated to make lease payments sufficient to fund the debt service on the certificates . Upon repayment of the certificates , title to the property will revert to the District. The assets and debt re- lating to the facilities are recognized on the District ' s financial statements . The Department of Energy loan provides for forgiveness of the debt at the discretion of the Department of Energy if certain conditions are met by the District . As of December 31 , 1986 , the District was not in compliance with cer- tain debt covenants of the FmHA note and bonds . During 1987 the cov- enants were amended and the District obtained a waiver of all past covenants . Scheduled principal maturities on long-term debt are as follows for the next five years - 1988 $ 140 ,000 1989 127,000 1990 134,000 1991 123,000 1992 and thereafter 3 ,452 ,085 $3 ,976 ,085 NOTE 5 - EMPLOYEE BENEFIT PLANS: Pension plan - The District contributes to a single employer pension plan which covers substantially all District employees who have at least one year of service. The District ' s payroll for employees covered by the plan for the year ended December 31 , 1987 was $ /,uSS, 57q , representing S3 % of total District payroll . Qc_ The plan provides for specific benefits to employees at retire- ment . Benefits vest to participants at the rate of 10% per year of service . Employees who retire at or after age 65 with ten years of credited service are entitled to receive monthly benefits equal to 40% of the individuals average monthly compensation. Benefits are reduced pro rata for less than 20 years of credited service , and increased by . 2% of average monthly compensation for each year of service in excess of 20 years . The plan also provides for death, disability and early retirement benefits which are more fully de- scribed in the plan document . There were no participants receiving benefits as of December 31 , 1987. The plan' s funding policy re- quires the District to make actuarially determined contributions such that sufficient assets will be available to pay benefits to employees when due . The actuarial valuations for the plan indi- cated that no contributions were necessary for 1987 or 1986 as the plan ' s accumulated assets were sufficient to provide for the normal cost of the plan. The District has made contributions of $16 ,452 - 10 - FOR DISCUSSION PURPOSES ONLY and $13 ,626 for 1987 and 1986 , respectively, which relate to pre- miums on employee life insurance coverage . The latest actuarial report , dated December 31 , 1987 , indicates the following informa- tion related to the plan for the last three years : December 31 , 1987 1986 198S Actuarial present value of accumulated plan benefits : Vested $2689696 $197 ,118 $167 ,501 Nonvested 249641 20 ,284 201,671 1293 ,337 $217 ,402 $188 , 172 Net assets available for plan benefits 542 682 $481 ,372 $430 ,032 The actuarial valuation presented above is used as a substitute for the standardized measure of the pension benefit obligation under Statement No . 5 of the Governmental Accounting Standards Board . Actuarially determined funding requirements are determined using the individual aggregate method which assumes a 7e weighted average rate of return on plan assets . IRS regulations require a funding calculation using the entry age normal method , which also indicated no funding requirement . Effective January 1 , 1988 the District is obligated under a new union contract which provides additional retirement benefits . These additional benefits will result in an increase to the total actuarial present value of accumulated plan benefits in 1988 . Deferred compensation plan - The District maintains a deferred compensation plan which permits employees to defer a portion of their compensation. The amount deferred and held in trust aggregated $45 ,846 and $24, 741 at Decem- ber 31 , 1987 and 1986 , respectively. All amounts of compensation deferred under the plan, all property and rights purchased with those amounts , and all income attributable to those amounts , prop- erty or rights are (until paid or made available to the employee or other beneficiary) solely the property and rights of the District (without being restricted to the provisions of benefits under the plan) , subject only to the claims of the District ' s general credi- tors . The District has no liability for losses under the plan but does have the duty of due care that would be required of an ordi- nary prudent investor . - 11 - FOR DISCUSSION PURPOE.ES ONLY NOTE 6 - CHANGES IN ACCOUNTING PRINCIPLES: Construction advances - Effective January 1 , 1987 , the District adopted a policy of recog- nizing construction advances and other charges received from custo- mers , for which the District has no contractual obligation to per- form services , as income at the point in time when the fees or charges are no longer refundable to the customer. Prior to 1987 , the District recorded these amounts as construction advances and accrued interest on the balances . The cumulative effect of this change in accounting principle in 1987 was to increase earnings before cumulative effect of a change in accounting principle by $1 , 112 , 751 . Revenues - Effective for the years ending after January 1 , 1987 , the District adopted the policy to recognize revenue earned but not billed and the related purchased power incurred . In conjunction with the adoption of the policy for earned but not billed revenue , the District reevaluated its method for providing for doubtful receivables based on historical experience . The cu- mulative effect of the changes mentioned above aggregated $322 ,331 . 12 - FOR DISCUSSION PURPOSES ONLY ADDITIONAL INFORMATION Our examination was made for the purpose of forming an opinion on the financial statements taken as a whole. The divisional combining in- formation on pages 14 and 15 and the divisional information on pages 16 and 17 is presented for purposes of additional analysis of the fi- nancial statements rather than to present the financial position and results of operations of the individual divisions . The additional information described above relating to 1987 has been subjected to the auditing procedures applied in the examination of the 1987 fi- nancial statements and, in our opinion, is fairly stated in all mate- rial respects in relation to the 1987 financial statements taken as a whole. The additional information described above relating to 1986 was de- rived from the District ' s 1986 individual electric and water opera- tions financial statements which were examined by other auditors whose reports dated April 29, 1987 expressed unqualified opinions on those statements . We have reviewed the adjustments to combine the 1986 electric and water operations and, in our opinion, such adjust- ments have been properly applied to the additional information relat- ing to 1986 . Certified Public Accountants 13 - l FOR DISCUSSION PURPOSES ONL"r) TRUCKEE DONNER PUBLIC UTILITY DISTRICT DIVISIONAL COMBINING BALANCE SHEET December 31, 1987 Electric Water operations operations Total 1986 Total ASSETS UTILITY PLANT $ 7,715,707 $1,762,236 $ 9,477,943 $ 7,428,687 RESTRICTED FUNDS 2,063,802 1,616,826 3,680,628 4,720,231 CURRENT ASSETS: General fund 701,032 105,574 806,606 1,115,150 Accounts receivable 933,847 272,611 1,206,4S8 S06,079 Materials and supplies 198,059 53,379 2S1,438 197,545 Purchased power refund 102,496 102,496 69,759 Prepaid expenses and other current assets 64,472 17,204 81,676 62,866 TOTAL CURRENT ASSETS 1,999,906 448,768 2,448,674 1,9S1,399 PRELIMINARY SURVEY COSTS AND UNAMORTIZED DEBT DISCOUNT AND ISSUANCE COSTS 371,236 371,236 402,823 $12,150,651 $3,827,830 $15,978,481 $14,503,140 EQUITY AND LIABILITIES RETAINED EARNINGS $ 6,628,720 $2,676,619 $ 9,30S,339 $ 7,073,092 LONG-TERM DEBT, less current portion 3,289,767 546,318 3,836,085 3,303,409 CURRENT LIABILITIES: Purchased power payable 1,087,561 1,087,561 789,796 Accounts payable 370,241 66,813 437,054 417,492 Consumer deposits 307,848 49,445 357,293 3S2,265 Accrued interest payable 98,157 18,317 116,474 99,328 Deferred standby fees 27,866 13,159 41,025 50,080 Accrued compensation and related costs 153,436 30,891 184,327 135,277 Current portion of long-term debt 120,000 20,000 140,000 601 ,45S TOTAL CURRENT LIABILITIES 2,165,109 198,625 2,363,734 2,445 ,693 CONSTRUCTION ADVANCES 67,05S 406,268 473,323 1,680,946 12,150,651 $3.827.830 $15,978,481 $14.SO3.140 - 14 - FOR DISCUSSION PURPOSES ONL"V TRUCKEE DONNER PUBLIC UTILITY DISTRICT DIVISIONAL COMBINING STATEMENT OF EARNINGS AND RETAINED EARNINGS Year ended December 31, 1987 Electric Water 1986 operations operations Eliminations Total Total Operating revenues: Sales to customers $6,494,902 $1,282,333 $ - $7,777,235 $6,686,787 Other 566,484 186,300 (384,909) 367,875 512,046 7,061,386 1,468,633 (384,909) 8,145,110 7,198,833 Operating expenses: Purchased power 5,OS0,701 361,692 (361,692) 5,050,701 5,031,152 Operations and maintenance SS1,802 381,827 933,629 823,573 Administrative and general 700,357 218,303 (23,217) 895,443 725,188 Customer services 320,347 38,880 359,227 328,175 Depreciation 227,105 100,262 327,367 302,053 6,850,312 1,100,964 (384,909) 7,566,367 7,210,141 EARNINGS (LOSS) FROM OPERATIONS 211,074 367,669 578,743 (11,308) Other income (expense) : Interest income 167,257 111,S12 278,769 327,330 Interest expense (82,210) (32,844) (11S,OS4) (188,343) Other 54,707 54,707 139,754 78,668 218,422 138,987 EARNINGS BEFORE CUMULATIVE EFFECT OF CHANGES IN AC- COUNTING PRINCIPLES 350,828 446,337 797,165 127,679 Cumulative effect of changes in accounting principles 655,823 779,259 1,435,082 EARNINGS 1,006,651 1,225,596 2,232,247 127,679 Retained earnings: Beginning of year. 5,622,069 1,451,023 7,073,092 6,945,413 End of year 6.628.720 $2,676,619 $ - $9,305.339 7,073.092 - 15 - FOR DISCUSSION PURPO-S.LS ONLY TRUCKEE DONNER PUBLIC UTILITY DISTRICT COMPARATIVE STATEMENTS OF EARNINGS ELECTRIC OPERATIONS Year ended December 31 , 1987 1986 Operating revenues : Sales to customers $6 ,494 ,902 $5 ,694 ,013 Other 566 ,484 419 ,968 71061 ,386 6 , 113 ,981 Operating expenses : Purchased power 5 ,050 ,701 4 ,758 ,606 Operations and maintenance 551 ,802 542 ,702 Administrative and general 700 ,357 536 ,740 Customer services 320 ,347 286 ,709 Depreciation 227 , 10S 210 ,228 6 ,850 ,312 6 ,334 ,985 �^ EARNINGS (LOSS) FROM OPERATIONS 211 ,074 (221 ,004) Other income (expense) : Interest income 167 ,257 188, 151 Interest expense (82 , 210) (60 , 136 ) Other S4 ,707 139 ,754 12810IS EARNINGS (LOSS) BEFORE CUMULA- TIVE EFFECT OF CHANGES IN ACCOUNTING PRINCIPLES 350 ,828 (929989) Cumulative effect of changes in ac- (05S �Q3 counting principles EARNINGS (LOSS) $_ $ (92 ,989) 16 - FOR DISCUSSION PURPOFS ONIi TRUCKEE DONNER PUBLIC UTILITY DISTRICT r COMPARATIVE STATEMENTS OF EARNINGS WATER OPERATIONS Year ended December 31 , 1987 1986 Operating revenues : Sales to customers $1 ,282 ,333 $ 992 ,774 Other 186 ,300 92 ,078 1 ,468 ,633 1 ,084 ,852 Operating expenses: Purchased power 361 ,692 2729546 Operations and maintenance 381 ,827 280 ,871 Administrative and general 2182303 1889448 Customer services 389880 41 ,466 Depreciation 1001262 919825 1 , 100 ,964 875 , 1S6 EARNINGS FROM OPERATIONS 3679669 20911696 Other income (expense) : Interest income 111 ,512 1391)179 Interest expense (321844) (128 , 207) 78 ,668 10 ,972 EARNINGS BEFORE CUMULATIVE EFFECT OF CHANGES IN AC- COUNTING PRINCIPLES 446 ,337 220 ,668 Cumulative effect of changes in ac- a�99 counting principles , t, aaS, EARNINGS $1—,218 .432 220 ,6b8 r'^ 17 - LAW OFFICES OF PORTER, SIMON. GRAHAM AND PHELPS PROFESSIONAL CORPORATION JAMES L. PORTER, JR. MASONIC BUILDING JAMES L. PORTER, JR. (CALIFORNIA 6 NEVADA) COMMERCIAL ROW MICHAEL E. GRAHAM JAMES ERNEST SIMON POST OFFICE BOX 2819 PETER H. CUTTITTA MICHAEL E. GRAHAM (CALIFORNIA 6 NEVADA) TRUCKEE, CALIFORNIA 95734 NEVADA OFFICE JOHN M. PHELPS (916) 587-3862 33S WEST FIRST STREET FAX r [916) 587-8908 RENO, NEVADA 89503 PETER H. CUTTITTA (7021 322-6767 ICALIFORNIA 6 NEVADA) EVE NEUMANN GRAVELL May 19, 1988 CONFIDENTIAL ATTORNEY-CLIENT PRIVILEGED Board of Directors Truckee Donner Public Utility District Post Office Box 309 Truckee, California 95734 Re: 1987 Audit; Funds Provided by Dart Dear Directors: We are writing this letter at the request of Paul Colburn, and at the suggestion of the District auditors, Touche, Ross & Co. , regarding several agreements between the District and Dart Industries , Inc. (Dart) , or Dart's predecessor, LakeWorld Development Corporation. Touche Ross tentatively concluded that these agreements do not contractually obligate the District to use certain funds for any particular purpose. They suggested that we review the same agreements and offer our opinion. If we agree with Touche Ross's tentative conclusions, Touche Ross will recommend to the District that it modify the manner in which these funds are characterized on the District's financial statement. We were asked by Paul Colburn to review the following agreements and documents: 1. March 19, 1970 Agreement between the District and LakeWorld Development Corp. , the predecessor to Dart. 2 . October 15, 1973 Supplemental Agreement between the District and Dart. 3 . December 16, 1975 letter from Dart to the District. 4 . December 17, 1975 letter from Dart to the District. 5. September 7, 1979 Agreement between the District and Dart. We were not asked to make an independent review of the District files to determine if there are any other agreements bearing on these issues, and we therefore did not make any such independent review. We are assuming, for purposes of this TDPUD Board of Directors May 19 , 1988 Page 2 letter, that the agreements with which we have been provided are the only agreements bearing on these issues. The District currently has three funds which were created as a result of the agreements set forth above. They are: 1. The $40. 00 Per Lot Fund. We understand that this fund was fully depleted during 1987, but that there were funds in this account during a portion of 1987 , the period covered by the audit. 2 . The High Water Services Fund. We understand that there are currently funds in this account. 3 . The Northwoods Pipeline Settlement Fund. We understand that there are currently funds in this account. We will discuss these funds in the order set forth above. 1. The $40. 00 Per Lot Fund. Paragraph 14 of the 1970 District/LakeWorld Agreement required LakeWorld to pay to the District $40. 00 for each lot in the proposed Tahoe Donner subdivision, excluding the first 800 lots of the project. The District was required to deposit such amounts in an interest-bearing account and use them only for the cost of additional water source and supply facilities to supply the Tahoe Donner subdivision. Paragraph 14 further provides, however, that when and if the District Board of Directors determines that all water requirements of Tahoe Donner have been adequately provided for, any remaining funds may be used by the District to improve any portion of the District's water system, whether located in Tahoe Donner or elsewhere. Paragraph 14 of the 1970 District/LakeWorld agreement was not altered or modified by the subsequent 1973 and 1979 agreements between the District and Dart. In the 1979 District/Dart Agreement, Dart agreed to provide the Airport well , and various related pipelines, water tanks, and other portions of the Tahoe Donner water system. The District, in turn, acknowledged that Dart's provision of these items "will satisfy all water volume requirements for the Tahoe Donner Project at full development . . . . " (Para. 13) . I assume for purposes of this letter that Dart did in fact provide all that was required by the terms of the 1979 District/Dart Agreement, and that the District Board of Directors has determined that all water TDPUD Board of Directors May 19, 1988 Page 3 requirements of the Tahoe Donner subdivision have been adequately met or provided for. If this assumption is correct, then as of the date of such determination by the District Board of Directors, all funds remaining in the $40. 00 Per Lot Fund were freed of the prior contractual obligation, and the District could legally use those funds for improvements of its water system, inside or outside of the Tahoe Donner subdivision. 2 . High Water Services Fund. In a December 16, 1975 letter from Dart to the District, Dart mentioned a determination by the District's Engineer that certain water services were not installed deep enough in the ground, and might freeze in cold weather. The District Engineer calculated that in 1975 dollars, it would cost the District approximately $60, 000 to $70, 000 to correct these water lines . Without admitting liability, Dart offered a one-time $35, 000 cash payment to the District, in full settlement of this issue. In a subsequent letter the next day, Dart offered $70, 000 �- to the District in full settlement of this issue. The High Water Services Fund was not mentioned in the subsequent, 1979 District/Dart Agreement. The terms of the December 16 and 17, 1975 letters did not require that the High Water Services Fund be used for any particular purpose. It simply acknowledged the District's claim that a high water service problem would be encountered, and that Dart would pay $70, 000 to the District in settlement of any claims that the District might have. There is no contractual requirement that the funds be used to repair high water services. Nor is there any contractual restriction on how the funds might be used. 3 . Northwoods Pipeline Settlement Fund. The only mention of this fund in any of the agreements referred to above is found at Paragraph C(7) of the 1979 District/Dart Agreement, which provides: Dart agrees to reimburse TDPUD Restricted Funds for Tahoe Donner Water System Improvements in the amount that was previously withheld for the Northwoods Boulevard pipeline of $56, 875. 00. 10— A review of correspondence dated April 27, 1979 from Dan Cook, the District's engineering consultant on the Tahoe Donner project, seems to indicate that Dart withheld $56,875. 00 from the amount that Dart was to contribute to the $40. 00 Per Lot Fund, but then TDPUD Board of Directors May 19 , 1988 Page 4 decided, in the 1979 District/Dart Agreement, to contribute this amount to the District. If the Northwoods Pipeline Settlement Fund is actually a portion of the $40. 00 Per Lot Fund, then as indicated above, the District is not contractually obligated to use these funds for any particular purpose. If, on the other hand, it is not a part of the $40. 00 Per Lot Fund, and assuming, as we have above, that there is no other mention of the Northwoods Pipeline Settlement Fund in any other agreement between the District and Dart, the phrase quoted above would not contractually obligate the District to use these funds for any particular purpose. I understand that most, if not all, of these funds are currently in accounts that had been restricted by the Board. By concluding that the District is not contractually obligated to use these funds for any particular purpose, I do not mean to suggest that the Board may not continue to s" restrict these funds for any purpose that it chooses. We were asked only to comment on whether the District is contractually obligated to use these funds for any particular purpose. We conclude that the District is not. We would be pleased to answer any questions that the Board might have. Very truly yours, PORTER, SIMON, GRAHAM AND PHELPS Professional Corporation J `HN M. PHELPS imp/if cc: Peter Holzmeister -� Paul Colburn Touche, Ross & Co. TDPUD\TR-Dart. ltr LAW OFFICES OF PORTER, SIMON, GRAHAM AND PHELP5 PROFESSIONAL CORPORATION JAMES L. PORTER, JR. MASONIC BUILDING JAMES L. PORTER, JR. ICAUFORNIA 6 NEVADA) COMMERCIAL ROW MICHAEL E. GRAHAM JAMES ERNEST SIMON POST OFFICE BOX 2819 PETER H. CUTTITTA MICHAEL E. GRAHAM (CALIFORNIA 6 NEVADA) TRUCKEE. CALIFORNIA 95734 NEVADA OFFICE JOHN M. PHELP5 (916) 587-3862 335 WEST FIRST STREET RENO, NEVADA 89503 PETER H. CUTTITTA FAX IF 1916) 587-8908 (702)322-6767 ICALIFORNIA 6 NEVAOAI EV_ NEUMANN GRAVELL May 19, 1988 CONFIDENTIAL ATTORNEY-CLIENT PRIVILEGED Board of Directors Truckee Donner Board of Directors Post Office Box 309 Truckee, California 95734 Re: District Water Meter Fee Dear Directors: I have been asked by Paul Colburn to review and comment upon the District's current water meter fee. Since 1979, the District has been charging, as part of a new customer's water connection fee, a "meter allocation fee, " to help defray the cost of possible, eventual system-wide water meter installation. The fee was initially set at $40. 00 per customer, but has since been raised, and is currently $135.00 per customer. Resolution 79-20, which initiated the meter allocation fee, is attached hereto as Exhibit A, and a policy statement, containing identical language, is attached hereto as Exhibit B. Touche, Ross & Co. , the District's auditors, has inquired concerning the nature of this fee. How the fund that has accumulated should be carried on the District's financial statements is determined by how the District characterizes this fee. We have reviewed only Exhibits A and B, which are the only Board actions that Paul Colburn discovered that touch on this issue. From a reading of Exhibits A and B, it is difficult to determine the precise nature of the fee. It would be helpful to the auditors, and probably in the District' s best interest, to clarify this matter. From a reading of Exhibits A and B, the following two questions come to mind: ,. 1. Has the District determined that it will require system-wide water meters at some future date? TDPUD Board of Directors May 19, 1988 Page 2 Resolution 79-20 (Exhibit A) suggests that the District has not yet made this determination. It may not be legal for the District to charge a fee, only to new customers, to cover an expense that the District has not yet committed itself to incur. If, at some point in the future, the District determines that it will not require system-wide metering, then persons who have paid the fee might be entitled to demand a refund, thereby creating an extremely difficult, if not impossible task, for the District' s bookkeeping department. The manner in which the District auditors characterize the fund would be different if the possibility exists that it might not ever be used by the District, or might be refunded at some future date. If the District desires to keep charging this fee, it would be advisable for the District Board to resolve to definitely require system-wide metering, while still leaving open the date that such metering will occur. A resolution of this type would eliminate the risk of an eventual refund, give clear direction to the District auditors, and leave the timing of eventual metering in the discretion of the Board. 2 . Is the meter allocation fee in the nature of a facilities fee, to be applied to the overall cost of eventual system-wide metering; or is it in the nature of a prepayment of an individual ' s meter installation expense, to be applied solely to the nayor's eventual meter expense? If the fee is in the nature of a facilities fee, the District need not keep records of who paid, and how much they paid, and need not pay interest on amounts on deposit. When the District eventually meters the system, all amounts on deposit would be applied to the overall cost of metering. Individual homeowners would pay equally, without anyone receiving credit for a prior payment. If, on the other hand, the fee is treated as a prepayment of an individual 's water meter expense, then the District must keep records of each payment, probably pay interest on the amount held, and allow those who have paid to apply it to their eventual meter installation expenses. The treatment of the accumulated funds on the District's financial statement would depend on the answer to this question. My impression from discussing this issue with District staff and consultants is that the District has not yet decided to eventually install water meters. It seems clear, however, that TDPUD Board of Directors May 19 , 1988 Page 3 the District intended that this fee be in the nature of a facilities fee, applied to the overall cost of eventual system- wide metering, and not to an individual 's metering expenses. If the District Board desires to continue charging this fee as a facilities fee, we recommend that the District resolve to eventually require system-wide water meters, at a date to be determined by the Board, and further clarify that the fee is in the nature of a nonrefundable facilities fee, to be applied to the overall costs of system-wide water metering. We will be pleased to answer any questions that you might have. Very truly yours, PORTER, SIMON, GRAHAM AND PHELPS Professional Corporation t (fJN . PHELPS JMP/lf Attachments TDPUD\Waterfee.ltr cc: Peter Holzmeister Paul Colburn Touche, Ross & Co. Rertricted-fund5 c�.l,lected for facilities fees, interest earned POLICY ITLM: aril reserve for future meters Date issued: 6/4/79 Reference: Date effective: 6/4/79 Resolution N 7920 ?olicy 3tatemert All facilities fees collected shall be identified as "-�stricted funds" -nd shall be invested at the best rate of return pursuant Resolution No. 7911. All interest earned upon said funds shall adopt a chara_.er of, and become part of the specific restricted account. The 5150.00 Domestic Water Connection Fee currently ir.=::ides a $40.00 meter allocation. The meter portion shall be set aside as restricted funds and in- vested pursuant to Resolution No. 7911. Absent earlier Board action, the cronies shall retain that character for a five year period, at which time the Board shall evaluate if it intends to install meters for domestic water. Thereafter, the review and anVysis shall occur at least every five years until so=e final determination is made. It is expressly understood that the Board of Directors may, by resolution, modify this policy regar�_inq meters at any time. I� I EXHIBIT "B" RESOLUTION NO. 7920 OF r TRUCKEE-DONNER PUBLIC UTILITY DISTRICT ESTABLISHING DISTRICT POLICY REGARDING RESTRICTED FUNDS COLLECTED FOR FACILITIES FEES, INTEREST EARNED AND RESERVE FOR FUTURE. METERS WHEREAS, as part of the recent audit, the Board of Directors was informed by its auditors t: at the District policy of impounding facilities fees as a restricted fund was not established by resolution; and WHEREAS, by adoption of this resolution the Board of Directors does hereby wish to clarify its policy regarding the nature of interest earned as well as meter, retentions. NOW, THEREFORE BE IT RESOLVED by the Board of Directors of the Truckee-Donner Public Utility District, as follows: 1. All facilities fees collected shall be identified as "restricted funds" and shall be invested at the best rate of return pursuant to Resolution No. 7911. All interest earned upon said funds shall adopt a character of, and become part of the specific restricted account. 2. The $150.00 Domestic Water Connection Fee cur- rently includes a $40.00 meter allocation. The meter portion shall be set aside as restricted funds and invested pursuant to Resolution No. �^ 7911. Absent earlier Board action, the monies shall retain that character for a five (5) year period, at which time the Board shall evaluate if it intends to install meters for domestic water. Thereafter, the review and analysis shall occur at least every five (5) years until some final determination is made. It is expressly understood that the Board of Directors may, by resolution, modify this policy regarding meters at any time. PASSED AND ADOPTED by the.Board of Directors of the Truckee- Donner Public Utility District, at a meeting held within said District on the 4th day of June 1979, by the following roll call vote. AYES: Hatch Kuttei Sutton Maass NOES: None ABSENT: Huber TRUCKEE-DONNER PUBLIC UTILITY DISTRICT By JAMES A. MAASS, President ATTEST: A. MltTorq SS MOUR, Clerk Thereof EXHIBIT "A" Truckee Donner Public Utility District Post Office Box 309 * 11570 Donner Pass Road • Truckee, California 95734 (916) 587-3896 MEMORANDUM May 16 , 1988 To : Board of Directors From: Paul Colburn, Finance Supervisor (L SUBJECT : 1987 AUDIT Attached please find a preliminary copy of the audit and a letter from Touche Ross which discusses the Dart Agreements . We will be receiving additional schedules this week so I will forward all information to you. You will then have the week- end to review prior to our Monday workshop. If you have any questions , please feel free to contact me. PC/sf Attachment FOR DISCUSSION PURPGSES ONLY CONTENTS Page FINANCIAL STATEMENTS: Accountants ' report 1 Balance sheets 2 Statements of earnings and retained earnings 3 Statements of general and restricted fund flows 4 Notes to financial statements 5 ADDITIONAL INFORMATION: Accountants ' report 13 Divisional combining statement of earnings and retained earnings 14 r-- TRUCKEE DONNER PUBLIC UTILITY DISTRICT BALANCE SHEETS ASSETS EQUITY AND LIABILITIES December 31, December 31, 1987 1986 1987 1986 (restated) (restated) UTILITY PLANT (Note 2) $ 9,S87,893 $ 7,SS1,678 EQUITY - Retained earnings $ 9,779.804 E 7,311 ,OSO RESTRICTED FUNDS (Note 3) 3,423,9SS 4,863,S90 LONG-TERM DEBT, less current CURRENT ASSETS: portion (Note 4) 3,647.913 3,227,159 General fund 806,606 971,791 CURRENT LIABILITIES: 0 Accounts receivable (including Purchased power payable 1,087,561 909,179 unbilied mounts of $401,207 Accounts payable 437,OS4 417,492 and $3S7,341), less allowance Consumer deposits 3S7,293 352,26S H of $26.000 and $125,237 for Accrued interest payable 116,474 9o,31R v doubtful accounts 1,106,4S8 863,420 Deferred standby fees 41,025 SO,080 F�+1 Retalnage 2S6,673 Accrued compensation and related Materials and supplies 2S1,438 197,S45 costs 184317 135277 co Prepaid expenses and other Purchased power refund 102,496 , ,69,759 Current portion of long-term debt 140,000 601 ,4SS current assets 81,676 62,866 1 TOTAL CURRENT LIABILITIES 2,363,734 2 S6S,076 0 TOTAL CURRENT ASSETS CCn S,T(`U(A io rJ 2,705,347 2,165,381 ADVANCES 108,808 1,680,946 PRELIMINARY SURVEY COSTS 183,064 203,S82 $15.900.259 111,70 7 84,231 5�5 900.259 4 4 yQ G; lid C1 Id See notes to financial statements. 2 _ t-+ FOR DISCUSSION PURPOYSES ONLY TRUCKEE DONNER PUBLIC UTILITY DISTRICT STATEMENTS OF EARNINGS AND RETAINED EARNINGS Year ended December 31 , 1987 1986 (restated) Operating revenues : to (oS(o 7S`7 Sales to customers $7 ,777 ,235 Other 4102143 S121046 8 , 187,378 Operating expenses : t2 9$` 3 3 Purchased power S ,OSO ,701 4 ,758 ,606 Operations and maintenance 933 ,629 1a9,IM Administrative and general 895 ,443 7as,ri� Customer services 3331227 2811797 Depreciation 327 ,367 3029OS3 Bad debt expense (recovery) (58 ,373) 46 ,378 7 ,481 ,994 I EARNINGS (LOSS) FROM OPERATIONS 705 ,384 (11 ,308) Other income (expense) : Interest income 278 ,769 327 $ 30 Property damage recovery 190 ,631 Interest expense (115 ,054 ) (188 , 343) Preliminary survey costs abandoned (25 ,974) 328 ,372 138 ,987 Cumulative effect of change in accounting principle (Note 6) 1 ,434 ,998 EARNINGS 2 , 468 ,754 1271679 Retained earnings: Beginning of year 71311 ,050 7 , 183 ,371 End of year $9 , 779,804 $7, 311 ,OSO See notes to financial statements . 3 - FOR DISCUSSION PURPOSES ONLY TRUCKEE DONNER PUBLIC UTILITY DISTRICT STATEMENTS OF GENERAL AND RESTRICTED FUND FLOWS Year ended December 31 , 1987 1986 (restated) FUNDS PROVIDED BY OPERATING ACTIVITIES: Earnings $ 2,468,754 $ 127,679 Adjustments to reconcile earnings to funds provided by operating activities - Depreciation 327 ,367 302,053 Amortization of debt issuance costs 11,069 Preliminary survey costs abandoned 25,974 Accounts receivable (343,038) 82 ,980 Retainage (256,673) Materials and supplies (S3,893) (33,591 ) Purchased power refund (32,737) 17,198 Prepaid expenses and other current assets (18 ,810) 26,774 Purchased power payable 178 ,382 (153,283) Accounts payable 19,S62 2Z9,333 .+ Consumer deposits 5 ,028 88 ,031 Accrued interest payable 17, 146 1 ,278 Deferred standby fees (9,055) (21 ,486) Accrued compensation and related costs 49,050 27 ,562 Cumulative effect of a change in accounting principle (1,434 ,998) Net funds provided by operating activities 953, 128 694 ,528 FUNDS USED BY INVESTING ACTIVITIES: Additions to utility plant, net (2,363 ,582) (2,077,539) Additions to preliminary survey costs (5 ,456) (27,26S) Net funds used by investing activ- ities (2,369,038) (2,104 ,804) FUNDS PROVIDED (USED) BY FINANCING ACTIVITIES: Proceeds from long-term debt 207,659 2,905 ,687 Repayments of long-term debt (259,429) Reduction of advances (137, 140) (134 ,323) i7c rcro Net funds provided (used) by financing activities (188.91U) 2 ,771 ,364 INCREASE (DECREASE) IN GENERAL AND RESTRICTED FUNDS 1(1 ,6�04,820) $1 .361 ,088 See notes to financial statements. 4 - FOR DISCUSSION PURPOSES ONLY TRUCKEE DONNER PUBLIC UTILITY DISTRICT NOTES TO FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31 , 1987 AND 1986 NOTE 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. The electric and water service operations are maintained and op- erated separately. These financial statements reflect the combined electric and water operations of the District. All significant interdivisional transactions have been eliminated . The District prepares its financial statements in accordance with the Uniform System of Accounts prescribed by the Federal Energy Regulatory Commission. Utility plant - Utility plant assets are stated at cost . Betterments and major renewals , less customer reimbursements , are capitalized while main- tenance and repairs are charged to operations as incurred. Depreciation is determined by the straight-line method over the estimated useful lives of the related assets . Composite rates are used for asset groups and , accordingly, no gain or loss is recorded on the disposition of an asset unless it represents a major retire- ment . Materials and supplies - Materials and supplies are recorded at average cost. Debt discount and issuance costs - Discounts and issuance costs relating to the sale of debt are amor- tized over the lives of the related bonds using the effective in- terest method . Revenues - ,-. Revenues consist of billings to consumers as meters are read on a cycle basis throughout each month . Effective Janaury 1 , 1987 , the District adopted the policy of recording an estimate of revenue earned but not billed to customers at year end . The 1986 financial statements have been restated to give effect to this change (see Note 6) . Services provided to municipal entities without charge are not reflected in operating revenues . S - FOR DISCUSSION PURPOSES ONLY to ' Income taxes - The District is exempt from payment of Federal and state income taxes under Rule of the Internal Revenue Code . Reclassifications - Certain reclassifications have been made to the 1986 financial statements to conform with the 1987 presentation . NOTE 2 - UTILITY PLANT: Utility plant consists of the following - December 31 , 1987 1986 Electric distribution facilities $ 6 ,034 ,986 $5 ,917 ,55S Water operating facilities 3 ,210 ,631 2 ,829, 7SS General plant 3 , 341 ,039 12 , 586 , 656 8 , 747 ,310 Less accumulated depreciation 3 , 250 ,886 2 , 934 ,901 .-- 9 , 335 , 700 5 , 812 ,409 Construction work in progress 252 , 123 1 , 739, 269 $ 9 , 587 , 983 $7 , 5S1 ,678 NOTE 3 - GENERAL AND RESTRICTED FUNDS: General and restricted funds consist of the following - December 31 , 1987 1986 Cash $ (22 , 944) $1 , 351 ,114 State of California Local Agency Investment Fund , at cost, which approximates market value 3 ,825 ,000 2 , 423, 372 Bank of America Corporate Trust Investment Government Fund, at cost , which approximates market value 354 , 176 1 , 993 , 540 �^ Accrued interest 74 , 329 67 ,355 $4 , 230 , 561 .$5 ,835 , 381 6 - FOB DTSCUSSION PURPOSES UB L Y The District maintains funds which are restricted pursuant to resolu- tions of the Board of Directors , debt covenants and retentions . The allocation of the above cash and investments between funds is as fol- lows - December 31 , 1987 1986 Electric: General fund $ 701 ,032 $ 83S , 202 Facilities fees 492 , S48 417 ,424 Storm damage fund 154 ,021 143, 263 Building fund 787 ,384 292 , 539 Certificates of Participation debt funds - Lease payment fund 69 , 108 2871661 Reserve fund 285 ,058 2799430 Project fund 10 1 ,422 ,782 REA special reserve fund 19,000 19,000 Consumer deposits and other 143 , 359 2 , 508 , 161 3 ,840 , 660 Water : General fund 105 ,574 136 , 589 Facilities fees 460, 342 33S , 301 Reserve for future meters 397 , 806 3S7, 169 Building fund 368 ,843 732 ,843 Dart Industries water agreement 2S ,686 Dart Industries water services settlement 294 ,S59 292 ,816 Farmers Home Administration debt service fund 21 , 940 26 , 848 Prepaid connection fees 62 ,000 61 ,772 Other 11 ,336 2S , 697 1 , 722 ,400 1 ,994 ,721 $4 , 230 . S61 15,835 .381 General funds - General funds are derived from the operations of the District. General funds not deposited to the restricted or bond funds are unrestricted . Facilities fees The District charges facilities fees to applicants for new service �^ to cover the pro rata share of the cost of existing supply facili- ties , any expansion or additions thereof , and the cost of. future facilities required to serve the applicant. These fees are held as restricted funds pursuant to Board resolutions . 7 - FOR DISCUSSION PURPOB.ES ONLY Reserve for future meters - Connection fees charged to applicants for water service include an amount which is applied to a restricted fund for future metering of the District. Storm damage fund - The District previously established a restricted fund to provide for future storm damages. Building fund - The District established a building fund to provide funds for the construction of a new District complex. Funds are deposited from power purchase refunds . Dart Industries - Certificates of Participation debt funds - Resolutions relating to the issuance of the Certificates of Parti- cipation require a lease payment fund to be maintained to provide for each semiannual principal and interest payment as they come due. A reserve fund is maintained for the highest annual debt ser- vice payment over the life of the debt . A project fund was main- tained for payment of construction costs for the new facilities . The construction was completed in 1987 and excess project funds were applied to the lease payment fund . Farmers Home Administration (FmHA) debt funds - Bond resolutions require funds to be established to provide for the payment of principal and interest of the water system debt . A debt service fund provides for the upcoming annual and semiannual prin- cipal and interest payments due on the FmHA bonds . A reserve fund requires monthly deposits equal to 10% of the amounts deposited to the debt service fund until such time that the fund equals 10% of the remaining aggregate debt service due on the bonds . - 8 - FOR DISCUSSION YU .H,Y(tS.E?; 5 u�t1, Y NOTE 4 - LONG-TERM DEBT: Long-term debt consists of the following - December 31 , 1987 1986 Certificates of participation, 5 .3% to 7. 7S% , annual principal payments of $50, 000 beginning in 1988 in- creasing annually to $255 ,000 at maturity in 2012 $3,050,000 $3 ,OSO ,000 Installment loans , 8 . 69% . quarterly principal and interest payments of $9,250, due through 1992 140 ,668 Rural Electrification Administration bonds : First Series , 2% , annual principal payments of $13 ,000 to $14 ,000 , due 1994 941000 107,000 Second Series , 2% , annual principal payments of $3 ,000 to $5 ,000, r^' due 2002 64,000 67 ,000 Third Series , 20 , net of undrawn funds of $65 ,426 , annual principal payments of $3, 000 to $6,000, due 2004 19, 574 22 , 513 Farmers Home Administration: Note , 50 , 32 remaining annual install- ments of $14 , 800 2312113 2349218 Bonds , So , annual principal payments of $5 ,000 to $20 ,000, due 2020 295 ,000 300 ,000 Department of Energy loan, 7. 37S% in- terest, annual principal and interest payments of $4 , 500, due 1992 16 , 182 20, 228 Other notes , 7% and 8. 75% , annual prin- cipal payments of $33 ,600, due 1990 65 , 548 103,905 Less : 3 ,976 ,085 3 ,904 ,864 Unamortized debt discount and issuance costs 1881172 76, 250 Current portion of long-term debt 140 ,000 601 ,4SS $3 ,647 ,913 $3 . 227. 159 The Certificates of Participation were issued by Truckee Donner Public Utility District Financing Corporation in order to finance the 9 - FOR DISCUSSION PURPOSES ONLY construction of a new office and warehouse facility for the Dis- trict . The District entered into agreements with the financing cor- poration whereby title to the property is held with the financing corporation as collateral for the certificates , and the District is obligated to make lease payments sufficient to fund the debt service on the certificates . Upon repayment of the certificates , title to the property will revert to the District . The assets and debt re- lating to the facilities are recognized on the District' s financial statements . The Department of Energy loan provides for forgiveness of the debt at the discretion of the Department of Energy if certain conditions are met by the District . As of December 31 , 1986 , the District was not in compliance with cer- tain debt covenants of the FmHA note and bonds . During 1987 the Dis- trict amended the covenants and obtained a waiver of all past cove- nant violations . Accordingly, the debt is no longer reclassified as current. Scheduled principal maturities on• long-term debt are as follows for the next five years - 1988 $ 1401000 1989 127 , 000 1990 134 , 000 1991 123 ,000 1992 and thereafter 31452 ,085 $3 , 976 , 085 NOTE 5 - EMPLOYEE BENEFIT PLANS: Pension plan - The District contributes to a single employer pension plan which covers substantially all District employees who have at least one year of service. The District ' s payroll for employees covered by the plan for the year ended December 31 , 1987 was $ representing % of total District payroll . The plan provides for specific benefits to employees at retire- ment. Benefits vest to participants at the rate of 10% per year of service. Employees who retire at or after age 65 with ten years of credited service are entitled to receive monthly benefits equal to 40% of the individuals average monthly compensation. Benefits are reduced pro rata for less than 20 years of credited service , and increased by . 2% of average monthly compensation for each year of service in excess of 20 years . The plan also provides for death, disability and early retirement benefits which are more fully de- scribed in the plan document . There were no participants receiving benefits as of December 31 , 1987 . The plan ' s funding policy re- quires the District to make actuarially determined contributions such that sufficient assets will be available to pay benefits to 10 - FOR DISCUSSION PURPOSES ON .0 employees when due . The actuarial valuations for the plan indi- cated that no contributions were necessary for 1987 or 1986 as the plan ' s accumulated assets were sufficient to provide for the normal cost of the plan. The District has made contributions of $ and $13 , 626 for 1987 and 1986 , respectively , which relate to pre- miums on employee life insurance coverage . The latest actuarial report , dated December 31 , 1987 , indicates the following informa- tion related to the plan for the last three years : December 31 , 1987 1986 1985 Actuarial present value of accumulated plan benefits : Vested $268 , 696 $197,118 $167 ,501 Nonvested 24 ,641 201284 201671 293 , 337 $217 ,402 $188 , 172 Net assets available for plan benefits Spa 481 372 $430 ,032 The actuarial valuation presented above is used as a substitute for the standardized measure of . the pension benefit obligation under r Statement No. S of the Governmental Accounting Standards Board . Actuarially determined funding requirements are determined using the individual aggregate method which assumes a 7% weighted average rate of return on plan assets . IRS regulations also require a funding calculation using the entry age normal method . This calcu- lation also indicated no funding requirement . Effective January 1 , 1988 the District is obligated under a new union contract which provides additional retirement benefits . These additional benefits will result in an increase to the total actuarial present value of accumulated plan benefits - �Fri Ito 09S. Deferred compensation plan - The District maintains a deferred compensation plan which permits employees to defer a portion of their compensation . The amount deferred and held in trust aggregated $45 ,846 and $24 , 741 at Decem- ber 31 , 1987 and 1986 , respectively. All amounts of compensation deferred under the plan, all property and rights purchased with those amounts , and all income attributable to those amounts , prop- erty or rights are (until paid or made available to the employee or other beneficiary) solely the property and rights of the District (without being restricted to the provisions of benefits under the plan) , subject only to the claims of the District ' s general credi - tors . The District has no liability for losses under the. plan but does have the duty of due care that would be required of an ordi- nary prudent investor . - 11 - FOR DISCUSSION PURPUS_ES ONLY NOTE 6 - CHANGE IN ACCOUNTING PRINCIPLE: NOTE 7 - RESTATEMENT OF 1986 FINANCIAL STATEMENTS: The 1986 financial statements have been restated to reflect the Dis- trict ' s adoption, in 1987 , of an accounting policy to recognize reve- nue earned and purchased power incurred but not billed during an ac- counting period. The cumulative effect of adopting this accounting method is reflected below as an increase in retained earnings , ac- counts receivable and purchased power payable as of January 1 , 1986 . No adjustment has been made to reported 1986 operations , as the ef- fect of the change is insignificant to earnings . Net increase As previously resulting from reported As restated restatement Retained earnings : Beginning of year $6 ,945 ,413 $7 , 183 , 371 237 958 End of year $7 ,073 ,092 $7 , 311 ,050 $237 ,9S8 Accounts receivable 460 ,967 $ 818_308 357 341 Purchased power payable $ 789, 796 $ 909 , 179 119 383 12 - FOR DISCUSSION PURPOSES ONLY 10- NOTE 6 - CHANGE IN ACCOUNTING PRINCIPLE: NOTE 7 - RESTATEMENT OF 1986 FINANCIAL STATEMENTS: The 1986 financial statements have been restated to reflect the Dis- trict 's adoption, in 1987 , of an accounting policy to recognize reve- nue earned and purchased power incurred but not billed during an ac- counting period. The cumulative effect of adopting this accounting method is reflected below as an increase in retained earnings , ac- counts receivable and purchased power payable as of January 1 , 1986 . No adjustment has been made to reported 1986 operations , as the ef- fect of the change is insignificant to earnings . Net increase As previously resulting from reported As restated restatement Retained earnings : Beginning of year $6 ,945 ,413 $7 , 183 , 371 237 958 End of year $7 ,073 ,092 $7 , 311 ,OSO 237 958 Accounts receivable $ 460 ,967 $ 818_308 357 341 Purchased power payable $ 789, 796 $ 909 , 179 $119 , 383 r^ LY FOR DISCUSSION PURPOSES ON ADDITIONAL INFORMATION Our examination was ma for the purpose o forming an opinion on the financial statements tak n as a whole. T e divisional combining- in- formation on page 14 is p sented for p poses of additional analysis of the financial statements rather tha to present the financial po- sition, results of operation and fun flows of the individual divi- sions . The additional informa ion d scribed above , on which we ex- press no opinion, has been subje te� to the auditing procedures applied in the examination of the financial statements and , in our opinion, subject to the effects , ny, as might have been required had the outcome of the uncertain ies eferred to in the second para- graph of our report on the acco anyin financial statements been known, is fairly stated in all material espects in relation to the financial statements taken as a whole . Certified Public Account nts bo 13 - )TRUCKEE DONNER PUBLIC UTILITY DISTRICT DIVISIONAL COMBINING STATEMENT OF EARNINGS AND RETAINED EARNINGS Year ended December 3I 1987 Electric Water 1986 operations operations Eliminations Total Total Operating revenues: ` Sales to customers S6,SSS,083 $1,122,1S2 $ - $7,777,23S $6,671,267 Other S66_j84 228,566 (384,909) 410,143 S12,046 7,121,567 1,4SO,720 (384,909) 8,187,378 7.193,313 Operating expenses: 0 Purchased power S,OSO,701 361,692 (361,692) 5,OSO,701 4,7S8,606 1� Operations and maintenance S51,802 381,927 933.629 1,090,582 Administrative and general 700,3S7 218,303 (23,217) 89S,443 71S,20S Customer services 299,347 33,880 333,227 281,797 }--� Depreciation 227,105 100,262 327,367 302,OS3 �•+ Bad debt expense (recovery) (40,SS4) (17,819) (S8,373) _ 461378 6,788,758 1,078,145 384 909) 7,481,994 7,194,621 EARNINGS (LOSS) FROM OPERATIONS 332,809 372,S75 70S,384 (11,308) Other income (expense): Go Interest income 167,2S7 111,S12 279,769 327,330 Property damage recovery 80681 109,9SO 190,631 N1 Interest expense (82:210) (32,844) (115,054) (188,343) O Preliminary survey costs abandoned (25,974) (2S,974) 0 139,9S4 188,618 328,372 138,987 Cumulative effect of change in accounting principle 409,913 1,025,085 - 1,434.998 EARNINGS 882,676 1,S86,278 2,468,754 127,679 Retained earnings: Beginning of year _5,806,42S 1.504,62S 7.311,OSO 7,183,371 End of year 16.689.101 13,090,903 - $9,779,804 S7 11.OSO co 00y �1 14 - r L%ILI &Co. Touche Ross 1111 Third Avenue Seate,WA 98101-3205 Tejep one:2,Oe 292.1y00 7e{ex.32-114 TR AND CO SEA May 13 , 1988 Ms . Karen White i Mr . Joe Aquera Finance Committee of the Board of Directors Truckee Donner Public Utility District Truckee , California Dear its. White and Mr . Aquera: i In our letter to you dated April 29 , 1988 , we identified the na- ture of items included within the financial statement category ,., entitled "Construction Advances" and asked for clarification of District policy regarding facilities and connection fees only. In this letter we seek clarification of the obligations , if any, and policies related to the funds received from Dart Industries relative to the agreements which the District entered into with Dart Industries and LakeWorld Development . District management has provided us with copies of four agreements pertinent to funds received from Dart Industries . These agree- ments are: I o Agreement Between Truckee Donner Public Utility District and Lakekorld Development Company Reflecting Aorthwoods Development, dated March 19 , 1970 o Supplemental Agreement Between Truckee Donner Public Utility District and Dart Industries , Inc . , Respecting Tahoe Donner Development , dated October 15 , 1973 o Letters to Truckee Donner Public Utility District from Tahoe Donner (Dart Industries , Inc . ) , Concerning High Services Settle- ment , dated December 16-17, 1975 o Agreement Between Truckee Donner Public Utility District and Dart Industries , Inc. Respecting Certain Developments Related to the Tahoe Donner hater System, dated September 7 , 1979 Toliche ROSS i We have read the agreements mentioned above and summaries prepared for our audit files of our understanding of these agreements is i attached for your reference . i As of December 31 , 1986 , the District had recorded on its balance sheet, as construction advances , $388 ,069 representing "future Hater source and storage facilities" and "anticipated future re- pairs of water lines constructed by Dart Industries . " The recording of "construction advances ," in accounting terms , implies that either a contractual legal obligation of the District exists or that some future event must occur in which the District has an obligation to perform. Based upon our inquiries relating to this issue , we believe the Board should consult with their legal advisor and their accounting department to determine the present legal obligations of the Dis- trict, if any. We would suggest obtaining answers to , at least, the following questions: 1 . Whether the developer has fully satisfied the obligation of the $40 per lot fee (1970 agreement) , and whether satisfaction has been obtained pursuant to the 1979 agreement; 2 . Whether all requirements for water distribution and storage i and supply facilities of the project have been adequately met by the developer as required under the 1970 agreement ; 3. Whether the District has spent up to $70 ,000 since 197S relat- ing to the high services problems with Units 1 through 7 as identified in the 19'15 letter agreement ; 4 . Whether the District has reimbursed Dart for all facilities fees charged to and received from developers who have con- nected directly to the pipeline within ten years of acceptance ! of the pipeline (1979 agreement) ; .and S . whether cathodic protection provisions have been satisfied (1979 agreement , Section C , paragraph 11") . Should it be determined, after a reading of all of the pertinent documents related to the Dart Industries settlement , that no fu- ture contractual legal obligation exists by the District or that no future event is required to occur in which the District must perform , the balance of the funds accumulated as "Construction Advances" should be removed from construction advances (a liabil- ity) and reclassified to retained earnings as of December 31 , 1987 . This determination would have no bearing on the cash and investment funds which the Board has previously set aside and designated for specific purposes . Please give us a call at (206) 292-1800 if you have any questions . Sincerely, W CIliam A. owler WAF/tir : 7068W Enclosure { I i SUMMARY OF AGREEMENT BETWEEN THE DISTRICT AND LAKEWORLD DEVELOPMENT 1 . 1970 A reement with LakeWorld Develo me�akeWorld)t : This atoeement providestab- the lashed a requirement o t e eveloper facil- District with a water distribution system, initial supply ities and funds for additional supply facilities to serve the Tahoe Donner Development . The District agreed to operate , vain- taro, repair and replace the system and charge establish rates to users of the project . Lakeltiorld agreed to pay the District $$4ofper l t(ininal reaiing 6% each year after 1975) upon recordation map for each unit of the project, provided no suvision ch fee will be charged for the first 800 lots . The District was obligated to deposit all such payments in an interest bearing trust account and use the funds solely for the cost of additional water source and supply facilities to meet the increasing requirements of the project which the initial supply facilities cannot meet. 10-1 The agreement further provided that upon the District Board of Directors determining that all requirements on the project which cannot be met by the initial supply facilities have been ade- quately met or provided for, said funds may be expended for im- provement of the District ' s water system and related services and facilities anywhere in the District . The developer shall then relinquish all claims to any funds deposited or interest accrued or earned thereon . 2 . 1973 A reement with Dart Industries : Dart assumed all rights and obligations of Lakeit'orld under t e 1970 agreement . The District and Dart agreed to study and provide for alternate water sources facilitiesand for Tahoe ontemplatedinthe1970 agreement could onot r a ke water source be secured . contemplated e p 3 . 1975 Letter Agreement Concerning High Services Settlement : Dart agree to a one-time cash settlement of 10 ,000 to the District as a settlement for an undetermined number of services in Units 1 through 7 which andmay ifnot theyhave areadequate connectedcover struprotect them from freezing when 4 . 1979 Agreement with Dart Concerning Developments of the Tahoe Donner Water System: This agreement was to settle certain issues between Dart and the District regarding the water supply for Tahoe Donner and desires to satisfy the requirements of the 1970 and 1973 agreements . Dart agrees to provide the Airport Well , the Sanders Well and pipeline easements between the Sanders Well and the Northside pump station to the District . The District agreed to reimburse Dart a facilities fee which is to be levied to any developer who directly connects to the pipeline within ten years from acceptance of the pipeline . The District agreed that the actions contained in the agreement r— satisfied all water volume requirements for the Tahoe Donner pro- ject at full development teas well as any demand by the District for three sources o The agreement provided for reimbursement by Dart to the District for amounts totalling up to $101 ,875 for various costs relating to the project. It also required Dart to contribute to District Restricted Funds $32 ,000 for water system improvements and $35 ,000 for cathodic protection, investigation and mitigation on the water system in full settlement of any claims of the District arising out of design or construction by Dart of the water system. This agreement also indicated forthat Tahoe"there Donnerremain thatcertain unreissues relating to the water solved." { 2 - b[�►3 ' 3rt+d 3111y2S/S'=0Z! 3H:)nOl wfO63 28 :b1 88 , 91 Touche Ross&Co. Touche Ross 1111 Third Avenue Seattle,WA 98101-3205 Telephone:206 292-1800 Telex:32-1149 TR AND CO SEA May 13 , 1988 RECT MAY 9 0 REC'D r;pgiEa TO: BOARD: AAANAGER:..�.---Ms . Karen White Mr . Joe A qu e r a -- Finance Committee of the Board of Directors Truckee Donner Public Utility District Truckee, California Dear Ms . White and Mr . Aquera : In our letter to you dated April 29 , 1988 , we identified the na- ture of items included within the financial statement category entitled "Construction Advances" and asked for clarification of District policy regarding facilities and connection fees only. In this letter we seek clarification of the obligations , if any, and policies related to the funds received from Dart Industries relative to the agreements which the District entered into with Dart Industries and LakeWorld Development. District management has provided us with copies of four agreements pertinent to funds received from Dart Industries . These agree- ments are : o Agreement Between Truckee Donner Public Utility District and LakeWorld Development Company Reflecting Northwoods Development , dated March 19, 1970 o Supplemental Agreement Between Truckee Donner Public Utility District and Dart Industries , Inc. , Respecting Tahoe Donner Development , dated October 1S , 1973 o Letters to Truckee Donner Public Utility District from Tahoe Donner (Dart Industries , Inc . ) , Concerning High Services Settle- ment, dated December 16-17 , 1975 o Agreement Between Truckee Donner Public Utility District and Dart Industries , Inc. Respecting Certain Developments Related to the Tahoe Donner Water System, dated September 7 , 1979 .o^ Touche Ross International ��Touche Ross We have read the agreements mentioned above and summaries prepared for our audit files of our understanding of these agreements is attached for your reference. As of December 31 , 1986 , the District had recorded on its balance sheet , as construction advances , $388 ,069 representing "future water source and storage facilities" and "anticipated future re- pairs of water lines constructed by Dart Industries ." The recording of "construction advances ," in accounting terms , implies that either a contractual legal obligation of the District exists or that some future event must occur in which the District has an obligation to perform. Based upon our inquiries relating to this issue , we believe the Board should consult with their legal advisor and their accounting department to determine the present legal obligations of the Dis- trict , if any. We would suggest obtaining answers to, at least , the following questions : 1 . Whether the developer has fully satisfied the obligation of the $40 per lot fee (1970 agreement) , and whether satisfaction has been obtained pursuant to the 1979 agreement; 2 . Whether all requirements for water distribution and storage r-� and supply facilities of the project have been adequately met by the developer as required under the 1970 agreement ; 3 . Whether the District has spent up to $70 ,000 since 1975 relat- ing to the high services problems with Units 1 through 7 as identified in the 1975 letter agreement ; 4 . Whether the District has reimbursed Dart for all facilities fees charged to and received from developers who have con- nected directly to the pipeline within ten years of acceptance of the pipeline (1979 agreement) ; and 5 . Whether cathodic protection provisions have been satisfied (1979 agreement , Section C , paragraph 12 ) . Should it be determined, after a reading of all of the pertinent documents related to the Dart Industries settlement , that no fu- ture contractual legal obligation exists by the District or that no future event is required to occur in which the District must perform, the balance of the funds accumulated as "Construction Advances" should be removed from construction advances (a liabil- ity) and reclassified to retained earnings as of December 31 , 1987 . This determination would have no bearing on the cash and investment funds which the Board has previously set aside and designated for specific purposes. 2 - ��Touche Ross Please give us a call at (206) 292-1800 if you have any questions . Sincerely, William A. Fowler WAF/tlr: 7068W Enclosure - 3 - SUMMARY OF AGREEMENT BETWEEN THE DISTRICT AND LAKEWORLD DEVELOPMENT 1 . 1970 Agreement with LakeWorld Development : This agreement estab- lished a requirement of the" developer (LakeWorld) to provide the District with a water distribution system, initial supply facil- ities and funds for additional supply facilities to serve the Tahoe Donner Development . The District agreed to operate , main- tain, repair and replace the system and charge establish rates to users of the project. LakeWorld agreed to pay the District $40 per lot ( increasing 6% each year after 1975) upon recordation of the final subdivision map for each unit of the project , provided no such fee will be charged for the first 800 lots . The District was obligated to deposit all such payments in an interest bearing trust account and use the funds solely for the cost of additional water source and supply facilities to meet the increasing requirements of the project which the initial supply facilities cannot meet . The agreement further provided that upon the District Board of Directors determining that all requirements on the project which cannot be met by the initial supply facilities have been ade- quately met or provided for, said funds may be expended for im- provement of the District ' s water system and related services and facilities anywhere in the District. The developer shall then relinquish all claims to any funds deposited or interest accrued or earned thereon. 2 . 1973 Agreement with Dart Industries : Dart assumed all rights and obligations of La eWorl under t e 1970 agreement . The District and Dart agreed to study and provide for alternate water sources and facilities for Tahoe Donner as the Donner Lake water source contemplated in the 1970 agreement could not be secured. 3 . 1975 Letter Agreement Concerning High Services Settlement : Dart agreed to a one-time cash settlement of $70 ,000 to the District as a settlement for an undetermined number of services in Units 1 through 7 which may not have adequate cover to protect them from freezing when and if they are connected to structures . 4 . 1979 Agreement with Dart Concerning Developments of the Tahoe Donner Water System. This agreement was to settle certain issues etween Dart and the District regarding the water supply for Tahoe Donner and desires to satisfy the requirements of the 1970 and 1973 agreements . Dart agrees to provide the Airport Well , the Sanders Well and pipeline easements between the Sanders Well and the Northside pump station to the District . The District agreed to reimburse Dart a facilities fee which is to be levied 10-1 to any developer who directly connects to the pipeline within ten years from acceptance of the pipeline. The District agreed that the actions contained in the agreement satisfied all water volume requirements for the Tahoe Donner pro- ject at full development as well as any demand by the District for three sources of water. The agreement provided for reimbursement by Dart to the District for amounts totalling up to $101 ,875 for various costs relating to the project . It also required Dart to contribute to District Restricted Funds $32 ,000 for water system improvements and $35 , 000 for cathodic protection, investigation and mitigation on the water system in full settlement of any claims of the District arising out of design or construction by Dart of the water system. This agreement also indicated that "there remain certain issues relating to the water supply for Tahoe Donner that are unre- solved." 2 -