HomeMy WebLinkAbout16 Draft Audit Report 2007 Agenda Item # 16
TRUCKEE
Public Utility District
ACTION
To: Board of Directors
From: Mary Chapman
Date: June 04, 2008
Subject: Review of the Draft Audit Reports for 2007
1. WHY THIS MATTER IS BEFORE THE BOARD
The District is required to have its financial records audited each year. The Board is
responsible for hiring auditors. The auditors present their findings directly to the
Board.
2. HISTORY
This is the third year Virchow Krause & Company LLP accounting firm has performed
the District audit.
3. NEW INFORMATION
The 2007 audit is now complete and ready to be presented to the Board of
Directors. Tom Unke will be at the Board meeting to go over the results of the audit
which includes drafts of the consolidated Financial Statement and the Primary
Government Only Financial Statement for the year ended December 31, 2007. Mr.
Unke will also present the management letter which includes their recommendations.
Attached are copies of the draft audit statements, the management letter and the
audit representation letter that will be signed by the General Manager and myself.
4. FISCAL IMPACT
This is a report on the financial activity for 2007. There is no fiscal impact.
5. RECOMMENDATION
That the Board adopt the draft Audit Reports for 2007.
Mary Ch4p , d�nistrative Services Michael D. Holley, General Manager
Manager
yob 6
T CKEE DONNER PUBLIC
QQ' �O avy UTILITY DISTRICT
O
p PRIMARY GOVERNMENT ONLY
FINANCIAL STATEMENTS
December 31, 2007 and 2006
INDEPENDENT AUDITORS' REPORT
Th oard of Directors
ruckee Donner Public Utility District
Truckee, California
We have audited the accompanying balance sheets of the Truckee Donner Public Utility District
as of December 31, 2007 and 2006, and the related statements of revenues, expenses, and
changes in net assets and cash flows for the year then ended, as noted in the table of contents.
These financial statements are the responsibility of the Truckee Donner Public Utility District's
management. Our responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with auditing standards generally accepted in the United
States of America. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material misstatement.
An audit includes examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our opinion
The financial statements referred to above include only the primary government of the Truckee
Donner Public Utility District which consists of all departments that comprise the District's legal
entity. The financial statements do not include financial data for the District's legally separate
component units, which accounting principles generally accepted in the United States of America
require to be reported with the financial data of the District's primary government. As a result, the
primary government financial statements do not purport to, and do not, present fairly the financial
position of the reporting entity of the Truckee Donner Public Utility District, as of December 31,
2006 and 2007, the results of operations, or its cash flows for the years then ended in conformity
with accounting principles generally accepted in the United States of America. In accordance
with accounting principles generally accepted in the United States of America, the Truckee
Donner Public Utility District, has issued separate reporting entity financial statements, for which
we have issued our report dated May_, 2008.
In our opinion, the financial statements referred to above present fairly, in all material respects,
the financial position of the Truckee Donner Public Utility District at December 31, 2007 and
2006, and the results of its operations and its cash flows for the years then ended in conformity
with accounting principles generally accepted in the United States of America.
As discussed in Note 8, the Truckee Dinner Public Utility District adopted the provisions of GASB
Statement No. 45 — Accounting and Financial Reporting by Employers for Postemployment
benefits other than Pensions (OPEB) Effective January 1, 2007.
Page 1
TJRU KEE DONNER PUBLIC UTILITY DISTRICT
�` os
,q QVQ'Q MANAGEMENT'S DISCUSSION AND ANALYSIS
Q 0 y December 31, 2007 and 2006
S O
O�
s fi cial management of the Truckee Donner Public Utility District, we offer readers of these
fi cial statements this narrative overview and analysis of the financial activities of the District
for the years ended December 31, 2007 and 2006. This discussion and analysis is designed to
assist the reader in focusing on the significant financial issues, provide an overview of the
District's financial activity and identify changes in the District's financial position.
We encourage readers to consider the information presented here in conjunction with that
presented within the basic financial statements. The reader should take time to read and
evaluate all sections of this report, including the footnotes and other supplementary information
that is provided, in addition to this MD&A.
FINANCIAL HIGHLIGHTS
• The District's net capital assets increased $10.6 million (or 12%) from $85.6 million at
December 31, 2006 to $96.2 million at December 31, 2007, primarily due to an approximate
$4 million of electrical underground conduit and devices, and an approximate $6 million of
water transmission & distribution lines.
• The District's total net assets increased by $15.5 million (or 26%) from $59.0 million at
December 31, 2006 to $74.5 million at December 31, 2007. The increase is primarily due to
an approximate increase of $10 million in capital assets, $2 million in restricted assets, and
$4 million in unrestricted assets.
• Operating revenues increased $1.8 million (or 7%) from $27.3 million for the year ended
December 31, 2006 to $29.1 million for the year ended December 31, 2007, primarily due
to electric and water rate increases and customer growth.
• Operating expenses of the District increased by $3.1 million (or 15%) from $21.0 million
during 2006 to $24.1 million during 2007, due primarily to increased operation and
administration costs.
• Net non-operating revenues, less non operating expenses, decreased $0.1 million. Non-
operating revenues increased $0.3 million from 2006, primarily from increased income from
investments. Non-operating expenses increased $0.4 million primarily due to increased
interest expense.
• In 2006 the District issued $26.6 million in Certificates of Participation (COP's) to refund
the 1996 COP's, finance the upgrading of its water system infrastructure and complete the
financing of the Donner Lake water system upgrade. No new debt was issued in 2007.
OVERVIEW OF THE FINANCIAL STATEMENTS
This report includes Management's Discussion and Analysis, the Independent Auditors' Report,
the Basic Financial Statements, (which includes the notes to the financial statements), and
Supplementary Information.
Page 3
Q+A Slz5 T UCKEE DONNER PUBLIC UTILITY DISTRICT
VR`V MANAGEMENT'S DISCUSSION AND ANALYSIS
\�GSO' December 31, 2007 and 2006
O
DISTRICT HIGHLIGHTS
The condensed financial statements are presented below.
Condensed Balance Sheet
Increase
(Decrease)
ASSETS 2007 2006 2005 2007-2006
Current assets $ 29,429,366 $ 31,503,819 $ 13,663,419 $ (2,074,453)
Non-current assets:
Capital assets, net 96,185,152 85,576,981 70,649,606 10,608,171
Restricted assets 13,203,369 11,560,194 8,764,610 1,643,175
Other long-term assets 11,157,011 11,882,254 12,182,707 (721L
TOTAL ASSETS $ 149,974,898 $ 140,523,248 $ 105,260,342 $ 9,451,650
LIABILITIES AND NET ASSETS
Current liabilities $ 7,960,150 $ 7,723,061 $ 6,719,823 $ 237,089
Non-current Liabilities
Long-term debt,net of current
portion 57,875,497 62,405,736 47,130,458 (4,530,239)
Deferred revenue 9,644,465 11,440,230 6,309,561 (1,795,765)
Total Liabilities 75,480,112 81,569,027 60,159,842 (6,088,915)
Net Assets
Invested in capital assets,net
of related debt 61,965,042 52,122,829 44,604,336 9,842,213
Restricted for debt service 15,682,345 14,030,896 8,103,064 1,651,449
Unrestricted (3,152,601) (7,199,504) (7,606,900) 4,046,903
Total Net Assets 74,494,786 58,954,221 45,100,500 15,540,565
TOTAL LIABILITIES
AND NET ASSETS $ 149,974,898 $ 140,523,248 $ 105,260,342 $ 9,451,650
In 2007, the District's net capital assets increased $10.6, primarily due to an approximate $4
million of electrical underground conduit and devices, and an approximate $6 million of water
transmission & distribution lines. Non-current restricted assets increased $1.6 million due to a
$1.1 million increase in facilities fees and other miscellaneous increases in the District's
restricted reserves. The District's total net assets increased by $15.5 million primarily due to an
approximate increase of $10 million in capital assets, $2 million in restricted assets, and $4
million in unrestricted assets.
Page 5
PLO sT UCKEE DONNER PUBLIC UTILITY DISTRICT
�ev4Qp5 MANAGEMENT'S DISCUSSION AND ANALYSIS
December 31, 2007 and 2006
OAS
DISTRICT HIGHLIGHTS (cont.)
Sales to consumers were $27.4 million in 2007, $26.5 million in 2006 and $23.9 million in 2005.
The overall increases of $0.9 million (or 3.4%) in 2007 and $2.6 million (10.8%) in 2006 are
primarily due to electric and water rate increases to pay for increased operating costs, revenue
generated for Board designated purposes and growth in customers.
Total operating expenses were $24.1 million in 2007, $21.0 million in 2006 and $20.1 million in
2005. The overall increases of $3.1 million (14.8%) in 2007 and $0.9 million (4.5%) in 2006 in
operating expenses are due primarily to increased payroll and benefit costs as well as increases
in depreciation, automotive fuel and other related costs.
Net non-operating revenues, less non operating expenses, decreased $0.1 million. Non-
operating revenues increased $0.3 million from 2006, primarily from increased income from
investments. Non-operating expenses increased $0.4 million primarily due to increased interest
expense.
Capital contributions were $11.0 million in 2007, $7.9 million in 2006, and $5 million in 2005. The
overall increases of $3.1 million (39.2%) in 2007 and $2.9 million (58.6%) in 2006 in
contributions are due primarily to the completion of long-term development projects.
CAPITAL ASSETS
As of December 31, 2007, 2006 and 2005, the District had $96.2, $86.6, and $70.6 million,
respectively, invested in a variety of capital assets, net of accumulated depreciation. A summary
of capital assets is reflected in the following schedule.
Page 7
p T UCKEE DONNER PUBLIC UTILITY DISTRICT
MANAGEMENT'S DISCUSSION AND ANALYSIS
QP v5oOO��y December 31, 2007 and 2006
O
NTACTING THE DISTRICT'S FINANCIAL MANAGEMENT
The financial report is designed to provide readers with a general overview of the District's
finances and to demonstrate the District's accountability for the money it receives. If you have
questions about this report or need additional financial information, contact Truckee Donner
Public Utility District, Attn: Accounting & Finance Department, P.O. Box 309, Truckee, CA 96160.
Page 9
LIABILITIES AND NET ASSETS
2007 2006
CURRENT LIABILITIES
Other Liabilities
Accounts payable $ 1,767,735 $ 1,894,599
Customer deposits 247,980 204,849
Other 812,280 543,191
Total Other Liabilities 2,827,995 2,642,639
Current Liabilities Payable From Restricted Assets
Current portion of long-term debt 4,477,985 4,256,945
Accrued interest payable 654,170 823,477
Total Current Liabilities Payable from Restricted Assets 5,132,155 5,080,422
Total Current Liabilities 7,960,150 7,723,061
NON-CURRENT LIABILITIES
Long-term debt, net of discounts, premiums and losses 55,094,403 59,179,074
Installment loans 2,781,094 3,226,662
Deferred revenues 9,644,465 11,440,230
Total Other Non-Current Liabilities 67,519,962 73,845,966
Total Liabilities 75,480,112 81,569,027
NET ASSETS
Invested in capital assets, net of related debt 61,965,042 52,122,829
Restricted for debt service 15,682,345 14,030,896
Unrestricted (deficit) (3,152,601) (7,199,504)
Total Net Assets 74,494,786 58,954,221
TOTAL LIABILITIES AND NET ASSETS $ 149,974,898 $ 140,523,248
See accompanying notes to financial statements.
Page 11
T UCKEE DONNER PUBLIC UTILITY DISTRICT
Q��J�\ O�Q�PeO CONSOLIDATED STATEMENTS OF CASH FLOWS
Q JSS�Oo���l Years Ended December 31, 2007 and 2006
2007 2006
CASH FLOWS FROM OPERATING ACTIVITIES
Received from customers $ 28,907,065 $ 26,810,167
Paid to suppliers for goods and services (15,767,810) (13,180,847)
Paid to employees for services (4,431,094) (4,192,107)
Net Cash Flows From Operating Activities 8,708,161 9,437,213
CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES
Principal payments on long-term debt (2,470,000) (2,385,000)
Interest payments on long-term debt (955,875) (1,047,012)
Net Cash Flows From Noncapital Financing Activities (3,425,875) (3,432,012)
CASH FLOWS FROM CAPITAL AND RELATED
FINANCING ACTIVITIES
Capital expenditures for utility plant (8,021,650) (13,770,481)
Cost of disposal of property net of salvage - 121,377
Proceeds from sale of land - 440,408
Capital contributions, connection and facility fees 2,936,519 8,521,835
Special assessments receipts 496,507 548,476
Debt issuance costs and premiums received, net (12,034) 217,579
Loss on advance refunding - (142,995)
Proceeds from issuance of new debt - 27,479,521
Principal payments on long-term debt (1,801,230) (9,628,350)
Interest payments on long-term debt (1,859,271) (1,042,962)
Net Cash Flows From Capital and Related Financing Activities (8,261,159) 12,744,408
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of investments (1,698,880) (1,895,996)
Marketable securities sold - 808,470
Interest received 2,316,898 1,189,445
Cash Flows From Investing Activities 618,018 101,919
Net Change in Cash and Cash Equivalents (2,360,855) 18,851,528
CASH AND CASH EQUIVALENTS—Beginning of Year 35,704,554 16,853,026
CASH AND CASH EQUIVALENTS—END OF YEAR $ 33,343,699 $ 35,704,554
NONCASH INVESTING ACTIVITIES
Developer and customer added capital assets $ 6,523,819 $ 4,551,144
Page 13
A TRUCKEE DONNER PUBLIC UTILITY DISTRICT
OQ, �QQO NOTES TO FINANCIAL STATEMENTS
December 31, 2007 and 2006
TE 1 -ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A. ORGANIZATION
The Truckee Donner Public Utility District (the District) was formed and operates under the State
of California Public Utility District Act. The District is governed by a board of directors which
consists of five elected members. The District provides electric and water service to portions of
Nevada and Placer counties described as Truckee. The electric and water service operations are
separately maintained and operated. These financial statements reflect the combined electric
and water operations of the District. All significant transactions between electric and water
operations have been eliminated. These eliminations include power purchases and rent for
shared facilities.
The District's blended component units consist of organizations whose respective governing
Boards are comprised entirely of the members of the District's Board of Directors. These
organizations are reported as if they are a part of the District's operations. The entities are
legally separate, however, in the case of the Truckee Donner Public Utility District Financing
Corporation, financial support has been pledged and financial and operational policies may be
significantly influenced by the District.
The financial results of these blended component units are not included in this report, however,
the District has issued an additional consolidated report that includes these component units. A
copy of that report can be requested from the District.
The following is a description of the District's blended component units:
Truckee Donner Public Utility District Financing Corporation: legal entity created to issue and
administer Certificates of Participation on behalf of the District. See note 5.
Truckee Donner Public Utility District Community Facilities District No. 03-1 (Old Greenwood):
legal entity created to issue special tax bonds to finance various public improvements needed to
develop property located within Old Greenwood.
Truckee Donner Public Utility District Community Facilities District No. 04-1 (Gray's Crossing):
legal entity created to issue special tax bonds to finance various public improvements needed to
develop property located within Gray's Crossing.
Separate standalone financial statements are not available for the blended component units
described above. Unless noted, disclosures relating to the component units are the same as for
the District.
B. ACCOUNTING POLICIES
The financial statements of Truckee Donner Public Utility District(District) have been prepared in
conformity with accounting principles generally accepted in the United States of America. The
Governmental Accounting Standards Board (GASB) is the accepted standard-setting body for
establishing governmental accounting and financial reporting principles.
Page 15
RUCKEE DONNER PUBLIC UTILITY DISTRICT
NOTES TO FINANCIAL STATEMENTS
F December 31, 2007 and 2006
N 1 —ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)
L SPECIAL ASSESSMENT RECEIVABLE
Special assessments represent amounts due from property owners within the Donner Lake
Assessment District for improvements made by the District pursuant to an agreement with the
property owners to improve their water quality as discussed in note 7.
J. DEFERRED CHARGES
The district entered into a Broadband Sierra Pacific Communication (AT&T) dark fiber agreement
in 2003 for maintenance purposes which is included in other deferred charges on the
accompanying balance sheets. The agreement is expected to provide benefit to the district over
the estimated 20-year life of the agreement.
K. CAPITAL ASSETS
Capital assets are generally defined by the district as assets with an initial, individual cost of
more than $2,500 and an estimated useful life in excess of one year.
Capital assets of the District are stated at the lower of cost or the fair market value at the time of
contribution to the District. Major outlays for plant are capitalized as projects are constructed.
Depreciation on capital assets is calculated using the straight-line method over the estimated
useful lives of the assets, which are as follows:
Distribution Plant
Water 20-40 years
Electric 23-35 years
Computer software and hardware 4-5 years
Buildings and improvements 20-33 years
Equipment and furniture 10 years
It is the District's policy to capitalize interest paid on debt incurred for significant construction
projects while those projects are under construction, less any interest earned on related unspent
debt proceeds. In 2006, interest was capitalized in connection with the Gray's Crossing District
project which was completed in December 2006. No interest was capitalized in 2007.
L. COMPENSATED ABSENCES
Under terms of employment, employees are granted sick leave and vacations in varying
amounts. Only benefits considered to be vested are disclosed in these statements. Vested
vacation and sick leave pay is accrued when earned in the financial statements. The liability is
liquidated from general operating revenues of the utility.
Page 17
TRUCKEE DONNER PUBLIC UTILITY DISTRICT
O
5 NOTES TO FINANCIAL STATEMENTS
December 31, 2007 and 2006
Q
O4�v5 V—ORGANIZATION
OT AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cunt.)
O. POWER PURCHASES AND TRANSMISSION(coat)
In December of 2005, the District entered into an agreement with the Utah Associated Municipal
Power System (UAMPS) under which UAMPS will supply the District with a fixed amount of
power capacity and energy each month for the period January 1, 2008 through March 24, 2009
to replace energy contracts expiring with CPS.
P. INCOME TAXES
As a government agency, the District is exempt from payment of federal and state income taxes.
Q. CONTRIBUTED CAPITAL ASSETS
A portion of the District's capital assets have been obtained through amounts charged to
developers for plant constructed by the District; direct contributions of capital assets from
developers and other parties; as well as assessments of local property owners. These items are
recognized within capital assets as construction is completed for plant constructed by the District
based on the cost of the items, when received for contributed capital assets based on the actual
or estimated fair value of the contributed items, or upon completion of the related project for
development agreements. The District records amounts received within capital contributions
when a legally enforceable claim is established. Until the District meets the criteria to record the
amounts described above as capital contributions, any amounts received are recorded within
deferred revenue on the balance sheet.
R. ACCOUNTING PRONOUNCEMENTS NOT YET IMPLEMENTED
In July 2004, the GASB issued Statement No. 45, Accounting and Financial Reporting by
Employers for Postemployment Benefits Other Than Pensions. Statement No. 45 establishes
standards for the measurement, recognition, and display of other postemployment benefits
(OPEB) expense/expenditures and related liabilities (assets), note disclosures, and, if applicable,
required supplementary information (RSI) in the financial reports of state and local governmental
employers. OPEB includes postemployment healthcare, as well as other forms of
postemployment benefits (for example, life insurance) when provided separately from a pension
plan. The adoption of Statement No. 45 is effective for the District beginning fiscal year 2007.
See note 8.
Page 19
CKEE DONNER PUBLIC UTILITY DISTRICT
�5 NOTES TO FINANCIAL STATEMENTS
JPQOS December 31, 2007 and 2006
to
550 xl
NO C AND INVESTMENTS(CONT.)
and Sale Trust Fund
The District's Board has set aside certain funds from the sale of surplus properties to pay for
future capital improvement projects.
Other Postemployment Benefits (OPEB) Fund
Starting in 2007, the Board has set aside funds for other postemployment benefits, such as
health care.
Debt Service Coverage Fund
Effective 2007, the Board has set aside a portion of the water rates to improve the cash-to-
debt-service ratio.
Donner Lake Assessment District Surcharge Fund
The District established a monthly billing surcharge in the amount of $6.65 applicable to
customers in the Donner Lake area to provide revenue to pay the remainder of the cost of
reconstruction effective October 2006.
As of December 31, board designated accounts consisted of the following:
2007 2006
Building fund $ 238,095 $ 268,656
Storm damage fund 275,548 261,882
Electric rate reserve 1,148,106 753,020
Reserve for future meters 375,665 280,310
Water capital replacement fund 294,508 127,004
Prepaid connection fees 77,400 74,734
Land sale trust fund 3,552,291 2,619,363
Other post employment benefits 201,630 -
Debt service coverage fund 252,481 -
Donner Lake Assessment District surcharge fund 5,465 -
Totals $ 6,421,189 $ 4,384,969
Certain assets have been restricted by certificates of participation covenants or third party
contractual agreements for the following purposes:
Page 21
RUCKEE DONNER PUBLIC UTILITY DISTRICT
11yOP S
NOTES TO FINANCIAL STATEMENTS
December 31, 2007 and 2006
E CASH AND INVESTMENTS (cont.)
2006 COP Water System Project Fund
During 2006, the District issued $26.6 million in water COP's (see note 5), the proceeds of
which are to be used in part for future water system replacement. The District established the
Water System Project Fund to account for the unspent bond proceeds. The District is allowed
to draw upon such funds as valid construction costs are incurred.
Equipment Loans Escrow Accounts
During 2005, the District obtained loans to purchase various capital equipment. As the
District received loan funds, the proceeds were held in escrow until qualified purchases were
made. In 2007, the District used the remaining funds for purchases of capital equipment.
Other (Area Improvement Funds)
The District receives funds from the County of Nevada, which are to be used only for
improvements to specific areas within the District's boundaries in Nevada County. These
areas include various Nevada County assessment districts.
When both restricted and unrestricted resources are available for use, it is the district's policy
to use restricted resources first, then unrestricted resources as they are needed.
As of December 31, restricted cash and cash equivalents and investments consisted of the
following:
2007 2006
Certificates of participation $ 7,023,345 $ 6,536,779
Facilities fees 6,828,586 5,737,065
DWR-Prop 55 reserve fund 310,184 321,923
Glenshire escrow accounts 145,346 119,501
Donner Lake Special Assessment District
Improvement Fund 2,119,389 1,908,861
Donner Lake Special Assessment District reserve fund 160,172 40,043
2006 COP Water System Project fund 7,275,910 10,260,903
Equipment loans escrow accounts - 19,712
Other(area improvement funds) 172,738 170,489
Total Restricted Cash and Cash
Equivalents and Investments $ 24,035,670 $ 25,115,276
Page 23
RUCKEE DONNER PUBLIC UTILITY DISTRICT
4DhisCLosuREs
�P 4oS�9 NOTDecember ES Ov31, 21007 AL STATEMENTS
006NTS
0G CASH AND INVESTMENTS (coat.)
RELATING TO INTEREST RATE RISK
Interest rate risk is the risk that changes in the market interest rates will adversely affect the fair
value of an investment. Generally, the longer the maturity of an investment, the greater the
sensitivity of its fair value to changes in market interest rates. Information about the sensitivity of
the fair values of the District's investments to market interest rate fluctuations is provided by the
following table that shows the District's investments by maturity for 2007 and 2006:
Investment Maturity
LAIF 12 months or less
Federated U.S.Treasury Cash Reserve 12 months or less
Fidelity Institutional Prime 12 months or less
Fidelity Money Market 12 months or less
FSA Capital Management- Investment Contract 12 months or less
Federal Home Loan Mortgage 9/15/2011
Federal Farm Credit Banks 3/2/2021
DISCLOSURES RELATING TO CREDIT RISK
Generally, credit risk is the risk that an issuer of an investment will not fulfill its obligation to the
holder of the investment. This is measured by the assignment of a rating by a nationally
recognized statistical rating organization. LAW does not have a rating provided by a nationally
recognized statistical rating organization. The Fidelity Money Market is also not rated. The
Fidelity Institutional Prime and the Federated U.S. Treasury Cash Reserve are rated AAAm by
S&P and Aaa by Moody's. The Federal Home Loan Mortgage is implicitly backed by the U.S.
government. FSA Capital Management and Federated Farm Credit Banks are rated AAA by S&P
and Aaa by Moody's.
CUSTODIAL CREDIT RISK
Custodial credit risk for deposits is the risk that, in the event of the failure of a depository
financial institution, a government will not be able to recover its deposits or will not be able to
recover collateral securities that are in the possession of an outside party. The California
Government Code and the District's investment policy do not contain legal or policy requirements
that would limit the exposure to custodial credit risk for deposits, other than the following for
deposits: The California Government Code requires that a financial institution secure deposits
made by state or local governmental units by pledging securities in an undivided collateral pool
held by a depository regulated under state law (unless waived by the government unit). The
market value of pledged securities in the collateral pool must equal at least 110% of the total
amount deposited by the public agencies.
As of December 31, 2007 and 2006 all deposits were fully insured or collateralized.
Page 25
TRUCKEE DONNER PUBLIC UTILITY DISTRICT
NOTES TO FINANCIAL STATEMENTS
JPQOsos December 31, 2007 and 2006
p\S T —CAPITAL ASSETS (cont.)
January 1, December 31,
2006 Additions Reductions 2006
Electric distribution facilities $ 20,884,302 $ 5,167,154 $ (229,981) $ 25,821,475
Water distribution facilities 56,986,916 5,745,909 (281,047) 62,451,778
General plant 9,969,072 398,334 (168,803) 10,198,603
87,840,290 11,311,397 (679,831) 98,471,856
Less: Accumulated depreciation (22,702,610) (3,212,232) 744,362 (25,170,480)
Construction work in progress 5,081,826 15,726,423 (8,962,744) 11,845,505
Land held for future use 430,100 - - 430,100
Totals $ 70,649,606 $ 23,825,588 $ (8,898,213) $ 85,576,981
As of December 31, 2007 and 2006, the plant in service included $1,925,482 of land which is not
being depreciated.
A portion of the plant has been contributed to the District. When replacement is needed, the
District replaces the contributed plant with District-financed plant.
During 2006, the service utility of one of the transformers at the Tahoe Donner Substation
became impaired as a result of damage from an animal entering the substation. The financial
statements for the electric department include an impairment gain of $119,987. The gain is
reported inclusive of$127,967 of insurance recoveries.
NOTE 4—TELECOMMUNICATION SERVICES
In 1999, the District initiated a project to expand their basic service offerings to include internet
access, cable television and voice delivered over fiber optic networks (the broadband project).
The District has completed the broadband design project and obtained the necessary regulatory
approvals and franchises needed to construct and launch the broadband project. Expenses
incurred by the District to date on the broadband project total $2,802,103 of which $553,534 is
included in capital assets on the accompanying balance sheet. During 2006 expenditures for this
project, mainly related to legal, financing, and charges for District labor and overhead was
$168,011, none of which were capitalized. There were no additional expenditures during 2007.
Cebridge Connections (Cebridge), a local cable television service provider, filed an objection in
September 2004 with the Local Agency Formation Commission (LAFCO), the entity responsible
for providing regulatory approval for the broadband project. After denying Cebridge's request for
a reconsideration of their approval of the District's project, Cebridge filed a lawsuit against
LAFCO. The District was not named in the lawsuit. A ruling on the lawsuit was received in
January 2006. LAFCO prevailed on all portions of Cebridge's claim. Cebridge filed an appeal,
however, in June of 2007, the Court ruled in favor of LAFCO, upholding the initial ruling. The
District's Board may still consider moving forward with financing and construction of the project
or leasing the assets to a broadband provider.
Page 27
RUCKEE DONNER PUBLIC UTILITY DISTRICT
NOTEDe embeTO N3N1AL STATEMENTS
2007 andT 006
QP��ts �p Q JQQ
p»UTE —LoNG-TERM DEBT(coat.)
January 1, December 31, Due within
2006 Additions Reductions 2006 one year
Certificates of Participation—
Electric,2.5%to 5.75%,
due serially to 2013(net of
unamortized premiums of
$284,354). $ 22,616,962 $ - $ (2,467,608) $ 20,149,354 $ 2,470,000
State Revolving Fund Loan—
Water,2.34%,due semi-annually
beginning in 2006 to 2026. 11,823,444 909,521 (505,843) 12,227.122 517,749
Certificates of Participation—
Water,4.00%to 5.00%,
due serially to 2036(net of
unamortized discounts of
$141,408 and premiums of
$633,492) - 27,062,084 - 27,062,084 615,000
Certificates of Participation—
Water,5.25%to 5.4%,
due serially to 2021(net of
unamortized discounts of
$30,172). 8,434,829 - (8,434,829) -
Department of Water Resources,
3.18%,due semiannually to
2021,secured by real
and personal property. 3,728,336 - (189,491) 3,538,845 195,582
Installment loans,5.4%to 6.23%,
various payment terms and
due dates,secured by
equipment. 4,153,289 - (468,011) 3,685,278 458,614
Totals $ 50,756,860 $ 27,971,605 $(12,065,782) $ 66,662,683 $ 4,256,945
On October 12, 2006, Truckee Donner Public Utility District Financing Corporation issued
$26,570,000 of Certificates of Participation to refund 100% of the outstanding balance of the
Certificates issued in 1996, complete the funding of the Donner Lake Assessment District water
system, and fund water system capital improvements. The terms of the Certificates call for
payments to be made only from the net revenues of the Water Division and the debt is secured
by this revenue. These revenues are required to be at least equal to 125% of the debt service for
each year.
On April3, 2003, the District issued $26,265,000 of Certificates of Participation, the net
proceeds of which were utilized to pay the amounts due to IDACORP for the purchase power
contract settlement fees, as well as to cover the associated costs of issuance. The terms of the
new Certificates call for debt service payments to be made only from the net revenues of the
Electric Division. These revenues are required to be a least equal to 120% of the debt service for
each year.
Page 29
TRUCKEE DONNER PUBLIC UTILITY DISTRICT
�Q,P� NOTES TO FINANCIAL STATEMENTS
A Q,Q0
5�5 December 31, 2007 and 2006
QP
O`SQ�PIVT73 —LONG-TERM DEBT(cont.)
Scheduled payments on debt are:
Principal Interest Total
2008 $ 4,477,985 $ 2,542,575 $ 7,020,560
2009 4,562,147 2,356,378 6,918,525
2010 4,703,470 2,162,004 6,865,474
2011 4,841,145 1,942,292 6,783,437
2012 5,086,978 1,699,475 6,786,453
2013-2017 14,050,221 6,090,254 20,140,475
2018-2022 9,855,905 4,061,482 13,917,387
2023-2027 5,642,163 2,598,926 8,241,089
2028-2032 4,230,000 1,568,875 5,798,875
2033-2037 4,165,000 478,800 4,643,800
61,615,014 $ 25,501,061 $ 87,116,075
Plus: Unamortized premiums 870,516
Less: Unamortized discounts (132,047)
Total Payments on Debt $ 62,353,482
Page 31
TRUCKEE DONNER PUBLIC UTILITY DISTRICT
F�
NOTES TO FINANCIAL STATEMENTS
December 31, 2007 and 2006
Jss
00,S 0T —DONNER LAKE WATER COMPANY PURCHASE (cunt.)
Project costs incurred in excess of the assessment are being collected through surcharges to
each property owner's bill until all costs are recovered. As of December 31, 2007 and 2006, the
amount outstanding from the property owners was $9,117,247 and $9,613,754 respectively, of
which $557,542 and $523,728 is due in the next year. These amounts are shown as Special
Assessments Receivable in the Balance Sheet. Per Board resolution, all funds received from
property owners are set aside in the Donner Lake Special Assessment District Improvement
Fund until such time as the funds will be used to fund the debt service on the District's initial
third party debt.
During April 2004, the District obtained financing in the form of a State Revolving Fund Loan for
$12,732,965 at a rate of 2.34%. The semi-annual principal and interest payments are $400,426.
The District is also required to fund a reserve account by making semi-annual reserve payments
in the amount of $40,043 for a 10-year period. Prior to obtaining the State Revolving Fund Loan,
the District had third party bridge financing in the form of two lines of credit totaling $10,000,000.
Both lines of credit were extinguished with funds received through the State Revolving Fund
Loan.
NOTE 8—EMPLOYEE BENEFIT PLANS
A. CALPERS PLAN
The District and bargaining unit employees elected to participate in the Public Agency portion of
CalPERS, effective August 21, 2004. The CalPERS plan is an agent multiple-employer plan
administered by CalPERS, which acts as a common investment and administrative agent for
participating public employers within the state of California. State statutes within the Public
Employees' Retirement Law establish a menu of benefit provisions, as well as other
requirements. The District selects optional benefit provisions from the benefit menu by contract
with CalPERS and adopts those benefits through local ordinance or resolution. The CalPERS
plan also provides for death and disability benefits. CalPERS issues a separate comprehensive
annual financial report. Copies of the CaIPERS' annual financial report may be obtained from the
CalPERS Executive Office — 400 P Street— Sacramento, California, 95814.
Active plan participants are required to contribute 7% of their annual covered salary, of which the
District on the participants' behalf pays 4%. The District is required to contribute the actuarially
determined remaining amounts necessary to fund the benefits for its participants. The required
employer contribution rate for fiscal years ending June 30, 2007 and 2006 is 18.006% of eligible
participant payroll. The contribution requirements of the plan participants are established by
State statute and the employer contributions rate is established and may be amended by
CalPERS.
Page 33
TRUCKEE DONNER PUBLIC UTILITY DISTRICT
Q. NOTES TO FINANCIAL STATEMENTS
PQy� SAS December 31, 2007 and 2006
EMPLOYEE BENEFIT PLANS (cont.)
C. OTHER POST EMPLOYMENT BENEFITS(OPEB)
The District began providing post employment health care on January 1, 2000 to all employees,
and their qualified dependents that retire from the District on or after attaining age 60 with
service of at least 20 years. The board of directors of the District retains full authority to set the
provisions and contribution obligations related to this benefit. For years worked which are less
than 20, the benefit is reduced by 5% for each year. For retirement prior to age 60, the benefit is
reduced by 2% for each year. Currently eight retired employees meet those eligibility
requirements. The District pays insurance premiums for medical, dental, and prescription drugs.
Expenditures for post employment health care benefits are recognized when premiums are paid.
The post employment health care premiums were $72,804, $57,232, and 47,508 for 2007, 2006,
and 2005 respectively.
During 2006, the District received an OPEB actuarial report prepared by its medical benefits
provider, National Rural Electric Cooperative Association (NRECA). In addition to the above post
employment health care premiums, the District began to contribute to an internally designated
OPEB account in 2007 for the purpose of contributing to the California Employer's Retiree
Benefit Trust Program (CERBT) in 2008. See note 14.
The District administers a single-employer defined benefit healthcare plan ("The Retiree Health
Plan"). The plan provides health insurance contributions for eligible retirees and their spouses
through the Districts group health insurance plan, which covers both active and retired members.
Benefit provisions are established through collective bargaining agreements and state that
eligible retirees and their spouses receive lifetime healthcare insurance at established
contribution rates. The Retiree Health Plan does not issue a publicly available financial report.
Contribution requirements are established through collective bargaining agreements and may be
amended only through negotiations between the District and the union. The District makes the
same monthly health insurance contribution on behalf of the retiree as it makes on behalf of all
other active employees during that year. The district contributes 100% percent of the current
year premiums for a family and a single plan for eligible retired plan members and their spouses.
For fiscal year 2007, the district contributed $54,100 to the plan. Plan members receiving
benefits contribute 0% percent of their premium costs for a family plan and a single plan. For
fiscal year 2007, total member contributions were $0. Administrative costs of the plan are
financed through investment earnings.
Page 35
TRUCKEE DONNER PUBLIC UTILITY DISTRICT
NOTES TO FINANCIAL STATEMENTS
P�AO 051B December 31, 2007 and 2006
EMPLOYEE BENEFIT PLANS (cont.)
Actuarial valuations of an ongoing plan involve estimates for the value of reported amounts and
assumptions about the probability of occurrence of events far into the future. Examples include
assumptions about future employment, mortality, and the healthcare cost trend. Amounts
determined regarding the funded status of the plan and annual required contributions of the
employer are subject to continual revision as actual results are compared with past expectations
and new estimates are made about the future.
Projections of benefits for financial reporting purposes are based on the substantive plan (the
plan is understood by the employer and plan members) and include the types of benefits
provided at the time of each valuation and the historical pattern of sharing benefit costs between
the employer and plan members to that point. The methods and assumptions used include
techniques that are designed to reduce short-term volatility in actuarial accrued liabilities and the
actuarial value of assets, consistent with the long-term perspective of the calculations.
The required supplemental information relating to historical data has not been included in this
report as this is the first year of implementation.
NOTE 9—SELF FUNDED INSURANCE
The District has a self-funded vision insurance program. Prior to 2007, the District also had a
very small amount of self insurance with respect to the supplemental cost of certain mail order
prescriptions that was not covered by the commercial health insurance. For both, claims were
processed by and on behalf of the District. The District did not maintain a claim liability, rather
claims were expensed as paid. The amount of claims paid for each of the past three years have
not been material.
Page 37
TRUCKEE DONNER PUBLIC UTILITY DISTRICT
NOTES TO FINANCIAL STATEMENTS
�yO� �tG9 December 31, 2007 and 2006
QO
QQ� � y
SEGMENT DISCLOSURE(cont.)
O�5
Balance Sheets(cont.)
2006
ASSETS Electric Water
Current assets $ 14,698,254 $ 16,805,565
Noncurrent Assets
Capital assets, net 28,155,819 57,421,162
Restricted assets 2,872,982 8,687,212
Other assets 1,401,178 10,481,076
Total Noncurrent Assets 32,429,979 76,589,450
Total Assets $ 47,128,233 $ 93,395,015
LIABILITIES AND NET ASSETS(DEFICIT)
Current liabilities $ 4,953,135 $ 2,769,926
Noncurrent Liabilities
Long-term debt, net of current
portion 18,348,816 44,056,920
Other liabilities 9,006,899 2,433,331
Total Liabilities 32,308,850 49,260,177
Net Assets(Deficit)
Invested in capital assets, net of
related debt 28,060,462 24,062,367
Restricted for debt service 5,448,187 8,582,709
Unrestricted (18,689,266) 11,489,762
Total Net Assets(Deficit) 14,819,383 44,134,838
Total Liabilities
and Net Assets $ 47,128,233 $ 93,395,015
Page 39
TRUCKEE DONNER PUBLIC UTILITY DISTRICT
NOTES
De December 31, 21AL 007 andSTATEMENTS
006
e0
Q O A -SEGMENT DISCLOSURE(cont.)
O
Statements of Revenues, Expenses, and Changes in Net Assets(cont.)
2006
Electric Water
OPERATING REVENUES
Sales to customers $ 18,287,011 $ 8,247,123
Other operating revenues 1,855,391 532,682
Operating expenses (13,555,636) (6,169,931)
Depreciation (1,026,111) (1,926,984)
Nonoperating revenues(expenses) (349,583) 17,449
Income(loss)before
capital contributions 5,211,072 700,339
Capital contributions 3,543,877 4,398,433
Change in net assets 8,754,949 5,098,772
TOTAL NET ASSETS
(DEFICIT)—Beginning
of Year 6,064,434 39,036,066
TOTAL NET ASSETS
(DEFICIT)—END OF
YEAR $ 14,819,383 $ 44,134,838
Page 41
TRUCKEE DONNER PUBLIC UTILITY DISTRICT
NOTES TO FINANCIAL STATEMENTS
P�'A 0� December 31, 2007 and 2006
-CONTINGENCIES
0�5G
he District is one of a group of approximately 50 utilities involved in a matter relating to the
disposal of PCB wastes at two sites. The clean up of the two sites falls under the federal EPA
Superfund Program. The District believes it has resolved this matter with the EPA, with the
District funding its portion of the cleanup expenses, as long as expenses do not exceed
$60,000,000. If cleanup expenses exceed $60,000,000, the District will be liable for their portion
(.163%) of the additional cost. The District's management believes that it will not incur any
additional liability.
NOTE 12-CLAIMS AND JUDGMENTS
From time to time, the utility is party to various pending claims and legal proceedings. Although
the outcome of such matters cannot be forecasted with certainty, it is the opinion of management
and the utility's legal counsel that the likelihood is remote that any such claims or proceedings
will have a material adverse effect on the utility's financial position or results of operations
NOTE 13-RISK MANAGEMENT
The utility is exposed to various risks of loss related to torts; theft of, damage to, or destruction
of assets; errors and omissions; workers compensation; and health care of its employees. These
risks are covered through the purchase of commercial insurance, with minimal deductibles.
Settled claims have not exceeded the commercial liability in any of the past three years. There
were no significant reductions in coverage compared to the prior year.
NOTE 14-SUBSEQUENT EVENTS
A. POSTRETIREMENT BENEFITS
In October 2007, the Governor signed Assembly Bill 554 (AB 554) into law. AB 554 allows
California public employers to join the CERBT to prefund their OPEB obligations after January 1,
2008. On November 7, 2007, the Board approved a participation agreement with PERS to be the
plan administrator for the District's OPEB trust. The participation agreement was submitted to
PERS on November 8, 2007, and became effective on January 15, 2008. On February 4, 2008,
the District contributed $203,935 to the PERS CERBT fund.
Plan Description: The plan is CERBT Fund, which is an IRC Section 115 Trust set up for the
purpose of receiving employer contributions to prefund health and other postemployment
benefits for retirees and their beneficiaries. The plan is an agent multiple employer plan and will
be administered by PERS. It will provide medical, and dental for retirees and their beneficiaries.
Any changes to these benefits would be approved by the District's Board and union contracts. To
obtain a CERBT report, please contact PERS at 888-CALPERS.
Page 43
`�PP�OPp' OS�S
SG�Sc,� EMENTAL INFORMATION
O�
y0
�0 Q JPQpS�S
p Electric Water
Operations Operations Eliminations Totals
LIABILITIES AND NET ASSETS
CURRENT LIABILITIES
Other liabilities
Accounts payable $ 1,354,058 $ 413,677 $ - $ 1,767,735
Customer deposits 202,120 45,860 - 247,980
Other 568,326 243,954 - 812,280
Total Other Liabilities 2,124,504 703,491 2,827.995
Current liabilities payable from restricted assets:
Current portion of long-term debt 2,747,373 1,730,612 - 4,477,985
Accrued interest payable 461,577 192,593 - 654,170
Total Current Liabilities Payable from Restricted Assets 3,208,950 1,923,205 - 5,132,155
Total Current Liabilities 5,333,454 2,626,696 - 7,960,150
NON-CURRENT LIABILITIES
Long-term debt,net of discounts,premiums and losses 15,034,878 40,059,525 - 55,094,403
Installment loans 480,178 2,300,916 - 2,781,094
Deferred revenues 7,725,892 1,918,573 9.644.465
Total Non-Current liabilities 23,240,948 44,279,014 - 67,519,962
Total Liabilities 28,574,402 46,905,710 - 75,480,112
NET ASSETS
Invested in capital assets,net of related debt 32,924,664 29,040,378 - 61,965,042
Restricted for debt service 6,080,894 9,601,451 - 15,682,345
Unrestricted (15,499,381) 12,346,780 - 3,152601
Total Net Assets 23,506,177 50,998,609 - 74,494,786
TOTAL LIABILITIES AND NET ASSETS $ 52,080,579 $ 97,894,319 $ - $ 149,974,898
Page 46
�F( TRUCKEE DONNER PUBLIC UTILITY DISTRICT
0
ept`G�M,BOA vPQ00 STATEMENTS FLOWS
Year Ended December 31,2007
SNP
Q�cJ Electric Water
Operations Operations Eliminations Total
CASH FLOWS FROM OPERATING ACTIVITIES
Received from customers $ 20,907,512 $ 9,754,209 $ (1,754,656) $ 28,907,065
Paid to suppliers for goods and services (12,720,873) (4,801,593) 1,754,656 (15,767,810)
Paid to employees for services (2,379,627 (2,051,467) - (4,431,094)
Net Cash Flows from Operating Activities 5,807,012 2,901,149_ 8,708,161
CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES
Principal payments on long-term debt (2,470,000) - - (2,470,000)
Interest payments on long-term debt (955,875) - (955,875)
Net Cash Flows from Noncapital Financing Activities (3,425,875 - (3,425,875)
CASH FLOWS FROM CAPITAL AND RELATED
FINANCING ACTIVITIES
Capital expenditures for utility plant (3,234,927) (4,786,723) - (8,021,650)
Capital contributions,connection and facility fees 399,435 2,537,084 - 2.936,519
Special assessments receipts - 496,507 - 496,507
Proceeds from issuance of new debt - (12,034) - (12,034)
Principal payments on long-term debt (216,696) (1,584,534) - (1,801,230)
Interest payments on long-term debt (37,010) (1,822,261) - (1,859,271)
Cash Flows From Capital and Related Financing Activities (3,089,198) (5,171,961) (8,261,159)
CASH FLOWS FROM INVESTING ACTIVITIES
P (1,698,880) (1,698,880)
Purchases of investments
Interest received 810,349 1,506,549 - 2,316,898
Cash Flows from Investing Activities 810,349 (192.331) - 618,018
Net Change In Cash and Cash Equivalents 102,288 (2,463,143) (2,360,855)
CASH AND CASH EQUIVALENTS—Beginning of Year 13,811,329 21,893,225 35,704,554
CASH AND CASH EQUIVALENTS—END OF YEAR $ 13,913,617 $ 19,430,082 $ - $ 33,343,699
NONCASH INVESTING ACTIVITIES
During 2007$2,996,383 and$3,256.436 of capital assets were contributed to the water and electric utilities,respectively,by customers and developers.
Page 48
' o
QP �A p�5
�pcU E DONNER PUBLIC
UTILITY DISTRICT
FINANCIAL STATEMENTS
December 31, 2007 and 2006
V�
Q SG�Sc,��ON•( INDEPENDENT AUDITORS' REPORT
0�
Th B of Directors
Tru ee Donner Public Utility District
Truckee, California
We have audited the accompanying balance sheets of the Truckee Donner Public Utility District
as of December 31, 2007 and 2006, and the related statements of revenues, expenses, and
changes in net assets and cash flows for the year then ended, as noted in the table of contents.
These financial statements are the responsibility of the Truckee Donner Public Utility District's
management. Our responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with auditing standards generally accepted in the United
States of America. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material misstatement.
An audit includes examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our opinion
In our opinion, the financial statements referred to above present fairly, in all material respects,
the financial position of the Truckee Donner Public Utility District at December 31, 2007 and
2006, and the results of its operations and its cash flows for the years then ended in conformity
with accounting principles generally accepted in the United States of America.
As discussed in Note 9, the Truckee Dinner Public Utility District adopted the provisions of GASB
Statement No. 45 — Accounting and Financial Reporting by Employers for Postemployment
benefits other than Pensions (OPEB) Effective January 1, 2007.
The management's discussion and analysis on pages 2 through 7 is not a required part of the
basic financial statements, but is supplementary information required by accounting principles
generally accepted in the United States of America. We have applied certain limited procedures,
which consisted principally of inquiries of management regarding the methods of measurement
and presentation of the required supplementary information. However, we did not audit the
information and express no opinion on it.
Our audits were conducted for the purpose of forming an opinion on the financial statements
taken as a whole. The consolidating statements as identified in the table of contents are
presented for purposes of additional analysis and are not a required part of the financial
statements. The consolidating statements have been subjected to the auditing procedures
applied in the audit of the financial statements and, in our opinion, are fairly stated, in all material
respects, in relation to the financial statements taken as a whole.
Madison, Wisconsin
May_, 2008
Page 1
TRUCKEE DONNER PUBLIC UTILITY DISTRICT
RA OS- ANAGEMENT'S DISCUSSION AND ANALYSIS
December 31, 2007 and 2006
O
VIEW OF THE FINANCIAL STATEMENTS
This report includes Management's Discussion and Analysis, the Independent Auditors' Report,
the Basic Financial Statements, (which includes the notes to the financial statements), and
Supplementary Information.
REQUIRED FINANCIAL STATEMENTS
The financial statements of the District are designed to provide readers with a broad overview of
the District's finances similar to a private-sector business. They have been prepared using the
accrual basis of accounting in accordance with accounting principles generally accepted in the
United States of America (GAAP). Under this basis of accounting, revenues are recognized in
the period in which they are earned and expenses are recognized in the period in which they are
incurred, regardless of the timing of related cash flows. These statements offer short- and long-
term financial information about the District's activities.
The reporting entity consists of the primary government, which has two departments (electric
operations and water operations), and the blended component units. Further details about the
component units are provided in note 1.
The Balance Sheet presents information on all of the District's assets and liabilities and
provides information about the nature and amounts of investments in resources (assets) and the
obligations to District creditors (liabilities). It also provides the basis for computing rate of return,
evaluating the capital structure of the District and assessing the liquidity and financial flexibility
of the District.
All of the current year's revenues and expenses are accounted for in the Statement of
Revenues, Expenses, and Changes in Net Assets. This statement provides a measurement of
the District's operations over the past year and can be used to determine whether the District
has successfully recovered all its costs through its rates and other charges and to also analyze
profitability and credit worthiness.
The Statement of Cash Flows provides relevant information about the District's cash receipts
and cash payments during the reporting period. This statement reports cash receipts and cash
payments resulting from operating, non-capital financing, capital and related financing and
investing activities. When used with related disclosures and information in the other financial
statements, the statement of cash flows should provide insight into (a) the District's ability to
generate future net cash flows, (b) the District's ability to meet its obligations as they come due,
(c) the District's needs for external financing, (d) the reasons for differences between operating
income and associated cash receipts and payments and (e) the effects on the District's financial
position of both its cash and its noncash investing, capital and financing transactions during the
period. The changes in cash balances are an important indicator of the District's liquidity and
financial condition_
Page 3
�tr� RUCKEE DONNER PUBLIC UTILITY DISTRICT
yV
gyox", v�QOSrG5 M NAGEMENT'S DISCUSSION AND ANALYSIS
e cn s\ONQy December 31, 2007 and 2006
\D:I%ST HIGHLIGHTS (cont.)
Net assets invested in capital assets, net of related debt, consist of capital assets, net of
accumulated depreciation, reduced by the amount of outstanding indebtedness attributable to the
acquisition, construction or improvement of those assets. When there are significant unspent
bond proceeds, the portion of related debt is not to be included in the calculation of this item.
Instead, that portion of the debt is included in the net assets restricted for capital projects
component as an offset to the related unspent bond proceeds.
Net assets restricted for debt service represents amounts restricted for payments related to
outstanding revenue bonds.
The District had income before capital contributions of $4.9, $7.3, and $3.9 million for the years
ended December 31, 2007, 2006 and 2005, respectively. Changes in the District's net assets can
be determined by reviewing the following Condensed Revenues, Expenses, and Changes in Net
Assets for the year.
Condensed Revenues,Expenses,and Changes in Net Assets
Increase
(Decrease)
2007 2006 2005 2007-2006
Sales to consumers $ 27,439,892 $ 26,534.134 $ 23,881,041 $ 905,758
Other operating revenues 1,676,574 737,500 805,544 939,074
Total Operating Revenues 29,116,466 27,271,634 24,686,585 1,844.832
Operating expenses 24,118,158 21,027,149 20.121,360 3,091,009
Operating Income(Loss) 4,998,308 6.244,485 4,565,225 (1,246,177)
Non-operating revenues(expenses) (77,568) 1,090,776 (676,877) (1,168,344)
Income(loss)before
capital contributions 4,920,740 7,335,261 3.888,348 (2,414,521)
Capital contributions,net 10,986,108 (9,127,441) (2,790,931) 20,113,549
Change in net assets 15,906,848 (1,792,180) 1,097,417 17,699,028
NET ASSETS,Beginning of Year 18,727,576 20,519,756 19,422,339 (1,792,180)
NET ASSETS,END OF YEAR $ 34,634,424 $ 18,727,576 $ 20,519,756 $ 15,906,848
Sales to consumers were $27.4 million in 2007, $26.5 million in 2006 and $23.9 million in 2005.
The overall increases of $0.9 million (or 3.4%) in 2007 and $2.6 million (10.8%) in 2006 are
primarily due to electric and water rate increases to pay for increased operating costs, revenue
generated for Board designated purposes and growth in customers.
Total operating expenses were $24.1 million in 2007, $21.0 million in 2006 and $20.1 million in
2005. The overall increases of $3.1 million (10.2%) in 2007 and $0.9 million (4.4%) in 2006 in
operating expenses are due primarily to increased payroll and benefit costs as well as increases
in depreciation, automotive fuel and other related costs.
Page 5
F( RUCKEE DONNER PUBLIC UTILITY DISTRICT
.t O
�M��JP`0 PQOg�S M NAGEMENT'S DISCUSSION AND ANALYSIS
QP� F PJ December 31, 2007 and 2006
�pN �
�5G
C1IT ASSETS (cont.)
Net capital assets (additions, less retirements and depreciation) at December 31, 2007 increased
$10.6 million (or 12.4%) from December 31, 2006 and net capital assets at December 31, 2006
increased $14.9 million (or 21.1%) from December 31, 2005. The increases in both years have
been due primarily to the electric and water plant additions for new development within the
District's service area as well as contributed assets received from the Community Facilities
Districts.
LONG-TERM DEBT
Long-term debt includes revenue bonds and notes payable. At December 31, 2007, 2006 and
2005, the District had $108.5 million, $112.8 million, and $97.0 million, respectively, in long-term
debt outstanding, including current maturities.
In October, 2006 the District issued $26.6 million in certificates of participation to refund the
1996 COP's, for the funding of water system infrastructure improvements and the completion of
the financing of the Donner Lake water system replacement.
In July 2005, the Gray's Crossing Community Facilities District issued the second in a series of
two bond issues for $19.2 million in special tax bonds, of which the proceeds were used to
acquire certain infrastructure assets within a new development within the District's service area.
CONTACTING THE DISTRICT'S FINANCIAL MANAGEMENT
The financial report is designed to provide readers with a general overview of the District's
finances and to demonstrate the District's accountability for the money it receives. If you have
questions about this report or need additional financial information, contact Truckee Donner
Public Utility District, Attn: Accounting & Finance Department, P.O. Box 309, Truckee, CA 96160.
Page 7
OaP�
a�
Qa��M` F°a vaP°sus
a�S
LIABILITIES AND NET ASSETS
2007 2006
CURRENT LIABILITIES
Other Liabilities
Accounts payable $ 1,767,735 $ 1,894,599
Customer deposits 247,980 204,849
Other 812,280 543,191
Total Other Liabilities 2,827,995 2,642,639
Current Liabilities Payable From Restricted Assets
Current portion of long-term debt 4,637,985 4,361,945
Accrued interest payable 1,511,287 1,681,713
Total Current Liabilities Payable from Restricted Assets 6,149,272 6,043,658
Total Current Liabilities 8,977,267 8,686,297
NON-CURRENT LIABILITIES
Long-term debt, net of discounts, premiums and losses 101,042,614 105,254,663
Installment loans 2,781,094 3,226,662
Deferred revenues 11,080,054 12,758,132
Total Other Non-Current Liabilities 114,903,762 121,239,457
Total Liabilities 123,881,029 129,925,754
NET ASSETS
Invested in capital assets, net of related debt 16,526,277 6,646,999
Restricted for debt service 19,318,592 17,665,753
Unrestricted(deficit) (1,210,445) (5,585,176)
Total Net Assets 34,634,424 18,727,576
TOTAL LIABILITIES AND NET ASSETS $ 158,515,453 $ 148,653,330
See accompanying notes to financial statements.
Page 9
EE DONNER PUBLIC UTILITY DISTRICT
AVM\N OA OSWN OLIDATED STATEMENTS OF CASH FLOWS
PP F vAp ars Ended December 31, 2007 and 2006
s\ON p�
O\
2007 2006
CASH FLOWS FROM OPERATING ACTIVITIES
Received from customers $ 28,907,065 $ 26,810,167
Paid to suppliers for goods and services (15,767,810) (13,180,847)
Paid to employees for services (4,431,094) (4,192,107)
Net Cash Flows From Operating Activities 8,708,161 9,437,213
CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES
Principal payments on long-term debt (2,470,000) (2,385,000)
Interest payments on long-term debt (955,875) (1,047,012)
Net Cash Flows From Noncapital Financing Activities (3,425,875) (3,432,012)
CASH FLOWS FROM CAPITAL AND RELATED
FINANCING ACTIVITIES
Capital expenditures for utility plant (8,021,650) (13,770,481)
Cost of disposal of property net of salvage - 121,377
Proceeds from sale of land - 440,408
Capital contributions, connection and facility fees 2,936,519 8,521,835
Special assessments receipts 496,507 548,476
Capital contributed to developers - (15,789,394)
Special tax receipts 2,597,823 1,647,075
Debt issuance costs and premiums received, net (12,034) 217,579
Loss on advance refunding - (142,995)
Proceeds from issuance of new debt - 27,479,521
Principal payments on long-term debt (1,906,230) (9,728,350)
Interest payments on long-term debt (4,433,980) (3,622,786)
Net Cash Flows From Capital and Related Financing Activities (8,343,045) (4,077,735)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of investments (1,698,880) (1,895,996)
Marketable securities sold - 808,470
Interest received 2,585,308 1,817,356
Cash Flows From Investing Activities 886,428 729,830
Net Change in Cash and Cash Equivalents (2,174,331) 2,657,296
CASH AND CASH EQUIVALENTS—Beginning of Year 40,486,423 37,829,127
CASH AND CASH EQUIVALENTS—END OF YEAR $ 38,312,092 $ 40,486,423
NONCASH INVESTING ACTIVITIES
Developer and customer added capital assets $ 6,523,819 $ 4,551,144
Page 11
�F1 RUCKEE DONNER PUBLIC UTILITY DISTRICT
INX O�
PQOSEs NOTES TO FINANCIAL STATEMENTS
QR Qv December 31, 2007 and 2006
�\S
NOT -ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A. ORGANIZATION
The Truckee Donner Public Utility District (the District) was formed and operates under the State
of California Public Utility District Act. The District is governed by a board of directors which
consists of five elected members. The District provides electric and water service to portions of
Nevada and Placer counties described as Truckee. The electric and water service operations are
separately maintained and operated. These financial statements reflect the combined electric
and water operations of the District_ All significant transactions between electric and water
operations have been eliminated. These eliminations include power purchases and rent for
shared facilities.
The District's blended component units consist of organizations whose respective governing
Boards are comprised entirely of the members of the District's Board of Directors. These
organizations are reported as if they are a part of the District's operations. The entities are
legally separate, however, in the case of the Truckee Donner Public Utility District Financing
Corporation, financial support has been pledged and financial and operational policies may be
significantly influenced by the District. The following is a description of the District's blended
component units:
Truckee Donner Public Utility District Financing Corporation: legal entity created to issue and
administer Certificates of Participation on behalf of the District. See note 5.
Truckee Donner Public Utility District Community Facilities District No. 03-1 (Old Greenwood):
legal entity created to issue special tax bonds to finance various public improvements needed to
develop property located within Old Greenwood. See note 7.
Truckee Donner Public Utility District Community Facilities District No. 04-1 (Gray's Crossing):
legal entity created to issue special tax bonds to finance various public improvements needed to
develop property located within Gray's Crossing. See note 7.
Separate standalone financial statements are not available for the blended component units
described above. Unless noted, disclosures relating to the component units are the same as for
the District.
B. ACCOUNTING POLICIES
The financial statements of Truckee Donner Public Utility District (District) have been prepared in
conformity with accounting principles generally accepted in the United States of America. The
Governmental Accounting Standards Board (GASB) is the accepted standard-setting body for
establishing governmental accounting and financial reporting principles.
The financial statements are reported using the economic resources measurement focus and the
accrual basis of accounting. Under the accrual basis of accounting, revenues are recognized
when earned and expenses are recorded when the liability is incurred or economic asset used.
Revenues, expenses, gains, losses, assets and liabilities resulting from exchange and
exchange-like transactions are recognized when the exchange takes place.
Page 13
TRUCKEE DONNER PUBLIC UTILITY DISTRICT
�� E5 NOTES TO FINANCIAL STATEMENTS
QP�VM BOA ��VC December 31, 2007 and 2006
�ss� Nov
N 1 — GANIZATfON AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cunt.)
J. DEFERRED CHARGES
The district entered into a Broadband Sierra Pacific Communication (AT&T) dark fiber agreement
in 2003 for maintenance purposes which is included in other deferred charges on the
accompanying balance sheets. The agreement is expected to provide benefit to the district over
the estimated 20-year life of the agreement.
K. CAPITAL ASSETS
Capital assets are generally defined by the district as assets with an initial, individual cost of
more than $2,500 and an estimated useful life in excess of one year.
Capital assets of the District are stated at the lower of cost or the fair market value at the time of
contribution to the District. Major outlays for plant are capitalized as projects are constructed.
Depreciation on capital assets is calculated using the straight-line method over the estimated
useful lives of the assets, which are as follows:
Distribution Plant
Water 20-40 years
Electric 23-35 years
Computer software and hardware 4-5 years
Buildings and improvements 20-33 years
Equipment and furniture 10 years
It is the District's policy to capitalize interest paid on debt incurred for significant construction
projects while those projects are under construction, less any interest earned on related unspent
debt proceeds. In 2006, interest was capitalized in connection with the Gray's Crossing District
project which was completed in December 2006. No interest was capitalized in 2007.
L. COMPENSATED ABSENCES
Under terms of employment, employees are granted sick leave and vacations in varying
amounts. Only benefits considered to be vested are disclosed in these statements. Vested
vacation and sick leave pay is accrued when earned in the financial statements. The liability is
liquidated from general operating revenues of the utility.
M. REVENUE RECOGNITION
Revenues are recorded as meters are read on a cycle basis throughout each month for electric
and commercial water. Unbilled revenues, representing estimated consumer usage for the period
between the last billing date and the end of the period, are accrued in the period of consumption.
Other water customers are billed on a flat-rate basis, and revenues are recorded as billed. Also,
the District records estimated revenues earned, but not billed to customers, as of the end of the
year. Revenues from connection fees are recognized upon completion of the connection. Income
that the District has earned through investing its excess cash is reflected within income from
investments when earned.
Page 15
TRUCKEE DONNER PUBLIC UTILITY DISTRICT
P
4VeT
iRGANIZATION
'PosesNOTDeeES Omberv31! 21007 andAL T 006NTS
AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cunt.)
Q. TAX REVENUES
Beginning in 2004, the District levied ad valorem property tax on all the taxable property within
the Old Greenwood District in an amount sufficient to pay the yearly principal and interest on the
Special Assessment District Tax Bonds (see note 5). The District had revenues of $772,768 in
2007 and $830,024 in 2006.
Beginning in 2005, the District levied ad valorem property tax on all taxable property within the
Gray's Crossing District in an amount sufficient to pay the yearly principal and interest on the
Special Assessment District Tax Bonds (see note 5). The District had revenues of $1,966,628 in
2007 and $1,342,957 in 2006.
Taxes are assessed based on the county tax year ending June 30, resulting in deferred revenue
for each of the community facility districts.
R. CONTRIBUTED CAPITAL ASSETS
A portion of the District's capital assets have been obtained through amounts charged to
developers for plant constructed by the District; direct contributions of capital assets from
developers and other parties; as well as assessments of local property owners. These items are
recognized within capital assets as construction is completed for plant constructed by the District
based on the cost of the items, when received for contributed capital assets based on the actual
or estimated fair value of the contributed items, or upon completion of the related project for
development agreements. The District records amounts received within capital contributions
when a legally enforceable claim is established. Until the District meets the criteria to record the
amounts described above as capital contributions, any amounts received are recorded within
deferred revenue on the balance sheet.
During 2006, the Gray's Crossing District contributed $17,069,751 to the District and other
government entities. There were no contributions in 2007. The contribution out from Gray's
Crossing District was netted with capital contributions on the accompanying statement of
revenues, expenses, and changes in net assets.
During 2006 and 2007, the Old Greenwood District did not make any contributions to the District
or other government entities.
S. RECENT ACCOUNTING PRONOUNCEMENTS
In July 2004, the GASB issued Statement No. 45, Accounting and Financial Reporting by
Employers for Postemployment Benefits Other Than Pensions. Statement No. 45 establishes
standards for the measurement, recognition, and display of other postemployment benefits
(OPEB) expense/expenditures and related liabilities (assets), note disclosures, and, if applicable,
required supplementary information (RSI) in the financial reports of state and local governmental
employers. OPEB includes postemployment healthcare, as well as other forms of
postemployment benefits (for example, life insurance) when provided separately from a pension
plan. The adoption of Statement No. 45 is effective for the District beginning fiscal year 2007.
See note 9.
Page 17
TRUCKEE DONNER PUBLIC UTILITY DISTRICT
NOTES TO FINANCIAL STATEMENTS
December 31, 2007 and 2006
��M� OP POS
N — AND INVESTMENTS (cont.)
ther Postemployment Benefits (OPEB) Fund
Starting in 2007, the Board has set aside funds for other postemployment benefits, such as
health care. See note 9.
Debt Service Coverage Fund
Effective 2007, the Board has set aside a portion of the water rates to improve the cash-to-
debt-service ratio.
Donner Lake Assessment District Surcharge Fund
The District established a monthly billing surcharge in the amount of $6.65 applicable to
customers in the Donner Lake area to provide revenue to pay the remainder of the cost of
reconstruction effective October 2006.
As of December 31, board designated accounts consisted of the following:
2007 2006
Building fund $ 238,095 $ 268,656
Storm damage fund 275,548 261,882
Electric rate reserve 1,148,106 753,020
Reserve for future meters 375,665 280,310
Water capital replacement fund 294,508 127,004
Prepaid connection fees 77,400 74,734
Land sale trust fund 3,552,291 2,619,363
Other post employment benefits 201,630 -
Debt service coverage fund 252,481 -
Donner Lake Assessment District surcharge fund 5,465 -
Totals $ 6,421,189 $ 4,384,969
Certain assets have been restricted by certificates of participation covenants or third party
contractual agreements for the following purposes:
Certificates of Participation: Electric
The terms of the Electric Division's Certificates of Participation require a reserve fund as
security for each principal and interest payment as they come due. A reserve fund is set
aside for the highest annual principal and interest payment over the life of the borrowed
amount. All of these reserve funds are held by Bank of New York Western Trust Company.
Page 19
TRUCKEE DONNER PUBLIC UTILITY DISTRICT
oaP� NOTES TO FINANCIAL STATEMENTS
`M�NAaP 05�g December 31, 2007 and 2006
tLAMe cc,,�� NP
I, AND INVESTMENTS(cunt.)
Grays Crossing Project Fund
During 2004, the Gray's Crossing Community Facilities District issued $16,375,000 of Special
Tax bonds to finance various property improvements within Gray's Crossing. The District
established the Gray's Crossing Project Fund to account for the unspent bond proceeds. The
District is allowed to draw upon such funds as valid construction costs are incurred.
2006 COP Water System Project Fund
During 2006, the District issued $26.6 million in water COP's (see note 5), the proceeds of
which are to be used in part for future water system replacement. The District established the
Water System Project Fund to account for the unspent bond proceeds. The District is allowed
to draw upon such funds as valid construction costs are incurred.
Equipment Loans Escrow Accounts
During 2005, the District obtained loans to purchase various capital equipment. As the
District received loan funds, the proceeds were held in escrow until qualified purchases were
made. In 2007, the District used the remaining funds for purchases of capital equipment.
Other (Area Improvement Funds)
The District receives funds from the County of Nevada, which are to be used only for
improvements to specific areas within the District's boundaries in Nevada County. These
areas include various Nevada County assessment districts.
When both restricted and unrestricted resources are available for use, it is the district's policy
to use restricted resources first, then unrestricted resources as they are needed.
Page 21
TRUCKEE DONNER PUBLIC UTILITY DISTRICT
NOTES TO FINANCIAL STATEMENTS
40T,
December 31, 2007 and 2006
INVESTMENTS (cont.)
MENTS AUTHORIZED BY THE DISTRICT'S INVESTMENT POLICY
During 2006, the District's investment policy only authorized investment in the local government
investment pool administered by the State of California ("LAIF"). The District adopted a new
investment policy in 2006 which allowed for investments in instruments allowed by the California
Government Code and/or the investments allowed by the trust agreements on District financing.
The District's investment policy contains provisions intended to limit the District's exposure to
interest rate risk, credit risk, and concentration of credit risk. At December 31, 2007 and 2006 the
District's deposits and investments were held as follows:
2007 2006
Cash on hand $ 900 $ 900
Deposits 675,331 449,187
LAW 23,117,571 30,573,641
Money Market Funds 7,242,380 9,462,695
Guaranteed Investment Contract 7,275,910 -
Government Bonds 3,594,876 1,895,996
Totals $ 41,906,968 $ . 42,382,419
DISCLOSURES RELATING TO INTEREST RATE RISK
Interest rate risk is the risk that changes in the market interest rates will adversely affect the fair
value of an investment. Generally, the longer the maturity of an investment, the greater the
sensitivity of its fair value to changes in market interest rates. Information about the sensitivity of
the fair values of the District's investments to market interest rate fluctuations is provided by the
following table that shows the District's investments by maturity for 2007 and 2006:
Investment Maturity
LAIF 12 months or less
Federated U.S.Treasury Cash Reserve 12 months or less
Fidelity Institutional Prime 12 months or less
Fidelity Money Market 12 months or less
FSA Capital Management- Investment Contract 12 months or less
Federal Home Loan Mortgage 9/15/2011
Federal Farm Credit Banks 3/2/2021
Page 23
TRUCKEE DONNER PUBLIC UTILITY DISTRICT
NOTES TO FINANCIAL STATEMENTS
M`NPR.t� SES December 31, 2007 and 2006
NQ
N. �,� ASSETS
ital assets consist of the following at December 31, 2007 and 2006:
January 1, December 31,
2007 Additions Reductions 2007
Electric distribution facilities $ 25,821,475 $ 6,009,855 $ (290,856) $ 31,540,474
Water distribution facilities 62,451,778 8,971,842 (67,166) 71,356,454
General plant 10,198,603 506,197 (1,253,678) 9,451,122
98,471,856 15,487,894 (1,611,700) 112,348,050
Less:Accumulated depreciation (25,170,480) (3,933,152) 1,611,700 (27,491,932)
Construction work in progress 11,845,505 9,477,317 (10,423,888) 10,898,934
Land held for future use 430,100 - - 430,100
Totals $ 85,576,981 $ 21,032,059 $ (10,423,888) $ 96,185,152
January 1, December 31,
2006 Additions Reductions 2006
Electric distribution facilities $ 20,884,302 $ 5,167,154 $ (229,981) $ 25,821,475
Water distribution facilities 56,986,916 5,745,909 (281,047) 62,451,778
General plant 9,969,072 398,334 (168,803) 10,198,603
87,840,290 11,311,397 (679,831) 98,471,856
Less: Accumulated depreciation (22,702,610) (3,212,232) 744,362 (25,170,480)
Construction work in progress 5,081,826 15,726,423 (8,962,744) 11,845,505
Land held for future use 430,100 - - 430,100
Totals $ 70,649,606 $ 23,825,588 $ (8,898,213) $ 85,576,981
As of December 31, 2007 and 2006, the plant in service included $1,925,482 of land which is not
being depreciated.
A portion of the plant has been contributed to the District. When replacement is needed, the
District replaces the contributed plant with District-financed plant.
During 2006, the service utility of one of the transformers at the Tahoe Donner Substation
became impaired as a result of damage from an animal entering the substation. The financial
statements for the electric department include an impairment gain of $119,987. The gain is
reported inclusive of$127,967 of insurance recoveries.
During 2006, the District capitalized $1,279,938 of interest in connection with the Gray's
Crossing District. No interest was capitalized in 2007 since the project was completed and in
service at the end of 2006.
Page 25
TRUCKEE DONNER PUBLIC UTILITY DISTRICT
�pPPF� NOTES TO FINANCIAL STATEMENTS
�M`N Q QOS�S December 31, 2007 and 2006
S'sON �t
N — - ERM DEBT
g-term debt consisted of the following at December 31, 2007 and 2006:
January 1, December 31, Due within
2007 Additions Reductions 2007 one year
Certificates of Participation—
Electric,2.5%to 5.75%,
due serially to 2013(net of
unamortized premiums of
$209,878). $ 20,149.354 $ $ (2,544,476) $ 17,604,878 $ 2,570,000
State Revolving Fund Loan—
Water,2.34%,due semiannually
beginning in 2006 to 2026, 12,227,122 (517,749) 11,709,373 529.935
Special Tax Bonds—Mello
Roos,2.25%to 5.7%,due
serially to 2013(net of
unamortized discounts of
$129.534). 12,198,576 (33,110) 12,165,466 55,000
Special Tax Bonds—Mello
Roos,3,25%to 5.7%,
due serially to 2035(net of
unamortized discounts of
$310,493). 15,049,319 188 15,049,507 35,000
Special Tax Bonds—Mello
Roos,3.50%to 5.50%,due
due serially to 2035(net of
unamortized discounts of
$211,761). 18,932,692 (39,453) 18,893.239 70,000
Certificates of Participation—
Water,4.00%to 5.00%,
due serially to 2036(net of
unamortized discounts of
$132,047 and premiums of
$591,558) 27,062,084 (578,493) 26,483,591 745.000
Department of Water Resources,
3.18%,due semiannually to
2021,secured by real
and personal property. 3,538,845 (195,582) 3,343,263 201,765
Installment loans,5.4%to 6.23%,
various payment terms and
due dates,secured by
equipment. 3,685.278 (472,902) 3.212,376 431,285
Totals $112,843,270 $ $ (4,381,577) $ 108,461,693 $ 4,637,985
Page 27
TRUCKEE DONNER PUBLIC UTILITY DISTRICT
NOTES TO FINANCIAL STATEMENTS
�M��.1POP Q05Es December 31, 2007 and 2006
G-TERM DEBT(cont.)
April3, 2003, the District issued $26,265,000 of Certificates of Participation, the net
proceeds of which were utilized to pay the amounts due to IDACORP for the purchase power
contract settlement fees, as well as to cover the associated costs of issuance. The terms of the
new Certificates call for debt service payments to be made only from the net revenues of the
Electric Division. These revenues are required to be a least equal to 120% of the debt service for
each year.
During April 2004, the District obtained financing in the form of a State Revolving Fund Loan, the
proceeds of which are to be utilized in the replacement of the Donner Lake water system. The
District submitted expenditures to the State for reimbursement of $12,732,965. The semi-annual
principal and interest payments are $400,426 and commenced in 2006. The District is also
required to fund a reserve account by making semi-annual reserve payments in the amount of
$40,043 for a 10-year period beginning in 2006. In 2004, the remaining balance of $12,227,122
was used to pay off the temporary lines of credit obtained in 2001 and 2002 to fund the Donner
Lake project. See note 8 for additional information.
During December 2003, the Old Greenwood Community Facilities District issued $12,445,000 of
Special Tax Bonds, the net proceeds of which were utilized to finance various public
improvements for property within Old Greenwood. The terms of the Special Tax Bonds call for
debt service payments to be provided solely by taxes levied on and collected from the owners of
the taxable land within Old Greenwood. The bonds are secured by land located within Old
Greenwood.
During 2005 and 2004 respectively, the Gray's Crossing Community Facilities District issued
$15,375,000 and $19,155,000 of Special Tax Bonds, the net proceeds of which were utilized to
finance various public improvements for property within Gray's Crossing (see note 7). The terms
of the Special Tax Bonds call for debt service payments to be provided solely by taxes levied on
and collected from the owners of the taxable land within Gray's Crossing. The bonds are secured
by land located within Gray's Crossing.
During 1996, Truckee Donner Public Utility District Financing Corporation issued $10,905,000 of
Certificates of Participation to refund 100% of the outstanding balance of Certificates issued in
1991. The 1991 Certificates were used to finance the repair and construction of various water
system improvements for the District. The terms of the new Certificates call for payments to be
made only from the net revenues of the Water Division and the debt is secured by this revenue.
These revenues are required to be at least equal to 110% of the debt service for each year.
On October 12, 2006 Certificates of Participation in the amount of $26,570,000 described above
were issued, a portion of which were used to refund $8,465,000 of the above-mentioned 1996
Certificates of Participation. The refunding portion of the 2006 COP's has an average interest
rate of 4.10%. The refunded 1996 COP's had an average interest rate of 5.41%. The net
proceeds of $7,500,557(after payment of $63,733 in underwriting fees, insurance and other
issuance costs) plus an additional $1,315,194 of reserve fund monies were used to prepay the
outstanding debt service requirements on the 1996 COP's.
Page 29
TRUCKEE DONNER PUBLIC UTILITY DISTRICT
P��,�er�FO QJPepS NOTES TO FINANCIAL STATEMENTS
December 31, 2007 and 2006
O�
E 6—DEFERRED REVENUE
For transactions that have not yet met revenue recognition requirements, revenues are deferred
and reflected in the accompanying balance sheets. As of December 31, 2007 and 2006, deferred
revenues consist of unearned special assessment revenues, development agreement deposits,
connection fees and other deposits.
Deferred revenue consisted of the following at December 31, 2007 and 2006:
January 1, December 31,
2007 Additions Reductions 2007
Unearned tax revenues $ 1,317,902 $ 1,435,589 $ (1,317,902) $ 1,435,589
Development agreement deposits 8,892,325 1,853,378 (3,114,577) 7,631,126
Connection fees and other deposits 2,547,905 1,869,303 (2,403,869) 2,013,339
Totals $ 12,758,132 $ 5,158,270 $ (6,836,348) $ 11,080,054
January 1, December 31,
2006 Additions Reductions 2006
Unearned tax revenues $ 794,206 $ 1,317,902 $ (794,206) $ 1,317,902
Development agreement deposits 3,944,461 6,369,502 (1,421,638) 8,892,325
Connection fees and other deposits 2,365,100 2,606,510 (2,423,705) 2,547,905
Totals $ 7,103,767 $ 10,293,914 $ (4,639,549) $ 12,758,132
NOTE 7 — COMMUNITY FACILITIES DISTRICTS
In order to finance various public improvements needed to develop property within the Town of
Truckee, California, the District formed Community Facilities Districts (CFD), which issued
Special Tax Bonds pursuant to the Mello-Roos Community Facilities Act of 1982, as amended.
Accordingly, the Bonds are special obligations of the respective Community Facilities Districts
and are payable solely from revenues derived from taxes levied on and collected from the
owners of the taxable land within the respective Community Facilities Districts. These Special
Tax Bonds are not general or special obligations of the District. The Board of Directors of the
District is the legislative body of the Communities Facilities Districts and as such they approve
the rates and method of apportionment of the special taxes. As improvements are completed, the
infrastructure is donated, in the form of a capital contribution to the Town of Truckee, the
Truckee Sanitary District, Southwest Gas and the District.
Page 31
TRUCKEE DONNER PUBLIC UTILITY DISTRICT
PQO50S NOTES
DeceOmberv311,, 21AL 007 andSTATEMENTS
006
E ONNER LAKE WATER COMPANY PURCHASE(cont)
uring April 2004, the District obtained financing in the form of a State Revolving Fund Loan for
$12,732,965 at a rate of 2.34%. The semi-annual principal and interest payments are $400,426.
The District is also required to fund a reserve account by making semi-annual reserve payments
in the amount of $40,043 for a 10-year period. Prior to obtaining the State Revolving Fund Loan,
the District had third party bridge financing in the form of two lines of credit totaling $10,000,000.
Both lines of credit were extinguished with funds received through the State Revolving Fund
Loan.
NOTE 9—EMPLOYEE BENEFIT PLANS
A. CALPERS PLAN
The District and bargaining unit employees elected to participate in the Public Agency portion of
CalPERS, effective August 21, 2004. The CalPERS plan is an agent multiple-employer plan
administered by CalPERS, which acts as a common investment and administrative agent for
participating public employers within the state of California. State statutes within the Public
Employees' Retirement Law establish a menu of benefit provisions, as well as other
requirements. The District selects optional benefit provisions from the benefit menu by contract
with CalPERS and adopts those benefits through local ordinance or resolution. The CaIPERS
plan also provides for death and disability benefits. CalPERS issues a separate comprehensive
annual financial report. Copies of the CalPERS' annual financial report may be obtained from the
CalPERS Executive Office —400 P Street— Sacramento, California, 95814.
Active plan participants are required to contribute 7% of their annual covered salary, of which the
District on the participants' behalf pays 4%. The District is required to contribute the actuarially
determined remaining amounts necessary to fund the benefits for its participants. The required
employer contribution rate for fiscal years ending June 30, 2007 and 2006 is 18.006% of eligible
participant payroll. The contribution requirements of the plan participants are established by
State statute and the employer contributions rate is established and may be amended by
CalPERS.
The District's annual pension cost for the years ended December 31, 2007, 2006, and 2005
respectively, was $1,056,022, $974,467 and $907,711 and was equal to the District's required
and actual contributions as determined by the June 30, 2006 actuarial valuation using the entry
age normal actuarial cost method with the contributions determined as a percent of payroll. The
actuarial methods and assumptions used are those adopted by the CalPERS Board of
Administration. Significant actuarial assumptions include:
Actuarial Cost Method Entry Age Normal Cost Method
Inflation Rate 3.00%compounded annually
Investment Return 7.75%compounded annually
Salary Increases 3.25%
Page 33
PPc� TRUCKEE DONNER PUBLIC UTILITY DISTRICT
J�QO�tGS NOTES TO FINANCIAL STATEMENTS
"Cog,I? December 31, 2007 and 2006
V1V0T —EMPLOYEE BENEFIT PLANS (cont.)
C. OTHER POST EMPLOYMENT BENEFITS (OPEB) (cont.)
During 2006, the District received an OPEB actuarial report prepared by its medical benefits
provider, National Rural Electric Cooperative Association (NRECA). In addition to the above post
employment health care premiums, the District began to contribute to an internally designated
OPEB account in 2007 for the purpose of contributing to the California Employer's Retiree
Benefit Trust Program (CERBT) in 2008. See note 15.
The District administers a single-employer defined benefit healthcare plan ("The Retiree Health
Plan"). The plan provides health insurance contributions for eligible retirees and their spouses
through the Districts group health insurance plan, which covers both active and retired members.
Benefit provisions are established through collective bargaining agreements and state that
eligible retirees and their spouses receive lifetime healthcare insurance at established
contribution rates. The Retiree Health Plan does not issue a publicly available financial report.
Contribution requirements are established through collective bargaining agreements and may be
amended only through negotiations between the District and the union. The District makes the
same monthly health insurance contribution on behalf of the retiree as it makes on behalf of all
other active employees during that year. The district contributes 100% percent of the current
year premiums for a family and a single plan for eligible retired plan members and their spouses.
For fiscal year 2007, the district contributed $54,100 to the plan. Plan members receiving
benefits contribute 0% percent of their premium costs for a family plan and a single plan. For
fiscal year 2007, total member contributions were $0. Administrative costs of the plan are
financed through investment earnings.
The District's annual other postemployment benefit (OPEB) cost (expense) is calculated based
on the annual required contribution of the employer (ARC), an amount actuarially determined in
accordance with parameters of GASB Statement No. 45. The ARC represents a level of funding
that, if paid on an ongoing basis, is projected to cover normal cost each year and amortize any
unfunded actuarial liabilities (or funding excess) over a period not to exceed thirty years. The
following table shows the components of the District's annual OPEB cost for the year, the
amount actually contributed to plan, and changes in the District's net OPEB obligation to the
Retiree Health Plan:
Annual required contribution $ 252,900
Interest on net OPEB obligation
Adjustment to annual required contribution -
Annual OPEB cost 252,900
Contributions made 54,100
Increase in net OPEB obligation(asset) 198,800
Net OPEB Obligation(Asset)-Beginning of Year -
Net OPEB Obligation(Asset)-End of Year $ 198,800
Page 35
�( TRUCKEE DONNER PUBLIC UTILITY DISTRICT
O�
NOTES TO
�pP vPQpS�S Decembe3 FINANCIAL STATEMENTS
2007 and 006
r p
DIVOT 0-SELF FUNDED INSURANCE
The District has a self-funded vision insurance program. Prior to 2007, the District also had a
very small amount of self insurance with respect to the supplemental cost of certain mail order
prescriptions that was not covered by the commercial health insurance. For both, claims were
processed by and on behalf of the District. The District did not maintain a claim liability, rather
claims were expensed as paid. The amount of claims paid for each of the past three years have
not been material.
NOTE 11 -SEGMENT DISCLOSURE
The District has issued revenue bonds to finance water and electric distribution facilities. During
2005 and 2004, the District also issued special tax bonds secured by tax revenues. Each project
has an external requirement to be accounted for separately, and investors in the revenue and
special tax bonds rely solely on the revenue generated by the individual projects for repayment.
Summary financial information as of and for the years ending December 31, 2007 and 2006 for
each project is presented below.
Page 37
TRUCKEE DONNER PUBLIC UTILITY DISTRICT
NOTES TO FINANCIAL STATEMENTS
�\NpPP OS�S December 31, 2007 and 2006
pP Opp
EGMENT DISCLOSURE (cunt.)
O�
Balance Sheets(cont.)
2006
Gary's Old
ASSETS Electric Water Crossing Greenwood
Current assets $ 14,698,254 $ 16,805,565 $ 2,093,312 $ 838,918
Noncurrent Assets
Capital assets,net 28,155,819 57,421,162 - -
Restricted assets 2,872,982 8,687,212 3,219,933 1,273,160
Other assets 1,401,178 10,481,076 476,460 228,299
Total Noncurrent Assets 32,429,979 76.589,450 3,696,393 1,501,459
Total Assets $ 47,128,233 $ 93,395,015 $ 5,789,705 $ 2,340,377
LIABILITIES AND NET ASSETS(DEFICIT)
Current liabilities $ 4,953,135 $ 2,769,926 $ 683,080 $ 280,156
Noncurrent Liabilities
Long-term debt,net of current
portion 18,348,816 44,056,920 33,917,012 12,158,577
Other liabilities 9,006,899 2,433,331 936,360 381,542
Total Liabilities 32,308,850 49,260,177 35,536,452 12,820,275
Net Assets(Deficit)
Invested in capital assets,net of
related debt 28,060,462 24,062,367 (33,505,552) (11,970,278)
Restricted for debt service 5,448,187 8,582,709 2,601,853 1,033,004
Unrestricted (18,689,266) 11,489,762 1,156,952 457,376
Total Net Assets(Deficit) 14,819,383 44,134,838 (29,746,747) (10,479,898)
Total Liabilities
and Net Assets $ 47,128,233 $ 93,395,015 $ 5,789,705 $ 2,340,377
Page 39
TRUCKEE DONNER PUBLIC UTILITY DISTRICT
NOTES TO FINANCIAL STATEMENTS
�PQ�O 05�5 December 31, 2007 and 2006
N d GMENT DISCLOSURE(cont.)
�\C
Statements of Revenues, Expenses,and Changes in Net Assets(cont.)
2006
Gray's Old
Electric Water Crossing Greenwood
OPERATING REVENUES
Sales to customers $ 18,287,011 $ 8,247,123 $ - $ -
Other operating revenues 1,855,391 532,682 175 765
Operating expenses (13,555,636) (6,169,931) - -
Depreciation (1,026,111) (1,926,984) - -
Nonoperating revenues(expenses) (349,583) 17,449 1,286,578 136,332
Income(loss)before
capital contributions 5,211,072 700,339 1,286,753 137,097
Capital contributions 3,543,877 4,398,433 (17,069,751) -
Change in net assets 8,754,949 5,098,772 (15,782,998) 137,097
TOTAL NET ASSETS
(DEFICIT)—Beginning
of Year ' 6,064,434 39,036,066 (13,963,749) (10,616,995)
TOTAL NET ASSETS
(DEFICIT)—END OF
YEAR $ 14,819,383 $ 44,134,838 $ (29,746,747) $ (10,479,898)
Page 41
TRUCKEE DONNER PUBLIC UTILITY DISTRICT
p�P NOTES TO FINANCIAL STATEMENTS
SNP 09 Pe December 31, 2007 and 2006
S
�N� O E
y
N 128 NTINGENCIES
District is one of a group of approximately 50 utilities involved in a matter relating to the
disposal of PCB wastes at two sites. The clean up of the two sites falls under the federal EPA
Superfund Program. The District believes it has resolved this matter with the EPA, with the
District funding its portion of the cleanup expenses, as long as expenses do not exceed
$60,000,000. If cleanup expenses exceed $60,000,000, the District will be liable for their portion
(.163%) of the additional cost. The District's management believes that it will not incur any
additional liability.
NOTE 13—CLAIMS AND JUDGMENTS
From time to time, the utility is party to various pending claims and legal proceedings. Although
the outcome of such matters cannot be forecasted with certainty, it is the opinion of management
and the utility's legal counsel that the likelihood is remote that any such claims or proceedings
will have a material adverse effect on the utility's financial position or results of operations
NOTE 14—RISK MANAGEMENT
The utility is exposed to various risks of loss related to torts; theft of, damage to, or destruction
of assets; errors and omissions; workers compensation; and health care of its employees. These
risks are covered through the purchase of commercial insurance, with minimal deductibles.
Settled claims have not exceeded the commercial liability in any of the past three years. There
were no significant reductions in coverage compared to the prior year.
NOTE 15—SUBSEQUENT EVENTS
A. POSTRETIREMENT BENEFITS
In October 2007, the Governor signed Assembly Bill 554 (AB 554) into law. AB 554 allows
California public employers to join the CERBT to prefund their OPEB obligations after January 1,
2008. On November 7, 2007, the Board approved a participation agreement with PERS to be the
plan administrator for the District's OPEB trust. The participation agreement was submitted to
PERS on November 8, 2007, and became .effective on January 15, 2008. On February 4, 2008,
the District contributed $203,935 to the PERS CERBT fund.
Plan Description: The plan is CERBT Fund, which is an IRC Section 115 Trust set up for the
purpose of receiving employer contributions to prefund health and other postemployment
benefits for retirees and their beneficiaries. The plan is an agent multiple employer plan and will
be administered by PERS. It will provide medical, and dental for retirees and their beneficiaries.
Any changes to these benefits would be approved by the District's Board and union contracts. To
.obtain a CERBT report, please contact PERS at 888-CALPERS.
Page 43
PF�
` PPP P cO'
EMENTAL INFORMATION
O�
oPP�
Component Units
Electric Water
Operations Operations Gray's Cross Old Greenwood Eliminations Totals
LIABILITIES AND NET ASSETS
CURRENT LIABILITIES
Other liabilities
Accounts payable $ 1,354,058 $ 413,677 $ - $ - $ - $ 1.767.735
Customer deposits 202,120 45,860 - - 247,980
Other 568,326 243,954 - - 812.280
Total other liabilities 2,124,504 703,491 - - 2,827 995
Current liabilities payable from restricted assets:
Current portion of long-term debt 2,747,373 1,730,612 105,000 55,000 - 4,637.985
i
Accrued interest payable 461,577 192,593 617,334 239,783 - 1,511,287
Total Current Liabilities Payable from Restricted Assets 3,208,950 1,923,205 722,334 294,783 - 6,149.272
Total Current Liabilities 5,333,454 2,626,696 722,334 294,783 - 8,977.267
NON-CURRENT LIABILITIES
Long-term debt,net of discounts,premiums and losses 15,034,878 40,059,525 33.837,746 12,110,465 - 101,042,614
Installment loans 480,178 2,300,916 - - - 2,781,094
Deferred revenues 7.725.892 1,918,573 1,034,307 401,282 11,080,054
Total non-current liabilities 23,240,948 44,279,014 34,872,053 12,511,747 - 114,903,762
Total Liabilities 28,574,402 46,905,710 35,594,387 12,806,530 - 123,881,029
NET ASSETS
I Invested in capital assets,net of related debt 32,924,664 29,040,378 (33,490,069) (11,948,696) 16.526.277
I Restricted for debt service 6,176,815 9,928,775 2,641,755 1,020,538 - 19,767.883
r Unrestricted (15,595,302) 12,019,456 1,356,278 559,832 - (1,659,736)
Total Net Assets 23,506,177 50,988,609 (29,492,036) (10,368,326) - 34,634.424
i
f
i
TOTAL LIABILITIES AND NET ASSETS $ 52,080,579 $ 97,894,319 $ 6,102,351 $ 2,438,204 $ - $ 158,515,453
i r--
t
i
Page 46
I '
OPT TRUCKEE DONNER PUBLIC UTILITY DISTRICT
QP�L\M\F P P Q0c STATEMENTS OF CASH FLOWS
OC\QV Year Ended December 31,2007
�\s
__ Component Units
Electric Water Old
Operations Operations Gray's Cross Greenwood Eliminations Total
CASH FLOWS FROM OPERATING ACTIVITIES
Received from customers $ 20,907,512 $ 9.754,209 $ $ $ (1,754,656) $ 28.907,065
Paid to suppliers for goods and services (12,720,873) (4,801,593) 1,754,656 (15,767,810)
Paid to employees for services (2,379.627) (2,051,467) (4,431,094)
Net Cash Flows from Operating Activities 5,807,012 2,901,149 8,708,161
CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES
Principal payments on long-term debt (2,470,000) - (2,470,000)
Interest payments on long-term debt (955,875) (955,875)
Net Cash Flows from Noncapital Financing Activities (3,425,875) (3,425,875)
CASH FLOWS FROM CAPITAL AND RELATED
FINANCING ACTIVITIES
Capital expenditures for utility plant (3,234,927) (4,786,723) (8,021,650)
Capital contributions,connection and facility fees 399,435 2,537,084 2,936,519
Special assessments receipts - 496,507 496,507
Special tax receipts - 1,846,893 750,930 2,597,823
Debt issuance Costs and premiums received,net (12,034) - - (12,034)
Principal payments on long-term debt (216,696) (1,584,534) (65,000) (40,000) (1,906,230)
Interest payments on long-term debt (37,010) (1,822,261) (1,854,240) (720,469) (4,433,980)
Cash Flows From Capital and Related Financing Activities (3,089,198) (5,171,961) (72,347) (9,539) (8,343,045)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of investments - (1,698,880) (1,698,880)
Interest received 810,349 1,506,549 191,093 77,317 2,585,308
Cash Flows from Investing Activities 810,349 (192,331) 191,093 77,317 886,428
Net Change in Cash and Cash Equivalents 102,288 (2,463,143) 118.746 67,778 (2,174,331)
CASH AND CASH EQUIVALENTS—Beginning of Year 13,811,329 21,893,225 3,438,995 1.342,874 40,486,423
CASH AND CASH EQUIVALENTS—END OF YEAR $ 13,913,617 $ 19,430,082 $ 3,557,741 $ 1,410,652 $ $ 38,312,092
NONCASH INVESTING ACTIVITIES
During 2007$2,995,383 and$3,258,436 of capital assets were contributed to the water and electric utilities,respectively,by customers and developers.
Page 48
i
i ,
pA�M113A►AY DW
FDA ES
P�
MbOAS101guX
Truckee Donner Public Utility District
11570 Donner Pass Road
PO Box 309
Truckee, CA 96160
Dear Board Members:
We are presenting for your consideration our comments and recommendations on the system of
internal control and other operating matters. These matters came to our attention during our audit
of the financial statements of Truckee Donner Public Utility District (District) for the year ended
December 31, 2007 and 2006, which we reported upon on May_, 2008.
This letter, by its nature, focuses on improvements and does not comment on the many strong
areas of the District's systems and procedures. The comments and suggestions on the attached
report are not intended to reflect in any way on the integrity or ability of the personnel of the
District. They are made solely in the interest of establishing sound internal control practices and
improving the District's operations.
This report is intended solely for the information and use of the directors and management and is
not intended to be and should not be used by anyone other than these specified parties.
CURRENT YEAR COMMENTS
INFORMATION TECHNOLOGY(IT) GENERAL CONTROLS
The implementation of the new auditing standards (#104-111) are intended to improve the
auditors' understanding of the environment in which you operate and your internal controls.
Information technology is a significant part of the financial environment. As such we have
reviewed the general computer control (GCC) environment at the District as it relates to the 2007
financial audit. The GCC review utilized the IT RAS framework to obtain a more detailed
understanding of the District IT control environment. As part of the GCC review, the following
areas related to the IT function were reviewed:
➢ IT Organizational Structure
➢ Systems Architecture
➢ Manage Changes - Program Development and Program Change
➢ Computer Operations and Logical Access to Programs and Data
➢ IT Risk Assessment and Management
From our review we have identified the following area where controls should be reviewed and
strengthened.
Truckee Donner Public Utili
pREUM1NAR
May_, 2008 PO PUB?
Page 3 I SCUSS1ON
Owy
NEW ACCOUNTING STANDARDS (cont)
NEW STANDARD— STATEMENT ON AUDITING STANDARDS(SAS)
NO. 114 THE AUDITOR'S COMMUNICATION WITH THOSE CHARGED WITH GOVERNANCE(cont)
Unless all of those charged with governance are involved in managing the entity, the following
should also be communicated:
• Material corrected misstatements
• Representations the auditor is requesting from management
• Managements consultations with other accountants
• Significant issues, if any, arising from the audit, or subject of correspondence, with
management.
How does this impact your organization? We are providing increased communications to you
throughout the audit process. We have included a section in the back of this report to you
covering the items noted above. The new requirements provide for two-way communication and
are important in assisting the auditor and you with more information relevant to the audit. We
welcome the opportunity to hear from you.
PRIOR YEAR COMMENTS AND STATUS
DOCUMENTATION OF AUTOMATED OVERHEAD ALLOCATION PROCESS
During 2006 District staff and management dedicated a significant effort to improving the work
order process. This included implementing a monthly closing and reconciliation process as well
as implementing several process efficiencies. One of these efficiencies was to automate the
overhead allocation process, or allow the work order system to allocate overheads each month
based on the total overhead costs and the total work order charges for the month. This eliminates
a significant amount of staff effort to manually calculate this allocation monthly. We recommend
that staff develop documentation for this automated allocation process including how the total
overhead costs are accumulated and what the basis for the allocation to each work order is and
develop a process to review this monthly to ensure that the allocations prepared by the system are
consistent and reasonable. During 2007, the District implemented a control to reconcile and
review the overhead allocation on a monthly basis.
MONTHLY FINANCIAL REPORTING FOR ONGOING DISTRICT MANAGEMENT
As the board has the ultimate responsibility for the finances of the District we commend the board
members for their desire to review detailed reports on a monthly basis however we also
understand that there can be a lot of information included for a utility the size of the District. It is
important for the board to review the disbursement records and feel comfortable with the purpose
and payees included on these records. Beyond that, however, many governing bodies struggle
with what information provides the best analysis with the limited amount of time the members
have available for review. We would recommend two types of monthly reports be considered.
Truckee Donner Public Utility District
May_, 2008 PRELIMINARY DW' T
Page 5 FOR
DISCUSSION Y RPOSES
INTERNAL CON cont)
A material weakness is a significant deficiency, or combination of significant deficiencies, that
results in more than a remote likelihood that a material misstatement of the financial statements
will not be prevented or detected by the entity's internal control. We believe that the following
deficiencies constitute material weaknesses.
• Financial Reporting- During the 2007 audit we noted material journal entries not detected
by staff or management.
• Financial Reporting- During the 2007 audit the auditor provided significant assistance to
management during the preparation of the financial statements.
To accomplish such a high level of internal controls over financial reporting is a difficult task for
most governments. Many large organizations, such as SEC companies, have been required by law
to prepare their own statements for years, and are staffed appropriately to do so. Most
governments require time to make this adjustment. Under the new accounting standards, we
must, therefore, inform you that these are material weaknesses in your internal control.
COMMUNICATION TO AUDIT COMMITTEE OR ITS EQUIVALENT
We have completed our audit of the financial statements of Truckee Donner Public Utility District
for the year end December 31, 2007 and 2006 and have issued our report thereon dated May
2008. This letter presents communications required by our professional standards.
OUR RESPONSIBILITY UNDER AUDITING STANDARDS
GENERALLY ACCEPTED IN THE UNITED STATES OF AMERICA
The objective of a financial statement audit is the expression of an opinion on the financial
statements. We conducted the audit in accordance with auditing standards generally accepted in
the United States of America. These standards require that we plan and perform our audit to
obtain reasonable, rather than absolute, assurance about whether the financial statements
prepared by management with your oversight are free of material misstatement, whether caused
by error or fraud. Our audit included examining, on a test basis, evidence supporting the
significant estimates made by management, and evaluating the overall financial statement
presentation. Our audit does not relieve management or (the board) of their responsibilities.
As part of the audit, we obtained an understanding of the entity and its environment, including
internal control, sufficient to assess the risks of material misstatement of the financial statements
and to design the nature, timing and extent of further audit procedures. The audit was not
designed to provide assurance on internal control or to identify deficiencies in internal control.
OTHER INFORMATION IN DOCUMENTS CONTAINING AUDITED FINANCIAL STATEMENTS
Our responsibility does not extend beyond the audited financial statements identified in this report.
We do not have any obligation to and have not performed any procedures to corroborate other
information contained in client prepared documents, such as official statements related to debt
issues.
Truckee Donner Public Utility District
May_, 2008 PRELIMINARY
DRAFT
Page 7
DISCUSSION Y RPOSES
COMMUNICA AUDIT COMMITTEE OR ITS EQUIVALENT (cont.)
AUDIT ADJUSTMENTS
Professional standards require us to accumulate all known and likely misstatements identified
during the audit, other than those that are trivial, and communicate them to the appropriate level
of management.
For purposes of this letter, professional standards define an audit adjustment as a proposed
correction of the financial statements that, in our judgment, may not have been detected except
through our auditing procedures. An audit adjustment may or may not indicate matters that could
have a significant effect on the Truckee Donner Public Utility District's financial reporting process.
Matters underlying adjustments proposed by the auditor could potentially cause future financial
statements to be materially misstated.
Certain audit and bookkeeping adjustments we prepared were included in your financial
statements. Copies of these adjustments are available from management_
The following audit adjustment, in our judgment, indicates matters that could have a material
effect on the Truckee Donner Public Utility District's financial reporting process:
Amount
Adjustments to deferred credits and purchased power $1,219,396
The net result of all the adjusting entries was an increase in assets of $48,000, a decrease in
liabilities of$5,000 and an increase in income of$52,000.
DISAGREEMENTS WITH MANAGEMENT
For purposes of this letter, professional standards define a disagreement with management as a
matter, whether or not resolved to our satisfaction, concerning a financial accounting, reporting, or
auditing matter that could be significant to the financial statements or the auditor's report. We are
pleased to report that no such disagreements arose during the course of our audit.
CONSULTATIONS WITH OTHER INDEPENDENT ACCOUNTANTS
In some cases, management may decide to consult with other accountants about auditing and
accounting matters, similar to obtaining a "second opinion" on certain situations. If a consultation
involves application of an accounting principle to the Districts' financial statements or a
determination of the type of auditors' opinion that may be expressed on those statements, our
professional standards require the consulting accountant to check with us to determine that the
consultant has all the relevant facts. To our knowledge, there were no such consultations with
other accountants.
MANAGEMENT REPRESENTATIONS
We have requested certain representations from management that are included in the
management representation letter. This letter is attached.
Truckee Donner Public Utility District
May_, 2008
Page 9
PRELIMI FOR DWANAG MENT REPRESENTATION LETTER
DISCUSSION PURPOSES (CLIENT'S LETTERHEAD)
ONLY
May,,
Virchow, Krause & Company, LLP
Ten Terrace Court
P.O. Box 7398
Madison, WI 53707
Dear Auditors:
We are providing this letter in connection with your audit of the financial statements of the Truckee Donner
Public Utility District as of December 31, 2007 and December 31, 2006 and for the years then ended for
the purpose of expressing an opinion as to whether the financial statements present fairly, in all material
respects, the respective financial position, results of operations, and cash flows of Truckee Donner Public
Utility District in conformity with accounting principles generally accepted in the United States of America.
We confirm that we are responsible for the fair presentation in the financial statements of financial position,
results of operations and cash flows in conformity with accounting principles generally accepted in the
United States of America. We are also responsible for adopting sound accounting policies, establishing
and maintaining internal control and preventing and detecting fraud.
We confirm, to the best of our knowledge and belief, the following representations made to you during your
audit.
1. The combined financial statements referred to above are fairly presented in conformity with
accounting principles generally accepted in the United States of America. We have engaged you to
advise us in fulfilling that responsibility. The financial statements include all properly classified funds
of the oversight unit and all component units required by accounting principals generally accepted in
the United States of America to be included in the financial reporting entity.
2. We have made available to you all —
a. Financial records and related data.
b. Minutes of the meetings of the board of directors and summaries of actions of recent meetings
for which minutes have not yet been prepared.
3. There have been no communications from regulatory agencies concerning noncompliance with, or
deficiencies in, financial reporting practices.
4. There are no material transactions that have not been properly recorded in the accounting records
underlying the financial statements.
5. We believe the effects of the uncorrected financial misstatements are immaterial, both individually
and in the aggregate, to the basic financial statements taken as a whole. In addition, you have
recommended adjusting journal entries, and we are in agreement with those adjustments.
Truckee Donner Public Utility District
May_, 008-BELIMINIIRY FOR DRAFT
Page 11
DISCUSSION Y RpOSE
ON
14. The financial statements include all component units as well as joint ventures with an equity interest,
and properly disclose all other joint ventures and other related organizations.
15. The financial statements properly classify all funds and activities.
16. Net asset components (invested in capital assets, net of related debt; restricted; and unrestricted)
and fund balance reserves and designations are properly classified and, if applicable, approved.
17. Expenses have been appropriately classified in or allocated to functions and programs in the
statement of activities, and allocations have been made on a reasonable basis.
18. Interfund, internal, and intra-entity activity and balances have been appropriately classified and
reported.
19. Deposits and investment securities are properly classified as to risk, and investments are properly
valued.
20. Capital assets, including infrastructure assets, are properly capitalized, reported, and if applicable,
depreciated.
21. We understand that, as a part of your audit, you prepared adjusting journal entries and acknowledge
that we have reviewed and approved those entries and acknowledge the impact on the financial
statements.
22. We understand that you prepared the trial balance for use during the audit and that your preparation
of the trial balance was limited to formatting the information in the organizations general ledger into a
working trial balance.
23. We have a process to track the status of audit findings and recommendations.
24. We have identified to you any previous financial audits, attestation engagements, performance
audits, or other studies related to the objectives of this audit being undertaken and the corrective
actions taken to address significant findings and recommendations.
To the best of our knowledge and belief, no events, including instances of noncompliance, have occurred
subsequent to December 31, 2007 and through the date of this letter that would require adjustment to, or
disclosure in, the aforementioned financial statements.
Signed
Title/Date ! /
Signed
Title/Date ! !