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HomeMy WebLinkAbout5 Draft Audit Report 2001 Agenda Item # �TRUCKEE DONNER DNI Public Utility District M Memorandum To: Board of Dirctors From: Peter Holzmeister Date: May 10, 2002 Subject: Draft audi t report for 2001 Attached for your review is a draft audit report prepared by Arthur Anderson covering the District's financial reports for the year ended December 31, 2001. I expect Rick Bloomfield to attend the meeting to help discuss the audit report. At the conclusion of the discussion you can accept the audit report if you so choose, or you can ask Rick to put it in final form and I will list it for adoption on a future agenda. Tentative& Preliminary For Discussion Purposes Only REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To the Board of Directors of Truckee Donner Public Utility District: We have audited the accompanying balance sheets of Truckee Donner Public Utility District(the District)as of December 31, 2001 and 2000, and the related statements of operation ,and cash flows for the years then ended. These financial statements and the combining statem Ltd to below are the responsibility of the District's management. Our responsibility is tq akpress Mon on these financial statements and combining statements based on our au We conducted our audits in accordance with au tt€ng standards8ttplly acceplin the United States. Those standards require that we ppr d perforip�audtts tai� i reasonablsurance about whether the financial stateme t -�',K e of ma dlilh isstaterritht, An audit inch"des examining, on a RIM test basis, evidgWp sppportin e ,Mmts andiisol ures in financial statements. An audit also includes assete<accou� 3ciples uS� gmficastimates made by management, as well as evaluating otll finartIll ement pent} We believe that our audits provide a reasonable ba"sfor tr opmz In our opimotl1ic:,11ncial stements referred to above present fairly, in all material respects,the financial pos the District as of December 31, 2001 and 2000, and the results of its operations and is cash flows= dt the years then ended in conformity with accounting principles generally accepted in the United States. Our audits were made for the purpose of forming an opinion on the basic financial statements taken as a whole. The divisional combining statements(Exhibits I and 11)and the divisional statements (Exhibits III and IV)are presented for purposes of additional analysis and are not a required part of the basic financial statements. This information has been subjected to the auditing procedures applied in our audits of the basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the basic financial statements taken as a whole. As explained in Note I to the financial statements, effective January 1, 2001,the District was required to adopt Statement No. 33 of the Governmental Accounting Standards Board, "Accounting and Financial Reporting for Non-exchange Transactions." Sacramento, California April 12,2002 Tentative& Preliminary For Discussion Purposes Only TRUCKEE DONNER PUBLIC UTILITY DISTRICT Balance Sheets As of December 31, 2001 and 2000 2001 2000 Assets Plant Serving Consumers (Note 2) $ 38,046,954 $ 30,443,251 Restricted Funds (Note 3) 7,534,072 6,532,026 Current Assets: General fund (Note 3) 225,829 844,250 Amounts due from consumers (including amounts not yet billed of $1,118,064 and $854,661 for 2001 and 2000, respectively), less reserves for uncollectible amounts of$30,658 and $31,918 for 2001 and 2000, respectively. 2,655,766 1,922,859 Current portion of Special Assessment Receivable (Note 6) 426,587 0 Materials and supplies 530,586 598,823 Prepaid expenses and other current assets 240,733 270,337 Total current assets 4,079,501 3,636,269 Special Assessment Receivable, net of current portion (Note 6) 11,862,710 0 Unamortized Financing Costs 835,376 920,090 Total assets $ 62,358,613 $ 41,531,636 Consumers' Funds and Obligations Consumers' Funds Reinvested in the District $ 22,175,137 $ 19,042,793 Borrowed Funds, less portion due next year(Note 4) 16,366,353 17,028,328 Current Obligations: Amounts due for power purchases 199,182 455,086 Amounts due for other purchases 1,007,470 982,007 Deposits collected to ensure payment for services 228,750 216,521 Interest due to creditors 191,249 215,628 Standby fees billed and due next year 0 105,115 Amounts due to employees for payroll 374,755 329,081 Borrowed funds due next year(Note 4) 6,878,387 786,240 Total current obligations 8,879,793 3,089,678 Deferred Revenue (Note 5) 14,937,330 0 Funds Received for Construction of Facilities 0 2,370,837 Total consumers' funds and obligations $ 62,358,613 $ 41,531,636 The accompanying notes are an integral part of these financial statements. Tentative&Preliminary For Discussion Purposes Only TRUCKEE DONNER PUBLIC UTILITY DISTRICT Statements of Operations For the Years Ended December 31, 2001 and 2000 2001 2000 Operating Revenues: Sales to consumers $14,253,065 $13,240,137 Consumer electric refund 0 (880,924) Standby fees 297,455 220,598 Connection fees 284,900 0 Other 345,757 432,762 Total operating revenues 15,181,177 13,012,573 Operating Expenses: Power purchases (Note 1) 3,990,359 4,686,883 Operations and maintenance 3,213,755 2,829,925 Administrative and general 2,541,890 1,916,580 Consumer services 772,839 648,127 Use and deterioration of plant 1,452,408 1,470,228 Total operating expenses 11,971,251 11,551,743 Operating income 3,209,926 1,460,830 Non-Operating Revenue (Expense): Income from investments 350,156 498,825 Interest expense (926,579) (986,105) Total non-operating expense (576,423) (487,280) Capital contributions (Note 1) 498,841 0 Revenues in excess of expenses 3,132,344 973,550 Consumers' funds, December 31, 2000 19,042,793 18,069,243 Consumers' funds, December 31, 2001 $22,175,137 $19,042,793 The accompanying notes are an integral part of these financial statements. Tentative& Preliminary For Discussion Purposes Only TRUCKEE DONNER PUBLIC UTILITY DISTRICT Statements of Cash Flows For the Years Ended December 31, 2001 and 2000 2001 2000 Cash Flows From Operating Activities: Operating income $ 3,209,926 $ 1,460,830 Adjustments for operating items that did not use cash- Use and deterioration of plant 1,452,408 1,470,228 Changes in operating assets and liabilities- Amounts due from consumers, materials and supplies, prepaid expenses and other current assets (6071826) 378,730 Amounts due for power purchases, other current purchases, deposits and standby fees (267,546) 20,663 Amounts due to employees for payroll 45,674 21,117 Net cash provided by operating activities 3,832,636 3,351,568 Cash Flows From Plant and Related Borrowing Activities: Acquisition and construction of plant, net (10,490,050) (3,424,020) Principal payments on borrowed funds (822,038) (717,210) Cash from borrowing new funds 6,252,210 269,137 Interest payments on borrowed funds (950,959) (934,761) Cash received to fund plant projects 1,303,198 918,513 Net cash used in plant and related borrowing activities (4,707,639) (3,888,341) Cash Flows From Investing Activities: Special Assessment receipts 850,998 0 Cash received from investment interest 407,630 481,430 Net cash provided by investing activities 1,258,628 481,430 Net increase (decrease) in cash and cash equivalents 383,625 (55,343) Cash and Cash Equivalents, beginning of year 7,376,276 7,431,619 Cash and Cash Equivalents, end of year $ 7,759,901 $ 7,376,276 The accompanying notes are an integral part of these financial statements. Tentative& Preliminary For Discussion Purposes Only TRUCKEE DONNER PUBLIC UTILITY DISTRICT Notes to Financial Statements 1. 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 provides electric and water service to portions of Nevada and Placer counties described as Truckee and Donner Lake. The electric and water service operations are maintained and operated separately. 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, rent for shared facilities and interest costs. b. Basis of Accounting and Revenue Recognition Governmental Accounting Standards Board (GASB) Statement No. 20 requires that governments' proprietary activities apply all GASB pronouncements as well as the pronouncements of the Financial Accounting Standards Board (FASB) and its predecessors issued on or before November 30, 1989, unless those pronouncements conflict with or contradict GASB pronouncements. As allowed by GASB No. 20, the District has elected not to implement FASB Statements and Interpretations issued after November 30, 1989. Effective January 1, 2001, this District adopted GASB No. 33, "Accounting and Financial Reporting for Nonexchange Transactions." GASB No. 33 establishes accounting and financial reporting guidance for nonexchange transactions. Nonexchange transactions occur when an entity gives or receives value without directly receiving or giving equal value in return. The statement specifically addresses the timing of revenue recognition for four different types of nonexchange transactions: derived tax revenues, imposed nonexchange revenues, government-mandated nonexchange transactions, and voluntary nonexchange transactions. The District has certain transactions which fall into the category of imposed nonexchange transactions. GASB No. 33 requires assets from imposed nonexchange transactions be recognized when an enforceable legal claim has arisen or the resources are received, whichever is first. Additionally, revenues are required to be recognized in the same period that the assets are recognized unless the enabling legislation includes time requirements. If so, revenues should be recognized in the period when the resources are required to be used or when use is first permitted. The impact of adoption upon the District was that certain fees and contributions are now required to be reported as revenues in the accompanying statements of operations; whereas in previous fiscal years, these same type of transactions were reported as either a reduction of Plant Serving Consumers or Funds Received for Construction of Facilities in the accompanying balance sheets. In accordance with GASB No. 33 transition guidance, the District has not restated the previous year's presentation of these types of transactions. Tentative&Preliminary For Discussion Purposes Only c. Use of Estimates in the Preparation of Financial Statements The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. d. Plant Serving Consumers Plant is recorded at the amounts paid when purchased. New plant is recorded as an asset. Maintenance and repair costs are expenses of operations. Prior to 2001, consumer contributions were applied to reduce the cost. Beginning in 2001, the District implemented GASB No. 33 requiring governmental entities to recognize revenue on consumer contributions instead of netting contributions against plant. Depreciation (use and deterioration of plant) is calculated using the straight-line method over the estimated useful lives of the assets. Average rates are used for asset groups. A gain or loss is recorded on the sale or disposal of an asset. e. Cash Equivalents For purposes of the statements of cash flows, the District considers highly liquid, short-term investments with original maturities of three months or less to be cash equivalents. f. Investments The District follows GASB No. 31, "Accounting and Financial Reporting for Certain Investments and for External Investment Pools." This standard establishes fair value standards for investments. The difference between cost and fair market value on the District's investments was $20,127 and $78,815 at December 31, 2001 and 2000, respectively. g. Materials and Supplies Materials and supplies are recorded at the amounts paid when purchased. h. Unamortized Financing Costs The costs relating to borrowing funds are amortized over the lives of the related borrowings using the effective interest method. 2 Tentative& Preliminary For Discussion Purposes Only i. Funds Received for Construction of Facilities The District receives fees for assistance with construction. Prior to 2001, the District recorded these fees as liabilities until they were used for construction costs at which time they were offset against plant or refunded if required by law. Beginning in 2001, the District implemented GASB No. 33, requiring governmental entities to recognize revenue on consumer contributions instead of netting contributions against plant. j. Revenues Revenues are recorded as meters are read on a cycle basis throughout each month for electric and commercial water. Income that the District has earned through investing its cash not needed currently is reflected as revenue when the District has earned it. Prior to December 31, 2000, the District authorized an 11% credit on all consumer electric bills, however, effective January 1, 2001, this credit was discontinued. k. Power Purchases The District purchases all of its power from third party sources. A contract to purchase power from Idaho Power was entered into in July 1997. The Board of Directors subsequently approved three amendments that have extended the contract through December 2009. During 2001, the District purchased its actual requirements of 132,347 MWh. In an effort to help plan its power costs and protect itself against an increase in market prices, the latest amendment includes fixed pricing provisions beginning January 2002 through the year 2009. Beginning in 2002, the District is required to purchase all of its power requirements to meet customer needs, and, in addition, may have surplus power resulting from the contract obligations. In 2003, the District may be obligated to purchase 25 megawatts per hour(MWh) for all hours of each day (219,000 MWh per year at a price of$72 per MWh). If the District is obligated to purchase the 25 megawatt block there may be an offsetting revenue resulting from the sale of surplus power by Idaho Power. Idaho Power has agreed to use its best efforts to sell the surplus. However, the possibility exists that from 2002 to 2009, this sale of surplus power may be at a loss. This would reduce the value of the contract. The District is also exposed to the failure of the counter party to fulfill the contract. Purchased power contracts are filed with the Federal Energy Regulatory Commission (FERC). In 1999, the District entered into an agreement with Sierra Pacific Power Company (SPPC), whereby SPPC will provide transmission services to the District through December 31, 2027. In addition, the District purchases scheduling and dispatch services from Northern California Power Agency. These purchases represented 14% of total purchased power costs in 2001 and 2000. 1. Capital Contributions Due to the implementation of GASB No. 33 in 2001, all funds received from certain assessments, facility fees and for construction of facilities are recognized as Capital Contributions in the accompanying statements of operations when an enforceable legal claim is established. Additionally, in accordance with GASB No. 33 transition guidance, Capital Contributions received in years prior to 2001 were not restated in the accompanying financial statements. 3 Tentative& Preliminary For Discussion Purposes Only m. Income Taxes The District is exempt from payment of federal and state income taxes. n. Recent Accounting Pronouncements In June 1999, GASB issued Statement No. 34, "Basic Financial Statements-and Management's Discussion and Analysis-for State and Local Governments." This statement establishes accounting and financial reporting standards for general purpose external financial reports for governmental entities. The anticipated results of this statement will be the inclusion of a Management's Discussion and Analysis section and certain formatting changes to the basic structure of the financial statements. GASB No. 34 is effective for the District beginning in year 2003. Given that this statement primarily impacts financial statement disclosures, the District does not anticipate a material impact to the financial position or operations of the District as a result of implementing this standard. In June 2001, GASB issued Statement No. 38, "Certain Financial Statement Note Disclosures." This statement modifies, establishes and rescinds certain financial statement disclosure requirements. GASB No. 38 is effective for the District in beginning in year 2003. Given that this statement primarily impacts financial statement disclosures, the District does not anticipate a material impact to the financial position or operations of the District as a result of implementing this standard. o. Reclassifications Certain account balances at December 31, 2000 have been reclassified to conform to the 2001 presentation. 2. Plant Serving Consumers Plant consisted of the following at December 31: 2001 2000 Electric distribution facilities $ 13,441,332 $ 12,429,894 Water distribution facilities 21,853,508 19,538,246 Gene plant lant 8,725,873 8,409,304 44,020,713 40,377,444 Less: accumulated depreciation (14,985,862) (13,460,425) 29,034,851 269170 19 Construction work in progress 9,012,103 3,526,232 $ 38,046,954 $ 30,443,251 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. Future rate increases may be necessary to pay for these replacements. 4 Tentative& Preliminary For Discussion Purposes Only 3. General and Restricted Funds The District maintains funds pursuant to Board of Director's (Board) rules and commitments made when borrowing funds. A description of general and restricted funds follows: a. General Funds General funds are derived from the operations of the District and are unrestricted. The 1996 Certificates of Participation require the water general fund to be classified as a restricted fund. b. Facilities Fees The District charges facilities fees to applicants for new service to cover the costs of infrastructure needed to meet their systems demand. These fees are held as restricted funds as required by Board rules. During 2001, the Board of Directors authorized the use of water facility fees for the construction of the Martis Valley Well. c. 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 are 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 BNY Western Trust Company. d. Building Fund In compliance with Board rules, the District maintains a building fund to help pay for the interest and principal of the borrowed funds used for the District office complex. During 1996, the Board of Directors authorized a loan from the restricted electric and water building funds to the water general fund for the construction of a water pipeline. The original loan amounts were $622,284 and $500,000 from the restricted electric and water building funds, respectively. During 2000 and 1999, the water general fund paid off the entire balance owed to the electric building fund and water building fund, respectively. During 2001, the Board of Directors authorized two loans from the restricted electric building fund to the electric and water general funds for$560,627 and $750,000, respectively. The loans were to fund general purchases for electric and to fund the take over of the Donner Lake Water Company (see Note 6). At December 31, 2001 the loan balance for electric and water was$560,627 and $0, respectively. e. Storm Damage Fund The District maintains a restricted fund to provide for storm damages that may occur in the future. I. Electric Rate Reserve In compliance with Board rules, the District has created an electric rate stabilization fund in anticipation of future costs. The Board can make transfers from this fund to the electric general fund when demands on the electric general fund exceed the fund balance in lieu of increasing electric rates. 5 Tentative& Preliminary For Discussion Purposes Only g. Certificates of Participation: Water The terms of the Water Division's Certificates of Participation require several restricted funds. These funds are to provide for payment of principal and interest if no other monies of the District are available. A reserve fund is set aside for principal and interest payments as they become due. All revenues received by the District's water operations and not used for normal operations must be restricted. The Water Division's Certificates of Participation debt funds are held by US Trust, with the exception of the general revenue fund, which is held by the District. h. Department of Water Resources (DWR) Prop 55 Reserve Fund Regulations relating to the Department of Water Resources loan require the accumulation of a reserve fund as security for each principal and interest payment as they are due. Annual payments into the fund are required for each of the first ten years beginning April 1, 1996. The total reserve fund will equal two semi-annual payments. These funds will be set aside for the life of the borrowed amount. All of the reserve funds are held by the State of California Local Agency Investment Fund. i. Reserve for Future Meters Prior to 1992, connection fees charged to applicants for water service included an amount which was applied to a restricted fund to offset the cost of future metering. As meters are installed, restricted funds are transferred to the general fund to repay the general fund for meter costs. During 2000, the water department's reserve for future meters fund loaned funds to the water department's general fund. At December 31, 2001 and 2000, the amount outstanding under the loan was $550,068 and $567,468, respectively. j. Tahoe Donner Water System Fund In compliance with Board rules, the District maintains a restricted fund for Tahoe Donner Water System improvements. k. Prepaid Connection Fees In compliance with Board rules, the District has set aside funds received as prepaid connection fees. The funds will be used to cover the cost of the installation of water services. I. 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. 6 Tentative&Preliminary For Discussion Purposes Only m. Donner Lake Special Assessment District Improvement Fund In 2001, the District established the Donner Lake Assessment District Improvement Fund to restrict all funds received from the Special Assessment Receivable. These funds will be used to pay the debt payments related to the Donner Lake Water System project. (see Note 6). The balances of the general and restricted funds were as follows at December 31: 2001 2000 Electric general fund $ 225,829 $ 844,250 Restricted funds: Electric- Facilities fees 256,733 170,265 Certificates of Participation 272,446 294,412 Building fund 832,673 1,338,414 Storm damage fund 303,187 289,604 Electric rate reserve 2,448,281 641,790 Restricted funds—electric 4,113,320 2,734,485 Water- General revenue fund 707 0 Facilities fees 0 1,429,812 Certificates of Participation 1,028,696 921,767 DWR-Prop 55 reserve fund 185,648 157,067 Building fund 453,006 495,448 Reserve for future meters 536,078 462,350 Tahoe Donner water system fund 117,838 112,554 Prepaid connection fees 75,040 75,888 Other(area improvement funds) 170,610 142,655 Donner Lake Assessment District Improvement Fund 853,129 0 Restricted funds—water 3,420,752 3,797,541 Total restricted funds 7,534,072 6,532,026 Total general and restricted funds $ 7,759,901 $ 7,376,276 The District's investments are categorized to provide an indication of the level of custodial risk assumed by the District at December 31, 2001. Category 1 includes investments that are insured or registered, or for which the securities are held by the District or its agent in the District's name. Category 2 includes uninsured and unregistered investments for which the securities are held by brokers or dealers, or by their trust department or agent, in the District's name. Category 3 includes uninsured and unregistered investments for which the securities are held by brokers or dealers, or by their trust department or agent, but not in the District's name. At December 31, 2001, the District did not hold investments which would be included in Category 2 or 3. Cash and investments are considered risk category one under the guidelines of GASB No. 3. 7 Tentative&Preliminary For Discussion Purposes Only 2001 2000 Cash and cash equivalents: Cash $ 1,123,928 $ (58,754) State of California Local Agency Investment Fund, at market value 5,334,830 6,218,851 BNY Western Trust Company Investment Fund, at cost which approximates market value 272,446 294,412 US Trust Company Investment Fund, at cost which approximates market value 1,028,697 921,767 $ 7,759,901 $ 7,376,276 4. Borrowed Funds: Long-term debt consisted of the following at December 31: 2001 2000 Certificates of Participation— Electric, interest rates of 2.75% to 5.375%, annual principal payments of $125,000 beginning in 1994 increasing each year to $250,000 when finally due in 2012. $ 2,185,000 $ 2,335,000 Certificates of Participation —Water, interest rates of 5.25% to 5.4%, annual principal payments of$235,000 beginning in 1999 increasing each year to$745,000 when finally due in 2021. 9,695,000 9,965,000 Department of Water Resources, interest rate of 3.18%, semiannual interest payments due through 2021, and semiannual principal payments of$153,094 beginning in 1996 and continuing through 2021, secured by real and personal property. 4,429,196 4,591,134 Installment Loans, interest rates ranging from 5.4% to 6.23%, various payment terms and due dates, secured by equipment. 911,983 986,274 US Trust Line of Credit—Water, interest rate of 62% of prime, due in full in September 2002, secured by the Special Assessment Receivable (see Note 6). 6,080,000 0 23,301,179 17,877,408 Less: borrowed funds due next year (6,878,387) (786,240) Less: unamortized cost of borrowed funds (56,439) (62,840) $16,366,353 $17,028,328 8 Tentative& Preliminary For Discussion Purposes Only During 1993, Truckee Donner Public Utility District Financing Corporation issued $3,245,000 of Certificates of Participation to refinance the construction loan of a new office and warehouse facility for the District. The District signed agreements with the financing corporation so that ownership of the property is held by the financing corporation as collateral. The District is required to make payments equal to the debt service on the Certificates. Upon final payment of the Certificates, ownership of the property will revert to the District. The terms of the new Certificates call for lease payments to be made only from the net revenues of the Electric Division. These revenues are required to be at least equal to 110% of the debt service for each year. The outstanding balance on these Certificates was$2,185,000 and $2,335,000 at December 31, 2001 and 2000, respectively. During 1996, Truckee Donner Public Utility District Financing Corporation issued $10,905,000 of Certificates of Participation to refund Certificates issued in 1991. The 1991 Certificates were 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. The outstanding balance on these Certificates was$9,695,000 and $9,965,000 at December 31, 2001 and 2000, respectively. Scheduled principal payments on borrowed funds are: 2002 $ 6,878,387 2003 753,971 2004 801,103 2005 780,319 Thereafter 14,087,399 $ 23,301,179 As of December 31, 2001 the District had a standby letter of credit outstanding of approximately $1,500,000. 5. Deferred Revenue Due to the implementation of GASB No. 33 in 2001 (see Note 1), the District began recognizing revenue on imposed nonexchange transactions when an enforceable legal claim is established unless the enabling legislation includes time requirements. If so, revenues are recognized in the period when the revenues are required to be used or when use is first permitted. For transactions that have not yet met these revenue recognition requirements, revenues are deferred and reflected in the accompanying balance sheets. As of December 31, 2001, deferred revenues consist of unearned special assessment revenues, facility fees and connection fees. 9 Tentative& Preliminary For Discussion Purposes Only 6. Donner Lake Water Company Purchase In 2001, the District took over Donner Lake Water Company by initiating an eminent domain lawsuit. As a part of the take over, the District agreed to replace the entire water system, which is estimated to cost approximately $13,000,000. The District has agreed to initially finance the replacement through obtaining third party financing but the Donner Lake property owners have agreed to reimburse the District. Therefore an assessment has been placed on each Donner Lake homeowner's property for a pro-rata share of the $13,000,000, payable immediately or over 20 years at approximately 3.5% interest rate. One twentieth of the assessment is added to each property owner's annual property tax bill and is collected by Nevada and Placer Counties on behalf of the District. The Donner Lake homeowner's property values secure the $13,000,000 assessment. In the event that the project costs more than anticipated and consequently the amount collected through the assessment district is not enough to recover all of the District's costs, the District will recover any shortfall by adding a surcharge to each property owner's bill until all costs are recovered. As of December 31, 2001, the amount outstanding from the property owners was $12,289,297 of which $426,587 is due next year. These amounts are shown in the caption Special Assessment Receivable in the accompanying balance sheets. Additionally, the property owners made $853,129 in prepayments during 2001. 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 make the debt service on the District's initial third party debt. During 2001, the District obtained third party bridge financing for the project in the form of a $7,000,000 line of credit of which $6,080,000 was outstanding as of December 31, 2001 (see Note 4). The District is in the process of obtaining permanent financing in the form of a State Revolving Fund Loan for approximately $12,000,000 at an anticipated rate of 2.5%. If this financing arrangement does not go through, the District intends to issue Certificates of Participation to finance the remaining project costs. As part of the take over, the District obtained a third party appraisal of the water system, which appraised the system at$750,000. The District paid the appraised amount. The previous owner of Donner Lake Water Company is asserting that the actual value of the water system is $7,000,000. The District is in the discovery phase of litigation and is not able to determine if they will be liable for an additional amount at this time. The District believes that they will prevail and will not have to make an additional payment. However, if the court rules in favor of the previous owner, the District will assess the additional amount to the Donner Lake property owners and account for the additional cost as an increase to plant. The District anticipates a court ruling in December 2002. 7. Employee Benefit Plans a. Pension Plan The District contributes to its own pension plan for almost all District employees who have at least one year of service. The plan provides specific benefits to employees at retirement. Benefits vest to participants at the rate of 10% per year of service for the first four years and 20%for years five through seven. Employees who retire at or after age 65 with ten years of credited service are entitled to receive monthly benefits equal to a set percentage of the individual's average monthly compensation. Employees who retire with 20 years of service will receive 40% of their average monthly compensation. Benefits are reduced pro rata for less than 20 years of credited service, and increased by 0.5% of average monthly compensation for each year of service in excess of 20 years. The plan also provides for death, disability and early retirement benefits. 10 Tentative& Preliminary For Discussion Purposes Only During the years ended December 31, 2001 and 2000, $0 and $344,012, respectively, was paid to former participants. The plan requires the District to make adequate contributions so that enough funds are available to pay benefits to employees when due. The actuarial valuations for the plan indicated that contributions of$166,187 and $0 were necessary for 2001 and 2000, respectively, to meet the minimum funding requirements of the Internal Revenue Code. The District follows GASB Statement No. 27, "Accounting for Pensions by State and Local Governmental Employers." The required contributions as of December 31, 2001 and 2000 were computed as part of an actuarial valuation. Significant actuarial assumptions include: • A rate of return on the investment of present and future assets of 7%for 2001 and 2000. • Salaries are assumed to increase at a rate of 2.5% for 2001 and 2000. • Prior to retirement age, no employee turnover is assumed. b. Funding Status The amounts shown as unfunded actuarial accrued liability(UAAL) are a standardized disclosure measure of the present value of pension benefits estimated to be payable in the future as a result of employee service to date. The UAAL is adjusted for the effect of projected salary increases. The measures are intended to help users assess the funding status of the Plan on a going concern basis, assess progress made in accumulating sufficient assets to pay benefits when due, and make comparisons among plans. The measures are the actuarial present value of credited projected benefits and are independent of the funding methods used to determine annual required contributions to the Plans. The following is a funding schedule for the Truckee Donner Public Utility District Defined Benefit Plan: Actuarial Actuarial Value Actuarial Accrued Funded Valuation Date of Assets Liability (AAL) (Unfunded)AAL Funded Ratio 12/31/99 $ 1,887,629 $ 1,668,362 $ 219,267 113% 12/31/00 $ 1,429,265 $ 1,660,872 $ (231,607) 86% 12/31/01 $ 1,475,614 $ 1,955,228 $ (479,614) 75% c. Deferred Compensation Plan The District maintains a deferred compensation plan (the Plan) for certain employees. The amount deferred and held in trust was$2,390,621 and $2,570,494 at December 31, 2001 and 2000, respectively. The District has no liability for losses under the Plan but does have the duty of due care that would be required of an ordinary prudent investor. In accordance with GASB No. 32, the District has not reflected the Plan's assets and corresponding liabilities (if any) on the accompanying balance sheets. 11 Tentative& Preliminary For Discussion Purposes Only d. 401(a) Plans During 2000, the Board of Directors approved a 401(a) defined contribution plan (401(a) Plan)for District management(effective August 1, 2000) and bargaining unit employees(effective January 1, 2000). Contributions are made by the District on the employees' behalf and employees are immediately vested in the 401(a) Plan. The District contributed 10%of earnings on behalf of management and exempt employees as part of the management 401(a) Plan, and 3% of earnings for employees in the bargaining unit 401(a) Plan, increasing to 4% in 2001 and 5% in 2002. At December 31, 2001, the 401(a) Plan assets were$131,805 and $109,032 for the management and bargaining unit, respectively. At December 31, 2000, the 401(a) Plan assets were $36,432 and $57,486 for the management and bargaining unit, respectively. The District has no liability for losses under the 401(a) Plan but does have the duty of due care that would be required of an ordinary prudent investor. In accordance with GASB No. 32, the District has not reflected the 401(a) Plans' assets and corresponding liability (if any) on the accompanying balance sheets. e. Post Employment Health Care The District began providing Post Employment Health Care on January 1, 2000 to all employees, and their qualified dependents, who retire from the District on or after attaining age 60 with service of at least 20 years. For years worked less than 20 years, 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 three individuals meet those eligibility requirements. The District pays insurance premiums for medical, dental, prescription drugs and vision. Expenditures for post employment health care benefits are recognized when premiums are paid. The cost of post employment health care was$9,717 and $5,901 for years 2001 and 2000,respectively. 8. Contiin encles The District is one of a group of approximately 50 utilities involved in a matter relating to the disposal of small amounts of PCB wastes at two sites. The clean up of the two sites is under the federal EPA Superfund Program. During 2001, the District resolved this matter with the EPA and paid $87,383. This amount represents the District's 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 of the additional cost. The District believes that the cost already paid was conservative and they will not incur an additional liability. Also see Note 6. 9. Subsequent Event On February 7, 2002, the District acquired the Glenshire Mutual Water District. The District acquired certain of the water system assets at no charge, including construction in progress. The construction in progress requires approximately $2,000,000 to complete the project, which will be funded through the sale of certain acquired Glenshire assets and through a property owner surcharge. 12 Exhibit III Tentative&Preliminary For Discussion Purposes Only TRUCKEE DONNER PUBLIC UTILITY DISTRICT Comparative Statements of Electric Operations For the Years Ended December 31, 2001 and 2000 2001 2000 Operating Revenues: Sales to consumers $ 9,759,286 $ 9,334,548 Consumer electric refund 0 (931,032) Interdivisional sales 923,640 787,366 Standby fees 39,333 28,957 Connection fees 163,580 0 Other 172,188 258,500 Total operating revenues 11,058,027 9,478,339 Operating Expenses: Power purchases 3,986,550 4,683,112 Operations and maintenance 1,532,822 1,460,439 Administrative and general 1,612,485 1,334,514 Consumer services 599,315 504,916 Use and deterioration of plant 749,545 785,322 Total operating expenses 8,480,717 8,768,303 Operating income 2,577,310 710,036 Non-Operating Revenue (Expense): Income from investments 158,809 239,045 Interest expense (183,525) (184,074) Total non-operating revenue (expense) (24,716) 54,971 Capital Contributions 117,290 0 Revenues in excess of expenses $ 2,669,884 $ 765,007 Exhibit IV Tentative& Preliminary For Discussion Purposes Only TRUCKEE DONNER PUBLIC UTILITY DISTRICT Comparative Statements of Water Operations For the Years Ended December 31, 2001 and 2000 2001 2000 Operating Revenues: Sales to consumers $ 4,493,779 $ 3,905,589 Interdivisional sales 968 898 Standby fees 258,122 191,641 Connection fees 121,320 0 Other 173,569 174,262 Total operating revenue 5,047,758 4,272,390 Operating Expenses: Power purchases 698,213 547,097 Operations and maintenance 1,680,933 1,369,486 Administrative and general 1,159,609 776,896 Consumer services 173,524 143,211 Use and deterioration of plant 702,863 684,906 Total operating expenses 4,415,142 3,521,596 Operating income 632,616 750,794 Non-Operating Revenue (Expense): Income from investments 225,130 306,572 I nterest expense (776,837) (848,823) Total non-operating expense (551,707) (542,251) Capital Contributions 381,551 0 Revenues in excess of expenses $ 462,460 $ 208,543 CD 0 m w 0 0 Exhib0 i ^' Tenlnriiw aid PrefiminnO F.. 'rur Discussion Nnrpnsea Only TRUCKEE DONNER PUBLIC UTILITY DISTRICT r M D'seskknal Combining Balance Sheets .� AsofDacember3l,2ODI and 200D so,2001.. - ~ Electric w_. Operations Water Operations Eliminalions , Tots! _,,,,_ 2000 Total - ro PlantServing Consumers $15,/33,191 $22.913,763 b 0 b 38.046,954 $30.443,251 0 H Restricted Funds 4,113,320 3,420,752 0 7,534,072 _ 6,632,028 0 CurrwIAssets: General fund 225,829 0 p 225,829 849,250 Amounts due Isom consumers 2,606,217 4T,549 0 2,655,766 1,922,899 Curetd potion of Special Assessment Receivable 0 426,687 0 426,587 0 Meltable and supplies 399,060 131,526 0 530,986 598,823 9 Prepaid expenses and other current assets 173A82 66,851 0 240,733 _ 270,337 Z Total arrenl assets 3,400,988 972,St3 0 4,079,501 8,636,269 Special Assessment Receivable net of arrant porton 0 11.862,710 0 11.862,710 0 D7 Unamodind I'mmucNg Costly, 171,066 664,310 0 835,37E 920,09O Totalassets S 22,824,565 8 39,534,048 3 0 3 62.358,613 b 41,531.636 Consumers!Funds fi d Oblin 0cn Consumers'Funk Rernvestad in the Dlsincl $ 17,272,208 $ 4,902,049 $ 0 b 22,175,137 519,M2,793__ Borraked Funds,less portion due next year 2,614,368 13.751.985 0 16,366,353 17,028,328 CuaentObligations: 0 I99,t82 455,086 Am power Amounts due far purchases 199,102 0 Amounts due for ether inschades 440.072 55B,398 0 1,007,470 SWAT Deposits collected to ensure payment for services 165.872 63D78 0 228.750 216,521 55,209 136.040 0 19f,249 216,628 Inturesl due to ctaddaa p 0 105,115 Standby fees pilled and due next"at 0 0 Amounts due to employees fa payroll 351,867 23,14E 0 374,755 786.241 eoustAed funds due next year 306,026 6,W2.361 0 Q878,387 786,240 Total currant obligations 1,626,768 7,353,025 0 8.879.793 3,OB9,670 Defeved Revenue 1,411.141 13,526,189 0 14,937.330 0 0 0 p 0 2,370,7137 Funds Racelved fa Construction of FSCIM105 - Tow consumers'funds era/obligations 522.824,565 639,534,048 3 0 b62,,-58,613 541,531,636 0 0 ro i : o I� 0 m N 0 0 ExhibB 11 'ro TLnroffw&Prt'ffllt11urn. N ror Olscunian Pu>Pmns 6Mp —1 7RUCKEE OONNER PUBLIC VfiUTY DISiRIGT H Dhnslonal Cambhing Slalemems 01 OPM110na I9 For the Years Ended December 31,2001 and 2000 t`1 rfl w Et.dric N Oeeral'ona Weler DaeraBons Elirninallons Total _20D0 Total o Operating Revenues: Sales to consumer: 9 9,759,286 $ 4,490,779 $ 0 6 14,253,065 6 13,240.137 Ca Consmnm electric refund 0 0 0 0 (680.924) I Interdivislonal sales 923,640 968 (924,608) 0 0 Standby fees 30,333 256,122 0 297,455 220,598 Cmnedlon Fees t83,580 121,320 0 2E4,900 0 Oliver t72.188 173,669 0 345,757 - 432,762 Total oPual"s19 rernues f1,058.027 5,047,7W (924160(I) 15,181,177 13,012,573 > -- -- C7 lcl Operating Expenses: 3,990.359 4,686,803 Ponerpurchases 3.966,550 69E,213 (694,404) zn Operationsandn general l 1,601,714 1,712,041 0 3,213,755 2,029,925 Z AdminlsUall�re andd general 1,599.315 1,159,609 73524 (230,200 2,772,839 1,916,580 Consamerservic�s 599,315 173,524 0 7T2,839 648,127 Use and detedarallon of plant 749,545 702,863 _- 0 1,452,40E 1,470,228 Total operating expanses -- 8,449,609 4,146,250 (924,606) 11971251 11,551,743 Operating Income 2,608,418 601,508 0 .,, 3.209.926 1,480,630 NarrOpere4in9 Ravemse(Expense): income From laves"onls 180,809 225,130 (33,703) 350,15E 488,82b (183,52G) (776,837) 39,783 (926,579) (986,105) Inlmeef expense (24,716) (561,707) 0 (576,423) (467,290) Total naYoperatin0 expense 0 498541 0 Capvlal Coatriburmns 117,293 981,551 _-_ 2,700.982 431,352 0 3,137,344 973,550 Revenues in excess of expenses 14,571298 4,471,497 0 19,042.793 18,069,243 Consumers'lurds,December 31,2000 — Ceneurners funds,December 31.2001 $ 17,272,28E $ 4,802,849 $ 0 3 22,175,131 S 19,042,793 Co Co