CD CWS Annual Financial Reports 02-07-17

REPORTC O M P R E H E N S I V EANNUAL FINANCIAL

Clean Water Services2550 SW Hillsboro Highway

Hillsboro, Oregon 97123cleanwaterservices.org

A Component Unit ofWashington County, Oregon

for the fiscal year endedJune 30, 2016

CLEAN WATER SERVICES (A Component Unit of Washington County, Oregon)

Comprehensive Annual Financial Report

For the fiscal year ended June 30, 2016

Prepared by:

Business Operations Department


Table of Contents Page(s)

INTRODUCTORY SECTION: Letter of Transmittal I Board of Directors and Principal Officer XI GFOA Certificate of Achievement for Excellence in Financial Reporting XII Organizational Chart XIII

FINANCIAL SECTION:

REPORT OF INDEPENDENT AUDITOR 1 - 3

MANAGEMENT’S DISCUSSION & ANALYSIS 4 - 15

BASIC FINANCIAL STATEMENTS: Statement of Net Position 16 Statement of Revenues, Expenses and Changes in Net Position 17 Statement of Cash Flows 18 Notes to Basic Financial Statements 19-53

REQUIRED SUPPLEMENTARY INFORMATION: 54 55

Schedule of Funding Progress Other Post-Employment Benefits Schedule of Statutorily Required Employer Contributions Pension Plan Schedule of Proportionate Share of the Collective Net Pension Liability (Asset) 56

SUPPLEMENTAL INFORMATION: COMBINING SCHEDULES:

Combining Schedule of Net Position 57 Combining Schedule of Revenues, Expenses and Changes in Net Position 58 Combining Schedule of Cash Flows 59

BUDGETARY SCHEDULES: Description of Budgetary Funds 60-61 Schedules of Revenues and Expenditures - Budget and Actual:

General Fund 62 Storm and Surface Water Management Fund 63 Master Plan Update Debt Service Fund 64 Revenue Pension Bond Debt Service Fund 65 Liability Reserve Fund 66 Capital Expenditure Reserve Sanitary Sewer Fund 67 Sanitary Sewer LID Construction Fund 68 Surface Water Management LID Construction Fund 69 Sanitary Sewer Construction Fund 70 Tualatin Basin Water Supply Capital Project Construction Fund 71 Capital Expenditure Reserve Storm and Surface Water Management Fund 72 Surface Water Management Construction Fund 73 Reconciliation of Revenues and Expenditures (Budgetary Basis)

to Increase in Net Position (GAAP Basis) 74


Table of Contents Page(s)

STATISTICAL SECTION: Description of Statistical Section 75 FINANCIAL TRENDS

Net Position by Component 76 Changes in Net Position 77 Operating Revenues by Source 78 Operating Expenses 79 Nonoperating Revenues and Expenses 80

REVENUE CAPACITY Monthly Sewer and Storm/Surface Water Rates 81 System Development Charges and Revenues 82 Ten Largest Individual Ratepayers 83

DEBT CAPACITY Ratios of Outstanding Debt by Type 84 Pledged Revenue Coverage 85

DEMOGRAPHICS & ECONOMICS Demographic Statistics 86 Major Employment Industries in Washington County 87

OPERATING Administrative, Support and Operational Staff FTE 88 Summary of Treatment Plant Capacities 89 Operating and Capital Indicators 90

COMPLIANCE REPORT

Independent Auditor’s Report Required by Oregon State Regulations 91-92

INTRODUCTORY

SECTION

I

December 6, 2016

To Board of Directors, Ratepayers and Interested Parties:

We are pleased to submit the Comprehensive Annual Financial Report of Clean Water Services (the District), a component unit of Washington County, Oregon, for the year ended June 30, 2016, together with the report thereon of the District’s independent auditors.

This report was prepared by Clean Water Services’ Business Operations Department in accordance with the provisions of Oregon Revised Statutes Chapter 297. District management assumes full responsibility for the accuracy of the data and the reliability of the presentations and all disclosures contained in this report. To provide a reasonable basis for making these representations, management of the District has established a comprehensive internal control framework that is designed both to protect the District’s assets from loss, theft, or misuse and to compile sufficient reliable information for the preparation of the District’s financial statements in conformity with the accounting principles generally accepted in the United States of America. Because the cost of internal control should not exceed anticipated benefits, the objective is to provide reasonable, rather than absolute, assurance that the financial statements are free of any material misstatements. We believe the data is accurate and complete in all material respects and that it presents fairly the financial position, results of operations and cash flows of the District for the year ended June 30, 2016. This report should be read in conjunction with Management’s Discussion and Analysis which begins on page 4.

Independent Audit

The provisions of Oregon Revised Statutes Chapter 297, known as the “Municipal Audit Law”, require that an independent audit of the District’s records be made within six months following the close of the fiscal year, with approved extensions. The auditors are appointed by the Board of Directors following a public competitive request for proposal process. The firm of Moss Adams LLP has completed its third audit of the District’s financial statements which is incorporated into the financial section of this report.

The firm of Moss Adams LLP has issued an unmodified opinion on the District’s financial statements for the year ended June 30, 2016. The independent auditor’s report is located at the front of the financial section of this report.

Transmittal Letter To Board of Directors, Ratepayers and Interested Parties: (Continued)

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DISTRICT PROFILE

Clean Water Services is a county service district, which, in close cooperation with cities within its service area, provides sanitary sewer and surface water management utility services for the urbanized portion of Washington County (County) and small portions of the City of Portland, the City of Lake Oswego, and Multnomah and Clackamas counties. Clean Water Services’ service area encompasses most of the developed part of the Tualatin River watershed, an area of approximately 123 square miles and more than 95 percent of Washington County’s population. Cities located within and served by the District are as follows: Banks, Beaverton, Cornelius, Durham, Forest Grove, Gaston, Hillsboro, King City, North Plains, Sherwood, Tigard, Tualatin, and small portions of Lake Oswego and Portland.

The District began operation as Unified Sewerage Agency of Washington County on February 4, 1970 after its formation was authorized by popular vote. On July 1, 1990 it assumed responsibility for surface water management. Effective June 5, 2001, Unified Sewerage Agency of Washington County changed its name to “Clean Water Services.” The name change was made to better reflect the roles and responsibilities for providing cost-effective, environmentally sensitive management of water resources in the Tualatin River Basin.

The Clean Water Services’ Board of Directors is comprised of the same individuals who are elected to the Board of County Commissioners of Washington County. Although Clean Water Services maintains a close working relationship with Washington County, the District is a separately managed and financed municipal corporation under Oregon Revised Statutes Chapter 451. Administration and management of the District is the responsibility of the General Manager, who is appointed by the Board of Directors. Under the criteria of the Governmental Accounting Standards Board (GASB), the District is considered a component unit of Washington County for financial reporting purposes.

Operational and technical input to the Board is provided by Clean Water Services’ Advisory Commission (CWAC), a Board-appointed commission of 15 members.

Accounting Systems & Budgetary Control

Clean Water Services’ accounting records are maintained by fund on a modified accrual accounting basis for budgetary reporting purposes. For financial reporting purposes, the financial statements are presented on a full accrual basis.

The Board of Commissioners is required to adopt a final budget prior to the beginning of the fiscal year. This annual budget serves as the foundation of the District’s financial planning and control. The legal level of budgetary control is by fund and organizational unit or other specified category, in accordance with Oregon Revised Statutes Local Budget Law.

For budgetary and legal purposes, the activities are accounted for in the funds described below:

General Fund - accounts for normal recurring sewerage operations (also referred to as theOperating Fund).

Storm and Surface Water Management Fund - accounts for normal storm and surface watermanagement operations.


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Master Plan Update Debt Service Fund - accounts for the redemption of bond principal andinterest.

Liability Reserve Fund - accounts for the District’s self-insurance programs.

Capital Expenditure Reserve Funds - (one each for Sanitary and Surface Water Management) -account for the recovery of capital costs for maintenance, upkeep and improvement of thesystems.

Tualatin Basin Water Supply Capital Project Fund – accounts for the transactions of the TualatinBasin Water Supply Project, which is a joint project to provide additional water volume toenable continued compliance with water quality requirements.

Sanitary Sewer (LID) Construction Fund, Surface Water Management (LID) Construction Fund,and Sanitary Sewer and Surface Water Management Construction Funds - account for capitalconstruction expenditures by the District, or for capital construction expenditures made for thebenefit of property owners in the case of the Sanitary Sewer and Surface Water ManagementLID Construction Funds.

Revenue Pension Bond Debt Service Fund - accounts for the payment of the Series 2004Revenue Pension Bonds used to finance the District’s unfunded actuarial liability in Oregon’sPublic Employees Retirement System.

ECONOMIC CONDITION AND OUTLOOK

The economy of the District's service area reflects a diversity of industries including agriculture, high technology, sports apparel and services. Major employment industries in Washington County include professional and business services (19%), wholesale/retail trade (16%), computer and electronic equipment manufacturing (10%), healthcare and social services (10%), government services (8%) and leisure and hospitality (9%). The unemployment rate in Washington County continued a steady decline of about one percent per year with rates falling from a high of 10.3 percent in 2009 to a rate of 4.7 percent in June 2016, with the second lowest unemployment rate in Oregon. Washington County has experienced strong job growth, adding 40,165 jobs between 2010 and 2015, and per capita personal income is showing signs of modest continual growth. Washington County’s per capita personal income has consistently outpaced state average, and was second highest in the state in 2015.

Washington County, the second most populous county in Oregon, continues to be one of the fastest growing counties in the state, adding 40,800 more residents between 2011 and 2016. The region-wide population growth trend has remained steady. Although official population estimates for special districts are not available, Clean Water Services’ estimates the population of its service area at approximately 570,000. Population growth within the District’s service area has consistently outpaced population growth within the region over the past decade or more, and is expected to add an additional 170,000 people by 2030.


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LONG RANGE FINANCIAL PLANNING AND RELEVANT FINANCIAL POLICIES

To ensure Clean Water Services is poised for the future to respond to continued economic growth at affordable customer rates, District rate increases are planned to be regular, predictable and relatively affordable, with capital plans that are phased so that revisions can be made to improve operational efficiencies and respond to changes in customer demand. In concert with the above, fund balances shall be kept at levels that provide appropriate working capital, funding for operating contingencies and planned capital improvements, while ensuring favorable credit ratings and maintaining strong coverage ratios. Moreover, financial forecasts are conservatively constructed so the District does not overestimate concomitant revenue growth.

The District’s policies on rates and careful management of resources have allowed the District to limit estimated average annual combined residential sanitary sewer and surface water management fee increases for the last ten years to less than 4.27 percent.

MAJOR NEW AND ONGOING INITIATIVES

District Forms Captive Insurance Company

On February 16, 2016, the Clean Water Services Board of Directors approved the District’s formation of Clean Water Insurance Company, LLC, a wholly owned subsidiary of the District, domiciled in the state of Hawaii. The District is the sole member of this captive insurance company, which will operate for the benefit of the District and its ratepayers. The captive, which will be managed by the District, will result in long term risk management program savings through the use of a formalized self-insurance program that can access the reinsurance markets for additional seismic coverages as well as provide a potential for funding of loss prevention and mitigation projects to further protect District assets or recover from a seismic event.

Investing in Watershed Health

Clean Water Services has spent more than 40 years pursuing a cohesive strategy to advance the health of the Tualatin River Watershed for 570,000 residents in 12 cities. Through innovation, scientific knowledge and creativity we work to improve environmental health and value for our customers. These efforts have paid dividends for water quality, public health, and our community—the Tualatin River is healthier than it has been in generations and has become a valued recreational asset.

In September 2014 Clean Water Services set the highest bar yet in Tree-For-All with a goal to plant one million trees in one year for “one water”. We did it! Through innovative and collaborative partnerships in urban and agricultural areas we met and exceeded the challenge. And we’re not done. Tree-For-All is using Mother Nature as its guide to develop and implement long-term stewardship strategies while making the Tualatin Watershed a showcase of economic prosperity, ecological health, and community wellness. By implementing community-based restoration and enhancing the benefits that natural resources provide, we are leveraging partnerships to meet Clean Water Services’ goal of beautiful clean water while also meeting our partner’s goals – natural areas for wildlife, cleaner air, noise reduction, and scenic beauty – all at lower cost than if we did it alone.


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Investing in Infrastructure, Public Health and the Environment

In the last 10 years, Clean Water Services and our partner cities have invested more than $100 million to expand, replace and upgrade our community’s four wastewater treatment facilities, 40 pump stations, 838 miles of sewer lines, and 516 miles of storm sewers.

2015-16 Achievements

Cleaned more than 23.0 billion gallons of wastewater.

Recycled 31 dry tons of biosolids a day applied to agricultural fields in the Willamette Valley andeastern Oregon to improve soil condition and crop production.

Monitored nearly 1,000 strict permit conditions at each treatment facility, including monthly,weekly and daily limits established to protect the Tualatin River.

Swept more than 12,715 miles of streets, collecting almost 687 dump truck loads of debris, andcleaned more than 16,141 catch basins, collecting material equivalent to 218 dump truck loads,to keep pollutants out of our river and streams.

Replaced 239 sanitary sewer laterals and rehabilitated 12,882 linear feet of sewer mains and518 manholes associated with the Infiltration and Inflow (I/I) reduction program.

District and member cities retrofitted 86 catch basins to provide additional water qualitytreatment.

Increased area treated by 431 acres to almost 30% of the basin. Managed over 500 permits issued to industrial customers to monitor and control their

discharges to the wastewater treatment facilities and to stormwater.

Investing in Public Involvement & Education

Clean Water Services reaches out to the community to encourage residents to join our efforts in protecting public health, enhancing the region’s environmental quality of life, and planning for the region’s water future.


Maintained and promoted Westside Voices (www.joinwestsidevoices.org ) –an onlinecommunity engagement panel that allows residents to weigh in on community issues throughsurveys and focus groups. Just over 2,000 residents participate in the two-year-oldprogram. Westside Voices is a partnership between Clean Water Services, Washington County,other local agencies and nonprofits.

The award-winning Tualatin River Rangers program reached 3,000 students and an estimated6,000 adults at nearly 50 percent of public elementary schools in the Tualatin Basin.

Nearly 600 high school science students participated in Sewer Science and got hands oneducation about water treatment followed by a facility tour.

More than 1,500 people from around the world toured Clean Water Services treatmentfacilities to learn how wastewater is cleaned at a higher level than 98% of the nation’s facilities.

This year the Fernhill Natural Treatment System project continued to attract thousands ofvisitors including 600 who attended five public events (Birds and Brew, May Day, treeplantings), engaged 300 students from nine Tualatin Basin schools in place-based education,

http://www.joinwestsidevoices.org/


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hosted tours and projects by students from Pacific University, Portland Community College (PCC), and Portland State University (PSU), and was the subject of tours or presentations to 8 civic and professional groups.

To engage our community in a discussion about water and how we can make water fit forpurpose, the District launched the Pure Water Brew project. The District supplied high puritywater from 100% effluent to a non-profit association of local home brewers, the Oregon BrewCrew (OBC). Twenty-five homebrewers from the OBC brewed beer and submitted entries to acompetition sponsored by Carollo. The top ten were featured at tastings at the nationalWateReuse Symposium and the Water Environment Federation Conference. The project so farhas generated regional, national, and international coverage with more than 500 media storiesand started a wonderful conversation about the nature of water and how it is continuallyrecycled and reused.

Investing in Resource Recovery

Wastewater treatment has transformed over the last decade, moving from waste disposal to a growing recognition as resource recovery facilities that produce clean water, recover valuable nutrients, and produce clean, renewable energy. Clean Water Services is on the leading edge of this transformation:


Provided 92.3 million gallons of irrigation water to more than 250 acres of athletic fields, golfcourses, wetlands and parks from the Durham Advanced Wastewater Treatment Facility.

Provided another 54.5 million gallons of Class A irrigation water from the Rock Creek AdvancedTreatment Facility to the wetlands and Natural Treatment System at Fernhill.

The Durham and Rock Creek Resource Recovery Facilities recycled phosphorus and ammonia toproduce 464 tons of Crystal Green® fertilizer for sale to the commercial nursery and turfindustry.

Generated 11.3 million kWh of renewable energy by capturing digester gas from the Rock Creekand Durham facilities as well as solar power at Durham to meet approximately 22% of theDistrict’s electrical demands.

Continued the development of Clean Water Grow™, a slow-release fertilizer that helps reducenutrient runoff to waterways by gently releasing nutrients as plants use them. It’s Clean WaterServices’ opportunity to provide ratepayers with a product—a critical part of which is harvestedfrom our treatment plants—that can help further reduce the amount of phosphorus runoff intostreams. The fertilizer is offered at many retail nurseries around the region as well as nativeplant sales and farmers markets. This product is made possible by the ratepayer’s investmentin building the nation’s most advanced resource recovery facilities at the Durham and RockCreek Treatment Facilities.


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Investing in Science

Together with the USGS, DEQ and the Washington County Watermaster, Clean Water Services has conducted comprehensive water quality and flow monitoring of the Tualatin River and its tributaries for more than two decades. This integrated monitoring program has allowed water resource managers to be more responsive to the needs and potential of the watershed.


The Water Quality Laboratory collected nearly 27,000 treatment plant, stormwater, surfacewater and industrial samples and performed nearly 114,000 chemical, biological and physicalanalyses to help Clean Water Services assure the health and safety of the Tualatin Riverwatershed and its residents.

Monitored more than two dozen water quality parameters at 27 sites on the Tualatin River andits tributaries on a twice per month basis and also assumed the operation of a continuous waterquality monitoring station on Beaverton Creek.

The Laboratory supported research and projects that included frog embryo survival inKingfisher Marsh, effects of tributary flow restoration on water quality, harmful algae blooms,and fungal uptake and degradation of pollutants, along with a number of studies on improvingefficiencies and effectiveness at the wastewater treatment facilities.

Working with the Watermaster and consultants, Clean Water Services managed andmaintained more than 15 stream flow gauging stations to continuously measure the flow in theTualatin River, Dairy, Fanno, Rock, Beaverton, Gales, Chicken Creeks, and many other TualatinRiver tributaries.

Working with the USGS, gathered continuous, real-time water quality data in the Tualatin Riverand major tributaries.

Investing in Community and Building Partnerships

Clean Water Services is building innovative partnerships to create a shared vision and strategy to advance the health of the Tualatin River Watershed:


Worked with the Tualatin Soil and Water Conservation District, Tualatin Hills Park andRecreation District, U.S. Fish and Wildlife Service, Metro and other partners on over 100 milesof stream corridors that have been restored in agricultural and urban areas. This work providestemperature, water quality, habitat and recreational benefits along the Tualatin River andtributaries.

Inspired Cities, non-profits, park districts, private landowners and agricultural partners to planta diverse collection of more than 2,000,000 native trees, shrubs and plants along streams,wetlands and the river to filter pollutants, provide shade and create healthy wildlife habitat aspart of the Tree-For-All campaign.

Catalyzed community organizations to rally more than 6,600 volunteers to get their hands dirtyon behalf of Mother Nature. The volunteers donated more than 17,000 hours, an estimated


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value of $375,000, and they rooted over 50,000 native plants to clean water, purify air, create wildlife habitat and promote Washington County’s scenic beauty.

Partnered with community restoration organizations to access and deploy advancedtechnologies that increase efficiency of large scale planting operations and reduce staff timeassociated with plant inventory management and site review.

Partnered with Portland Community College to develop Vegetated Private Water QualityFacilities Management Training modules.

Partnered with the City of Tigard to restore the confluence of Derry Dell and Fanno Creeks. Thisrestoration project reconnected the floodplain to Derry Dell Creek, eliminated three sanitarysewer creek crossings and an existing fish barrier at the Walnut Street culvert.

Partnered with Washington County to construct Bio-retention Swale using a remnant parcelowned by the County, resulting in stormwater treatment to over 65 acres of existing developedarea.

Received Salmon Safe certification for site management of District facilities by meetingstringent qualifications for conserving urban habitat and water quality.

Regulatory Climate

In February 2004, the Oregon Department of Environmental Quality (DEQ) issued Clean Water Services the nation’s first integrated, municipal, watershed-based permit under the Clean Water Act. This innovative permit integrates the District’s four municipal wastewater treatment facilities and the municipal stormwater system permits into an integrated bundle, which changes the regulatory framework to allow the District greater flexibility to take advantage of creative approaches and new solutions. The watershed-based permit was renewed by DEQ in 2016. The renewed watershed-based permit continues to include several elements that were first included in the 2004 permit:

Water quality credit trading for thermal loads between treatment facilities and the release ofstored water from Hagg Lake and Barney Reservoirs.

Water quality credit trading for thermal loads between treatment facilities and streamsideshading improvements outside and inside the District’s service boundary.

Establishes performance benchmarks for the stormwater management activities of the District,its partner cities and Washington County as a whole.

Consolidation of regulatory reporting requirements.

Additionally, the renewed permit expands the watershed approach by allowing for new discharges from a natural treatment system in Forest Grove, expands thermal load trading strategies, and includes a bubble–load concept for suspended solids that provides operational flexibility to the District’s treatment facilities. The renewed permit also provides greater flexibility for the District to optimize operations and fully utilize existing infrastructure while accommodating new growth in the basin. The permit greatly increases monitoring requirements, establishes new limits for ammonia during the wet season, and increases reporting requirements to respond to changing regulatory requirements. Regulatory changes, including new, more stringent water quality standards for the protection of human health, more aggressive stormwater management requirements, and the stricter


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controls on wet weather flow management will pose new challenges to the District in maintaining regulatory compliance and meeting the overall ecological objectives for the Tualatin basin.

Water Quality Requirements The Environmental Quality Commission (EQC) has adopted several pollution control strategies known as Total Maximum Daily Loads (TMDLs) including those for phosphorus, temperature, bacteria, and ammonia-nitrogen in the Tualatin River to protect water quality and restore impaired beneficial uses of the river. The TMDLs define the quality of effluent that the District’s treatment plants may discharge to the Tualatin River. Limits are the most restrictive during the dry weather season. The TMDL structure targets in-stream concentration for phosphorus and maintaining adequate dissolved oxygen in the river. Augmentation of stream flows and thermal load trading occurs during the summer to reduce stream temperatures. As growth occurs, limits have been established to control ammonia, along with Hydraulic loading and mass limits affect during peak wintertime flows.

Limits set on the Durham and Rock Creek Wastewater Treatment Plants’ effluent are some of the most stringent in the United States for phosphorus and ammonia-nitrogen. As a result, the District currently provides a higher level of wastewater treatment than 98 percent of the treatment facilities in the nation.

User Charges Clean Water Services’ Board of Directors is authorized by state law to set fees and charges for connection to, and use of, the public sewer system and connection to, and/or use of, the public facilities and public services related to surface water management, including storm water drainage. The District is 100 percent fee and charge supported. The District bills for all residential and non-industrial commercial customers in the unincorporated areas and in the smaller “franchise” cities of North Plains, Banks, Gaston, Durham, and King City. The cities of Beaverton, Tigard, Hillsboro, Tualatin, Forest Grove, Cornelius and Sherwood bill for services to residential and non-industrial commercial customers within their respective corporate limits and remit a portion of fees collected to the District by agreement. The cities of Portland and Lake Oswego bill residential and non-industrial customers within the District’s service area and remit a portion of fees collected to the District by agreement. The District directly bills all industrial permit holders. Clean Water Services establishes a basic schedule of rates and charges annually, and the Cities of Beaverton, Tigard, Hillsboro, Tualatin, Forest Grove, Cornelius and Sherwood bill according to District developed schedules. These seven largest cities may also approve additional supplemental charges. The Cities of Portland and Lake Oswego may bill at different rates but remit funds for District customers based on District rates. The monthly billing rate for residential and commercial sewer customers is calculated by adding a consumption component to a base rate component. The District’s average residential, commercial and industrial sewer rates for fiscal year 2016 increased by approximately 3 percent from fiscal year 2015.


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Industrial customers are billed for domestic wastewater flows in a manner that is essentially identical to the process outlined above for residential and other non-industrial customers. Industrial and commercial customers with high-waste flows and high-strength wastes are monitored for permit compliance (including onsite pretreatment) and billed based on four components: volume, biochemical oxygen demand, suspended solids, and customer service.

Surface Water Management (SWM) fees are based on measured impervious surface areas, including roofs, paved areas such as parking lots and roads, and charged against an average residential measurement (2,640 square feet) or equivalent service unit (ESU). The rate charged for SWM services is $7.25 per month per ESU, an increase of 7.4% or $.50 per month to the average residential customer’s bill from fiscal year 2015. Residences are typically charged a flat 1.0 ESU rate.

AWARDS

The Government Finance Officers Association of the United States of America and Canada (GFOA) awarded a Certificate of Achievement for Excellence in Financial Reporting to Clean Water Services for its Comprehensive Annual Financial Report (CAFR) for the fiscal year ended June 30, 2015. This was the 29th consecutive year that the District has achieved this prestigious award. In order to be awarded a Certificate of Achievement, a government must publish an easily readable and efficiently organized CAFR. The report must satisfy both generally accepted accounting principles and applicable legal requirements. A Certificate of Achievement is valid for a period of one year only. We believe that our current CAFR continues to meet the Certificate of Achievement Program’s requirements and we are submitting it to the GFOA to determine its eligibility for another certificate. In addition, the District’s Adopted Budget Document for the Fiscal Year 2015-16 received the Distinguished Budget Presentation Award from GFOA. This was the 28th consecutive year that the District has achieved this prestigious award. In order to qualify, the budget document must be judged proficient as a policy document, a financial plan, an operations guide and a communications device. ACKNOWLEDGMENTS

Clean Water Services would like to thank the entire Finance Team whose professionalism, dedication and efficiency are responsible for the preparation of this report.

The District closes with a word of thanks for the continuing support of the Board of Directors in providing District staff with the tools necessary to assist in the careful stewardship of public resources.

Respectfully submitted, Bill Gaffi Diane Taniguchi-Dennis Mark Poling General Manager Deputy General Manager Business Operations Director

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Clean Water Services (A Component Unit of Washington County, Oregon)

Governing Body in accordance with ORS 451.485

Board of Directors

Washington County, Oregon 155 North First Avenue Hillsboro, OR 97124

Directors as of June 30, 2016

ELECTED: Term Expires

Andy Duyck, Chairman December 31, 2018 Dick Schouten, District 1 Director December 31, 2016 Greg Malinowski, District 2 Director December 31, 2018 Roy Rogers, District 3 Director December 31, 2016 Bob Terry, District 4 Director December 31, 2018

APPOINTED: Bill Gaffi, General Manager REGISTERED AGENT: Bill Gaffi, General Manager REGISTERED OFFICE: 2550 SW Hillsboro Highway Hillsboro, OR 97123

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District Organization Chart

Laboratory Services

Division

Treatment Plant

Services Division

Finance &

Accounting

Information

Technology

Government &

Public Affairs

Human Resources

Risk & Benefits

Wastewater

Treatment

Department

Conveyance

Systems

Department

Field Operations

Division

Engineering

Services Division

Operations

Division

Mechanical

Maintenance

Division

Source Control

Legal

Fleet & Purchasing

Watershed

Management

Department

Business Services

Department

Clean Water

Services Customers

Board of Directors

Clean Water

Services Advisory

Commission

General Manager

Deputy General

Manager

Regulatory Affairs

Department

FINANCIAL SECTION

REPORT OF INDEPENDENT

AUDITOR

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REPORTOFINDEPENDENTAUDITORSTotheBoardofCommissionersCleanWaterServices(AcomponentunitofWashingtonCounty,Oregon)Hillsboro,OregonReportontheFinancialStatementsWe have audited the accompanying financial statements of Clean Water Services (the District), acomponent unit ofWashington County, Oregon, as of and for the year ended June30, 2016, and therelated notes to the financial statements, which collectively comprise the District’s basic financialstatementsaslistedinthetableofcontents.Management’sResponsibilityfortheFinancialStatementsManagement is responsible for the preparation and fair presentation of these financial statements inaccordancewithaccountingprinciplesgenerallyacceptedintheUnitedStatesofAmerica;thisincludesthe design, implementation, andmaintenance of internal control relevant to the preparation and fairpresentationoffinancialstatementsthatarefreefrommaterialmisstatement,whetherduetofraudorerror.Auditor’sResponsibilityOur responsibility is to express an opinion on these financial statements based on our audit. Weconductedouraudit inaccordancewithauditing standardsgenerallyaccepted in theUnitedStatesofAmerica.Thosestandardsrequire thatweplanandperformtheaudit toobtainreasonableassuranceaboutwhetherthefinancialstatementsarefreefrommaterialmisstatement.Anauditinvolvesperformingprocedurestoobtainauditevidenceabouttheamountsanddisclosuresinthe financial statements. The procedures selected depend on the auditor’s judgment, including theassessmentof therisksofmaterialmisstatementof the financialstatements,whetherdue to fraudorerror. Inmakingthoseriskassessments, theauditorconsidersinternalcontrolrelevant to theentity’spreparationand fairpresentationof the financial statements inorder todesignauditprocedures thatare appropriate in the circumstances, but not for the purpose of expressing an opinion on theeffectivenessof theDistrict’s internal control.Accordingly,weexpressno suchopinion.Anaudit alsoincludes evaluating the appropriateness of accounting policies used and the reasonableness ofsignificantaccountingestimatesmadebymanagement,aswellasevaluatingtheoverallpresentationofthefinancialstatements.

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REPORTOFINDEPENDENTAUDITORS(continued)Webelievethattheauditevidencewehaveobtainedissufficientandappropriatetoprovideabasisforourauditopinion.OpinionIn our opinion, the financial statements referred to above present fairly, in allmaterial respects, thefinancialpositionoftheDistrictasofJune30,2016,andtherespectivechangesinfinancialpositionandcashflowsthereof,fortheyearsthenendedinconformitywithaccountingprinciplesgenerallyacceptedintheUnitedStatesofAmerica.EmphasisofMatterAsdiscussedinNote1,thefinancialstatementspresentonlytheDistrictanddonotpurportto,anddonot present fairly the financial position ofWashington County, Oregon, as of June 30, 2016 and thechanges in its financial position and its cash flows for the years then ended, in accordance withaccountingprinciplesgenerallyaccepted in theUnitedStatesofAmerica.Ouropinion isnotmodifiedwithrespecttothismatter.OtherMattersRequiredSupplementaryInformationAccountingprinciplesgenerallyacceptedintheUnitedStatesofAmericarequirethatthemanagement’sdiscussion and analysis, the schedule of funding progress for other post‐employment benefits, thescheduleofstatutorilyrequiredemployercontributionspensionplan,andthescheduleofproportionateshareofthecollectivenetpositionliabilitybepresentedtosupplementthebasicfinancialstatements.Suchinformation,althoughnotapartofthebasicfinancialstatements,isrequiredbytheGovernmentalAccountingStandardsBoard,whoconsidersittobeanessentialpartoffinancialreportingforplacingthebasicfinancialstatementsinanappropriateoperational,economic,orhistoricalcontext.Wehaveappliedcertain limitedprocedurestotherequiredsupplementary informationinaccordancewithauditingstandardsgenerallyacceptedintheUnitedStatesofAmerica,whichconsistedofinquiriesofmanagement about themethods of preparing the information, then comparing the information forconsistencywithmanagement’s responses to our inquiries, the basic financial statements, and otherknowledgeweobtainedduringourauditofthebasicfinancialstatements.Wedonotexpressanopinionor provide any assurance on the information because the limited procedures do not provide uswithsufficientevidencetoexpressanopinionorprovideanyassurance.SupplementaryInformationOur audit was conducted for the purpose of forming an opinion on the financial statements thatcollectivelycomprisetheDistrict’sbasicfinancialstatements.Thecombiningschedulesandscheduleofrevenuesandexpenditures–budgetandactualandrelatednotes(thebudgetaryschedules)onpages55through74,collectivelyrepresentingsupplementalinformationasprovidedinthetableofcontents,arepresented for purposes of additional analysis and are not a required part of the basic financialstatements.

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REPORTOFINDEPENDENTAUDITORS(continued)The supplemental information is the responsibilityofmanagementandwasderived fromand relatesdirectlytotheunderlyingaccountingandotherrecordsusedtopreparethebasicfinancialstatements.Such information has been subjected to the auditing procedures applied in the audit of the basicfinancial statements and certain additional procedures, including comparing and reconciling suchinformationdirectlytotheunderlyingaccountingandotherrecordsusedtopreparethebasicfinancialstatements or to the basic financial statements themselves, and other additional procedures inaccordancewithauditingstandardsgenerallyacceptedintheUnitedStatesofAmerica.Inouropinion,thesupplementalinformationasdescribedaboveisfairlystated,inallmaterialrespects,inrelationtothebasicfinancialstatementsasawhole.OtherInformationOur audit was conducted for the purpose of forming an opinion on the financial statements thatcollectivelycomprisetheDistrict’sbasic financialstatements.The introductoryandstatisticalsectionshavenotbeensubjectedtotheauditingproceduresappliedintheauditofthebasicfinancialstatements,andaccordingly,wedonotexpressanopinionorprovideanyassuranceonit.ReportonOtherLegalandRegulatoryRequirementsIn accordance with the Minimum Standards for Audits of Oregon Municipal Corporations, we haveissued our report dated December 6, 2016, on our consideration of the District’s compliance withcertain provisions of laws and regulations, including the provisions of Oregon Revised Statues asspecified in Oregon Administrative Rules. The purpose of that report is to describe the scope of ourtestingofcomplianceandtheresultsofthattestingandnottoprovideanopiniononcompliance.JulieDesimone,PartnerforMossAdamsLLPDecember6,2016

MANAGEMENT’S

DISCUSSION

AND ANALYSIS

4

CLEAN WATER SERVICES

A Component Unit of Washington County, Oregon

MANAGEMENT’S DISCUSSION AND ANALYSIS Fiscal Year Ended June 30, 2016

As management of Clean Water Services (the District), a component unit of Washington County, Oregon, we offer readers of the District’s financial statements this narrative overview and analysis of the financial activities for the fiscal year ended June 30, 2016. We encourage readers to consider the information presented here in conjunction with additional information that we have furnished in our letter of transmittal (which can be found on pages I‐X of this report), and in the financial statements and notes to the basic financial statements (which immediately follow this discussion).

Financial Highlights

The assets and deferred outflows of resources of the District exceeded its liabilities and deferred inflows of resources at the close of the fiscal year by $687.2 million (net position). Of this amount, $119.3 million represents unrestricted net position, which may be used to meet the District’s ongoing obligations to ratepayers and creditors.

The District’s total net position increased by $49.2 million mainly due to net proceeds from current year operations and capital contributions from developers.

The District’s total net capital assets increased $14.5 million primarily due to capital assets constructed and purchased in the current year totaling $42.6 million, and contributions of infrastructure systems and easements by developers totaling $14.4 million less District contributions of capital assets and loss on disposal totaling $2.8 million and current year depreciation and amortization of $39.7 million.

Debt service coverage for senior debt was 3.06, which exceeded the 1.2 required by the bond covenants. The District had no subordinate debt outstanding during the year.

Operating revenues total $130.1 million, an increase of $4.6 million. This is primarily attributed to a rate increase for sanitary and storm service charges during the year.

Operating expenses total $108.9 million, an increase of $19.3 million. The primary contributing factor is an increase in labor costs related to pension expense in the current year.

Long‐term debt decreased by $15.6 million due to payment of outstanding bonds. The District had $229.1 million in net debt outstanding at year‐end.

CLEAN WATER SERVICES A Component Unit of Washington County, Oregon

MANAGEMENT’S DISCUSSION AND ANALYSIS (Continued) Fiscal Year Ended June 30, 2016

5

Overview of the Financial Statements

This discussion and analysis is intended to serve as an introduction to Clean Water Services’ basic financial statements. The basic financial statements consist of the Statement of Net Position, Statement of Revenues, Expenses and Changes in Net Position, Statement of Cash Flows and Notes to Basic Financial Statements. The notes explain in more detail some of the information in the financial statements.

Financial Statements

The Statement of Net Position includes all of the District’s assets, liabilities, and deferred inflows/outflows of resources, with the difference reported as net position. This statement provides information about the nature and amounts of investments in resources (assets) and the obligations to the District’s creditors (liabilities). They also provide the basis for computing rate of return, evaluating the capital structure of the District and assessing the liquidity and financial flexibility of the District. Over time, increases or decreases in net position may serve as a useful indicator of whether the financial position of the District is improving or deteriorating.

All of the current year’s revenues and expenses are accounted for in the Statement of Revenues, Expenses and Changes in Net Position. This statement measures the success 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 user fees and other charges, and its profitability and credit worthiness.

The last financial statement is the Statement of Cash Flows. The primary purpose of this statement is to provide information about the District’s cash receipts and cash payments during the reporting period. The statement reports cash receipts, cash payments and net changes in cash resulting from operations, investing and financing activities and provides answers to such questions as where did the cash come from, what was the cash used for and what was the change in cash balance during the reporting period.

Clean Water Services maintains two operations, Sanitary Sewer and Surface Water Management (SWM), which the District accounts for and discloses separately in the Combining and Individual Schedules on pages 57‐59 of this report. These statements offer short and long‐term financial information about the activities of the two operations.

Notes to Basic Financial Statements

The notes provide additional information that is essential to a full understanding of the data provided in the government‐wide statements. The Notes to Basic Financial Statements can be found on pages 19‐53 of this report.

Other Information

In addition to the basic financial statements and accompanying notes, this report also presents certain required supplementary information concerning the District’s other post‐employment health benefits,



6

pension plan, and budgetary comparisons. Required supplementary information can be found on pages 54‐56 of this report.

Financial Analysis

Financial Position

As noted earlier, net position over time may serve as a useful indicator of financial position. In the case of Clean Water Services, assets and deferred outflows of resources exceeded liabilities and deferred inflows of resources by $687.2 million at the close of the most recent fiscal year, an increase of $49.2 million. The table below provides a summary of net position at fiscal year‐end.

Net Position

(in Thousands)

2016 2015 Amount %

ASSETS

Current assets $ 153,526 $ 123,097 $ 30,429 24.7%

Noncurrent assets Cash and investments ‐ restricted 135,543 131,231 4,312 3.3%

Capital assets, net 658,415 643,931 14,484 2.2%

Investment in joint venture 2,491 2,568 (77) ‐3.0% Other noncurrent assets 3,530 10,886 (7,356) ‐67.6%

Total assets 953,505 911,713 41,792 4.6%

Deferred outflows of resources 3,617 2,410 1,207 50.1%

LIABILITIES

Current liabilities 36,806 34,424 2,382 6.9%

Noncurrent liabilities 228,674 229,938 (1,264) ‐0.5%Total liabilities 265,480 264,362 1,118 0.4%

Deferred inflows of resources 4,480 11,771 (7,291) 100.0%

NET POSITION

Net investment in capital assets 436,635 406,700 29,935 7.4%

Restricted 131,179 127,787 3,392 2.7%

Unrestricted 119,348 103,503 15,845 15.3%

Total net position, end of year $ 687,162 $ 637,990 $ 49,172 7.7%

Change



7

Net investment in capital assets

63.5%

Restricted19.1%

Unrestricted17.4%

Net PositionJune 30, 2016

Net Position

By far the largest portion of Clean Water Services’ net position (63.5%) reflects its investment in capital assets (e.g., treatment facilities, collection and conveyance systems, land, sewer lines, stormwater management improvements, buildings, plant and office equipment and automotive equipment), less

any related outstanding debt used to acquire or construct those assets. Clean Water Services uses these capital assets to provide services to ratepayers; consequently, these assets are not available for future spending. Although Clean Water Services’ investment in capital assets is reported net of related debt, it should be noted that the resources needed to repay this debt must be provided from

services to customers (ratepayers) or other sources, since the capital assets themselves cannot be used to liquidate these liabilities.

An additional portion of Clean Water Services’ net position (19.1%) represents resources that are subject to external restrictions on how they may be used. These restricted net assets include System Development Charges (SDC’s) collected from District customers when they connect to the sanitary sewer system to pay the cost of infrastructure expansion as needed to meet demands of population growth and to share cost burdens with existing customers for collection and treatment systems already built, funds restricted for debt service, and funds restricted for capital asset construction.

The remaining balance of unrestricted net position ($119.3 million or 17.4%) may be used to meet the District’s ongoing obligations to ratepayers and creditors.



8

Results of Operations

In addition to the analysis of net assets provided above it is useful to analyze the financial operations that took place during the year. The following table provides a summary of the changes in net position:

2016 2015 Amount %

REVENUES

Operating revenues:Service fees $ 124,230 $ 119,513 $ 4,717 3.9%

Other revenues 5,822 5,936 (114) ‐1.9%Total operating revenues 130,052 125,449 4,603 3.7%

Nonoperating revenues:Interest income 2,319 1,887 432 22.9%

Total revenues 132,371 127,336 5,035 4.0%

EXPENSES

Operating expenses 108,896 89,618 19,278 21.5%

Nonoperating expenses:Interest 8,650 9,577 (927) ‐9.7%Loss on disposal of capital assets 182 76 106 139.5%

Loss on equity in joint venture 77 75 2 2.7%

Capital Donations 2,425 3,499 (1,074) ‐30.7%Total expenses 120,230 102,845 17,385 16.9%

Income before contributions 12,141 24,491 (12,350) ‐50.4%

Capital contributions 37,031 32,503 4,528 13.9%

Change in net position 49,172 56,994 (7,822) ‐13.7%Net position, beginning of year, before adjustment 637,990 603,765 34,225 5.7%

Less: Accumulated adjustment for change in accounting principle ‐ (22,769) 22,769 ‐100.0%Net position, beginning of year, as adjusted 637,990 580,996 56,994 9.8%

Net position, end of year $ 687,162 $ 637,990 $ 49,172 7.7%

Change

Changes in Net Position

(in Thousands)



9

Revenues

Total revenues for FY 2016, including operating revenues, non‐operating revenues and contributed capital, totaled $169.4 million, an increase of approximately 6% over FY 2015. The increase in total revenues was primarily due to an increase in service fees and capital contributions.

Sanitary & SWM Service Charges: Operating revenue consists mainly of user charges for sewage and storm services. Monthly service charge revenues increased by 3.9%, totaling $124.2 million. This increase was primarily related to the sanitary sewer rate increase of 3% and a corresponding rate increase for the SWM service charge of 7.4% along with customer growth.

Capital Contributions: This revenue source includes System Development Charges (SDC’s), developer donated infrastructure, donated easements and third party contributions for District projects. Capital contributions totaled $37.0 million, an increase of $4.5 million, or 13.9% compared to the prior year. The increase is split between an increase in connections to the system (customer base growth) and developer donated infrastructure and donated easements as compared to the prior year. The increase also reflects a one‐time transfer of contributed capital of $336,000 to form the Captive insurance company.

Other Income: This revenue source includes all other fees, grant revenues, subsidy payments and refunds. Other income decreased by $0.1 million, or 1.9%. A majority of these revenues relate to a one‐time revenue source for the District.

Investment Income: Investment income totaled $2.3 million in 2016, an increase of $0.4 million compared to 2015, attributed to increased cash invested and investment valuation gains at year‐end.



10

Expenses

Total expenses for FY 2016, including operating expenses, non‐operating expenses and donated capital, totaled $120.2 million, an increase of approximately 16.9% over FY 2015. The increase in total expenses was primarily due to an increase in labor and benefit costs.

Operating costs increased by $19.3 million or 21.5%. This increase was due to the increase in labor costs related to the addition of 10 full‐time‐equivalent (FTE) positions during the year, and the increase in pension expense by $12.0 million resulting from the shift from a net pension asset of $5.8 million in the prior year to a net pension liability of $15.0 million at year‐end. All other operating costs including utilities, professional services, supplies and depreciation and amortization were relatively flat or decreased during the year.

Non‐operating costs decreased by $1.9 million or 14.3%. Bond debt service interest expense decreased by $0.9 million due to a decrease in debt service of $0.5 million with the final payoff of the Series 2010A Revenue Bonds in October 2015, and an increase in capitalized interest during FY 2016 of $0.4 million, consistent with the increase in Construction‐in‐Progress at year‐end. Capital donations to others decreased by $1.0 million or 30.7%. Capital donations include project costs incurred by the District on joint construction projects with other local jurisdictions. Once the project is complete, the asset is donated to the jurisdiction that owns the asset and will continue to maintain it.

The District’s financial condition remains strong, with adequate liquid assets for ongoing operations, treatment plants and collection systems functioning at a level necessary to meet demand and a reasonable level of unrestricted net position. The current financial condition, support staff capabilities and Operating and Capital Improvement Plans (CIP) needed to meet anticipated growth within the service area are well balanced and under control.

$0

$5

$10

$15

$20

$25

$30

$35

$40

$45

$50

PersonnelExpense

Materials &Services

Depreciation &Amortization

Interest onDebt

Loss onDisposal ofAssets

CapitalDonations

EXPENSES BY TYPE

2016

2015



11

Capital assets

As of year‐end, the District has $658.4 million (net of accumulated depreciation and amortization) invested in capital assets, as reflected in the table below. Capital assets include treatment facilities, collection and conveyance systems, land, sewer lines, stormwater management improvements, buildings, plant and office equipment, automotive equipment and intangible assets including easements and patents. Total additions to capital assets from current year activity, before depreciation and amortization, were $42.6 million. The net change in capital assets from current year activity was an increase of $14.5 million over FY 2015.

2016 2015 Amount %

Land $ 16,575 $ 16,575 $ ‐ 0.0%

Easements 8,787 3,925 4,862 123.9%

Construction in progress 107,482 80,050 27,432 34.3%

Buildings and improvements 32,484 34,367 (1,883) ‐5.5%Land improvements 75,263 71,604 3,659 5.1%

Treatment plants 230,559 250,631 (20,072) ‐8.0%Sewer lines 154,936 151,263 3,673 2.4%

Plant equipment 27,023 29,807 (2,784) ‐9.3%Automotive equipment 1,427 1,570 (143) ‐9.1%Plans and studies 2,906 3,043 (137) ‐4.5%Office equipment 854 968 (114) ‐11.8%Temporary Easements 54 57 (3) ‐5.3%Patents 65 71 (6) ‐8.5% Total capital assets $ 658,415 $ 643,931 $ 14,484 2.2%

Change

Capital Assets

(Net of Depreciation and Amortization)(in Thousands)



12

Capital additions by category during FY 2016 included the following:

Additional information on Clean Water Services’ capital assets can be found in note 5 on page 32 of this report.

Treatment plant facilities $ 22,669,719 Sanitary conveyance systems 7,923,632 Stormwater conveyance systems 2,417,685 Pump stations 5,215,539 Watershed 3,539,126 Other (facilities, fleet, IT) 854,901

$ 42,620,602



13

Long‐term debt

Debt outstanding at year‐end is summarized in the table below. Revenue bonds, which are the District’s principal source of debt financing, are paid from sanitary sewer system operating revenues.

As of year‐end, the District had total net bonded debt outstanding of $229.1 million versus $244.7 million at the end of fiscal year 2015, and of that amount $16.3 million is due within one year. All of this debt (i.e., revenue bonds) is secured solely by specified revenue sources of the sanitary sewer operations.

Sewer revenue bonds are expected to be the preferred debt instrument for the District. The District advanced refunded a portion of the Series 2009A Revenue Bonds in October 2016. The District’s strong financial position resulted in an upgrade in the rating by Standard & Poor’s from AA+ to AAA and Moody’s from Aa2 to Aa1.

Historically, District bond credit ratings have been enhanced by funding required debt service reserves with bond surety insurance policies. District bond surety providers experienced significant credit rating downgrades in 2008, which created the need to fund debt service reserve requirements on the District’s recent issues with cash from bond proceeds. This change in practice will also enhance the District’s capacity to market future bond issues.

Additional information on Clean Water Services long‐term debt can be found in note 7 on pages 33‐37 of this report.

2016 2015 Amount %

Sewer revenue bonds $ 215,137 $ 230,253 $ (15,116) ‐6.6%Revenue pension bonds 14,000 14,480 (480) ‐3.3%

Total $ 229,137 $ 244,733 $ (15,596) ‐6.4%

Change

Long‐term Debt

(Net of Premiums and Discounts)(in Thousands)



14

Economic Factors and Next Year's Budgets and Rates

The adopted budget for 2017 reflects a 2.7% increase in operating expenses. This increase is primarily due to increased labor costs of $1.6 million or 4.2%, which reflects an increase of 8.45 FTE from the prior year. Materials and services are expected to increase by approximately $160,500, or 0.6% and capital outlay decreased by $13,700 or 3.1% for equipment purchases.

Budgeted positions for fiscal year 2017 increased by 8.45 FTE, or 2.6% from the prior year.

Adopted sanitary sewer fee rates increased by 3% for fiscal year 2017. This will add an estimated $1.21 per month to the average residential customer’s bill. Storm water maintenance fees are increasing by 6.9%, which will add an estimated 50 cents per month to the average residential customer’s bill.

The District has budgeted for an estimated $67.1 million in new sanitary sewer system improvements and $3.9 million in new surface water management system improvements in FY 2017. These projects will be funded using a combination of cash reserves from system development charges and service fees and contributions from developers or partnering agencies. These investments are planned to increase system capacity, meet regulatory requirements for water quality, and enhance overall watershed health.

The adopted budget for FY 2017 reflects relatively flat debt service with an increase of just 0.5%.

All of these factors were considered in preparing Clean Water Services’ budget for the 2017 fiscal year.

The District annually prepares a 10‐year financial outlook that incorporates capital improvement planning (CIP) with operational planning. The 10‐year CIP plans are developed using new project requests and updates to the status of existing projects. The CIP plans are developed by division and program managers and reviewed with recommendations as to projects needing funding incorporated into the financial forecast. Project spending is then matched with either cash reserves or debt financing. Depending upon the reserves needed, the financial plan then becomes a model of integrating productivity improvements, growth projections, rate increases, debt restructuring and debt financing of capital. The first year of the CIP becomes the basis for the next year’s budget with respect to investments in capital improvements.

The current 10‐year forecast projects that estimated future sanitary operating revenues will safely cover operating expenses and all current and future debt service requirements. The current 10‐year forecast for SWM operations indicates ending reserves will slowly increase if the District manages SWM capital expenditures with modest annual increases going forward and continues to increase the SWM rates annually consistent with the recent trending at $0.50 per ESU. The District will continue to evaluate the need for capital expenditures and options for funding costs in the future.



15

Requests for Information

The financial report is designed to provide a general overview of Clean Water Services’ finances for all those with an interest in the District’s finances. Questions concerning any of the information provided in this report or requests for additional information should be addressed to the Business Operations Department Director, Clean Water Services, 2550 SW Hillsboro Highway, Hillsboro, Oregon 97123.

BASIC FINANCIAL

STATEMENTS

Current assets:$ 129,794,266

18,774,032 1,264,707 209,168 499,543

Current assets ‐ unrestricted 150,541,716

2,155,656 237,527 204,389 386,479

Current assets ‐ restricted 2,984,051

Total current assets 153,525,767

Noncurrent assets:135,542,562

2,707,513

Land 16,574,799 Permanent easements 8,787,143 Construction in progress 107,482,388

525,452,289 Intangible assets, net of accumulated amortization 118,540 Investment in joint venture 2,490,836 Prepaid electricity 450,890

371,915

Total noncurrent assets 799,978,875

Total assets 953,504,642

Deferred outflow of resources:Deferred loss on refunding 354,014 Pension related 3,263,381

Total assets and deferred outflow of resources $ 957,122,037

Current liabilities:$ 5,683,433

5,071,319 91,500

2,584,294 16,279,573

Current liabilities ‐ payable from unrestricted assets 29,710,119

7,018,856 77,001

Current liabilities ‐ payable from restricted assets 7,095,857

Total current liabilities 36,805,976

Noncurrent liabilities:212,857,871

Net pension liability 15,003,706 562,565 250,000

Total noncurrent liabilities 228,674,142

Total liabilities 265,480,118

Deferred inflow of resources:Pension related 4,479,891

Total liabilities and deferred inflow of resources 269,960,009

Net position:436,635,507

Restricted for:110,116,909 20,811,719

Captive Insurance 250,000 Unrestricted 119,347,893

Total net position 687,162,028

Total liabilities, deferred inflow of resources and net position $ 957,122,037

Contracts receivable

Bonds payable, net

Accounts payableAccrued payrollAccrued self insurance

Liabilities and Net Position

Accrued self insurance

Net investment in capital assets

Capital constructionDebt service

Accrued interest payable Current portion of bonds payable, net

Accounts payable ‐ from restricted assetsAccrued interest payable‐ from restricted assets

Postemployment benefits other than pensions

Capital assets, not being depreciated or amortized:

Capital assets, net of accumulated depreciation

Current portion contracts receivable‐restricted

Contracts receivable‐restricted

Prepaid expenses

Cash and investments‐restricted

Connection fees receivable‐restricted

Contributions receivable from local governments‐restrictedBuild America Bonds (BABs) subsidy receivable‐restricted

June 30, 2016

CLEAN WATER SERVICES(A Component Unit of Washington County, Oregon)

Statement of Net Position

Cash and investmentsAccounts receivable (net of allowance for uncollectibles)Materials and supplies inventoryCurrent portion contracts receivable

Assets

See notes to basic financial statements16

Operating revenues:$ 124,229,823

5,822,263

Total operating revenues 130,052,086

Operating expenses:44,920,532 4,445,657 8,777,456 3,854,577 2,255,696 502,042 826,868

3,574,661 39,738,493

Total operating expenses 108,895,982

Operating income 21,156,104

Nonoperating revenues (expenses):2,304,246

Interest on assessments and contracts 14,552 (182,209) (77,007)

(8,649,511) (2,425,219)

Total nonoperating expense (9,015,148)

Income before contributions 12,140,956

Capital contributions:21,427,590 15,267,497

Contributed capital ‐ CWIC captive insurance 336,000

Total capital contributions 37,031,087

Change in net position 49,172,043

Net position, beginning of year 637,989,985

Net position, end of year $ 687,162,028

Insurance

Loss on equity in joint ventureInterest expenseCapital donations ‐ intergovernmental agreements

ChemicalsDepreciation and amortization expense

Investment income

Net loss on disposal of capital assets

System development chargesInfrastructure donated by developers

For the year ended June 30, 2016


Statement of Revenues, Expensesand Changes in Net Position

Service feesOther

Labor and fringe benefitsUtilitiesProfessional servicesSuppliesAdministrative costsRepairs and maintenance


Cash flows from operating activities:$ 122,561,488

(22,970,720) (32,200,280) 5,820,189

Net cash from operating activities 73,210,677

Cash flows from noncapital financing activities:(480,000) (874,711)

(2,425,219) Contributed capital ‐ CWIC captive insurance 336,000

Net cash from noncapital financing activities (3,443,930)

Cash flows from capital and related financing activities:(38,787,500) (14,005,000) (10,775,511) 1,965,844

13,089 22,338,148

147,464

Net cash from capital and related financing activities (39,103,466)

Cash flows from investing activities:2,304,246

Net increase in cash and cash equivalents 32,967,527

Cash and cash equivalents, beginning of year 232,369,301

Cash and cash equivalents, end of year 265,336,828

129,794,266 135,542,562

Total cash and investments $ 265,336,828

Reconciliation of operating income to net cash from operating activities:

$ 21,156,104

Adjustments to reconcile operating income to net cashfrom operating activities:

39,738,493 27,522

12,057,986 11,765 (2,074)

(1,668,335) (311,874) (242,154) 681,701

1,761,543

52,054,573

$ 73,210,677

$ 14,356,939 $ (77,007)

Net cash from operating activities

Schedule of non‐cash capital and related financing activities:Contributions of capital assets by developersLoss on equity in joint venture

Materials and supplies inventoryPrepaid expensesAccrued expensesAccounts payable

Total adjustments

Postemployment benefit costs other than pensionsBABs subsidyChanges in assets and liabilities:

Accounts receivable

Operating income

Depreciation and amortization

Net pension expenseAmortization of prepaid electric

Proceeds from sale of capital assets

Interest on investments

Unrestricted cash and investments

Restricted cash and investments

Interest paid on bonds

Interest received on assessments and contractsCapital contributed by customers and cities

Principal received on assessments and contracts

Acquisition and construction of capital assetsPrincipal paid on bonds

Payments to suppliersPayments to employees for servicesOther operating revenue

Capital donations to others

Principal paid on pension bondsInterest paid on pension bonds


Statement of Cash Flows


Received from customers



NOTES TO BASIC FINANCIAL STATEMENTS Fiscal Year Ended June 30, 2016

19

(1) Summary of Significant Accounting Policies

(a) Reporting Entity

Clean Water Services (the District) (formerly known as the Unified Sewerage Agency of Washington County), a Component Unit of Washington County, Oregon was formed February 4, 1970 under the provisions of Oregon Revised Statutes (ORS) Chapter 451 to operate a sanitary sewer system in the Tualatin River Drainage Basin. Sixteen individual sanitary districts were consolidated to form the District. Subsequently, thirteen municipalities selected the District to perform sewage collection and treatment of waste. On July 1, 1990, the District assumed responsibility for surface water management in the Basin. As required by ORS 451.485, the Washington County Board of Commissioners is the governing body of the District. Principal funding sources are charges to users and system development charges (SDCs).

The District is considered a component unit of Washington County, Oregon (County) because the elected officials of the County also serve as the Board for the District. The District is presented in the Comprehensive Annual Financial Report of the County as a discretely presented component unit to emphasize the District’s separate enterprise operations.

Clean Water Institute

On March 2, 2010, the Clean Water Services Board of Directors instructed the District to form Clean Water Institute (CWI). The General Manager of the District currently serves as the Executive Director for CWI. One of the District’s Board Members currently serves on CWI’s Board.

CWI is a nonprofit 501(c)(3) formed to advance watershed restoration and resource recovery through innovative strategies and to promote scientific research, education, and environmental protection activities that benefit watersheds throughout the country and around the world. For the fiscal year ended June 30, 2016, the transactions between the District and CWI are deemed to be immaterial, and therefore, CWI is not reported as a component unit of the District.

Clean Water Insurance Company

On February 16, 2016, the Clean Water Services Board of Directors instructed the District to form Clean Water Insurance Company (CWIC or “the Captive”), a wholly owned subsidiary of the District, domiciled in the state of Hawaii. The District is the sole member of this captive insurance company.

The Captive is a registered Limited Liability Company (LLC) formed to advance long term risk management program savings through the use of a formalized self-insurance program that can access the reinsurance markets for additional seismic coverages as well as provide a potential for funding of loss prevention and mitigation projects to further protect District assets or recover from a seismic event.

The Captive was initially funded with cash reserves from the District’s non-represented employee self-insurance dental plan with a transfer of $336,000 to fund operations beginning July 1, 2016 and to meet minimum capital and surplus requirements set by the State of Hawaii of $250,000.


NOTES TO BASIC FINANCIAL STATEMENTS (continued) Fiscal Year Ended June 30, 2016

20

(1) Summary of Significant Accounting Policies (Continued)

The Captive is considered a component unit of the District and is presented in the Comprehensive Annual Financial Report of the District as a blended component unit because it provides services exclusively to the District. CWIC issues separate financial statements and they can be obtained upon request from the District.

(b) Basis of Presentation and Accounting

The District's financial statements are maintained on a flow of economic resources measurement focus. With this measurement focus, all assets and liabilities are included in the Statement of Net Position. The Statement of Revenues, Expenses and Changes in Net Position presents increases (e.g. revenues) and decreases (e.g. expenses) in total net position.

The District’s financial statements are presented on the accrual basis of accounting. Under the accrual basis of accounting, revenues are recorded at the time they are earned and expenses are recorded at the time liabilities are incurred.

The District reports the following operating segment:

The sanitary sewer operations segment accounts for the activities of the District which manage the public sanitary system. The District operates 4 sewage treatment plants, 40 pump stations, and maintains responsibility for 758 miles of sanitary gravity mains, 66 miles of force mains, and 14 miles of reuse mains.

(c) Operating vs. Nonoperating Revenues and Expenses

The District has defined operating revenues to include all service charges and other applicable charges for services directly attributable to providing either sanitary or surface water management services, plan check, product sales or other related activity.

Operating expenses are defined as those expenses directly related to providing services including administrative expenses and depreciation and amortization, and excludes personnel services utilized directly for capital projects which are charged to capital assets.

Nonoperating revenues and expenses are not directly attributable to the services provided. This includes investment interest, capital donations and contributions, gain (loss) on disposal of capital assets, gain (loss) on equity in joint ventures and non-operating grant revenue. Capital donations relate to infrastructure constructed by the District which is donated to another jurisdiction upon completion. Capital contributions include sewer and storm connections fees collected from customers newly connecting to the system and developer constructed infrastructure donated to the District.

(d) Cash and Investments

The District’s cash and investments are comprised of pooled funds held and invested by 1) the Washington County Department of Support Services, Finance Division, 2) the State of Oregon Treasurer’s Local Government Investment Pool, 3) Tualatin Valley Water District as a fiscal agent, and 4) Bank of Hawaii for the Captive. Cash and investments are presented at fair value in accordance with GASB Statement No. 31, Accounting and Financial Reporting for Certain Investments and for External Investment Pools, and GASB Statement No 72, Fair Value



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Measurement and Application. Interest earned on investments is allocated monthly by the County based upon the District’s average monthly cash balance.

(e) Cash Equivalents/Statement of Cash Flows

For purposes of the Statement of Cash Flows, cash and cash equivalents include all cash and investments held by the District’s Treasurer, since it has the general characteristics of a demand deposit (i.e. deposits of additional cash may be made at any time and cash may be withdrawn at any time without prior notice or penalty).

(f) Accounts Receivable

Accounts receivable represent user charges which are recognized as earned. An allowance for doubtful accounts is established for amounts deemed to be uncollectible, based on historical collection percentages. At June 30, 2016, the allowance was $340,000.

(g) Materials and Supplies Inventory

Inventories of operating supplies and repair parts are valued at the lower of cost (average cost) or market and are charged against operations as used.

(h) Assessments and Contracts Receivable

Assessments receivable represent amounts assessed against property owners for local sewer improvements. An allowance for doubtful accounts is not deemed necessary as the assessments represent liens against the property. Outstanding assessments are payable over ten to twenty years at interest rates ranging from 3.5% to 6.46%.

(i) Restricted Assets and Liabilities

Assets, the use of which is restricted to specific purposes by state statute, bond indenture, or other outside party, and related liabilities, are segregated on the Statement of Net Position.

(j) Capital Assets

Capital asset items purchased are valued at historical cost or estimated historical cost if actual historical cost is not available. Contributed capital assets are recorded at estimated fair market value at the time received.

Major additions, improvements and replacements including related plans and studies are capitalized. Normal maintenance and repairs are charged to operations as incurred. Gains or losses realized from disposal of capital assets are reflected in the Statement of Revenues, Expenses and Changes in Net Position. Assets costing more than $5,000 with a life of 5 years or more are capitalized and depreciated over their useful lives. One-half year’s depreciation is taken in the year of acquisition and disposal of asset. Depreciation is computed on capital assets placed in service using the straight-line method over their estimated useful lives as follows:

Sewer lines 50 years Treatment plants 25 years Land improvements 25 years Plans and studies 5-25 years Buildings 20 years



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Plant and office equipment 5-10 years Automotive equipment 5 years

(k) Intangible Capital Assets

Intangible assets, including easements, water rights, patents and internally generated computer software, are reported in the financial statements. Intangible assets purchased are valued at historical cost or estimated historical cost if actual historical cost is not available. Contributed intangible assets are recorded at estimated fair market value at the time received.

Intangible capital assets with an individual cost of $5,000 and a useful life of more than five years are capitalized and amortized over their useful lives. Intangible assets with indefinite lives are not amortized. Additions or improvements and other capital outlays that significantly extend the useful life of an asset, or that significantly increase the capacity of an asset are capitalized. Normal maintenance and repairs are charged to operations as incurred.

Amortization on exhaustible intangible capital assets is reported on the straight-line basis over the estimated useful life of the asset. One-half year’s amortization is taken in the year of acquisition and disposal of the asset. Gains or losses realized from disposal of intangible capital assets are reflected in the Statement of Revenues, Expenses and Changes in Net Position.

(l) Investments in Joint Venture

Investments in joint venture with other governments are reported at cost plus or minus the District’s share of operating income or loss (equity method).

(m) Premium and Discount on Bonds Payable

Premiums and discounts are amortized by the effective interest method over the life of the respective debt instruments. Bonds payable are reported net of the applicable bond premium or discount.

(n) Post-employment Benefits Other than Pensions

The entity’s net Other Post-Employment Benefits (OPEB) Obligation is recognized as a long-term liability in the government-wide financial statements and in the proprietary fund statements, the amount of which is actuarially determined.

The District offers health benefits to retirees under age 65 as well as their qualified dependents, as required by state law. The District’s subsidized retiree health benefits are not pre-funded and are reported on a pay-as-you-go basis.

(o) Contributions Other Than Capital Assets

Contributions which represent non-exchange transactions are comprised of the following:

Customers – Sewer line and storm and surface water management connection fees from sewer patrons and sewer pipe installation fees from developers.

Capital Grants – Funds received from federal and state agencies restricted for acquisition and construction of sewage facilities.



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Contributions from Local Governments – Funds received from cities and Washington County for shared construction costs of collection systems owned and maintained by the District, and for other projects with regional benefit undertaken by the District.

(p) Insurance

The District is insured under a guaranteed cost plan for workers' compensation and for costs in excess of insurance policy retention (deductible) limits on fire loss, property damage, and all risk coverage (theft, vandalism, etc.). The District currently provides for estimated losses from pending claims on all self-insured retention risks which are reported as a current expense and liability.

Incurred but not reported (IBNR) claims for general and employment liability are claims that are incurred through the end of the fiscal year but not reported until after that date and are reported as noncurrent liabilities.

(q) Accrued Compensated Absences

The District allows employees to accumulate earned but unused vacation and sick leave benefits and compensatory time balances. Unused sick pay is not recognized as a liability because it does not vest. Accumulated compensation for overtime and vacation pay accrued at the end of each year is used within one year and is reported as a current expense and liability.

(r) Deferred Outflows/Inflows of Resources

In addition to assets, the Statement of Net Position will sometimes report a separate section for deferred outflows of resources. This separate financial statement element, deferred outflows of resources, represents a consumption of net position that applies to a future period and so will not be recognized as an outflow of resources (expense/expenditure) until then.

In addition to liabilities, the Statement of Net Position will sometimes report a separate section for deferred inflows of resources. This separate financial statement element, deferred inflows of resources, represents an acquisition of net position that applies to a future period and so will not be recognized as an inflow of resources (revenue) until then.

Loss on Refunding. The item that qualifies in this category is the deferred loss on refunding reported in the Statement of Net Position. Deferred charges, resulting from the carrying value of refunded debt and its reacquisition price, are deferred and amortized over the shorter of the life of the refunded debt or refunding debt.

Pensions. For purposes of measuring the net pension liability, deferred outflows of resources and deferred inflows of resources related to pensions, and pension expense, information about the fiduciary net position of the Oregon Public Employees Retirement System (OPERS) and additions to/deductions from OPERS’s fiduciary net position have been determined on the same basis as they are reported by OPERS. For this purpose, benefit payments (including refunds of employee contributions) are recognized when due and payable in accordance with the benefit terms. Investments are reported at fair value.



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(s) Net Position

Net position comprises various net earnings from operating and nonoperating revenues, expenses and contributions of capital. Net position is classified in the following three components: net investment in capital assets; restricted net position; and unrestricted net position.

Net investment in capital assets consists of all capital assets less accumulated depreciation, and debt less unspent debt proceeds that is attributable to the acquisition, construction and improvement of those assets.

Restricted net position consists of net assets for which constraints are placed thereon by external parties, such as lenders, grantors, contributors, laws, regulations and enabling legislation.

Unrestricted net position consists of all other net assets not included in the above categories.

The District has not established a formal policy regarding the use of its restricted and unrestricted fund balance amounts.

(t) Use of Estimates

The preparation of the financial statements, in conformity with accounting principles generally accepted in the United States of America, requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities on 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.



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(u) Adoption of new GASB pronouncements

During the fiscal year ended June 30, 2016, the District implemented the following GASB pronouncements:

GASB Statement No. 72, Fair Value Measurement and Application

This Statement establishes accounting and financial reporting standards for fair value measurements, the level of fair value hierarchy, and valuation techniques. The definition of fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. This Statement provides guidance for determining a fair value measurement for financial reporting purposes, applying fair value to certain investments, and disclosures related to all fair value measurements. This statement is effective for the fiscal year ended June 30, 2016.

GASB Statement No. 76, The Hierarchy of Generally Accepted Accounting Principles for State and Local Governments

This Statement reduces the GAAP hierarchy to two categories of authoritative GAAP and addresses the use of authoritative and non-authoritative literature in the event that the accounting treatment for a transaction or other event is not specified within a source of authoritative GAAP. This Statement supersedes Statement No. 55, The Hierarchy of Generally Accepted Accounting Principles for State and Local Governments. The requirements of this Statement are effective for the fiscal year ended June 30, 2016.

(2) Stewardship, Compliance, and Accountability

Oregon Local Budget Law requires the District to prepare and adopt a budget by individual funds prior to July 1 of the budget year. The resolution authorizing appropriations, adopted in the categories of operating expenses, debt service, capital outlay, contingency and operating transfers for each fund sets the level by which expenditures cannot legally exceed appropriations. Appropriations lapse at the end of the fiscal year. The District’s budget is prepared on the modified accrual basis of accounting.

Unexpected additional resources may be added to the original budget through the use of a supplemental budget and appropriation resolution. A supplemental budget, greater than 10% of the fund’s original budget, requires hearings before the public, publications in newspapers and approval by the Board of Directors. Original and supplemental budgets may be modified by the use of appropriation transfers between the levels of control. Such transfers require approval by the Board of Directors. During the fiscal year ended June 30, 2016, the Board approved one supplemental budget and one appropriation transfer.



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(3) Cash and Investments

Washington County, Oregon maintains a common cash and investment pool for all County funds including those of the District, except the Captive. The types of investments in which the County and District may invest are restricted by State of Oregon Statutes and a Board adopted investment policy. Authorized investments include general obligations of the United States Government and its agencies, certain bonded obligations of Oregon municipalities, banker’s acceptances, certain high-grade commercial paper, repurchase agreements, and the State of Oregon Treasurer's Local Government Investment Pool (LGIP), among others. The District also maintains restricted cash in reserves with the Tualatin Valley Water District as a fiscal agent for the District. The Captive cash is held in bank demand deposits with the Bank of Hawaii.

Cash and investments for the District at June 30, 2016 are as follows:

Petty cash $ 3,850 Cash with fiscal agent 185,147 Bank of Hawaii – Captive Insurance/CWIC 336,005 Investments 264,811,826

$ 265,336,828

Cash and investments are reflected on the statement of net position as follows:

Cash and investments $ 129,794,266 Restricted cash and investments 135,542,562

$ 265,336,828

Investments at June 30, 2016 were as follows:

State of Oregon Treasurer's Local Government Investment Pool $ 24,633,065 Washington County investment pool 240,178,761

Total investments $ 264,811,826

(a) Investment in the Oregon State Treasurer’s Local Government Investment Pool

Investments in the Local Government Investment Pool (LGIP) are included in the Oregon Short-Term Fund, which is an external investment pool, and is not registered with the U.S. Securities and Exchange Commission as an investment company. Investments in the Short-Term Fund are governed by ORS 294.135, Oregon Investment Council, and portfolio guidelines issued by the Oregon Short-Term Fund Board. Investment in the LGIP is neither insured nor guaranteed by the FDIC or any other government agency. The State Treasurer is the investment officer for the LGIP and is responsible for all funds in the LGIP. These funds must be invested and the investments managed, as a prudent investor would, exercising reasonable care, skill and caution. Investments in the LGIP are stated at fair market value. Separate financial statements for the Oregon Short Term Fund are available from the Oregon Audits Division, 255 Capital Street NE, Suite 500, Salem, OR 97301.



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(3) Cash and Investments (Continued)

The table below outlines the LGIP’s investment maturity limitations and the actual maturities at June 30, 2016:

Allowable

per Policy

LGIP Maturity:

Up to 93 days Minimum of 50% 72%

94 days to 1 year Maximum of 25% 12%

1 to 3 years Maximum of 25% 16%

Actual

(b) Cash and investments include pooled cash and investments held by Washington County, Oregon, on behalf of the District

Disclosures relating to Custodial Credit Risk: This is the risk that in the event of bank failure, the District deposits may not be returned to them. As required by Oregon Revised Statues, deposits in excess of federal depository insurance were held at a qualified depository for public funds. All qualified depositories for public funds are included in the multiple financial institution collateral pool that is maintained by and in the name of the Office of the State Treasurer. As a result, the District’s remaining deposits in excess of Federal Depository Insurance Corporation (FDIC) insurance are considered to be fully collateralized.

Deposits with Bank of Hawaii for the Captive are comprised of bank demand deposits. The combined total bank balance is $336,500. Of these deposits, $250,000 is covered by federal depository insurance.

Disclosures relating to Interest Rate Risk: Interest rate risk is the risk that would adversely affect the fair value of an investment should market interest rates change. Generally, the longer the maturity of an investment, the greater the sensitivity of its fair value to changes in market interest rates. District management believes the liquidity in the portfolio is sufficient to meet cash flow requirements and preclude the District from having to sell investments below original cost for that purpose. The District relies upon their treasurer, Washington County, to monitor the interest rate risk inherent in its portfolio by comparing the maturity dates of its investments to the minimum maturity dates outlined in the investment policy.



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(3) Cash and Investments (Continued)

The table below outlines the investment maturity limitations and the actual maturities of the Washington County investment pool at June 30, 2016:

Maturity: Less than 30 days 10% 10% Less than 1 year 25% 60% 5 years or less 100% 100%Weighted Average Maturity 2.5 years 1 year

Minimum

Allowed Actual

Disclosures relating to Credit Risk: This is the risk that an issuer of an investment will not fulfill its obligation to the holder of the investment. Credit risk is measured by the assignment of a rating by a nationally recognized rating organization and is minimized by purchasing only those securities, which are rated by three of the nationally recognized credit rating agencies, at the time of purchase. The District’s investment policy specifies ratings – Standard & Poor’s = minimum AA-, and Moody’s Investors Services = minimum Aa3.

The District categorizes its fair value measurements within the fair value hierarchy established by generally accepted accounting principles. The hierarchy is based on the valuation inputs used to measure the invested value of the asset. Level 1 inputs are quoted prices in active markets for identical assets; Level 2 inputs are significant other observable inputs: Level 3 inputs are significant unobservable inputs. The District has the following recurring fair value measurements as of June 30, 2016:

Federal agency coupon securities are valued using quoted market prices (Level 1 inputs)

Corporate notes are valued using quoted market prices (Level 1 inputs)

Treasury coupon securities are valued using quoted market prices (Level 1 inputs) For more detailed information, reference should be made to the Washington County Comprehensive Annual Financial Report for June 30, 2016.



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(4) Receivables

SANI SWM TOTAL

Service receivable 17,219,934$ 1,856,357$ 19,076,291$

Interest receivable 22,616 - 22,616

Other 15,125 - 15,125

Unrestricted Accounts Receivable 17,257,675 1,856,357 19,114,032

Allowance for doubtful accounts (290,000) (50,000) (340,000)

Net Unrestricted Accounts Receivable 16,967,675 1,806,357 18,774,032

Connection fees receivable 2,155,656 - 2,155,656

Contributions receivable from local governments 204,389 - 204,389

Build America Bonds subsidy receivable 386,479 - 386,479

Restricted Accounts Receivable 2,746,524 - 2,746,524

Total Net Accounts Receivable 19,714,199$ 1,806,357$ 21,520,556$

ACCOUNTS RECEIVABLE - CURRENT

CURRENT NON-CURRRENT TOTAL

Washington County Fleet 51,070$ 51,070$ 102,140$

City of Forest Grove Rehab, Phase 3B 44,563 - 44,563

City of Forest Grove Sunset Drive Sanitary Sewer 113,535 115,882 229,417

Clean Water Instittute Operating Loan - 204,963 204,963

Unrestricted Contracts Receivable 209,168 371,915 581,083

Tualatin Valley Water District - Tualatin Basin Water Supply - 15,556 15,556

Local Improvement District Assessments - 252,855 252,855

City of Hillsboro Central Podium 48,504 442,986 491,490

City of Hillsboro - East Podium 100,431 993,447 1,093,878

City of Hillsboro West Podium 88,592 1,002,669 1,091,261

Restricted Contracts Receivable 237,527 2,707,513 2,945,040

Total Contracts Receivable 446,695$ 3,079,428$ 3,526,123$

CONTRACTS RECEIVABLE



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(4) Receivables (Continued)

Washington County Fleet

The District brought fleet service in-house and entered into an intergovernmental agreement between the District and Washington County dated September 18, 2001. The District paid Washington County the marginal cost the County incurred $510,700 in constructing additional capacity in the fleet facility at Walnut Street to accommodate District vehicles and equipment. The County agreed to make payments to the District totaling $51,070, beginning on December 31, 2008, annually for ten years, coinciding with the County’s future capacity needs.

City of Forest Grove Notes Receivable

Intergovernmental agreement between the District and City of Forest Grove for construction of public sanitary sewer lines and private sanitary sewer laterals in the area around Hawthorn Street and B Street in the City of Forest Grove, dated Novermber 11, 2005. The City agreed to reimburse the District for the cost of construction. On February 28, 2007, Forest Grove entered into a 10 year note with a beginning balance of $777,152, annual interest rate of 3.77% and semi-annual payments of $47,002.

Intergovernmental agreement between the District and City of Forest Grove for construciton of sanitary sewer lines on Sunset Drive, dated September 19, 2006. The City agreed to reimburse the District for cost of construction. On July 15, 2008, Forest Grove entered into a 10 year note with a beginning balance of $987,835, annual interest rate of 4.20% and semi-annual payments of $60,997.

Tualatin Valley Water District Notes Receivable

The District has an Intergovernmental Agreement with Tualatin Valley Water District as a partner in the Tualatin Basin Water Supply Study. The receivable due relates to costs incurred by the District maintaining land owned by the partners.

Clean Water Institute Loan

On October 26, 2010, the District entered into a loan agreement with CWI. The agreement allows for loans and/or advances from the District to CWI of up to $400,000 over the following four fiscal years. Interest on outstanding loan balances due from CWI to the District are calculated monthly and based on 1.1 times the average monthly Oregon Local Government Investment Pool (LGIP) rates.

City of Hillsboro Notes Receivable

Intergovernmental Agreement between the District and City of Hillsboro financing connections for a multi-family development in Orenco Station called the WRAP, dated November 19, 2013. The connections financed totaled $1,295,719, interest rate of 3.67%, ten-year note with semi-annual payments of $80,775 beginning November 1, 2014. This loan was paid off in full during the fiscal year.

Financing agreement between the District and Holland Group financing connections for a multi-family development in Orenco Station called the Central Podium, dated April 10, 2014. The connections financed totaled $542,918, interest rate of 4.50%, ten-year note with semi-annual payments of $34,999 beginning June 1, 2015. The City of Hillsboro is administering this loan and remitting payments to the District.



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(4) Receivables (Continued)

Financing agreement between the District and Holland Group financing connections for a multi-family development in Orenco Station called the East Podium, dated May 12, 2014. The connections financed totaled $1,124,325 plus accrued interest, interest rate of 4.50%, ten-year note with semi-annual payments of $74,084 beginning January 1, 2016. The City of Hillsboro is administering this loan and remitting payments to the District.

Financing agreement between the District and Holland Group financing connections for a multi-family development in Orenco Station called the West Podium, dated January 27, 2015. The connections financed totaled $1,028,006 plus accrued interest, interest rate of 4.50%, ten-year note with semi-annual payments of $68,359 beginning December 1, 2016. The City of Hillsboro is administering this loan and remitting payments to the District.



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(5) Capital Assets Activity in capital assets for the year ended June 30, 2016 is as follows:

Non-depreciable capital assets:Land $ 16,574,799 $ - $ - $ - $ 16,574,799 Easements 3,925,304 4,721,627 140,213 - 8,787,144 Construction in progress 80,050,342 42,620,602 (12,610,653) (2,577,904) 107,482,387

Total non-depreciable capital assets 100,550,445 47,342,229 (12,470,440) (2,577,904) 132,844,330

Depreciable capital assets:Buildings and improvements 68,485,254 - 983,147 - 69,468,401 Land improvements 172,648,505 6,544,887 2,199,308 - 181,392,700 Treatment plants 617,270,068 - 266,346 (440,535) 617,095,879 Sewer lines 231,123,157 3,090,425 5,281,573 - 239,495,155 Plant equipment 85,471,990 - 2,916,880 (88,544) 88,300,326 Automotive equipment 11,069,407 - 441,080 (409,567) 11,100,920 Plans and studies 15,722,404 - 132,760 - 15,855,164 Office equipment 16,498,676 - 249,346 (3,729,403) 13,018,619

Total depreciablecapital assets 1,218,289,461 9,635,312 12,470,440 (4,668,049) 1,235,727,164

Less accumulated depreciation for:Buildings and improvements (34,117,777) (2,866,943) - - (36,984,720) Land improvements (101,044,460) (5,085,029) - - (106,129,489) Treatment plants (366,638,636) (20,162,512) - 264,321 (386,536,827) Sewer lines (79,860,092) (4,699,102) - - (84,559,194) Plant equipment (55,664,953) (5,700,293) - 87,770 (61,277,476) Automotive equipment (9,499,646) (583,612) - 409,567 (9,673,691) Plans and studies (12,679,753) (269,269) - - (12,949,022) Office equipment (15,531,023) (362,836) - 3,729,403 (12,164,456)

Total accumulated depreciation (675,036,340) (39,729,596) - 4,491,061 (710,274,875)

Total depreciable assets, net 543,253,121 (30,094,284) 12,470,440 (176,988) 525,452,289

Amortizable capital assets:Temporary easements 64,905 - - - 64,905 Patents 113,031 - - - 113,031

Total amortizablecapital assets 177,936 - - - 177,936

Less accumulated amortization for:Temporary easements (8,113) (3,245) - - (11,358) Patents (42,386) (5,652) - - (48,038)

Total accumulated amortization (50,499) (8,897) - - (59,396)

Total amortizable assets, net 127,437 (8,897) - - 118,540

Total capital assets, net $ 643,931,003 $ 17,239,048 $ - $ (2,754,892) $ 658,415,159

Balance06/30/15 Retirements

Ending

06/30/16Balance

Additions Transfers

Capitalized Interest Total interest costs incurred in fiscal year 2016 was $10,640,610 of which $1,991,099 was capitalized for a net interest expense of $8,649,511.



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(6) Joint Venture

The Barney Reservoir Joint Ownership Commission (the Commission) was formed to own, operate, and expand the J.W. Barney Reservoir. Ownership of the joint venture is comprised of the District (10%), Tualatin Valley Water District (35%), and the cities of Hillsboro (31%), Forest Grove (2.5%), and Beaverton (21.5%). The Commission is governed by one member from each entity. The operating costs of the joint venture are shared by the participating agencies and are reported as an operating expense in the District’s Sanitary Sewer Fund. The net position of the Commission continues to decline due to depreciation expense, which is not funded by the joint venture partners. There are no significant projects identified in the 10 year capital plan for the Commission. If future projects are identified by the Commission, the District will include its proportionate share of costs in the annual Capital Improvement Plan. The District’s year-end equity investment in the Commission was $2,490,836.

Financial statements for the Commission may be obtained from the City of Hillsboro, Finance Department at 150 East Main Street, Hillsboro, Oregon, 97123.

(7) Bonds Payable

The District has issued revenue bonds in accordance with ORS 451.545. The District’s revenue bonds are payable exclusively from the District’s net sewer revenue as defined in the bond indenture agreements. The District’s tax-exempt debt remains in compliance with all Internal Revenue Service arbitrage regulations.

Legal Debt Margin The District’s legal debt limitation, as defined by Oregon Revised Statutes 451.545, shall not exceed 13 percent of the true cash value of all property assessed within the District’s boundaries. The limitation applies to the aggregate of all outstanding General Obligation Bonds. The legal debt limit and debt margin for the District are both $10.787 billion at June 30, 2016, because the District had no outstanding general obligation debt.

Investment in joint venture at June 30, 2015 2,567,843$

Investment -

Income (loss) for the year (77,007)

Investment in joint venture at June 30, 2016 2,490,836$

INVESTMENT IN JOINT VENTURE



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(7) Bonds Payable (Continued)

The details of the individual bond issues are as follows:

Bond principal and interest transactions for the year ended June 30, 2016 are as follows:Outstanding Outstanding Due

June 30, Matured and June 30, within Long-term

Bonds 2015 Issued Paid 2016 one year portion

Sewer Revenue:

2004 Series 7,520,000$ -$ 3,660,000$ 3,860,000$ 3,860,000$ -$

2009 Series A 53,595,000 - 2,735,000 50,860,000 2,845,000 48,015,000

2010 Series A 3,080,000 - 3,080,000 - - -

2010 Series B 90,260,000 - - 90,260,000 3,300,000 86,960,000

2011 Series A 22,595,000 - 2,775,000 19,820,000 2,915,000 16,905,000

2011 Series B 46,645,000 - 1,755,000 44,890,000 1,815,000 43,075,000

Revenue Pension:

2004 Series 14,480,000 - 480,000 14,000,000 565,000 13,435,000

Unamortized premium

and discounts 6,557,553 1,110,109 5,447,444 979,573 4,467,871

$ 244,732,553 -$ 15,595,109$ 229,137,444$ 16,279,573$ 212,857,871$

Is sue Original Insta l lment Pledged for Interest

Bonds Date Issue Payments Repayment Purpose Rates

Sewer Revenue Bonds:

2004 Series

Senior Lien 07/01/04 26,455,000$ Annual ly Net sewer Refunding 2.0-5.25%

through 2017 revenue

2009 Series A

Senior Lien 03/25/09 58,755,000 Annual ly Net sewer Sewer capita l 3.0-5.25%

through 2028 revenue improvement

2010 Series A



2010 Series B



2011 Series A

Senior Lien 08/24/11 30,255,000 Annual ly Net sewer Refunding 2.0-5.0%

through 2022 revenue

2011 Series B



Revenue Pens ion Bonds:

2004 Series 05/27/04 15,990,000 Annual ly Gross sewer Pens ion 4.596-6.095%

through 2028 revenue l iabi l i ty

280,610,000$



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Future maturities of bond principal and interest at June 30, 2016 are as follows:2004

Total Sewer Revenue

Revenue Pension

Fiscal Year 2004 2009A 2010B 2011A 2011B Bonds Bonds Total Principal

Principal

2017 3,860,000$ 2,845,000$ 3,300,000$ 2,915,000$ 1,815,000$ 14,735,000$ 565,000$ 15,300,000$

2018 2,975,000 3,385,000 3,060,000 1,890,000 11,310,000 660,000 11,970,000

2019 - 3,130,000 3,475,000 3,210,000 1,965,000 11,780,000 760,000 12,540,000

2020 - 3,290,000 3,575,000 3,375,000 2,060,000 12,300,000 870,000 13,170,000

2021 - 3,460,000 3,680,000 3,540,000 2,165,000 12,845,000 990,000 13,835,000

2022-2026 - 20,265,000 20,180,000 3,720,000 12,445,000 56,610,000 7,155,000 63,765,000

2027-2031 - 14,895,000 23,930,000 - 15,450,000 54,275,000 3,000,000 57,275,000

2030-2036 - - 28,735,000 - 7,100,000 35,835,000 - 35,835,000

3,860,000 50,860,000 90,260,000 19,820,000 44,890,000 209,690,000 14,000,000 223,690,000

Bond

premium 8,312 1,008,649 - 1,738,378 2,692,105 5,447,444 - 5,447,444

Bonds

payable, net 3,868,312$ 51,868,649$ 90,260,000$ 21,558,378$ 47,582,105$ 215,137,444$ 14,000,000$ 229,137,444$

2004

Total Sewer Revenue

Revenue Pension

Fiscal Year 2004 2009A 2010B 2011A 2011B Bonds Bonds Total Interest

Interest

2017 101,325$ 2,495,913$ 4,726,318$ 918,125$ 1,877,450$ 10,119,131$ 847,010$ 10,966,141$

2018 - 2,364,638 4,591,082 768,750 1,803,350 9,527,820 813,839 10,341,659

2019 - 2,212,013 4,444,415 612,000 1,726,250 8,994,678 774,628 9,769,306

2020 - 2,051,513 4,286,540 447,375 1,635,450 8,420,878 728,914 9,149,792

2021 - 1,882,763 4,120,447 274,500 1,529,825 7,807,535 676,584 8,484,119

2022-2026 - 6,433,095 17,779,561 93,000 6,023,550 30,329,206 2,317,139 32,646,345

2027-2031 - 1,122,775 11,844,122 - 3,014,000 15,980,897 246,238 16,227,135

2030-2036 - - 4,290,565 - 286,800 4,577,365 - 4,577,365

101,325 18,562,710 56,083,050 3,113,750 17,896,675 95,757,510 6,404,352 102,161,862

Tota l Principa l

and Interest 3,961,325$ 69,422,710$ 146,343,050$ 22,933,750$ 62,786,675$ 305,447,510$ 20,404,352$ 325,851,862$



36


Sewer revenue bond indenture agreements require the District to maintain net operating revenues, as defined in the indenture agreements, in each fiscal year at least equal to 1.2 times annual debt service on the Senior Lien Bonds and 1.1 times annual debt service on the Subordinate Lien Bonds and to maintain adequate insurance on the facilities. Additionally the bond indenture agreements establish that bonds are secured by a pledge from the District to maintain separate Senior Lien and Subordinate Lien reserve accounts in an amount equal to annual debt service for each class of bonds. The District has fulfilled the reserve requirements by obtaining surety bonds as allowed by the bond indenture agreements for the Series 2004 issues and funded reserves with debt proceeds for the Series 2009A issued in fiscal year 2009, the Series 2010A and 2010B issued in fiscal year 2010, and the Series 2011B issued in fiscal year 2011, of $5.3 million, $0.6 million, $5.8 million, and $1.8 million, respectively.

Future pledged revenues for outstanding revenues bonds are as follows:

Build America Bonds The District issued $99,155,000 in Senior Lien Sewer Revenue Bonds in fiscal year 2010 including $8,895,000 in tax exempt Series 2010A and $90,260,000 in federally taxable Series 2010B. The Series 2010B Bonds are issued as “Build America Bonds” (BABs) and are eligible under current federal law for a 35% interest subsidy. The District is not able to reduce the annual debt service or maximum annual debt service by the amount of the interest subsidies received for purposes of determining compliance with the District’s rate covenant and the tests for issuing additional Senior Lien Parity Obligations.

The federal interest subsidy was reduced by 6.8% for the October 1, 2015 and April 1, 2016 bond interest payments, respectively, which reduced the subsidy by approximately $114,045. The total reduction in subsidy payments to-date has been $368,970. This was in response to the requirements of the Balanced Budget and Emergency Deficit Control Act of 1985. The District will receive Federal subsidy payments totaling approximately $19.6 million over the remaining life of the issue. This subsidy may be reduced in the future based on federal balanced budget constraints.

Revenue, Net For the Year

For the Year of Related Ended June

Ending June Future Pledged Expenses for 30, 2016 Debt

30, of Final Revenue Debt the Year Ended (P&I)

Issue Purpose Revenue Stream Payments Outstanding June 30, 2016 Payments

2004 Series Refunding Refunding Net sewer revenue 2017 3,860,000$ 75,856,933$ * 3,958,725$

2009 Series A Sewer capital improvement Net sewer revenue 2029 50,860,000 * 5,342,513

2010 Series A Sewer capital improvement Net sewer revenue 2016 - * 3,157,000

2010 Series B Sewer capital improvement Net sewer revenue 2036 90,260,000 * 4,791,823

2011 Series A Refunding Net sewer revenue 2022 19,820,000 * 3,835,375

2011 Series B Sewer capital improvement Net sewer revenue 2033 44,890,000 * 3,695,075

209,690,000$ 75,856,933$ 24,780,511$

* same revenue source pledged for all six bond series outstanding



37


Pension related debt The revenue pension bond agreement issued in May 2004 requires debt service to be paid from gross sewer revenues. Accordingly, debt service for these bonds will be treated as operating expenses in determining debt service coverage in future periods.

Prior year defeased debt In prior years, the District defeased certain bonds by placing the proceeds of refunding bonds in an irrevocable trust to provide for all future debt service on the defeased bonds. Accordingly, the trust account assets and the related liability for those defeased bonds are not included in the District's financial statements. As of June 30, 2016, $26,830,000 of defeased bonds remain outstanding.

(8) Deferred compensation plan

During 1977 the District adopted, and has made subsequent amendments to, the Clean Water Services Deferred Compensation Plan. This plan is created in accordance with IRS code section 457(b), and was most recently amended and restated effective June 26, 2012. The General Manager, and the Risk and Benefits Manager of the District are the Trustee and Administrators of the plan. Plan contributions and assets are set aside in trust, with the custodial trustee and administrator, Empower Retirement (formerly Great West Life), for the exclusive benefit of participants and beneficiaries.

The plan generally covers any full-time employee working 37.5 or more hours per week, and any regular part-time employee working fewer than 40 hours per week. The plan permits participating employees to contribute up to 100% of gross pay or the statutorily prescribed annual dollar limit whichever is smaller. The District may, at its discretion, make employer contributions. The District’s plan as currently adopted does not provide for employer contributions. Plan contributions and earnings thereon are available to participating employees upon termination of employment, retirement, death, or unforeseen emergency.

Contributions from plan members during fiscal year 2016 were $1,402,646.



38

(9) Pension Plan

Plan Description

Substantially all District employees are members in the Oregon Public Employees Retirement System (OPERS); a

cost-sharing, multiple-employer defined benefit pension plan that acts as a common investment and

administrative agent for government units in the State of Oregon. Employees hired before August 29, 2003

belong to the Tier One/Tier Two Retirement Benefit Program (established pursuant to ORS Chapter 238), while

employees hired on or after August 29, 2003 belong to the OPSRP Pension Program (established pursuant to

ORS Chapter 238A). OPERS produces an independently audited CAFR which can be found at:

http://www.oregon.gov/pers/Pages/section/financial_reports/financials.aspx.

Benefits Provided

Tier One/Tier Two Retirement Benefit

Pension Benefits. The PERS retirement allowance is payable monthly for life. It may be selected from 13

retirement benefit options. These options include survivorship benefits and lump-sum refunds. The basic

benefit is based on years of service and final average salary. A percentage (2.0% for police and fire employees,

1.67% for general service employees) is multiplied by the number of years of service and the final average

salary. Benefits may also be calculated under either a formula plus annuity (for members who were contributing

before August 21, 1981) or a money match computation if a greater benefit results.

A member is considered vested and will be eligible at a minimum retirement age for a service retirement

allowance if he or she has had contribution in each of five calendar years or has reached at least 50 years of age

before ceasing employment with a participating employer (age 45 for police and fire members). General service

employees may retire after reaching age 55. Police and fire members are eligible after reaching age 50. Tier

One general service employee benefits are reduced if retirement occurs prior to age 58 with fewer than 30 years

of service. Police and fire member benefits are reduced if retirement occurs prior to age 55 with fewer than 25

years of service. Tier Two members are eligible for full benefits at age 60. The ORS Chapter 238 Defined Benefit

Pension Plan is closed to new members hired on or after August 29, 2003.

Death Benefits. Upon the death of a non-retired member, the beneficiary receives a lump-sum refund of the

member’s account balance (accumulated contributions and interest). In addition, the beneficiary will receive a

lump-sum payment from employer funds equal to the account balance, provided one or more of the following

conditions are met:

the member was employed by a PERS employer at the time of death,

the member died within 120 days after termination of PERS-covered employment,

the member died as a result of injury sustained while employed in a PERS-covered job, or

the member was on an official leave of absence from a PERS-covered job at the time of death.

Disability Benefits. A member with 10 or more years of creditable service who becomes disabled from other

than duty-connected causes may receive a non-duty disability benefit. A disability resulting from a job-incurred

injury or illness qualifies a member for disability benefit regardless of the length of PERS-covered service. Upon

qualifying for either a non-duty or duty disability, service time is computed to age 58 (55 for police and fire

members) when determining the monthly benefit.

http://www.oregon.gov/pers/Pages/section/financial_reports/financials.aspx



39

(9) Pension Plan (Continued)

Benefit Changes After Retirement. Members may choose to continue participation in a variable equities

investment account after retiring and may experience annual benefit fluctuations due to changes in the market

value of equity investments. Under ORS 238.360 monthly benefits are adjusted annually through cost-of-living

changes. The COLA for fiscal year 2015 was capped at 1.5% for all benefits recipients. As a result of the Moro

Decision, the cap on the COLA will be restored to 2.0% for fiscal year 2016 and beyond.

OPSRP Pension Program

Pension Benefits. The Pension Program (ORS Chapter 238A) provides benefits to members hired on or after

August 29, 2003. This portion of OPSRP provides a life pension funded by employer contributions. Benefits are

calculated by formula for members who attain normal retirement age. For general service members, 1.5% is

multiplied by the number of years of service and the final average salary. Normal retirement age for general

service members is age 65, or age 58 with 30 years of retirement credit. For police and fire members, 1.8% is

multiplied by the number of years of service and the final average salary. Normal retirement age for police and

fire members is age 60 or age 53 with 25 years of retirement credit. To be classified as a police and fire

member, the individual must have been employed continuously as a police and fire member for at least five

years immediately preceding retirement.

A member of the OPSRP Pension Program becomes vested on the earliest of the following dates: the date the

member completes 600 hours of service in each of five calendar years, the date the member reaches normal

retirement age, and if the pension program is terminated, the date on which termination becomes effective.

Death Benefits. Upon the death of a non-retired member, the spouse or other person who is constitutionally

required to be treated in the same manner as the spouse, receives for life 50 percent of the pension that would

otherwise have been paid to the deceased member.

Disability Benefits. A member who has accrued 10 or more years of retirement credits before the member

becomes disabled or a member who becomes disabled due to job-related injury shall receive a disability benefit

of 45 percent of the member’s salary determined as of the last full month of employment before the disability

occurred.

Benefit Changes After Retirement. Under ORS 238A.210 monthly benefits are adjusted annually through cost-of-

living changes. The COLA for fiscal year 2015 was capped at 1.5% for all benefits recipients. As a result of the

Moro Decision, the cap on the COLA will be restored to 2.0% for fiscal year 2016 and beyond.

Contributions

PERS funding policy provides for monthly employer contributions at actuarially determined rates. These

contributions, expressed as a percentage of covered payroll, are intended to accumulate sufficient assets to pay

benefits when due. Employer contribution rates for the period were based on the December 31, 2013 actuarial

valuation. The rates based on a percentage of payroll, first became effective July 1, 2015. The District’s

contribution rates for the period were 12.29% for Tier One/Tier Two member and 5.96% for OPSRP General

Service members. The District’s total contributions were $2,372,887. Covered employees are required to

contribute 6% of their annual covered salary to the Plan.



40


Pension Assets, Liabilities, Pension Expense, Deferred Outflows of Resources and Deferred Inflows of Resources Related to Pensions

At June 30, 2016, the District reported a liability of $15,003,706 for its proportionate share of the OPERS net

pension liability. The net pension liability was measured as of June 30, 2015, and the total pension liability used

to calculate the net pension liability was determined by an actuarial valuation as of December 31, 2013 rolled

forward to June 30, 2015. The District’s proportion of the net pension liability was based on a projection of the

District’s long-term share of contributions to the pension plan relative to the projected contributions of all

participating employers, actuarially determined. At June 30, 2015, the District’s proportion was 0.261322%,

which increased by .004742% from its proportion measured as of June 30, 2014.

The Oregon Supreme Court (Court) ruled on April 30, 2015 that certain provisions of Senate Bill (SB) 861, signed

into law in October 2013, were unconstitutional. The Moro decision modified the COLA-related changes of

Senate Bills 822 and 861, creating a blended COLA for members who earned service both before and after the

effective dates of the legislation. As a result, those who retired before the bills were passed will continue to

receive a COLA tied to the Consumer Price Index that normally results in a 2% increase annually. OPERS

members who have accrued benefits before and after the effective dates of the 2013 legislation will have a

blended COLA rate when they retire. This is a change in benefit terms legally in effect before the measurement

date, and is required to be reflected in the June 30, 2015 Total Pension Liability. The COLA change due to Moro

resulted in a collective pension expense of $5.3 billion (or $14.0 million for the District’s proportionate share).

For the year ended June 30, 2016, the District recognized pension expense of $14,587,107. At June 30, 2016,

the District reported deferred outflows of resources and deferred inflows of resources related to pensions from

the following sources:

Deferred Outflows Deferred Inflows

of Resources of Resources

Differences between expected and actual

experience 809,076$ -$

Net difference between projected and actual

earnings on investments - 3,145,117

Change in proportionate share 81,418 -

Differences between employer contributions

and proportionate share of contributions - 1,334,774

Contributions subsequent to the

measurement date 2,372,887 -

Total 3,263,381$ 4,479,891$



41


Deferred outflows of resources related to pensions of $2,372,887 resulting from the District’s contributions

subsequent to the measurement date will be recognized as either a reduction of the net pension liability or an

increase in the net pension asset in the year ended June 30, 2017. Other amounts reported as deferred inflows

of resources related to pensions will be recognized in pension expense as follows:

2017 (1,623,310)$

2018 (1,623,309)

2019 (1,623,309)

2020 1,281,870

2021 (1,339)

Total (3,589,397)$

Year ended June 30:



42


Actuarial Methods and Assumptions

The total pension liability in the December 31, 2013 actuarial valuation was determined using the following

actuarial methods and assumptions:

Actuarial Cost Method Entry Age Normal

Amortization Method Amortized as a level percentage of payroll as layered

amortization bases over a closed period; Tier One/Tier

Two UAL is amortized over 20 years and OPSRP

pension UAL is amortized over 16 years

Asset Valuation Method Market value of assets

Actuarial Assumptions:

Inflation Rate 2.75%

Investment Rate of Return 7.75%

Projected Salary Increases 3.75% overall payroll growth; salaries for individuals

are assumed to grow at 3.75% plus assumed rates of

merit/longevity increases based on service

Cost of living adjustments (COLA) Blend of 2.00% COLA and graded COLA (1.25%/0.15%)

in accordance with Moro decision; blend based on

service.

Mortality Healthy retirees and beneficiaries:

RP-2000 Sex-distinct, generational per Scale AA, with

collar adjustments and set-backs as described in the

valuation.

Active members:

Mortality rates are a percentage of healthy retiree

rates that vary by group, as described in the valuation.

Disabled retirees:

Mortality rates are a percentage (65% for males, 90%

for females) of the RP-2000 static combined disabled

mortality sex-distinct table.



43


Actuarial valuations of an ongoing plan involve estimates of the value of projected benefits and assumptions

about the probability of events far into the future. Actuarially determined amounts are subject to continual

revision as actual results are compared to past expectations and new estimates are made about the future.

Experience studies are performed as of December 31 of even numbered years. The methods and assumptions

shown above are based on the 2014 Experience Study which reviewed experience for the four-year period

ending on December 31, 2014.

Long-Term Expected Rate of Return

To develop an analytical basis for the selection of the long-term expected rate of return assumption, in July 2013

the PERS Board reviewed long-term assumptions developed by both Milliman’s capital market assumptions

team and the Oregon Investment Council’s (OIC) investment advisors. The table below shows Milliman’s

assumptions for each of the asset classes in which the plan was invested at that time based on the OIC long-

term target asset allocation. The OIC’s description of each asset class was used to map the target allocation to

the asset classes shown below. Each asset class assumption was based on a consistent set of underlying

assumptions, and includes adjustment for the inflation assumption. These assumptions are not based on

historical returns, but instead are based on a forward-looking capital market economic model.

Asset Class

Target

Allocation

Compounded

Annual Return

(Geometric)

Core Fixed Income 7.20% 4.50%

Short-Term Bonds 8.00% 3.70%

Intermediate -Term Bonds 3.00% 4.10%

High Yield Bonds 1.80% 6.66%

Large Cap US Equities 11.65% 7.20%

Mid Cap US Equities 3.88% 7.30%

Small Cap US Equities 2.27% 7.45%

Developed Foreign Equities 14.21% 6.90%

Emerging Foreign Equities 5.49% 7.40%

Private Equities 20.00% 8.26%

Opportunity Funds/Absolute Return 5.00% 6.01%

Real Estate (Property) 13.75% 6.51%

Real Estate (REITS) 2.50% 6.76%

Commodities 1.25% 6.07%

Total 100.00%

Assumed Inflation - Mean 2.75%



44


Discount Rate

The discount rate used to measure the total pension liability was 7.75% for the Defined Benefit Pension Plan.

The projection of cash flows used to determine the discount rate assumed that contributions from plan

members and those contributing employers are made at the contractually required rates, as actuarially

determined. Based on those assumptions, the Pension Plan’s fiduciary net position was projected to be

available to make all projected future benefit payments of current Plan members. Therefore, the long-term

expected rate of return on Pension Plan investments was applied to all periods of projected benefit payments to

determine the total pension liability.

Sensitivity of the District’s proportionate share of the net pension liability to changes in the discount rate

The following presents the District’s proportionate share of the net pension liability (asset) calculated using the

discount rate of 7.75%, as well as what the District’s proportionate share of the net pension liability (asset)

would be if it were calculated using a discount rate that is 1-percentage-point lower (6.75%) or 1-percentage-

point higher (8.75%) than the current rate:

1% Decrease

(6.75%)

Current Discount Rate

(7.75%) 1% Increase

(8.75%)

District's proportionate share of the net pension liability (asset) $ 36,210,886 $ 15,003,706 $ (2,868,375)

Pension Plan Fiduciary Net Position

Detailed information about the pension plan’s fiduciary net position is available in the separately issued OPERS

financial report.

The schedule of funding progress, presented as required supplementary information following the notes to the

financial statements, presents multiyear trend information about whether the actuarial value of plan assets is

increasing or decreasing relative to the actuarial accrued liability for benefits.



45

(10) Other Post-Employment Benefits (OPEB)

(a) Post-Employment Healthcare Plan

Plan Description The District offers health benefits to retirees under age 65 as well as their qualified dependents at the same rate provided to current employees, as required by Oregon Revised Statutes 243.303. Retirees electing to remain on the District sponsored health plans pay the entire premium for that coverage in order to maintain coverage. Even though the District does not pay any portion of the retiree premium, there is an implicit rate subsidy with respect to retired employees because the medical premium rates charged are less than they would be if the retirees were in a separately rated health plan. Actual medical premium rates are determined by blending both active employee and retiree experience. This “plan” is a single-employer plan and is not a stand-alone plan, and therefore, does not issue its own financial statements. No formal/legal trust has been established for the handling of resources used to fund this benefit.

The number of plan participants are as follows:

Active participants 142

Retired employees 19

Total participants 161

Funding Policy The District collects insurance premiums from all retirees each month. The District then pays the health insurance premiums for all retirees at the blended rate for each family classification. The required contributions to the plan include the entity’s pay-as-you-go amount, an amount paid by retirees and an additional amount calculated to pre-fund future benefits as determined by the actuary.

For fiscal year 2016, the District contributed $103,377 consisting of retiree payments. The District has elected to not pre-fund the actuarially determined future cost amount of $562,565.

The required monthly contributions of the plan members were as follows for the year ended June 30, 2016:

Health Insurance

Providence Providence

Open Option Connect Kaiser

Employee $ 492.74 $ 404.37 $ 619.47

Employee + 1 $ 1,000.38 $ 820.97 $ 1,263.71

Full Family $ 1,404.63 $ 1,152.72 $ 1,765.48



46

(10) Other Post-Employment Benefits (OPEB) (Continued)

Annual OPEB Cost and Net OPEB Obligation The District’s annual other post-employment benefit (OPEB) cost is calculated based on the annual required contribution (ARC) of the District, an amount actuarially determined in accordance with the 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 over a thirty year period.

The annual OPEB cost and net OPEB obligation at June 30, 2016 was as follows:

Annual required contribution $ 139,878Interest on net OPEB Obligation 22,032 Adjustment to annual required contribution (46,768)Annual OPEB cost 115,142Contributions made 103,377Increase in net OPEB obligation 11,765 Net OPEB obligation, beginning of year 550,800 Net OPEB obligation, end of year $ 562,565

The District’s annual OPEB cost, the percentage of annual OPEB cost contributed to the plan and the net OPEB obligation for the last three fiscal years ended were as follows:

Fiscal

Annual

Percent of Annual

Net

Year

OPEB

OPEB Cost

OPEB

Ended

Cost

Contribution

Obligation

6/30/2016 $ 115,142 90% $ 562,565

6/30/2015

$ 113,291

102%

$ 550,800

6/30/2014

$ 110,342

100%

$ 553,039

Funding status and Funding Progress As of July 1, 2015, the most recent actuarial valuation date, the plan was funded on a pay-as-you-go basis, and therefore, had no assets. The actuarial accrued liability for benefits was $1,406,532 and also equaled the unfunded actuarial accrued liability (UAAL). The annual payroll of active employees covered by the plan (covered payroll) was $25,650,242 and the ratio of the UAAL to the covered payroll was 5.5%.

Actuarial valuations of the ongoing plan involve estimates of 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 the annual required contributions of the employer are subject to continual revisions as actual results are compared with past expectations and new estimates are made about the future.



47


Actuarial Methods and Assumptions Projections of benefits for financial reporting purposes are based on the substantive plan (the plan as 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 of benefit costs between the employer and plan members to that point. The actuarial methods and assumptions used include techniques that are designed to reduce the effects of short-term volatility in actuarial results consistent with the long-term perspective of the calculations.

In the July 1, 2015 valuation, the projected unit credit actuarial cost method was used, with accrued benefits allocated in equal proportion over the participant’s years of service from hire to expected retirement. The actuarial assumptions included (a) a 4 percent accrued liability discount rate, (b) a 2.5 percent inflation component, and (c) healthcare cost trend rate of 7 percent for 2016 grading down over seventeen years to 5 percent. The Unfunded Actuarial Accrued Liability (UAAL) is being amortized over an open period of thirty years as a level percentage of payroll for Non-Represented Retirees, and over a closed period of four years as a flat dollar amount for Represented Retirees.

Actuarial Actuarial Actuarial Unfunded Annual

Valuation Value of Accrued Liability Funded Covered UAAL as

Date Assets Liability (AAL) (UAAL) Ratio Payroll % of Payroll

7/1/2015 $ - $ 1,406,532 $ 1,406,532 0.0% $ 25,650,242 5.5%

The schedule of funding progress presented immediately following the financial statements as required supplementary information, presents multi-year trend information about whether the actuarial value of plan assets is increasing or decreasing over time relative to the actuarial accrued liability for benefits.

(b) Retirement Health Insurance Account (RHIA)

Plan Description As a member of Oregon Public Employees Retirement System (OPERS), the District contributes to the Retirement Health Insurance Account (RHIA) for each of its eligible employees. RHIA is a cost-sharing, multiple-employer defined benefit other post-employment benefit plan administered by OPERS. RHIA pays a monthly contribution toward the cost of Medicare companion health insurance premiums of eligible retirees. Oregon Revised Statute (ORS) 238.420 established this trust fund. Authority to establish and amend the benefit provisions of RHIA reside with the Oregon Legislature. The plan is closed to new entrants after January 1, 2004. OPERS issues a publicly available financial report that includes financial statements and required supplementary information. That report may be obtained by writing to the Oregon Public Employees Retirement System, P.O. Box 23700, Tigard, OR 97281-3700, by calling 1-888-320-7377, or by accessing the PERS web site at http://oregon.gov/PERS/.

http://oregon.gov/PERS/



48


Funding Policy Because RHIA was created by enabling legislation (ORS 238.420), contribution requirements of the plan members and the participating employers were established and may be amended only by the Oregon Legislature. ORS require that an amount equal to $60 or the total monthly cost of Medicare companion health insurance premiums coverage, whichever is less, shall be paid from the RHIA established by the employer, and any monthly cost in excess of $60 shall be paid by the eligible retired member in the manner provided in ORS 238.410. To be eligible to receive this monthly payment towards the premium cost the member must: (1) have eight years or more of qualifying service in PERS at the time of retirement or receive a disability allowance as if the member had eight years or more of creditable service in PERS, (2) receive both Medicare Part A and B coverage, and (3) enroll in a PERS-sponsored health plan. A surviving spouse or dependent of a deceased PERS retiree who was eligible to receive the subsidy is eligible to receive the subsidy if he or she (1) is receiving a retirement benefit or allowance from PERS or (2) was insured at the time the member died and the member retired before May 1, 1991.

Participating employers are contractually required to contribute to RHIA at a rate assessed each year by OPERS, currently 0.53% of annual covered payroll for Tier One and Tier Two members and 0.45% of annual covered payroll for OPSRP members. The OPERS Board of Trustees sets the employer contribution rate based on the annual required contribution of the employers (ARC), an amount actuarially determined in accordance with the 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) of the plan over a closed period not to exceed thirty years. The District’s contributions to RHIA for the years ended June 30, 2016, 2015, and 2014 were $122,000, $126,000, and $143,000 which equaled the required contributions each year.

(11) Risk Management/Insured Risks and Captive Insurance

It is the policy of the District to periodically assess the proper combination of commercial insurance and retention of risk to cover losses to which it may be exposed. The District currently utilizes two government entity self-insured risk pools through Special Districts Association of Oregon (SDAO) for its workers’ compensation and liability insurance. The District purchases a commercial insurance policy for all-risk property coverage. A self-insurance reserve is maintained to pay the retained amount (deductible) of any insured loss and payments for those losses that are either uninsured or uninsurable. The District maintains retention levels of $50,000 per occurrence on its liability insurance coverage and $1,000,000 per occurrence on its property coverage. The District has earmarked approximately $5.6 million of its unrestricted net assets for future uninsured risks at June 30, 2016.

The District’s liabilities are reported when it is both probable that a loss has occurred and the amount of that loss can be reasonably estimated. Liabilities include an amount for claims that have been incurred but not reported. Liabilities are reevaluated periodically to consider current settlements, frequency of claims, past experience and economic factors. During the past three fiscal years, there were no settlements which exceeded insurance coverage.



49

(11) Risk Management/Insured Risks and Captive Insurance (Continued)

Changes in the balances of the District’s claims liabilities during fiscal years 2016 and 2015 were as follows:

Fiscal year

Beginning of fiscal year

liability

Current claims and changes in estimates

Claims payments

Balance at fiscal

year-end

2015-2016 $ 310,300 $ 129,441 $ (98,241) $ 341,500 2014-2015 $ 303,500 $ 111,914 $ (105,114) $ 310,300

The Captive was formed under the laws of the State of Hawaii as single member Limited Liability Company (LLC) captive insurance company pursuant to Chapter 428 and Article 19 of Chapter 431 of the Hawaii Revised Statutes. The Captive received its Certificate of Authority from the Hawaii Insurance Division on June 30, 2016, and operations will commence on July 1, 2016. The Certificate of Authority enables the Captive to operate as a captive insurance company in the State of Hawaii. The District is the sole member of the Captive. Insurance exposures covered by the Captive will include the non-represented employee self-insurance dental plan, general liability self-insured retention of $50,000, automobile liability self-insured retention of $50,000, property damage self-insured retention of $5 million, and uninsured risk within these categories.

(12) Net Position

Net position represents the difference between assets and liabilities. The components of net position at June 30, 2016 were as follows:

Net Investment in Capital Assets:

Net capital assets in service $ 658,415,159

Less:

Revenues bonds payable, net (214,783,431)

Accounts payable for capital assets (6,996,221)

$ 436,635,507

Restricted for Capital Acquisition and Debt Service:

Total Restricted Net Position-due to enabling legislation $ 43,832,333

Total Restricted Net Position-other 96,776,446

Total Restricted Net Position- CWIC capitve insurance 250,000 Total Restricted Net Position 140,858,779

Deductions Liabilities payable from restricted net position proceeds-enabling legislation (22,634)

Liabilities payable from restricted net position proceeds-other (9,657,517)

Liabilities payable from restricted net position proceeds (9,680,151)

Restricted Net Position-due to enabling legislation 43,809,699 Restricted Net Position-other 87,118,929 Total Restricted Net Position- CWIC capitve insurance 250,000

Restricted Net Position $ 131,178,628



50

(12) Net Position (Continued)

The Hawaii Insurance Division established certain minimum capital and surplus requirements for the Captive which are required to be maintained at all times. The minimum was set at $250,000 at formation. As of June 30, 2016, the Captive was in compliance with the minimum capital and surplus requirements of the State of Hawaii.

(13) Related Party Transactions

Washington County performs certain fiscal and accounting services, partnering in capital projects and provides certain facility related services, for which the District was charged approximately $299,100 during fiscal 2016.

On April 16, 2013, the District entered into a new Operating Agreement with the Clean Water Institute (CWI). Under the Operating Agreement, the District may provide resources to conduct work for CWI. Upon mutual agreement, the District and CWI may enter into agreements which shall describe the particular scope of services to be performed by the District for CWI. The District may also provide staff and resources to provide administrative support to CWI and charge CWI for such support. The District has billed CWI $7,500 for such services under the Operating Agreement for fiscal year ended June 30, 2016.

On October 26, 2010, the District entered into a loan agreement with CWI. The agreement allows for loans and/or advances from the District to CWI of up to $400,000 over the following four fiscal years. Interest on outstanding loan balances due from CWI to the District are calculated monthly and based on 1.1 times the average monthly Oregon Local Government Investment Pool (LGIP) rates. As of June 30, 2016 the loan balance with CWI was $205,387. During fiscal year 2016, CWI was charged $1,498 in interest and made payments totaling $13,803 leaving a loan balance of $205,387 as of June 30, 2016.

On September 21, 2010, the District entered into an Assignment Agreement with CWI, which assigned certain intellectual property rights to CWI. The agreement requires CWI to share future revenues generated from the licensing of these intellectual property rights with the District. Per this agreement, all revenues associated with the agreement received by CWI shall first be applied to repay the loan amounts to the District and any revenues in excess of the loan amount will be shared equally between CWI and the District. In accordance with the agreement, CWI has remitted proceeds of $13,803 to the District in fiscal year 2016 which were applied against the loan balance referenced above.

Clean Water Institute billed the District $20,000 for professional services during fiscal year 2016.

To legally form the Clean Water Insurance Company, in June 2016, the District transferred $336,000 from self-insured dental plan reserves to fund the required reserves and cover operating costs starting July 2016.



51

(14) Commitments and Contingencies

The District is involved as a defendant in several claims and disputes which, for the most part, are normal to the District’s activities. Management intends to vigorously contest these matters and does not believe their ultimate resolution will have a material effect upon the District’s financial position or results of operations.

The District is committed for approximately $53.6 million for various construction projects and other significant commitments at June 30, 2016. The District plans to finance these projects using existing resources.

(15) Operating Leases

The District leases various equipment, buildings and land under cancelable and non-cancelable operating leases. Total costs for such leases were approximately $73,756 for the year ended June 30, 2016. The future approximate minimum lease payments for these leases are as follows:

Fiscal Year Amount

2017 $ 61,203

2018 61,203

2019 59,559

2020 57,915

Total $ 239,880



52

(16) Segment Information

The Sanitary Sewer Segment accounts for the provision of sanitary sewer services within the Tualatin River Drainage Basin.

Segment information as of and for the year ended June 30, 2016 is as follows:

Sanitary Sewer

Assets :

Current assets 143,499,177$

Noncurrent assets 707,747,216

Tota l assets 851,246,393

Deferred outflow of resources 3,617,395

Tota l assets and deferred outflow of resources 854,863,788

Liabi l i ties :

Current l iabi l i ties 36,464,443

Noncurrent l iabi l i ties 228,674,142

Tota l l iabi l i ties 265,138,585

Deferred inflow of resources 4,479,891

Tota l l iabi l i ties and deferred inflow of resources 269,618,476

Net pos i tion:

Net investment in capita l assets 349,745,332

Restricted net assets 126,111,732

Unrestricted 109,388,248

Tota l net pos i tion 585,245,312$

Operating revenues 116,391,644$

Depreciation and amortization (34,307,522)

Other operating expenses (60,076,806)

Operating income (loss ) 22,007,316

Nonoperating revenues (expenses):

Investment income 2,190,486

Interest on assessment and contracts 14,552

Net loss on disposal of capita l assets (182,209)

Loss on equity in joint venture (77,007)

Interest expense (8,649,511)

Capita l donations - intergovernmental agreements (2,425,219)

Tota l nonoperating revenues (expenses) (9,128,908)

Capita l contributions 25,084,874

Change in net pos i tion 37,963,282

Net pos i tion, beginning of year, before adjustment 547,282,030

Net pos i tion, end of year 585,245,312$

Cash flows from:

Operating activi ties 68,590,254$

Non-capita l financing activi ties (3,779,930)

Capita l and related financing activi tes (37,345,009)

Investment activi ties 2,190,486

Net increase 29,655,801

Beginning cash and investments 222,256,604

Ending cash and investments 251,912,405$

Condensed Statements of Net Position

Condensed Statements of Revenues, Expenses and Changes in Net Position

Condensed Statements of Cash Flows



53

(17) Subsequent Events

On October 13, 2016, the District issued Senior Lien Revenue Refunding Bonds totaling $33.225 million. The proceeds will be used to refund and defease a portion of the District’s outstanding Senior Lien Sewer Revenue Bonds, Series 2009A. The District netted over $5.2 million in present value savings on the refunding of existing debt. The interest rate on the bonds is 5.0 percent and the maturity date is October 1, 2028.

REQUIRED SUPPLEMENTARY

INFORMATION


Required Supplementary Information

Schedule of Funding ProgressOther Post Employment Benefits

Unfunded ActuarialUnfunded Accrued Liability

Actuarial Actuarial Actuarial Actuarial (Asset) as a PercentValuation Value of Accrued Accrued Funded Covered of CoveredDate Assets Liability Liability (Asset) Ratio Payroll Payroll

7/1/2015 ‐$ 1,406,532$ 1,406,532$ 0 % 25,650,242$ 5.5 %7/1/2013 ‐$ 1,369,136$ 1,369,136$ 0 % 23,362,845$ 5.9 %7/1/2011 ‐$ 1,548,140$ 1,548,140$ 0 % 21,608,777$ 7.2 %7/1/2009 ‐$ 1,884,808$ 1,884,808$ 0 % 20,314,357$ 9.3 %

54

(b) (b/c)

(a) Contributions in (a‐b) (c) Contributions

Year Statutorily relation to the Contribution District's as a percentEnded required statutorily required deficiency covered of coveredJune 30, contribution contribution (excess) payroll payroll

2016 2,372,887$ 2,372,887$ ‐$ 27,123,860$ 8.75%

2015 1,793,128$ 1,793,128$ ‐$ 25,570,409$ 7.01%

2014 1,700,572$ 1,700,572$ ‐$ 24,174,163$ 7.03%

*

(A Component Unit of Washington County, Oregon)CLEAN WATER SERVICES

Schedule of Statutorily Required Employer Contributions

Pension Plan


Last Three Fiscal Years*

Fiscal year 2015 was the first year that the new reporting requirements of GASB 68 were implemented at the District. This schedule is required to illustrate 10‐years of information. However, until a full 10‐year trend has been compiled, information is presented only for the years for which the required supplementary information is available.

55


(A Component Unit of Washington County, Oregon)


Schedule of Proportionate Share of the Collective

Net Pension Liability (Asset)

(b/c)

District's

(a) (b) Plan fiduciaryDistrict's District's (c) net position as

Year proportion of proportionate share District's a percentage of Ended the net pension of the net pension covered the total pensionJune 30, liability (asset) liability (asset) payroll liability

2016 0.26132208% 15,003,706$ 25,570,409$ 58.68% 91.88%

2015 0.25658001% (5,815,937)$ 24,174,163$ ‐24.06% 103.59%

2014 0.25658001% 13,093,654$ 24,141,544$ 54.24% 91.97%

*

proportionate share of the net pension liability (asset) as a

percentage of its covered payroll

Last Three Fiscal Years*

Fiscal year 2015 was the first year that the new reporting requirements of GASB 68 were implemented at the District. This schedule is required to illustrate 10‐years of information. However, until a full 10‐year trend has been compiled, information is presented only for the years for which the required supplementary information is available.

56

SUPPLEMENTAL

INFORMATION

Combining Schedules

Combining Schedule of Net Position

Sanitary Surface Water CWIC Assets Sewer Management Captive Insurance Total

Current assets:$ 121,574,033 $ 8,134,228 $ 86,005 $ 129,794,266

16,967,675 1,806,357 ‐ 18,774,032 1,264,707 ‐ ‐ 1,264,707 209,168 ‐ ‐ 209,168 499,543 ‐ ‐ 499,543

Current assets ‐ unrestricted 140,515,126 9,940,585 86,005 150,541,716

2,155,656 ‐ ‐ 2,155,656 237,527 ‐ ‐ 237,527 204,389 ‐ ‐ 204,389 386,479 ‐ ‐ 386,479

Current assets ‐ restricted 2,984,051 ‐ ‐ 2,984,051

Total current assets 143,499,177 9,940,585 86,005 153,525,767

Noncurrent assets:130,338,372 4,954,190 250,000 135,542,562

2,707,513 ‐ ‐ 2,707,513

Land 16,574,799 ‐ ‐ 16,574,799 Permanent easements 1,867,373 6,919,770 ‐ 8,787,143 Construction in progress 104,395,529 3,086,859 ‐ 107,482,388

448,484,995 76,967,294 ‐ 525,452,289 Intangible assets, net of accumulated amortization 64,994 53,546 ‐ 118,540

2,490,836 ‐ ‐ 2,490,836 Prepaid expenses 450,890 ‐ ‐ 450,890

371,915 ‐ ‐ 371,915

Total noncurrent assets 707,747,216 91,981,659 250,000 799,978,875

Total assets 851,246,393 101,922,244 336,005 953,504,642

Deferred outflow of resources:Deferred loss on refunding 354,014 ‐ ‐ 354,014 Pension related 3,263,381 ‐ ‐ 3,263,381

Total assets and deferred outflow of resources $ 854,863,788 $ 101,922,244 $ 336,005 $ 957,122,037

Current liabilities:Accounts payable $ 5,479,195 $ 204,238 $ ‐ $ 5,683,433 Accrued payroll 5,071,319 ‐ ‐ 5,071,319 Accrued self insurance 91,500 ‐ ‐ 91,500Accrued interest payable 2,584,294 ‐ ‐ 2,584,294 Current portion of bonds payable, net 16,279,573 ‐ ‐ 16,279,573

Current liabilities ‐ payable from unrestricted assets 29,505,881 204,238 ‐ 29,710,119

Accounts payable‐ from restricted assets 6,881,561 137,295 ‐ 7,018,856 Accrued interest payable‐from restricted assets 77,001 ‐ ‐ 77,001

Current liabilities ‐ payable from restricted assets 6,958,562 137,295 ‐ 7,095,857

Total current liabilities 36,464,443 341,533 ‐ 36,805,976

Noncurrent liabilities:Bonds payable, net 212,857,871 ‐ ‐ 212,857,871 Net pension liability 15,003,706 ‐ ‐ 15,003,706 Postemployment benefits other than pensions 562,565 ‐ ‐ 562,565 Accrued self insurance 250,000 ‐ ‐ 250,000

Total noncurrent liabilities 228,674,142 ‐ ‐ 228,674,142

Total liabilities 265,138,585 341,533 ‐ 265,480,118

Deferred inflow of resources:Pension related 4,479,891 ‐ ‐ 4,479,891

Total liabilities and deferred inflow of resources 269,618,476 341,533 ‐ 269,960,009

Net position:Net investment in capital assets 349,745,332 86,890,175 ‐ 436,635,507 Restricted net assets 126,111,732 4,816,896 250,000 131,178,628 Unrestricted 109,388,248 9,873,640 86,005 119,347,893

Total net position 585,245,312 101,580,711 336,005 687,162,028 Total liabilities, deferred inflow of resources and net position $ 854,863,788 $ 101,922,244 $ 336,005 $ 957,122,037

Materials and supplies inventoryCurrent portion contracts receivablePrepaid expenses


Cash and investmentsAccounts receivable (net of allowance for

uncollectibles)

June 30, 2016

Connection fees receivable‐restricted

Contributions receivable from local governments‐restrictedBABs subsidy receivable‐restricted

Capital assets, not being depreciated or amortized:

Current portion contracts receivable‐restricted

Contracts receivable‐restricted

Liabilities and Net Position

Capital assets, net of accumulated depreciation

Contracts receivable

Investment in joint venture

Cash and investments‐restricted

57


Combining Schedule of Revenues, Expenses

Sanitary Surface Water CWICSewer Management Captive Insurance Total

Operating revenues:$ 111,570,464 $ 12,659,359 $ ‐ $ 124,229,823

4,821,180 1,001,083 ‐ 5,822,263

Total operating revenues 116,391,644 13,660,442 ‐ 130,052,086

Operating expenses:38,361,529 6,559,003 ‐ 44,920,532 4,307,678 137,979 ‐ 4,445,657 7,669,114 1,108,342 ‐ 8,777,456 3,496,465 358,112 ‐ 3,854,577 1,502,224 753,472 ‐ 2,255,696 419,774 82,268 ‐ 502,042 753,061 73,807 ‐ 826,868

3,566,961 7,700 ‐ 3,574,661 34,307,522 5,430,971 ‐ 39,738,493

94,384,328 14,511,654 ‐ 108,895,982

22,007,316 (851,212) ‐ 21,156,104

2,190,486 113,755 5 2,304,246 Interest on assessments and contracts 14,552 ‐ ‐ 14,552

(182,209) ‐ ‐ (182,209) (77,007) ‐ ‐ (77,007)

(8,649,511) ‐ ‐ (8,649,511) (2,425,219) ‐ ‐ (2,425,219)

(9,128,908) 113,755 5 (9,015,148)

12,878,408 (737,457) 5 12,140,956

System development charges 20,454,721 972,869 ‐ 21,427,590 Infrastructure donated by developers 4,630,153 10,637,344 ‐ 15,267,497

‐ ‐ 336,000 336,000

25,084,874 11,610,213 336,000 37,031,087

37,963,282 10,872,756 336,005 49,172,043

547,282,030 90,707,955 ‐ 637,989,985

$ 585,245,312 $ 101,580,711 $ 336,005 $ 687,162,028


Net position, end of year

Capital contributions:

Total capital contributions

Interest expenseCapital donations ‐ intergovernmental agreements

Income (loss) before contributions

Change in net position

Net position, beginning of year

Operating income (loss)

Nonoperating revenues (expenses):Investment income

Total operating expenses

Loss on equity in joint venture

Contributed capital ‐ CWIC captive insurance

Insurance


and Changes in Net Position

Service feesOther

Labor and fringe benefitsUtilitiesProfessional servicesSuppliesAdministrative costsRepairs and maintenance

Total nonoperating revenues (expenses)

Chemicals

Net gain/(loss) on disposal of capital assets


58


Combining Schedule of Cash Flows

Sanitary Surface Water CWICSewer Management Captive Insurance Total

$ 110,064,346 $ 12,497,142 $ ‐ $ 122,561,488 (20,651,921) (2,318,799) ‐ (22,970,720) (25,641,277) (6,559,003) ‐ (32,200,280) 4,819,106 1,001,083 ‐ 5,820,189

Net cash from operating activities 68,590,254 4,620,423 ‐ 73,210,677

(480,000) ‐ ‐ (480,000) (874,711) ‐ ‐ (874,711)

Capital donations to others (2,425,219) ‐ ‐ (2,425,219) ‐ ‐ 336,000 336,000

Net cash from noncapital financing activities (3,779,930) ‐ 336,000 (3,443,930)

(36,056,174) (2,731,326) ‐ (38,787,500) (14,005,000) ‐ ‐ (14,005,000) (10,775,511) ‐ ‐ (10,775,511) 1,965,844 ‐ ‐ 1,965,844

13,089 ‐ ‐ 13,089 21,365,279 972,869 ‐ 22,338,148

147,464 ‐ ‐ 147,464

financing activities (37,345,009) (1,758,457) ‐ (39,103,466)

2,190,486 113,755 5 2,304,246

29,655,801 2,975,721 336,005 32,967,527

222,256,604 10,112,697 ‐ 232,369,301

251,912,405 13,088,418 336,005 265,336,828

121,574,033 8,134,228 86,005 129,794,266 130,338,372 4,954,190 250,000 135,542,562

$ 251,912,405 $ 13,088,418 $ 336,005 $ 265,336,828

$ 22,007,316 $ (851,212) $ ‐ $ 21,156,104

34,307,522 5,430,971 ‐ 39,738,493 27,522 ‐ ‐ 27,522

Net pension expense 12,057,986 12,057,986 11,765 ‐ ‐ 11,765 (2,074) ‐ ‐ (2,074)

(1,506,118) (162,217) ‐ (1,668,335) (311,874) ‐ ‐ (311,874) (242,154) ‐ ‐ (242,154) 681,701 ‐ ‐ 681,701

1,558,662 202,881 ‐ 1,761,543

46,582,938 5,471,635 ‐ 52,054,573

$ 68,590,254 $ 4,620,423 $ ‐ $ 73,210,677

$ 3,719,595 $ 10,637,344 $ ‐ $ 14,356,939 $ (77,007) $ ‐ $ ‐ $ (77,007)


Loss on equity in joint venture


Total adjustments

Net cash from operating activities

Schedule of non‐cash capital and related financing activities:Contributions of capital assets by developers

Accounts payable

Postemployment benefit costs other than pensionsBABs subsidyChanges in assets and liabilities:

Accounts receivableMaterials and supplies inventoryPrepaid expensesAccrued expenses

Amortization of prepaid electric

Adjustments to reconcile operating income (loss) to net cash

Net increase (decrease) in cash and cash equivalents

Cash and cash equivalents, beginning of year

Cash and cash equivalents, end of year

Unrestricted cash and investmentsRestricted cash and investments

from operating activities:

Acquisition and construction of capital assets

Total cash and investments

Reconciliation of operating income (loss) to net cash fromoperating activities:

Interest on investments

Principal paid on bonds Interest paid on bonds

Proceeds from sale of capital assets

Net cash from capital and related

Cash flows from investing activities:

Interest received on assessments and contractsCapital contributed by customers and cities

Operating income (loss)

Principal received on assessments and contracts

Cash flows from capital and related financing activities:

Cash flows from noncapital financing activities:Principal paid on pension bondsInterest paid on pension bonds

Contributed capital ‐ CWIC captive insurance

Cash flows from operating activities:Received from customersPayments to suppliersPayments to employees for servicesOther operating revenue

59

SUPPLEMENTAL

INFORMATION

Budgetary Schedules

CLEAN WATER SERVICES (A Component Unit Of Washington County, Oregon)

DESCRIPTION OF BUDGETARY FUNDS

June 30, 2016

60

Legal requirements set forth in Oregon Budget Law require the District to prepare and adopt a budget by individual funds. Therefore, activities of the District, for budgetary and legal purposes, are accounted for in the funds described below.

General Fund

This fund accounts for the District’s normal recurring sanitary sewer operations. The primary source of revenue is sewer service fees.

Storm and Surface Water Management (SWM) Fund

The SWM Fund provides for storm and surface water management in the Tualatin River Basin. Its primary source of revenue is SWM service fees.

Master Plan Update Debt Service Fund

The Master Plan Update Debt Service Fund accounts for the redemption of sewer revenue bonds and interest thereon. The primary resource is sewer revenues transferred from the General Fund.

Revenue Pension Bond Debt Service Fund

The Revenue Pension Bond Debt Service Fund accounts for the redemption of sewer revenue pension related bonds and interest thereon. The primary resource is sewer revenues transferred from the General Fund.

Liability Reserve Fund

The Liability Reserve Fund accounts for the District’s expense incurred under its self-insurance programs for:

Fire loss, property damage, and all risks (theft, vandalism, etc.) up to a self-insured retention limit of $1.0 million.

Workers’ compensation claims relating to job injuries.

The primary resources are interest earnings, insurance settlements and transfers from other funds.

Capital Expenditure Reserve (Sanitary Sewer) Fund

The Capital Expenditure Reserve (Sanitary Sewer) Fund accounts for the recovery of capital costs for maintenance and upkeep of the sewerage system. The primary resources are connection fees and earnings on investments.

CLEAN WATER SERVICES (A Component Unit Of Washington County, Oregon)

DESCRIPTION OF BUDGETARY FUNDS (Continued)

June 30, 2016

61

Sanitary Sewer LID Construction Fund

The LID Construction Fund accounts for sanitary sewer capital construction expenditures for benefited property owners. The primary resources are from the sale of bonds or bond anticipation notes and assessment collections.

Surface Water Management LID Construction Fund

The LID Construction Fund accounts for surface water management construction expenditures for benefited property owners. The primary resources are from the sale of bonds or bond anticipation notes and assessment collections.

Sanitary Sewer Construction Fund

The Sanitary Sewer Construction Fund provides for the construction of projects financed from a combination of revenue bond proceeds, sanitary system development charges and transfers from the General Fund.

Tualatin Basin Water Supply Capital Project Construction Fund

The Tualatin Basin Water Supply Capital Project Construction Fund provides financing for capital improvements to provide additional water volume in the Tualatin River, enabling continued compliance with the water quality requirements. The partners funding the project include the District, the Cities of Hillsboro and Beaverton, the Tualatin Valley Water District and the US Bureau of Reclamation.

Capital Expenditure Reserve Storm and Surface Water Management Fund

The Capital Expenditure Reserve Storm and Surface Water Management Fund provides for the construction and extension of storm water systems and facilities. Primary revenue resources are connection fees and interest earnings.

Surface Water Management Construction Fund

The Surface Water Management Construction Fund provides for the construction of projects primarily financed by system development charges and transfers from the SWM operating fund.


General Fund 101

Schedule of Revenues and Expenditures ‐ Budget and Actual


VarianceInitial Final fromBudget Budget Actual budget

Revenues:Sewer service fees $ 112,375,500 $ 112,375,500 $ 111,571,933 $ (803,567) Interest earned 268,500 268,500 952,423 683,923 Septage charges 709,700 709,700 1,067,339 357,639 Plan check fees 342,400 342,400 267,400 (75,000) Grants, contributions, & assessments 300,000 300,000 31,888 (268,112) Other 620,200 620,200 1,415,344 795,144

Total revenues 114,616,300 114,616,300 115,306,327 690,027

Expenditures:Personnel Services 38,447,900 38,447,900 32,559,834 5,888,066 Materials and services 26,265,900 27,405,900 23,920,991 3,484,909 Capital outlay 2,679,600 2,659,600 1,082,178 1,577,422 Contingency 10,109,000 8,969,000 ‐ 8,969,000

Total expenditures 77,502,400 77,482,400 57,563,003 19,919,397

Excess of revenues over expenditures 37,113,900 37,133,900 57,743,324 20,609,424

Other financing sources (uses):Transfers from other funds 9,314,200 9,314,200 9,041,393 (272,807) Transfers to other funds (41,662,800) (41,682,800) (41,682,800) ‐

Total other financing sources (uses) (32,348,600) (32,368,600) (32,641,407) (272,807)

Net change in fund balance 4,765,300 4,765,300 25,101,917 20,336,617

Fund balance, beginning of year 86,424,238 86,424,238 99,092,379 12,668,141

Fund balance, end of year $ 91,189,538 $ 91,189,538 124,194,296 $ 33,004,758

Reconciliation to net postion ‐ GAAP BasisAdjust for accrued performance bonus (1,333,822) Adjust for CWI loan receivable 204,963 Adjust for prepaid electricity ‐ current 27,522 Adjust for prepaid electricity ‐ long term 439,047 Adjust for net pension liability (15,003,706) Adjust for deferred outflows ‐ pension 3,263,381 Adjust for deferred inflows ‐ pension (4,479,891) Adjust for OPEB liability being accrued (562,565) Adjust for investment in joint venture 2,490,836 Adjust for capital assets not being depreciated 18,774,881 Adjust for capital assets , net of accumulated depreciation 448,549,989

Net position ‐ GAAP Basis $ 576,564,931

62


Storm and Surface Water Management Fund 201




Revenues:Stormwater service fees $ 12,492,900 $ 12,492,900 $ 12,438,050 $ (54,850) Regional stormwater management charge ‐ ‐ 553,946 553,946 Erosion control fees 227,000 227,000 371,390 144,390 Plan check fees 276,800 276,800 285,605 8,805 Interest earned 49,600 49,600 65,719 16,119 Other 557,800 557,800 663,086 105,286

Total revenues 13,604,100 13,604,100 14,377,796 773,696

Expenditures:Other 216,200 216,200 64,297 151,903 Contingency 476,500 476,500 ‐ 476,500

Total expenditures 692,700 692,700 64,297 628,403


Other financing (uses):Transfers to other funds (12,314,200) (12,314,200) (11,541,393) 772,807

Net change in fund balance 597,200 597,200 2,772,106 2,174,906



Reconciliation to net postion ‐ GAAP BasisAdjust for capital assets not being depreciated 6,973,316 Adjust for capital assets , net of accumulated depreciation 76,967,294


63


Master Plan Update Debt Service Fund 111




Revenues:Interest earned $ 155,100 $ 155,100 $ 200,687 $ 45,587 Build America Bonds subsidy 1,557,100 1,557,100 1,560,973 3,873

Total revenues 1,712,200 1,712,200 1,761,660 49,460

Expenditures:Debt payments 24,780,511 24,780,511 24,780,511 ‐ Bond issuance costs 200,000 200,000 ‐ 200,000 Contingency 1,239,000 1,239,000 ‐ 1,239,000


Excess of expenditures over revenues (24,507,311) (24,507,311) (23,018,851) 1,488,460

Other financing sources:Transfers from other funds 24,335,100 24,335,100 22,335,100 (2,000,000)

Total other financing sources 24,335,100 24,335,100 22,335,100 (2,000,000)

Net change in fund balance (172,211) (172,211) (683,751) (511,540)



Reconciliation to net postion ‐ GAAP BasisAdjust for prepaid bond discount ‐ current 67,431 Adjust for prepaid bond discount ‐ long term 286,583 Adjust for bond premium ‐ current (979,574) Adjust for bond premium ‐ long term (4,467,871) Adjust for interest payable being accrued (2,584,295) Adjust for bonds payable ‐ due within one year (14,735,000) Adjust for long term bonds payable (194,955,000)

Net position ‐ GAAP Basis $ (194,490,835)

64


Revenue Pension Bond Debt Service Fund 114




Revenues:

Interest earned $ 3,100 $ 3,100 $ 5,070 $ 1,970

Expenditures:Debt payments 1,354,711 1,354,711 1,354,711 ‐ Contingency 67,700 67,700 ‐ 67,700

Total expenditures 1,422,411 1,422,411 1,354,711 67,700

Excess of expenditures over revenues (1,419,311) (1,419,311) (1,349,641) 69,670

Other financing sources:Transfers from other funds 1,354,700 1,354,700 1,354,700 ‐

Net change in fund balance (64,611) (64,611) 5,059 69,670

Fund balance, beginning of year 589,618 589,618 591,066 1,448

Fund balance, end of year $ 525,007 $ 525,007 596,125 $ 71,118

Reconciliation to net postion ‐ GAAP BasisAdjust for interest payable being accrued (77,001) Adjust for bonds payable ‐ due within one year (565,000) Adjust for long term bonds payable (13,435,000)

Net position ‐ GAAP Basis $ (13,480,876)

65


Liability Reserve Fund 102




Revenues:Interest earned $ 33,100 $ 33,100 $ 47,592 $ 14,492 Payments from third parties 6,100 6,100 5,219 (881) Insurance reimbursement ‐ ‐ ‐ ‐ Worker's compensation refunds 29,000 29,000 ‐ (29,000)

Total revenues 68,200 68,200 52,811 (15,389)

Expenditures:Claim costs 810,000 810,000 88,798 721,202 Contingency 335,000 335,000 ‐ 335,000

Total expenditures 1,145,000 1,145,000 88,798 1,056,202 Excess of expenditures over revenues (1,076,800) (1,076,800) (35,987) 1,040,813

Other financing sources:Transfers from other funds 300,000 300,000 300,000 ‐

Net change in fund balance (776,800) (776,800) 264,013 1,040,813

Fund balance, beginning of year 5,323,291 5,323,291 5,352,222 28,931

Fund balance, end of year $ 4,546,491 $ 4,546,491 $ 5,616,235 $ 1,069,744

66


Capital Expenditure Reserve Sanitary Sewer Fund 107




Revenues:Connection fees $ 15,827,700 $ 15,827,700 $ 20,454,721 $ 4,627,021 Interest earned 66,100 66,100 433,963 367,863

Total revenues 15,893,800 15,893,800 20,888,684 4,994,884

Expenditures:Contingency 3,852,200 3,852,200 ‐ 3,852,200


Other financing uses:Transfers to other funds (25,681,100) (25,681,100) (25,681,100) ‐

Net change in fund balance (13,639,500) (13,639,500) (4,792,416) 8,847,084


Fund balance, end of year $ 29,043,094 $ 29,043,094 $ 42,963,319 $ 13,920,225


67


Sanitary Sewer LID Construction Fund 108




Revenues:Assessment liens, principal $ 165,300 $ 165,300 $ ‐ $ (165,300) Interest earned 70,900 70,900 22,472 (48,428)

Total revenues 236,200 236,200 22,472 (213,728)

Expenditures:Capital outlay 50,000 50,000 ‐ 50,000 Other 50,000 50,000 ‐ 50,000 Contingency 100,000 100,000 ‐ 100,000

Total expenditures 200,000 200,000 ‐ 200,000

Excess (deficiency) of revenues over expenditures and net change in fund balance 36,200 36,200 22,472 (13,728)

Fund balance, beginning of year 1,820,911 1,820,911 1,650,551 (170,360)

Fund balance, end of year $ 1,857,111 $ 1,857,111 $ 1,673,023 $ (184,088)


68


Surface Water Management LID Construction Fund 208



Revenues:Assessment liens, principal $ ‐ $ 36,900 $ 36,920 $ 20 Interest earned 4,600 4,600 5,310 710

Total revenues 4,600 41,500 42,230 730

Expenditures:Capital outlay 15,000 140,000 122,653 17,347 Contingency 100,000 11,900 ‐ 11,900


Excess (deficiency) of revenues over expenditures and net change in fund balance (110,400) (110,400) (80,423) 29,977

Fund balance, beginning of year 675,085 675,085 675,634 549

Fund balance, end of year $ 564,685 $ 564,685 $ 595,211 $ 30,526



69


Sanitary Sewer Construction Fund 112




Revenues:Interest earned $ 697,100 $ 697,100 $ 538,499 $ (158,601) Contributions from developers 1,466,700 1,466,700 794,622 (672,078) Other 2,551,900 2,551,900 1,000,567 (1,551,333)

Total revenues 4,715,700 4,715,700 2,333,688 (2,382,012)

Expenditures:Capital outlay 59,756,300 59,756,300 37,553,964 22,202,336 Other 1,100,000 1,100,000 ‐ 1,100,000 Contingency 5,975,600 5,975,600 ‐ 5,975,600


Excess of expenditures over revenues (62,116,200) (62,116,200) (35,220,276) 26,895,924

Other financing sources (uses):Bond sale proceeds 53,500,000 53,500,000 ‐ (53,500,000) Transfers from other funds 43,346,000 43,346,000 43,346,000 ‐ Transfers to other funds (2,000,000) (2,000,000) ‐ 2,000,000

Total other financing sources (uses) 94,846,000 94,846,000 43,346,000 (51,500,000)

Net change in fund balance 32,729,800 32,729,800 8,125,724 (24,604,076)


Fund balance, end of year $ 83,316,354 $ 83,316,354 61,936,012 $ (21,380,342)

Reconciliation to net postion ‐ GAAP BasisAdjust for capital assets not being depreciated 103,529,808



70


Tualatin Basin Water Supply Capital Project Construction Fund 115




Revenues:Interest earned $ 2,600 $ 2,600 $ 4,331 $ 1,731 Rental income ‐ ‐ ‐ ‐ Contributions from partners 6,890 6,890 15,980 9,090

Total revenues 9,490 9,490 20,311 10,821

Expenditures:Capital outlay 10,000 35,000 23,202 11,798 Other 10,000 10,000 ‐ 10,000 Contingency 5,000 ‐ ‐ ‐


Excess (deficiency) of revenues over expenditures (15,510) (35,510) (2,891) 32,619

Other financing sources:Transfers from other funds 8,100 28,100 28,100 ‐

Net change in fund balance (7,410) (7,410) 25,209 32,619


Fund balance, end of year $ 362,989 $ 362,989 400,681 $ 37,692

Reconciliation to net postion ‐ GAAP BasisAdjust for capital assets not being depreciated 533,012

Net position ‐ GAAP Basis $ 933,693


71


Capital Expenditure Reserve Storm and SurfaceWater Management Fund 207



VarianceInitial Final from Budget Budget Actual budget

Revenues:Connection fees $ 261,700 $ 261,700 $ 348,610 $ 86,910 Interest earned 6,200 6,200 6,637 437 Other 75,000 75,000 ‐ (75,000)

Total revenues 342,900 342,900 355,247 12,347

Expenditures:

Contingency 30,000 30,000 ‐ 30,000

Excess of revenues over expenditures 312,900 312,900 355,247 42,347

Other financing (uses):Transfers to other funds (100,000) (100,000) (100,000) ‐

Net change in fund balance 212,900 212,900 255,247 42,347


Fund balance, end of year $ 681,827 $ 681,827 $ 846,379 $ 164,552


72


Surface Water Management Construction Fund 212




Revenues:Other $ 158,300 $ 158,300 $ ‐ $ (158,300) Interest 33,100 33,100 36,089 2,989 Reimbursement from developers 1,420,000 1,420,000 ‐ (1,420,000)

Total revenues 1,611,400 1,611,400 36,089 (1,575,311)

Expenditures:Capital outlay 3,971,000 3,971,000 2,597,356 1,373,644 Other 50,000 50,000 ‐ 50,000 Contingency 225,000 225,000 ‐ 225,000


Excess of expenditures over revenues (2,634,600) (2,634,600) (2,561,267) 73,333

Other financing sources:Transfers from other funds 3,100,000 3,100,000 2,600,000 (500,000)

Net change in fund balance 465,400 465,400 38,733 (426,667)



Reconciliation to net postion ‐ GAAP BasisAdjust for capital assets not being depreciated 3,086,859



73


Reconciliation of Revenues and Expenditures(Budgetary Basis) to Increase in Net Position (GAAP Basis)


Fund Revenues Expenditures Net

101 General Fund $ 115,306,327 $ 57,563,003 $ 57,743,324 201 Storm and Surface Water Management Fund 14,377,796 64,297 14,313,499 111 Master Plan Update Debt Service Fund 1,761,660 24,780,511 (23,018,851) 114 Revenue Pension Bond Debt Service Fund 5,070 1,354,711 (1,349,641) 102 Liability Reserve Fund 52,811 88,798 (35,987) 107 Capital Expenditure Reserve (Sanitary Sewer) Fund 20,888,684 ‐ 20,888,684 108 Sanitary Sewer LID Construction Fund 22,472 ‐ 22,472 208 Surface Water Management LID Construction Fund 42,230 122,653 (80,423) 112 Sanitary Sewer Construction Fund 2,333,688 37,553,964 (35,220,276) 115 Tualatin Basin Water Supply Capital Project Construction Fund 20,311 23,202 (2,891) 207 Capital Expenditure Reserve Storm and Surface Water

Management Fund 355,247 ‐ 355,247 212 Surface Water Management Construction Fund 36,089 2,597,356 (2,561,267)

$ 155,202,385 $ 124,148,495 31,053,890

Reconciliation to change in net postion ‐ GAAP BasisExpenditures capitalized 40,629,503 Interest capitalized 1,991,099 Bond principal paid 14,485,000 Contributions of capital assets 9,635,312 Contributions of intangible assets 4,721,626 Donation of capital assets (2,425,219) Loss on disposal of capital assets (329,672) Loss on equity in joint venture (77,007) Net postemployment benefits costs other than pension (11,765) Net accrued performance bonus (9,611) Depreciation (39,729,596) Amortization of intangibles (8,897) Amortization of prepaid bond discount (273,998) Amortization of prepaid bond premium 1,121,131 Net pension expense (12,057,986) Accrued bond interest payable 162,479 Contract receivable from CWI (12,729) Amoritization of prepaid electric (27,522) Contributed capital ‐ CWIC, captive insurance 336,000 Investment income ‐ CWIC, captive insurance 5

Increase in net position ‐ GAAP Basis $ 49,172,043


74

STATISTICAL SECTION


STATISTICAL SECTION June 30, 2016

75

This part of Clean Water Services’ Comprehensive Annual Financial Report presents detailed information as a context for understanding what the information in the financial statements, note disclosures, and required supplementary information says about the District’s overall financial health. This section contains the following tables and information:

Financial Trends

These schedules contain trend information to help the reader understand how the District’s financial performance and well‐being have changed over time.

Revenue Capacity

These schedules contain trend information to help the reader assess the District’s most significant local revenue source, the District sewer rate.

Debt Capacity

These schedules present information to help the reader assess the affordability of the District’s current levels of outstanding debt and the District’s ability to issue additional debt in the future.

Demographic and Economic Information

These schedules offer demographic and economic indicators to help the reader understand the environment within which the District’s financial activities take place.

Operating Information

These schedules contain service and infrastructure data to help the reader understand how the information in the District’s financial report relates to the services the District provides and the activities it performs.

Sources

Unless otherwise noted, the information in these schedules is derived from the Comprehensive Annual Financial Reports for the relevant year. The District implemented GASB Statement No. 34 in 2001; schedules presenting government‐wide information include information beginning in that year.

FINANCIAL TRENDS


Net Position by ComponentLast Ten Fiscal Years

Primary government 2016 2015 2014 2013 2012 2011 2010 2009 2008 2007(as restated)

Net investment in capital assets $ 436,635,507 406,700,471 383,717,737 $ 391,885,915 $ 388,941,070 $ 381,066,548 $ 390,670,167 $ 385,725,001 $ 390,805,703 $ 357,300,700Restricted 131,178,628 127,786,935 119,140,360 96,440,900 68,909,370 61,775,675 49,038,025 42,178,008 23,253,984 27,282,621Unrestricted 119,347,893 103,502,579 78,138,167 79,630,097 64,776,264 54,690,331 49,053,092 54,331,451 51,809,458 59,180,335

Total primary government net position $ 687,162,028 637,989,985 580,996,264 $ 567,956,912 $ 522,626,704 $ 497,532,554 $ 488,761,284 $ 482,234,460 $ 465,869,145 $ 443,763,656

Source: District financial records

76

Fiscal Year


Changes in Net PositionLast Ten Fiscal Years

Fiscal

Year

Operating

Revenues

Operating

Expenses

Operating

Income

Total

Nonoperating

Revenues/

(Expenses)

Income/(Loss)

before Capital

Contributions

Capital

Contributions

Change in Net

Position

2016 $ 130,052,086 $ 108,895,982 $ 21,156,104 $ (9,015,148) $ 12,140,956 $ 37,031,087 $ 49,172,043

2015 125,448,797 89,618,408 35,830,389 (11,339,290) 24,491,099 32,502,622 56,993,721

2014 120,174,299 96,280,642 23,893,657 (14,651,481) 9,242,176 28,309,974 37,552,150

2013 117,098,321 94,068,352 23,029,969 (14,420,166) 8,609,803 36,720,405 45,330,208

2012 107,029,050 90,554,014 16,475,036 (6,598,345) 9,876,691 15,217,459 8,771,270

2011 103,373,535 89,766,997 13,606,538 (14,087,715) (481,177) 9,252,447 6,526,82477 2010 96,329,080 88,092,976 8,236,104 (7,809,866) 426,238 6,100,586 16,365,315

2009 89,584,555 82,966,612 6,617,943 (6,014,792) 603,151 15,762,164 22,105,489

2008 84,753,809 78,282,300 6,471,509 (6,036,886) 434,623 21,670,866 19,379,843

2007 81,652,086 74,018,632 7,633,454 (5,780,687) 1,852,767 17,527,076 18,500,333



Operating Revenues by SourceLast Ten Fiscal Years

Fiscal Year Service Fees Other Subtotal Service Fees Other Subtotal District Total

2016 $ 111,570,464 $ 4,821,180 $ 116,391,644 $ 12,659,359 $ 1,001,083 $ 13,660,442 $ 130,052,086

2015 107,658,777 4,980,140 112,638,917 11,853,799 956,081 12,809,880 125,448,797

2014 102,996,729 5,680,914 108,677,643 10,689,684 806,972 11,496,656 120,174,299

2013 100,519,134 6,084,818 106,603,952 9,786,430 707,939 10,494,369 117,098,321

2012 92,498,359 5,031,139 97,529,498 8,759,882 739,670 9,499,552 107,029,050

2011 90,102,698 4,751,456 94,854,154 7,900,108 619,273 8,519,381 103,373,535

2010 85,956,660 2,612,125 88,568,785 7,137,108 623,187 7,760,295 96,329,08078 2009 80,439,284 1,752,735 82,192,019 6,623,154 769,382 7,392,536 89,584,555

2008 76,246,357 1,049,813 77,296,170 6,803,780 653,859 7,457,639 84,753,808

2007 71,564,670 2,290,158 73,854,828 6,958,589 838,669 7,797,258 81,652,086


Sanitary Sewer Funds Storm/Surface Water Management Funds


Operating ExpensesLast Ten Fiscal Years

Fiscal

YearLabor &

Benefits Utilities

Professional

Services Chemicals

Other

Operating

Expenses(1)

Subtotal,

before

Depreciation/

Amortization

Depreciation/

Amortization

Total Operating

Expenses

2016 $ 44,920,532 $ 4,445,657 $ 8,777,456 $ 3,574,661 $ 7,439,183 $ 69,157,489 $ 39,738,493 $ 108,895,982

2015 23,465,196 4,546,965 8,570,149 3,682,534 7,551,698 47,816,542 41,801,866 89,618,408

2014 30,075,163 5,086,259 9,072,824 3,761,027 7,739,709 55,734,982 40,545,660 96,280,642

2013 29,844,695 4,738,941 7,943,524 3,607,150 8,089,574 54,223,884 39,844,468 94,068,352

2012 29,997,509 4,775,989 7,547,526 3,274,779 7,677,188 53,272,991 37,281,023 90,554,014

2011 29,237,212 4,648,207 7,746,575 3,062,877 7,119,112 51,813,983 37,953,014 89,766,997

2010 28,574,294 4,751,022 8,288,032 3,161,181 7,953,642 52,728,171 35,364,805 88,092,97679 2009 27,711,838 4,633,182 7,735,526 3,018,492 7,197,134 50,296,172 32,670,440 82,966,612

2008 24,573,218 5,032,352 7,185,849 2,803,784 7,261,233 46,856,437 31,425,864 78,282,301

2007 22,937,504 4,581,058 7,093,836 2,331,916 6,329,670 43,273,984 30,744,648 74,018,632

(1) Other Operating Expenses include supplies, administrative costs, repairs and maintenance, insurance and amortization of prepaid bond costs.



Nonoperating Revenues and ExpensesLast Ten Fiscal Years

Fiscal

Year

Investment

Income

Gain/Loss on

disposal of

assets Other

Interest

Expense

Total

Nonoperating

Expenses

2016 $ 2,304,246 $ (182,209) $ (2,487,674) $ (8,649,511) $ (9,015,148)

2015 1,847,402 (76,242) (3,533,567) (9,576,883) (11,339,290)

2014 1,653,029 (1,880,762) (5,194,139) (9,229,609) (14,651,481)

2013 517,151 (3,773,629) (2,922,353) (8,241,335) (14,420,166)

2012 1,562,181 (115,549) (994,750) (7,050,227) (6,598,345)

2011 1,497,433 54,443 (4,464,323) (11,175,268) (14,087,715)

2010 1,386,567 32,256 (70,163) (9,158,526) (7,809,866)80 2009 2,291,299 75,584 (70,066) (8,311,609) (6,014,792)

2008 3,082,021 (536) (81,703) (9,036,668) (6,036,886)

2007 4,642,643 (342,009) 98,910 (10,180,231) (5,780,687)


REVENUE CAPACITY


Monthly Sewer and Storm/Surface Water RatesLast Ten Fiscal Years

2016 2015 2014 2013 2012 2011 2010 2009 2008 2007

Sewer Rates

Residential Customers

Base Charge $ 26.63 $ 25.85 $ 25.10 $ 24.37 $ 23.52 $ 22.46 $ 21.30 $ 20.12 $ 19.14 $ 18.46 (per Equivalent Dwelling Unit)

Usage Charge $ 1.77 $ 1.72 $ 1.67 $ 1.62 $ 1.56 $ 1.50 $ 1.42 $ 1.35 $ 1.31 $ 1.27 (per CCF = 748 gallons)

Total Average Monthly Charge $ 40.79 $ 39.61 $ 38.46 $ 37.33 $ 36.00 $ 34.46 $ 32.66 $ 30.95 $ 29.62 $ 28.62 (at 8,000 gallons average)

Industrial Customers

Category II‐Minor(1)

Usage Charge‐Per ccf metered discharge $ 2.990 $ 2.900 $ 2.820 $ 2.740 $ 2.640 $ 2.530 $ 2.400 $ 2.273 $ 2.175 $ 2.101 Category III‐Major(2)

Usage Charge‐Per ccf metered discharge $ 2.990 $ 2.900 $ 2.820 $ 2.740 $ 2.640 $ 2.530 $ 2.400 $ 2.273 $ 2.175 $ 2.101 Chemical Oxygen Demand Charge $ 0.153 $ 0.149 $ 0.145 $ 0.141 $ 0.136 $ 0.130 $ 0.123 $ 0.117 $ 0.112 $ 0.108 (per pound over 800 mg/L)

Suspended Solids Charge $ 0.235 $ 0.228 $ 0.221 $ 0.215 $ 0.199 $ 0.190 $ 0.190 $ 0.180 $ 0.172 $ 0.166 (per pound over 400 mg/L)

Surface / Storm Water Rates

Service Charge $ 7.25 $ 6.75 $ 6.25 $ 5.75 $ 5.25 $ 4.75 $ 4.25 $ 4.00 $ 4.00 $ 4.00 (per Equivalent Service Unit)

(1)Category II ‐ Defined as a source of industrial waste or wastewater disharging less than 25,000 gallons per day with a strength of waste discharge less than 800 mg/L chemical oxygen demnd ("COD") and 400 mg/L suspended solids ("SS").

(2)Category III ‐ Defined as a source of industrial waste or wastewater disharging more than 25,000 gallons per day, or with a strength of waste discharge of more than 800 mg/L COD, or 400 mg/L SS.

The District's Board of Directors is authorized under state statute to fix fees and charges for connection to and use ofthe public sewer system by properties that are served by, or are capable of being served by the District's sewagedisposal system.

Source: District records

81

Fiscal Year


System Development Charges and RevenuesLast Ten Fiscal Years

Fiscal year Percent Percent Percentended Connection Total increase Connection Total increase Connection Total increaseJune 30 fee amount (decrease) fee amount (decrease) fee amount (decrease)

2016 $ 500 $ 257,885 (15.25) % $ 5,100 $ 20,454,721 9.63 % $ 5,600 $ 20,712,606 9.23 %2015 500 304,290 51.91 4,900 18,658,680 (10.85) 5,400 18,962,970 (10.26)2014 500 200,315 16.09 4,800 20,930,115 (33.87) 5,300 21,130,430 (33.60)2013 500 172,558 7.00 4,665 31,649,985 171.17 5,165 31,822,543 168.932012 500 161,269 57.76 4,500 11,671,613 61.09 5,000 11,832,882 61.042011 500 102,221 (1.89) 4,100 7,245,462 (20.65) 4,600 7,347,683 (20.44)2010 500 104,193 18.46 3,600 9,131,098 20.29 4,100 9,235,291 20.262009 500 87,957 (67.12) 3,100 7,591,185 (3.52) 3,600 7,679,142 (5.61)2008 500 267,527 (2.55) 2,800 7,868,133 (8.16) 3,300 8,135,660 (7.99)2007 500 274,522 (36.41) 2,700 8,567,662 (22.22) 3,200 8,842,184 (22.66)


82

Storm/Surface Water Management Sanitary Sewer Combined


Ten Largest Individual Ratepayers Current Year and Ten Years Ago

Customer Amount % Customer Amount %Intel Corporation ‐ Ronler Acres Campus $ 7,351,053 6.59% Intel Corporation ‐ Ronler Acres $ 3,219,278 4.50%

Intel Corporation ‐ Aloha Campus 752,369 0.67% Resers Fine Foods ‐ Jenkins Rd 517,772 0.72%Pacific Foods of Oregon 744,752 0.67% Maxim Integrated Products 439,184 0.61%Maxim Integrated Products 650,046 0.58% Pacific Foods of Oregon 385,410 0.54%Resers Fine Foods ‐ Jenkins Rd 618,805 0.55% Integrated Device Technology, Inc. 321,773 0.45%

SolarWorld Industries America Inc. 577,288 0.52% Merix Corporation ‐ Poplar Lane 212,973 0.30%Jireh Semiconductor, Inc. 400,293 0.36% Fujimi America FO Facility 183,890 0.26%

Providence Health Systems ‐ St. Vincent 356,242 0.32% Gray and Company 153,125 0.21%

Heritag Village Mobile Park 256,476 0.23% Triquint Semiconductor 80,801 0.11%

Hillsboro Landfill Inc. 190,390 0.17% OHSU ‐ West Campus 51,585 0.07%

Subtotal (10 largest industrial ratepayers) 11,897,714 10.66% Subtotal (10 largest industrial ratepayers) 5,565,791 7.78%

Balance from other customers(1) 99,672,750 89.34% Balance from other customers(1) 65,998,879 92.22%

Grand Totals $ 111,570,464 100.00% Grand Totals $ 71,564,670 100.00%

(1) Includes Residential Customers and Wholesale Customers (other cities).


Fiscal Year 2016 Fiscal Year 2007

83

DEBT CAPACITY


Ratios of Outstanding Debt by TypeLast Ten Fiscal Years

Fiscal year General Bancroft As a Shareended Obligation Improvement Revenue Pension Per of PersonalJune 30 Bonds Bonds Bonds Bonds Contracts Amount Capita Income2016 $ ‐ $ ‐ $ 209,690,000 $ 14,000,000 $ ‐ $ 223,690,000 $ 392 N/A2015 ‐ ‐ 223,695,000 14,480,000 ‐ 238,175,000 425 0.91%2014 ‐ ‐ 237,105,000 14,885,000 ‐ 251,990,000 457 1.02%2013 ‐ ‐ 250,045,000 15,215,000 ‐ 265,260,000 489 1.08%2012 ‐ ‐ 272,385,000 15,480,000 ‐ 287,865,000 537 1.25%2011 ‐ ‐ 248,160,000 15,685,000 ‐ 263,845,000 497 1.25%2010 ‐ ‐ 268,425,000 15,835,000 ‐ 284,260,000 537 1.35%2009 ‐ ‐ 188,445,000 15,935,000 ‐ 204,380,000 393 0.94%2008 ‐ ‐ 147,830,000 15,990,000 ‐ 163,820,000 321 0.79%

2007 ‐ ‐ 165,205,000 15,990,000 196,282 181,391,282 362 0.93%

N/A ‐ Information not available as of printing

Source: District financial records, Portland State Population Research Center, and Bureau of Economic Analysis

Total

84


Pledged‐Revenue CoverageLast Ten Fiscal Years

2016 2015 2014 2013 2012 2011 2010 2009 2008 2007

GROSS REVENUES(1):

Rate revenue $ 111,570,464 $ 107,658,777 $ 102,996,729 $ 100,519,134 $ 92,498,359 $ 90,102,698 $ 85,956,660 $ 80,439,284 $ 76,246,357 $ 71,564,670 System development charges 20,454,721 18,658,680 20,930,115 31,649,985 11,671,613 7,245,462 9,131,098 7,591,187 7,868,133 8,567,738 Interest income 2,190,486 1,814,026 1,595,791 506,964 1,523,061 1,445,822 1,324,665 1,917,023 2,334,393 3,731,956 Other revenue 3,072,780 3,273,958 2,349,676 (1,035,255) 1,676,171 2,274,165 1,626,436 1,513,034 1,009,194 1,886,605

Total gross revenue 137,288,451 131,405,441 127,872,311 131,640,828 107,369,204 101,068,147 98,038,859 91,460,528 87,458,077 85,750,969

OPERATING EXPENSES(1):

Labor and fringe benefits (2) 39,716,239 (4)18,557,226 (3)

25,240,700 24,958,015 24,860,163 23,557,917 23,104,049 23,617,007 20,810,508 19,885,823 Utilities 4,307,678 4,391,294 4,961,727 4,588,517 4,610,517 4,507,906 4,603,445 4,487,204 4,917,736 4,480,362 Professional services 7,669,114 7,488,054 7,982,179 7,007,149 6,504,014 6,591,481 6,848,295 6,010,866 6,344,719 6,569,665 Supplies 3,496,465 3,627,717 3,745,608 4,111,536 3,584,252 3,099,887 3,610,806 3,736,093 3,749,776 2,486,247 Administrative costs 1,502,225 1,597,198 1,588,969 1,365,536 1,266,169 1,216,905 1,264,781 1,451,818 1,365,570 2,065,497 Repair and maintenance 419,775 292,129 393,193 454,727 415,946 278,912 349,032 187,265 156,214 94,261 Insurance 753,061 758,030 710,448 575,899 584,027 537,178 618,005 714,417 665,878 654,102 Chemicals 3,566,961 3,667,497 3,748,437 3,593,948 3,269,986 3,061,660 3,155,413 3,011,128 2,794,825 2,324,554

Total operating expenses 61,431,518 40,379,145 48,371,261 46,655,327 45,095,074 42,851,846 43,553,826 43,215,798 40,805,226 38,560,511

TOTAL AVAILABLE FOR DEBT SERVICE $ 75,856,933 $ 91,026,296 $ 79,501,050 $ 84,985,501 $ 62,274,130 $ 58,216,301 $ 54,485,033 $ 48,244,730 $ 46,652,851 $ 47,190,458

85

DEBT SERVICE

SENIOR BONDS

1992 Revenue Bonds‐Series A $ ‐ $ ‐ $ ‐ $ ‐ $ ‐ $ ‐ $ ‐ $ 3,093,000 $ 7,776,000 $ 2,322,212 1996 Revenue Bonds‐Series 1996 ‐ ‐ ‐ ‐ ‐ ‐ ‐ 2,620,152 2,615,930 2,619,305 1997 Revenue Bonds‐Series A ‐ ‐ ‐ 10,205,200 10,199,500 10,202,750 10,206,963 7,112,181 2,423,631 7,878,594 2001 Revenue Bonds‐Series 2001 ‐ ‐ ‐ ‐ 2,654,750 4,393,600 4,385,056 4,377,488 4,383,188 4,382,688 2004 Revenue Bonds‐Series 2004 3,958,725 3,961,800 3,961,550 3,952,800 3,966,300 3,958,614 3,953,303 1,336,177 1,331,978 1,332,577 2009 Revenue Bonds‐Series 2009A 5,342,513 5,339,713 5,340,238 2,843,263 2,843,263 2,843,263 2,890,650 ‐ ‐ ‐ 2010 Revenue Bonds‐Series 2010A 3,157,000 3,163,475 3,149,950 356,950 356,950 330,179 ‐ ‐ ‐ ‐ 2010 Revenue Bonds‐Series 2010B 4,791,823 4,791,823 4,791,823 4,791,823 4,791,823 4,432,437 ‐ ‐ ‐ ‐ 2011 Revenue Bonds‐Series 2011A 3,835,375 3,835,750 3,877,650 3,767,850 794,588 ‐ ‐ ‐ ‐ ‐ 2011 Revenue Bonds‐Series 2011B 3,695,075 3,691,900 3,693,087 2,058,775 1,200,952 ‐ ‐ ‐ ‐ ‐

Total Senior Debt Service $ 24,780,511 $ 24,784,461 $ 24,814,298 $ 27,976,661 $ 26,808,126 $ 26,160,843 $ 21,435,972 $ 18,538,998 $ 18,530,727 $ 18,535,376

Senior Debt Service Coverage 3.06 3.67 3.20 3.04 2.32 2.23 2.54 2.60 2.52 2.55

JUNIOR BONDS

1997 Revenue Bonds‐Series One $ ‐ $ ‐ $ ‐ $ 7,046,938 $ 7,049,888 $ 7,051,563 $ 7,053,112 $ 7,050,544 $ 7,049,862 $ 7,052,219

Total Junior Debt Service $ ‐ ‐ $ ‐ $ 7,046,938 $ 7,049,888 $ 7,051,563 $ 7,053,112 $ 7,050,544 $ 7,049,862 $ 7,052,219 Junior Debt Service Coverage 0.00 0.00 0.00 7.30 4.27 3.80 4.08 3.69 3.46 3.54

(1) As defined in Resolutions and Orders No. 87‐53, 89‐58, 92‐55, and 09‐7. Revenues and expenses reported are for Sanitary Sewer activities only.(2) Includes debt service on the Pension Bonds.(3) Pension expense was reduced by $7 million with implementation of GASB 68 and reporting of a net pension asset of $5.8 million at year‐end.(4) Pension expense increased by $12 million resulting from a net pension liability of $15 million at year‐end.


DEMOGRAPHICS AND ECONOMICS


Demographic StatisticsLast Ten Fiscal Years

Fiscal year Personalended Population income Per capita UnemploymentJune 30 (estimated) (in thousands) income rate2016 570,510 N/A N/A 4.7%2015 560,465 26,299,466$ 46,713$ 5.0%2014 550,990 24,940,284 44,893 5.7%2013 542,845 24,817,543 45,309 6.6%2012 536,370 23,208,234 43,008 7.2%2011 531,070 21,132,801 39,772 7.9%2010 529,710 20,798,130 39,638 9.0%2009 519,925 21,540,424 41,760 10.3%2008 511,075 20,636,676 40,556 5.0%2007 500,585 19,519,736 38,866 4.4%

N/A ‐ Information not available as of printing

Source ‐ Portland State Population Research Center, Bureau of Economic Analysis, and Oregon Employment Department

86


Major Employment Industries in Washington CountyCurrent Year and Ten Years Ago

% of Total % of TotalManufacturing:

Wood and Lumber 992 1,664Metals 3,289 3,071Food 1,851 1,608Rubber/Plastic 1,993 2,232Computer and Electronic Equipment/Instruments 27,806 28,036Machinery 4,302 3,505Other 6,948 7,847

Total Manufacturing 47,181 17% 47,963 19%Trade, Transportation, and Utilities:

Wholesale Trade 12,832 17,602Retail Trade 30,938 29,089Transportation and Utilities 4,340 4,195

Total Trade, Transportation, and Utilities 48,110 17% 50,886 21%Information:

Publishing 3,141 3,681Telecommunications 2,173 2,032Other (broadcasting, ISP's, etc.) 2,085 1,629

Total Information 7,399 3% 7,342 3%Financial Activities:

Finance and Insurance 10,616 10,866Real Estate 3,397 3,867

Total Financial Activities 14,013 5% 14,733 6%Professional and Business Services 52,907 19% 34,282 14%Construction 13,160 5% 15,298 6%Educational Services 5,139 2% 4,662 2%Healthcare and Social Assistance 27,924 10% 19,655 8%Leisure and Hospitality 23,999 9% 19,424 8%Other Services (agriculture, repairs, private homes, misc.) 12,496 5% 11,439 5%Government (federal, state, and local) 22,599 8% 20,339 8%

TOTAL EMPLOYMENT 274,927 100% 246,023 100%

* Fiscal Year 2016 information includes data through 12/31/15

Source: Oregon Employment Department Labor Market Information System (OLMIS)

Annual Average2016 * 2007

Annual Average

87

OPERATING

CLEAN WATER SERVICES (A Component Unit of Washington County, Oregon)Administrative, Support and Operational Staff FTELast Ten Fiscal Years

Fiscal yearendedJune 30 Number Percent Number Percent Number Percent Number Percent Number Percent

2016 35 11% 49 15% 197 60% 49 15% 330 100%2015 36 11% 49 15% 191 60% 44 14% 320 100%2014 35 11% 50 16% 187 60% 41 13% 313 100%2013 31 10% 57 18% 192 62% 32 10% 311 100%2012 34 11% 52 17% 181 57% 49 15% 316 100%2011 40 13% 53 17% 175 55% 48 15% 316 100%2010 42 13% 49 15% 178 56% 49 16% 319 100%2009 42 13% 49 15% 178 56% 49 16% 319 100%2008 38 12% 49 16% 172 56% 48 16% 308 100%2007 34 11% 49 16% 164 54% 54 18% 301 100%


88

Administrative staff Total staffSupport staff Operations staff Capital staff


Summary of Treatment Plant CapacitiesFiscal Year Ending June 30, 2016

Annual Average Dry weather Average Wet weatheraverage dry weather design wet weather design Peak day Peak design

flow (MGD) flow (MGD) capacity (MGD) 1flow (MGD) capacity (MGD)

1flow (MGD) flow (MGD)

2

Durham 25.3 19.1 33.0 31.6 49.0 55.1 140.0

Rock Creek 37.7 29.1 45.0 46.5 70.0 83.8 150.0

Forest Grove 4.5 3.3 — 5.7 20.0 20.3 20.0

Hillsboro 5.1 4.0 — 6.1 20.0 15.0 20.0

District totals 72.6 55.5 78.0 89.9 159.0 174.2 330.0

MGD – Million Gallons Per Day1 The design capacity statistics report system flows that are treated in the plants and reflect permit requirements based on the time of the year.The District operates under separate permits for the dry weather and wet weather seasons. The dry weather season has more restrictive permit

requirements and requires higher quality treatment of flows. This results in lower system capacity in dry weather months as compared to wet weathercapacity. The Forest Grove and Hillsboro treatment plants are closed and non‐permitted during the dry weather season and flows are diverted toRock Creek.

2 The peak design flow reflects maximum hydraulic flow through the plants. These flows may not be fully treated.

Source‐District records

Plant

89


Operating and Capital IndicatorsLast Ten Fiscal Years

2016 2015 2014 2013 2012 2011 2010 2009 2008 2007 2006

Wastewater Treatment

Number of Treatment Plants 4 4 4 4 4 4 4 4 4 4 4

Number of Pump Stations 40 40 40 40 41 41 41 40 40 39 39

Dry Weather Design Capacity (MGD) 78 78 78 75 75 71.3 71.3 71.3 71.3 70.2 69

Average Dry Weather Flow (MGD) 55.5 53.3 55.5 56.3 54.1 56.4 56.7 51.9 53.1 51.3 51.4

Unused capacity(millions of gallons) 23 25 23 19 21 15 15 19 18 19 18

Percentage of capacity utilized 71% 68% 71% 75% 72% 79% 80% 73% 74% 73% 74%

Conveyance Systems

Number of System Development permits 99 84 78 59 34 25 44 54 92 100 102

Number of Connections 1,593 1,176 1,033 793 804 640 703 663 1,004 1,203 1,550

Total miles of sewer line 838 839 840 832 837 826 811 796 791 790 770

Total miles of storm water line 516 495 503 491 490 487 474 469 464 453 440

District‐Wide

Estimated Number of EDU's serviced 289,821 285,495 281,670 277,032 271,223 269,130 267,237 264,540 261,305 258,471 254,936

Other Programs

River Rangers program # of Students 2,620 2,024 3,673 4,258 3,251 3,787 3,883 3,725 4,071 3,111 2,531

# of Schools 38 33 49 58 47 54 40 41 48 36 15

Storm drain Stenciling # of drains stenciled 346 936 105 603 1,191 1,113 1,338 1,477 1,049 2,437 2,128

N/A ‐ information not availableMGD ‐ Million Gallons Per DayEDU ‐ Equivalent Dwelling Unit

Source‐District Records

90

Fiscal Year

COMPLIANCE REPORT

91

REPORTOFINDEPENDENTAUDITORSONCOMPLIANCEANDINTERNALCONTROLOVERFINANCIALREPORTINGBASEDONANAUDITOFFINANCIAL

STATEMENTSPERFORMEDINACCORDANCEWITHOREGONAUDITINGSTANDARDS

TotheBoardofCommissionersCleanWaterServices(AcomponentunitofWashingtonCounty,Oregon)Hillsboro,OregonWehaveauditedtheaccompanyingfinancialstatementsoftheCleanWaterServices,acomponentunitofWashingtonCounty,Oregon(theDistrict),asofandfortheyearendedJune30,2016,andhaveissuedour report thereon dated December 6, 2016. We conducted our audit in accordance with auditingstandardsgenerallyacceptedintheUnitedStatesofAmerica.Thosestandardsrequirethatweplanandperform the audit to obtain reasonable assurance aboutwhether the financial statements are free ofmaterialmisstatement.ComplianceAspartofobtainingreasonableassuranceaboutwhethertheDistrict’sfinancialstatementsarefreeofmaterial misstatement, we performed tests of its compliance with certain provisions of laws,regulations,contractsandgrants,includingprovisionsofOregonRevisedStatutesasspecifiedinOregonAdministrative Rules (OAR) 162‐010‐000 to 162‐010‐330, as set forth below, noncompliance withwhichcouldhaveadirectandmaterialeffectonthedeterminationoffinancialstatementamounts:

Theaccountingrecordsandrelatedinternalcontroloverfinancialreporting. Theamountandadequacyofcollateralpledgedbydepositoriestosecurethedepositofpublic

funds. Therequirementsrelatingtodebt. Therequirementsrelatingtobudgeting. Therequirementsrelatingtoinsuranceandfidelitybondcoverage. Theappropriatelaws,rules,andregulationspertainingtoprogramsfundedwhollyorpartially

byothergovernmentalagencies. Thestatutoryrequirementspertainingtotheinvestmentofpublicfunds. Therequirementspertainingtotheawardingofpubliccontractsandtheconstructionofpublic

improvements.

92

REPORTOFINDEPENDENTAUDITORSONCOMPLIANCEANDINTERNALCONTROLOVERFINANCIALREPORTINGBASEDONANAUDITOFFINANCIAL

STATEMENTSPERFORMEDINACCORDANCEWITHOREGONAUDITINGSTANDARDS(continued)

TheresultsofourtestsdisclosednomattersofnoncompliancewiththoseprovisionsthatarerequiredtobereportedunderMinimumStandardsforAuditsofOregonMunicipalCorporations,prescribedbytheSecretaryofState.However,providinganopiniononcompliancewiththoseprovisionswasnotanobjectiveofourauditand,accordingly,wedonotexpresssuchanopinion.InternalControloverFinancialReportingIn planning and performing our audit, we considered the District’s internal control over financialreportingasabasisfordeterminingourauditingproceduresforthepurposeofexpressingouropiniononthefinancialstatements,butnotforthepurposeofexpressinganopinionontheeffectivenessoftheDistrict’s internal control over financial reporting. Accordingly,we do not express an opinion on theeffectivenessoftheDistrict’sinternalcontroloverfinancialreporting.A control deficiency existswhen the design or operation of a control doesnot allowmanagement oremployees, in the normal course of performing their assigned functions, to prevent or detectmisstatements on a timely basis. A significant deficiency is a control deficiency, or combination ofcontroldeficiencies, thatadverselyaffect theDistrict’sability to initiate,authorize, record,process,orreport financial data reliably in accordance with generally accepted accounting principles such thatthereismorethanaremotelikelihoodthatamisstatementoftheDistrict’sfinancialstatementsthatismore than inconsequential will not be prevented or detected by the District’s internal controls. Amaterialweakness isa significantdeficiency,orcombinationof significantdeficiencies, that results inmore than a remote likelihood that a material misstatement of the financial statements will not bepreventedordetectedbytheDistrict’sinternalcontrol.Ourconsiderationoftheinternalcontroloverfinancialreportingwasforthelimitedpurposedescribedin the first paragraph of this section and would not necessarily identify all deficiencies in internalcontrol that might be significant deficiencies or material weaknesses. We did not identify anydeficiencies in internalcontroloverfinancialreportingthatweconsidertobematerialweaknessesasdefinedabove.PurposeofthisReportThis report is intended solely for the informationanduseof theDistrict’smanagement, theBoardofCommissioners,andtheSecretaryofState,DivisionofAuditsoftheStateofOregonandisnotintendedtobeandshouldnotbeusedbyanyoneotherthanthesespecifiedparties.JulieDesimone,PartnerforMossAdamsLLPDecember6,2016

CD CWS Annual Financial Reports 02-07-17

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Transcript of CD CWS Annual Financial Reports 02-07-17