FINANCIAL REPORT - WLSSD · 2019-06-03 · region including recycling programs, a Materials...

COMPREHENSIVE ANNUAL

FINANCIAL REPORT

FOR THE FISCAL YEAR ENDING DECEMBER 31, 2015

Western Lake Superior Sanitary District

Duluth, Minnesota

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COMPREHENSIVE ANNUAL

F I N A N C I A L R E P O R T

WESTERN LAKE SUPERIOR SANITARY DISTRICT

DULUTH, MINNESOTA

FOR THE FISCAL YEAR ENDED DECEMBER 31, 2015

Prepared by Business Services Division

WESTERN LAKE SUPERIOR SANITARY DISTRICT DULUTH, MINNESOTA

COMPREHENSIVE ANNUAL FINANCIAL REPORT YEAR ENDED DECEMBER 31, 2015

TABLE OF CONTENTS

Page Number INTRODUCTORY SECTION

Letter of Transmittal 1 Certificate of Achievement 4 Organization Structure 5 Board of Directors 6 Political Boundaries 7

FINANCIAL SECTION Independent Auditors’ Report 8 Management’s Discussion and Analysis 11 Basic Financial Statements

Comparative Statement of Net Position 18 Comparative Statement of Revenues, Expenses, and Changes in Net Position 20 Comparative Statement of Cash Flows 22 Notes to Financial Statements 24

Required Supplementary Information

Schedule of WLSSD’s Proportionate Share of the Net Pension Liability 58 Schedule of WLSSD Contributions 59 Schedule of Funding Progress – Other Postemployment Benefit Plan 60

Supplementary Schedules

Detailed Schedule of Revenue Compared to Budget 61 Detailed Schedule of Expenses 62

Compared to Budget – Departmental Level Schedule of Expenditures of Federal Awards 65 Notes to the Schedule of Expenditures of Federal Awards 66

STATISTICAL SECTION (Last Ten Fiscal Years)(Unaudited)

Financial Trends Net Position by Component 69 Changes in Net Position 70 Operating Revenues by Source/Uses 71 Operating Expenses by Function/Object 72 Nonoperating Revenues and Expenses 73


COMPREHENSIVE ANNUAL FINANCIAL REPORT YEAR ENDED DECEMBER 31, 2015

TABLE OF CONTENTS (CONTINUED)

Page Number

STATISTICAL SECTION (Last Ten Fiscal Years)(Unaudited) – (Continued)

Revenue Capacity Total Wastewater Treated by Billing Parameters 74 Wastewater Volume 75 Operations and Maintenance Unit Costs 76 Solid Waste Volume (MSW) and Tipping Fee 77 Solid Waste Volume (MSW) 78 Principal Revenue Payers 79

Debt Activity

Ratio of Outstanding Debt by Type 80 Net Tax Capacity and Estimated Actual Value of Taxable Property 81 Net General Bonded Debt Ratios 82 Pledged Revenue Coverage 83

Demographic and Economic Information

Demographic and Economic Statistics 84 Principal Employers 85

Operating Information

Number of Employees by Identifiable Activity 86 Operating Indicators – Wastewater Operations 87 Capital Asset Statistics – Wastewater Operations 88

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2626 Courtland Street

Duluth, MN 55806-1894

phone 218.722.3336

fax 218.727.7471

www.wlssd.com

Western Lake Superior Sanitary District

April 15, 2016 Board of Directors Western Lake Superior Sanitary District 2626 Courtland Street Duluth, Minnesota 55806 The Comprehensive Annual Financial Report of the Western Lake Superior Sanitary District (WLSSD) for the fiscal year ended December 31, 2015 is hereby submitted. Responsibility for both the accuracy of the data, and the completeness and fairness of the presentation, including all disclosures, rests with WLSSD. To the best of our knowledge and belief, the enclosed data are accurate in all material respects and are reported in a manner designed to fairly present the financial position and results of operations of the enterprise fund. All disclosures necessary to enable the reader to gain an understanding of the financial activities of the WLSSD have been included. Services of WLSSD WLSSD is located in northeastern Minnesota, and encompasses 513 square miles and includes the cities of Cloquet, Carlton, Scanlon, and Wrenshall, and townships of Silver Brook, Thomson, and Twin Lakes in Carlton County and the cities of Duluth, Hermantown, Proctor, and Rice Lake, and the townships of Canosia, Duluth, Grand Lake, Lakewood, Midway, and Solway in St. Louis County. WLSSD was established in 1971 to improve and protect the waters of the lower St. Louis River basin. This was accomplished by providing wastewater treatment to the municipalities listed above, as well as to four large industrial customers. In 1974, the State Legislature also gave WLSSD the additional responsibility for solid waste management. The combination of both wastewater treatment and proper solid waste management resulted in the cleanup of the waters of the St. Louis River which remains one of the most significant events in the environmental history of this region. The WLSSD has continued to make significant capital investments aligned with our mission. These include the construction of a biosolids digestion facility allowing for the eventual land application of biosolids produced in the treatment plant and construction of a solid waste transfer station to facilitate the proper disposal of solid waste within the WLSSD service area. WLSSD also provides solid waste programming for both business and residents in the region including recycling programs, a Materials Recovery Center, Household Hazardous Waste Facility, Organics Composting Facility and recently expanded Reuse Centers. WLSSD is widely recognized for its innovative programs and leadership on pollution prevention issues including mercury reduction. In 2014, the WLSSD completed a long-term energy plan and has begun implementation of a phased project which will utilize the biogas produced in our biosolids digesters to produce electricity for use in the wastewater treatment process.

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2015 Comprehensive Annual Financial Report

Local Economy

WLSSD serves a large geographic territory (513 square miles) with a relatively diverse service area and a population of approximately 135,000. The WLSSD serves a region with a diverse economy comprised of healthcare, forest products manufacturing, aviation and a large and robust higher education sector. The largest contributor to loadings is the forest products segment.

In 2013, the Sappi pulp and paper mill in Cloquet, Minnesota converted its kraft pulp operation to the production of dissolving pulp. This large capital investment provided the Cloquet mill additional product/market diversity. In 2015, the Sappi Cloquet mill produced both kraft and dissolving pulp. In January of 2015 the New Page paper mill in Duluth was acquired by Verso Paper. During 2015, both the Sappi pulp and paper mill and the Verso paper mill in Duluth ran with little, to no downtime. The resulting loadings to the WLSSD far exceeded budget for 2015.

In January 2016, the Verso Corporation filed for bankruptcy protection. It is unclear what impact that may have on future loadings.

Long-term Financial Planning

As part of the Master Planning Process, WLSSD develops ten (10) year capital plans for both Wastewater and Solid Waste operations. This planning process integrates projected changes in demand with an engineering assessment of the major components of the facility. These capital projections are utilized in combination with loading projections and operating assumptions to develop a ten year projection for operating costs. These projections are used to make informed decisions on debt and loan financing to ensure adequate fund balances are maintained over both the short and long-terms. Please refer to the Management Discussion and Analysis section of this document for a more detailed discussion of WLSSD financial and planning highlights.

Internal Controls

WLSSD management is responsible for designing, establishing and maintaining an internal control system that protects WLSSD assets from loss, theft or misuse and ensures that adequate accounting data is compiled to prepare the financial statements in accordance with generally accepted accounting principles. Internal control systems are designed to provide reasonable assurance that these objectives are met, while recognizing that the cost of a control should not exceed the benefits. The evaluation of costs and benefits requires management estimates and judgments. WLSSD’s internal control system is continually monitored and evaluated by management as a good business practice.

Independent Audit

WLSSD’s enabling legislation requires an annual audit of all books and accounts to be made by independent certified public accountants or by the State Auditor’s office. This requirement has been complied with, and the certified public accountants’ opinion accompanies this report.

The auditors will issue a management and compliance letter covering the review made as part of their examination of the District's system of internal control and compliance with applicable legal provisions. The management and compliance letter will not modify or affect in any way this report on the financial statements.

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2015 Comprehensive Annual Financial Report Awards The Government Finance Officers Association (GFOA) awarded a Certificate of Achievement for Excellence in Financial Reporting to the WLSSD for its Comprehensive Annual Financial Report for the fiscal year ended December 31, 2014. This was the thirty-first consecutive year that the WLSSD has received this prestigious award. In order to be awarded a Certificate of Achievement, WLSSD published an easily readable and efficiently organized Comprehensive Annual Financial Report. This report satisfied 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 Comprehensive Annual Financial Report 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. Acknowledgments The accurate and timely preparation of this report could not have been accomplished without the efficiency and dedication of WLSSD's Business Services Division. We express our appreciation to all members of the division, and to the staff of the certified public accountants who reviewed and assisted in the preparation. We would also like to thank the WLSSD Board of Directors for their interest and support in planning and conducting the financial operations of the District in a responsible and progressive manner. Respectfully submitted,

Marianne Bohren Cathy Remington Executive Director Director of Finance

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WESTERN LAKE SUPERIOR SANITARY DISTRICT DULUTH, MINNESOTA BOARD OF DIRECTORS

Members Length of Service Appointment Date Term Expires

Ruth Janke 6.5 Years 7/1/2009 7/1/2018

Archie Chelseth 1.5 Years 7/1/2014 7/1/2018

Paul Thomsen 3.5 Years 6/25/2012 7/1/2018

Yvonne Solon .5 Years 7/1/2015 7/1/2017

James Aird 6.5 Years 4/30/2009 7/1/2016

Bruce Ahlgren 4.5 Years 7/7/2011 7/1/2017

Dave Manderfeld 11.5 Years 8/24/2004 7/1/2016

Julene Boe 2.5 Year 7/1/2013 7/1/2016

Marcia Podratz 3.5 Years 4/23/2012 7/1/2017

Executive Team Length of Service

Marianne Bohren Executive Director 11.5 Years

Jack Ezell Manager of Planning & Technical Services 41 Years

Al Parrella Manager of Operations & Maintenance 37 Years

Position

FINANCIAL SECTION

An independent member of Nexia International

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INDEPENDENT AUDITORS’ REPORT Board of Directors Western Lake Superior Sanitary District Duluth, Minnesota Report on the Financial Statements We have audited the accompanying financial statements of Western Lake Superior Sanitary District (WLSSD), as of and for the years ended December 31, 2015 and 2014, and the related notes to the financial statements, which collectively comprise WLSSD’s basic financial statements as listed in the table of contents. Management’s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Auditors’ Responsibility Our responsibility is to express opinions on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditors’ judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to WLSSD’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of WLSSD’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Board of Directors Western Lake Superior Sanitary District

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Opinion In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Western Lake Superior Sanitary District as of December 31, 2015 and 2014, and the respective changes in financial position and, cash flows, thereof, for the years then ended in accordance with accounting principles generally accepted in the United States of America. Emphasis of Other Matters During the year ended December 31, 2015, the District adopted the provisions of Governmental Accounting Standards Board Statement (GASB) No. 68, Accounting and Financial Reporting for Pensions and the related GASB Statement No. 71, Pension Transition for Contributions Made Subsequent to the Measurement Date—an amendment of GASB Statement No. 68. As a result of the implementation of these standards, the District reported a restatement for the change in accounting principle (see Note 5). Our auditors’ opinion was not modified with respect to the restatement. Other Matters Required Supplementary Information Accounting principles generally accepted in the United States of America require that the Management’s Discussion and Analysis, Schedule of Funding Progress – Other Postemployment Benefit Plan, Schedule of WLSSD’s Proportionate Share of the Net Pension Liability, and Schedule of WLSSD Contributions, as listed in the table of contents, be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management’s responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. Other Information Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the Western Lake Superior Sanitary District’s basic financial statements. The introductory section, detailed Schedule of Revenue Compared to Budget, and the Detailed Schedule of Expenses Compared to Budget - Departmental Level and statistical section are presented for purposes of additional analysis and are not a required part of the basic financial statements. The schedule of expenditures of federal awards, as required of Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), is also presented for purposes of additional analysis and is not a required part of the basic financial statements. The Detailed Schedule of Revenue Compared to Budget, the Detailed Schedule of Expenses Compared to Budget -Departmental Level, and the Schedule of Expenditures of Federal Awards are the responsibility of management and were derived from and relate directly to the underlying accounting and other records used to prepare the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the information is fairly stated, in all material respects, in relation to the basic financial statements as a whole.

Board of Directors Western Lake Superior Sanitary District

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Other Matters (Continued) Other Information (Continued) The introductory and statistical sections have not been subjected to the auditing procedures applied in the audit of the basic financial statements, and accordingly, we do not express an opinion or provide any assurance on it. Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated April 15, 2016, on our consideration of Western Lake Superior Sanitary District's internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the result of that testing, and not to provide an opinion on internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering Western Lake Superior Sanitary District’s internal control over financial reporting and compliance.

CliftonLarsonAllen LLP Brainerd, Minnesota April 15, 2016


MANAGEMENT’S DISCUSSION AND ANALYSIS

(UNAUDITED)

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This section presents management’s analysis of the Western Lake Superior Sanitary District’s (WLSSD) financial condition and activities for the fiscal year ending December 31, 2015. Please read this information in conjunction with the financial statements which follow this section.

FINANCIAL HIGHLIGHTS

Operating revenues increased by $1,338,249 or 3.85% more than 2014. Total budgeted wastewater charges for 2015 increased 2.82% over 2014. Overall actual wastewater charges in 2015 were $201,423 higher than 2014 due to increased loadings primarily from SAPPI. Solid waste user charges and service fees were $695,149 higher than 2014 due to volumes and user rates. The capacity availability fee was $230,324 higher than 2014 due to increased user connections. Miscellaneous income was $211,352 higher than 2014 primarily due to paint care reimbursement revenue and additional volume for hauled waste user charges.

Operating expenses before depreciation and amortization were .45% or $106,452 higher than prior year expenses. Operating expenses for solid waste disposal expenses were higher in 2015 by $297,666 due to increased volumes. Employee benefit expenses were higher in 2015 by $233,553 primarily due to medical insurance increases. Utility expenses were lower in 2015 by $194,485 primarily due to natural gas. Chemical expenses were lower in 2015 by $141,627 primarily due to decreased dosages.

WLSSD continued to fund a significant portion of capital projects from current revenues.

Wastewater capital projects funded from current revenue were $3 million in 2015.

OVERVIEW OF THE FINANCIAL STATEMENTS

Management’s Discussion and Analysis (MD&A) serves as an introduction to the basic financial statements. The MD&A represents management’s examination and analysis of WLSSD’s financial condition and performance. The MD&A is required to accompany the basic financial statements and notes to the financial statements and, therefore, is included as required supplementary information.

REQUIRED FINANCIAL STATEMENTS

The financial statements of WLSSD are presented as an enterprise fund using the accrual basis of accounting which is similar to the accounting used by private sector companies. The Statement of Net Position includes all of WLSSD’s assets, deferred outflows of resources, liabilities, and deferred inflows of resources and provides information about the nature and amounts of investments in resources (assets) and the obligation to creditors (liabilities). It also provides the basis for evaluating the capital structure and assessing the liquidity of WLSSD.



(UNAUDITED)

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REQUIRED FINANCIAL STATEMENTS (CONTINUED)

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 performance of the operations over the past year and can be used to determine whether WLSSD has recovered all of its costs through its user fees and other charges. The Statement of Cash Flows reports cash receipts, cash payments, and net changes in cash resulting from operations, investments, and financing activities and provides answers to such questions as where did the cash come from, what was cash used for, and what was the change in the cash balance during the reporting period.

NET POSITION

To begin our analysis, a summary of WLSSD’s Statement of Net Position is presented in Table A-1.

2014 to 2015 2013 to 2014Increase Increase

2015 2014 2013 (Decrease) (Decrease)

Current and Other Assets $ 43,135 $ 39,573 $ 35,794 $ 3,562 $ 3,779

Capital Assets 97,101 85,176 87,356 11,925 (2,180) Total Assets 140,236 124,749 123,150 15,487 1,599

Deferred Outflows of Resources 839 - - 839 -

Current Liabilities 12,386 9,295 9,100 3,091 195 Long-Term Debt 49,697 41,609 45,896 8,088 (4,287)

Total Liabilities 62,083 50,904 54,996 11,179 (4,092)

Deferred Inflows of Resources 823 - - 823 -

Net Investment in Capital Assets 47,270 38,116 36,165 9,154 1,951 - Restricted 16,442 14,820 12,976 1,622 1,844 - Unrestricted 14,457 20,909 19,013 (6,452) 1,896

Total Net Position $ 78,169 $ 73,845 $ 68,154 $ 4,324 $ 5,691

Table A-1Condensed Statement of Net Position

(000’s)



(UNAUDITED)

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NET POSITION (CONTINUED)

As noted in the table above, total Net Position increased by $4.32 million in 2015 as compared to $5.69 million in 2014. The 2015 increase resulted from total assets increasing by $15.49 million offset by an increase in total liabilities of $11.18 million. The 2014 increase resulted from total assets increasing by $1.60 million combined with a decrease in total liabilities in the amount of $4.09 million. In 2015, current and other assets increased by $3.56 million primarily due to an increase in investments of $4.95 million offset by a decrease in accounts receivable of $.58 million. In 2014, current and other assets increased by $3.78 million primarily due to an increase in investments. In 2015, net capital assets increased by $11.93 million primarily due to capital outlays related to wastewater plant grit and screening ($6.7 million), plant heating and biogas conditioning ($9.7 million) and other wastewater ($4.8 million) projects less depreciation expense ($9.3 million). In 2014, net capital assets decreased by $2.18 million primarily due to capital outlays related to wastewater interceptor replacement project ($5.87 million) less depreciation expense ($8.05 million). Current liabilities increased in 2015 by $3.09 million primarily due to an increase in construction contracts payable for capital projects ($2.37 million) and an increase in general obligation debt service principal payments ($.70 million). Current liabilities increased in 2014 by $.19 million primarily due to an increase in construction contracts payable for capital projects ($.60 million) and an increase in general obligation debt service principal payments ($.16 million) offset by a decrease in due to other governments ($.42 million) due to less year-end adjustments in 2014 owed to municipal customers and a decrease in accounts payable outstanding at year end ($.07 million). The increase in long-term debt for 2015 of $8.09 million is primarily due to GASB 68 implementation (Net Pension Liability of $6.12 million) and increased financing of new capital projects (offset by payoff of debt) through debt issuance ($2.07 million). The decrease in long-term debt for 2014 of $4.29 million is primarily due to debt principal payments exceeding lower financing of new capital projects through debt issuance.



(UNAUDITED)

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REQUIRED FINANCIAL STATEMENTS (CONTINUED) NET POSITION (CONTINUED)

2014 to 2015 2013 to 2014Dollar Change Dollar Change

Increase Increase


Operating Revenues Wastewater User Charges $ 26,797 $ 26,596 $ 25,743 $ 201 $ 853

Solid Waste Fees 7,560 6,864 6,564 696 300 District-Wide Allocation 355 355 355 - -

Capacity Availability Fee 604 373 320 231 53 Other Operating Revenues 813 602 687 211 (85) Nonoperating Revenues:

Earnings on Investments 83 46 51 37 (5) Operating Grants 406 455 344 (49) 111 Other Nonoperating Revenue 20 22 8 (2) 14

Property Taxes 1,109 799 798 310 1 Total Revenues 37,747 36,112 34,870 1,635 1,242

Operating Expenses 23,750 23,643 22,715 107 928 Depreciation Expenses 9,258 8,292 8,185 966 107 Non-Operating Expenses 1,043 1,074 1,556 (31) (482) Total Expenses 34,051 33,009 32,456 1,042 553

Income (Loss) Before Capital Contributions 3,696 3,103 2,414 593 689

Capital Contributions 6,613 2,588 5,633 4,025 (3,045)

Changes in Net Position 10,309 5,691 8,047 4,618 (2,356)

Beginning Net Position 73,845 68,154 60,107 5,691 8,047

Prior Period Adjustment (5,985) - - (5,985) -

Beginning Net Position, Restated 67,860 - - 67,860 -

Ending Net Position $ 78,169 $ 73,845 $ 68,154 $ 4,324 $ 5,691

Table A-2Condensed Statement of Revenues, Expenses, and Changes in Net Position

(000’s)



(UNAUDITED)

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NET POSITION (CONTINUED)

While the Statement of Net Position shows the change in financial position, the Statement of Revenues, Expenses and Changes in Net Position provides answers as to the nature and source of these changes. As can be seen in Table A-2 above, there was an increase before capital contributions of $3.70 million in 2015, while there was an increase before capital contributions of $3.10 million in 2014, and an increase before capital contributions of $2.41 million in 2013. Operating revenues increased by $1.34 million in 2015 due to an increase in wastewater charges of $.20 million, an increase in solid waste fees of $.70 million primarily due to volumes and increases in the hauler collected fees, an increase in the capacity availability fee of $.20 million due to increased connection charges, and an increase in other revenue of $.20 million primarily due to paint care reimbursement revenue and additional hauled waste user volume. Operating revenues increased by $1.12 million in 2014 due to an increase in wastewater user charges based on an increase in loadings primarily from SAPPI in the amount of $.85 million, an increase in solid waste fees of $.30 million from increased volumes, an increase in the capacity availability fee of $.05 million due to increased connection charges, and a decrease in other revenue of $.08 million. Non-operating revenues for 2015 increased by $.3 million primarily due to an increase in the line item fee assessed on property taxes. Non-operating revenues for 2014 increased by $.12 million primarily due to an increase in operating grants. Total operating expenses increased by $.11 million in 2015. Primary expense increases were $.3 million for solid waste disposal expenses due to increased volumes, $.20 million for employee benefit expenses due to increases in medical insurance rate increases, offset by decreases in utility expense of $.19 million due to natural gas, and chemical expense decreases of $.14 million due to decreased dosages. Total operating expenses increased by $.90 million in 2014. Primary expense increases were $.33 million for utilities primarily for natural gas costs and utilization and increased electrical usage, $.30 million for contract services for the solid waste programs and contracted maintenance, $.12 million for solid waste disposal, and $.14 increase in chemical costs primarily due to treatment of increased loadings.



(UNAUDITED)

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CAPITAL ASSETS At the end of 2015, WLSSD had invested $303.70 million in capital assets as shown in Table A-3. Capital assets increased by $13.27 million primarily due to improvements to the wastewater plant projects and other wastewater improvements.

2014 to 2015 2013 to 2014Dollar Change Dollar Change

Increase Increase


Land & Easements $ 812 $ 812 $ 812 $ - $ - Improvements 193,982 181,116 175,535 12,866 5,581

Buildings & Structures 74,673 74,673 74,673 - - Furniture & Equipment 31,272 31,020 30,880 252 140

Motor Vehicle 2,956 2,807 2,621 149 186 Total 303,695 290,428 284,521 13,267 5,907

206,595 205,253 197,166 1,342 8,087

Net Capital Assets $ 97,100 $ 85,175 $ 87,355 $ 11,925 $ (2,180)

Less: Accumulated Depreciation

Table A-3Capital Assets

(000’s)

More detailed information about WLSSD’s capital assets is presented in Note 3.A.3 to the financial statements.

DEBT ADMINISTRATION

WLSSD is required to maintain, in a sinking fund at year-end, cash and investments to meet the debt service payments for the following year. Wastewater debt service charges are recovered entirely through user charges. It is the goal of management to maintain a minimum of 120% the following year’s debt service in the fund at year-end. Such a goal has been incorporated into all future long-term capital planning. General obligation indebtedness at year end 2015 was $49.82 million. This amount includes $20.74 million in general obligation bonds and $29.08 million in general obligation notes from the State of Minnesota revolving loan fund. Additional general obligation revenue notes were issued in the amount of $8.96 million to fund wastewater infrastructure. More detailed information about WLSSD’s long-term debt activity is presented in Notes 3.B. 2-4.


OPERATING INFORMATION CAPITAL ASSET STATISTICS – WATERWATER OPERATIONS

LAST TEN FISCAL YEARS

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DEBT ADMINISTRATION (CONTINUED) General obligation indebtedness at year end 2014 was $47.05 million. This amount includes $24.77 million in general obligation bonds and $22.28 million in general obligation notes from the State of Minnesota revolving loan fund. Additional general obligation revenue notes were issued in the amount of $1.67 million to fund wastewater infrastructure. More detailed information about WLSSD’s long-term debt activity is presented in Notes 3.B 2-4.

ECONOMIC FACTORS

Table A-4 shows the wastewater rate history for each of the four billing parameters: flow, peak flow, BOD, and suspended solids for the period 2011 through 2015. For the five year period presented the cost of flow increased by 12.03%, the cost of peak flow increased by 45.51%, the cost of BOD increased by 3.21% and the cost of suspended solids increased by 6.24%. The typical domestic strength (domestic equivalent) cost per 1000 gallons increased by 5.99% over this period. Domestic strength wastewater assumptions are 200 MG/L for BOD and 200 MG/L for suspended solids.

SuspendedFlow Peak Flow BOD Solids Domestic Equivalent

Fiscal Year (per 1000 gal) (per 1000 gal) (per lb) (per lb) Cost/1000 gallons2011 $ 0.5103 $ 0.0167 $ 0.1462 $ 0.2614 $ 1.67 2012 0.5564 0.0175 0.1501 0.2701 1.73 2013 0.5567 0.0203 0.1777 0.2664 1.76

2014 0.5438 0.0208 0.1632 0.2701 1.73 2015 0.5717 0.0243 0.1509 0.2777 1.77

Table A-4Wastewater Rate History

FINANCIAL CONTACT

This financial report is designed to provide our customers and creditors with a general overview of WLSSD’s finances and to demonstrate WLSSD’s accountability. If you have questions about this report or need additional financial information, contact the Western Lake Superior Sanitary District, 2626 Courtland Street, Duluth, Minnesota 55806-1894.

BASIC FINANCIAL STATEMENTS


COMPARATIVE STATEMENT OF NET POSITION DECEMBER 31, 2015 AND 2014

The notes to the financial statements are an integral part of this statement. (18)

Assets and Deferred Outflows of Resources

Current Assets:Cash and Cash Equivalents $ 8,607,341 $ 8,788,881Investments 12,336,335 9,269,613Accounts Receivable 1,939,524 2,518,485Accrued Interest Receivable 19,823 19,547Due from Other Governments 1,242,805 1,849,891Inventory 1,942,479 1,969,064Prepaid Expense 340,995 337,342Assets Restricted for Memorial Fund Investments 2,746 2,756Assets Restricted for Wastewater Infrastructure Fund Capital Replacement Investments 2,030,647 1,122,500Assets Restricted for General Obligation Debt Service Investments 14,673,019 13,694,843

Total Current Assets 43,135,714 39,572,922

Noncurrent Assets:Capital Assets: 303,695,896 290,469,672 Less: Allowance for Depreciation (206,594,737) (205,293,752)

Total Capital Assets Net of Accumulated Depreciation 97,101,159 85,175,920

Total Noncurrent Assets 97,101,159 85,175,920

Total Assets 140,236,873 124,748,842

Deferred Outflows of Resources:Pension Related 838,905 -

Total Assets and Deferred Outflows of Resources 141,075,778 124,748,842

2015 2014


COMPARATIVE STATEMENT OF NET POSITION (CONTINUED) DECEMBER 31, 2015 AND 2014


Liabilities and Deferred Inflows of Resources

Current Liabilities:Accounts Payable $ 1,181,565 $ 1,317,816Salaries and Wages Payable 377,235 315,473Accrued Vacation Payable 444,528 475,493Compensatory Time Payable 230,249 214,557Payroll Deductions Payable 11,105 23,354Due to Other Governments 148,299 41,896Sick Leave Liability 91,388 47,437Employee Benefits 11,164 7,095Construction Contracts Payable 3,001,507 635,189 Current Liabilities Payable from Restricted Assets: General Obligation Debt Service

Accrued Interest Payable 263,910 300,675 General Obligation Bonds 4,225,000 4,100,000 General Obligation Taxable Revenue Notes 2,400,323 1,815,675

Total Current Liabilities 12,386,273 9,294,660

Noncurrent Liabilities:General Obligation Taxable Revenue Notes 26,680,828 20,462,647General Obligation Bonds (Net of Unamortized

Bond Discounts and Premiums) 16,524,693 20,681,924Net Pension Liability 6,120,555 - Sick Leave Liability 126,252 240,540Net Other Postemployment Benefits Obligation 244,882 223,760

Total Noncurrent Liabilities 49,697,210 41,608,871

Total Liabilities 62,083,483 50,903,531

Deferred Inflows of Resources:Pension Related 822,956 -

Total Liabilities and Deferred Inflows of Resources 62,906,439 50,903,531

Net Position

Net Investment in Capital Assets 47,270,315 38,115,671Restricted:

Memorial Fund 2,746 2,756 Wastewater Infrastructure Fund Capital Replacement 2,030,647 1,122,500 General Obligation Debt Service 14,409,109 13,694,844

Unrestricted 14,456,522 20,909,540

Total Net Position $ 78,169,339 $ 73,845,311

2015 2014


COMPARATIVE STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN NET POSITION

YEARS ENDED DECEMBER 31, 2015 AND 2014


Operating Revenue:User Charges - Municipalities $ 10,821,814 $ 10,981,475 User Charges - Industries 15,975,134 15,614,050 User Charges - Solid Waste 5,164,712 4,835,687 Service Fee - Solid Waste 2,394,847 2,028,723 District-wide Allocation 355,001 355,000 Capacity Availability Charges 603,542 373,218 Other Income 812,857 601,505

Total Operating Revenue 36,127,907 34,789,658

Operating Expenses:Salaries, Wages and Compensation 6,903,556 6,975,215 Employee Benefits 3,175,454 2,941,901 Other Postemployment Benefits 21,122 18,283 Professional Services 167,203 146,759 Safety and Training 95,225 112,534 Public Information and Other Special Services 193,360 187,502 Easements and Rents 51,144 69,019 Travel 18,681 20,864 Repairs and Maintenance 866,524 859,868 Solid Waste Disposal 4,638,046 4,340,380 Insurance 155,675 160,248 Outside Services 118,169 113,136 Contracted Services 1,535,534 1,519,373 Supplies 478,009 477,780 Utilities 3,505,714 3,700,199 Office Expenses 66,672 65,796 Chemicals 1,499,679 1,641,306 Dues, Publications, and Permits 92,716 102,837 Grants to Other Governmental Units 156,656 169,345 Miscellaneous 9,634 19,976 Depreciation 9,258,381 8,292,394

Total Operating Expenses 33,007,154 31,934,715

Operating Income (Loss) 3,120,753 2,854,943

2015 2014


COMPARATIVE STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN NET POSITION (CONTINUED)

YEARS ENDED DECEMBER 31, 2015 AND 2014


Nonoperating Revenue (Expenses):Earnings on Investments $ 83,444 $ 45,763 Gain on Sale of Capital Asset 19,863 21,782 Operating Grants 406,338 455,328 Property Taxes 1,108,655 798,705 Interest Expense (1,042,621) (1,073,871) Loss on disposal of obsolete inventory (559) -

Total Nonoperating Revenue (Expenses) 575,120 247,707

Income (Loss) Before Contributions 3,695,873 3,102,650

Capital ContributionsState 1,327,894 2,587,513 Federal 5,285,405 358

Total Capital Contributions 6,613,299 2,587,871

Changes in Net Position 10,309,172 5,690,521

Net Position - Beginning of Year 73,845,311 68,154,790

Prior Period Adjustment (See Note 5) (5,985,144) -

Net Position - Beginning of Year, as Restated 67,860,167 68,154,790

Net Position - End of Year $ 78,169,339 $ 73,845,311

2015 2014


COMPARATIVE STATEMENT OF CASH FLOWS YEARS ENDED DECEMBER 31, 2015 AND 2014


Cash Flows from Operating ActivitiesCash Received from Customers $ 36,719,161 $ 35,701,088 Cash Paid to Suppliers (13,761,960) (13,898,014) Cash Paid to Employees (9,991,576) (9,970,186) Other Operating Revenues 812,857 601,505

Net Cash Provided by Operating Activities 13,778,482 12,434,393

Cash Flows from Noncapital Financing ActivitiesState and Federal Operating Grants 283,980 454,967 Property Taxes 1,103,109 809,200

Net Cash Provided by Noncapital Financing Activities 1,387,089 1,264,167

Cash Flows from Capital and Related Financing Activities Financing Activities

Proceeds from Sale of Capital Assets 19,304 21,782 Proceeds from Bond Issues 2,680,000 - Proceeds from Note Issues 8,959,779 1,674,882 Proceeds from Capital Contributions 6,629,542 2,619,455 Principal Paid on General Obligation Bonds (6,715,000) (4,000,000) Interest Paid on General Obligation Bonds (1,079,386) (1,098,635) Principal Paid on Public Facilities Authority General Obligation Note (2,154,181) (1,805,755) Acquisition or Construction of Capital Assets (18,817,302) (5,477,154)

Net Cash Provided by (Used In) Capital and Related Financing Activities (10,477,244) (8,065,425)

Cash Flows from Investing ActivitiesSale of Investments 16,753,157 15,916,538 Interest on Investments 83,168 47,512 Purchase of Investments (21,706,192) (21,706,192)

Net Cash Provided by (Used in) Investing Activities (4,869,867) (5,742,142)

Net Increase (Decrease) in Cash and Cash Equivalents (181,540) (109,007)

Cash and Cash Equivalents - Beginning of Year 8,788,881 8,897,888

Cash and Cash Equivalents - End of Year $ 8,607,341 $ 8,788,881

2015 2014


COMPARATIVE STATEMENT OF CASH FLOWS (CONTINUED) YEARS ENDED DECEMBER 31, 2015 AND 2014


Reconciliation of Operating Income to Net Cash Provided by Operating Activities

Net Operating Income (Loss) $ 3,120,753 $ 2,854,943 Adjustments to Reconcile Net Operating Income to Net Cash Provided by Operating Activities

Depreciation 9,258,381 8,292,394 Pension Adjustment 119,462 - Change in Assets and Liabilities Decrease (Increase) in Receivables 1,297,708 1,984,350 Decrease (Increase) in Inventory 26,585 (115,386) Decrease (Increase) in Prepaids (3,653) (10,702) Increase (Decrease) in Payables (40,754) (515,746) Increase (Decrease) in Unearned Revenue - (55,460)

Net Cash Provided by Operating Activities $ 13,778,482 $ 12,434,393

2015 2014

Noncash Investing, Capital and Financing Activities

In 2015, WLSSD had $12,868 of bond discount amortized within interest expense. This amount is included within the principal paid on general obligation bonded debt. In 2015, WLSSD had $10,098 of bond premium amortized within interest expense. This amount is included within the principal paid on general obligation bonded debt. In 2015, WLSSD acquired capital assets of $3,001,507 which had not been paid for at year end. The unpaid amount is shown as contracts payable. In 2015, WLSSD had $16,243 of capital contributions which had not been received at year-end. This amount is included in assets restricted for construction – due from other governments. In 2014, WLSSD had $14,935 of bond discount amortized within interest expense. This amount is included within the principal paid on general obligation bonded debt. In 2014, WLSSD had $10,098 of bond premium amortized within interest expense. This amount is included within the principal paid on general obligation bonded debt. In 2014, WLSSD acquired capital assets of $635,189 which had not been paid for at year end. The unpaid amount is shown as contracts payable. In 2014, WLSSD had $31,584 of capital contributions which had not been received at year-end. This amount is included in assets restricted for construction – due from other governments.


NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 2015 AND 2014

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1. Summary of Significant Accounting Policies

The accounting policies of the Western Lake Superior Sanitary District (WLSSD) conform to generally accepted accounting principles (GAAP) for the years ended December 31, 2015 and 2014. The Governmental Accounting Standards Board (GASB) is responsible for establishing GAAP for state and local governments through its pronouncements (statements and interpretations). This financial report has been prepared in conformity with Governmental Accounting Standards Board Statement No. 34, Basic Financial Statements – and Management’s Discussion and Analysis – for State and Local Governments, issued in June 1999. The following is a summary of the more significant policies.

A. Financial Reporting Entity

WLSSD was formed pursuant to 1971 Minnesota Laws, chapter 478, as amended. WLSSD was created for the purpose of protection of the public health, safety, and welfare of the area, for the preservation and best use of waters, land and other natural resources, for the prevention, control and abatement of water pollution and disposal of solid waste, and for the efficient and economic collection, treatment and disposal of sewage and solid waste. WLSSD is governed by a nine-member board which consists of one member appointed by Carlton County, three members appointed by the City of Cloquet, four members appointed by the City of Duluth and one member appointed by St. Louis County. The Board is organized with a chair and vice-chair elected in July of each year.

As required by generally accepted accounting principles, these financial statements present WLSSD (primary government) and its component units for which WLSSD is financially accountable. There is financial accountability if the Primary Government appoints a voting majority of an organization’s governing body and has the ability to impose its will on that governing body; or there is the potential for the organization to provide specific financial benefits or to impose specific financial burden on the Primary Government. Based on the criteria for determining component units, WLSSD is not required to include any component units.

B. Basis of Presentation - Fund Accounting

The accounts of WLSSD are presented as an enterprise fund. Enterprise funds are used to account for operations that are financed and operated in a manner similar to private business enterprises - where the intent of the governing body is that the costs (expenses, including depreciation) of providing goods or services to the general public on a continuing basis be financed or recovered primarily through user charges.

C. Basis of Accounting

Accounting records are maintained on the accrual basis, under which revenues are recorded when earned, and expenses, including vacation leave, are recorded when incurred.

When both restricted and unrestricted resources are available for use, it is WLSSD’s policy to use restricted resources first, then unrestricted resources as needed.



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1. Summary of Significant Accounting Policies (Continued) D. Assets, Liabilities and Net Position

1. Assets

Cash and Cash Equivalents For purposes of the statement of cash flows, WLSSD has defined cash and cash equivalents as deposits in checking and savings accounts and petty cash. All other investments are not considered to be cash equivalents.

WLSSD has elected to value all money market and participating interest-earning investment contracts that mature within one year of acquisition at amortized cost. All of WLSSD’s holdings in commercial paper, bankers’ acceptances, negotiable certificates of deposit, and government agency securities qualify for amortized cost reporting. WLSSD’s investments in money market mutual funds are valued at the current share price. The carrying value of the investments which are valued at amortized cost does not differ materially from the fair value of those investments.

Inventory The inventory consists of chemicals, fuels and expendable supplies held for consumption. The chemicals and fuels were inventoried at year-end and were valued at cost using the first-in, first-out method. A perpetual inventory system is maintained for the supplies inventory, which is valued using the moving weighted-average cost method. Restricted Assets Certain funds of WLSSD are classified as restricted assets on the statement of net position because the restriction is either imposed by law through constitutional provisions or enabling legislation or imposed externally by creditors, grantors, contributors, or laws or regulations of other governments. Therefore, their use is limited by applicable laws and regulations. Restricted assets consist of monies specified for payment of memorial fund scholarships, wastewater infrastructure capital replacement, and bond and note principal and interest. These assets are offset by restricted net position.



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1. Summary of Significant Accounting Policies (Continued)

D. Assets, Liabilities and Net Position (Continued)

1. Assets (Continued)

Capital Assets Capital assets are defined by WLSSD as assets with an initial, individual cost of more than $10,000 and an estimated useful life in excess of one year. Such assets are recorded at historical cost or estimated historical cost if purchased or constructed. Donated capital assets are recorded at estimated fair value at the date of donation. The costs of normal maintenance and repairs that do not add to the value of the asset or materially extend asset’s lives are not capitalized.

Major outlays for capital assets and improvements are capitalized as projects are constructed. Interest incurred during the construction phase of capital assets is included as part of the capitalized value of the assets constructed. During 2015 and 2014, WLSSD capitalized $24,123 and $40,434 of interest, respectively.

Depreciation of capital assets is determined using the straight-line method. The estimated useful lives of the assets are:

Classification Range Buildings and Structures 30 Years Improvements Other Than Buildings 10-20 Years Furniture and Equipment: Furniture 10 Years Equipment 5-15 Years Motor Vehicles 5 Years



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D. Assets, Liabilities and Net Position (Continued) 2. Liabilities

Compensated Absences Employees are granted from ten to twenty-six days of vacation per year depending on their years of service and union bargaining unit. Varying amounts of vacation, depending on length of service, may be accumulated and carried over to the succeeding year. Unused vacation is paid to employees upon their termination. Vacation leave is expensed when earned.

Effective January 1, 1984, employees no longer accrue sick leave. Personnel are authorized sick leave as needed up to a maximum of twenty weeks. Prior to 1984, sick leave was earned and accumulated at various rates based on length of service.

Other Post-Employment Benefits WLSSD’s supervisory/confidential employees participate in a post-retirement health savings plan administered by the Minnesota State Retirement System. At retirement, the value of supervisory/confidential employee’s vacation balance is transferred to the post-retirement health savings plan to be used to cover post-retirement medical expenses. The amounts are contributed tax-free and there are no taxes paid when the amounts are withdrawn from the employees account. Effective January 1, 2009, upon voluntary retirement under PERA, the value of a bargaining unit employee’s accumulated sick bank balance established as of December 31, 1983, will be transferred to a post-retirement health care savings plan administered by the Minnesota State Retirement System.

3. Net Position

WLSSD’s net position is reported in three parts: (1) net investment in capital assets; (2) restricted net position; and (3) unrestricted net position. When an expense is incurred for purposes which both restricted and unrestricted net position is available, it is WLSSD’s policy to us restricted first, then unrestricted net position.



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D. Assets, Liabilities and Net Position (Continued) 3. Net Position (Continued)

It is WLSSD’s policy to maintain minimum unrestricted net position targets for solid waste and wastewater functions. In the solid waste function the operations fund should maintain unrestricted net position of at least 25 percent of the next year’s annual operating expenditures, or $1,083,192. In addition, the solid waste function should maintain a balance of $550,000 in the capital fund and $150,000 in the transfer station capital fund. In the wastewater function, the operations fund should maintain unrestricted net position of at least 25 percent of the next year’s annual operating expenditures, or $3,955,253. The wastewater function should maintain a balance of $1,000,000 in the capital fund.

E. Revenues

Operating revenues, such as user charges, result from exchange transactions associated with the principal activity of the fund. Exchange transactions are those in which each party receives and gives up essentially equal values. Nonoperating revenues, such as operating grants and earnings on investments, result from non-exchange transactions or incidental activities WLSSD's operating and maintenance costs are allocated to the municipalities and industries using WLSSD's sewage treatment system through a user service charge. The allocation is based on the "Cost Apportionment Policy" adopted by the Board of Directors. The general planning, regulation, and technical assistance provided by WLSSD are funded by a district-wide allocation. These costs are allocated against all governmental units within WLSSD based on their assessed valuation. Solid waste users are charged tipping fees based on the volume of refuse disposed and a hauler collected solid waste management fee based on the customer container sizes. The fees are approved by the Board. A line item fee is levied on residential parcels to cover use of the solid waste facilities such as the household hazardous waste facility and material recovery center. The amount to be charged against real estate per parcel is set by the Board and certified to St. Louis County and Carlton County for collection in the following year. In Minnesota, counties act as collection agents for all property taxes. The counties are required to distribute collections to WLSSD three times each year.



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E. Revenues (Continued)

The property tax calendar is as follows:

Adopt final levy and certify to Counties October 15

Lien date January 1

Receive first installment from Counties prior year’s balance of tax collections January 26 First half property taxes due May 15

Receive second installment from County first half tax collections July 6 Second half property taxes due October 15

Receive third installment from County second half tax collections December 4

Capital contributions consist of federal and state capital grants for the construction of pump stations and other wastewater treatment system improvements.

F. Expenses

Operating expenses for proprietary funds include the cost of sales and services, administrative expenses, and depreciation on the capital assets. All expenses not meeting this definition are reported as other expenses.

G. Use of Estimates

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

H. Prior Period Comparative Financial Information/Reclassification Certain amounts presented in the prior year data have been reclassified in order to be consistent with the current year’s presentation.



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2. Stewardship, Compliance and Accountability

A. General Obligation Bond Reserve Requirement

The bond resolutions require that the value of cash, cash equivalents, and investments on hand at October 1, 2015 and 2014 plus the estimated revenues to be collected through September 30, 2016 and 2015, be not less than the amount of principal and interest due on the bonds in the next succeeding year. WLSSD has complied with this requirement.

B. Budgets and Budgetary Accounting

Minnesota Statutes Section 458D.08 requires WLSSD’s Board to adopt an annual budget. WLSSD follows these procedures in establishing the budgetary data reflected in the financial statements:

(1) During September thru October, the Executive Director submits to the

Board of Directors an estimate of revenues and expenses for the fiscal year commencing January 1. Revenues and expenses are budgeted on an accrual basis.

(2) The budget is adopted by the Board of Directors by the passage of a motion on or before November 1.

(3) The Board of Directors may increase or decrease the budget at any time by the passage of a motion. Management may increase or decrease line items within the budget.

(4) Budgetary control of expenses is maintained at the level of total expenses. For management control purposes, the expenses are controlled at the department level.

(5) Unexpended items within the budget lapse at year-end.



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2. Stewardship, Compliance and Accountability (Continued)

B. Budgets and Budgetary Accounting (Continued)

Below is a summary statement of actual and budget revenues and expenses for the fiscal years ended December 31, 2015 and 2014:

Variance

FavorableBudget Actual (Unfavorable)

Operating Revenue:User Charges - Municipalities $ $10,860,129 $ 10,821,814 $ (38,315) User Charges - Industries 14,863,125 15,975,134 1,112,009 User Charges - Solid Waste 4,365,356 5,164,712 799,356 Service Fee - Solid Waste 2,215,183 2,394,847 179,664 District-wide Allocation 355,000 355,001 1 Capacity Availability Charges 320,000 603,542 283,542 Other Income 620,500 812,857 192,357

Total Operating Revenue 33,599,293 36,127,907 2,528,614

Operating Expenses:Operating Expenses Before

Depreciation & Amortization $23,651,984 23,748,773 (96,789) Depreciation 7,904,895 9,258,381 (1,353,486)

Total Operating Expenses 31,556,879 33,007,154 (1,450,275)

Operating Income (Loss) 2,042,414 3,120,753 1,078,339

Nonoperating Revenue (Expenses):Earnings on Investments 44,000 83,444 39,444 Gain on Sale of Capital Asset - 19,863 19,863 Operating Grants 362,000 406,338 44,338 Property Taxes 1,109,563 1,108,655 (908) Interest Expense (1,034,006) (1,042,621) (8,615) Loss on disposal of obsolete inventory - (559) -

Total Nonoperating Revenue (Expenses) 481,557 575,120 94,122

Income (Loss) Before Contributions 2,523,971 3,695,873 1,172,461

Capital Contributions - 6,613,299 6,613,299

Change in Net Position $ 2,523,971 $ 10,309,172 $ 7,785,760

2015



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2. Stewardship, Compliance and Accountability (Continued)

B. Budgets and Budgetary Accounting (Continued)

Variance

FavorableBudget Actual (Unfavorable)

Operating Revenue:User Charges - Municipalities $ $10,838,514 $ 10,981,475 $ 142,961 User Charges - Industries 14,178,221 15,614,050 1,435,829 User Charges - Solid Waste 4,726,655 4,835,687 109,032 Service Fee - Solid Waste 1,917,000 2,028,723 111,723 District-wide Allocation 355,000 355,000 - Capacity Availability Charges 320,000 373,218 53,218 Other Income 686,800 601,505 (85,295)

Total Operating Revenue 33,022,190 34,789,658 1,767,468

Operating Expenses:Operating Expenses Before

Depreciation & Amortization $23,431,558 23,642,321 (210,763) Depreciation 7,904,895 8,292,394 (387,499)

Total Operating Expenses 31,336,453 31,934,715 (598,262)

Operating Income (Loss) 1,685,737 2,854,943 1,169,206

Nonoperating Revenue (Expenses):Earnings on Investments 44,500 45,763 1,263 Gain on Sale of Capital Asset - 21,782 21,782 Operating Grants 325,000 455,328 130,328 Property Taxes 798,885 798,705 (180) Interest Expense (1,132,450) (1,073,871) 58,579

Total Nonoperating Revenue (Expenses) 35,935 247,707 211,772

Income (Loss) Before Contributions 1,721,672 3,102,650 1,380,978

Capital Contributions - 2,587,871 2,587,871

Change in Net Position $ 1,721,672 $ 5,690,521 $ 3,968,849

2014



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3. Detailed Notes

A. Assets

1. Deposits and Investments Reconciliation of WLSSD’s total cash and investments to the financial statements follows:

Current Assets: 2015 2014 Cash and Cash Equivalents $ 8,607,341 $ 8,788,881 Investments 12,336,335 9,269,613 Restricted Assets: Memorial Fund Investments 2,746 2,756 Wastewater Infrastructure Fund Capital Replacement Investments 2,030,647 1,122,500 Debt Service Investments 14,673,019 13,694,843 Total Cash and Investments $ 37,650,088 $ 32,878,593

a. Deposits

Minnesota Statutes §§118A.02 and 118A.04 authorize WLSSD to designate a depository for public funds and to invest in certificates of deposit. Minnesota Statutes §118A.03 requires that all WLSSD’s deposits be protected by insurance, surety bond, or collateral. The fair value of collateral pledged shall be at least ten percent more than the amount on deposit at the close of the financial institution's banking day, not covered by insurance or bonds. Authorized collateral includes treasury bills, notes and bonds; issues of U.S. government agencies; general obligations rated “A” or better, revenue obligations rated “AA” or better; irrevocable standby letters of credit issued by the Federal Home Loan Bank; and certificates of deposit. Minnesota Statutes require that securities pledged as collateral be held in safekeeping in a restricted account at the Federal Reserve Bank or in an account at a trust department of a commercial bank or other financial institution that is not owned or controlled by the financial institution furnishing the collateral.

Custodial Credit Risk Custodial credit risk is the risk that in the event of a financial institution failure, WLSSD’s deposits may not be returned to it. WLSSD’s policy is that all Certificates of Deposit shall be collateralized in compliance with Minnesota Statutes §118A.03. As of December 31, 2015, WLSSD’s bank balance was not exposed to custodial credit risk.



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3. Detailed Notes (Continued)

A. Assets (Continued)

1. Deposits and Investments (Continued)

b. Investments Minnesota Statutes §§ 118A.04 and 118A.05 generally authorize the following types of investments as available to WLSSD:

(1) securities which are direct obligations or are guaranteed or insured

issues of the United States, its agencies, its instrumentalities, or organizations created by an act of Congress, except mortgage-backed securities defined as “high risk” by Minnesota Statutes §118A.04, subd. 6;

(2) mutual funds through shares of registered investment companies provided the mutual fund receives certain ratings depending on its investments;

(3) general obligations of the State of Minnesota and its municipalities, and in certain state agency and local obligations of Minnesota and other states provided such obligations have certain specified bond ratings by a national bond rating service;

(4) bankers’ acceptances of United States banks; (5) commercial paper issued by United States corporations or their

Canadian subsidiaries that is rated in the highest quality category by two nationally recognized rating agencies and matures in 270 days or less; and

(6) with certain restrictions, in repurchase agreements, securities lending agreements, joint powers investment trusts, and guaranteed investment contracts.



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b. Investments (Continued)

Custodial Credit Risk The custodial credit risk for investments is the risk that, in the event of the failure of the counterparty to a transaction, a government will not be able to recover the value of investment or collateral securities that are in the possession of an outside party. It is WLSSD’s policy that all investment securities be held in safekeeping in compliance with the requirements of Minnesota Statutes §118A.06. This statute allows investment securities to be held in safekeeping with (1) any federal reserve bank, (2) any bank authorized under the laws of the United States or any state to exercise corporate trust powers, including, but not limited to the bank from which the investment is purchased, (3) a primary reporting dealer in United States government securities to the Federal Reserve Bank of New York, or (4) a securities broker-dealer which is registered as a broker-dealer under chapter 80A or is exempt from the registration requirements, is regulated by the Securities and Exchange Commission, and maintains insurance through the Securities Investor Protection Corporation or excess insurance coverage in an amount equal to or greater than the value of the securities held.

At December 31, 2015, WLSSD had no investments which were subject to custodial credit risk.

Interest Rate Risk Interest rate risk is the risk that changes in the market interest rates will adversely affect the fair value of an investment. WLSSD investment policy limits investment maturities to fewer than two years. The policy sets guidelines for the minimum percentages of the investment portfolio to be maintained at various maturities. In this way, WLSSD minimizes their exposure to interest rate risk by investing in both shorter and longer-term investments and by timing cash flows from maturities so that a portion of the portfolio is maturing or coming close to maturity evenly over time as necessary to provide the cash flow and liquidity needed for operations.



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b. Investments (Continued) Credit Risk Generally, credit risk is the risk that an issuer of an investment will not fulfill its obligation to the holder of the investment. This is measured by the assignment of a rating by a nationally recognized statistical rating organization. It is WLSSD’s policy to invest only in securities that meet the ratings requirements set by state statute. Minnesota Statutes §118A.04 requires commercial paper to be rated in the highest quality category by at least two nationally recognized rating agencies and mature in 270 days or less. State and local government securities must be rated “A” or better for general obligation securities and “AA” or better for revenue obligations. Public funds may also be invested in United States securities which are direct obligations or are guaranteed or insured issues of the United States, its agencies, its instrumentalities, or organizations created by an act of Congress. Concentration of Credit Risk The concentration of credit risk is the risk of loss that may be caused by WLSSD’s investment in a single issuer. It is WLSSD’s policy to diversify the use of investment instruments to avoid incurring unreasonable risks inherent in over investing in specific instruments, individual financial institutions, or maturities. WLSSD’s investment policy allows WLSSD to invest in U.S. treasury obligations, U.S. government agency securities, and certificates of deposit which are fully insured by the Federal Deposit Insurance Corporation, without limit. However, certificates of deposit are limited to 50% with any one depository. Repurchase agreements and bankers’ acceptances are limited by the investment policy to no more than 50% of the portfolio and no more than 50% with any one depository. Commercial paper is limited to no more than 50% of the portfolio and no more than 10% with any one issuer. Money market funds are limited to a maximum of 25% of the portfolio.



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b. Investments (Continued) Concentration of Credit Risk

Carrying

Investment Type Rating Agency Value

U.S. Government Agency Securities

Federal Home Loan Bank Notes AA+/AAA S&P/ Moody's 5% 11/23/2016 $ 1,500,100

Federal Home Loan Bank Notes AA+/AAA S&P/ Moody's <5% 9/9/2016 762,848

Total U.S. Government Agency Securities $ 2,262,948

Negotiable Certificates of Deposit

Standard Bank IL N/R,N/R N/A <5% 1/15/2016 248,027$

Hardin Cnty Bk TN N/R,N/R N/A <5% 1/20/2016 248,014

Level One Bk N/R,N/R N/A <5% 1/21/2016 240,012

Citizens Community Bank VA CD N/R,N/R N/A <5% 1/21/2016 248,600

Middlefield Banking Company N/R,N/R N/A <5% 1/21/2016 249,100

First Merit Bank N/R,N/R N/A <5% 1/22/2016 248,000

Bank Rhode Island RI N/R,N/R N/A <5% 1/22/2016 248,000

Midland STS Bk Effingham ILL N/R,N/R N/A <5% 1/22/2016 248,000

First Ipswich Bk N/R,N/R N/A <5% 1/22/2016 248,000

Union Bank N/R,N/R N/A <5% 1/26/2016 200,000

Mahopac Bk NY N/R,N/R N/A <5% 1/29/2016 248,000

Summit Bank Kansas City MO CD N/R,N/R N/A <5% 2/12/2016 248,025

East West Bank N/R,N/R N/A <5% 2/19/2016 248,800

Woori Amer Bk NY N/R,N/R N/A <5% 2/25/2016 248,000

First Community Bank MI N/R,N/R N/A <5% 2/25/2016 248,000

Everbank FL N/R,N/R N/A <5% 2/26/2016 248,000

Cathay Bank CA N/R,N/R N/A <5% 2/26/2016 248,000

United Bankers Bank N/R,N/R N/A <5% 2/26/2016 248,000

Franklin Synergy Bk N/R,N/R N/A <5% 2/26/2016 248,000

First Trust Bank N/R,N/R N/A <5% 2/26/2016 248,000

Bank of India NY CD N/R,N/R N/A <5% 3/2/2016 248,000

Bank of China New York City CD N/R,N/R N/A <5% 3/3/2016 200,157

Mizrahi Tefahot Bank CA CD N/R,N/R N/A <5% 3/22/2016 248,000

Banc of California Irvine CA CD N/R,N/R N/A <5% 3/23/2016 248,000

Pacific Premier Bank CA CD N/R,N/R N/A <5% 3/28/2016 248,000

Farmers & Merchants State Bank KS CD N/R,N/R N/A <5% 4/29/2016 248,000

Compass Bank Birmingham AL CD N/R,N/R N/A <5% 5/31/2016 248,000

Mbank Manitisque MI CD N/R,N/R N/A <5% 6/29/2016 248,000

First Bank & Trust Co Lubbock TX CD N/R,N/R N/A <5% 6/30/2016 248,000

First Bank Southern Pines NC CD N/R,N/R N/A <5% 6/30/2016 248,000

Katahdin Tr Co ME CD N/R,N/R N/A <5% 7/22/2016 248,012

Cadence Bank MS CD N/R,N/R N/A <5% 7/22/2016 245,013

First Foundation Bank CA CD N/R,N/R N/A <5% 7/28/2016 248,000

Transportation Alliance Bank UT CD N/R,N/R N/A <5% 7/28/2016 248,000

Credit Risk

Credit Rating Over 5 Percent

of Portfolio Maturity Date

Interest Rate Risk

Concentration Risk



(38)




b. Investments (Continued)

Concentration of Credit Risk (Continued)

Carrying


Credit Risk



Interest Rate Risk

Concentration Risk

Ally Bank Utah CD N/R,N/R N/A <5% 7/29/2016 248,000$

Community Bank Chesapeake CD N/R,N/R N/A <5% 8/5/2016 248,000

Safra National Bank New York City CD N/R,N/R N/A <5% 8/16/2016 248,029

Community Financial Services Bank KY CD N/R,N/R N/A <5% 8/19/2016 248,017

Merrick Bank South Jordan Utah CD N/R,N/R N/A <5% 8/19/2016 248,000

CIT Bank/Onewest Bank CA CD N/R,N/R N/A <5% 8/19/2016 247,900

Enerbank USA UT CD N/R,N/R N/A <5% 8/19/2016 248,700

Private Bank MI CD N/R,N/R N/A <5% 8/19/2016 248,700

Eagle Valley Bank WI CD N/R,N/R N/A <5% 8/22/2016 247,300

Fidelity Bank Atlanta GA CD N/R,N/R N/A <5% 8/23/2016 222,000

Comenity Capital Bank UT CD N/R,N/R N/A <5% 8/24/2016 248,000

Beal Bank Las Vegas NV CD N/R,N/R N/A <5% 8/24/2016 248,000

BBCN Bank Los Angeles CA CD N/R,N/R N/A <5% 8/25/2016 248,000

Bank Hapoalim New York CD N/R,N/R N/A <5% 8/25/2016 248,000

Farmers & Merchants Bank MN CD N/R,N/R N/A <5% 8/26/2016 248,000

Southside Bank Tyler TX CD N/R,N/R N/A <5% 8/26/2016 248,000

State Bank of Lismore MN CD N/R,N/R N/A <5% 8/26/2016 248,000

Santander Bank CD N/R,N/R N/A <5% 8/26/2016 248,000

Apple Bank NY CD N/R,N/R N/A <5% 8/26/2016 248,000

Goldman Sachs Bank NY CD N/R,N/R N/A <5% 8/26/2016 248,000

Discover Bank CD N/R,N/R N/A <5% 8/26/2016 248,000

Mizuho Bank CD N/R,N/R N/A <5% 8/26/2016 248,000

Essa Bank & Trust, PA CD N/R,N/R N/A <5% 8/30/2016 248,000

Bank of Baroda NY CD N/R,N/R N/A <5% 8/30/2016 248,000

State Bank of India NY CD N/R,N/R N/A <5% 9/22/2016 248,000

Celtic Bank Salt Lake City UT CD N/R,N/R N/A <5% 9/23/2016 248,000

BMO Harris Bank CD N/R,N/R N/A <5% 9/23/2016 248,000

Community Business Bank West CD N/R,N/R N/A <5% 9/30/2016 248,000

Orrstown Bank PA CD N/R,N/R N/A <5% 9/30/2016 248,800

BOFI Federal Bank CA CD N/R,N/R N/A <5% 9/30/2016 248,800

Evergreen Bank Group IL CD N/R,N/R N/A <5% 9/30/2016 248,000

Patriot Bank OK CD N/R,N/R N/A <5% 9/30/2016 248,500

Green Bank National Association TX CD N/R,N/R N/A <5% 9/30/2016 248,000

Yadkin Vy Bank & Tr Co Elkin CD N/R,N/R N/A <5% 10/17/2016 248,037



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b. Investments (Continued) Concentration of Credit Risk

Carrying


Credit Risk



Interest Rate Risk

Concentration Risk

Zions First National Bank Utah CD N/R,N/R N/A <5% 11/10/2016 248,057$

Investors Bank Short Hills NJ CD N/R,N/R N/A <5% 11/17/2016 248,037

Bank of the Ozarks Arkansas CD N/R,N/R N/A <5% 11/22/2016 248,300

Spring Valley Bank OH CD N/R,N/R N/A <5% 11/22/2016 248,300

Valley National Bank OK CD N/R,N/R N/A <5% 11/22/2016 248,400

Kansas State Bank KS CD N/R,N/R N/A <5% 11/23/2016 248,200

Valor Bank OK CD N/R,N/R N/A <5% 11/23/2016 248,000

Brookline Bank MA CD N/R,N/R N/A <5% 11/25/2016 248,007

Bank North Carolina CD N/R,N/R N/A <5% 11/30/2016 248,000

State Bank of Chilton WI CD N/R,N/R N/A <5% 11/30/2016 248,000

Prime Bank Edmond OK CD N/R,N/R N/A <5% 11/30/2016 248,000

First Capital Bank TN CD N/R,N/R N/A <5% 12/19/2016 247,800

Prudential Savings Bank PA CD N/R,N/R N/A <5% 12/19/2016 248,000

Southern States Bank AL CD N/R,N/R N/A <5% 12/19/2016 248,000

Affiliated Bank TX CD N/R,N/R N/A <5% 12/19/2016 248,000

Central Bank FL CD N/R,N/R N/A <5% 12/19/2016 248,000

Industrial & Commercial Bank of China NY CD N/R,N/R N/A <5% 12/19/2016 248,000

Bremer Bank MN CD N/R,N/R N/A <5% 12/19/2016 248,000

Wolverine Bank FSB MI CD N/R,N/R N/A <5% 12/19/2016 248,000

Berkshire Bank Pittsfield MA CD N/R,N/R N/A <5% 12/23/2016 248,000

TCF National Bank CD N/R,N/R N/A <5% 12/23/2016 248,000

Academy Bank CO CD N/R,N/R N/A <5% 12/23/2016 248,000

Open Bank Los Angeles CA CD N/R,N/R N/A <5% 12/28/2016 248,000

First VA Community Bank Fairfax CD N/R,N/R N/A <5% 12/30/2016 248,000

Total Negotiable Certificates of Deposit 22,689,644

Money Market Mutual Funds

4M Fund N/A N/A 6% N/A 1,821,122

Wells Fargo Government Fund AAA S&P/Moody's 6% N/A 1,670,095

First American-Prime Obligation Fund AAA S&P/Moody's <5% N/A 596,192

Total Money Market Mutual Funds 4,087,410

Total Investments 100% 29,040,002

Deposits 8,608,891

Petty Cash 1,195

Total Cash and Investments $ 37,650,088

N/A - Not Applicable

<5% - Concentration is Less Than 5% of Investment



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A. Assets (Continued) 2. Due from Other Governments

Due from other governments consists of the following:

2015 2014

Current AssetsMunicipality Service Charges $ 974,416 $ 963,684 Other 268,389 886,207

Total $ 1,242,805 $ 1,849,891

3. Capital Assets

Capital asset activity for the year ended December 31, 2015, was as follows:

Beginning Balance Increases Decreases Ending Balance Capital Assets, Not Depreciated

Land $ 605,265 $ - $ - $ 605,265

Easements 207,149 - - 207,149

Total Capital Assets,

Not Depreciated 812,414 - - 812,414

Capital Assets, Depreciated

Improvements 181,115,863 20,752,939 7,886,366 193,982,439

Buildings and Structures 74,672,544 - - 74,672,544

Furniture and Equipment 31,021,398 251,251 - 31,272,649

Motor Vehicles 2,807,184 192,916 44,250 2,955,850

Total Capital Assets, Depreciated 289,616,989 21,197,106 7,930,616 302,883,482

Less: Accumulated Depreciation for:

Improvements 99,162,314 8,814,257 7,872,875 100,103,696

Buildings and Structures 72,992,027 125,216 - 73,117,243

Furniture and Equipment 30,709,593 111,169 - 30,820,762

Motor Vehicles 2,389,549 207,737 44,250 2,553,036

Total Accumulated Depreciation 205,253,483 9,258,379 7,917,125 206,594,737

Total Capital Assets, Depreciated, Net 84,363,506 11,938,727 13,491 96,288,745

Capital Assets, Net $ 85,175,920 $ 11,938,727 $ 13,491 $ 97,101,159



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3. Capital Assets (Continued)

Capital asset activity for the year ended December 31, 2014, was as follows:

Beginning Balance Increases Decreases Ending Balance Capital Assets, Not Depreciated

Land $ 605,265 $ - $ - $ 605,265

Easements 207,149 - - 207,149

Total Capital Assets,

Not Depreciated 812,414 - - 812,414

Capital Assets, Depreciated

Improvements 175,534,659 5,581,201 - 181,115,863

Buildings and Structures 74,672,544 - - 74,672,544

Furniture and Equipment 30,881,442 197,782 57,826 31,021,398

Motor Vehicles 2,621,383 333,388 147,587 2,807,184

Total Capital Assets, Depreciated 283,710,028 6,112,371 205,413 289,616,989

Less: Accumulated Depreciation for:

Improvements 91,276,203 7,886,111 - 99,162,314

Buildings and Structures 72,840,912 151,115 - 72,992,027

Furniture and Equipment 30,687,150 80,269 57,826 30,709,593

Motor Vehicles 2,362,206 174,930 147,587 2,389,549

Total Accumulated Depreciation 197,166,471 8,292,425 205,413 205,253,483

Total Capital Assets, Depreciated, Net 86,543,557 (2,180,054) - 84,363,506

Capital Assets, Net $ 87,355,971 $ (2,180,054) $ - $ 85,175,920



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B. Liabilities

1. Due to Other Governments

Due to other governments consists of the following:

Current liabilities - (Payable from current assets):

2015 2014User Adjustments $ 148,299 $ 41,896

2. Long-Term Debt

Long-term debt is comprised of the following:

Types of Indebtedness Final

Maturity Installment Amounts

Interest Rates (%)

Original Issues Amount

Outstanding Balance December 31, 2015

General Obligation Bonds

2007 G.O. WWT Capital Improvement Bonds 2022 4.00-4.50 $ 4,575,000 $ 2,505,000

2011A G.O. Refunding Bonds 2020 2.00-3.50 16,045,000 9,035,000

2011B G.O. Refunding Bonds 2017 2.50-3.00 2,345,000 835,000

2012E G.O. Refunding Bonds 2021 0.20-2.15 8,635,000 5,680,000

2015C G.O Refunding Bond 2020 0.65-2.05 2,680,000 2,680,000

Total General Obligation Bonds $ 34,280,000 20,735,000

Less: Unamortized Discount (33,274) Plus: Unamortized Premium 47,967

Total General Obligation Bonds, Net $ 20,749,693

$1,620,000-$1,940,000

$250,023-$524,458

$355,000-$425,000

$103,250-$1,251,330

$225,000- $410,000



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B. Liabilities (Continued)

2. Long-Term Debt (Continued)

Types of Indebtedness Final

Maturity Installment Amounts

Interest Rates (%)

Original Issues Amount

Outstanding Balance December 31, 2015

General Obligation Taxable Revenue Notes

2006 G.O. Taxable Revenue Note 2021 2.82 $ 3,579,691 $ 1,816,000

2007 G.O. Taxable Revenue Note 2023 2.611 2,359,776 1,364,000



2010 G.O. Taxable Revenue Note 2025 1.59 678,748 421,000











2015 G.O. Taxable Revenue Note 2030 1.00 2,132,276 215,466

Total General Obligation

Taxable Revenue Notes $ 45,327,060 $ 29,081,151

,$324,000

$214,116-$528,230

$100,518- $202,900

$200,540- $249,000

$8,000- $11,000

$40,748- $50,000

$10,131- $24,000

$360,990-$501,000

$22,000- $27,000

$46,959- $123,000

$4,000- $186,000

$9,541- $158,000

$90,969- $155,000

$150,704- $277,510

$278,888- $277,510

$53,009-$160,600



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3. Debt Service Requirements

Debt service requirements at December 31, 2015, were as follows:

Year Ending

December 31

2016 $ 4,225,000 $ 490,369 $ 2,400,323 $ 437,246

2017 4,290,000 419,405 2,440,056 397,679

2018 3,945,000 331,218 2,481,847 357,334

2019 3,780,000 239,663 2,523,695 316,209

2020 2,975,000 142,605 2,561,602 274,268

2021-2025 1,520,000 69,490 11,539,823 776,198

2026-2030 - - 5,133,805 128,936

Total $ 20,735,000 $ 1,692,750 $ 29,081,151 $ 2,687,870

Interest

General Obligation Notes General Obligation Bonds

Principal Principal Interest

4. Changes in Long-Term Liabilities

Long-term liability activity for the year ended December 31, 2015, was as follows:

Additions Reductions

General Obligation Bonds $ 24,770,000 $ 2,680,000 $ 6,715,000 $ 20,735,000 $ 4,225,000

Public Facilities Authority

General Obligation Notes 22,278,322 8,959,779 2,156,950 29,081,151 2,400,323

Total 47,048,322 11,639,779 8,871,950 49,816,151 6,625,323

Sick Leave Liability 287,977 4,275 74,612 217,640 91,388

Net OPEB Liability 223,760 63,573 42,450 244,882 -

Long-Term Liabilities $ 47,560,059 $ 11,707,627 $ 8,989,012 $ 50,278,673 $ 6,716,711

Beginning Balance

Due Within One Year Ending Balance



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4. Changes in Long-Term Liabilities (Continued)

Long-term liability activity for the year ended December 31, 2014, was as follows:

Additions Reductions

General Obligation Bonds $ 28,770,000 $ - $ 4,000,000 $ 24,770,000 $ 4,100,000

Public Facilities Authority

General Obligation Notes 22,414,032 1,674,882 1,810,592 22,278,322 1,815,675

Total 51,184,032 1,674,882 5,810,592 47,048,322 5,915,675

Sick Leave Liability 347,930 7,943 67,896 287,977 47,437

Net OPEB Liability 205,478 64,453 46,170 223,760 -

Long-Term Liabilities $ 51,737,440 $ 1,747,278 $ 5,924,658 $ 47,560,059 $ 5,963,112

Due Within One Year

Beginning Balance Ending Balance

The general obligation bonds and notes are retired with income from operations. WLSSD has a contingent liability against its full faith and credit to the extent that income from operations is insufficient to retire the general obligation bonds. The general obligation bonds of WLSSD are exempt from the limitations on net debt imposed by Minnesota law.

5. Refunding Debt Issued

During 2015, WLSSD issued 2015 Taxable General Obligation Refunding Bonds, Series 2015C in the amount of $2,680,000 with and interest rate of .65 to 2.05 percent. These proceeds were used to provide for the current refunding of the 2005A and 2006A General Obligation Bonds. The balance of the 2005A maturities being refunded was $1,240,000 and interest rates of 3.85 to 4.15 percent. The balance of the 2006A maturities being refunded was $1,375,000 and interest rates of 4.25 to 5.00 percent. As a result of this refunding, WLSSD increased its debt service requirements $65,000 resulting in an economic gain (difference between the present value of the debt service payment on the old and new debt service) of $179,530.



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5. Pension Plans

a) Pension Description The District participates in the following cost-sharing multiple-employer defined benefit pension plans administered by the Public Employees Retirement Association of Minnesota (PERA). PERA’s defined benefit pension plans are established and administered in accordance with Minnesota Statutes, Chapters 353 and 356. PERA’s defined benefit pension plans are tax qualified plans under Section 401 (a) of the Internal Revenue Code.

All full-time and certain part-time employees of the District are covered by the General Employees Retirement Fund (GERF). GERF members belong to either the Coordinated Plan or the Basic Plan. Coordinated Plan members are covered by Social Security and Basic Plan members are not. The Basic Plan was closed to new members in 1967. All new members must participate in the Coordinated Plan.

b) Benefits Provided

PERA provides retirement, disability, and death benefits. Benefit provisions are established by state statute and can only be modified by the state legislature. Benefit increases are provided to benefit recipients each January. Increases are related to the funding ratio of the plan. Members in plans that are at least 90 percent funded for two consecutive years are given 2.5% increases. Members in plans that have not exceeded 90% funded, or have fallen below 80%, are given 1% increases. The benefit provisions stated in the following paragraphs of this section are current provisions and apply to active plan participants. Vested, terminated employees who are entitled to benefits but are not receiving them yet are bound by the provisions in effect at the time they last terminated their public service.



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5. Pension Plans (Continued)

b) Benefits Provided (Continued) Benefits are based on a member’s highest average salary for any five successive years of allowable service, age, and years of credit at termination of service. Two methods are used to compute benefits for PERA's Coordinated and Basic Plan members. The retiring member receives the higher of a step-rate benefit accrual formula (Method 1) or a level accrual formula (Method 2). Under Method 1, the annuity accrual rate for a Basic Plan member is 2.2% of average salary for each of the first ten years of service and 2.7% for each remaining year. The annuity accrual rate for a Coordinated Plan member is 1.2 percent of average salary for each of the first ten years and 1.7% for each remaining year. Under Method 2, the annuity accrual rate is 2.7% of average salary for Basic Plan members and 1.7% for Coordinated Plan members for each year of service. For members hired prior to July 1, 1989, a full annuity is available when age plus years of service equal 90 and normal retirement age is 65. For members hired on or after July 1, 1989, normal retirement age is the age for unreduced Social Security benefits capped at 66. Disability benefits are available for vested members and are based upon years of service and average high-five salary.

c) Contributions Minnesota Statutes Chapter 353 sets the rates for employer and employee Contributions. Contribution rates can only be modified by the state legislature. Basic Plan members and Coordinated Plan members were required to contribute 9.10% and 6.50%, respectively, of their annual covered salary in calendar year 2015. The District was required to contribute 7.50% for Coordinated Plan members in calendar year 2015. The District’s contributions to the GERF for the year ended December 31, 2015, were $523,052. The District’s contributions were equal to the required contributions as set by state statute.



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5. Pension Plans (Continued) d) Pension Costs

At December 31, 2015, the District reported a liability of $6,120,555 for its proportionate share of the GERF’s 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 that date. The District’s proportion of the net pension liability was based on the District’s contributions received by PERA during the measurement period for employer payroll paid dates from July 1, 2014, through June 30, 2015, relative to the total employer contributions received from all of PERA’s participating employers. At June 30, 2015, the District’s proportion was .1181 percent which was an increase of .0001 percent from its proportion measured as of June 30, 2014. For the year ended December 31, 2015, the District’s recognized pension expense of $642,445 for its proportionate share of the GERF’s pension expense. At December 31, 2015, the District reported its proportionate share of the GERF’s deferred outflows of resources and deferred inflows of resources related to pensions from the following sources:

DescriptionDeferred Outflows of

ResourcesDeferred Inflows of

ResourcesDifferences Between Expected and Actual Economic Experience -$ 308,580Changes in Actuarial Assumptions - - Net Difference Between Projected and Actual Earnings on Pension Plan Investments 579,405 - Changes in Proportion and Differences Between WLSSD Contributions and Proportionate Share of Contributions - 514,376WLSSD Contributions Subsequent to the Measurement Date 259,500 -

Total 838,905$ 822,956$



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5. Pension Plans (Continued) d) Pension Costs (Continued)

$259,500 reported as deferred outflows of resources related to pensions resulting from the District’s contributions subsequent to the measurement date will be recognized as a reduction of the net pension liability in the year ended December 31, 2016. Other amounts reported as deferred outflows and inflows of resources related to pensions will be recognized in pension expense as follows:

Pension Expenses Amount

(129,468)$ (129,468) (129,468) 144,853

- - Thereafter

Year Ended December 31,20162017201820192020

e) Actuarial Assumptions

The total pension liability in the June 30, 2015, actuarial valuation was determined using the following actuarial assumptions:

Assumptions GERFInflation 2.75% per YearSalary Increases 3.50% per YearInvestment Rate of Return 7.9% per Year

Salary increases were based on a service-related table. Mortality rates for active members, retirees, survivors and disabilitants were based on RP-2000 tables for males or females, as appropriate, with slight adjustments. Benefit increases for retirees are assumed to be 1% effective every January 1st through 2026 and 2.5% thereafter. Actuarial assumptions used in the June 30, 2015, valuation were based on the results of actuarial experience studies. The experience study in the GERF was for the period July 1, 2004, through June 30, 2008, with an update of economic assumptions in 2014. Experience studies have not been prepared for PERA’s other plans, but assumptions are reviewed annually.



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e) Actuarial Assumptions (Continued)

The following changes in actuarial assumptions occurred in 2015: the discount rate was changed from 8.0% through June 30, 2017 and 8.5% thereafter to 8.0% for all years, the inflation assumption was changed from 3.0% to 2.75%, the payroll growth assumption was changed from 3.75% to 3.5%, assumed increases in member salaries were decreased by 0.25% at all ages and the assumed postretirement benefit increase rate was changed from 1.0% per year through 2026 and 2.5% thereafter to 1.0% per year through 2034 and 2.5% per year thereafter. The long-term expected rate of return on pension plan investments is 7.9%. The State Board of Investment, which manages the investments of PERA, prepares an analysis of the reasonableness of the long-term expected rate of return on a regular basis using a building-block method in which best-estimate ranges of expected future rates of return are developed for each major asset class. These ranges are combined to produce an expected long-term rate of return by weighting the expected future rates of return by the target asset allocation percentages.

The target allocation and best estimates of arithmetic real rates of return for each major asset class are summarized in the following table:

Asset Class Target Allocation Long-Term Expected Real

Rate of Return Domestic Stocks 45 % 5.50 %International Stocks 15 6.00Bonds 18 1.45Alternative Assets 20 6.40Cash 2 0.50

Totals 100 %

f) Discount Rate

The discount rate used to measure the total pension liability was 7.90%. The projection of cash flows used to determine the discount rate assumed that employee and employer contributions will be made at the rate specified in statute. Based on that assumption, each of the pension plan’s fiduciary net position was projected to be available to make all projected future benefit payments of current active and inactive employees. 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.



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g) Pension Liability Sensitivity The following presents the District’s proportionate share of the net pension liability for all plans it participates in, calculated using the discount rate disclosed in the preceding paragraph, as well as what the District’s proportionate share of the net pension liability would be if it were calculated using a discount rate one percentage point lower or one percentage point higher than the current discount rate:

Description 1% Decrease Current

Discount Rate1% Increase in Discount Rate

GERF Discount Rate 6.90% 7.90% 8.90%District's Proportionate Share of the GERF Net Pension Liability 9,623,688$ 6,120,555$ 3,227,505$

h) Pension Plan Fiduciary Net Position

Detailed information about each pension plan’s fiduciary net position is available in a separately-issued PERA financial report that includes financial statements and required supplementary information. That report may be obtained on the Internet at www.mnpera.org; by writing to PERA at 60 Empire Drive #200, St. Paul, Minnesota, 55103-2088; or by calling (651) 296-7460 or 1-800-652-9026.



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6. Postemployment Benefits

Plan Description and Funding Policy There is no explicit subsidy for employees hired prior to December 31, 1983 with no accumulated sick leave and for employees hired on or after January 1, 1984. Active employees who retire from WLSSD when eligible to receive a retirement benefit from PERA, that do not qualify for the aforementioned benefits, and do not participate in any other health benefits program providing coverage similar to that herein described, will be eligible to continue coverage with respect to both themselves and their eligible dependents under WLSSD’s health benefits program. These retirees are required to pay 100 percent of the total premium cost. Since the premium is a blended rate determined on the entire active and retiree population, the retirees are receiving an implicit rate subsidy. The authority to provide these benefits is established in Minnesota Statutes § 471.61, subdivision 2a. The cost of other postemployment benefits is funded on a “pay-as-you-go” method. Annual OPEB Cost and Net OPEB Obligation WLSSD’s annual other postemployment benefit (OPEB) cost is calculated based on the annual required contribution (ARC) of the employer, 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) over a period not to exceed 30 years. The following table shows the components of WLSSD’s annual OPEB cost for 2015 and 2014, the amount actually contributed to the plan, and changes in WLSSD’s net OPEB obligation:

2015 2014

Annual Required Contribution (ARC) $ 74,339 $ 74,339 Interest on Net OPEB Obligation 10,069 9,246 Adjustment to ARC (20,835) (19,133)Annual OPEB Cost 63,573 64,452 Contributions During the Year (42,451) (46,170)Increase in Net OPEB Obligation 21,122 18,282 Net OPEB, Beginning of Year 223,760 205,478 Net OPEB, End of Year $ 244,882 $ 223,760



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6. Postemployment Benefits (Continued)

Annual OPEB Cost and Net OPEB Obligation (Continued) WLSSD’s annual OPEB cost, the percentage of annual OPEB cost contributed to the plan and the net OPEB obligation for 2015, 2014, and 2013 was as follows:

Year Ended Year Ended Year Ended December 31, December 31, December 31,

2015 2014 2013 Percentage of Annual OPEB Cost Contributed 66.78% 80.38% 105.70%

Annual OPEB Cost $ 63,573 $ 64,452 $ 61,079 Employer Contributions (42,451) (46,170) (40,002)

Net Increase (Decrease)in Net OPEB Obligation 21,122 18,282 21,077

Net OPEB Obligation, Beginning of Year 223,760 205,478 184,401

Net OPEB Obligation, End of Year $ 244,882 $ 223,760 $ 205,478

In 2015, there were no significant changes to the plan provisions and actuarial methods and assumptions since the last GASB valuation.



(54)



6. Postemployment Benefits (Continued)

Funding Status and Funding Progress The actuarial accrued liability for benefits at January 1, 2014 is $444,057. WLSSD currently has no assets that have been irrevocably deposited in a trust for future health benefits, thus the entire amount is unfunded. The covered payroll (annual payroll of active employees covered by the plan) is $6,429,743. The ratio of the unfunded actuarially accrued liabilities (UAAL) to covered payroll is 6.9 percent. Actuarial valuations 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 healthcare cost trends. Amounts determined regarding the funded status of the plan and the annual required contributions of the employer are subject to continual revision as actual results are compared with past expectations and new estimates are made about the future. The schedule of funding progress, presented as required supplementary information following the notes to the financial statements, presents multi-year trend information about whether the actuarial value of plan assets is increasing or decreasing over time relative to the actuarial accrued liabilities for benefits. Projections of benefits for financial reporting purposes are based on the substantive plan (as understood by the employer and plan members) and include the types of benefits provided at the time of each valuation. The actuarial methods and assumptions used include techniques that are designed to reduce the effect of short-term volatility in actuarial accrued liabilities, consistent with the long-term perspective of the calculations. In the January 1, 2014 actuarial valuation, the projected unit credit actuarial cost method was used. The actuarial assumptions included a 3 percent inflation factor and a 4.50 percent discount rate, which is based on the estimated long-term investment yield on the general assets of WLSSD. The annual healthcare cost trend rate is 10.00 percent initially, reduced incrementally to an ultimate rate of 5 percent after eleven years. The unfunded actuarial accrued liability is being amortized over 15 years as a level dollar amount based on an open group.



(55)

4. Other Note Disclosures

A. Major Customers Major customers of services provided by WLSSD were as follows:

2015 2014 2015 2014Sappi Cloquet LLC $ 11,320,770 $ 10,997,029 31.3% 31.3%City of Duluth 8,703,174 8,754,255 24.1% 25.9%Verso Duluth Mill 3,838,806 3,798,782 10.6% 12.1%

User ServiceCharges

Total UserService Charges

Percentage of

B. Construction Commitments

As of December 31, 2015, WLSSD had the following commitments with respect to unfinished capital projects.

Project

Remaining

Construction

Commitment

Expected Date of

Completion

Headworks Grit & Screening 8,038,124$ 5/31/2016

Biogas & Heating System

Improvements 1,863,893 6/30/20169,902,017$

C. Risk Management WLSSD is exposed to various risks of loss related to torts; theft of, damage to, and destruction of assets; errors and omissions; health and dental claims, injuries to employees, and natural disasters. These risks are covered by commercial insurance purchased from independent third parties except for dental claims which are self-insured, workers compensation and health insurance for which WLSSD belongs to public entity risk pools. WLSSD has a $50,000 deductible for property and a $1,000 deductible for liability insurance coverage per covered incident. There have been no significant reductions in insurance coverage during the current year. Settled claims from these risks have not exceeded insurance coverage in the past three fiscal years.



(56)

4. Other Note Disclosures (Continued)

C. Risk Management (Continued)

WLSSD retains the risk of loss from claims related to employee dental. WLSSD has contracted with Delta Dental to administer WLSSD’s dental claims. WLSSD charges a premium to each employee and contributes an employer’s share based on negotiated union contracts to cover the estimated dental claims. Claims are recognized as they are paid.

2015 2014

Unpaid Claims, Beginning of Year -$ -$ Incurred Claims 80,277 68,198 Claim Payments (80,277) (68,198) Unpaid Claims, End of Year -$ -$

Workers compensation coverage is obtained through the League of Minnesota Cities Insurance Trust – Group Self-Insured Workers' Compensation Plan, a public entity risk pool operated by the League of Minnesota Cities to lower and stabilize its members' workers' compensation costs and to assure that its members have a source of coverage available. The League of Minnesota Cities purchases reinsurance to protect the program from catastrophic and abnormal claims. WLSSD pays an annual premium to the pool and has elected to have a deductible of $5,000 per occurrence (for medical costs only). The deductible option under this plan allows WLSSD to obtain a premium discount of 11%. As medical costs are incurred, the claims are paid by the pool and then are billed back to WLSSD up to the amount of the deductible per occurrence.

For group health insurance, WLSSD belongs to the North East Service Cooperative (NESC), a joint powers entity which sponsors a plan to provide group employee health benefits to its participating members. All members pool premiums and losses; however, a particular member may receive increases or decreases depending on a good or bad year of claims experience. Premiums are determined annually by the NESC and are based partially on the experience of WLSSD and partially on the experience of the group. The NESC solicits proposals from carriers and negotiates the contracts.



(57)

4. Other Note Disclosures (Continued)

D. Postemployment Health Care – Northland VEBA Trust Plan

In 2007, WLSSD Board approved a Voluntary Employees’ Beneficiary Association (VEBA) plan for funding employee health benefits for supervisors effective January 1, 2008 as authorized under Sections 501(c)(9) and 213(d) of the IRS Code. Effective January 1, 2009, all employees were eligible for participation in this plan. The VEBA plan is a health reimbursement plan providing for individual employer-funded accounts that can be used to help pay eligible medical expenses incurred by participating employees. The plan is used in combination with a high-deductible health plan. Funding is provided through pre-tax contributions from WLSSD based on employee health care elections. The VEBA plan is administered by Compensation Consultants, Ltd. The current maximum WLSSD contribution for active participating employees is $3,000 for those with family medical coverage with a $3,700 deductible and $1,350 for active participating employees for those with single medical coverage with a $1,850 deductible. Any balance remaining in an employee’s account at year-end rolls over into the subsequent year. All bargaining unit and supervisory employees participating in WLSSD’s high-deductible medical insurance plan are covered by the VEBA plan.

E. Legal Contingencies WLSSD may be involved in various claims and litigation. Although the outcome of any claims is not presently determinable, in the opinion of WLSSD’s attorney, the resolution of these matters will not have a material adverse effect on the financial condition of WLSSD.

6. Restatement for Change in Accounting Principle

During the year ended December 31, 2015, WLSSD adopted GASB Statement No 68, Accounting and Financial Reporting for Pensions, and the related GASB Statement No. 71, Pension Transition for Contributions Made Subsequent to the Measurement Date-an amendment of GASB Statement No. 68. These pronouncements require the restatement of the December 31, 2014, net position of the business-type activities as follows:

Business-TypeNet Position, December 31, 2014, as Previously Reported 73,845,311$ Cumulative Affect of Application of GASB 68, Net Pension Liability (6,233,581) Cumulative Affect of Application of GASB 71, Deferred Outflow ofResources for WLSSD Contributions Made to the Plan During theMeasurement Period (7/1/14 - 12/31/14). 248,437 Net Position, December 31, 2014, as Restated 67,860,167$

REQUIRED SUPPLEMENTARY INFORMATION


SCHEDULE OF WLSSD’S PROPORTIONATE SHARE OF THE NET PENSION LIABILITY DECEMBER 31, 2015

(58)

Measurement

Date June 30, 2015

0.1181%

6,120,555$

6,936,710$

88.23%

78.20%Plan Fiduciary Net Position as a Percentage of the Total Pension Liability

WLSSD's Proportion of the Net Pension Liability

WLSSD's Proportionate Share of the Net Pension Liability

WLSSD's Covered-Employee Payroll

WLSSD's Proportionate Share of the Net Pension Liability as a Percentage of Its Covered-Employee


SCHEDULE OF WLSSD CONTRIBUTIONS DECEMBER 31, 2015

(59)

2015 2014PERAContractually Required Contribution 523,052$ 507,255$ Contributions in Relation to the Contractually Required Contribution (523,052) (507,255) Contribution Deficiency (Excess) -$ -$

WLSSD's Covered-Employee Payroll 6,974,027$ 6,996,621$

Contributions as a Percentage of Covered Employee Payroll 7.50% 7.25%


SCHEDULE OF FUNDING PROGRESS OTHER POSTEMPLOYMENT BENEFIT PLAN

DECEMBER 31, 2015

(60)

Actuarial Value of Assets

Actuarial Accrued Liability

Unfunded Actuarial Accrued Liability

(UAAL) Funded Ratio Covered Payroll

UAAL as Percentage of

Covered Payroll

(a) (b) (b - a) (a/b) (c) ((b - a)/c)

January 1, 2008 $ - $ 1,554,220 $ 1,554,220 0.00% $ 5,395,402 28.81%

January 1, 2011 - 493,999 493,999 0.00% 6,067,454 8.14%

January 1, 2014 - 444,057 444,057 0.00% 6,429,743 6.91%

Actuarial Valuation Date

Notes to Schedule of Funding Progress The Western Lake Superior Sanitary District currently has no assets that have been irrevocably deposited in a trust for future health benefits. Therefore, the actuarial value of assets is zero. WLSSD implemented Governmental Accounting Standards Board Statement 45 in the fiscal year ended December 31, 2008. Information for prior years is not available. Since the January 2008 valuation, WLSSD changed their employment contracts to require the value of the sick leave which was accumulated by employees prior to December 31, 1983 to be deposited into a health care savings plan upon retirement. This change in the employment contracts resulted in the January 2011 actuarial valuation excluding this sick leave reserve from the Governmental Accounting Standards Board Statement 45 liability. This reduced the Actuarial Accrued Liability at the January 1, 2011 valuation date.

SUPPLEMENTARY SCHEDULES


DETAILED SCHEDULE OF REVENUE COMPARED TO BUDGET YEAR ENDED DECEMBER 31, 2015

WITH COMPARATIVE ACTUAL AMOUNTS FOR YEAR ENDED DECEMBER 31, 2014

(61)

2015Variance 2014

Actual Favorable ActualBudget Revenue (Unfavorable) Revenue

Wastewater TreatmentUser Charges -

MunicipalitiesDuluth $ 8,609,536 $ 8,703,174 $ 93,638 $ 8,754,255

Cloquet 904,518 804,499 (100,019) 907,795

Proctor 294,061 285,693 (8,368) 277,814

Hermantown 426,276 413,498 (12,778) 412,713

Scanlon 86,280 98,257 11,977 98,905

Thomson Township (Esko) 119,884 119,472 (412) 121,268

Carlton 107,345 103,128 (4,217) 105,765

Twin Lakes Township 68,926 72,653 3,727 72,947

Wrenshall 19,494 18,123 (1,371) 21,145

Thomson 7,884 8,158 274 8,435

Jay Cooke 4,176 4,031 (145) 3,916

North Shore 44,151 37,768 (6,383) 40,795

Knife River 15,953 16,110 157 16,024

Oliver 15,973 15,504 (469) 15,730

Rice Lake Township 45,714 43,254 (2,460) 42,672

MPCA Landfill 22,763 19,027 (3,736) 19,446

Midway 4,836 5,047 211 4,462

Pike Lake 62,359 54,418 (7,941) 57,388

Total Municipalities 10,860,129 10,821,814 (38,315) 10,981,475

Industries Sappi 10,438,089 11,320,770 882,681 10,997,029

Georgia Pacific 88,501 75,303 (13,198) 86,763

USG 439,388 434,128 (5,260) 454,045

NewPage Corp (Stora Enso) 3,673,152 3,838,806 165,654 3,798,782

Specialty Minerals 223,995 306,127 82,132 277,431

Total Industries 14,863,125 15,975,134 1,112,009 15,614,050

Total Wastewater Treatment 25,723,254 26,796,948 1,073,694 26,595,525

User Charges - Solid Waste 4,365,356 5,164,712 799,356 4,835,687

Service Fee - Solid Waste 2,215,183 2,394,847 179,664 2,028,723

Other Revenue District-Wide Allocation 355,000 355,001 1 355,000

Capacity Availability Fee 320,000 603,542 283,542 373,218

Earnings on Investments 44,000 83,444 39,444 45,763

Operating Grants 362,000 406,338 44,338 455,328

Property Taxes 1,109,563 1,108,655 (908) 798,705

Capital Contributions - 6,613,299 6,613,299 2,587,871

Gain on Sale of Capital Asset - 19,863 19,863 21,782

Miscellaneous 620,500 812,857 192,357 601,505

Total Other Revenue 2,811,063 10,002,999 7,191,936 5,239,172

Total Revenue $ 35,114,856 $ 44,359,506 $ 9,244,650 $ 38,699,107


DETAILED SCHEDULE OF EXPENSES COMPARED TO BUDGET – DEPARTMENTAL LEVEL YEAR ENDED DECEMBER 31, 2015

WITH COMPARATIVE ACTUAL AMOUNTS FOR YEAR ENDED DECEMBER 31, 2014

(62)

2015Variance 2014

Actual Favorable ActualBudget Expenses (Unfavorable) Expenses

Clean Water Production Salaries & Benefits $ 2,106,386 $ 2,026,072 $ 80,314 $ 1,976,017

Electricity 2,054,930 1,975,537 79,393 1,887,115

Fuels 251,025 195,665 55,360 410,592

Chemicals 1,355,617 1,499,679 (144,062) 1,641,306

Other Operating Expenses 433,534 327,666 105,868 314,571

Total Clean Water Production 6,201,492 6,024,619 176,873 6,229,601

Conveyance SystemSalaries & Benefits 474,255 447,908 26,347 481,341

Electricity 940,623 917,653 22,970 910,594


Total Conveyance System 1,816,478 1,711,154 105,324 1,703,730

BiosolidsSalaries & Benefits 675,799 675,683 116 653,192


Total Biosolids 904,077 810,664 93,413 854,261

Maintenance Salaries & Benefits 2,125,871 1,994,312 131,559 2,131,874

Repairs 700,000 610,302 89,698 683,308

Contracted Services 395,000 384,430 10,570 451,211

Other Operating Expenses 145,446 164,211 (18,765) 116,181

Total Maintenance 3,366,317 3,153,255 213,062 3,382,574

Environmental Programs WastewaterSalaries & Benefits 183,875 184,896 (1,021) - Operating Expenses 95,560 73,439 22,121 -

Total Environmental Programs Wastewater 279,435 258,335 21,100 -

Transfer Station Salaries & Benefits 56,454 55,221 1,233 35,451

Solid Waste Disposal 3,804,573 4,370,640 (566,067) 4,104,831

Operating Expenses 35,550 40,466 (4,916) 32,163

Total Transfer Station 3,896,577 4,466,327 (569,750) 4,172,445


DETAILED SCHEDULE OF EXPENSES COMPARED TO BUDGET – DEPARTMENTAL LEVEL (CONTINUED)

YEAR ENDED DECEMBER 31, 2015 WITH COMPARATIVE ACTUAL AMOUNTS FOR

YEAR ENDED DECEMBER 31, 2014

(63)

2015

Variance 2014

Actual Favorable Actual

Budget Expenses (Unfavorable) Expenses

Material Recovery Center Salaries & Benefits $ 255,831 $ 341,342 $ (85,511) $ 275,172

Solid Waste Disposal 220,186 255,832 (35,646) 216,409

Contract Services 177,600 172,119 5,481 135,420

Operating Expenses 43,750 32,870 10,880 39,853

Total Material Recovery Center 697,367 802,163 (104,796) 666,854

Recycling Salaries & Benefits - - - 46,417

Operating Expenses - - - 192,086

Total Recycling - - - 238,503

Organics Salaries & Benefits 146,876 185,084 (38,208) 138,495


Total Organics 291,376 299,788 (8,412) 268,421

Household Hazardous WasteSalaries & Benefits 410,273 406,793 3,480 360,010


Total Household Hazardous Waste 695,223 794,486 (99,263) 699,090

Environmental Programs Solid WasteSalaries & Benefits 382,503 372,409 10,094 - Operating Expenses 418,002 350,354 67,648 - Total Environmental Programs Solid Waste 800,505 722,763 77,742 -

Business ServicesSalaries & Benefits 1,282,690 1,400,308 (117,618) 1,330,733

Other Postemployment Benefits - 21,122 (21,122) 18,283

Insurance 160,000 155,675 4,325 160,248

Professional Services 194,405 211,518 (17,113) 146,759


Total Business Services 2,258,973 2,370,284 (111,311) 2,286,026


DETAILED SCHEDULE OF EXPENSES COMPARED TO BUDGET – DEPARTMENTAL LEVEL (CONTINUED)

YEAR ENDED DECEMBER 31, 2015 WITH COMPARATIVE ACTUAL AMOUNTS FOR

YEAR ENDED DECEMBER 31, 2014

(64)

2015

Variance 2014

Actual Favorable Actual

Budget Expenses (Unfavorable) Expenses

Planning & Engineering Salaries & Benefits $ 975,138 $ 948,643 $ 26,495 $ 938,262

Contracted Services 4,000 1,352 2,648 190


Total Planning & Engineering 1,004,138 957,315 46,823 956,968

Environmental ProgramsSalaries & Benefits - - - 536,709

Operating Expenses - 1,550 (1,550) 283,392

Total Environmental Programs - 1,550 (1,550) 820,101

Management Information System Salaries & Benefits 354,389 367,341 (12,952) 367,250



Total Management Information System 545,021 548,925 (3,904) 541,466

Lab Services Salaries & Benefits 638,105 672,999 (34,894) 646,193



Total Lab Services 895,005 827,145 67,860 822,281

Non-Departmental Depreciation 7,904,895 9,258,381 (1,353,486) 8,292,394

Interest and Bond Amortization Expense 1,034,006 1,042,621 (8,615) 1,073,871

Total Non-Departmental 8,938,901 10,301,002 (1,362,101) 9,366,265

Total Expenses $ 32,590,885 $ 34,049,775 $ (1,458,890) $ 33,008,586


SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS YEAR ENDED DECEMBER 31, 2015

The notes to the schedule of expenditures of federal awards are an integral part of this statement. (65)

Federal Grantor Federal Pass-Through Agency Pass-Through CFDA Grant Program Title Grant Numbers Number

Coastal Zone Management Act of 1972 Passed Through Minnesota's Lake Superior Coastal Program STAR Grant 306-STAR04-12 11.419 $ 1,550

U.S. Environmental Protection Agency Passed Through Minnesota Department of Employment and Economic Development Capitalization Grants for Clean Water State Revolving Funds Grit & Screening MPFA-14-0091-R-FY15 66.458 5,347,185 Plant Heating and Biogas Conditioning MPFG-11-0092-R-FY16 66.458 4,127,130 Plant Heating and Biogas Conditioning MPFA-11-0092-R-FY16 66.458 5,972,328 Esko Pump Station MPFG-11-0089-R-FY16 66.458 1,158,274 Esko Pump Station MPFA-11-0089-R-FY16 66.458 645,133

Total U.S. Environmental Protection Agency 17,250,050

Total Federal Awards $ 17,251,600

Expenditures


NOTES TO THE SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS YEAR ENDED DECEMBER 31, 2015

(66)

1. Reporting Entity The Schedule of Expenditures of Federal Awards presents the activities of federal award programs

expended by the Western Lake Superior Sanitary District. WLSSD’s reporting entity is defined in Note 1 to the financial statements.

2. Basis of Presentation

The accompanying Schedule of Expenditures of Federal Awards includes the federal grant activity of the Western Lake Superior Sanitary District under programs of the federal government for the year ended December 31, 2015. The information in this schedule is presented in accordance with the requirements of Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance). Because the schedule presents only a selected portion of the operations of the Western Lake Superior Sanitary District, it is not intended to and does not present the financial position, changes in net position, or cash flows of the Western Lake Superior Sanitary District.

3. Summary of Significant Accounting Policies

Expenditures reported on the schedule are reported on the accrual basis of accounting. Such expenditures are recognized following the cost principles contained in Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), wherein certain types of expenditures are not allowable or are limited as to reimbursement. Pass-through entity identifying numbers are presented where available.

4. Reconciliation to Comparative Statement of Revenues, Expenses, and Changes in Net

Position and Note 3.B.4.

Expenditures under CFDA No. 66.458 are capitalized in capital assets on the financial statements. The funding received under this program is federal grant funding shown as additions to the long-term debt payable. Other federal grants are reported as operating grants or federal contributions.


NOTES TO THE SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS (CONTINUED) YEAR ENDED DECEMBER 31, 2015

(67)

4. Reconciliation to Comparative Statement of Revenues, Expenses, and Changes in Net Position and Note 3.B.4. (Continued)

Nonoperating Revenues: Operating Grants $ 406,338

Less: State Portion of Operating Grants (404,788)

Federal Portion of Operating Grants 1,550

Capital Contributions - Federal 5,285,405

Public Facility Authority Loans 11,964,645

Expenditures Per Schedule of Expenditures of Federal Awards $ 17,251,600

5. Subrecipients

Of the expenditures presented in the Schedule, Western Lake Superior Sanitary District did not provide federal awards to any subrecipients.

STATISTICAL SECTION (Last Ten Fiscal Years)

(Unaudited)


STATISTICAL SECTION

(68)

This part of Western Lake Superior Sanitary District’s 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 WLSSD’s overall financial health. Contents Financial Trends – Pages 69-73

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

Revenue Capacity – Pages 74-79 These schedules contain information to help the reader assess WLSSD’s revenue sources for both wastewater and solid waste generators.

Debt Capacity – Pages 80-83 These schedules contain information to help the reader assess the affordability of WLSSD’s current levels of outstanding debt and its ability to issue additional debt in the future.

Demographic and Economic Information – Pages 84-85 These schedules contain demographic and economic indicators to help the reader understand the environment within which WLSSD’s financial activities take place.

Operating Information – Pages 86-88 These schedules contain service and infrastructure data to help the reader understand how the information in WLSSD’s financial report relates to the services WLSSD 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.

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AL

YE

AR

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(73)

2015

2014

2013

2012

2011

2010

2009

2008

2007

2006

Ear

ning

s on

Inv

estm

ents

$

8

3,44

4 $

45,

763

$

5

0,63

9 $

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2014

2013

2012

2011

2010

2009

2008

2007

2006

MU

NIC

IPA

LIT

IES

Flo

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mil

lion

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/day

)15

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TE

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S

(76)

2015

2014

2013

2012

2011

2010

2009

2008

2007

2006

Flow

(co

st/1

000g

al)

$

0

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7 $

0.54

38

$

0.

5567

$

0.55

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2015

2014

2013

2012

2011

2010

2009

2008

2007

2006

VO

LU

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ons)

Dis

tric

t (St

. Lou

is C

ount

y)51

,600

52,6

6452

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50,0

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60,0

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70,0

00

80,0

00

90,0

00

100,

000

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

TONS

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LID

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1.37

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4,94

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0

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1.38

%

2008

2

2,42

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0

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1.48

%

2009

2

0,15

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0

35,3

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52

57

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428

1.31

%

2010

1

7,79

5,00

0

34,3

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30

54

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1.18

%

2011

3

1,76

0,00

0

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%

2012

3

2,78

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2013

2

8,77

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0

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51

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%

2014

2

4,77

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0

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78,3

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47

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2015

2

0,73

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2006

$

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66

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2,

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148,

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9

2,90

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4 $

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03,5

59,4

00

2007

1

03,9

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9

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005,

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10

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00

2008

1

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120,

079

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400

11

1,85

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00

2009

1

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3,

182,

985

168,

118,

500

11

2,49

8,37

0

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00

2010

1

05,7

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9

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3,

281,

294

173,

320,

126

10

8,99

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9,5

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00

2011

1

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97,6

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9

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4,

895,

657

259,

451,

700

10

4,99

3,33

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9,6

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00

2012

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60

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5,

187,

172

274,

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600

10

2,82

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552,

595

292,

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500

10

5,97

7,40

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9,6

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20

2014

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911,

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311,

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400

10

9,38

9,50

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9,9

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2015

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4,75

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2006

134,

684

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454

$

57,

642,

215

$

9,

396,

955

$

48,

245,

260

51.9

3%$

3

58.2

0 0.

55%

2007

135,

102

106,

929,

251

61,

290,

342

9,

859,

930

51,

430,

412

48.1

0%

3

80.7

0 0.

55%

2008

134,

975

111,

853,

207

57,

792,

052

9,

822,

605

47,

969,

447

42.8

9%

3

55.4

0 0.

49%

2009

135,

721

112,

498,

370

54,

495,

930

9,

988,

676

44,

507,

254

39.5

6%

3

27.9

0 0.

46%

2010

137,

536

108,

994,

716

50,

721,

538

10,

057,

849

40,

663,

689

37.3

1%

2

95.7

0 0.

43%

2011

138,

061

104,

993,

339

48,

954,

114

10,

610,

737

38,

343,

377

36.5

2%

2

77.7

0 0.

40%

2012

137,

650

102,

823,

032

53,

273,

770

11,

540,

636

41,

733,

134

40.5

9%

3

03.1

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44%

2013

137,

519

105,

977,

405

51,

184,

032

12,

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621

38,

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411

36.3

9%

2

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2014

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684

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508

47,

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322

13,

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844

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478

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2

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34%

2015

138,

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10

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$

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15

2%

2007

3

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20,

684,

223

12

,226

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5,1

21,2

61

2,53

4,01

6

7,6

55,2

77

160%

2008

3

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21,

090,

448

11

,137

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5,1

24,2

40

2,38

9,08

6

7,5

13,3

26

148%

2009

3

2,61

9,44

9

20,

375,

609

12

,243

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5,4

23,0

74

2,23

3,94

6

7,6

57,0

20

160%

2010

3

4,58

2,65

5

22,

104,

631

12

,478

,024

5,3

36,1

38

2,04

2,35

3

7,3

78,4

91

169%

2011

3

3,57

0,37

3

22,

693,

649

10

,876

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5,4

12,6

00

1,62

7,23

7

7,0

39,8

37

155%

2012

3

4,69

0,28

9

23,

917,

851

10

,772

,438

5,7

07,6

04

1,23

7,47

8

6,9

45,0

82

155%

2013

3

4,87

0,65

2

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715,

130

12

,155

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5,7

53,3

64

1,13

2,45

2

6,8

85,8

16

177%

2014

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642,

321

12

,468

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5,8

10,5

92

1,13

0,29

2

6,9

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2015

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7,74

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13

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1,05

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2008

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34,

139

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137,

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3

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1113

8,06

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2012

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7,51

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2015

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2015

2014

2013

2012

2011

2010

2009

2008

2007

2006

Was

tew

ater

S

anit

ary

Sew

ers

(mil

es)

74.3

3074

.260

74.6

6774

.667

74.6

6774

.667

74.6

6774

.667

74.6

6774

.667

T

reat

men

t Cap

acity

(M

GD

)48

.40

48.4

048

.40

48.4

048

.40

48.4

048

.40

48.4

048

.40

48.4

0

BO

D T

reat

men

t Cap

acity

(L

bs/D

ay)

121,

000

121,

000

121,

000

121,

000

121,

000

121,

000

121,

000

121,

000

121,

000

121,

000

Sou

rce:

Fin

ance

Dep

artm

ent W

este

rn L

ake

Supe

rior

San

itar

y D

istr

ict

FINANCIAL REPORT - WLSSD · 2019-06-03 · region including recycling programs, a Materials...

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