2017 comprehensive annual financial...

2017 ComprehensiveAnnual Financial Report

For fiscal years June 30, 2017 and 2016BEAUFORT-JASPER WATER & SEWER AUTHORITY

Okatie, South Carolina

BEAUFORT-JASPER WATER AND SEWER AUTHORITY 843-987-9200 | 6 SNAKE ROAD | OKATIE, SOUTH CAROLINA 29909

www.bjswa.org

Beaufort-Jasper Water & Sewer Authority

Comprehensive Annual Financial Report

For the Fiscal Years EndedJune 30, 2017 and 2016

Prepared by:Finance Department

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1TABLE OF CONTENTS

Beaufort-Jasper Water & Sewer AuthorityComprehensive Annual Financial Report

For the Fiscal Years Ended June 30, 2017 and 2016

TABLE OF CONTENTS

Letter of Transmittal 4

GFOA Certifi cate of Achievement 8

Board of Directors 9

Organizational Chart 10

Report of Independent Auditor 12

Management’s Discussion and Analysis 14

Financial Statements 24-27 Statements of Net Position for June 30, 2017 and 2016 24Statements of Revenues, Expenses, and Changes in Net Positions for June 30, 2017 and 2016 26 Statements of Cash Flows for June 30, 2017 and 2016 27Notes to Financial Statements 28

Required Supplementary Information 53Schedule of the Authority’s Proportionate Share of the Net Pension Liability 53Schedule of the Authority’s Contributions to the South Carolina Retirement System – Last Ten Fiscal Years 53Schedule of Funding Progress for the Postemployment Healthcare Plan 53

Supplementary Financial Data 54Budgetary Comparison Schedule for June 30, 2017 54Budgetary Comparison Schedule by Functional Classifi cation for June 30, 2017 55Schedule of Expenses by Natural Classifi cation-Budgetand Actual for June 30, 2017 57Schedule of Net Earnings for Debt Service and Debt Coverage for June 30, 2017 and 2016 57

Statistical Contents 60

Financial Trends and Debt Capacity 61–64Schedule of Changes in Revenues and Expenses, and Debt Service Coverage – Last Ten Fiscal Years 61 Schedule of Changes in Net Position – Last Ten Fiscal Years 62

Introductory Section

Financial Section

Statistical Section

2 BJWSA COMPREHENSIVE ANNUAL FINANCIAL REPORT 2017

Net Position at End of Year Graph 62Net Position by Component – Last Ten Fiscal Years 63Ratio Analysis 63Ratio of Outstanding Debt by Type 64Debt Service Coverage Analysis 64

Capital Assets 65Detailed Schedule of Changes in Capital Assets – 65Last Ten Fiscal YearsSchedule of Total Capital Assets – 65Last Ten Fiscal Years

Revenue Capacity 66-71Wholesale and Retail Water Sales Volume Historical 66 Data – Last Ten Fiscal Years Retail Water Sales Volume Historical Data – 66 Last Ten Fiscal Years Wholesale Water Revenues by Area and Average Revenue 67 per Th ousand Gallons (kgal) – Last Ten Fiscal Years Retail Water Revenues by Area and Average Revenue 68per Th ousand Gallons (kgal) – Last Ten Fiscal YearsWastewater Flows and Capacities by Plant – 69Last Ten Fiscal YearsWastewater Customer Base by Plant – Last Ten Fiscal Years 70Wastewater Revenues by Area and Average Revenue 71per Th ousand Gallons (kgal) – Last Ten Fiscal Years

Demographic and Economic Information 72–77Customer Statistics at Fiscal Year-End from 2003 72Billings at Fiscal Year-End from 2003 72Water Sales & Customer History Graph 73Wastewater Sales & Customer History Graph 73Water and Wastewater Ten-Year Rate Comparisons and Graph 74Wholesale Water Rates by Area and Comparison Graph 75Population/Per Capita Income 76Wage/Salary Employment 76Unemployment Rate 76Principal Employers 77

Other Operational Information 78–80Full-time Equivalent Employees by Function 78Ten Largest Wastewater Users 78Ten Largest Water Users 79Insurance in Force 80

Report on Internal Control Over Financial Reporting and 82on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards

Statistical Section—continued

Independent Auditor’s Other Reports Section

Introductory Section


December 6, 2017

To Beaufort-Jasper Water and Sewer Authority Board of Directors and Stakeholders:

Th e management and staff of Beaufort-Jasper Water and Sewer Authority (the Authority) are pleased to present the Comprehensive Annual Financial Report (CAFR) for the fi scal year ended June 30, 2017. Th e Authority is required to publish a complete set of audited fi nancial statements. Th is report fulfi lls that requirement for the fi scal year ended June 30, 2017.

Th e Authority’s management assumes full responsibility for the completeness and reliability of the information contained in this report, based on a comprehensive framework of internal control that it has established for this purpose. Because the cost of internal control should not exceed anticipated benefi ts, the objective is to provide reasonable, rather than absolute, assurance that the fi nancial statements are free of any material misstatements.

Carr, Riggs & Ingram, Certifi ed Public Accountants, has issued an unmodifi ed (“clean”) opinion on the Authority’s fi nancial statements for the year ended June 30, 2017. Th e indep endent auditors report is located at the front of the fi nancial section of this report.

Management’s Discussion and Analysis (MD&A) immediately follows the independent auditors report and provides a narrative introduction, overview, and analysis of the basic fi nancial statements. MD&A complements this letter of transmittal and should be read in conjunction with it.

PROFILE OF BEAUFORT-JASPER WATER AND SEWER AUTHORITY

Th e Authority was created under provisions of Act No. 784 - enacted during the 1954 Session of the General Assembly of the State of South Carolina - as a public, nonprofi t corporation to acquire and distribute supplies of fresh water for industrial and domestic purposes within its service area. During its 1969 Session, the General Assembly enacted Act No. 598, which enlarged the functions and powers of the Authority to include the construction of facilities that provide for the collection, treatment, and disposal of wastewater in thickly populated areas of Beaufort County. In 1971, the General Assembly created the Jasper County Water and Sewer Authority to provide an entity capable of providing water and wastewater service in Jasper County for areas not served by municipal governments. In 1983, the Authority and the Jasper County Water and Sewer Authority were consolidated into the entity now called the Beaufort-Jasper Water and Sewer Authority. Th e Authority was governed by a Board that consisted of nine members appointed by the Governor of South Carolina, upon recommendation of the legislative delegations for Beaufort County and Jasper County. In May 2009, the South Carolina Legislature passed Act S793, which consolidated all past enabling legislation amendments relating to the powers, service area and membership of the Authority and adjusted its powers and duties to recognize the changed environment of the 21st century. As part of the Act, the Board membership was expanded from nine to eleven members. Th e t wo additional members are recommended to the Governor by the Jasper County Delegation. Th e Authority provides direct services to the citizens in the incorporated areas of the City of Beaufort, the Town of Blufft on, the City of Hardeeville, the Town of Port Royal, as well as to areas of unincorporated Beaufort and Jasper counties. Additionally, the Authority indirectly serves thousands of additional citizens in the Beaufort and Hilton Head Island areas through wholesale services provided to other water and sewer utilities.

Th e Authority’s c ustomer b ase a s o f June 3 0, 2 017 w as 5 5,132 r etail w ater a ccounts a nd t he f ollowing s even w holesale w ater c ustomers: Military installations – Naval Hospital, Parris Island Recruit Depot, Marine Corps Air Station Beaufort, Laurel Bay Housing Facility; Utilities – Hilton Head Island PSD, Fripp Island PSD, Harbor Island Utilities, Callawassie/CUC, Inc., Moss Creek/Water Oak Utility, and Warsaw Eustis

6 SNAKE ROAD, OKATIE, SC 29909-3937 Phone 843.987.8100 Fax 843.548.0096

Customer Service 843.987.9200Operations & Maintenance 843.987.8046

Engineering 843.987.8065www.bjwsa.org

Inspire trust and enhance public health

ED SAXON, PE, GENERAL MANAGER 843.987.8041 (o) | 843.263.1924 (c)

5INTRODUCTION

Oaks Water Company. Th ese wholesale customers resell and/or redistribute the Authority’s water to their residents, resulting in total customers directly and indirectly serviced by the Authority in excess of 170,000. Th e Authority’s headquarters are located on Highway 170, approximately thirteen miles south of the City of Beaufort.

Th e Authority provides reliable high quality supplies of potable water used for drinking, irrigation, fi re protection, and other purposes. Th e Chelsea Water Treatment Plant, located on Highway 170 at the Authority’s headquarters, and the Purrysburg Water Treatment Plant, located near the Savannah River north of the City of Hardeeville in Jasper County, are the principal treatment facilities, both utilizing the Savannah River as their source. Ground water systems supplement the main system during peak demand periods and also provide water to Point South and Palm Key in Jasper County.

Th e wastewater system serves 37,372 retail customers and two bulk/wholesale customers. Th e wastewater collection systems consist of gravity pipelines, lift stations, and force mains conveying wastewater to eight (8) treatment plants. Th e three largest wastewater treatment plants are Cherry Point Water Reclamation Facility, Port Royal Island Water Reclamation Facility, and the Hardeeville Wastewater Treatment Plant, with respective capacities of 7.5, 7.5, and 1.01 MGD (millions of gallons per day). Th e additional fi ve plants’ combined capacity is approximately 2.52 MGD. Other wastewater services include industrial pretreatment programs, water reclamation for irrigation, and sludge and septage disposal.

LOCAL ECONOMY

Th e Lowcountry of South Carolina enjoys ranking as a top destination nationally for both vacationers as well as retirees seeking a lower cost of living and warmer winters. Employers also in search of those same attributes are bringing new industry, as well as projects such as the Ocean Terminal in Jasper County, and the sale and development of the Port of Port Royal in Beaufort County. Quality of life is a major driver for the area, which boasts a diversity of waterfront venues and year-round golf, as well as proximity to both Charleston and Savannah. Th ree military installations in Beaufort County contribute $2.2 billion annually in local economic.

Th e Authority’s planned capital improvements seek to remain ahead of anticipated growth. Projects such as the Hardeeville Wastewater Treatment Plant expansion and the City of Beaufort’s Boundary Street enhancement have made the Authority a partner to the booming economic vitality of the region. Other endeavors include a variety of infrastructure replacements, installation of solar energy panels at two sites and the provision of new or improved services to LMI customers.

LONG-TERM FINANCIAL PLANNING

Th e fi nancial management policies of the Authority provide the framework and direction for fi nancial reporting, planning, and decision making by management and the Board and ensuring the Authority maintains its solid fi scal health. Th e Authority’s fi nancial accounting system is based on the full accrual basis in accordance with generally accepted accounting principles in the United States of America (GAAP). Th e Authority has no taxing power. All activities of the Authority are accounted for within a single proprietary (enterprise) fund, which is utilized when the intent of the governing body is that the cost of providing goods or services to the general public be fi nanced primarily through user charges. Operational and maintenance costs, including certain equipment purchases, are funded from customer fees and charges. Th e acquisition and construction of capital assets are funded by capital (cash and systems) contributions from customers, including other utilities and developers, Federal and State grants and loans, and customer revenues.


Th e Authority uses a one-year operating budget process with an additional three-year cash and debt coverage projections included to ensure a longer term planning and management perspective. Cash projections include annual expenditures to operate the system, capital related costs, principal and interest payments on debt, and contributions to specifi c reserves. Under the Authority’s fi nancial policies, four months operating cash is required to be available to support operations and cover debt service. Th e Authority’s Board approves the annual operating budget for recommended rates, expenses, and capital outlay. Th e Authority produces a ten year capital improvement forecast and the Board adopts a three-year capital improvement funding plan that is incorporated into, but produced separately from the operating budget.

MAJOR INITIATIVES

Th e Authority continues its work on the Hardeeville Water Reclamation Facility Upgrade that will increase the plant’s capacity from 1.01 MGD to 2.7 MGD. Th e new plant will utilize fl ow equalization, oxidation ditches, two 85’ diameter clarifi ers and sodium hypochlorite for disinfection. Th e project was awarded an Envision Bronze rating from the Institute for Sustainable Infrastructure. State Utility Contractors was awarded the project and started construction in October 2016. Th e plant is expected to be online summer of 2018.

Th e Authority is underway in implementing a new Beacon Cellular Metering Network that off ers a number of features useful for both the Authority and for its customers. A complete interface with the Authority’s billing system provides enhanced customer data, including geographical demand and largest users. Additionally, the program delivers proactive investigations of high/zero consumption and data/analytics, as well as easier revenue management and compliance reporting. Customers receive faster leak detection, the ability to quantify the eff ects of their water conservation eff orts and an enhanced customer service experience. Over the next three years the Authority plans to spend approximately $8.5 million to ensure all its customers are upgraded to the Beacon technology.

During the year, the Authority developed its Business Continuity Plan (BCP). Th is plan provides the Authority viable strategies for business continuity and continuity of services in the wake of an event that poses an unacceptable risk of business and/or operational disruption. Th e goals of a BCP are to provide the strategies, tools, and necessary information to respond to, recover from, and mitigate damages incurred from a disruption of normal operating conditions. Much of the information in this plan is subject to change over time. As a result, the Authority will annually update strategies, time frames, and resource identifi cation.

AWARDS AND ACKNOWLEDGEMENTS

Organizational Awards

Th e South Carolina Department of Health and Environmental Control (SCDHEC) Facilities Excellence Award is given for achieving excellence in all aspects of operations, maintenance, capital improvement planning and regulatory compliance for all of our wastewater systems. Th e Authority has received this award every year since its inception ten years ago.

Th e National Association of Clean Water Agencies (NACWA) Peak Performance Award was again given to all eight of the Authority’s wastewater facilities. Th e award is given in recognition of wastewater systems for outstanding compliance with National Pollutant Discharge Elimination System (NPDES) permits. In 2017 the Authority received its fi rst Platinum Peak Performance Award for fi ve years of perfect compliance at the Hardeeville Wastewater Treatment Plant.

Th e Partnership for Safe Drinking Water standards exceed both state and federal regulations. Chelsea Water Treatment Plant met Phase III standards for the 15th year. Purrysburg Water Treatment Plant earned the Phase IV President’s Award in 2017.

Th e SCDHEC Area Wide Optimization Program (AWOP) Award is an EPA-sponsored program that recognizes water utilities for continual production of superior quality water based on strict compliance with rigorous standards. Th e Chelsea Water Treatment plant has earned this award for the fourteenth time, and the Purrysburg Water Treatment Plant has met AWOP goals every year since it became operational in 2004.

Th e annual SCDHEC Sanitary Survey was completed with “no defi ciencies detected” for the twelft h consecutive year. Th e survey is an evaluation of critical components of the water system by our state regulators, including treatment plants, wells, tank sites, booster pump stations and distribution system operations.

7INTRODUCTION

Financial Awards

Th e Government Finance Offi cer Association of the United States and Canada (GFOA) awarded a Certifi cate of Achievement for Excellence in Financial Reporting to Beaufort-Jasper Water and Sewer Authority for its comprehensive annual fi nancial report (CAFR) for the fi scal year ended June 30, 2016. Th is was the thirteen consecutive year that the Authority has achieved this prestigious award. In order to be awarded a Certifi cate of Achievement, the Authority must publish an easily readable and effi ciently organized CAFR that satisfi ed both generally accepted accounting principles and applicable legal requirements.

A Certifi cate of Achievement is valid for a period of one year only. Management believes that the current CAFR continues to meet the Certifi cate of Achievement Program’s requirements and is submitting it to the GFOA to determine its eligibility for another certifi cate

Acknowledgements

Th e preparation of this CAFR was made possible by the dedicated service of the entire staff of the Finance Department. We are thankful to all the employees of the Authority for their hard work and dedication. Additionally, we would like to recognize the Authority’s General Manager and Board of Directors for their leadership, support, and continued commitment to excellence.

Respectfully submitted,

Sarah Linkimer, Deputy General Manager - Finance & Administration

9INTRODUCTION

BEAUFORT COUNTYJerry SchulzePersonnel Committee

BEAUFORT COUNTYDonna L. AltmanBoard ChairExecutive Committee – Chair

TOWN OF BLUFFTONMichael L. BellBoard Vice ChairCapital Projects Committee – ChairExecutive Committee –Vice Chair

CITY OF HARDEEVILLEJames N. ScottCapital Projects Committee

JASPER COUNTYLorraine W. BondCapital Projects Committee

JASPER COUNTYDr. William SingletonFinance Committee

TOWN OF RIDGELANDR. Thayer RiversPersonnel Committee

TOWN OF HILTON HEADJames E. BakerPersonnel Committee– Chair

CITY OF BEAUFORTDavid S. LottPersonnel CommitteeExecutive Committee

BEAUFORT COUNTYDonald A. MansonBoard Secretary/Treasurer Finance CommitteeExecutive Committee

TOWN OF PORT ROYALBrandy M. GrayFinance Committee – Chair

Board of Directors

From left : Michael Bell, Jerry Schulze, Donna Altman, David Lott, R. Th ayer Rivers, Donald Manson, Lorraine Bond, William Singleton, James Baker.


NOTE: Divisions are presented alphabetically and the contact manager for each is listed. Th e number of authorized positions in each division is noted next to the division head, with 178 positions total for the entire organization.

Organizational ChartBoard of Directors

General ManagerEd Saxon, P.E. (2)

Deputy General Manager Finance & Administration

Sarah Linkimer (1)

Business Services Will Bettis (7)

Communications Pamela Flasch (2)

Customer Care Linda Tillery (16)

Finance Beth Lowther (5)

Human Resources Allena Lee-Brown (6)

Revenue & Billing Mike Jones (4)

Deputy General Manager Operations & Technical Services

Jeff Boss, P.E. (2)

Engineering Brian Chemsak, P.E. (11)

Field Operations Joe DeVito (64)

Information Systems Kenneth Frazier (8)

Maintenance Al Legare (16)

Treatment Operations Tricia Kilgore, P.E. (34)

Financial Section

12 BJWSA COMPREHENSIVE ANNUAL FINANCIAL REPORT 201712 BJWSA COMPREHENSIVE ANNUAL FINANCIAL REPORT 2017

Independent Auditor’s ReportBeaufort-Jasper Water & Sewer Authority Governing BoardBeaufort, South Carolina

Report on Financial StatementsWe have audited the accompanying fi nancial statements of Beaufort‐Jasper Water & Sewer Authority (the “Authority”) as of and for the years ended June 30, 2017 and 2016, and the related notes to the fi nancial statements, which collectively comprise the Authority’s basic fi nancial statements as listed in the table of contents.

Management’s Responsibility for the Financial StatementsManagement is responsible for the preparation and fair presentation of these fi nancial 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 fi nancial statements that are free from material misstatement, whether due to fraud or error.

Auditor’s ResponsibilityOur responsibility is to express an opinion on these fi nancial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Th ose standards require that we plan and perform the audit to obtain reasonable assurance about whether the fi nancial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the fi nancial statements. Th e procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the fi nancial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the fi nancial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the eff ectiveness of the entity’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of signifi cant accounting estimates made by management, as well as evaluating the overall presentation of the fi nancial statements.

We believe that the audit evidence we have obtained is suffi cient and appropriate to provide a basis for our audit opinion.

OpinionIn our opinion, the fi nancial statements referred to above present fairly, in all material respects, the respective fi nancial position of the Authority, as of June 30, 2017 and 2016, and the respective changes in fi nancial position and, where applicable, cash fl ows thereof for the years then ended in accordance with accounting principles generally accepted in the United States of America.

Other MattersRequired Supplementary Information

Accounting principles generally accepted in the United States of America require that the management’s discussion and analysis on pages 14 ‐ 23 and the schedule of the Authority’s proportionate share of the net pension liability, schedule of the Authority’s contributions to the South Carolina Retirement System – last ten fi scal years, and the schedule of funding progress for the postemployment healthcare plan on page 53 be presented to supplement the basic fi nancial statements. Such information, although not a part of the basic fi nancial statements, is required by the Governmental Accounting Standards Board, who considers it to be an essential part of fi nancial reporting for placing the basic fi nancial 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

13FINANCIAL 13FINANCIAL

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 fi nancial statements, and other knowledge we obtained during our audit of the basic fi nancial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with suffi cient evidence to express an opinion or provide any assurance.

Other Information

Our audit was conducted for the purpose of forming an opinion on the fi nancial statements that collectively comprise the Authority’s basic fi nancial statements. Th e introductory section and statistical section are presented for purposes of additional analysis and are not a required part of the basic fi nancial statements.

Th e supplementary fi nancial data on pages 54 – 57 are the responsibility of management and was derived from and relates directly to the underlying and other records used to prepare the basic fi nancial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic fi nancial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic fi nancial statements or to the basic fi nancial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the supplementary fi nancial data is fairly stated, in all material respects, in relation to the basic fi nancial statements as a whole.

Th e introductory and statistical sections have not been subjected to the auditing procedures applied in the audit of the basic fi nancial statements and, accordingly, we do not express an opinion or provide any assurance on them.

Other Reporting Required by Governmental Auditing StandardsIn accordance with Government Auditing Standards, we have also issued our report dated December 6, 2017, on our consideration of the Authority’s internal control over fi nancial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, grant agreements and other matters. Th e purpose of that report is to describe the scope of our testing of internal control over fi nancial reporting and compliance and the results of that testing, and not to provide an opinion on internal control over fi nancial reporting or on compliance. Th at report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the Authority’s internal control over fi nancial reporting and compliance.

Enterprise, Alabama

December 6, 2017


OverviewTh e following Management’s Discussion and Analysis (MD&A) serves as an introduction to the fi nancial statements of the Beaufort-Jasper Water and Sewer Authority (the Authority) for the fi scal years ended June 30, 2017 and 2016. Th e MD&A represents management’s examination and analysis of the Authority’s fi nancial condition and performance and should be read in conjunction with the fi nancial information of the transmittal letter in the introductory section, the fi nancial statements as presented in the fi nancial section of this report, and the supplementary fi nancial data. Th e fi nancial statements include: statement of net position; statements of revenues, expenses, and changes in net positions; statements of cash fl ows; and notes to the fi nancial statements.

Th e statements of net position present fi nancial information on all of the Authority’s assets, liabilities, and deferred infl ows/outfl ows of resources, with the diff erence reported as net position. Increases and decreases in net position may serve as an indicator of whether the fi nancial position of the Authority is improving or deteriorating.

Th e statements of revenues, expenses, and changes in net position present the results of the business activities and information about how the net position changed during the course of the fi scal year. All changes in net position are reported as soon as the underlying event giving rise to the change occurs, regardless of the timing of the related cash fl ows. Th is statement also provides certain information on the Authority’s cost recovery. Rate setting policies use diff erent methods of cost recovery not fully addressed by generally accepted accounting principles. Th ese policies seek to improve equity among customer classes and to ensure that capital costs are allocated on the basis of long-term capacity needs.

Th e statements of cash fl ows present the cash activities of the Authority segregated in the following three major categories: operating, investing, and capital and related fi nancing activities. Th is statement presents cash receipts and cash disbursement information without consideration of the earnings event, when an obligation arises, or depreciation of capital assets.

Th e notes to the fi nancial statements provide required disclosures and other information essential to fully understand the data provided in the statements. Supplementary information contains additional fi nancial data, such as budgetary comparisons, expenses by classifi cation, and debt service coverage. Although not a required part of the fi nancial statements, this data enhances information provided to users.

Financial Highlights• Financial Position continues to be strong, with adequate cash and debt service coverage. Of the $41.5 million unrestricted net position,

$14.3 million is Board-designated for capital funding and $27.2 million is available to provide for current operations. Unrestricted net position increased approximately $3.3 million, or 9%, from prior year (as compared to an increase of approximately $3.3 million, or 9%, from 2015 to 2016).

• Debt service coverage (excluding capacity fees) increased from 164% to 196% for fi scal year 2017; which continues to remain above the 125% requirement established by the Board. Th is increase in debt service coverage (excluding capacity fees) is largely the result of an increase in revenue during the year. Debt service coverage (including capacity fees) decreased from 189% in prior year to 164%, exceeding the 110% required by the bond covenants.

MANAGEMENT’SDISCUSSION & ANALYSIS

15FINANCIAL

• Total operating revenues for fi scal year 2017 were $57.4 million, an increase of approximately 13.4%, or $6.8 million, over the prior year primarily as a result of an increase in customer usage. Th e Authority reported an increase of 1,632 water customers and 1,472 wastewater customers at year end. Residential water consumption increased 26% or 840,850 kgals (thousands of gallons), while residential wastewater usage increased 30% or 647,200 kgals from prior year. Th e average residential customer’s monthly water consumption in kgals for the year increased from 5.47 to 6.69.

Fiscal year 2016 total operating revenues were $50.6 million, an increase of approximately 2.9%, or $1.4 million, over the prior year primarily as a result of a rate increase combined with customer growth. Th e Authority reported an increase of 1,631 water customers and 1,377 wastewater customers at year end. Residential water consumption decreased 0.2% or 5,000 kgals (thousands of gallons), while residential wastewater usage increased 1.4% or 29,600 kgals from prior year. Th e average residential customer’s monthly water consumption in kgals for the year decreased from 5.65 to 5.47.

• Total operating expenses for fi scal year 2017 were approximately $54.9 million, an increase of 6.8%, or $3.5 million, from the prior year. Depreciation expense accounted for $25.3 million of total operating expense and was an increase of approximately $565 thousand over prior year depreciation. Excluding depreciation, total operating expenses were $29.6 million, an increase of 10.9%, or $2.9 million, from the prior year. Excluding depreciation, water operating expenses increased 13.3%, or $2.0 million, from the prior year, and wastewater operating expenses increased 7.9%, or $918 thousand, from the prior year. Th ese increases are primarily attributed to salaries and wages and expenses associated with Hurricane Matthew.

Fiscal year 2016 total operating expenses were approximately $51.5 million, an increase of 3.4%, or $1.7 million, from the prior year. Depreciation expense accounted for $24.8 million of total operating expense and was an increase of approximately $539 thousand over prior year depreciation. Excluding depreciation, total operating expenses were $26.7 million, an increase of 4.6%, or $1.2 million, from the prior year. Excluding depreciation, water operating expenses increased 5.2%, or $736 thousand, from the prior year, and wastewater operating expenses increased 3.8%, or $425 thousand, from the prior year. Th ese increases are primarily attributed to salaries and wages and professional fees associated with the closing of the 2016A Refunding Revenue Bonds.

• Operating income was $2.4 million for 2017 compared to an operating loss of $850 thousand for 2016, an increase in operating margin of approximately $3.3 million. Th is increase resulted from an increase in water and wastewater revenue from prior year. For fi scal year 2017, $1.94 was generated from operating revenues for every $1.00 expensed (excluding depreciation and non-operating expenses), an increase of $0.04 or 2% from prior year’s operating ratio of $1.90.

Fiscal year 2016 operating loss was $850 thousand compared to $563 thousand operating loss for 2015, a decrease in operating margin of approximately $287 thousand. Th is decrease resulted from an increase in water and wastewater expenses from prior year. For fi scal year 2016, $1.90 was generated from operating revenues for every $1.00 expensed (excluding depreciation and non-operating expenses), a decrease of $0.03 or 2% from prior year’s operating ratio of $1.93.

• Net cash provided by operating activities for 2017 represented 47.8% of operating revenues compared to 49.3% in fi scal year 2016. Th e Authority generated $27.4 million from operations to support capital and fi nancing activities, an increase of $2.5 million or 10% over prior year.

Fiscal year 2016 net cash provided by operating activities represented 49.3% of operating revenues compared to 49.3% in fi scal year 2015. Th e Authority generated $24.9 million from operations to support capital and fi nancing activities, an increase of $708 thousand or 3% over prior year.

• Capacity fees and developer contributions of systems were $4.0 million and $7.8 million, respectively, for fi scal year 2017. Capacity fees decreased $1.0 million, or 21.2%, from prior year. Developer contributions, which were $6.9 million in 2016, increased 12.9% or $900 thousand in the current year. Th e increase in developer contributions is a positive sign that developer activity continues to improve in the area.

Fiscal year 2016 capacity fees and developer contributions of systems were $5.0 million and $6.9 million, respectively. Capacity fees increased $1.8 million, or 57.6%, from prior year. Developer contributions, which were $3.1 million in 2015, increased 120.1% or $3.8 million in the current year.


CONDENSED STATEMENTS OF NET POSITION

Financial Position Th e following comparative condensed Statement of Net Position provides an analysis of the change in fi nancial position from the previous fi scal years:

Total net position as of June 30, 2017 was $310 million, representing an increase of 4.1% from the prior year. Total net position increased by $12.2 million from fi scal year 2016, primarily as a result of an increase in construction in progress. In 2016, total net position increased by $8.3 million or 2.9% from prior year. Th is increase was due to the reduction in debt from scheduled principal payments and the 2016A Refunding Revenue Bonds transaction. Of the $41.5 million unrestricted net position, $14.3 million is Board-designated for capital funding and $27.2 million is available to provide for current operations.

Producing assets decreased a net $4.1 million (compared to a $7.7 million decrease in 2016), which refl ects additions of $7.8 million from developer noncash contributions; $10.2 million capitalized construction in progress (CIP) projects and $3.5 million in capital purchases, as well as a decrease of $25.3 million from depreciation. Major contributed capital additions representing 72% of the total include: Buck Island/Simmonsville Road CDBG ($1.0 million); Blufft on Gateway ($851 thousand); Hampton Lake ($829 thousand); Del Webb ($640 thousand); Shadow Moss ($499 thousand); Island Shoppes ($445 thousand); Palmetto Bluff ($440 thousand); Cypress Ridge ($436 thousand); and Villages at Oyster Bluff ($420 thousand). Th ese developments included pump stations in addition to water and wastewater lines. Th e $3.5 million operating capital purchases consisted of $1.4 million in capitalized meters and transponders, $712 thousand in capitalized engineering salaries, and $1.4 million in equipment purchases and vehicles. Th e Authority disposed of $668 thousand in assets (compared to $564 thousand in 2016). Disposals in fi scal year 2017 primarily consisted of vehicles and equipment.

Construction in progress increased a net of $16.1 million over prior year (compared to a net increase of $3.0 million in 2016). Th e Authority expended $26.3 million on capital assets related to construction projects during fi scal year 2017, with $10.2 million completed and moved to producing assets. Major projects (over $500 thousand) completed during fi scal year 2017 include: Hardeeville waterline replacement ($1.6 million); Boundary Street expansion ($1.3 million); Highway 170 widening project ($726 thousand); CP19 Pump Station rehab and upgrade ($636 thousand); and Mixing and Aeration for Port Royal EQ Tank ($562 thousand).

Of the $23.5 million in construction in progress at the end of fi scal year 2017, $16.5 million is related to the Hardeeville Wastewater Treatment Plant expansion, $937 thousand to the Rehab SS08 Collection System project, and $646 thousand to wastewater pump station replacements. Additional information on capital assets may be found in the footnotes to the fi nancial statements.

June 30, 2016 to 2017 2015 to 20162017 2016 2015 Dollars % Dollars %

Capital assets: Increase (decrease) Increase (decrease) Producing assets $370,796,592 $374,859,638 $382,575,478 $(4,063,046) -1.1% $(7,715,840) -2.0%Construction in progress 23,521,219 7,448,295 4,494,748 16,072,924 215.8% 2,953,547 65.7%

Current assets (including designated & restricted) 56,744,586 48,168,385 42,578,999 8,576,201 17.8% 5,589,386 13.1%Other noncurrent assets 21,956,694 22,940,544 23,828,508 (983,850) -4.3% (887,964) -3.7%

Total assets 473,019,091 453,416,862 453,477,733 19,602,229 4.3% (60,871) 0.0%

Total deferred outfl ows of resources 6,370,245 4,325,595 2,613,802 2,044,650 47.3% 1,711,793 65.5%

Current liabilities 19,997,684 16,939,474 17,902,446 3,058,210 18.1% (962,972) -5.4%Long term liabilities 148,774,216 141,970,187 147,473,450 6,804,029 4.8% (5,503,263) -3.7%

Total liabilities 168,771,900 158,909,661 165,375,896 9,862,239 6.2% (6,466,235) -3.9%

Total deferred infl ows of resources 847,890 1,229,531 1,451,855 (381,641) -31.0% (222,324) -15.3%

Net position:Net investment in capital assets 267,805,915 258,909,868 253,854,486 8,896,047 3.4% 5,055,382 2.0%Restricted for:

Capital activity 414,894 414,829 414,821 65 0.0% 8 0.0%Unrestricted 41,548,737 38,278,568 34,994,477 3,270,169 8.5% 3,284,091 9.4%

Total net position $309,769,546 $297,603,265 $289,263,784 $12,166,281 4.1% $8,339,481 2.9%

17FINANCIAL

Debt and Debt CoverageLong-term liabilities increased $6.8 million net over the prior fi scal year primarily due to draws on the Hardeeville Water Reclamation Facility expansion State Revolving Fund. In 2016, long-term liabilities decreased $5.5 million over 2015 due to principal payments made during the year and the reduction of the Series 2006 Revenue Bonds resulting from the 2016A refunding transaction.

Net position to long-term debt increased from 2.55 for 2016 to 2.58 for 2017. Th is translates to each $1 of long-term debt being represented by $2.58 in net position. Th e Authority believes the ratio is appropriate for its current operations, and it clearly demonstrates the strength of its net position.

In the bond resolutions the Authority covenants and agrees that it will, at all times, prescribe, maintain, and thereaft er collect rates and charges for the services and facilities furnished by the Authority, together with other income, that will yield annual net earnings in the fi scal year equal to at least one hundred ten percent (110%) of the sum of the annual debt service payments for all bonds outstanding. “Net Earnings” is defi ned by the bond resolution to mean, for the period in question, the net operating income of the system (i.e., the Authority) determined in accordance with generally accepted accounting principles, adding back depreciation, and including interest income not restricted to bond construction and cash capital contributions not received by government grants.

Th e rate covenant in the Bond Resolution obligates the Authority to review rates not less than once a year and to revise such rates and charges as necessary to meet the coverage test. Th e Authority further covenants in the bond resolution that it will maintain rates and charges that are at all times suffi cient to provide for the payment of the bonds; to maintain the debt service funds, debt service reserve funds, and any other related funding instruments related to the debt of the system; to provide for the payment of administrative and operational expenses of the system preserving the system in good repair and working order; and to build and maintain a reserve for depreciation of the system.

Although the Bond Resolutions allow the use of capacity fee revenue (i.e., cash capital contributions) in the calculation of debt service coverage, the Authority has adopted a more stringent internal policy of maintaining one hundred and twenty-fi ve percent (125%) debt service coverage without consideration of capacity fee revenue. Revenue bond debt service coverage for 2017 and 2016 was 223% and 197%, respectively, including cash capital contributions, and 196% and 164%, without the contributions. Th e following table presents the required net earnings as defi ned by the bond covenants; actual net earnings, including capital contributions, available for debt service; and total annual debt service. Additional information on long-term debt may be found in the footnotes to the fi nancial statements.

$14,284,753 $16,692,041 $16,129,772

$27,694,846 $29,951,127

$32,674,443

$12,986,139 $15,174,583 $14,663,429

$-

$7,000,000

$14,000,000

$21,000,000

$28,000,000

$35,000,000

2015 2016 2017

NET EARNINGS AVAILABLE FOR DEBT SERVICE

Required Net Earnings Net Earnings Debt Service


RevenuesRevenues from operations fall into three general categories: water service, wastewater service and ancillary charges. Ancillary charges include tap fees, account set up and penalty fees, engineering and inspection services, and charges for other miscellaneous services. Th e Authority has two classes of water and wastewater customers: wholesale and retail, with retail customers further subdivided into residential, commercial, and military.

Th e following condensed statements of revenues, expenses, and changes in net position, shows the results of operations for the current and the prior two fi scal years:

CONDENSED STATEMENTS OF REVENUES, EXPENSES, AND CHANGES IN NET POSITIONTh ree year comparison – year ended June 30,

2017 to 2016 to2017 2016 2015 2016 Actual 2015 Actual

Actual Actual Actual Dollars % Dollars %Revenues: Favorable/(Unfavorable)

Water service revenues $29,531,319 $24,563,544 $24,415,363 $4,967,775 20.2% $148,181 0.6%Other water revenues 3,204,361 3,067,055 3,072,478 137,306 4.5% (5,423) -0.2%Wastewater service revenues 24,350,709 22,457,571 21,441,148 1,893,138 8.4% 1,016,423 4.7%Other wastewater revenues 275,057 508,539 254,019 (233,482) -45.9% 254,520 100.2%

Total operating revenues 57,361,446 50,596,709 49,183,008 6,764,737 13.4% 1,413,701 2.9%Expenses:

Operating, before depreciation, but including franchise feesWater operations 11,096,823 9,988,125 9,707,101 (1,108,698) -11.1% (281,024) -2.9%Wastewater operations 8,663,989 8,363,428 8,238,186 (300,561) -3.6% (125,242) -1.5%

Depreciation - water 11,293,048 10,931,496 10,613,176 (361,552) -3.3% (318,320) -3.0%Depreciation - wastewater 14,051,485 13,848,428 13,627,402 (203,057) -1.5% (221,026) -1.6%General, administrative, customer

service and engineering -water 5,881,978 4,996,528 4,541,340 (885,450) -17.7% (455,188) -10.0%General, administrative, customer

service and engineering -wastewater 3,935,910 3,318,370 3,018,483 (617,540) -18.6% (299,887) -9.9%Total operating expenses 54,923,233 51,446,375 49,745,688 (3,476,858) -6.8% (1,700,687) -3.4%

Operating income (loss) 2,438,213 (849,666) (562,680) 3,287,879 387.0% (286,986) -51.0%Non-operating revenue (expense):

Interest expense (4,052,683) (4,508,604) (4,918,249) 455,921 10.1% 409,645 8.3%Litigation settlement (50,097) - 1,000,000 (50,097) -100.0% (1,000,000) -100.0%Investment Income 920,857 1,055,891 820,975 (135,034) -12.8% 234,916 28.6%Military construction revenue 215,538 239,277 362,169 (23,739) -9.9% (122,892) -33.9%Gain on sale of assets 207,704 109,353 118,821 98,351 89.9% (9,468) -8.0%

Increase (decrease) in net position,before contributions (320,468) (3,953,749) (3,178,964) 3,633,281 91.9% (774,785) -24.4%

Capital contributions:Grants 720,311 350,000 29,500 370,311 105.8% 320,500 1086.4%Capacity fees 3,971,040 5,036,468 3,196,319 (1,065,428) -21.2% 1,840,149 57.6%Developer contributions of systems 7,795,398 6,906,762 3,138,219 888,636 12.9% 3,768,543 120.1%

Total capital contributions 12,486,749 12,293,230 6,364,038 193,519 1.6% 5,929,192 93.2%Increase(decrease) in net position 12,166,281 8,339,481 3,185,074 Net position at beginning of year 297,603,265 289,263,784 303,057,043 Cumulative eff ect of change in accounting principle - - (16,978,333)Total Net Position $309,769,546 $297,603,265 $289,263,784

19FINANCIAL

Total operating revenues were $57.4 million, an increase of 13.4%, or $6.8 million, over the prior year primarily as a result of an increase in customer usage. From fi scal year 2016 to 2017, water customers increased 1,632 or 3.1% (compared to an increase of 1,634 or 3.2% from 2015 to 2016), and wastewater customers increased 1,472 or 4.1% (compared to an increase of 1,377 or 4.0% from 2015 to 2016). Retail residential and commercial water consumption fi gures, as measured by billings, increased 1,025,000 kgals (thousands of gallons) or 23.7% from prior year. Wastewater volume increased 746,000 kgals or 23.8% from prior year.

Th e following chart shows the change in rates for an average customer (defi ned as 7 thousand gallons per month residential water usage) from fi scal year 2014 to fi scal year 2017, utilizing the fi scal year 2014, 2015, 2016, and 2017 rates as adopted.

Th e average usage for residential customers for water was 5.47 thousand gallons in 2016 and 6.69 thousand gallons in 2017, an increase of 22.4%. Th e average usage for residential customers for wastewater was 5.51 thousand gallons in 2016 and 6.86 thousand gallons in 2017, an increase of 24.4%.

$30.22 $31.22 $31.57 $31.87

$48.00 $52.00 $53.00 $53.00

$78.22 $83.22 $84.57 $84.87

$0.00

$25.00

$50.00

$75.00

$100.00

2014 2015 2016 2017

MONTHLY WATER & WASTEWATER BILL FOR 7KGAL RESIDENTIAL CUSTOMER

Water only Wastewater only Total bill


ExpensesTh e Authority operates and maintains a potable water treatment and delivery system and a wastewater collection, treatment, and effl uent disposal system. Th e bulk of the water production occurs at the two surface water treatment plants. Wells are also used for some remote service areas and for peak management in the main system. Th e wastewater system includes nine wastewater treatment plants and associated transmission and disposal facilities.

Total operating expenses were approximately $54.9 million, an increase of 6.8%, or $3.5 million from the prior year. Depreciation expense accounted for $25.3 million of total operating expense and was an increase of approximately $565 thousand over prior year. Excluding depreciation, total operating expenses were $29.6 million, an increase of 10.9% or $2.9 million from the prior year.

Excluding depreciation, water operating expenses increased 13.3% or $2.0 million from the prior year. Th e signifi cant increases from the prior year primarily related to the following expenses:

• Salaries and wages, including overtime related to Hurricane Matthew (increased $545 thousand or 10%);

• Benefi ts and payroll taxes (increased $445 thousand or 19%);

• Hurricane preparation and recovery expenses (increased $195 thousand or 100%).

Excluding depreciation, wastewater operating expenses increased 7.9% or $918 thousand from the prior year. Th e signifi cant increases from the prior year primarily related to the following expenses:

• Salaries and wages, including overtime related to Hurricane Matthew (increased $415 thousand or 9%);

• Benefi ts and payroll taxes (increased $366 thousand or 20%);

• Hurricane preparation and recovery expenses (increased $130 thousand or 100%).

Water expense per kgal (unit cost) excluding depreciation decreased from $2.60 in 2016 to $2.26 in 2017, or 13.1%, due to expenses increasing at a lower rate than consumption this fi scal year. Wastewater expense per kgal (unit cost) excluding depreciation decreased from $3.73 in 2016 to $3.25 in 2017, or 12.9%, due to the increase in wastewater usage.

Operating MarginTh e increase in operating expenses compared to prior year, excluding depreciation, of $2.9 million, combined with the increase in total operating revenue of $6.8 million, resulted in the operating margin to increase by $3.9 million before depreciation. Th e actual 2017 operating income was $2.4 million compared to an operating loss of $850 thousand in 2016, an increase in operating margin of $3.3 million.

For fi scal year 2017, $1.94 was generated from operating revenues for every $1.00 expensed (excluding depreciation and non-operating expenses), which increased by $0.04 or 2% compared to prior year. For comparative purposes, the operating ratios (operating revenues divided by operating expenses less depreciation) were 1.94, 1.90, 1.93, and 1.91 for fi scal years 2017, 2016, 2015, and 2014, respectively.

21FINANCIAL

Cash Flow ActivityCash was generated throughout the year from operating and non-operating activities to provide suffi cient resources to cover operations and debt service. At year end, the unrestricted cash balances were above $13.5 million, which represents four months coverage for both operating expenses and debt service. At the end of the fi scal year unrestricted cash and cash equivalents were $25.2 million, as compared to $18.4 million prior year.

Th e following table shows the Authority’s ability to generate net operating cash. Net cash provided by operating activities is shown both in total dollars and as a percentage of operating revenues.

IN THOUSANDS 2017 to 2016 2016 to 20152017 2016 2015 Variance Variance

Total operating revenues $57,361 $50,597 $49,183 $6,764 $1,414

Net cash provided by operations $27,410 $24,889 $24,249 $2,521 $640

Net operating cash as a % of operating revenue 47.8% 49.2% 49.3%

Th e Authority was able to generate $27.4 million from operations to support capital and fi nancing activities, as a result of an increase in revenue, compared to prior year, which generated $24.9 million from operations. Th e Authority generated $921 thousand from investing activities in current year, compared to $984 thousand in prior year.

Cash payments for construction and acquisition of capital assets increased from $13.0 million in 2016 to $26.3 million in 2017. Th e $26.3 million in capital expenditures were funded by operating funds as well as capital funding from capacity fees, debt, and depreciation (renewal and replacement) funds. Total cash payments for debt service were approximately $47.4 million, compared to $28.1 million in prior year. Of the $28.3 million generated from operating and investing activities, a net of $21.1 million was expended on fi nancing activities, leaving an increase in cash and cash equivalents of $7.2 million for 2017, as compared to an increase of $5.2 million for 2016.

Capacity Fees and GrantsTh e Authority collects water and wastewater capacity fees to ensure that current customers do not bear the entire burden of growth. Th ese fees are paid by all new customers and represent, on a residential equivalent unit basis, the cost of the water and/or wastewater capacity represented by the new account.

On November 16, 2006, the Board adopted amended capacity fees to become eff ective June 1, 2007, as follows:

• Water Capacity $1,200/Residential Equivalent Unit ($3.00/gpd x 400 gallons)

• Wastewater Capacity $2,760/Residential Equivalent Unit ($9.20/gpd x 300 gallons)

Prior to this fee increase, the cost per residential equivalent unit (REU) of water and wastewater was $800 and $2,700, respectively.


In fi scal year 2017 the Authority received $334,106 in Community Development Block Grants for Old Bailey Road sewer extensions and $386,205 in FEMA reimbursements relating to Hurricane Matthew. Th e Authority received $350,000 in grants in fi scal year 2016 for the Hardeeville waterline replacement project.

Capacity fee revenues decreased 21.2% or $1.1 million for 2017, as compared to 2016. Th e Authority restricts the use of capacity fee revenue to capital investment in growth related projects and these fees are reported in the statement of cash fl ows as a capital fi nancing source.

Commercial and residential real estate developers also construct and then convey to the Authority water and wastewater systems that serve their developments. Th ese fees are reported as non-operating revenues and require reporting the amounts through the statement of revenues, expenses and changes in net position. Developers contributed utility systems valued at $7.8 million during fi scal year 2017. Th e developments at Buck Island/Simmonsville Road CDBG of $1.0 million, Blufft on Gateway of $851 thousand, Hampton Lake of $829 thousand, Del Webb of $640 thousand, Shadow Moss of $499 thousand, Island Shoppes of $445 thousand, Palmetto Bluff of $440 thousand, Cypress Ridge of $436 thousand, and Villages at Oyster Bluff of $420 thousand accounted for 72% of system contributions. Developers convey primarily residential systems to the Authority upon completion in accordance with plans and specifi cations approved by the Authority.

Th e following chart depicts capital contribution activity for the last four fi scal years:

$1,137

$3,196

$5,036 $3,971

$2,742 $3,138

$6,907 $7,795

$306 $30 $350 $720

$-

$2,000

$4,000

$6,000

$8,000

$10,000

2014 2015 2016 2017

CAPITAL CONTRIBUTIONS (IN THOUSANDS)

Capacity fees Contributed capital Grants

23FINANCIAL

Capital AssetsDuring the year ended June 30, 2016, the Authority received approximately $7.8 million in contributed capital, spent approximately $26.3 million on the capital improvement program and spent $3.5 million on operating capital (meters, equipment and vehicles). Disposals of assets were recorded in the amount of $668 thousand, with a net gain on disposals of assets relating to equipment, vehicles and scrap sales for the year in the amount of $208 thousand.

During the year ended June 30, 2016, the Authority received approximately $6.9 million in contributed capital, spent approximately $9.5 million on the capital improvement program and spent $3.6 million on operating capital (meters, equipment and vehicles). Disposals of assets were recorded in the amount of $564 thousand, with a net gain on disposals of assets relating to equipment, vehicles and scrap sales for the year in the amount of $109 thousand.

Additional information in changes in capital assets can be found in Note 6 of the fi nancial statements.

Economic Outlook and Final CommentsTh e economic outlook for both Beaufort and Jasper Counties continues to show positive trends in several areas. As evidenced by the increase in developer contributions received by the Authority from prior year, both Beaufort and Jasper Counties are showing increased developer activity, which coincides with economic growth. Both Beaufort and Jasper Counties have experienced an increase of 2% in the number of jobs as of June 30, 2017 compared to prior year. Beaufort and Jasper Counties have seen an increase of 4% and 7%, respectively, in per capita. Population increases in both counties mirror the positive trend the Authority has seen in customer growth.

Th ese positive economic indicators promote the fi nancial health and sustainability of the Authority. Th e Authority is committed to fi scal responsibility, which is our assurance we will judiciously spend, earn and generate funds without placing undue hardship on our ratepayers. Currently the Authority is working on its Strategic Focus Plan for fi scal years 2018-2021. Th e Plan will outline the specifi c areas the Authority will focus on to promote fi scal responsibility over the next several years. Th e Strategic Focus Plan is anticipated to be completed by March 2018.

Questions concerning this report or requests for additional information should be directed to Sarah Linkimer, Deputy General Manager Finance & Administration, at 843-987-8081 or at 6 Snake Road, Okatie, South Carolina, 29909-3937.


FINANCIAL STATEMENTSSTATEMENTS OF NET POSITION

June 302017 2016

Assets Current Assets:

Cash and cash equivalents $25,166,895 $18,423,965

Accounts receivable 6,866,135 6,397,813

Inventory and other assets 2,247,672 1,362,630 Total current assets (unrestricted) 34,280,702 26,184,408

Designated & restricted assets:Cash and cash equivalents - Designated 19,153,989 18,573,075

Cash and cash equivalents - Restricted 3,196,957 3,287,368

Designated receivables 112,938 123,534 Total designated & restricted assets 22,463,884 21,983,977 Total current assets 56,744,586 48,168,385

Noncurrent Assets: Capital assets

Land and land rights 10,427,291 10,427,291

Administrative facilities 11,767,148 11,767,148

Water systems 283,170,016 273,682,665

Wastewater systems 358,054,243 348,697,545

Equipment 15,025,119 12,973,667

Vehicles 5,028,688 5,078,667

Utility plant in service before depreciation 683,472,505 662,626,983

Less accumulated depreciation (312,675,913) (287,767,345)

Net utility plant in service 370,796,592 374,859,638

Construction work in progress 23,521,219 7,448,295 Total capital assets 394,317,811 382,307,933

Other AssetsISM Receivable-Department of the Navy 21,956,694 22,940,544

Total other assets 21,956,694 22,940,544 Total noncurrent assets 416,274,505 405,248,477

Total assets 473,019,091 453,416,862

Deferred outfl ows of resourcesPension contribution subsequent to measurement date 1,264,045 1,098,939

Pension investment return 2,588,565 1,205,682

Pension experience diff erences 227,192 334,210

Changes in proportionate share of plan contributions 478,627 - Deferred amounts on advance refundings 1,811,816 1,686,764

Total deferred outfl ows of resources $6,370,245 $4,325,595

Th e accompanying notes to fi nancial statements are an integral part of these statements.

25FINANCIAL

STATEMENTS OF NET POSITION (continued)June 30

2017 2016Liabilities Current liabilities:

Accounts payable and accrued expenses $4,407,837 $4,427,923

Accrued wages and benefi ts 1,419,897 1,759,724

Revenue bonds 3,102,289 3,127,815

State revolving fund 2,966,239 2,901,350

Notes payable 493,587 470,084 Total current liabilities (unrestricted) 12,389,849 12,686,896

Current liabilities payable from designated & restricted assets:Accounts payable for capital items 4,825,772 1,380,039

Revenue bonds 1,557,711 1,532,185

State revolving fund 279,008 272,135

Interest payable 945,344 1,068,219 Total current liabilities payable from designated & restricted assets 7,607,835 4,252,578 Total current liabilities 19,997,684 16,939,474

Long term liabilities:Revenue bonds 56,837,718 61,582,331

State revolving fund 51,731,275 43,349,458

Notes payable 11,355,885 11,849,471

Net pension liability 21,916,704 18,811,293

Other post retirement benefi ts liability 6,519,000 5,964,000

Unearned revenue-Levy projects 413,634 413,634 Total long term liabilities 148,774,216 141,970,187

Total liabilities 168,771,900 158,909,661

Deferred infl ows of resourcesPension investment return 744,666 1,079,769

Pension experience diff erences 23,803 33,641

Changes in proportionate share of plan contributions 79,421 116,121

Total deferred infl ows of resources 847,890 1,229,531

Net position:Net investment in capital assets 267,805,915 258,909,868

Restricted for:

Capital activity 414,894 414,829

Unrestricted 41,548,737 38,278,568 Total net position $309,769,546 $297,603,265



STATEMENTS OF REVENUES, EXPENSES, AND CHANGES IN NET POSITIONS

Year Ended June 30,2017 2016

Operating revenues:Water: Wholesale $4,078,291 $2,983,939

Retail 24,192,968 20,319,545 Military Retail 1,260,060 1,260,060 Other 3,204,361 3,067,055 Total water revenues 32,735,680 27,630,599

Wastewater: Service 21,123,369 19,230,231 Military Retail 3,227,340 3,227,340 Other 275,057 508,539 Total wastewater revenues 24,625,766 22,966,110 Total operating revenues 57,361,446 50,596,709

Operating expenses:Water: Source of supply 682,336 628,088

Water treatment 4,697,085 4,251,192 Transmission and distribution 4,470,738 4,010,835 Laboratory and testing 447,323 384,868 Franchise fee 799,341 713,142 Depreciation 11,293,048 10,931,496 General, administrative, customer service and other 5,881,978 4,996,528 Total water operating expenses 28,271,849 25,916,149

Wastewater: Collection and transmission 4,154,221 3,915,355 Wastewater treatment 2,898,779 2,936,791 Wastewater disposal 259,152 258,642 Sludge management 367,946 364,870 Laboratory and testing 315,821 274,773 Franchise fee 668,070 612,997 Depreciation 14,051,485 13,848,428 General, administrative, customer service and other 3,935,910 3,318,370 Total wastewater operating expenses 26,651,384 25,530,226 Total operating expenses 54,923,233 51,446,375

Operating income (loss) 2,438,213 (849,666)Non-operating revenue (expense):

Interest expense (4,052,683) (4,508,604)Litigation recovery/(settlement) (50,097) - Investment income 920,657 984,401 Easement revenue 200 71,490 Military Construction Revenue 215,538 239,277 Net gain (loss) on disposal of assets 207,704 109,353

Total non-operating revenue (expense) (2,758,681) (3,104,083)Decrease in net position, before capital contributions (320,468) (3,953,749)Capital contributions:

Grants 720,311 350,000 Capacity fees, net of bad debt 3,971,040 5,036,468 Developer contributions of systems 7,795,398 6,906,762

Total capital contributions 12,486,749 12,293,230 Increase in net position before cumulative eff ect of change in accounting principle 12,166,281 8,339,481 Net position at beginning of year 297,603,265 289,263,784 Net position at end of year $309,769,546 $297,603,265


27FINANCIAL

STATEMENTS OF CASH FLOWS

Year Ended June 30,2017 2016

Cash fl ows from operating activities:Cash received from customers $56,893,124 $50,398,691 Cash paid for wages and benefi ts (14,856,065) (13,266,338)Cash paid to suppliers (14,627,371) (12,242,943)

Net cash provided by operating activities 27,409,688 24,889,410 Cash fl ows from investing activities:

Interest income 920,657 984,401 Net cash provided by investing activities 920,657 984,401

Cash fl ows from capital and related fi nancing activities:Purchase/construction of property, plant, and equipment (26,340,285) (12,999,565)Proceeds from sale of assets 274,069 109,353 Proceeds from issuance of long term debt 46,542,259 13,800,540 Principal payments on debt (43,363,570) (23,536,011)Interest paid on borrowings (4,110,920) (4,604,632)Grant capital contributions 730,907 360,071 Military construction reimbursements 1,199,388 1,127,241 Proceeds from easements 200 71,490 Capacity fees, collected or received 3,971,040 5,036,468

Net cash used in fi nancing activities (21,096,912) (20,635,045)Increase in cash and cash equivalents 7,233,433 5,238,766 Cash and cash equivalents at beginning of year 40,284,408 35,045,642 Cash and cash equivalents at end of year 47,517,841 40,284,408 Reconciliation to statements of net position:

Unrestricted cash and cash equivalents 25,166,895 18,423,965 Designated cash and cash equivalents 19,153,989 18,573,075 Restricted cash and cash equivalents 3,196,957 3,287,368

Total cash and cash equivalents 47,517,841 40,284,408 Reconciliation of operating loss to net cash provided by operating activities:Operating income (loss) 2,438,213 (849,666)Adjustments:

Depreciation 25,344,533 24,779,924 Changes in assets and liabilities

Decrease (increase) in: Receivables, excluding interest income (468,322) (198,018)Inventory and other assets (885,042) (162,673)

Increase (decrease) in: Accounts payable and accrued expenses (378,866) 526,991 Other Post Retirement Benefi ts liability 555,000 562,040 Pension deferred infl ows/outfl ows and liability 804,172 230,812

Net cash provided by operating activities $27,409,688 $24,889,410 Noncash activities:

Developer contributions of systems $7,795,398 $6,906,762 Principal reduction of note payable-Department of the Navy (470,083) (447,698)



June 30, 2017 and 2016

1. Description of EntityTh e Beaufort-Jasper Water and Sewer Authority (“the Authority”) was established by an act of the General Assembly of the State of South Carolina on April 23, 1954. Th e Authority is a special purpose governmental entity engaged in business-type activities. Th e Authority provides water to various areas of Beaufort and Jasper Counties, South Carolina, and the three military installations, and wastewater services to several areas within the two counties.

2. Summary of Signifi cant Accounting PoliciesBASIS OF ACCOUNTING AND PRESENTATIONAll activities of the Authority are accounted for within a single proprietary (“enterprise”) fund. Proprietary funds are used to account for operations that are fi nanced and operated in a manner similar to private business enterprises where the intent of the governing body is that the cost (expenses, including depreciation) of providing goods or services to the general public on a continuing basis be fi nanced or recovered primarily through user charges. Accordingly, the Authority’s fi nancial statements have been prepared on the accrual basis of accounting in accordance with generally accepted accounting principles in the United States of America (“GAAP”).

Th e Authority utilizes the enterprise fund method of accounting whereby revenues and expenses are recognized on the accrual basis using the economic resources measurement focus. Th e Authority applies the provisions of Governmental Accounting Standards Board (“GASB”) Statement No. 62, “Codifi cation of Accounting and Financial Reporting Guidance Contained in Pre-November 30, 1989 FASB and AICPA Pronouncements”, which incorporates into the GASB’s authoritative literature certain accounting and fi nancial reporting guidance that is included in the Financial Accounting Standards Board (“FASB”) Statements and Interpretations, Accounting Principles Board Opinions and Accounting Research Bulletins of the American Institute of Certifi ed Public Accountants’ (“AICPA”) Committee on Accounting Procedures; the provisions of GASB Statement No. 62 additionally eliminates the election provided in Statement No. 20, “Accounting and Financial Reporting for Proprietary Funds and Other Governmental Entities Th at Use Proprietary Fund Accounting” to apply post-November 30, 1989 FASB Statements and Interpretations that do not confl ict with or contradict GASB pronouncements.

Th ese GASB statements require the presentation of Management’s Discussion and Analysis which precedes the fi nancial statements, in addition to several changes to the fi nancial statements such as: (1) the classifi cation of the equity section of the balance sheet into net position with categories of net investment in capital assets, restricted, and unrestricted; (2) the statement of revenues, expenses and changes in net position formatted to report changes in net position in lieu of changes in retained earnings; and (3) additional note disclosures to the fi nancial statements.

Th e accounting and fi nancial reporting treatment applied to the Authority is determined by its measurement focus. Th e transactions of the Authority are accounted for on a fl ow of economic resources measurement focus. Th erefore, all assets and all liabilities associated with the operations are included on the statement of net position.

OPERATING/NONOPERATING REVENUES AND EXPENSESOperating revenues and expenses are those that result from providing water and wastewater services. Non-operating revenues and expenses include capital, fi nancing, investing, and other activities not related to the provision of water and wastewater services.

NOTES TO FINANCIAL STATEMENTS

29FINANCIAL

REVENUE RECOGNITION AND RECEIVABLESAll water and wastewater revenues are recognized on the accrual basis when the related services are provided and the earnings process is complete. Services are provided to customers under a rate structure designed to produce revenue suffi cient for operating and maintenance costs, capital outlay, debt service, reserves and debt service coverage.

Customer receivables represent various volume, availability, impact, and special service fees earned, but not yet collected. Unbilled receivables have been estimated and accrued as revenue from the date of the last reading of the meters based on the billing cycle. Unbilled accounts receivable was approximately $2.82 million and $2.79 million as of June 30, 2017 and 2016, respectively. Th e allowance for doubtful accounts is determined by the following assumptions regarding the aging report: (1) accounts over ninety (90) days are deemed 90% uncollectible and (2) accounts over sixty (60) days are deemed 50% uncollectible. Payment plan amounts included in the delinquent accounts, which are considered collectible based upon the date of last payment, are added back to the allowance. Th e allowance for doubtful accounts was $915 thousand and $885 thousand as of June 30, 2017 and 2016, respectively.

BUDGETARY ACCOUNTINGTh e Authority adopts fl exible annual operating and capital budgets. Budgets are adopted on a basis consistent with GAAP. Th e current operating budget details the Authority’s plans to earn and expend funds for charges incurred for operation, maintenance, certain interest and general functions, and other charges for the fi scal year. Th e Authority budgets depreciation expense based upon prior year actual and estimates of acquisitions and contributed capital. Th e capital budget details the plan to receive and expend cash capital contribution fees, special assessments, grants, borrowings, and certain revenues for capital projects.

Management submits a proposed budget to the Authority’s Board of Directors prior to the May Board meeting. A budget is adopted by resolution prior to July 1. During the year, management is authorized to transfer budgeted amounts between line items within the Authority’s divisions.

CASH EQUIVALENTS, DEPOSITS AND INVESTMENTSCash and cash equivalents are considered to be cash on hand, demand deposits, and short-term investments with original maturities of three months or less from the date of acquisition.

Investments are reported at their fair value. Investments of the Authority must comply with South Carolina Code Section 6-5-10, which include collateralized money market accounts and certifi cates of deposit, U.S. Treasury Bills and Notes, high quality obligations of certain U.S. agencies and instrumentalities, and local government investment pools.

DESIGNATED AND RESTRICTED ASSETSRestricted assets represent cash, investments and receivables maintained in accordance with bond resolutions, loan agreements, grant awards, or other agreements containing externally imposed constraints placed on use of the asset. Designated assets represent cash, investments, and receivables that have been designated formally by Board action for depreciation and contingency activities, and improvements and extensions to the utility systems. Th ese funds are utilized to support the Board’s approved capital improvement program budget, which is approved every three (3) years; includes estimates of anticipated capacity fees and set aside revenues; and projects capital funding required.

Capacity fees, or impact fees, which are held in water and wastewater capital funds, are considered designated assets. Th ese fees are cash contributed capital received in exchange for the purchase of capacity in the system. Th e capacity certifi cate represents ownership of system capacity, and, as such, the Authority must ensure that the funds are utilized for growth infrastructure. Any receivables generated from extension of credit for capacity payments or construction reimbursements from front foot assessments are also considered designated.

During fi scal year 2000, the Authority began accepting letters of credit from certain developers and commercial customers for the payment of capacity fees. Th ere were no receivables for capital contributions under letters of credit recorded in fi scal years ended June 30, 2017 and 2016.


INVENTORIESMaterials and supplies inventories are stated at the lower of average cost or market.

CAPITAL ASSETSProperty acquired with an initial individual cost of $5,000 or more and an estimated useful life (i.e., generates an economic benefi t) in excess of one year are recorded at cost. Major outlays for construction of capital assets and improvements are capitalized at cost. Maintenance and repairs that do not signifi cantly extend the value or life of property, plant, and equipment are expensed as incurred. During fi scal year 1999, the Authority began capitalizing meters as a result of using signifi cantly more radio-read meters versus the less expensive standard meters. Th e Authority capitalizes meter transponder replacements for entire areas where the retrofi t signifi cantly adds to the estimated useful life of all meters for that development.

Assets acquired through contributions from developers or other entities are capitalized at their acquisition value, or at the engineers’ estimated value or cost to construct at the date of the contribution. Utility systems acquired from other service providers are recorded at the lower of the prior service provider’s net book value or fair value, with the cost and accumulated depreciation recorded. Internal engineering costs are capitalized to the extent of direct support and contribution to construction and expansion projects. Costs of studies that directly result in specifi c construction projects are capitalized.

Interest costs are capitalized on the construction of qualifi ed assets, whether or not borrowings exist for such projects, to the extent of amounts funded by debt or operating results. Interest is not capitalized on project costs funded by contributed capital, such as grants, gift s, and impact fees. Interest costs of tax-exempt borrowings are capitalized net of related investment earnings on the proceeds. Interest costs are not capitalized for small projects that will be constructed in less than six months or for those where the amounts are considered immaterial for purposes of interest capitalization.

Annualized depreciation expense, expressed as a percent of net depreciable capital assets, was 6.8% and 6.6% for fi scal years ended June 30, 2017 and 2016, respectively. Th e Authority utilizes the straight-line depreciation method and estimated useful lives of assets in service are as follows: Years Source of supply equipment 15-50 Water treatment plant 10-50 Wastewater treatment plant 10-50 Transmission and distribution systems 10-50 Equipment 3-20 Structures and improvements, including buildings 10-50 Offi ce furniture, equipment and vehicles 3-20 Meters 8

CAPITAL CONTRIBUTIONSContributions are recognized in the statement of revenues, expenses and changes in net position when earned. Contributions include capacity fees, developer contributed utility systems, capital grants, and other supplemental support by other utilities and industrial customers and federal, state and local grants in support of system improvements.

LONG-TERM OBLIGATIONS AND COSTSLong-term obligations are reported at face value, net of applicable premiums and discounts. Premiums, discounts, and gains or losses on advance refunding and defeasances aft er June 30, 1994, are amortized over the life of the bonds. In accordance with GASB Statement No. 65, Items Previously Reported as Assets and Liabilities, issuance costs are expensed in the reporting period in which the costs are incurred.

31FINANCIAL

COMPENSATED ABSENCESTh e Authority accounts for compensated absences by accruing a liability for employees’ compensation for future absences. Compensated absences are classifi ed as a current liability, because 1) each employee is eligible to “cash in” compensated absences up to $1,000 twice annually, 2) it is payable upon voluntary or involuntary termination, and 3) the use of accrued leave is unpredictable.

CLAIMS AND JUDGMENTSTh ese events and obligations are recorded on the accrual basis, when the event occurs and the obligation arises.

DEFERRED OUTFLOWS/INFLOWS OF RESOURCESIn addition to assets, the statement of net position contains a separate section for deferred outfl ows of resources. Th is separate net statement element, deferred outfl ows of resources, represents a consumption of net position that applies to a future period(s) and so will not be recognized as an outfl ow of resources (expense) until then. Th e Authority has deferred charges on advance refundings, which qualify for reporting in this category. Deferred charges on refundings and advance refundings result from the diff erence in the carrying value of refunded debt and its reacquisition price. Th is amount is deferred and amortized over the shorter of the life of the refunded or refunding debt. Th e Authority has deferred outfl ows related to pensions for contributions to the pension plan subsequent to the measurement date. Th ese contributions will be a reduction of the collective net pension liability in the next reporting period. Deferred outfl ows related to pensions for the net diff erence between expected and actual experience are amortized over a four year period. Deferred outfl ows related to pensions for the net diff erence between projected and actual investment earnings are amortized over a fi ve year period. Deferred outfl ows related to changes in proportionate share of plan contributions are amortized over a four year period.

In addition to liabilities, the statement of net position contains a separate section for deferred infl ows of resources. Th is separate net statement element, deferred infl ows of resources, represents an acquisition of net position that applies to a future period(s) and so will not be recognized as an infl ow of resources (revenue) until that time. Th e Authority has deferred infl ows related to pensions for the net diff erence between projected and actual investment earnings, which are amortized over a fi ve year period. Deferred infl ows related to pensions for the net diff erence between expected and actual experience are amortized over a four year period. Deferred infl ows related to changes in proportionate share of plan contributions are amortized over a four year period.

NET POSITIONNet position represents the diff erence between all other elements in a statement of net position and is displayed in the following three components: net investment in capital assets, restricted, and unrestricted. Net investment in capital assets consists of capital assets, net of accumulated depreciation, reduced by the outstanding balances of borrowings attributed to the acquisition, construction or improvement of the related assets (including any related deferred outfl ows or infl ows of resources). Any signifi cant unspent related debt proceeds or deferred infl ows of resources attributable to the unspent amount are not included in the calculation of net investment in capital assets. Th e restricted component consists of restricted assets reduced by liabilities and deferred infl ows of resources related to those assets. Th e unrestricted component of net position is the net amount of the assets, deferred outfl ows of resources, liabilities, and deferred infl ows of resources that are not included in the determination of net investment in capital assets or the restricted component of net position.

GENERAL AND ADMINISTRATIVE EXPENSE ALLOCATIONSFor the purposes of the statement of revenues, expenses and changes in net position, general and administrative expenses were allocated 60% and 40% to the water and wastewater divisions for fi scal years 2017 and 2016. Th is allocation is based on the number of proportionate water to wastewater customers and is reviewed each year during the budgeting process. Th e allocation of 60% and 40% will remain for fi scal year 2018.

USE OF ESTIMATESTh e preparation of fi nancial statements in conformity with GAAP requires management to make certain estimates and assumptions that aff ect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the fi nancial statements and the reported amounts of revenues and expenses during the reporting period. Estimates are used to determine depreciation expense, the allowance for doubtful accounts and certain claims and judgment liabilities, among other accounts. Actual results may diff er from those estimates.


3. Cash, Cash Equivalents, and InvestmentsDeposits include demand deposits and certifi cates of deposit in fi nancial institutions. Th e carrying amounts were $47,517,841 and $40,284,408 at June 30, 2017 and 2016, respectively. Th e bank balances were $48,378,918 and $40,989,767 at June 30, 2017 and 2016, respectively. At June 30, 2017 and 2016, demand deposits and investments were as follows:

Credit Risk

Investments of the Authority must comply with South Carolina Code Section 6-5-10, which states that the Authority may invest money subject to its control and jurisdiction in, obligations of the United States and agencies thereof, general obligations of the State of South Carolina or any of its political units, savings and loan associations to the extent that the same are insured by an agency of the federal government, certifi cates of deposit where the certifi cates are collaterally secured by the U. S. Treasury or its agencies, and repurchase agreements when collateralized by securities as set forth in this section. Th e provisions of South Carolina Code Section 6-5-10 do not impair the power of the Authority to hold funds in deposit accounts with banking institutions as otherwise authorized by law. All investments of the Authority were redeemable on demand without penalty as of June 30, 2017 and 2016, respectively, and are, therefore, classifi ed as cash and cash equivalents.

All deposits that are not U. S. Treasury investment securities held in the Authority’s name are collateralized with securities held by the pledging fi nancial institution’s agent in the Authority’s name. All investments of the Authority are rated Aaa by Moody’s and AA+ by Standard and Poors.

Th e following reconciles deposits and investments to cash and cash equivalents, and investments, as presented in the statement of net position:

June 302017 2016

Disclosures regarding deposits and investments:Cash on Hand $1,200 $1,200 Deposits 44,734,578 37,410,669 Investments 2,782,063 2,872,539

Total $47,517,841 $40,284,408

Statement of net position and cash fl ow statement amounts:Cash and cash equivalents

Unrestricted $25,166,895 $18,423,965 Designated 19,153,989 18,573,075 Restricted 3,196,957 3,287,368

Total cash and cash equivalents $47,517,841 $40,284,408

June 30, 2017 June 30, 2016Interest

YieldBook Balance Bank Balance

Interest Yield

Book Balance Bank Balance

Demand Deposits 0% $(544,597) $- 0% $(304,104) $- Demand Deposits 0% 45,279,175 45,106,642 0% 37,714,773 37,627,014 Total Demand Deposits $44,734,578 $45,106,642 $37,410,669 $37,627,014

Collateral Held by Agent in Authority’s Name $45,934,426 $38,517,844

Trust Accounts - U. S. Gov’t Agencies (Rule 2a-7) 0% 2,782,063 3,272,276 0% 2,872,539 3,362,753 Total Investments $2,782,063 $3,272,276 $2,872,539 $3,362,753

33FINANCIAL

4. Accounts ReceivableAccounts receivable were composed of the following:

June 302017 2016

Wholesale and retail water and wastewater customers:Billed services $4,359,404 $3,946,480 Unbilled services 2,822,095 2,792,805

Allowance for doubtful accounts (914,525) (885,488)Other receivables 599,161 544,016

Total $6,866,135 $6,397,813

5. Designated and Restricted AssetsCertain proceeds of revenue bonds and notes, as well as resources set aside for their repayment or to satisfy certain restrictive covenants of the bond agreements, are classifi ed as restricted assets on the statement of net position because their use is limited by those covenants. Th e “debt service fund” accounts are used to segregate resources accumulated for debt service payments over the next twelve months. Th e “debt service reserve fund” accounts are used to report resources set aside to make up potential future defi ciencies in revenue bond debt service funds or to eff ect whole or partial redemption of the bonds. Bond construction funds are restricted for the purposes of funding capital projects.

Designated assets are established by consistent Board action and are included in the funding sources available for Board approval of the capital improvement program budget. Th e “contingency and depreciation fund” accounts are used to accumulate resources to be used for contingencies and for improvements, betterments, and extensions of the system; the Authority establishes these amounts annually. Th e “capital projects fund” accounts are funds designated by Board approval of the capital projects budget.

Th e components of designated receivables at year end were as follows:

June 302017 2016

Capacity fees receivable $- $- Front Foot Assessment receivable 112,938 123,534 Total $112,938 $123,534


Th e components of the designated and restricted assets, and liabilities payable from designated and restricted assets as of June 30, 2017 and 2016 were as follows:

6. Capital AssetsCapitalized interest for construction reimbursement projects is determined at the repayment date and calculated based on the construction draws for the project, and added to the cost of the project at that time. Interest expense of $58,632 was capitalized in fi scal year 2017. No interest expense was capitalized for fi scal year 2016.

Construction in progress increased a net of approximately $16.1 million primarily as a result of the Hardeeville Wastewater Treatment Plant expansion project and the Rehab SS08 Collection System project. Of the $23.5 million in construction in progress at the end of fi scal year 2017, $16.5 million is related to the Hardeeville Wastewater Treatment Plant expansion, $937 thousand to the Rehab SS08 Collection System project, and $646 thousand to wastewater pump station replacements. Th e Authority expended $26.3 million on capital assets related to construction projects during fi scal year 2017, with approximately $10.2 million completed and moved to producing assets.

Th e Authority had an impairment of an asset in fi scal year 2017. Th e impairment was a pump station (CP87) damaged by Hurricane Matthew and the loss on the asset was $164,548. Th e impaired asset was covered by insurance. Th e insurance funds received by the Authority of $164,548 were netted against the related loss on the asset as both the loss and the insurance recovery occurred in the same fi scal year.

June 30, 2017

Total Designated & Restricted Assets

Liabilities Payable from Designated & Restricted Assets

Excess

Board designated:Contingency and depreciation $2,794,346 $- $2,794,346 Capital projects (incl. receivables) 16,472,581 (4,825,772) 11,646,809

Restricted:Capital projects-Levy 414,894 - 414,894 Debt service and reserves 2,782,063 (2,782,063) -

$22,463,884 $(7,607,835) $14,856,049

June 30, 2016

Total Designated & Restricted Assets

Liabilities Payable from Designated & Restricted Assets

Excess

Board designated:Contingency and depreciation $2,583,052 $- $2,583,052 Capital projects (incl. receivables) 16,113,557 (1,380,039) 14,733,518

Restricted:Capital projects-Levy 414,829 - 414,829 Debt service and reserves 2,872,539 (2,872,539) -

$21,983,977 $(4,252,578) $17,731,399

35FINANCIAL

DETAILED SCHEDULE OF CHANGES IN CAPITAL ASSETS Year ended June 30, 2017

Capital asset activity during the prior two fi scal years was as follows:

O&M Capital System Additions & Improvement

30-Jun-16 Contributions Depreciation Program Disposals 30-Jun-17Capital Assets, not being depreciated:Land and Land Rights $10,427,291 $- $- $- $- $10,427,291 Construction in Progress 7,448,295 - 26,301,394 (10,228,470) - 23,521,219 Total capital assets, not being depreciated 17,875,586 - 26,301,394 (10,228,470) - 33,948,510

Capital Assets, being depreciated:Administrative Fac. & Improv. 11,767,148 - - - - 11,767,148 Source of Supply 12,854,296 - - 272,991 - 13,127,287 Water Treatment Plant 58,566,900 - - 277,019 - 58,843,919 Wastewater Treatment Plant 102,787,952 - - 1,157,017 - 103,944,969 Water System Transmission & Distribution 202,261,469 2,773,212 1,786,791 4,377,338 - 211,198,810 Wastewater System Collection & Transmission 244,216,417 5,022,186 284,938 3,057,105 (164,548) 252,416,098 Wastewater Disposal Systems 1,693,176 - - - - 1,693,176 Other General Equipment 12,973,667 - 1,035,557 1,087,000 (71,105) 15,025,119 Vehicles 5,078,667 - 382,388 - (432,367) 5,028,688 Total capital assets, being depreciated 652,199,692 7,795,398 3,489,674 10,228,470 (668,020) 673,045,214

Less accumulated depreciation:Administrative Fac. & Improv. (3,340,850) - (324,620) - - (3,665,470)Source of Supply (7,785,653) - (449,386) - - (8,235,039)Water Treatment Plant (24,858,124) - (1,779,729) - - (26,637,853)Wastewater Treatment Plant (35,769,222) - (2,924,812) - - (38,694,034)Water System Transmission & Distribution (91,465,133) - (8,199,551) - - (99,664,684)Wastewater System Collection & Transmission (110,319,668) - (9,837,317) - - (120,156,985)Wastewater Disposal Systems (601,119) - (73,210) - - (674,329)Other General Equipment (9,893,007) - (1,031,872) - 4,740 (10,920,139)Vehicles (3,734,569) - (722,854) - 430,043 (4,027,380)Total accumulated depreciation (287,767,345) - (25,343,351) - 434,783 (312,675,913)Total capital assets, being depreciated, net 364,432,347 7,795,398 (21,853,677) 10,228,470 (233,237) 360,369,301 Total capital assets, net $382,307,933 $7,795,398 $4,447,717 $- $(233,237) $394,317,811


DETAILED SCHEDULE OF CHANGES IN CAPITAL ASSETS Year ended June 30, 2016

O&M Capital System Additions & Improvement

30-Jun-15 Contributions Depreciation Program Disposals 30-Jun-16Capital Assets, not being depreciated:Land and Land Rights $10,427,291 $- $- $- $- $10,427,291 Construction in Progress 4,494,748 - 9,526,463 (6,572,916) - 7,448,295 Total capital assets, not being depreciated 14,922,039 - 9,526,463 (6,572,916) - 17,875,586

Capital Assets, being depreciated:Administrative Fac. & Improv. 11,012,701 - - 754,447 - 11,767,148 Source of Supply 12,854,296 - - - - 12,854,296 Water Treatment Plant 57,759,142 - - 807,758 - 58,566,900 Wastewater Treatment Plant 102,154,545 - - 633,407 - 102,787,952 Water System Transmission & Distribution 196,060,669 2,880,957 1,835,345 1,501,874 (17,376) 202,261,469 Wastewater System Collection & Transmission 237,694,486 4,025,805 250,369 2,292,957 (47,200) 244,216,417 Wastewater Disposal Systems 1,693,176 - - - - 1,693,176 Other General Equipment 11,884,333 - 757,860 582,473 (250,999) 12,973,667 Vehicles 4,547,116 - 779,967 - (248,416) 5,078,667 Total capital assets, being depreciated 635,660,464 6,906,762 3,623,541 6,572,916 (563,991) 652,199,692

Less accumulated depreciation:Administrative Fac. & Improv. (3,028,963) - (311,887) - - (3,340,850)Source of Supply (7,249,532) - (536,121) - - (7,785,653)Water Treatment Plant (23,126,518) - (1,731,606) - - (24,858,124)Wastewater Treatment Plant (32,869,794) - (2,899,428) - - (35,769,222)Water System Transmission & Distribution (83,507,322) - (7,975,187) - 17,376 (91,465,133)Wastewater System Collection & Transmission (100,547,949) - (9,779,782) - 8,063 (110,319,668)Wastewater Disposal Systems (525,409) - (75,710) - - (601,119)Other General Equipment (9,315,950) - (828,056) - 250,999 (9,893,007)Vehicles (3,340,840) - (642,145) - 248,416 (3,734,569)Total accumulated depreciation (263,512,277) - (24,779,922) - 524,854 (287,767,345)Total capital assets, being depreciated, net 372,148,187 6,906,762 (21,156,381) 6,572,916 (39,137) 364,432,347 Total capital assets, net $387,070,226 $6,906,762 $(11,629,918) $- $(39,137) $382,307,933

37FINANCIAL

7. Long-Term DebtLong-term debt includes various bonds, loans, and notes payable that have been issued or approved by the Authority for the improvement or acquisition of water and wastewater infrastructure, and defeasance of outstanding debt. General covenants, along with debt service requirements, are disclosed below. See Note 5, designated & restricted assets, for a discussion of the accounts used in accounting for proceeds and reserves pledged as a result of the issuance of the various forms of debt.

Revenue bonds and State Revolving Loan payables are collateralized by an irrevocable pledge of income and revenues derived from the operation of the systems. Th e revenues derived from the operation of the respective systems are to be used for expenses in connection with the administration and operation of the systems.

Th e Authority’s debt instruments contain various covenants and restrictions, which among other things, require the Authority to provide certain fi nancial information and meet certain fi nancial tests. Th e Authority’s bond resolutions require that “net earnings” (as defi ned in the bond resolution) are equal to at least 110% of the annual principal and interest requirements of all series of bonds outstanding in that year. For the years ended June 30, 2017 and 2016, the Authority’s “net earnings” were 223% and 197%, respectively, of its annual principal and interest requirements of all series of bonds. Management believes that the Authority was in compliance with all covenants and restrictions of all debt instruments at June 30, 2017 and 2016.

REVENUE BONDS:Series 2006, Waterworks and Sewer System Improvement and Refunding Bonds, dated November 28, 2006, were issued in the original principal amount of $58,750,000, taking advantage of the favorable interest rate to advance refund the Series 2001 Bonds and to provide funds for the Cherry Point Water Reclamation Facility capital improvement project. Proceeds in the amount of $43,710,291 (along with $526,645 of the Authority’s accrued debt service fund) were deposited into an irrevocable trust with an escrow agent to provide all future debt service payments on the improvement portion of the 2001 Revenue Bonds. Th e refunding transaction resulted in a deferred amount on the refunding of $2,033,488, which was recorded as a deferred outfl ow of resources and is amortized using the eff ective interest method through fi scal year 2026, with amortization recorded in the amount of $684,100 and $293,186 for fi scal years 2017 and 2016, respectively. Th e new bonds were issued at a premium of $2,882,979, which is recorded as an increase in the carrying balance of the bonds payable and is amortized using the eff ective interest method through fi scal year 2031, with amortization recorded in the amount of $108,742 and $141,110 for fi scal years 2017 and 2016, respectively. A portion of these bonds was refunded in fi scal year 2016 with the issuance of the 2016A Revenue Bonds, restating the bond principal amount due for the original bonds as of February 11, 2016 to $37,325,000. In fi scal year 2017 $35,060,000 was refunded with the issuance of the 2016B Revenue Bonds and the remaining balance of $2,265,000 was paid in full.

Series 2010B, Waterworks and Sewer System Refunding Revenue Bonds, dated April 22, 2010, were issued in the original principal amount of $38,065,000, taking advantage of the favorable interest rate to refund the Series 1999 and 2000 Revenue Bonds; Series 1994, 1996, 1998, 1998B, 1993 (COB), 2000B, 2000C, 2000D, 2002A, 2002B, 2003A, 2003B, and 2003C State Revolving Fund Loans; and 2002 City of Hardeeville and 2004 Beaufort County School District Notes Payable. Proceeds in the amount of $5,991,206 (along with $128,239 of the Authority’s accrued debt service fund) were paid to Bank of America, N.A., the holder of the 1999 Bond, to pay the principal, accrued interest, and redemption premium due on the bond as of April 22, 2010. Proceeds in the amount of $5,606,365 (along with $130,767 of the Authority’s accrued debt service fund) were paid to Wachovia Bank, the holder of the 2000 Bond, to pay the principal, accrued interest, and redemption premium due on the bond as of April 22, 2010. All State Revolving Fund Notes are held by the South Carolina Budget and Control Board. Proceeds of $26,597,332 (along with $494,328 in debt service reserve funds and $2,239,955 of the Authority’s accrued debt service fund) were paid to US Bank, trustee, to pay the principal and accrued interested due on all refunded State Revolving Fund Notes as of April 22, 2010. Proceeds in the amount of $1,151,011 were paid to Branch Banking & Trust Co (BB&T), the holder of the 2002 City of Hardeeville Note Payable, to pay the principle, accrued interest, and premium due as of April 22, 2010. Proceeds in the amount of $966,938 were paid to the Beaufort County School District, as holder of the March 2004 note payable, to pay the principal and accrued interest due on the note as of April 22, 2010. Th e refunding transaction resulted in a deferred amount on the refunding of $235,986, which was recorded as a deferred outfl ow of resources and is amortized using the straight-line interest method through fi scal year 2023, with amortization recorded in the amount of $16,856 for fi scal years 2017 and 2016. Th e new bonds were issued at a premium of $2,660,805, which was recorded as an increase in the carrying balance of the bonds payable and is amortized using the eff ective interest method through fi scal year 2023, with amortization recorded in the amount of $180,022 and $215,917 for fi scal years 2017 and 2016, respectively. Payments are due in annual principal installments ranging from $1,060,000 to $4,820,000 through 2023, with interest at 2.5% to 5.0%, due March 1 and September 1.


Series 2016A, Waterworks and Sewer System Refunding Revenue Bonds, dated February 11, 2016, were issued in the original principal amount of $11,880,000, taking advantage of the favorable interest rate to advance refund a portion of the Authority’s Waterworks and Sewer System Improvement and Refunding Revenue Bonds, Series 2006. Proceeds in the amount of $14,370,578 (along with $288,222 of the Authority’s accrued debt service fund) were paid to U.S. Bank, N.A., the holder of the 2006 Bond, to pay the principal, accrued interest, and redemption premium due on a portion of the Series 2006 bond as of February 11, 2016. Th e refunding transaction resulted in a deferred amount on the refunding of $943,645, which was recorded as a deferred outfl ow of resources and is amortized using the straight-line interest method through fi scal year 2031, with amortization recorded in the amount of $58,978 for fi scal years 2017 and 2016. Th e new bonds were issued at a premium of $2,864,185, which was recorded as an increase in the carrying balance of the bonds payable and is amortized using the eff ective interest method through fi scal year 2031, with amortization recorded in the amount of $194,089 and $94,197 for fi scal years 2017 and 2016, respectively. Payments are due in annual principal installments ranging from $175,000 to $2,375,000 through 2031, with interest at 5.0%, due March 1 and September 1.

Series 2016B, Waterworks and Sewer System Refunding Revenue Bonds, dated December 6, 2016, were issued in the original principal amount of $31,725,000, taking advantage of the favorable interest rate to advance refund a portion of the Authority’s Waterworks and Sewer System Improvement and Refunding Revenue Bonds, Series 2006. Proceeds in the amount of $35,804,026 (along with $439,711 of the Authority’s accrued debt service fund) were paid to U.S. Bank, N.A., the holder of the 2006 Bond, to pay the principal, accrued interest, and redemption premium due on a portion of the Series 2006 bond as of December 6, 2016. Th e refunding transaction resulted in a deferred amount on the refunding of $995,609, which was recorded as a deferred outfl ow of resources and is amortized using the straight-line interest method through fi scal year 2025, with amortization recorded in the amount of $110,623 for fi scal year 2017. Th e new bonds were issued at a premium of $4,244,434, which was recorded as an increase in the carrying balance of the bonds payable and is amortized using the eff ective interest method through fi scal year 2025, with amortization recorded in the amount of $511,194 for fi scal year 2017. Payments are due in annual principal installments ranging from $2,145,000 to $5,830,000 through 2025, with interest at 5.0%, due March 1 and September 1.

STATE REVOLVING LOANS PAYABLE TO THE SOUTH CAROLINA STATE BUDGET AND CONTROL BOARD:Series 2000 (COH), Waterworks and Sewer System Improvement Revenue Parity Bonds, originally dated 1990 of the City of Hardeeville (“COH”), were assumed by the Authority as part of the City of Hardeeville acquisition on January 25, 2002, original principal amount of $875,085 (SC Water Pollution Control Revolving Fund Number 1-067-00-427-04). Funds were utilized to upgrade the Hardeeville pump stations. Interest is accrued at 3.75%, with principal and interest due in quarterly payments of $15,586 through October 1, 2021. Th e interest was reduced to 2.25% in fi scal year 2012 resulting in remaining quarterly principal and interest payments of $14,495.

Series 2001B, Waterworks and Sewer System Improvement Revenue Bonds, dated December 5, 2001, were issued in the original principal amount of $875,458 and fi nal draw amount of $814,410 (SC Drinking Water Revolving Loan Fund Number 3-011-02-0720003-06) to provide funds for improvements to the aquifer storage recovery system. Interest, in the amount of $6,005, was capitalized in 2003 when the project was substantially complete and payments became due on the loan. Interest is accrued at 3.75%, with principal and interest due in quarterly payments of $14,623 through March 1, 2023. Th e interest was reduced to 2.25% in fi scal year 2012 resulting in remaining quarterly principal and interest payments of $13,464.

Series 2004, Waterworks and Sewer System Improvement Revenue Bonds, dated June 25, 2004, were issued with an original principal amount of $24,781,500 and fi nal draw amount of $24,263,937 (SC Water Pollution Control Revolving Loan Fund Number X1-093-04-520-17) to provide funds for the Port Royal Island Water Reclamation Facility expansion. Interest, in the amount of $738,442, was capitalized in 2006 when the project was substantially complete and payments became due on the loan. Interest is accrued at 3%, with principal and interest due in quarterly payments of $416,745 through August 1, 2026. Th e interest was reduced to 2.25% in fi scal year 2012 resulting in remaining quarterly principal and interest payments of $395,486.

Series 2005, Waterworks and Sewer System Improvement Revenue Bonds, dated June 24, 2005, were issued with an original principal amount of $2,802,500 (SC Water Pollution Control Revolving Loan Fund Number X1-100-05-520-18), fi nal draw amount of $2,701,734, to provide funds for the Battery Creek crossing and Beaufort River Outfall effl uent line and force main related to the Port Royal Island Water Reclamation Facility. No draws were made as of the payment initiation date, October 1, 2005, and, therefore, no interest was capitalized. Interest is accrued at 3.25%,

39FINANCIAL

with principal and interest due in quarterly payments of $46,061 through October 1, 2025. Th e interest was reduced to 2.25% in fi scal year 2012 resulting in remaining quarterly principal and interest payments of $43,104.

Series 2008, Waterworks and Sewer System Improvement Revenue bonds, dated October 27, 2008, were issued with an original principal amount of $2,561,486 and fi nal draw amount of $2,440,331 (SC Drinking Water Revolving Loan Fund Number 3-034-08-0720003-14) to provide funds for the construction of a Sodium Hypochlorite system and new communications tower at the Chelsea Water Treatment Plant. Interest is accrued at 3.00%, with principal and interest due in quarterly payments of $40,676 through May 1, 2029. Th e interest was reduced to 2.25% in fi scal year 2012 resulting in remaining quarterly principal and interest payments of $38,262.

Series 2009A, Waterworks and Sewer System Improvement Revenue bonds, dated September 23, 2009, were issued with an original principal amount of $3,331,410 and fi nal draw amount of $3,130,266 (SC Drinking Water Revolving Loan Fund Number X3-047-09-0720003-15) to provide funds for the construction of an aquifer storage and recovery system (ASR3) connected to the Authority’s water system. Interest, in the amount of $6,231, was capitalized as of the payment initiation date of June 1, 2010. Interest is accrued at 3.50%, with principal and interest due in quarterly payments of $58,188 through June 1, 2030. Th e interest was reduced to 2.25% in fi scal year 2012 resulting in remaining quarterly principal and interest payments of $49,106.

Series 2010A, Waterworks and Sewer System Improvement Revenue bonds, dated February 26, 2010, were issued with an original principal amount of $13,773,549 and fi nal draw amount of $13,244,155 (SC Drinking Water Pollution Control Revolving Loan Fund Number 1-132-10-520-20) to provide funds for the Consolidation of the Military Wastewater Treatment Plants. Interest, in the amount of $90,154, was capitalized as of the payment initiation date of October 1, 2010. Interest is accrued at 3.50%, with principal and interest due in quarterly payments of $241,696 through October 1, 2030. Th e interest was reduced to 2.25% in fi scal year 2012 resulting in remaining quarterly principal and interest payments of $208,498.

Series 2011A, Waterworks and Sewer System Improvement Revenue bonds, dated September 23, 2011, were issued with an original principal amount of $411,418 and fi nal draw of $411,228 (SC Drinking Water Pollution Control Revolving Loan Fund Number X1-146-11-520-28) to provide funds for the Tansi Village Sewer System Rehabilitation. Interest is accrued at 1.00%, with principal and interest due in quarterly payments of $5,678 through April 1, 2032.

Series 2011B, Waterworks and Sewer System Improvement Revenue bonds, dated September 23, 2011, were issued with an original principal amount of $4,013,125 and fi nal draw of $3,911,884 (SC Drinking Water Pollution Control Revolving Loan Fund Number X1-147-11-520-23) to provide funds for the Rehabilitation of Four Collection Systems. Interest is accrued at 3.00%, with principal and interest due in quarterly payments of $66,892 through August 1, 2032. Th e interest was reduced to 2.25% on December 28, 2011 resulting in remaining quarterly principal and interest payments of $60,858.

Series 2012, Waterworks and Sewer System Improvement Revenue bonds, dated July 27, 2012, were issued with an original principal amount of $14,084,900 and fi nal draw of $14,040,926 (SC Drinking Water Revolving Fund Number 3-052-12-0720003-18) to provide funds for the Purrysburg-Levy Water Line. Interest is accrued at 2.25%, with principal and interest due in quarterly payments of $218,438 through April 1, 2033.

Series 2016C, Waterworks and Sewer System Improvement Revenue bonds, dated September 23, 2016, were issued with an original principal amount of $29,341,480 (SC Water Pollution Control Revolving Loan Fund Number 1-180-16-520-29) to provide funds for the Hardeeville Water Reclamation Facility Expansion. Interest is accrued at 1.67% blended rate, with principal and interest due in quarterly payments of $432,248 through October 1, 2038.

OTHER NOTES PAYABLE:2008 Department of the Navy is an unsecured note payable between the Authority and the US Department of the Navy, in the original amount of $15,039,628 to fi nance the purchase price of the water and wastewater assets on the 4 military installations (Naval Hospital, Parris Island, Air Station and Laurel Bay). Interest is accrued at 5% with monthly payments of principal and interest in the amount of $90,505 through May 31, 2033.


CHANGES IN LONG-TERM LIABILITIESA summary of the long-term liability activity for 2016 and 2017 is presented in the following table:

2016 2017

Description Rate 6/30/2015 Additions Reductions 6/30/2016 Additions Reductions 6/30/2017 CurrentRevenue Bonds:

Series 2006 4.0 to 5.0% $53,140,000 $- $(15,815,000) $37,325,000 $- $(37,325,000) $- $-

Series 2010B 2.5 to 5.0% 16,750,000 - (4,170,000) 12,580,000 - (2,395,000) 10,185,000 2,515,000

Series 2016A 5.0% - 11,880,000 - 11,880,000 - - 11,880,000 -

Series 2016B 5.0% - - - 31,725,000 - 31,725,000 2,145,000

69,890,000 11,880,000 (19,985,000) 61,785,000 31,725,000 (39,720,000) 53,790,000 4,660,000

Add: Bond Premiums 2,044,370 2,864,185 (451,224) 4,457,331 4,244,434 (994,047) 7,707,718 - Total Revenue Bonds 71,934,370 14,744,185 (20,436,224) 66,242,331 35,969,434 (40,714,047) 61,497,718 4,660,000

State Revolving Fund Loans:

Series 2000 (COH) 2.25% 337,159 - (50,819) 286,340 - (51,973) 234,367 53,152

Series 2001B 2.25% 382,034 - (45,643) 336,391 - (46,679) 289,712 47,738

Series 2004 2.25% 15,684,332 - (1,239,456) 14,444,876 - (1,267,580) 13,177,296 1,296,342

Series 2005 2.25% 1,574,365 - (138,155) 1,436,210 - (141,290) 1,294,920 144,496

Series 2008 2.25% 1,833,643 - (112,739) 1,720,904 - (115,297) 1,605,607 117,913

Series 2009A 2.25% 2,494,761 - (141,478) 2,353,283 - (144,688) 2,208,595 147,971

Series 2010A 2.25% 10,740,644 - (597,345) 10,143,299 - (610,899) 9,532,400 624,761

Series 2011A 1.00% 349,864 - (19,285) 330,579 - (19,479) 311,100 19,674

Series 2011B 2.25% 3,472,266 - (166,707) 3,305,559 - (170,490) 3,135,069 174,358

Series 2012 2.25% 12,757,188 - (591,686) 12,165,502 - (605,112) 11,560,390 618,842

Series 2016C 1.67% - - - - 11,627,066 - 11,627,066 -

Total State Revolving Loans 49,626,256 - (3,103,313) 46,522,943 11,627,066 (3,173,487) 54,976,522 3,245,247

Notes Payable

Department of Navy 5.0% 12,767,253 - (447,698) 12,319,555 - (470,083) 11,849,472 493,587

Total Notes Payable 12,767,253 - (447,698) 12,319,555 - (470,083) 11,849,472 493,587

Total Long Term Liabilities 134,327,879 14,744,185 (23,987,235) 125,084,829 47,596,500 (44,357,617) 128,323,712 8,398,834

Less current portion (9,891,012) (8,303,569) (8,398,834)

Total Long-Term Debt $124,436,867 $116,781,260 $119,924,878

41FINANCIAL

REMAINING DEBT PAYMENTSRemaining debt service payments at June 30, 2017, including annual sinking fund payments, are as follows:

CHANGES IN DEFERRED OUTFLOWS OF RESOURCESChanges in deferred amounts on advance refundings for 2016 and 2017 are as follows:

2016 20176/30/2015 Additions Reductions 6/30/2016 Additions Reductions 6/30/2017

Deferred outfl ows of resources:Deferred Amount on Refundings $(1,112,139) $(943,645) $369,020 $(1,686,764) $(995,609) $870,557 $(1,811,816)

Revenue Bonds SRF Loans Notes Payable Total Principal Interest Principal Interest Principal Interest Principal Interest

2018 $4,660,000 $2,620,400 $3,245,247 $944,312 $493,587 $592,473 $8,398,834 $4,157,185 2019 4,910,000 2,412,550 4,251,942 992,070 518,266 567,793 9,680,208 3,972,413 2020 4,515,000 2,193,200 4,656,273 1,262,276 544,180 541,880 9,715,453 3,997,356 2021 4,995,000 1,985,250 4,754,128 1,164,421 571,389 514,671 10,320,517 3,664,342 2022 5,600,000 1,735,500 4,810,358 1,064,707 599,958 486,101 11,010,316 3,286,308 2023-2027 20,265,000 4,526,250 23,777,352 3,784,318 3,480,906 1,949,393 47,523,258 10,259,961 2028-2032 8,845,000 1,132,250 8,772,691 526,965 4,442,621 987,679 22,060,312 2,646,894 2033-2037 - - 708,531 7,644 1,198,565 68,546 1,907,096 76,190

$53,790,000 $16,605,400 $54,976,522 $9,746,713 $11,849,472 $5,708,536 $120,615,994 $32,060,649


DEBT COMPONENTSTh e components of the Statement of Net Position entitled revenue bonds, state revolving fund, and notes payable from current liabilities, current liabilities payable from restricted assets, and long-term liabilities for 2017 and 2016 are as follows:

PremiumsPrincipal and Discounts 6/30/2017

Current liabilities:Revenue Bonds $3,102,289 $- $3,102,289 State Revolving Fund 2,966,239 - 2,966,239 Notes Payable 493,587 - 493,587

6,562,115 6,562,115 Current liabilities payable from designated & restricted assets:

Revenue Bonds 1,557,711 - 1,557,711 State Revolving Fund 279,008 - 279,008

1,836,719 1,836,719 Long-term liabilities:

Revenue Bonds 49,130,000 7,707,718 56,837,718 State Revolving Fund 51,731,275 - 51,731,275 Notes Payable 11,355,885 - 11,355,885

112,217,160 7,707,718 119,924,878 TOTALS $120,615,994 $7,707,718 $128,323,712

PremiumsPrincipal and Discounts 6/30/2016

Current liabilities:Revenue Bonds $3,127,815 $- $3,127,815 State Revolving Fund 2,901,350 - 2,901,350 Notes Payable 470,084 - 470,084

6,499,249 6,499,249 Current liabilities payable from designated & restricted assets:

Revenue Bonds 1,532,185 - 1,532,185 State Revolving Fund 272,135 - 272,135

1,804,320 1,804,320 Long-term liabilities:

Revenue Bonds 57,125,000 4,457,331 61,582,331 State Revolving Fund 43,349,458 - 43,349,458 Notes Payable 11,849,471 - 11,849,471

112,323,929 4,457,331 116,781,260 TOTALS $120,627,498 $4,457,331 $125,084,829

43FINANCIAL

8. Pension Plan PLAN DESCRIPTIONBJWSA is a member of the South Carolina Retirement System (SCRS), which is administered by the South Carolina Public Employee Benefi t Authority (PEBA). Th e Plan is a cost sharing multi-employer defi ned benefi t pension plan, established eff ective July 1, 1945, pursuant to the provisions of Section 9-1-20 of the South Carolina Code of Laws for the purpose of providing retirement allowances and other benefi ts for employees of the state, its public school districts, and political subdivisions. A Comprehensive Annual Financial Report containing fi nancial statements and required supplementary information for the SCRS is publicly available on their website at www.peba.sc.gov, or a copy may be obtained by submitting a request to PEBA.

MEMBERSHIPAll employees of covered employers are required to participate in and contribute to the system as a condition of employment. SCRS covers general employees and teachers and individuals newly elected to the South Carolina General Assembly beginning with the November 2012 general election. An employee member of the system with an eff ective date of membership prior to July 1, 2012, is a Class Two member. An employee member of the system with an eff ective date of membership on or aft er July 1, 2012, is a Class Th ree member.

BENEFITSBenefi t terms are prescribed in Title 9 of the South Carolina Code of Laws. Key elements of the benefi t calculation include the benefi t multiplier, years of service, and average fi nal compensation. A Class Two member who has separated from service with at least fi ve or more years of earned service is eligible for a monthly pension at age 65 or with 28 years credited service regardless of age. A member may elect early retirement with reduced pension benefi ts payable at age 55 with 25 years of service credit. A Class Th ree member who has separated from service with at least eight or more years of earned service is eligible for a monthly pension upon satisfying the Rule of 90 requirement that the total of the member’s age and the member’s creditable service equals at least 90 years. Both Class Two and Class Th ree members are eligible to receive a reduced deferred annuity at age 60 if they satisfy the fi ve or eight year earned service requirement, respectively. An incidental death benefi t is also available to benefi ciaries of active and retired members of employers who participate in the death benefi t program.

Th e annual retirement allowance of eligible retirees or their surviving annuitants is increased by the lesser of 1% or $500 every July 1. Only those annuitants in receipt of a benefi t on July 1 of the preceding year are eligible to receive the increase. Members who retire under the early retirement provision at age 55 with 25 years of service are not eligible for the benefi t adjustment until the second July 1 aft er the date they would have had 28 years of service credit had they not retired.

CONTRIBUTIONSContributions are prescribed in Title 9 of the South Carolina Code of Laws. Th e PEBA Board may increase the SCRS employer and employee contribution rates on the basis of the actuarial valuations. Employee contributions of 8.66% and 8.16% of earnable compensation were made through payroll deductions for fi scal years June 30, 2017 and 2016, respectively. BJWSA, as a Class II employer, was required to contribute at a rate of 11.41%, 10.91%, and 10.75% employee earnable compensation for fi scal years June 30, 2017, 2016, and 2015, respectively. For years ended June 30, 2017, 2016, and 2015, wages of $10,934,654, $9,936,160, and $9,299,952 were subject to retirement, representing 93.32%, 95.37%, and 95.74%, respectively, of total gross salaries. Total salaries were $11,717,123, $10,418,659, and $9,714,173 for 2017, 2016, and 2015, respectively. BJWSA is also required to contribute 0.15% of earnable compensation to the system for group life insurance. BJWSA’s contribution for retirement and life insurance for the fi scal years ended June 30, 2017, 2016 and 2015 were $1,264,045, $1,098,939, and $1,013,693, respectively, which is 11.56%, 11.06%, and 10.90%, respectively, of covered salaries. BJWSA contributed 100% of its annual required contributions for fi scal years 2017, 2016, and 2015.


ACTUARIAL ASSUMPTIONS AND METHODSActuarial valuations involve estimates of the reported amounts and assumptions about the probability of occurrence of events far into the future. Examples include assumptions about future employment, mortality, and future salary increases. Actuarial assumptions and methods used during the annual valuation process are subject to periodic revision, typically with an experience study, as actual results over an extended period of time are compared with past expectations and new estimates are made about the future.

South Carolina state statute requires that an actuarial experience study be completed at least once in each fi ve-year period. An experience report on the SCRS was most recently issued as of July 1, 2015. Th e June 30, 2016, total pension liability, net pension liability, and sensitivity information were determined by the SCRS consulting actuary, Gabriel, Roeder, Smith and Company (GRS) and are based on the July 1, 2015, actuarial valuations, as adopted by the PEBA Board and State Fiscal Accountability Authority (SFAA) which utilized membership data as of July 1, 2015. Th e total pension liability was rolled-forward from the valuation date to the SCRS’s fi scal year ended June 30, 2016, using generally accepted actuarial principles. Information provided in the following schedules is based on the certifi cation provided by GRS.

Th e following provides a summary of the actuarial assumptions and methods used in the July 1, 2015 valuation for SCRS:

Actuarial cost method Entry age normal Investment rate of return 7.5% Projected salary increases 3.5% to 12.5% (varies by service and includes infl ation at 2.75%) Benefi t adjustments lesser of 1% or $500 annually

Th e post-retiree mortality assumption is dependent upon the member’s job category and gender. Th is assumption includes base rates which are automatically adjusted for future improvement in mortality using published Scale AA projected from the year 2000. Assumptions used in the July 1, 2015, valuation for SCRS are as follows:

NET PENSION LIABILITY At June 30, 2017, the Authority reported $21,916,704 for its proportionate share of the collective net pension liability of SCRS. Th e net pension liability of the SCRS plan was measured as of June 30, 2016, and the total pension liability used to calculate the net pension liability was determined by an actuarial valuation as of July 1, 2015, projected forward to June 30, 2016. Th e Authority’s proportionate share of the SCRS net pension liability was based on a projection of the Authority’s long-term share of contributions to the pension plan relative to the projected contributions of all participating employers, actuarially determined. At June 30, 2017, the Authority’s proportionate share of the SCRS plan was 0.102607%.

DISCOUNT RATETh e discount rate used to measure the total pension liability was 7.50%. Th e projection of cash fl ows used to determine the discount rate assumed that the funding policy specifi ed in the South Carolina State Code of Laws will remain unchanged in future years. Based on those assumptions, the System’s fi duciary net position was projected to be a available to make all projected future benefi t payments of current plan members. Th erefore, the long-term expected rate of return on pension plan investments was applied to all periods of projected benefi t payments to determine the total pension liability.

Former Job Class Males Females

Educators PR-2000 Males (with White Collar adjustment) multiplied by 110%

PR-2000 Females (with White Collar adjustment) multiplied by 95%

General Employees and Members of the

General Assembly PR-2000 Males multiplied by 100% PR-2000 Females multiplied by 90%

Public Safety and Firefi ghters PR-2000 Males (with Blue Collar adjustment) multiplied by 115%

PR-2000 Females (with Blue Collar adjustment) multiplied by 115%

45FINANCIAL

LONG-TERM EXPECTED RATE OF RETURNTh e long-term expected rate of return on pension plan investments, as used in the July 1, 2015, actuarial valuation, was based upon the 30 year capital markets outlook at the end of the third quarter 2015. Th e long-term expected rate of returns represent assumptions developed using an arithmetic building block approach primarily based on consensus expectations and market based inputs. Expected returns are net of investment fees.

Th e expected returns, along with the expected infl ation rate, form the basis for the revised target asset allocation adopted beginning January 1, 2106. Th e long-term expected rate of return is produced by weighting the expected future real rates of return by the target allocation percentage and adding expected infl ation and is summarized in the below table. For actuarial purposes, the 7.50% assumed annual investment rate of return used in the calculation of the total pension liability includes a 4.75% real rate of return and a 2.75% infl ation component.

Asset ClassTarget Asset Allocation

Expected Arithmetic Real Rate of Return

Long Term Expected Portfolio Real Rate of Return

Global Equity 43.0%

Global Public Equity 34.0% 6.50% 2.22%Private Equity 9.0% 9.30% 0.84%

Real Assets 8.0%Real Estate 5.0% 4.32% 0.22%Commodities 3.0% 4.53% 0.13%

Opportunistic 20.0%GTAA/Risk Parity 10.0% 3.90% 0.39%HF (Low Beta) 10.0% 3.87% 0.39%

Diversifi ed Credit 17.0%Mixed Credit 5.0% 3.52% 0.17%Emerging Markets Debt 5.0% 4.91% 0.25%Private Debt 7.0% 4.47% 0.31%

Conservative Fixed Income 12.0%Core Fixed Income 10.0% 1.72% 0.17%Cash and Short Duration (Net) 2.0% 0.71% 0.01%

Total Expected Real Return 100.0% 5.10%

Infl ation for Actuarial Purposes 2.75%Total Expected Nominal Return 7.85%


SENSITIVITY ANALYSISTh e following table presents the Authority’s proportionate share of the net pension liability calculated using the discount rate of 7.50%, as well as what the Authority’s proportionate share of the net pension liability would be if it were calculated using a discount rate that is 1.00% lower (6.50%) or 1.00% higher (8.50%) than the current rate:

1% Decrease (6.50%)

Current Discount Rate (7.50%)

1% Increase (8.50%)

Authority’s proportionate share of the net pension liability $27,340,488 $21,916,704 $17,401,608

PENSION PLAN FIDUCIARY NET POSITIONDetailed information about the pension plan’s fi duciary net position is available in the separately issued SCRS fi nancial report.

DEFERRED OUTFLOWS/(INFLOWS) OF RESOURCESFor the year ended June 30, 2017, the Authority recognized pension expense of $1,970,365. At June 30, 2017, the Authority reported deferred outfl ows of resources and deferred infl ows of resources related to the pension from the following sources:

Deferred Outfl ows of Resources

Deferred Infl ows of Resources

Diff erences between expected and actual experience $227,192 $23,803 Net diff erence between projected and actual earnings on pension plan investments 2,588,565 744,666 Changes in proportionate share of plan contributions 478,627 79,421 BJWSA contributions subsequent to the measurement date 1,264,045 - Total $4,558,429 $847,890

Deferred outfl ows of resources of $1,264,045 related to pensions resulting from the Authority’s contributions subsequent to the measurement date will be recognized as a reduction of the net pension liability in the year ended June 30, 2018. Th e following schedule refl ects the amortization of the net balance of remaining deferred outfl ows/(infl ows) of resources at June 30, 2016. Average remaining service lives of all employees provided with pensions through the pension plans at June 30, 2016 was 4.116 years for SCRS.

Measurement Period ending June 30:2017 $625,140 2018 506,385 2019 882,520 2020 432,449 Th ereaft er - Net Balance of deferred Outfl ows/(Infl ows) of Resources $2,446,494

47FINANCIAL

9. Other Postemployment Benefi tsPLAN DESCRIPTIONOther postemployment benefi ts (OPEB) are part of the total compensation off ered to attract and retain the services of qualifi ed employees. Th e Authority provides other postemployment benefi ts under a single-employer benefi t plan. OPEB includes postemployment healthcare, as well as other forms of postemployment benefi ts (i.e., life insurance) when provided separately from a pension plan. Additional expenses for spouse, family, dental, etc., are not covered by the Authority. Th is plan does not issue separate fi nancial statements.

A retiring employee under the South Carolina Budget and Control Board State Retirement Plan, who has at least 5 years of service with the Authority and in a full time, regular position, is eligible to elect post retirement coverage. Benefi t eligibility is as follows:

Employees hired before May 2, 2008

• At age 60 or with 5 years of earned service. Th e participant will pay Funded premium rates if the participant retired with at least 10 years of service.

• At age 55 with 25 years of service, 5 years which must be earned. Participant pays Non-Funded rates until age 60 or would have obtained 28 years of service, whichever is fi rst, at which time they will pay the Funded premium rates.

• At any age with 28 years of service, 5 years must be earned. Participant will pay the Funded premium rates.• At any age with approved disability by SCRS. Th e participant will pay Funded premium rates if the participant retired with at least 10 years

of service.

Employees hired on or aft er May 2, 2008

• Employees hired on or aft er May 2, 2008 will be required to have 25 years of service to be eligible for the full employer subsidy and 15 years of service to be eligible for 50% of the employer subsidy.

Th e medical plans off ered provide hospital, medical and pharmacy coverage. Eligible retirees are able to select from three medical plans as follows:

• SHP Savings Plan• SHP Standard Plan• SHP Medicare Supplement Plan

FUNDING POLICYRetirees pay the full amount of their health and dental premiums. Th e postretirement medical benefi ts are funded on a pay-as-you-go basis with inclusion in the annual expense budget. No assets have been segregated and restricted to provide postretirement benefi ts.

ANNUAL OPEB COSTTh e Authority’s annual OPEB expense is calculated based on the annual required contribution of the employer (ARC), an amount actuarially determined in accordance with the parameters of GASB Statement 45. Th e ARC represents a level of accrual that, if paid on an ongoing basis, is projected to cover the normal cost each year and to amortize any unfunded actuarial liabilities (or funding excess) over a period not to exceed thirty years.


Th e Authority’s annual OPEB cost for the fi scal year 2017 is as follows:

Th e Authority’s annual OPEB cost, the amount contributed by the employer, the percentage of annual OPEB cost contributed to the plan, and the net OPEB obligation for fi scal years 2017, 2016 and 2015 are as follows:

FUNDED STATUS Th e below schedule shows the balance of the Authority’s actuarial accrued liability (AAL):

Under the reporting parameters, the Authority’s health care plan is 0.0% funded with an estimated actuarial accrued liability exceeding actuarial assets by $8,509,679 at June 30, 2014. As of the most recent valuation, the ratio of the unfunded actuarial accrued liability to annual covered payroll is 89.6%.

Funding interest rate 4.50%

Annual required contribution $835,000 Interest on OPEB obligation 268,000 Adjustment to ARC (249,000)Annual OPEB cost (expense) end of year 854,000 Net estimated employer contributions (299,000)Increase in net OPEB obligation 555,000

Net OPEB obligation/(asset) beginning of year $5,964,000 Net OPEB obligation/(asset) end of year $6,519,000

2017 2016 2015

Annual OPEB Cost $854,000 $829,040 $802,960

% of Annual OPEB Cost Contributed 35.0% 32.2% 31.8%

Net OPEB Obligation $6,519,000 $5,964,000 $5,401,960

Actuarial valuation date 6/30/2014Actuarial value of plan assets (a) - Actuarial accrued liability (AAL) (b) $8,509,679 Unfunded actuarial accrued liability (UAAL) (b-a) $8,509,679 Funded ratio (a/b) 0%Estimated covered payroll (c) $9,500,000 UAAL as % of covered payroll ([b-a]/c) 89.6%

49FINANCIAL

Actuarial valuations involve estimates of the value of reported amounts and assumptions about the probability of events in the future. Amounts determined regarding the funded status and the annual required contributions of the Authority’s retiree health care plan are subject to continual revision as actual results are compared to past expectations and new estimates are made about the future. Th e required schedule of funding progress presented as required supplementary information provides multiyear trend information that shows whether the actuarial value of plan assets is increasing or decreasing over time relative to the actuarial accrued liability for benefi ts.

ACTUARIAL METHODS AND ASSUMPTIONSTh e Projected Unit Credit Cost Method is used to calculate the GASB ARC for the Authority’s retiree health care plan. Using the plan benefi ts, the present health premiums and a set of actuarial assumptions, the anticipated future payments are projected. Th e actuarial cost method then provides for a systematic funding for these anticipated payments. Th e yearly ARC is computed to cover the cost of benefi ts being earned by covered members as well as to amortize a portion of the unfunded accrued liability.

Projections of health benefi ts are based on the plan as understood by the Authority and include the types of benefi ts in force at the valuation date and the pattern of sharing benefi t costs between the Authority and the Authority’s employees to that point. Actuarial calculations refl ect a long-term perspective and employ methods and assumptions that are designed to reduce short-term volatility in actuarial accrued liabilities and the actuarial value of assets.

Signifi cant methods and assumptions were as follows:

10. Net Position Net position represents the diff erence between (a) assets and deferred outfl ows of resources and (b) liabilities and deferred infl ows of resources. Th e net position amounts for fi scal years ended June 30, 2017 and 2016 were as follows:

Investment rate of return 4.50% per annum, net of expensesActuarial cost method Projected Unit Credit Cost MethodAmortization method Level as a percentage of employee payrollAmortization period 30-year open amortizationPayroll Growth 3.00% per annumInfl ation 3.00% per annumMedical Trend Initial rate of 6.00%, declining to an

ultimate rate of 4.50% aft er 9 yearsDrug Trend Initial rate of 6.00%, declining to an

ultimate rate of 4.50% aft er 9 years

June 302017 2016

Net investment in capital assetsNet property, plant and equipment in service $394,317,811 $382,307,933 Less: Debt as disclosed in note 7 (120,615,994) (120,627,498)

Premiums on bonds (7,707,718) (4,457,331)Deferred amount on refunding 1,811,816 1,686,764

267,805,915 258,909,868

Restricted for capital activity and debt service:Restricted cash and cash equivalents 3,196,957 3,287,368 Less: Debt service liabilities (2,782,063) (2,872,539)

414,894 414,829

Unrestricted 41,548,737 38,278,568

Total Net Position $309,769,546 $297,603,265


11. Commitments and ContingenciesCONSTRUCTION COMMITMENTSIn the normal course of its business, BJWSA has numerous contracts for construction and other activities related to the capital improvement program that it is committed to complete and pay. As of June 30, 2017, BJWSA had open contracts (purchase orders) of $14,489,388, including $1,651,944 retainage payable, to be paid upon further progress by contractors. As of June 30, 2016, the Authority had open contracts (purchase orders) of $940,051, including $153,310 retainage payable, to be paid upon further progress by contractors.

SERVICE CONTRACTSTh e Authority has entered into various long-term contracts to provide water and wastewater treatment services to retail and wholesale customers, including other local governments and utilities. Contracts vary as to the system’s capacity allocations and periodic revision in service rates.

GRANTSAmounts received or receivable from government agencies are subject to audit and adjustment by those agencies. Th e Authority has never experienced noncompliance and has never been subject to adjustments or refunds as a result of such audits.

12. Risk ManagementTh e Authority is exposed to various risks of loss relating to torts; theft of, damage to, and destruction of assets; errors and omissions; job-related injuries or illnesses to employees; natural disasters and employee health and accident. To insure against casualty risks the Authority is a member of the State of South Carolina Insurance Reserve Fund, a public entity risk pool currently operating as a common risk management and insurance program for local governments in South Carolina.

Th e Authority acquires insurance from the State Accident Fund for job related injury and illness (workers’ compensation) to its employees. Th rough June 30, 2017, medical insurance coverage, encompassing health, dental, life and other medical benefi ts to employees and their dependents, was obtained via the State’s group insurance program.

Th e Authority was a defendant in 10 Frontage Rd., et al v. BJWSA, a class action lawsuit commenced in January 2013 in the Court of Common Pleas in Beaufort County, South Carolina. Th e Authority purchased the South Carolina Ports Authority’s rights, title and interest in the former Port Royal Railroad Right of Way in November of 2009. Th e plaintiff s allege that the Authority has improperly and illegally invaded and clouded the Plaintiff s’ fee ownership in the subsurface and aerial rights associated with the Railroad Right of Way when the Authority placed water and sewer pipes beneath the surface and sold certain aerial rights to third party utility companies. A settlement was approved by the Court of Common Pleas on November 14, 2014. Under the settlement, the Authority has agreed to provide funds in the amount of $4.2 million to resolve the claims brought on behalf of approximately 390 property owners. Th e cost of the settlement, reduced by the coverage allowed under the insurance claim with the SC Budget & Control Board Insurance Reserve Fund, was included in non-operating expenses for 2014. Th e Authority paid $3,407,559 in settlement funds and received additional insurance proceeds of $1,000,000 in fi scal year 2015. Th e Authority paid $67,538 in settlement funds in fi scal year 2016. Th e Authority accrued an additional $50,097 in fi scal year 2017 relating to the fi nal settlement in the Railroad Right of Way. Th e fi nal settlement of $175,000 was paid in October 2017.

51FINANCIAL

13. Major CustomersRevenues from the largest three customers represented 5.70% and 4.60% of total operating revenues for fi scal years 2017 and 2016, respectively.

No sales to a single major customer exceeded 10% of total operating revenues.

14. Department of the NavyIn 1997 the Department of the Navy (Navy) solicited proposals for the privatization of the water and sewer utilities on the Marine Corp Air Station (MCAS), Parris Island Marine Corp Recruit Depot (PI), Laurel Bay Housing (LB), and Naval Hospital Beaufort (NH). Aft er several years of negotiation, the Authority’s proposal was accepted by the Navy in late 2007. In February 2008 the Authority and the Navy signed a 50-year, $252 million contract to privatize the water and sewer utilities eff ective September 1, 2008.

Under the terms of the contract, the Authority purchased the water and sewer facilities and agreed to provide operations and maintenance (O&M) services to the four installations for a set annual charge (facility charge). Th e facility charge is a fl at monthly charge based on cost of service which can be re-determined every three years. On September 1, 2008, the Authority began providing O&M services to the four installations. Th e Authority recognized $1.26 million in Military Retail Water revenue in fi scal years 2017 and 2016. Th e Authority recognized $3.23 million in Military Retail Wastewater revenue in fi scal years 2017 and 2016.

Th e Authority purchased the Navy water and sewer facilities for $15.3 million through a liability payable over 25 years at 5% interest. Payments began in September 2008, will end on August 31, 2033 and are made as a credit (purchase price credit) on the Navy’s monthly Facility charge invoice. During the years ended June 30, 2017 and 2016, the Navy liability was reduced by $470 thousand and $448 thousand, respectively, via purchase price credits with an ending balance of $11.8 million and $12.3 million, respectively.

Th e Navy agreed to pay the Authority $42.1 million to bring the military water and wastewater systems up to industry standards. Th ese construction projects are Initial System Modifi cations (ISMs) and represent a receivable for the Authority. Th e ISM’s will be reimbursed by the Navy in the following manner: (1) $8.97 million at commencement of contract which is the Navy’s share of the completed Port Royal Island Water Reclamation Facility (PRIWRF) plant expansion, (2) $7.32 million when consolidation construction is completed (paid September 2010) and (3) $11.99 million paid over 20 years at 4% interest with partial payments beginning in fi scal year 2012 and full payments starting in fi scal year 2015. In fi scal year 2010, the receivable and unearned revenue for the ISM’s were reduced by a price adjustment of $1.33 million. In fi scal year 2011, the receivable and unearned revenue for the ISM’s were increased by a price adjustment of $959 thousand. Th e Authority received principal payments of $984 thousand and $888 thousand in fi scal years 2017 and 2016, respectively.


15. New Accounting PronouncementsIn June 2015, GASB issued Statement No. 75, Accounting and Financial Reporting for Postemployment Benefi ts Other Th an Pensions. Th is Statement establishes standards for recognizing and measuring liabilities, deferred outfl ows of resources, deferred infl ows of resources, and expense/expenditures. For defi ned benefi t OPEB, this Statement identifi es the methods and assumptions that are required to be used to project benefi t payments, discount projected benefi t payments to their actuarial present value, and attribute that present value to periods of employee service. Note disclosure and required supplementary information requirements about defi ned benefi t OPEB also are addressed. Th is statement is eff ective for fi scal years beginning aft er June 15, 2017.

53FINANCIAL

REQUIRED SUPPLEMENTARY INFORMATION

Schedule of the Authority’s Proportionate Share of the Net Pension Liability*

Authority’s proportion of

the net pension liability

Authority’s proportionate

share of the net pension liability

Authority’s covered-

employee payroll

Authority’s proportionate share of the net pension

liability as a percentage of its covered-employee payroll

Plan fi duciary net positon as a

percentage of the total pension liability

6/30/2014 0.100025% $17,940,917 $9,080,983 197.57% 56.40%6/30/2015 0.100025% 17,220,989 9,299,952 185.17% 59.90%6/30/2016 0.099187% 18,811,293 9,936,160 189.32% 57.00%6/30/2017 0.102607% 21,916,704 10,934,654 200.43% 52.90%

*Schedule is intended to show information for 10 years. Additional years will be displayed as they become available.

Schedule of the Authority’s Contributions to the South Carolina Retirement System - Last 10 Fiscal Years

Contractually required

contribution

Contributions in relation to the contractually

required contribution

Contribution defi ciency

(excess)

Authority’s covered-employee

payroll

Contributions as a percentage of covered-

employee payroll6/30/2008 $755,723 $(755,723) $- $8,205,461 9.21%6/30/2009 876,577 (876,577) - 9,335,223 9.39%6/30/2010 852,666 (852,666) - 9,080,571 9.39%6/30/2011 859,649 (859,649) - 9,154,916 9.39%6/30/2012 906,127 (906,127) - 9,503,163 9.54%6/30/2013 1,015,771 (1,015,771) - 9,582,742 10.60%6/30/2014 962,583 (962,583) - 9,080,983 10.60%6/30/2015 1,013,693 (1,013,693) - 9,299,952 10.90%6/30/2016 1,098,939 (1,098,939) - 9,936,160 11.06%6/30/2017 1,264,045 (1,264,045) - 10,934,654 11.56%

Schedule of Funding Progress for the Postemployment Healthcare Plan

Actuarial Valuation

Date

Actuarial value of

plan assets (a)

Actuarial accrued liability (AAL)

(b)

Unfunded actuarial accrued liability (UAAL)

(b-a)

Funded ratio (a/b)

Estimated covered payroll

(c)

UAAL as % of covered payroll

([b-a]/c)

1/1/2010 $- $9,603,000 $9,603,000 0% $9,400,000 102.2%1/1/2012 - 7,830,678 7,830,678 0% 9,800,000 79.9%

6/30/2014 - 8,509,679 8,509,679 0% 9,500,000 89.6%


Th e following system schedules and analysis are furnished solely as supplementary information and are not required by GAAP.

BUDGETARY COMPARISON SCHEDULEYear ended June 30, 2017

(with comparative amounts for the fi scal year ended June 30, 2016)

SUPPLEMENTARY FINANCIAL DATA

Variance of FY 2017 Actual Data To2017 2016 Budget 2016 Actual

Actual Budget Actual Dollars % Dollars %Operating revenues Favorable (Unfavorable) Civilian wholesale $2,797,910 $1,995,900 $1,872,996 $802,010 40.2% $924,914 49.4%Military wholesale 1,280,381 1,186,600 1,110,943 93,781 7.9% 169,438 15.3%Retail 25,453,028 21,552,000 21,579,605 3,901,028 18.1% 3,873,423 17.9%Other 3,204,361 2,992,970 3,067,055 211,391 7.1% 137,306 4.5%Total water operating revenues 32,735,680 27,727,470 27,630,599 5,008,210 18.1% 5,105,081 18.5%

Wastewater service 24,350,709 22,175,300 22,457,571 2,175,409 9.8% 1,893,138 8.4%Other 275,057 211,000 508,539 64,057 30.4% (233,482) -45.9%Total wastewater operating revenues 24,625,766 22,386,300 22,966,110 2,239,466 10.0% 1,659,656 7.2%Total operating revenues 57,361,446 50,113,770 50,596,709 7,247,676 14.5% 6,764,737 13.4%

Operating expensesWater operating expenses:Source of supply 682,336 621,958 628,088 (60,378) -9.7% (54,248) -8.6%Water treatment 4,697,085 4,312,490 4,251,192 (384,595) -8.9% (445,893) -10.5%Transmission and distribution 4,470,738 3,967,920 4,010,835 (502,818) -12.7% (459,903) -11.5%Laboratory and testing 447,323 427,100 384,868 (20,223) -4.7% (62,455) -16.2%Engineering & construction services, incl. mapping 431,262 406,500 367,081 (24,762) -6.1% (64,181) -17.5%Franchise fee 799,341 714,500 713,142 (84,841) -11.9% (86,199) -12.1%Customer service, including meter reading 1,414,932 1,433,560 1,240,195 18,628 1.3% (174,737) -14.1%General and administrative 4,035,784 3,629,820 3,389,252 (405,964) -11.2% (646,532) -19.1%Total water operating expenses (excl. depr.) 16,978,801 15,513,848 14,984,653 (1,464,953) -9.4% (1,994,148) -13.3%

Wastewater operating expenses:Collection & transmission 4,154,221 3,857,542 3,915,355 (296,679) -7.7% (238,866) -6.1%Wastewater treatment 2,898,779 2,984,360 2,936,791 85,581 2.9% 38,012 1.3%Wastewater disposal 259,152 290,940 258,642 31,788 10.9% (510) -0.2%Sludge management 367,946 352,830 364,870 (15,116) -4.3% (3,076) -0.8%Laboratory and testing 315,821 345,010 274,773 29,189 8.5% (41,048) -14.9%Engineering & construction services, incl. mapping 287,405 270,980 244,740 (16,425) -6.1% (42,665) -17.4%Franchise fee 668,070 613,800 612,997 (54,270) -8.8% (55,073) -9.0%Customer service, including meter reading 939,598 955,970 813,278 16,372 1.7% (126,320) -15.5%General and administrative 2,708,907 2,419,860 2,260,352 (289,047) -11.9% (448,555) -19.8%Total wastewater operating expenses (excl. depr.) 12,599,899 12,091,292 11,681,798 (508,607) -4.2% (918,101) -7.9%

Operating expenses before depreciation 29,578,700 27,605,140 26,666,451 (1,973,560) -7.1% (2,912,249) -10.9%Depreciation - Water 11,293,048 11,154,400 10,931,496 (138,648) -1.2% (361,552) -3.3%Depreciation - Wastewater 14,051,485 13,855,700 13,848,428 (195,785) -1.4% (203,057) -1.5%

Total operating expenses 54,923,233 52,615,240 51,446,375 (2,307,993) -4.4% (3,476,858) -6.8%Operating income (loss) 2,438,213 (2,501,470) (849,666) 4,939,683 197.5% 3,287,879 387.0%Non-operating revenues (expenses), net (2,758,681) (2,658,530) (3,104,083) (100,151) -3.8% 345,402 11.1%Increase (decrease) in net position,before capital contributions (320,468) (5,160,000) (3,953,749) 4,839,532 93.8% 3,633,281 91.9%

Capital contributions 12,486,749 6,110,000 12,293,230 6,376,749 104.4% 193,519 1.6%Increase (decrease) in net position $12,166,281 $950,000 $8,339,481 $11,216,281 1180.7% $3,826,800 45.9%

55FINANCIAL

BUDGETARY COMPARISON SCHEDULE BY FUNCTIONAL CLASSIFICATIONYear ended June 30, 2017

(with comparative amounts for the fi scal year ended June 30, 2016)

Variance of FY 2017 Actual Data To2017 2016 Budget 2016 Actual

Actual Budget Actual Dollars % Dollars %Operating revenues Favorable (Unfavorable)

Civilian wholesale $2,797,910 $1,995,900 $1,872,996 $802,010 40.2% $924,914 49.4%Military wholesale 1,280,381 1,186,600 1,110,943 93,781 7.9% 169,438 15.3%Retail 25,453,028 21,552,000 21,579,605 3,901,028 18.1% 3,873,423 17.9%Other 3,204,361 2,992,970 3,067,055 211,391 7.1% 137,306 4.5%

Total water operating revenues 32,735,680 27,727,470 27,630,599 5,008,210 18.1% 5,105,081 18.5%Wastewater service 24,350,709 22,175,300 22,457,571 2,175,409 9.8% 1,893,138 8.4%Other 275,057 211,000 508,539 64,057 30.4% (233,482) -45.9%

Total wastewater operating revenues 24,625,766 22,386,300 22,966,110 2,239,466 10.0% 1,659,656 7.2%Total operating revenues 57,361,446 50,113,770 50,596,709 7,247,676 14.5% 6,764,737 13.4%

Operating expenses by FunctionSource of supply 682,336 621,958 628,088 (60,378) -9.7% (54,248) -8.6%Water treatment 4,697,085 4,312,490 4,251,192 (384,595) -8.9% (445,893) -10.5%Transmission and distribution 4,470,738 3,967,920 4,010,835 (502,818) -12.7% (459,903) -11.5%Collection & transmission 4,154,221 3,857,542 3,915,355 (296,679) -7.7% (238,866) -6.1%Wastewater treatment 2,898,779 2,984,360 2,936,791 85,581 2.9% 38,012 1.3%Wastewater disposal 259,152 290,940 258,642 31,788 10.9% (510) -0.2%Sludge management 367,946 352,830 364,870 (15,116) -4.3% (3,076) -0.8%Laboratory and testing 763,144 772,110 659,641 8,966 1.2% (103,503) -15.7%Franchise fee 1,467,411 1,328,300 1,326,139 (139,111) -10.5% (141,272) -10.7%Engineering & construction services, incl. mapping 718,667 677,480 611,821 (41,187) -6.1% (106,846) -17.5%Customer service, including meter reading 2,354,530 2,389,530 2,053,473 35,000 1.5% (301,057) -14.7%General and administrative 6,744,691 6,049,680 5,649,604 (695,011) -11.5% (1,095,087) -19.4%

Operating expenses before depreciation 29,578,700 27,605,140 26,666,451 (1,973,560) -7.1% (2,912,249) -10.9%Depreciation 25,344,533 25,010,100 24,779,924 (334,433) -1.3% (564,609) -2.3%

Total operating expenses 54,923,233 52,615,240 51,446,375 (2,307,993) -4.4% (3,476,858) -6.8%Operating income (loss) 2,438,213 (2,501,470) (849,666) 4,939,683 197.5% 3,287,879 387.0%Non-operating revenues (expenses), net (2,758,681) (2,658,530) (3,104,083) (100,151) -3.8% 345,402 11.1%Increase (decrease) in net position,

before capital contributions (320,468) (5,160,000) (3,953,749) 4,839,532 93.8% 3,633,281 91.9%Capital contributions 12,486,749 6,110,000 12,293,230 6,376,749 104.4% 193,519 1.6%Increase (decrease) in net position $12,166,281 $950,000 $8,339,481 $11,216,281 1180.7% $3,826,800 45.9%


Budget SummaryOperating revenues were $57.4 million, an increase of 13.4% or $6.8 million compared to prior year actual, and 14.5% or $7.2 million over budget. Th e increase in revenue over budget is primarily due to an increase in usage by both residential and commercial retail customers.

Total water operating revenues were $32.7 million, an increase of 18.5% or $5.1 million compared to prior year actual, and 18.1% or $5.0 million over budget. Th e overage to budget is due to an increase in usage for both residential and commercial customers. Total usage budgeted for residential customers was 3.1 million kgals compared to actual for this fi scal year of 4.0 million kgals.

Total wastewater operating revenues were $24.6 million, an increase of 7.2% or $1.7 million over prior year actual, and 10.0% or $2.2 million over budget. Th e increase over budget is attributed to an increase in usage for both commercial and residential customers. Total usage budgeted for residential customers was 2.1 million kgals compared to actual for this fi scal year of 2.8 million kgals.

Direct operational costs for water (excluding depreciation) were over budget 9.4% or $1.5 million. Over budget expenditures for water primarily related to the following functions and accounts:

• Water treatment - $385 thousand over budget mainly due to increase in chemicals directly correlating to the increase in customer demand.

• Transmission and distribution - $503 thousand over budget due to overtime relating to Hurricane Matthew, unanticipated maintenance costs, and recognition of the Authority’s proportionate share of the pension expense.

• General and administrative - $406 thousand over budget primarily due to expenses associated with Hurricane Matthew and higher than expected professional fees.

Direct operational costs for wastewater (excluding depreciation) were over budget 4.2% or $509 thousand. Over budget expenditures for wastewater primarily related to the following functions and accounts:

• Collection and transmission - $297 thousand over budget primarily due to overtime relating to Hurricane Matthew and recognition of the Authority’s proportionate share of the pension expense.

• General and administrative - $289 thousand over budget primarily due to expenses associated with Hurricane Matthew and higher than expected professional fees.

Th e increase of total operating expenses (excluding depreciation) of $2.0 million, combined with the increase in operating revenues of $7.2 million compared to prior year, resulted in an increase in the Authority’s operating margin of 2% this fi scal year. As compared to the $1.90 generated in fi scal year 2016, $1.94 was generated for every $1.00 expensed in 2017.

57FINANCIAL

SCHEDULE OF EXPENSES BY NATURAL CLASSIFICATIONBUDGET AND ACTUAL

Year ended June 30, 2017(with comparative actual amounts for the fi scal year ended June 30, 2016)

SCHEDULE OF NET EARNINGS FOR DEBT SERVICE AND DEBT COVERAGEYears ended June 30, 2017 and 2016

2017

Budget Actual

Variance Favorable

(Unfavorable) 2016

Actual

Increase (Decrease) from

2016 to 2017 Salaries and wages $10,249,820 $10,833,697 $(583,877) $9,873,350 9.7%Payroll taxes and benefi ts 4,502,428 5,041,712 (539,284) 4,231,241 19.2%Repairs and maintenance 2,331,642 2,613,062 (281,420) 2,396,888 9.0%Supplies 1,886,260 2,112,244 (225,984) 1,924,007 9.8%Professional services 1,201,600 1,411,489 (209,889) 1,228,275 14.9%Utilities 3,819,160 3,549,319 269,841 3,615,917 -1.8%Operating leases, fees, memberships 1,049,030 1,058,692 (9,662) 938,992 12.7%Franchise fees, licenses and permits 1,440,670 1,579,566 (138,896) 1,443,856 9.4%Safety training, supplies & services 75,580 75,345 235 68,289 10.3%Travel and training 235,350 198,119 37,231 191,245 3.6%Insurance 390,800 406,720 (15,920) 406,062 0.2%Other expense 422,800 698,735 (275,935) 348,329 100.6%Depreciation expense 25,010,100 25,344,533 (334,433) 24,779,924 2.3%Before interest expense & amortization 52,615,240 54,923,233 (2,307,993) 51,446,375 6.8%Interest expense and amortization 4,078,770 4,052,683 26,087 4,508,604 Total expenses $56,694,010 $58,975,916 $(2,281,906) $55,954,979

2017 2016

Operating income (loss) $2,438,213 $(849,666)

Adjustments to derive net earnings:Depreciation expense 25,344,533 24,779,924 Contributed capital - cash 3,971,040 5,036,468 Interest income, excluding bond interest income 920,657 984,401

Net earnings per bond resolution $32,674,443 $29,951,127

Total debt service paid $14,663,429 $15,174,583

Debt coverage 2.23 1.97

Debt coverage without capacity fees 1.96 1.64

Statistical Section


STATISTICAL CONTENTS

Th ese schedules contain trend information showing the changes in the Authority’s fi nancial performance over time, the aff ordability of current levels of outstanding debt and the Authority’s ability to manage debt in the future.

Th ese schedules contain infrastructure data which shows how the Authority’s fi nancial reports relate to its activities.

Th ese schedules contain information identifying the factors aff ecting the Authority’s ability to generate revenue.

Th ese schedules off er demographic and economic indicators showing the environment in which the Authority operates.

Th ese schedules contain operational and service information to convey how the Authority’s fi nancial reports relate to its services.

61-64

65

66-71

72-77

78-80

Financial Trends and Debt Capacity

Capital Assets

Revenue Capacity

Demographic and Economic Information

Other OperationalInformation

61STATISTICAL

SCH

EDU

LE O

F CH

AN

GES

IN R

EVEN

UES

AN

D E

XPEN

SES,

AN

D D

EBT

SERV

ICE

COV

ERAG

ELa

st te

n fi s

cal y

ears

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

Ope

ratin

g re

venu

eW

holes

ale w

ater

$3,

767,

300

$3,

559,

950

$2,

919,

396

$3,

334,

072

$3,

743,

344

$3,

374,

870

$3,

138,

992

$3,

426,

385

$2,

983,

939

$4,

078,

291

Reta

il w

ater

18,

796,

242

19,

068,

133

18,

498,

052

20,

375,

730

20,

773,

081

19,

845,

166

20,

004,

497

20,

988,

978

21,

579,

605

25,

453,

028

Reta

il se

wer

12,

972,

288

16,

124,

828

16,

475,

026

17,

071,

938

19,

084,

644

19,

124,

744

19,

655,

554

21,

441,

148

22,

457,

571

24,

350,

709

Oth

er re

venu

e 2

,802

,724

1

,960

,584

2

,624

,371

2

,145

,156

2

,198

,266

2

,393

,179

3

,242

,743

3

,326

,497

3

,575

,594

3

,479

,418

3

8,33

8,55

4 4

0,71

3,49

5 4

0,51

6,84

5 4

2,92

6,89

6 4

5,79

9,33

5 4

4,73

7,95

9 4

6,04

1,78

6 4

9,18

3,00

8 5

0,59

6,70

9 5

7,36

1,44

6 O

pera

ting

expe

nse

Wat

er Sour

ce o

f sup

ply

505

,623

5

55,5

20

501

,527

5

33,5

38

618

,147

5

55,6

71

578

,280

5

87,7

04

628

,088

6

82,3

36

Wat

er tr

eatm

ent

3,8

74,6

57

4,1

90,5

75

3,5

64,3

70

3,9

53,6

12

4,1

90,5

73

4,2

23,4

77

4,0

61,3

99

4,2

56,8

22

4,2

51,1

92

4,6

97,0

85

Tran

smiss

ion

and

distr

ibut

ion

3,5

77,6

94

3,1

74,0

85

3,0

32,9

44

3,2

87,6

14

3,6

58,7

77

3,4

61,5

89

3,4

95,8

58

3,7

52,2

10

4,0

10,8

35

4,4

70,7

38

Labo

rato

ry an

d te

sting

312

,074

3

30,6

04

322

,716

3

28,2

79

341

,217

3

64,6

99

358

,114

4

38,3

68

384

,868

4

47,3

23

Fran

chise

fee

581

,427

5

76,7

23

585

,638

6

03,1

69

620

,100

6

37,5

16

645

,787

6

71,9

97

713

,142

7

99,3

41

Dep

recia

tion

8,4

46,0

36

9,4

77,4

09

9,5

39,7

69

9,8

77,1

91

10,

132,

598

10,

297,

106

10,

270,

990

10,

613,

176

10,

931,

496

11,

293,

048

Gen

eral

and

adm

inist

rativ

e 3

,852

,378

4

,619

,543

4

,727

,837

4

,433

,291

4

,524

,092

4

,790

,255

4

,465

,804

4

,541

,340

4

,996

,528

5

,881

,978

W

aste

wat

erCo

llect

ion

and

trans

miss

ion

3,0

13,9

87

3,3

59,5

29

3,1

48,0

77

3,1

90,3

01

3,4

09,1

70

3,5

25,9

64

3,5

10,0

61

3,8

01,9

94

3,9

15,3

55

4,1

54,2

21

Was

tew

ater

trea

tmen

t 2

,778

,744

3

,035

,845

2

,875

,273

2

,781

,765

2

,893

,497

2

,866

,574

2

,686

,591

2

,947

,760

2

,936

,791

2

,898

,779

W

aste

wat

er d

ispos

al 1

94,5

20

211

,795

1

96,8

00

251

,607

2

22,7

31

171

,846

2

47,0

53

258

,804

2

58,6

42

259

,152

Sl

udge

man

agem

ent

227

,617

2

97,9

86

321

,882

3

33,7

22

321

,885

3

50,7

59

297

,313

3

79,7

19

364

,870

3

67,9

46

Labo

rato

ry an

d te

sting

352

,539

3

72,4

72

352

,528

3

74,3

36

377

,156

3

96,1

48

294

,310

2

73,3

14

274

,773

3

15,8

21

Fran

chise

fee

426

,767

4

41,6

50

456

,017

4

65,3

77

489

,156

5

17,3

73

536

,290

5

76,5

95

612

,997

6

68,0

70

Dep

recia

tion

9,6

92,1

06

11,

645,

562

12,

588,

218

12,

794,

708

13,

241,

478

13,

317,

619

13,

401,

852

13,

627,

402

13,

848,

428

14,

051,

485

Gen

eral

and

adm

inist

rativ

e 2

,564

,795

3

,059

,600

3

,164

,994

2

,969

,669

3

,047

,829

3

,186

,531

2

,978

,723

3

,018

,483

3

,318

,370

3

,935

,910

4

0,40

0,96

4 4

5,34

8,89

8 4

5,37

8,59

1 4

6,17

8,17

9 4

8,08

8,40

6 4

8,66

3,12

7 4

7,82

8,42

5 4

9,74

5,68

8 5

1,44

6,37

5 5

4,92

3,23

3

Ope

ratin

g in

com

e (2

,062

,410

) (4

,635

,403

) (4

,861

,746

) (3

,251

,283

) (2

,289

,071

) (3

,925

,168

) (1

,786

,639

) (5

62,6

80)

(849

,666

) 2

,438

,213

Ad

d no

n op

erat

ing

reve

nues

:In

vestm

ent i

ncom

e 1

,603

,877

3

09,0

22

56,

627

61,

600

372

,869

3

49,8

51

341

,168

8

20,6

29

984

,401

9

20,6

57

Capa

city F

ees -

cash

6,9

48,5

06

2,1

74,5

51

629

,060

7

64,6

79

1,8

57,5

18

1,0

27,9

50

1,1

36,8

17

3,1

96,3

19

5,0

36,4

68

3,9

71,0

40

Add

depr

eciat

ion

18,

138,

142

21,

122,

971

22,

127,

988

22,

671,

899

23,

374,

076

23,

614,

725

23,

672,

842

24,

240,

578

24,

779,

924

25,

344,

533

Net

inco

me a

vaila

ble f

or

debt

serv

ice $

24,6

28,1

15

$18

,971

,141

$

17,9

51,9

28

$20

,246

,895

$

23,3

15,3

92

$21

,067

,358

$

23,3

64,1

88

$27

,694

,846

$

29,9

51,1

27

$32

,674

,443

Ac

tual

annu

al de

bt se

rvice

on

deb

t $

12,3

41,6

82

$11

,973

,349

$

10,7

88,2

89

$12

,469

,603

$

12,3

39,2

00

$12

,871

,730

$

13,4

89,2

21

$12

,986

,139

$

15,1

74,5

83

$14

,663

,429

Pr

incip

al an

d in

tere

st co

vera

ge

on d

ebt

2.0

0 1

.58

1.6

6 1

.62

1.8

9 1

.64

1.7

3 2

.13

1.9

7 2

.23

Requ

ired

cove

rage

per

bon

d 1

.10

1.1

0 1

.10

1.1

0 1

.10

1.1

0 1

.10

1.1

0 1

.10

1.1

0 Pr

incip

al an

d in

tere

st co

vera

ge

on d

ebt w

/o C

C fe

es (1

) 1

.43

1.4

0 1

.61

1.5

6 1

.74

1.5

6 1

.65

1.8

9 1

.64

1.9

6

(1)

Th es

e fi g

ures

repr

esen

t the

actu

al de

bt se

rvice

pai

d by

the A

utho

rity (

exclu

ding

non

parit

y) an

d th

e ass

ociat

ed p

rincip

al an

d in

tere

st co

vera

ge ra

tio d

urin

g th

e fi sc

al ye

ars n

oted

.


SCH

EDU

LE O

F CH

AN

GES

IN N

ET P

OSI

TIO

NLa

st te

n fi s

cal y

ears

2008

2009

2010

2011

2012

2013

2014

2015

*20

1620

17

Ope

ratin

g in

com

e $

(2,0

62,4

10)

$(4

,635

,403

) $

(4,8

61,7

46)

$(3

,251

,283

) $

(2,2

89,0

71)

$(3

,925

,168

) $

(1,7

86,6

39)

$(5

62,6

80)

$(8

49,6

66)

$2,

438,

213

Non

-ope

ratin

g re

venu

e (ex

pens

e) (4

,147

,670

) (3

,028

,876

) (3

,996

,707

) 1

5,15

7,10

4 4

75,4

64

1,6

00,6

14

(7,4

56,8

06)

(2,6

16,2

84)

(3,1

04,0

83)

(2,7

58,6

81)

Capi

tal C

ontri

butio

ns 3

1,46

3,84

8 1

7,18

3,41

0 7

,744

,951

5

,439

,434

3

,684

,445

4

,905

,490

4

,185

,345

6

,364

,038

1

2,29

3,23

0 1

2,48

6,74

9 In

crea

se (d

ecre

ase)

in n

et p

ositi

on 2

5,25

3,76

8 9

,519

,131

(1

,113

,502

) 1

7,34

5,25

5 1

,870

,838

2

,580

,936

(5

,058

,100

) 3

,185

,074

8

,339

,481

1

2,16

6,28

1 N

et p

ositi

on at

beg

inni

ng o

f the

year

252

,658

,717

2

77,9

12,4

85

287

,431

,616

2

86,3

18,1

14

303

,663

,369

3

05,5

34,2

07

308

,115

,143

2

86,0

78,7

10

289

,263

,784

2

97,6

03,2

65

Net

pos

ition

at en

d of

year

$27

7,91

2,48

5 $

287,

431,

616

$28

6,31

8,11

4 $

303,

663,

369

$30

5,53

4,20

7 $

308,

115,

143

$30

3,05

7,04

3 $

289,

263,

784

$29

7,60

3,26

5 $

309,

769,

546

*Fisc

al ye

ar 2

015

inclu

des a

beg

inni

ng n

et p

ositi

on ad

justm

ent o

f $16

,978

,333

as a

resu

lt of

impl

emen

ting

GA

SB 6

8.

NET

PO

SITI

ON

AT

END

OF

YEA

R

$-

$50

,000

,000

$10

0,00

0,00

0

$15

0,00

0,00

0

$20

0,00

0,00

0

$25

0,00

0,00

0

$30

0,00

0,00

0

$35

0,00

0,00

0

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

Net

pos

ition

at e

nd o

f yea

r

63STATISTICAL

NET

PO

SITI

ON

BY

COM

PON

ENT

Last

ten

fi sca

l yea

rs

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

Net

inve

stmen

t in

capi

tal a

sset

s $

240,

244,

833

$25

5,09

5,58

7 $

258,

381,

404

$26

0,41

4,37

9 $

267,

441,

463

$26

1,09

3,02

6 $

257,

448,

074

$25

3,85

4,48

6 $

258,

909,

868

$26

7,80

5,91

5

Restr

icte

d 3

11,6

02

3,2

07,8

21

1,6

31,2

69

1,6

06,3

80

1,5

09,0

06

414

,520

4

14,7

79

414

,821

4

14,8

29

414

,894

Unr

estri

cted

37,

356,

050

29,

128,

208

26,

305,

441

41,

642,

610

36,

583,

738

46,

607,

597

45,

194,

190

34,

994,

477

38,

278,

568

41,

548,

737

Tota

l Net

Pos

ition

$27

7,91

2,48

5 $

287,

431,

616

$28

6,31

8,11

4 $

303,

663,

369

$30

5,53

4,20

7 $

308,

115,

143

$30

3,05

7,04

3 $

289,

263,

784

$29

7,60

3,26

5 $

309,

769,

546

RATI

O A

NA

LYSI

S

-

1.0

0

2.0

0

3.0

0

4.0

0

5.0

0

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

Ope

ratin

g Rat

ioEq

uity

to L

ong-

Term

Deb

tCu

rren

t Rat

io


RATI

O O

F O

UTS

TAN

DIN

G D

EBT

BY T

YPE

Tota

lTo

tal

Fisc

alRe

venu

e SR

FN

otes

Out

stan

ding

Deb

t Per

Year

Bond

sLo

ans

Paya

ble

Deb

tCu

stom

er20

08 $

76,4

26,4

37

$60

,770

,753

$

4,80

8,84

1 $

142,

006,

031

$1,

883

2009

74,

285,

355

59,

081,

273

19,

338,

995

152

,705

,623

2

,034

20

10 1

01,2

10,3

10

36,

471,

406

21,

633,

199

159

,314

,914

2

,050

20

11 9

5,55

8,37

5 4

1,37

9,98

5 1

5,93

4,21

8 1

52,8

72,5

78

1,9

40

2012

89,

858,

199

40,

227,

389

15,

202,

882

145

,288

,470

1

,802

20

13 8

3,87

8,06

5 5

2,96

6,04

6 1

4,42

8,64

2 1

51,2

72,7

53

1,8

66

2014

77,

743,

038

51,

859,

932

13,

618,

395

143

,221

,365

1

,713

20

15 7

1,93

4,37

0 4

9,62

6,25

6 1

2,76

7,25

3 1

34,3

27,8

79

1,5

55

2016

61,

785,

000

46,

522,

943

12,

319,

555

120

,627

,498

1

,349

20

17 5

3,79

0,00

0 5

4,97

6,52

2 1

1,84

9,47

2 1

20,6

15,9

94

1,3

04

DEB

T SE

RVIC

E CO

VER

AGE

AN

ALY

SIS

1.43

1.40

1.61

1.56

1.74

1.56

1.65

1.89

1.64

1.96

-

0.5

0

1.0

0

1.5

0

2.0

0

2.5

0

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

Cash

Flo

w/D

ebt S

ervi

ce C

over

age

Boar

d Po

licy 1

.25

Bond

Req

uire

men

t 1.1

65STATISTICAL

SCH

EDU

LE O

F TO

TAL

CAPI

TAL

ASS

ETS

Last

ten

fi sca

l yea

rs

DET

AIL

ED S

CHED

ULE

OF

CHA

NG

ES IN

CA

PITA

L A

SSET

SLa

st te

n fi s

cal y

ears

Capi

tal

Syste

mU

tility

Impr

ovem

ent

Syste

m30

-Jun-

08Co

ntrib

utio

ns A

cqui

sitio

nsPu

rcha

ses

Prog

ram

Disp

osal

sRe

class

30-Ju

n-17

Land

and

land

right

s $

7,89

7,79

1 $

491,

040

$-

$-

$2,

360,

560

$(3

22,1

00)

$-

$10

,427

,291

Ad

min

istra

tive f

acili

ties &

impr

ovem

ents

2,9

64,3

36

- -

- 8

,802

,812

-

- 1

1,76

7,14

8 So

urce

of s

uppl

y 9

,353

,440

-

- -

3,7

73,8

47

- -

13,

127,

287

Wat

er tr

eatm

ent p

lant

54,

395,

936

- -

60,

951

4,5

35,6

54

(148

,622

) -

58,

843,

919

Was

tew

ater

trea

tmen

t plan

t 6

4,74

7,44

5 -

- 2

,099

,648

3

7,29

1,90

7 (1

94,0

31)

- 1

03,9

44,9

69

Wat

er sy

stem

tran

smiss

ion

& d

istrib

utio

n 1

43,5

57,4

83

19,

610,

465

- 2

0,48

9,65

1 4

2,56

9,64

7 (1

5,02

8,43

6) -

211

,198

,810

W

aste

wat

er sy

stem

colle

ctio

n &

tran

smiss

ion

155

,083

,879

3

2,64

2,55

5 -

9,3

93,8

01

55,

994,

101

(698

,238

) -

252

,416

,098

W

aste

wat

er D

ispos

al Sy

stem

s 1

,643

,302

-

- -

49,

874

- -

1,6

93,1

76

Oth

er ge

nera

l equ

ipm

ent

4,9

21,0

73

- -

4,2

69,8

10

6,6

07,2

20

(772

,984

) -

15,

025,

119

Vehi

cles

3,1

68,1

93

- -

4,8

41,1

41

- (2

,980

,646

) -

5,0

28,6

88

Prop

erty

, pla

nt an

d eq

uipm

ent i

n se

rvic

e 4

47,7

32,8

78

52,

744,

060

- 4

1,15

5,00

2 1

61,9

85,6

22

(20,

145,

057)

- 6

83,4

72,5

05

Accu

mul

ated

dep

recia

tion

(115

,047

,172

) -

- (2

11,0

35,3

01)

- 1

3,40

6,56

0 -

(312

,675

,913

)Pr

oper

ty, p

lant

and

equi

pmen

t in

serv

ice,

net

332

,685

,706

5

2,74

4,06

0 -

(169

,880

,299

) 1

61,9

85,6

22

(6,7

38,4

97)

- 3

70,7

96,5

92

Cons

truct

ion

in p

rogr

ess

47,

449,

043

- -

137

,995

,012

(1

61,9

22,8

36)

- -

23,

521,

219

Net

pro

pert

y, pl

ant a

nd eq

uipm

ent

$38

0,13

4,74

9 $

52,7

44,0

60

$-

$(3

1,88

5,28

7) $

62,7

86

$(6

,738

,497

) $

- $

394,

317,

811

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

Util

ity p

lant i

n se

rvice

$44

7,73

2,87

8 $

522,

705,

473

$54

7,00

4,83

0 $

579,

266,

850

$58

8,58

2,73

3 $

608,

585,

027

$63

6,09

7,74

6 $

646,

087,

755

$66

2,62

6,98

3 $

683,

472,

505

Accu

mul

ated

dep

recia

tion

(115

,047

,172

) (1

30,7

45,9

53)

(152

,344

,300

) (1

74,7

10,2

69)

(193

,733

,087

) (2

16,7

39,0

96)

(239

,709

,457

) (2

63,5

12,2

77)

(287

,767

,345

) (3

12,6

75,9

13)

Net

util

ity p

lant

in se

rvic

e 3

32,6

85,7

06

391

,959

,520

3

94,6

60,5

30

404

,556

,581

3

94,8

49,6

46

391

,845

,931

3

96,3

88,2

89

382

,575

,478

3

74,8

59,6

38

370

,796

,592

Cons

truct

ion

in p

rogr

ess

47,

449,

043

13,

926,

148

21,

026,

680

6,9

26,6

86

16,

275,

471

19,

107,

871

3,0

19,0

92

4,4

94,7

48

7,4

48,2

95

23,

521,

219

Tota

l cap

ital a

sset

s $

380,

134,

749

$40

5,88

5,66

8 $

415,

687,

210

$41

1,48

3,26

7 $

411,

125,

117

$41

0,95

3,80

2 $

399,

407,

381

$38

7,07

0,22

6 $

382,

307,

933

$39

4,31

7,81

1


WH

OLE

SALE

AN

D R

ETA

IL W

ATER

SA

LES

VOLU

ME

HIS

TORI

CAL

DAT

ALa

st te

n fi s

cal y

ears

Th e f

ollo

win

g ta

ble s

ets f

orth

the g

allo

ns, i

n th

ousa

nds,

purc

hase

d by

each

of t

he A

utho

rity’s

who

lesa

le cu

stom

ers a

nd b

y al

l of i

ts re

tail

custo

mer

s for

the t

en fi

scal

yea

rs en

ded

June

30:

RETA

IL W

ATER

SA

LES

VOLU

ME

HIS

TORI

CAL

DAT

ALa

st te

n fi s

cal y

ears

Th e f

ollo

win

g ta

ble s

ets f

orth

the g

allo

ns, i

n th

ousa

nds,

purc

hase

d by

reta

il cu

stom

ers b

y ar

ea fr

om th

e Aut

horit

y fo

r the

fi sc

al y

ears

ende

d Ju

ne 3

0:

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

War

saw

-Eus

tis-O

aks

31,

390

25,

614

24,

729

27,

609

29,

553

27,

267

24,

983

24,

502

26,

005

30,

968

Frip

p Isl

and

PSD

168

,869

1

84,4

50

184

,560

2

17,9

31

195

,859

1

78,8

17

180

,969

1

75,2

30

156

,681

1

57,0

88

Har

bor I

sland

Util

ities

35,

812

30,

802

29,

352

35,

737

30,

551

32,

573

30,

569

28,

410

28,

349

29,

203

Calla

was

sie 9

9,34

1 9

0,07

0 9

1,13

2 1

14,9

76

104

,891

8

9,91

4 8

0,66

4 7

3,97

0 6

0,33

4 9

8,99

8 Br

oad

Cree

k PS

D

148

,903

2

43,9

97

- -

- -

- -

- -

Hilt

on H

ead

PSD

1

,047

,188

8

63,9

18

679

,724

8

77,9

34

1,2

40,6

31

1,0

03,1

31

776

,286

8

52,6

33

538

,925

1

,125

,264

W

ater

Oak

Util

ity(M

oss C

reek

) 1

04,3

97

88,

103

102

,483

1

62,5

21

150

,595

1

45,9

58

147

,776

1

40,7

91

142

,268

1

66,7

14

Tota

l Who

lesa

le, e

xclu

ding

Nav

y 1

,635

,900

1

,526

,954

1

,111

,980

1

,436

,708

1

,752

,080

1

,477

,660

1

,241

,247

1

,295

,536

9

52,5

62

1,6

08,2

35

US

Dep

artm

ent o

f the

Nav

y:N

aval

Hos

pita

l 2

3,90

6 2

3,91

3 2

5,10

6 2

0,10

7 2

1,90

1 2

2,93

2 2

1,28

1 2

2,93

3 2

4,30

0 2

5,21

2 Pa

rris

Islan

d Re

crui

t Dep

ot 3

69,9

56

397

,727

3

63,2

53

330

,021

3

14,2

05

324

,468

3

05,4

77

296

,484

2

95,0

94

344

,306

M

CAS

Beau

fort

95,

171

80,

389

89,

864

70,

829

58,

686

69,

284

81,

746

73,

171

59,

071

80,

812

Laur

el Ba

y Hou

sing

167

,048

1

37,2

68

129

,880

1

45,4

05

149

,246

1

29,3

02

129

,110

1

23,5

92

90,

288

85,

396

Tota

l Nav

y 6

56,0

81

639

,297

6

08,1

03

566

,362

5

44,0

38

545

,986

5

37,6

14

516

,180

4

68,7

53

535

,726

Tota

l Who

lesale

2,2

91,9

81

2,1

66,2

51

1,7

20,0

83

2,0

03,0

70

2,2

96,1

18

2,0

23,6

46

1,7

78,8

61

1,8

11,7

16

1,4

21,3

15

2,1

43,9

61

Tota

l Ret

ail

5,7

54,7

03

5,5

60,1

83

5,8

63,5

21

6,5

50,5

67

6,2

62,9

92

6,1

10,0

12

5,6

65,0

51

5,7

09,5

76

5,9

42,6

12

7,0

62,7

16

Tota

l Vol

ume (

thou

sand

s of g

allo

ns)

8,0

46,6

84

7,7

26,4

34

7,5

83,6

04

8,5

53,6

37

8,5

59,1

10

8,1

33,6

58

7,4

43,9

12

7,5

21,2

92

7,3

63,9

27

9,2

06,6

77

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

City

of B

eauf

ort

528

,623

5

24,5

64

479

,687

4

78,8

45

456

,109

4

76,8

38

470

,068

4

67,6

70

458

,725

5

31,8

39

Burto

n/G

ray’s

Hill

431

,585

3

13,5

66

399

,000

4

12,1

35

389

,652

3

89,5

13

391

,476

3

98,9

52

384

,809

4

08,3

82

Lady

’s Isl

and/

Cat I

sland

512

,359

4

50,1

96

483

,539

4

48,7

54

421

,410

4

30,8

05

423

,876

4

12,9

59

400

,275

4

93,2

96

Poin

t Sou

th 1

9,25

7 1

9,23

2 1

8,23

8 1

7,34

5 1

7,58

6 1

5,58

6 1

3,82

4 1

5,76

1 1

6,20

3 1

9,70

2 St

. Hele

na/D

ataw

Islan

d 3

31,2

41

301

,500

3

16,1

35

306

,162

2

99,2

50

282

,604

2

82,8

49

274

,002

2

53,3

11

314

,767

Bl

ufft o

n (1

) 1

,845

,794

1

,684

,073

1

,589

,820

1

,700

,892

1

,743

,526

1

,627

,104

1

,594

,519

1

,677

,349

1

,765

,489

2

,278

,875

Pa

lm K

ey 1

,193

1

,110

1

,466

1

,605

1

,125

1

,119

1

,312

1

,406

1

,516

1

,188

O

katie

750

,866

7

04,1

32

624

,545

7

56,5

80

740

,508

6

26,6

91

578

,073

5

75,6

77

541

,520

7

19,7

38

Har

deev

ille/

SoJ

aspe

rCty

163

,422

1

94,9

09

239

,166

2

56,5

35

266

,496

2

52,6

71

271

,964

2

86,3

87

286

,251

3

44,9

85

Tow

n of

Por

t Roy

al

187

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1

85,8

41

187

,485

1

93,8

89

193

,993

2

03,1

35

207

,038

2

19,2

56

224

,853

2

45,1

09

Oth

er/S

pecia

l Com

mer

cial

982

,915

1

,181

,060

1

,524

,440

1

,977

,825

1

,733

,337

1

,803

,946

1

,430

,052

1

,380

,157

1

,609

,660

1

,704

,835

Tota

l Vol

ume (

thou

sand

s of g

allo

ns)

5,7

54,7

03

5,5

60,1

83

5,8

63,5

21

6,5

50,5

67

6,2

62,9

92

6,1

10,0

12

5,6

65,0

51

5,7

09,5

76

5,9

42,6

12

7,0

62,7

16

(1)

Inclu

des T

own

of B

lufft

on an

d Bl

ufft o

n, A

shley

Plan

tatio

n Ap

ts., B

elfai

r, Ch

elsea

, Col

leton

Riv

er, P

ritch

ardv

ille,

Rose

Hill

, etc

.

67STATISTICAL

WH

OLE

SALE

WAT

ER R

EVEN

UES

BY

ARE

A A

ND

AV

ERAG

E RE

VEN

UE

PER

KGA

LLa

st te

n fi s

cal y

ears

2008

2009

2010

2011

2012

Kga

ls R

even

ue

Avg

reve

nue

per k

gal

Kga

ls R

even

ue

Avg

reve

nue

per k

gal

Kga

ls R

even

ue

Avg

reve

nue

per k

gal

Kga

ls R

even

ue

Avg

re

venu

e pe

r kga

l K

gals

Rev

enue

Avg

re

venu

e pe

r kga

l W

arsa

w-E

ustis

-Oak

s 3

1,39

0 $

67,4

89

$2.

15

25,

614

$55

,070

$

2.15

2

4,72

9 $

53,1

67

$2.

15

27,

609

$59

,357

$

2.15

2

9,55

3 $

70,3

36

$2.

38

Frip

p Isl

and

PSD

168

,869

4

20,9

42

2.49

1

84,4

50

376

,311

2.

04

184

,560

3

88,0

03

2.10

2

17,9

31

440

,300

2.

02

195

,859

4

56,2

87

2.33

H

arbo

r Isla

nd U

tiliti

es 3

5,81

2 7

6,99

6 2.

15

30,

802

69,

770

2.27

2

9,35

2 6

6,73

2 2.

27

35,

737

87,

556

2.45

3

0,55

1 8

2,56

9 2.

70

Calla

was

sie 9

9,34

1 1

62,9

21

1.64

9

0,07

0 1

67,5

32

1.86

9

1,13

2 1

69,5

06

1.86

1

14,9

76

213

,855

1.

86

104

,891

2

16,0

76

2.06

Br

oad

Cree

k PS

D 1

48,9

03

215

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1.

45

243

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1

91,7

00

0.79

-

- 0.

00

- -

0.00

-

- 0.

00

Hilt

on H

ead

PSD

1,0

47,1

88

1,5

18,4

23

1.45

8

63,9

18

1,3

58,3

69

1.57

6

79,7

24

934

,369

1.

37

877

,934

1

,199

,031

1.

37

1,2

40,6

31

1,4

72,5

69

1.19

W

ater

Oak

Util

ity(M

oss C

reek

) 1

04,3

97

210

,882

2.

02

88,

103

177

,968

2.

02

102

,483

2

07,0

69

2.02

1

62,5

21

301

,823

1.

86

150

,595

3

46,3

69

2.30

To

tal W

hole

sale

, exc

ludi

ng N

avy

1,6

35,9

00

2,6

73,5

62

1.63

1,

526,

954

2,3

96,7

20

1.57

1

,111

,980

1

,818

,846

1.

64 1

,436

,708

2

,301

,922

1.

60

1,7

52,0

80

2,6

44,2

06

1.51

U

S D

epar

tmen

t of t

he N

avy:

Nav

al H

ospi

tal

23,

906

40,

401

1.69

2

3,91

3 4

3,23

0 1.

81

25,

106

45,

693

1.82

2

0,10

7 3

6,59

5 1.

82

21,

901

44,

240

2.02

Pa

rris

Islan

d Re

crui

t Dep

ot 3

69,9

56

625

,226

1.

69

397

,727

7

23,8

63

1.82

3

63,2

53

661

,120

1.

82

330

,021

6

00,6

38

1.82

3

14,2

05

634

,694

2.

02

MCA

S Be

aufo

rt 9

5,17

1 1

60,8

58

1.69

8

0,38

9 1

46,3

09

1.82

8

9,86

4 1

57,3

55

1.75

7

0,82

9 1

28,9

09

1.82

5

8,68

6 1

18,5

48

2.02

La

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2013

2014

2015

2016

2017

Kga

ls R

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ue

Avg

re

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e pe

r kga

l K

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enue

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RETA

IL W

ATER

REV

ENU

ES B

Y A

REA

AN

D A

VER

AGE

REV

ENU

E PE

R KG

AL

Last

ten

fi sca

l yea

rs

2008

2009

2010

2011

2012

Kga

lsRe

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es

Avg

reve

nue

per k

gal

Kga

lsRe

venu

es

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reve

nue

per k

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of B

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09

6,5

50,5

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30,0

92

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62,9

92

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2013

2014

2015

2016

2017

Kga

lsRe

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es

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reve

nue

per k

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es

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nue

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69STATISTICAL

WA

STEW

ATER

FLO

WS

AN

D C

APA

CITI

ES B

Y PL

AN

TLa

st te

n fi s

cal y

ears

2008

2009

2009

2011

2012

Plan

tAv

erag

e Dai

ly

Flow

Capa

city

Aver

age D

aily

Fl

owCa

paci

tyAv

erag

e Dai

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2,60

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0 1

8,85

4,00

0 1

8,85

4,00

0

2013

2014

2015

2016

2017

Plan

tAv

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S (1

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oss C

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(1)

Th e A

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urch

ased

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reat

men

t plan

ts on

the M

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and

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is

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lants

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take

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lin

e in

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11 as

par

t of a

cons

olid

atio

n pr

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t div

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eir fl

ows t

o th

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WRF

.


WA

STEW

ATER

CU

STO

MER

BA

SE B

Y PL

AN

TLa

st te

n fi s

cal y

ears

2008

2009

2010

2011

2012

Plan

t R

esid

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l Co

mm

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al

Tot

al

Res

iden

tial

Com

mer

cial

T

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2013

2014

2015

2016

2017

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t R

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l Co

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Cher

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Cher

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.

71STATISTICAL

WA

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ENU

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AN

D A

VER

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R KG

AL

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2009

2010

2011

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55

2013

2014

2015

2016

2017

Bille

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CUSTOMER STATISTICSNumber of customers at fi scal year-end

BILLINGS AT FISCAL YEAR-ENDReported in kgals (thousands of gallons)

Ratio of Customers with Both services

Number of CustomersYear Water % Change Wastewater % Change2003 28,930 16,120 55.72%2004 32,687 13.0% 19,167 18.9% 58.64%2005 37,185 13.8% 21,499 12.2% 57.82%2006 40,549 9.0% 24,647 14.6% 60.78%2007 43,502 7.3% 27,232 10.5% 62.60%2008 45,314 4.2% 28,786 5.7% 63.53%2009 45,467 0.3% 28,483 -1.1% 62.65%2010 46,282 1.8% 29,214 2.6% 63.12%2011 46,788 1.1% 29,928 2.4% 63.97%2012 47,804 2.2% 30,936 3.4% 64.71%2013 48,992 2.5% 32,078 3.7% 65.48%2014 50,371 2.8% 33,252 3.7% 66.01%2015 51,876 3.0% 34,525 3.8% 66.55%2016 53,507 3.1% 35,902 4.0% 67.10%2017 55,139 3.1% 37,374 4.1% 67.78%

Year Water % Change Wastewater % Change2003 5,484,617 1,774,000 2004 6,069,040 10.7% 1,978,467 11.5%2005 6,300,397 3.8% 2,081,527 5.2%2006 6,918,014 9.8% 2,412,162 15.9%2007 8,538,526 23.4% 2,871,476 19.0%2008 8,046,684 -5.8% 3,091,499 7.7%2009 7,726,434 -4.0% 2,942,817 -4.8%2010 7,583,604 -1.8% 2,878,369 -2.2%2011 8,553,637 12.8% 3,141,176 9.1%2012 8,559,110 0.1% 3,192,127 1.6%2013 8,133,658 -5.0% 3,038,945 -4.8%2014 7,443,912 -8.5% 2,995,058 -1.4%2015 7,521,292 1.0% 3,083,632 3.0%2016 7,363,927 -2.1% 3,131,220 1.5%2017 9,206,677 25.0% 3,876,937 23.8%

73STATISTICAL

WATER SALES AND CUSTOMER HISTORY

WASTEWATER SALES AND CUSTOMER HISTORY

-

12,000

24,000

36,000

48,000

60,000

-

3,000,000

6,000,000

9,000,000

12,000,000

15,000,000

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Cust

omer

s

Kga

ls

Kgal Sales Customers

-

8,000

16,000

24,000

32,000

40,000

-

1,000,000

2,000,000

3,000,000

4,000,000

5,000,000

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Cust

omer

s

Kga

ls

Kgal Sales Customers


Th e following chart shows the change in rates for an average customer (defi ned as 7 thousand gallons per month residential water usage) from fi scal year 2009 to fi scal year 2018 Budget, utilizing the fi scal year 2009 through 2017 rates as adopted, and the budgeted rate eff ective July 1, 2017, for fi scal year 2018.

WATER RATE COMPARISONSEff ective date

WASTEWATER RATE COMPARISONSEff ective date

MONTHLY WATER & WASTEWATER BILL FOR 7KGAL RESIDENTIAL CUSTOMER

FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17FY18

BudgetCommercial Minimum $6.00 $6.00 $6.00 $6.00 $6.00 $6.00 $9.00 $9.00 $12.00 $12.00 Basic facilities charge

Usage $3.32 $3.32 $3.32 $3.46 $3.46 $3.46 $3.46 $3.51 $3.41 $3.41 Per thousand gallonsResidential Minimum $6.00 $6.00 $6.00 $6.00 $6.00 $6.00 $7.00 $7.00 $8.00 $8.00 Basic facilities charge

Usage $3.32 $3.32 $3.32 $3.46 $3.46 $3.46 $3.46 $3.51 $3.41 $3.41 Per thousand gallons

FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17FY18

BudgetCommercial Minimum $6.00 $6.00 $6.00 $6.00 $6.00 $6.00 $9.00 $9.00 $12.00 $13.00 Basic facilities charge

Per thousand gallons $5.60 $5.60 $5.60 $6.05 $6.05 $6.05 $6.10 $6.28 $6.28 $6.28 Per thousand gallonsResidential Minimum $6.00 $6.00 $6.00 $6.00 $6.00 $6.00 $9.00 $9.00 $10.00 $11.00 Basic facilities charge

$5.60 $5.60 $5.60 $6.05 $6.05 $6.05 $6.10 $6.28 $6.18 $6.18 Per thousand gallons

Maximum per month $45.00 $45.00 $45.00 $48.00 $48.00 $48.00 $52.00 $53.00 $53.00 $54.00 Residential maximum

$29.24 $29.24 $29.24 $30.22 $30.22 $30.22 $31.22 $31.57 $31.87 $31.87

$45.00 $45.00 $45.00 $48.00 $48.00 $48.00 $52.00 $53.00 $53.00 $54.00

$74.24 $74.24 $74.24 $78.22 $78.22 $78.22 $83.22 $84.57 $84.87 $85.87

$0.00

$25.00

$50.00

$75.00

$100.00

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Budget

Water only Wastewater only Total bill

75STATISTICAL

WHOLESALE WATER RATES BY AREAEff ective date

Area FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17FY18

BudgetMilitary $1.82 $1.82 $1.82 $2.02 $2.02 $2.02 $2.32 $2.37 $2.39 $2.56 A-2 Warsaw Eustis & Oaks 2.15 2.15 2.15 2.38 2.38 2.38 2.62 2.65 2.68 2.81 Area A3-Fripp Island PSD and Harbor Island 2.15 2.15 2.15 2.38 2.38 2.38 2.60 2.63 2.66 2.79 B-1 Callawassie Island 1.86 1.86 1.86 2.06 2.06 2.06 2.26 2.31 2.33 2.49 B-2 Water Oak Utility/Moss Creek 2.02 2.02 2.02 2.30 2.30 2.30 2.54 2.57 2.60 2.73 B-3 Hilton Head Island PSD 1.58 1.58 1.58 1.58 1.58 1.58 1.74 1.76 1.78 1.82

WHOLESALE WATER RATE COMPARISON

$-

$1.00

$2.00

$3.00

$4.00

FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18Budget

Military A-2 Warsaw Eustis & Oaks

Area A3-Fripp Island PSD and Harbor Island B-1 Callawassie Island

B-2 Water Oak Utility/Moss Creek B-3 Hilton Head Island PSD


POPULATION/PER CAPITA INCOMELast ten available years

WAGE/SALARY EMPLOYMENTNUMBER OF JOBS BY COUNTY (COMPARED TO STATE)

Last ten available years

ECONOMIC STATUS – UNEMPLOYMENT RATELast ten fi scal years

Sources: U.S. Census Bureau and Bureau of Economic Analysis

Source: SC Department of Employment and Workforce

Source: SC Department of Employment and Workforce

South Carolina Beaufort County Jasper CountyYear Population Per Capita Population Per Capita Population Per Capita2006 4,324,799 30,041 143,091 44,533 21,490 24,706 2007 4,404,914 31,103 146,722 45,992 21,900 24,043 2008 4,503,280 32,947 152,164 45,557 22,746 23,601 2009 4,561,242 32,505 155,215 43,371 23,221 23,361 2010 4,625,364 32,193 155,550 41,194 23,634 22,715 2011 4,673,348 34,183 164,684 43,584 25,195 23,110 2012 4,723,417 35,056 168,049 45,122 25,833 23,033 2013 4,771,929 35,831 171,569 45,222 26,710 23,747 2014 4,829,160 36,860 175,852 46,137 27,170 24,301 2015 4,894,834 38,783 179,589 48,134 27,824 25,951

South Beaufort % of Jasper %Year Carolina County South Carolina County South Carolina2008 1,874,633 61,652 3.29% 8,039 0.43%2009 1,924,059 59,101 3.07% 9,250 0.48%2010 1,825,900 60,223 3.30% 9,499 0.52%2011 1,839,400 60,046 3.26% 9,471 0.51%2012 1,947,936 60,067 3.08% 9,672 0.50%2013 1,991,908 61,016 3.07% 9,842 0.50%2014 2,050,128 63,123 3.08% 10,231 0.50%2015 2,112,034 68,118 3.23% 11,162 0.53%2016 2,185,181 71,435 3.27% 11,836 0.54%2017 2,229,882 72,842 3.27% 12,088 0.54%

Year South Carolina Beaufort County Jasper County2008 6.5% 5.2% 6.0%2009 12.1% 9.1% 11.2%2010 11.5% 8.6% 10.0%2011 11.2% 9.7% 11.1%2012 9.4% 8.8% 9.2%2013 8.1% 7.9% 8.1%2014 5.3% 5.6% 5.3%2015 6.6% 6.0% 5.9%2016 5.4% 5.2% 5.0%2017 4.0% 4.0% 3.6%

77STATISTICAL

PRINCIPAL EMPLOYERSCurrent year and nine years ago

2017 2008

Estimated Number of Employees Rank

Percentage of Total County Employment Employees Rank

Percentage of Total County Employment

BEAUFORT COUNTY Beaufort Memorial Hospital 1,000 to 4,999 1 N/A N/A N/A N/AUS Naval Hospital 1,000 to 4,999 2 N/A N/A N/A N/AMals 31 Headquarters 500 to 999 3 N/A N/A N/A N/AWestin Hilton Head Island Resort 500 to 999 4 N/A N/A N/A N/AHilton Head Hospital 500 to 999 5 N/A N/A N/A N/AWalmart Supercenter 500 to 999 6 N/A N/A N/A N/AMarriott-Hilton Head 250 to 499 7 N/A N/A N/A N/AMarriott-Surfwatch 250 to 499 8 N/A N/A N/A N/ABeaufort County Sheriff 250 to 499 9 N/A N/A N/A N/AFripp Island Golf & Beach Resort 250 to 499 10 N/A N/A N/A N/A

Source: http://jobs.scworks.orgN/A - Information not available

2017 2008

Employees Rank

Percentage of Total County Employment Employees Rank

Percentage of Total County Employment

JASPER COUNTYMalphrus Construction Co 500 to 999 1 N/A N/A N/A N/ADepartment of Corrections 250 to 499 2 N/A N/A N/A N/AWalmart Supercenter 250 to 499 3 N/A N/A N/A N/ACoastal Carolina Hospital 250 to 499 4 N/A N/A N/A N/ABeaufort-Jasper Comprehensive 100 to 249 5 N/A N/A N/A N/ACleland Construction Co Inc. 100 to 249 6 N/A N/A N/A N/ARidgeland Elementary School 100 to 249 7 N/A N/A N/A N/APublix Super Market 100 to 249 8 N/A N/A N/A N/AKey Nissan 100 to 249 9 N/A N/A N/A N/ARidgeland Nursing Center 100 to 249 10 N/A N/A N/A N/A

Source: http://jobs.scworks.orgN/A - Information not available


FULL-TIME EQUIVALENT EMPLOYEES BY FUNCTIONLast ten fi scal years

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017Water

Water Source of Supply 2.7 2.9 2.4 2.4 2.4 2.3 2.4 2.5 2.6 2.6 Water Treatment Ops 21.4 22.5 22.5 22.0 21.0 20.5 17.0 19.8 20.3 20.3 Transmission & Distribution 24.0 26.1 25.1 26.3 26.1 26.6 26.4 27.0 28.7 33.9

WastewaterWastewater Treatment Ops 14.5 16.3 15.3 15.0 13.1 15.5 12.2 11.9 14.3 14.5 Collection & Transmission 29.4 31.0 30.6 31.3 30.5 30.1 30.3 32.1 33.2 37.8 Sludge Management Ops 2.0 2.2 2.1 1.0 1.9 1.0 0.7 0.7 0.9 0.9

Laboratory and Testing 5.0 5.0 5.0 5.0 5.0 5.0 5.0 5.0 5.0 6.0 Engineering 13.0 15.0 14.0 15.0 15.0 11.0 12.0 12.0 13.0 10.0 Customer Service 16.0 17.0 18.0 16.0 17.0 17.0 17.0 14.0 15.0 14.0 Billing and Meter Reading 6.0 6.0 6.0 6.0 6.0 7.0 7.0 11.0 11.0 4.0 Financial and Business Services 9.0 8.0 7.0 8.0 8.0 8.0 8.0 8.0 8.0 11.0 General & Administrative 12.0 12.0 11.0 11.0 12.0 11.0 11.0 12.0 12.0 12.0 Information Technology 4.0 5.0 5.0 4.0 5.0 5.0 5.0 4.0 7.0 Total 158.0 168.0 164.0 164.0 162.0 160.0 154.0 161.0 168.0 174.0

TEN LARGEST WASTEWATER USERSFiscal year ended June 30, 2017

Ten largest wastewater users and any user representing 5.0% ormore of total annual billed revenues

User Name User’s Service Or Business2017 Billed Revenues

% of Total 2017 Billed Revenues

1Resort Services (bulk customer) Laundry $124,321 0.59%2NEPSA Admin Service DBA Blufft on House Multifamily Residential 123,889 0.59%3PRG Port Royal LP (formerly Th e Preserve at Port Royal) Multifamily Residential 90,434 0.43%4Estate at Westbury Multifamily Residential 90,161 0.43%5CPI Blaze Myrtle Park Owners LLC Multifamily Residential 85,201 0.40%6Blufft on Ostwo/Blufft on Osthree Multifamily Residential 80,778 0.38%7Hickory Hill Landfi ll Landfi ll 69,540 0.33%8PBLH LLC Hotel 69,073 0.33%9Austin Chase Apartments Multifamily Residential 67,589 0.32%

10Simmons Cay Apartments Multifamily Residential 67,422 0.32%Other 20,254,962 95.90%Total wastewater revenues $21,123,369

Bulk sewer customers:Total bulk customers 2 Total operating revenues $21,123,369 Wholesale (bulk) customer revenues $154,169 % of billed revenue 0.7%

79STATISTICAL

TEN LARGEST WATER USERSFiscal year ended June 30, 2017

Ten largest water users (not including bulk customers) and any user representing 5.0% ormore of total annual billed revenues

User Name User’s Service Or Business2017 Billed Revenues

% of Total 2017 Billed Revenues

1SCE&G Regulated Utility $418,033 1.48%2Sun City Community Association Residential Community (IR) 115,607 0.41%3NEPSA Admin Service DBA Blufft on House Multifamily Residential 68,416 0.24%4PRG Port Royal LP (formerly Th e Preserve at Port Royal) Multifamily Residential 52,382 0.19%5Beaufort Memorial Hospital Hospital 51,964 0.18%6Estate at Westbury Residential Community 50,171 0.18%7CPI Blaze Myrtle Park Owners LLC Multifamily Residential 47,594 0.17%8Hampton Hall Club Residential Club (IR) 46,656 0.17%9Palmetto Bluff Preservation Trust, Inc. Residential Community (IR) 46,357 0.16%

10Blufft on Otswo/Blufft on Osthree Multifamily Residential 46,240 0.16%Other (including Bulk Customers) 27,327,837 96.66%Total water revenues $28,271,259

IR - Denotes Irrigation service meters

Bulk Water Users:Hilton Head PSD Public Service District $1,555,262 5.50%Parris Island Recruit Depot Military Installation 822,891 2.91%Moss Creek/Water Oak Utility Private Utility 433,456 1.53%Fripp Island PSD Public Service District 407,923 1.44%Callawassie CUC, Inc. Private Utility 230,665 0.82%Laurel Bay Housing Military Installation 204,096 0.72%MCAS Beaufort Military Installation 193,136 0.68%Harbor Island Private Utility 87,608 0.31%Warsaw-Eustis & Oaks Private Utility 82,994 0.29%Naval Hospital Military Installation 60,257 0.21%Total wholesale revenues 4,078,291 14.43%Other water operating revenues 24,192,968 Total water revenues, including other $28,271,259

Bulk water customers:Total bulk customers 7 Total operating revenues $28,271,259 Wholesale (bulk) customer revenues $4,078,291 % of billed revenue 14.4%

NOTE: Customers under one contract (I.e., military installations) are considered one bulk customer in total number of bulk customers. Military retail charge not included in Total Water Revenues.


GENERAL TORT LIABILITY

SC State Budget & Control Board Insurance Reserve Fund

T1300797171/24/17–1/24/2018

Person injured, reputation marred, property damaged

$1,000,000 per occurrence; $250 deductible; $15,000 basic legal defense; $5,000 max sewer backup

WORKER’S COMPENSATION

SC State Accident Fund 10-064144-81/24/17–1/24/2018

Employee injured on the job

Statutory coverage pursuantto Article 1, Chapter 7, title 42 of the SC Code of Laws

POLLUTION LEGAL LIABILITY

Chartis Causality Company

70927918/1/16–8/1/2021

Environmentalliability

$25,000 deductible each incident & $10,000,000 limit each incident

MANAGEMENT LIABILITY POLICY

Westchester Fire Insurance Co., Kinghorn Insurance

G274761810037/4/17–7/4/2018

Not for Profi t individual and organization management liability declara-tions including employment practices claims

$5,000,000 aggregate limit all loss; $25,000 excess benefi t transaction excise taxes; $150,000 employment practices and other claims

INSURANCE IN FORCEType of Coverage & Insurance Provider

Policy NumberPolicy Period

Details of Coverage

Limits of Liability

COMMERCIAL CRIME BOND

Selective Insurance, Kinghorn Insurance

B60121261/23/17–1/23/2018

Employee dishonesty & theft of money and securi-ties

$100,000 bond$40,000 inside premise$20,000 outside premiseDATA PROCESSING


D1300797181/24/17–1/24/2018

Computer hardware and soft ware

$5,034,640 limit$1,000 deductible

BUILDING & PERSONAL PROPERTY


F130079718; F130079718A1/24/17–1/24/2018

“All risk” coverage on real & personal prop-erty

$5,000 per boiler/machinery accident; $100,000 per ordinance & law; $3,000 deductible

AUTOMOBILE LIABILITY & COLLISION


L130079718;C1300797181/24/17–1/24/2018

Vehicle comprehensive, collision & liability

$1,000,000 each accident; $500 deductible per occurrence; $1,000 medical each person

INLAND MARINE (MOBILE EQUIPMENT AND WELLS & BRIDGE LINES)


M130079718;M130079718A1/24/17–1/24/2018

Heavy equipment, trailers, pumps and generators, wells & bridge lines

$687,983 limit; deductible of 2% with $500 minimum per occur-rence; $500 deductible per occurrence (wells & bridge lines)CYBER LIABILITY

Travelers InsuranceKinghorn Insurance

1063075147/4/17–7/4/2018

Network & information security, communications & media liability, regulatory defense expenses

$1,000,000 network & informa-tion Security; $500,000 com-munications & media liability; $500,000 regulatory defense

Independent Auditor’s Other Reports Section


INDEPENDENT AUDITORS’ REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDITOF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS

To the Board of Directors of Beaufort-Jasper Water & Sewer Authority Beaufort, South Carolina

We have audited, in accordance with the auditing standards generally accepted in the United States of America and the standards applicable to fi nancial audits contained in Government Auditing Standards issued by the Comptroller General of the United States, the fi nancial statements of Beaufort‐Jasper Water and Sewer Authority (the “Authority”), as of and for the year ended June 30, 2017 and 2016, and the related notes to the fi nancial statements, which collectively comprise the basic fi nancial statements and have issued our report thereon dated December 6, 2017.

Internal Control over Financial ReportingIn planning and performing our audit of the fi nancial statements, we considered Beaufort‐Jasper Water and Sewer Authority’s internal control over fi nancial reporting (internal control) to determine the audit procedures that are appropriate in the circumstances for the purpose of expressing our opinions on the fi nancial statements, but not for the purpose of expressing an opinion on the eff ectiveness of Beaufort‐Jasper Water and Sewer Authority’s internal control. Accordingly, we do not express an opinion on the eff ectiveness of Beaufort‐Jasper Water and Sewer Authority’s internal control.

A defi ciency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, misstatements on a timely basis. A material weakness is a defi ciency, or a combination of defi ciencies, in internal control such that there is a reasonable possibility that a material misstatement of the entity’s fi nancial statements will not be prevented, or detected and corrected on a timely basis. A signifi cant defi ciency is a defi ciency, or a combination of defi ciencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance.

Our consideration of internal control was for the limited purpose described in the fi rst paragraph of this section and was not designed to identify all defi ciencies in internal control that might be material weaknesses or signifi cant defi ciencies. Given these limitations, during our audit we did not identify any defi ciencies in internal control that we consider to be material weaknesses. However, material weaknesses may exist that have not been identifi ed.

Compliance and Other MattersAs part of obtaining reasonable assurance about whether Beaufort‐Jasper Water and Sewer Authority’s fi nancial statements are free from material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements, noncompliance with which could have a direct and material eff ect on the determination of fi nancial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. Th e results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards.

83INDEPENDENT AUDITOR’S OTHER REPORTS SECTION

Purpose of this ReportTh e purpose of this report is solely to describe the scope of our testing of internal control and compliance and the results of that testing, and not to provide an opinion on the eff ectiveness of the entity’s internal control or on compliance. Th is report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the entity’s internal control and compliance. Accordingly, this communication is not suitable for any other purpose.

Enterprise, Alabama

December 6, 2017

2017 ComprehensiveAnnual Financial Report

For fiscal years June 30, 2017 and 2016BEAUFORT-JASPER WATER & SEWER AUTHORITY

Okatie, South Carolina

BEAUFORT-JASPER WATER AND SEWER AUTHORITY 843-987-9200 | 6 SNAKE ROAD | OKATIE, SOUTH CAROLINA 29909

www.bjswa.org

2017 comprehensive annual financial...

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