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Full text of "Annual report"

BOSTON PUBLIC LIBRARY 









Today in Boston we look to a future filled with promises and cfiallenges, 
as well as uncertainties. While our skyline is rich with the evidence of new de- 
velopment and continued growth, fiscal belt-tightening is becoming a major 
concern for all City agencies. 

As we close out the decade, the Boston Water and Sewer Commission 
(BWSC) accepts the challenge of maintaining a water and sewer system that 
must meet the promise of this new revitalized Boston. At the same time, we 
continue a management program of fiscal austerity. 

Since its inception, the BWSC has provided the City with some of the 
purest water in the nation. Originating at the Quabbin Reservoir, our water 
flows through 50 miles of MWRA pipeline before reaching the City of Boston. 
We also maintain a wastewater collection system that consists of over 
90,000 service pipes and extends over a length of 1 ,300 miles. Operating, 
maintaining and improving this vast service delivery infrastructure is a constant 
challenge. 

In addition, BWSC has earned a growing respect in financial communi- 
ties for its sound fiscal management, as well as in the environmental commu- 
nity for water conservation and pollution control programs, hiowever, since 
parts of our system are over 1 30 years old, much remains to be accom- 
plished. 

As the Executive Director of the Boston Water and Sewer Commission, I 
have set three important goals for the Commission: cost-control, continued 
excellence in customer service, and an increased vigilance in protecting our 
urban environment. 

I am committed to these goals. I also believe that the employees of the 
Commission share a common desire to serve the needs of the people of Bos- 
ton. This dedication of purpose will result in a greatly improved water and 
wastewater delivery system as we enter the next century. 



Sincerely, 




Robert J. Cioiek 
Executive Director 




Robert J Cioiek 
Executive Director 




Mary Net 



Lisa C. Cbapnick 
Commis 



la 





" Since its inception. 




tiie BWSC has 



provided tlie City 



witli some of 



the purest water 



in the nation. 



The Boston Woter and Sewer Commission (BWSC) fakes very seriously its role in 
presen/ing ond protecting Boston's urban environment. While the Commission has 
earned notional recognition for resource conservation programs and for achievements 
in rehabilitating and operating our water and wastewater system, we are committed to 
further improvements. As we move towards the year 2000, The Boston Water and 
Sewer Commission is pleased to be part of the increased effort to improve the environ- 
mental quality of life in the City of Boston. 

Conserving a Precious Resource. The BWSC has developed several 
model conservation programs to insure that Boston residents, businesses and visitors 
continue to receive a stable supply of clean, pure water. Successful conservation pro- 
grams include: 

■ An aggressive leak detection and repair program which has helped to reduce Bos- 
ton's vi^ater consumption from 150 million gallons per day in 1976 to 1 1 1 .4 million 
gallons per day in 1 989 - a reduction of 26 percent. In 1 989 alone, the program 
saved 1 0. 1 million gallons per day; 

■ A progressive rate structure which promotes water conservation by charging a 
higher rate for higher amounts of water used; 

■ Ongoing domestic and industrial consen/otion programs. 

Guarding Against Pollution. Improving water quality in Boston hHorbor 
will continue to be one of the most pressing environmental issues of the decade. The 
Commission, in cooperation with other state and federal agencies, plays a significant 
role in harbor clean-up efforts. 

The BWSC has token several major steps to control doily discharge of sewage 
info the harbor. Through the construction of two new interceptors in 1 988 and the sys- 
tematic cleaning of existing interceptors, we have enlarged our capacity for transport- 
ing sewage and have virtually eliminated dry weather overflows. 

During wet weather, Boston's sewage system, which combines wastewoter and 
storm drainage, often overflows at dozens of points around the harbor. These com- 
bined sewer overflows (CSOs), are a major source of pollution in the harbor and its 
tributaries. 

The BWSC has already separated over 4,600 feet of combined sewers, signifi- 
cantly reducing the threat of sewage spills during wet weather. In addition, the Com- 
mission exceeds federal permit requirements for inspection and maintenance of our 
fidegates and regulators, which help control the flow of combined sewage into the har- 
bor. 

The BWSC is actively locating and correcting illegal sewage connections to storm 
drains, thus reducing another source of contaminants being dischorged into the City's 
waterways. And by using the Calf Pasture CSO Pumping Station as a back-up to the 
Massachusetts Water Resources Authority treatment plant, BWSC is providing on outlet 
for combined sewage during storms and is treating harmful bacteria by chlorinating the 
flow into Dorchester Bay. 

Through aggressive maintenance and upgrading of Boston's woter and sewer sys- 
tem, the BWSC will continue to ploy a major part in restoring Boston Harbor. 



Uk 



Since ifs inception, the Boston Water and Sewer Commission has practiced inno- 
vative financial strategies that have allowed for capital improvements while securing a 
reputation for the Commission as one of the best managed utilities in the country. 

Today, however, we are faced with a future that calls for tighter cost controls, 
fiscal austerity and an ever-vigilant, ongoing scrutiny of our budgets and resources. 

The clean-up of Boston hHarbor involves costs of staggering proportions. Unfortu- 
nately, because of the abdication of the responsibility of the federal and state govern- 
ments in providing grants for this project, our customers will pay much more for water 
and wastewater services. Due to existing laws and our commitment to the quality of our 
water and wastewater systems, capital cost increases are largely unavoidable. 

As we enter this period of rapidly escalating rates, BWSC will actively seek ways 
to continue delivering high quality services in the most cost-effective manner. 

Fiscal Accountability. The major impetus for the creation of the Commission 
was to generate adequate revenue to meet the cost of proper operation and mainte- 
nance of the City's water and sewer system. 

Currently, rates must be established at a level sufficient to generate revenues to re- 
cover the full costs of operations on a fair and equitable basis, to encourage water 
conservation, and to provide continued discounts for the elderly and disabled. 

With the creation of the MWRA and its mission to clean up Boston Harbor as well 
as upgrade the existing water and sewer infrastructure, the City is now feeling the im- 
pact of increased rates. To assure accurate rate levels, the Commission carefully moni- 
tors metering at the 29 points where water is delivered by the MWRA and independ- 
ently reviews Authority rotemaking methodology. 

Our commitment to fiscal accountability assures our customers that their rote dollars 
are used wisely and efficiently. Recently, a national bond rating service recognized the 
Commission's sound fiscal management by awarding us an A/A - bond rating. 

Management Accountability. The Commission's policies are formulated 
by a three-member Board of Commissioners, appointed to four-year terms by the 
Mayor, subject to confirmation by the City Council. 

Policy is implemented under the direction of the Executive Director, RobertJ. 
Cioiek, and carried out through various departments managed by experienced senior 
staff. Units within the Office of the Executive Director include Legal, Planning and Pro- 
gram Management, Affirmative Action and Public Affairs. In addition to the Office of 
the Executive Director, the Commission is organized into four principal departments: 
Finance, Administration, Operations, and Engineering. 

Buoyed by a reputation for management accountability and fiscal stability and in- 
tegrity, the Commission enters this period of maximum fiscal austerity with a sound 
management and financial structure. 






Service to the 



people of Boston 



Service to the people of Boston, delivered with courtesy and respect, is Boston 
Water and Sewer Commission's most essential mission. We firmly believe that the 
people of Boston will be more willing to accept the high costs associated with harbor 
clean-up and increased water rates when they ore receiving value for their dollar as 
well as a sustained quality of service. 

Encouraging Community Access. Our customer service department con- 
tinues to actively work through community outreach to make the Commission more ac- 
cessible and accountable to residents. 

Public outreach efforts include cost-effective educational tools, such as conservation 
tips, billing inserts, and a traveling wafer conservation exhibit. Neighborhood meetings 
are frequently held to update customers on construction projects and local system 
improvements. 

By holding office hours in 1 5 convenient locations throughout Boston's neighbor- 
hoods, BWSC representatives are available to accept payments, listen to service-re- 
lated complaints and process elderly and disabled discounts. 

The BWSC once again confirms its commitment to the concept that our customers' 
needs are our most important consideration. 



is our most 



essential mission. 



The same vision that guided planners to tap 



Long Pond, to construct the Boston Main interceptor 



System and build the Quabbin Reservoir, must 



guide us to shape our future as well. 



1^ 



INDEPENDENT A, 



TORS' 



Boston Water and Sewer Commission: 

We have audited the accompanying balance sheets of the Boston Water and Sewer Com- 
mission (the "Commission"! as of December 31,1 989 and 1 988 and the related statements of 
operations, Commission equity and cash flows for the years then ended. These financial state- 
ments and the supplemental schedule discussed below are the responsibility of the Commission's 
management. Our responsibility is to express an opinion on these financial statements based on 
our audits. 

We conducted our audits in accordance with generally accepted auditing standards. 
Those standards require that we plan and perform the audit to obtain reasonable assurance about 
whether the financial statements are free of material misstatement. An audit includes examining, 
on a test basis, evidence supporting the amounts and disclosures in the financial statements. An 
audit also includes assessing the accounting principles used and significant estimates made by 
management, as well as evaluating the overall financial statement presentation. We believe that 
our audits provide a reasonable basis for our opinion. 

In our opinion, such financial statements present fairly, in all material respects, the financial 
position of the Commission at December 31,1 989 and 1 988 and the results of its operations 
and its cash flows for the years then ended in conformity with generally accepted accounting 
principles. 

Our audits were made for the purpose of forming an opinion on the basic financial state- 
ments taken as a whole. The supplemental schedule of revenues and expenses for the years 
ended December 31,1 989 and 1 988 is presented for purposes of additional analysis and is 
not a required part of the basic financial statements. Such supplemental schedule has been sub- 
jected to the auditing procedures applied in our audits of the basic financial statements and, in 
our opinion, is fairly stated in all material respects when considered in relation to the basic finan- 
cial statements taken as a whole. 



DELOIUE & TOUCHE 
Boston, Massachussetts 
April 27, 1990 



BALANCE SHEETS, December 31, 1989 and 1988 

ASSETS 

CURRENT ASSETS: 

Cash and cosh equivalents 

Accounts receivable: 

Customers, less allowances of 
$12,5 17,089 in 1989 and 
$10,179,803 in 1988 

City of Boston - net 
Earned revenues in excess of 

billings, less allowances of 

$1,732,419 in 1989 and $641,623 

in 1988 
Construction grants receivable 
Prepaid expenses 
Deferred charges 
Total current assets 

TRUSTEED ASSETS 

NONTRUSTEED ASSETS 

PROPERTY, PLANT AND EQUIPMENT ■ Net 

DEFERRED CHARGES 

DEBT ISSUE COSTS, LESS AMORTIZATION 

TOTAL 



NOTES 



1989 



1,5,9 $ 26,801,667 $ 36,932,369 



42,429,786 36,812,209 

7 976,736 1,585,750 



1 

9 
,2,8 


10,838,488 

12,893,326 

1,521,537 

12,594,773 

108,056,313 


7,134,473 
11,784,224 

1,073,979 

11,387.415 

106,710,419 


,5,9 


86,691,747 


86,008,860 


,5,9 


44,528,169 


2,614,295 


4,10 


256,914,295 


228,925,916 


,2,8 


27,355,384 


28,526,521 


1 


4,451,430 


3,989,837 




$527,997,338 


$456,775,848 



See notes lo financial slatemenls. 



BALANCE SHEETS, December 31, 1989 and 1988 (cont.) 

IIABIIITIES AND COA/WISSION EQUITY NOTES 



CURRENT LIABILITIES: 
Payable from current assets: 

Accounts payable 

Other accrued liabilities 
Total 
Payable from current trusteed assets: 

Massachusetts Water Resources 
Authority assessment 

City bonds 
Total 

General revenue bonds 
Deferred credits 
Total current liabilities 

OTHER LIABILITIES: 
City bonds 

General revenue bonds 
Deferred credits 
Other liabilities 
Total other liabilities 

COA^MISSION EQUITY: 
Contributed capital 
Accumulated deficit 
Total commission equity 

TOTAL 



$ 8,252,043 


$ 5,581,059 


4,144,934 


3,763,845 


12,396,977 


9,344.904 


6 2,976,492 


2,495,227 


5 621,453 


630,174 


3,597,945 


3,125,401 


5 6,320,820 


7,386,749 


1,3 18,426,107 


30,752,850 


40.741,849 


50,609,904 


5 1,705,000 


2,295,000 


5 241,143,511 


204,632,803 


1,3 125,570,982 


97,342,356 


1,249,247 


1,674,126 


369,668,740 


305,944,285 


1 117,586,749 


105,768,355 




(5,546,6961 


117,586,749 


100,221.659 


$527,997,338 


$456,775,848 



See notes to financial statements. 



STATEMENTS OF OPERATIONS 

For The Years Ended December 31, 1989 and 1988 



TOTAL WATER SEWER 





1989 


1988 


1989 


1988 


1989 


1988 


OPERATING REVENUES; 














Water and sewer usage 


$120,484,970 


$ 90,734,764 


$56,375,198 


$44,560,550 


$64,109,772 


$46,174,214 


Fire pipe 


1,678,379 


1,378,635 


1,678,379 


1,378,635 






Other 


870.533 
123,033.882 


813,539 
92,926.938 


400,445 
58,454,022 


382,363 
46,321,548 


470,088 


43 1 , 1 76 


Total operoting revenues 


64,579,860 


46,605.390 


OPERATING EXPENSES: 














Operations 


79,034,656 


61,353.142 


35,172,791 


27,832,594 


43,861,865 


33,520,548 


Engineering and 














administrative 


23,807,038 


14,409,642 


12,143,322 


6,585,206 


11,663,716 


7,824,436 


Maintenance 


4,831,816 


4,575,196 


2,222,635 


2.726.623 


2,609,181 


1,848,573 


Depreciation 


_ 4,366.778 


3,901,230 


2,008,076 


1,782.862 


2,358,702 


2,118,368 


Total operating expenses 


112.040,288 


84,239.210 


51,546,824 


38,927,285 


60,493,464 


45.311.925 


TOTAL OPERATING INCOME 


10,993,594 


8,687,728 


$ 6,907,198 


$ 7,394,263 


$ 4,086.396 


$ 1.293.465 


OTHER INCOME (EXPENSE): 














Interest income 


7,986,618 


6,503,666 










Interest expense 


(15,543.8201 


(15.642.921) 










INCOME (LOSS) FROM 














CURRENT OPERATIONS 














(Note 1 ) 


3,436,392 


(451,527) 











PRIOR YEAR RATE SURPLUS 
RECOGNIZED IN 
CURRENT YEAR 2,996,564 3,448,091 

CURRENT PERIOD RATE 
SURPLUS DEFERRED TO 
SUBSEQUENT YEAR (Note 1 ) (6.432.956) (2.996.564) 

NET INCOME $ -0- $ -0- 



See notes lo financial statements. 



STATEMENTS OF COMMISSION EQUITY 

For The Years Ended December 31, 1989 and 1988 (Note 1) 

TOTAL 
CONTRIBUTED ACCUMULATED CO^W\ISSION 
CAPITAL DEFICIT EQUITY 

BALANCE, JANUARY 1, 1988 $97,173,599 $(5,546,696) $91,626,903 

CONTRIBUTIONS IN AID OF 

CONSTRUCTION 9,373,194 9,373,194 

DEPRECIATION OF RELATED 

PROPERTY (778,438) (778,438) 

BALANCE, DECEMBER 31, 1988 105,768,355 (5,546,696) 100,221,659 

CONTRIBUTIONS IN AID OF 

CONSTRUCTION 13,309,386 13,309,386 

DEPRECIATION OF RELATED 

PROPERTY (1,490,992) (1,490,992) 

PRIOR YEARS RATE DEFICITS 

RECOVERED IN 1989 4,856,609 4,856,609 

RECOVERIES ON PRE-COMMISSION 
RECEIVABLES WRITTEN OFF IN 
PRIOR YEARS 690.087 690.087 

BALANCE, DECEMBER 31, 1989 $117.586.749 $ -0- $117,586,749 



See notes to financial statements. 



STATEMENTS OF CASH FLOWS 

For The Years Ended December 31, 1989 and 1988 



NOTES 



OPERATING ACTIVITIES: 
Net income 

Adiustments to reconcile net income to net cosh: 
Depreciation and amortization 
Loss on disposals of property, plant 

and equipment 
Recovery of accumulated deficit 
Cfiange in assets and liabilities: 
Accounts receivable 

Earned revenues in excess of billings - net 
Deferred charges 
Accounts payable, assessments, 
accrued liabilities and other 
Accrued interest 
Deferred credits 
Total 

FINANCING ACTIVITIES: 
Proceeds of debt issuance 
Payment for defeasance of bond 

principal and interest 
Payment of debt issuance costs 
Payment of principal on bonds 
Proceeds of contributions in aid of construction 
Total 



$ -0- 


$ -0- 


5,230,216 


5,453,874 


5,546,696 


100,346 


(5,008,563) 

(3,704,015) 

(36,221) 


420,750 

166,482 

(13,795,966) 


(4,855,027) 
(1,854,651) 
15,901,883 
11,220,318 


11,954,203 

(40,024) 

11,807,499 

16,067,164 


39,269,679 


54,290,112 


(779,000) 
(3,115,000) 
12,200.284 
47,575,963 


(51,498,254) 

(1,071,345) 

(2,900,000) 

8.594.756 

7.415.269 



INVESTING ACTIVITIES: 

Purchase of properly, plant and equipment 

Net proceeds (purchases) of investments 

Total 

CASH AND CASH EQUIVALENTS: 
Increase (decrease) during year 
Balance, beginning of year 

BALANCE, END OF YEAR 



(26,330,222) (25,051,900) 
(42,596,761) 23,132,044 
(68.926.9831 11.919.8561 



10,130,702) 
36.932,369 



21,562,577 
15,369.792 



$26.801.667 $ 36.932.369 



YEAR-END BALANCES COMPRISED OF: 

Cosh 

Current portion: 

Trusteed assets 

Nontrusteed assets 



$ 503.784 $ 

20,821,462 
5.476.421 



199.636 



13,925,770 
22.806.963 



TOTAL CASH AND CASH EQUIVALENTS 



$26.801.667 $ 36.932.369 



SUPPLEMENTAL DISCLOSURE OF CASH 
FLOW INFORMATION ■ Cosh paid 
during the year for interest 
(net of amount capitalized) 



$ 18,019.458 $ 15,682.944 



See notes to financial stalemenis 






NOTES TO FINANi 



TAf EMENTS 






1.0RCANIZATI0M, BASIS OF PRESEMTATIOM 
AMD SUMMARY OF SIGNIFICANT 
ACCOUNTING PRINCIPLES 

The Boston Water and Sewer Commission (the "Commis- 
sion") hos the responsibility to provide water and wastewater 
services on a fair and equitable basis in the City of Boston (the 
"City") as required under the Boston Water and Sewer Reor- 
ganization Act of 1977 (the "Enabling Act"). 

Under the Enabling Act, the Commission is required to 
maintain and present its financial statements in accordance with 
generally accepted accounting principles ("GAAP"). Also, the 
Commission has adopted a rate setting process which recog- 
nizes certain costs in periods other than when the costs are in- 
curred. This is generally accepted as appropriate regulatory 
practice. 

To accommodate this rate setting process, the Commission 
follows the accounting standards set forth under the Financial 
Accounting Standards Board Statement No. 71 ("FAS-71 "), "Ac- 
counting for the Effects of Certain Types of Regulation." FAS-71 
requires that under regulation (a) revenues provided for future al- 
lowable costs are deferred until the costs are actually incurred 
(deferred credits) and (b) allowable incurred costs are capital- 
ized if future recover/ is assured (deferred charges). 

The following is a reconciliation outlining the effects of 
FAS-71 on the statements of operations for the years ended De- 
cember 31, 1989 and 1988: 



Income prior to deferrals 

Revenues and expenses deferred in 
accordance with FAS71 ; 

Deferred revenues: 

Revenue bond principal payments 
Interest expense funded from escrow 

accounts 
Deposits to reserve funds 
Investment income on project funds 
Amortization of bond issue and 

defeasance costs 
Revenue raised for working capital 
Revenue financed capital 

improvements 
Depreciation on commission finonced 
property, plant and equipment 

Other 

Total 

Deferred expenses - depreciation on 
contributed capital 

Income (loss) from current operations 



1,858,132 $ 7,439,775 



(3,115,000) 


(2,540,000) 


Water: 

Works 

Meters and hydrants 
Sewerage: 

Works 


6,213,355 
(3,213,000) 
(5,146,168) 


3,589,285 
(2,929,162) 
(5,912,644) 


Pumping station 
Other 


1,278,819 
(6,294,360) 


774,208 
(10,159,000) 




(3,882,320) 


4,471,041 




4,366,778 

(120,8361 

(9,912,732) 


3,901,231 

135,302 

(8,669,7391 




1 ,490,992 


778,437 




$ 3,436,392 


$ (451,5271 





The Enabling Act requires that any net surplus or deficit, as 
defined by the rate setting process, must either be returned to 
the City or applied to offset water and sewer rates for the fol- 
lowing year. The Commission has applied $6,432,956 and 
$2,996,564 for the years ended December 31,1 989 and 
1988, respectively, to offset rates in the respective subsequent 
years. 

Revenues and Earned Revenues in Excess of Billings- Wa- 
ter and sewerage fees are billed to users of the systems on a 
'quarterly cycle basis. Revenues are accrued for periods be- 
tween the termination of billings for the various cycles and the 
end of the year. 

Trusteed and Nontrusteed Assets- These assets, consisting 
of direct and unconditionally guaranteed short-term obligations 
of the U.S. Government, repurchase agreements and money 
market units secured by government securities, are stated at cost 
plus accrued interest. 

Property, Plant and Equipment- Property, plant and equip- 
ment is stated at cost. Depreciation is provided on the straight- 
line method based upon the estimated useful lives of the various 
classes of assets. Maintenance and repairs are charged to ex- 
pense as incurred. Major renewals or betterments are capital- 
ized and depreciated over their estimated useful lives. 

The Commission capitalizes interest costs during construc- 
tion of assets for its own use. Interest totaling approximately 
$442,000 and $660,000 was capitalized in 1 989 and 
1 988, respectively. 

Depreciation- The ranges of estimated useful lives used in 
computing depreciation are as follows; 



Years 

60tol00 
10 to 40 

40 to 75 

35 

3tol5 



Commission Equity- Contributions from governmental agen- 
cies, individuals and others received in aid of specific construc- 
tion projects, which are not refundable, are included in Commis- 
sion equity as contributed capital. Accordingly, depreciation of 
the related property is charged directly to Commission equity 
and is not included in the accompanying statements of opera- 
tions. 

In 1989, the Commission determined that the accumulated 
deficit, previously recorded as a reduction of Commission eq- 
uity, would be recoverable. The balance of $5,546,696 was 
recovered in the 1 989 fiscal year, net of all previous receipts 
that represented payment of pre-Commission receivables previ- 
ously written off to the accumulated deficit. 

Cash Equivalents- The Commission considers all highly liq- 
uid, short-term cosh investments with a maturity of less than three 
months to be cash equivalents. 

Bond Issue Costs- Expenses related to the issuance of 
bonds are amortized on a weighted-overage basis over the life 
of the bonds which approximates the effective interest method. 

Reclassification- Certain amounts in the 1988 financial 
statements have been reclassified to conform to the 1 989 pres- 
entation. 

2.DEFERRED CHARGES 

The following is a summarization of the major components 
of deferred charges included in the accompanying balance 
sheet: 



3.DEFERRED CREDITS 

The following is a summarization of the major components 
of deferred credits included in the accompanying balance 
sheet: 



Current deferred credits: 






Reseive deposits made under the 






terms of the Bond Indenture 






(Note 5) 


$ 11,573,162 


$ 8,360,162 


Prior year surplus deferred to 






subsequent year 


6,432,956 


2,996,564 


Provision for additional working 






capital 




1 8,440,603 


Other 


419,989 


955,521 


Total current deferred credits 


$ 18,426,107 


$ 30,752,850 



Noncurrent deferred credits: 
Revenues raised for capital 

improvements and payments on 

long-term debt 
Working capital at inception of 

Commission 
Provision for additional working 

capital 
Self insurance and other 

Total noncurrent deferred credits 



69,626,118 $66,116,781 
28,985,575 28,985,575 



24,734,963 
2,224,326 



2.240.000 



1 25.570,982 $97,342,356 



Current deferred charges: 
Accrued interest expenses 
Accrued pension expenses 
Accrued legal claims 
Accrued vocation and sick time 

expenses 
Debt extinguishment expenses 
Provision lor adjustments 

Total current deferred charges 

Noncurrent deferred charges: 
Accrued pension expense 
Accrued legal cloims 
Debt extinguishment expense 

Total noncurrent deferred charges 



$10,186,561 $ 8,437,049 
201,833 189,255 
427,835 418,531 

818,544 640,055 

960,000 960,000 

742,525 



1 2,594,773 $11.387.415 



$16,541,824 $16,743,657 

1,664,822 1,674,126 

9,148,73& 10,108,738 

$27.355.384 $28,526,521 



4.PROPERTY. PLANT AMD EQUIPMENT 

The cost of water and sewerage plant and equipment in 
service and related accumulated depreciation at December 3 1 
1989 and 1988 are summarized as follows: 



Water: 

Works 

Meters and hydrants 
Total water 
Sewerage: 

Worb 

Pumping station 
Total sewerage 
Other 
Total 

Less accumulated depreciation 
Total 
Construction in progress 

Total 



$ 90,153,870 $ 83,217,000 

10,762,835 9.559,755 

100.916.705 92.776.755 



136,939,338 
6.798.216 



132,419.951 
6.781.316 



143.737.554 139.201,267 
10.017.442 



,863.301 



256,517,560 
35.647.669 

220,869,891 
36.044.404 



241,995,464 
29.789.897 

2)2,205.567 
16.720.349 



$256.914.295 $228.925.916 



21,902,728 $ 25,048,342 



5.BOMDS PAYABLE 

Outstanding bonds payable, including accrued interest, at 
December 31,1 989 and 1 988 were as follows: 



Revenue Bonds: 

1 984 Series A, bearing interest at rates 
ranging from 7.0% to 1 0.0% with 
maturity dotes ranging from January 1 , 
1 990 to January 1, 2011 : 

] 985 Series A, bearing a variable 
interest rote (6.6% and 7.3% at 
Decembers!, 1989 and 1988, 
respectively), maturing in two 
equal amounts on November 1 , 
201 4 and 201 5 and requiring 
annual sinking fund 
contributions through 20 1 4 

1 986 Series A, bearing interest at 
rales ranging from 6.0% to 7.9% 
with maturit/ dotes ranging from 
November 1, 1990 to 20 15 

1988 Series A, bearing interest at 
rales ranging from 6.0% to 7.4% 
with maturit/ dates ranging from 
November 1 , 1 990 to 2008 

1 989 Series A, bearing interest at 
rates ranging from 5.9% to 7. 1 % 
with maturity dates ranging from 
November 1, 1990 

to November 201 9 

City Bonds, bearing interest at 

rotes ranging from 5. 1 % to 9.5% 
with maturity dotes ranging from 
December 1990 to December 1999 

Total bonds outstanding 

Less current portion due within one 
year including accrued interest 



80,240,291 



50,411,868 



143 



55,872,063 55,428,199 



39,504,439 



2,326,453 
249,790,784 

6,942,273 



Z 

214 



925, 



174 
726 



923 



Portion due after one year, net of 
unamortized original issue 
discount 



$242,848,511 $206,927,803 



The Resolution Establishing Issue of Revenue Bonds adopted 
by the Commission on December 6, 1 984 places certain restric- 
tions on the Commission's operations. It requires that rates, 
charges and fees be set at a level sufficient to meet a net reve- 
nue test on an annual basis and requires that all revenues, as 
defined, be deposited in a Revenue Fund maintained by a fiscal 
agent. Amounts held in the Revenue Fund are to be disbursed to 
and withdrawn from other funds provided for in the Resolution. 
The Resolution provides that all excess cosh be held in the Reve- 
nue Fund until the last business day of the fiscal year. At that 
time, if certain covenants ore met, the Commission has the op- 
tion to remove any excess cash from the Revenue Fund and 
place such cash in a fund not restricted by the Resolution. 

In compliance with the Resolution the Commission has es- 
tablished both trusteed and nontrusteed funds with assets, princi- 
pally short-term securities, which are restricted for payment of 
specified liabilities. The Commission has options for early re- 
demption of revenue bonds starting in 1995 at prices ranging 
from 1 00% to 1 03% of face value. 

Revenue Bonds- The 1 984 Series A Bonds were issued in 
order to advance refund a series of 1 980 System Revenue 
Bonds. Under the Refunding Trust Agreement, the 1980 Bond- 
holders hove no right, title, interest or liens in any other funds, 
real or personal property or assets of the Commission other than 
the amounts held under the Refunding Trust Agreement and 
pledged for their benefit thereunder. 

The 1 985 Series A Bonds were issued to provide funds for 
projects under the Commission's ongoing capital improvement 
programs and other capital and operating needs. The Commis- 
sion maintains a letter of credit to guarantee the principal and 
interest payments on these bonds in the event that the Commis- 
sion is unable to moke such payments. 

In August of 1 986, the Commission issued 1 986 Series A 
General Revenue Bonds (1986 Bonds). This issue was structured 
as a rolling cross-over refunding and new money issue. The 
1986 bonds provide funds for the Commission's ongoing capi- 
tal improvement program and other capital and operating 
needs. In addition, a portion of the proceeds of the 1986 
bonds were deposited to the 1 986 Series A Escrow Account to 
provide for the principal payments of the 1 985 Series A Bonds 
and the interest payments of the 1986 bonds as they come due. 
Thus, the Commission is allowed to pay the low short-term inter- 
est rates provided under the 1 985 bonds and has secured a 
guaranteed redemption for the 1 985 bonds. 

In December of 1988, the Commission issued 1988 Series 
A bonds to provide for the defeasance of a portion of the Com- 
mission's General Revenue Bonds 1984 Series A, to provide 
supplemental funding for the Operating Reserve Fund and to 
pay costs of issuance. Under the 1 988 Refunding Trust Agree- 
ment, the Commission deposited sufficient funds with the 1 984 



Bond Trustee to pay when due, the principol and interest 
on the refunded bonds until the first coll dote, January 1 , 1 995. 
As result, the refunded bonds are no longer outstanding under 
the Commission's Resolution. 

In December of 1989, the Commission issued the 1989 
Series A Bonds to provide funds for projects undertaken as part 
of the Commission's ongoing capital improvement program. 

In the aggregote, $ 1 07, 1 40,000 remains outstanding at 
December 31,1 989 on the defeased portions of the 1 980 
and 1984 issues. 

City Bonds - At the time of its creation, the Commission as- 
sumed general obligation certificates of indebtedness of the City 
(City Bonds) pertaining to the water and sewerage works sys- 
tems. Payments for principal and interest are made directly to 
the City in accordance with the original maturity and interest 
schedule. 

Aggregate bond maturity and sinking fund requirements of 
the Revenue Bonds and City Bonds at December 31,1 989 ore 
as follows: 



Year 

1990 

1991 

1992 

1993 

1994 

Thereafter 

Subtotal 

Accrued interest 

Unamortized original issue discount 

Total bonds payable 



Total 

$ 3,895,000 
3,920,000 
4,440,000 
4,630,000 
4,955,000 
231,705,000 
253,545,000 
3,047273 
(6,801.4891 

$249,790,784 



6.MASSACHUSETTS WATER RESOURCES 
AUTHORITY 

The Massachusetts Water Resources Authority (the "Author- 
ity") provides all the Commission's water and sewer treatment re- 
quirements and assesses the Commission for its actual operating 
and capital expenses. Payments to the Authority are due in four 
installments in March, May, September and November. Interest 
is not charged on the outstanding balance. Assessments for 
1989 and 1988 ore as follows: 



During 1989 and 1988, over 70% and 67%, respectively, 
of water received from the Authority was billable to customers. 
Since its inception, the Commission has increased the percent- 
age of billable water from 52% in 1 977 to over 70% in 1 989 
and is continuing to take steps to improve the amount of water 
billable, including replacement of old and defective meters and 
comprehensive leak detection and repair program. 

7.TRAMSACTIOMS WITH THE CITY OF BOSTON 

The Commission's ongoing program to meter City facilities 
has resulted in billings to nine City departments based on actual 
consumption of $ 1 , 39 1 ,000 and $ 1 , 249,000 in 1 989 and 
1988, respectively. The remaining four City departments were 
billed $ 1 ,593,000 and $ 1 ,564,000 based on estimated con- 
sumption during 1989 and 1988, respectively. 

The City provides services to the Commission, including 
paving and facilities rental. Operating costs billed by the City 
were $520,000 during both 1989 and 1988. Capitol costs 
billed by the City were $763,000 and $361 ,000 during 
1989 and 1988, respectively. 

8.RETIREMEMT BENEFITS 

The Commission provides retirement benefits to substantially 
oil of its employees through a pension trust fund (trust fund) and 
the State-Boston Retirement System (Boston System). A dispute 
concerning the Commission's past and future obligations to all 
Commission employees covered by the Boston System was 
settled in 1 986, resulting in a payment of $ 1 9, 1 00,000 to the 
Boston System. This payment, funded primarily through 1985 
and 1 986 bond proceeds, was recorded as a deferred charge 
to be recovered through future rotes. 

As port of the settlement with the Boston System, the Com- 
mission annually reimburses the City for the Commission's share 
of pension benefits paid to Commission employees. The Com- 
mission's share is based upon the proportion of each em- 
ployee's total years of creditable service that were spent with 
the Commission. Employees become 100% vested after 10 
years of creditable service as defined by Chapter 32 of the 
Massachusetts General Laws. 



Assessments allocated on: 
Water usage 
Wastewater usage 



$21,928,747 $18,415,728 
32,787,627 24,778,849 



Total 



$54,716,374 $43,194,577 



The Commission's covered payroll was $14,738,993 and 
$1 3,570,544 in 1989 and 1988, respectively. Total payroll 
for all Commission employees was $17,443,241 and 
$14,782,906 in 1989 and 1988, respectively. Incompli- 
ance with Governmental Accounting Standard No. 5, as of 
Januan/ 1 , 1990, the Commission updated its actuarial valu- 
ation originally performed as of January 1 , 1989. The valu- 
ation and subsequent update were based on 98 retired and in- 
active employees, 153 vested active employees and 365 non- 
vested active employees. Employee contributions are defined 
under Massachusetts General Laws, Chapter 32. Total em- 
ployee contributions were $1,017,036 and $863,522 or 
6.9% and 6.4% of covered payroll in 1989 and 1988, re- 
spectively. 

As required by the Commission's Enabling Act, employee 
pension contributions are transferred to the Boston System and 
are either returned to employees upon termination or, for vested 
employees, are used to defray a portion of the total retirement 
benefit. The Commission's policy is to moke additional contribu- 
tions to the pension trust fund based upon the actuarially deter- 
mined cost of future benefits net of employee contributions. 

Trust fund assets at December 31,1 989 and 1 988 
comprised: 



Assets (at fair market value): 






Common stocks 


$ 8,740,563 


$ 7105,225 


U.S. Government securities 


4,378,249 


4,146,601 


Corporate bonds and notes 


1 ,924,029 




Short-term investments 


1,591,600 


2,286,000 


Cash 


264,957 


235,535 


Other 


289,817 


189,414 


Total 


$17,189,215 


$13,962,775 



Net assets in excess of pension benefit obligation appli- 
cable to the Commission's employees are determined as 
follows: 



Net assets available for benefits 
Pension benefit obligation: 
Retirees and beneficiories currently 

receiving benefits 
Current employees: 

Employer-financed vested 
Employer-financed nonvested 
Total pension benefit obligation 

Net assets in excess of pension 
benefit obligation 



$17,189,215 $13,962,775 



2,001,000 



3,213,000 
4,551,000 



,685,000 



2,790,000 
3,954,000 



9,765,000 8,429,000 



7424,215 $ 5,533,775 



The amount shown as the pension benefit obligation is a 
standardized disclosure measure of the present value of pension 
benefits, adjusted for the effects of projected solar/ increase, es- 
timated to be payable in the future as a result of employees' 
service to date. The measure is intended to help users assess the 
funding status of the system on a going-concern basis, assess 
progress mode in accumulating sufficient assets to pay benefits 
when due and make comparisons among systems. The meas- 
ure is independent of the actuarial funding method used to deter- 
mine contributions to the pension trust fund. 

The pension benefit obligation was computed as port of an 
update performed as of Januan/ 1 , 1 990 using the information 
and assumptions contained in the January 1 , 1 989 actuarial 
valuation. Significant actuarial assumptions used to calculate the 
pension benefit obligations include a rote of return on investment 
of present and future assets of 9% a year compounded annually 
and projected solan/ increases of 7% a year, compounded an- 
nually. 

The Commission's funding policy has been to provide for 
quarterly employer contributions to the trust fund based upon on 
actuarially determined rote using the aggregate actuarial cost 
method. The Commission's contributions totaled $990,92.9 
and $916,012 in 1989 and 1988, respectively, or 6.7% of 
the covered payroll. Historical information on the Commission's 
pension plan is not available. 

9.DEPOSITS AND INVESTMENTS 

The Boston Water and Sewer Commission's General Reve- 
nue Bond Resolution, adopted December 6, 1984, as 
amended, places certain limitations on the nature of deposits 
and investments available to the Commission. Demand deposits 
and term deposits without collaterolization can only be made 
with financial institutions meeting certain criteria. Certificates of 
deposit must be fully collateralized and issued by FDIC insured 
banks. Investments con also be made in securities issued by or 
unconditionally guaranteed by the U.S. Government or its Agen- 
cies; public agencies, municipalities or state obligations carry- 
ing the highest bond rating; commercial paper rated A-1 , P-1 ; 
A Rated money market funds; fully collateralized investment con- 
tracts and certain futures contracts. 

In addition, the Commission's Pension Trust Fund has addi- 
tional investment powers, most notably the ability to invest in 
stocks, corporate bonds and other instruments. 



Deposits- The following summary presents the amount of the 
Commission's deposits which ore (Category 1 ) fully insured or 
collateralized with securities held by the Commission or its agent 
in the Commission's name, (Category 2) those deposits which 
are collateralized with securities held by the pledging financial 
institution's trust department or agent in the Commission's name 
and (Category 3) those deposits which are not collateralized as 
of December 31,1 989 (in thousands): 





Bank Balances 


Total 








Cateaory 


Bank 
Balance 


Carrying 




X 


2 


3 


Amount 


Cash 
Certificates of 


$200 




$ 2,115 


$ 2,315 


$ 2,315 


Deposit 
Money market 


400 
200 




5,413 
3,836 


5,813 
4,036 


5,8)3 
4,036 


Total 


$800 


$o 


$11,364 


$12,164 


$12,164 



Investments- The Commission's investments are categorized 
according to the level of risk assumed by the Commission. 
Category 1 includes investments that are insured, registered or 
held by the Commission's trustee in the Commission's name. 
Category 2 includes uninsured and unregistered investments 
held by the counterparty's trust department or agent in the Com- 
mission's name. Category 3 includes uninsured or unregistered 
investments held by the counterparty, its trust department or 
agent but not in the Commission's name (in thousands): 



Category 



U. S. Government 
obligations 

U. S. Government 
Agency 
obligations 

Repurchase 
Agreements 

Money market 

Qher 

investments 

Total 



$35,957 



47,256 



Estimated 
Carrying Market 
Amount Value 

$ 35,957 $ 35,121 



47,256 50,658 



$33,993 $ 800 34,793 34,793 
26,526 26,526 26,526 



i,213 $35.319 $27,326 $145.858 $148,424 



lO.COMMITMEMTS 

The Commission leases its administrative offices. The lease 
provides for on initial term of five'years with two options to ex- 
tend the lease for additional five-year terms. The basic rent in- 
cludes on allocation for building operating costs and an escala- 
tion clause subject to certain limitations. In 1 988 the Commis- 
sion entered into an additional three-year lease of a vehicle 
maintenance facility. Total rent expense for both facilities 
amounted to $1,220, 120 and $1 ,025,000 for 1989 and 
1988, respectively. 

A major capital imiprovemenf program is currently in prog- 
ress. As part of this program, the Commission has entered into 
a number of contracts for the design and construction of its facili- 
ties. Commitments under these contracts aggregate approxi- 
mately $41 .7 million at December 3 1 , 1989. Capital im- 
provements, primarily related to water and wastewater system 
projects with an emphasis on the clean-up of the Boston Harbor 
area, are expected to aggregate approximately $ 1 36 million 
for 1990 through 1992. Of this amount, approximately 
$91 million represents extension and improvement projects and 
$45 million represents renewal and replacement projects. The 
extension and improvement projects will be 40% funded by fed- 
eral and state grants. The remaining amounts will be funded 
from Commission revenues. 

11.CONTINCEMCIES 

The Commission is involved in ordinary and routine litiga- 
tion and other matters incidental to its operations and the estab- 
lishment of rates. Management believes that the resolution of 
these matters will not materially affect the financial position of 
the Commission. 

The Commission has received federal and state grants for 
specific purposes that are subject to review and audit by the 
grantor agencies. Such audits could lead to requests for reim- 
bursement to the grantor agency for expenditures disallowed 
under terms of the grant. The Commission believes such disal- 
lowances, if any, will not be significant. 

The Commission is involved as a defendant in litigation re- 
garding the pollution of Boston Harbor. Management believes 
that, except for increases in future MWRA assessments inciden- 
tal to the litigation, the Commission's extensive capital improve- 
ment program (see Note 1 0) addresses probable actions that 
the Commission may be required to undertake in connection 
with this litigation. 



SUPPLEMENTAL SCHEDULE 



REVENUES AND EXPENSES 

For The Years Ended December 31. 1989 and 1988 



REVENUES: 

Water revenue $ 58.568,444 $45,856,376 

Sewer revenue 

Less: 

Adjustments 

Discounts 

Bad debt 
Total 

Net billed charges 
Prior year surplus 
Miscellaneous revenues: 

Late charge revenue 

Investment income 

Fire pipe revenue 

Other income 
Total revenues 
EXPENSES: 
Salaries and wages 
Overtime wages 
Fringe benefits 
Supplies and materials 
Repairs and maintenance 
Utilities 

Professional services 
Space and equipment rentals 
Other services 
Insurance 
Damage claims 
Inventory 
Capital outlay 

Total direct operating expenses 
MWRA ASSESSMENT 
CAPITAL IMPROVEMENTS 
PRINCIPAL PAYMENTS 
INTEREST EXPENSE 
DEPOSITS TO RESERVE FUNDS 
WORKING CAPITAL PROVISION 
RECOVERY OF ACCUMULATED DEFICIT 
TOTAL NONOPERATING EXPENSES 
TOTAL CURRENT EXPENSES 

CURRENT YEAR RATE SURPLUS 



This supplemental schedule presents the Commission's revenues and expenses on the basis that is presented in the Commission's 
budget and rote^selling documents. 



66,683,058 


47,635,464 


9,323,376 


7,798,591 


566,758 


372,062 


5,850,715 


257,391 


15,740,849 


8,428,044 


109,510,653 


85,063,796 


2,996,564 


3,448,090 


2,411,481 


2,232,288 


5,575, 1 37 


4,271,378 


1,678,380 


1,378,635 


1,421,737 


864,103 


123,593,952 


97,258,290 


16,335,091 


13,839,431 


1,108,150 


943,475 


2,900,338 


2,858,009 


1,247,115 


1,276,803 


4,831,816 


3,927,395 


423,507 


445,646 


1,617,191 


1 ,909,925 


1,220,120 


1,132,730 


298,075 


100,012 


786,642 


1,121,585 


104,717 


319,415 


446,41 1 


154,314 


584,478 


1,013,050 


31,903,651 


29,041,790 


54,716,374 


43,194,577 


3,297,843 


(6,469,800) 


3,115,000 


2,540,000 


9,772,770 


12,866,997 


3,213,000 


2,929,162 


6,294,360 


10,159,000 


4,8^7,998 




85,257,345 


65,219,936 


117,160,996 


94,261,726 


$ 6,432,956 


$ 2,996,564 



" Much has been accomplished in 



the last thirteen years towards 



the Commission's goal of providing 



superior water and sewer services 



to the city of Boston. 



But even as this tasic is mastered. 



greater challenges now begin. 



The BWSC stands ready to 



meet these growing challenges 





BOSTON'WATER AND SEWER COAAMISSION 
425 SUMMER STREET 
BOSTON, MA 022 1