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Full text of "Annual report"

BOSTON PUBLIC LIBRARY 






OSIOLIESHSiai 




Digitized by the Internet Archive 

in 2010 with funding from 

Boston Public Library 



http://www.archive.org/details/annualreport1990bostsew 



u^'O 




Boston Water and 
Sewer Commission 



425 Summer Street 
Boston, MA 02210-1700 
61 7-330-9400 
Fax 617-330-5167 



June 21, 1991 



Dear Friend: 

The Boston Water and Sewer Commission 1990 Annual Report tells 
the story of success. 

Once again the Commission has successfully responded to economic 
and financial challenges posed both by the local economic 
conditions and by the Massachusetts Water Resources Authority's 
rate increases. 

Our story is one of commitment and hard work. . .meeting customer 
satisfaction, systematic infrastructure maintenance and quality 
service delivery. 

Additionally, our story is one of strong management and 
dedicated, successful financial operations which have positioned 
the Commission to continue to cushion the impact of future 
challenges. 

We are pleased to share our story and success with you and invite 
you to share your comments and questions with us. 

Very truly yours, 

'atricia A. Fahy / 
Acting Executive Director 

Enclosure 

hd/ 




In 1978, the Boston Water and Sewer Commission (BWSC) was 
created to address an aging water and sewer infrastructure and to 
provide the City of Boston with some of the cleanest water in the 
nation. Today, our tradition of excellence continues. The BWSC 
has established a standard for quality, cost-effective service, well- 
maintained facilities, and impressive capital improvement programs. 



Roxana Marchosky 
Chairperson 




Mary Nee 

Commissioner 





Our water originates at the Quabbin Reservoir and flows through 
miles of pipeline before reaching Boston and the Commission's 
1,182 mile water system and our 1,300 mile wastewater collection 
system. In Boston's climate of fiscal austerity, operating, maintaining 
and improving these systems is an ongoing challenge — but a 
challenge which we continue to successfully meet. 

As the 1990s unfold, most public agencies face difiFicult financial 
constraints and adjustments. We are proud to announce that the 
BWSC has been operating at a surplus for the sixth year in row. Our 
solid fiscal planning and budgeting have enabled us to increase our 
reserves and improve our debt service coverage. We attribute these 
successes to a dedicated management team and a committed, well- 
trained work force. 

In addition to our financial successes, our operational 
accomplishments are many. We have seen a substantial reduction in 
unaccounted-for water and have made important strides in the 
critical area of metering. We have made additional commitments to 
environmental protection which have significandy contributed to 
the Boston Harbor cleanup. These achievements are meaningful and 
important, but serve only to mark out the foundadon for our goals 
in the coming years. 

As we move forward in the new decade, we take pride in our 
tradition of excellence, and stand firm in our commitment to 
■ progress. 





RobertJ. Cioiek 
Executive Director 



Patricia A. Fahy 
Deputy Director 




m 



^recious Resource 



The Boston Water and Sewer 
Commission (BWSC) provides 
•water distribution, wastewater 
collection and storm drainage 
services on a retail basis to the 
City of Boston, encompassing 
an area of approximately 45 
square miles. The water 
distribution system serves 
approximately 87,900 accounts 
through 1,180 mileS of water 
main. The wastewater 
collection system collects 
wastewater and stormwater 
from 20,500 acres through 
approximately 90,000 
wastewater connections and 
1,340 miles of sewers. Over 
75% of these sewers consist of 
separated storm and sanitary 
lines. 

The BWSC obtains its bulk 
water supply from the Massa- 
chusetts Wajer Resources Au- 
thority (MWRA), which 
supplies water from the 
Quabbin, Wachusetts and 
Ware River Watersheds, to the 
distribution system for the City 
of Boston. " 

Unaccounted-for water — the 
difference between the amount 
of water purchased from the 
MWRA and the amount actually 
billed to BWSC customers — is 
an ongoing issue of concern to 
the Commission. Since its 
inception in 1978, the Com- 
mission has made substantial 
progress in reducing such water^ 
loss. Unaccounted-for water has 
been reduced from 44% in 
1978 to 27% in 1990, a sub- 
stantial improvement. This 
progress has been made 
through efforts in several areas. 



N 




^ 



A Newly Formed 
Unaccounted-for Water 
Task Force 




An Aggressive Renewal atjd 
Replacement Program 



During its first decade, the 
Commission devoted consider- 
able time and energy to emer- 
gency repairs necessitated by a 
water distribution system, parts 
of which are over 100 years old. 
The majority of this work has 
been completed. Today, efforts 
are focused on a Renewal and 
Replacement Program with 
long-range planning for main- 
tenance and rehabilitation 
reconstruction. As part of this 
program, the Commission 
coordinates its efforts with 
street reconstruction and build- 
ing projects to help eliminate 
. neighborhood disruptions. 



In 1990 the Commission cre- 
ated the Unaccounted-for 
Water Task Force, whose man- 
date is to research and analyze 
existing areas of unaccounted- 
for water and to make recom- 
mendations to help eliminate . 
these losses. The Task Force has 
already presented some prelimi- 
nary recommendations. One 
such recommendation cur- 
rently in place is the Meter 
Downsizing Program. Larger 
meters do not always capture all 
of low flows during non-peak 
consumption periods. This is_ 
an important cause of 
unaccounted-for water. Since 
its implementation in August, 
over 200 three-inch-and-larger 
meters have been replaced by 
smaller rrieters able to detect 
low flows. The results, while 
still preliminary, are extremely 
positive and cost-effective. 
Other recommendations from 
the Task Force promise equally 
substantial savings ' 




In 1990, the BWSC was able to 
survey the entife 1,182 miles of 
delivery pipes for leaks, an 
undertaking which in the p^t 
has required rwo to three years 
to complete. The Commission 
reduced water leakage signifi- 
cantly by prioritizing the repair 
of leaks arid completing alL 
repairs within an efficient 
timefi'ame. In 1990, this pro- 
gram saved 3.6 million gallons 
of water each day, which would 
have-Otherwise been lost - 
through leakage. 



The Commission s Leaik Detec- 
tion and Renewal and Replace- 
ment programs ha\'e received 
national recognition for their 
effectiveness in water savings. 
We will continue to build upon 
these existing successes, incor- 
porating Task Force recom- 
mendations into the 
Commission's long-range 
planning. 



Renewing Our 
Commitment to Fiscal 
Strength and Integrity 



The Commission renews its 
commitment to sound manage- 
ment and financial structure. 
The Commission will continue 
its practices of using conserva- 
tive budgeting assumptions, 
funding capital expenses from 
both debt and rate revenue, 
sustaining adequate reserves 
and substantial coverage ratios, 
and most of all, ensuring a 
strong balance sheet. With 
strong reserves and sound fiscal 
policies, the Commission pro- 
duced a net operating surplus 
for 1990 of over $7 million. 
Because of its strong manage- 
ment, financial operations, and 
stable customer base, the Com- 
mission has received bond 
ratings of A/A-from Moody's 
Investor Services and Standard 
and Poors, respectively. 



ignificant Contributions to 
perating and Debt Service 
eserve Funds 



These contributions include 
additional subsidies to the 
Stabilization Fund, which can 
be used to stabilize rates or fund 
any shortfall in debt service. In 
the midst of a regional reces- 
sion, the Commission added $2 
million to this fund. At the end 
of 1990, operating and debt 
service reserve funds totaled 
over $50 million. 



Effective Billing and 
Collection System 



As rates continue to rise, the 
metering, billing and collec- 
tions processes have become an 
increasingly important focus of 
the Commission. The Com- 
mission employs a Rally inte- 
grated approach to its 
collections program, including 
dunning letters and phone 
contact, termination of water 
service and litigation. In 1990, 
the Commission reached an 
agreement with the City of 
Boston to pursue tax takings on 
any property for which pay- 
ment is overdue. 



We have worked assiduously 
and wisely to achieve out solid 
financial position, and will 
continue our tradition of con- 
servative approaches to budget- 
ing and planning, both in 
estimating revenues and in 
forecasting and controlling 
expenses. We are confident that 
this foundation of prudent 
financial management will 
result in a continuation of a 
strong fiscal position for years 
to come. 



Independent Auditors' Report 



Boston Water and Sewer Commission: 

We have audited the accompanying balance sheet Of the Boston Water and Sewer Commission (the 
"Commission") as of December 31, 1990 and the related statements of operations, Commission 
equity and cash flows for the year then ended. These financial statements are the responsibility of 
the Commission's management. Our responsibility is to express an opinion on these financial 
statements based on our audit. The financial statements of the Commission as of December 31 , 
1989, were audited by other auditors whose report thereon dated April 27,1990, expressed an 
unqCialified opinion on those statements. 

We conducted our audit in accordance with generally accepted.auditing standards. Those standards 
require that we plan and perform the audit to obtain r^easonable 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 si'gnificant estimates made by management, as well 
as evaluating the overall financial statement presentation. We believe that our audit provides a 
reasonable basis for our opinion. 

In our opinion, the 1990 financial statements referred to above present fairly, in all material respects, 
the financial position of the Commission^ at December 31, 1990 and the results of its operations and 
, its cash flows for the year'then ended in conformity with generally accepted accounting principles. 

Our audit was made for the purpose of forming an opinion on the basic financial statements taken 
as a whole. The supplemental schedule of revenues and expenses for the year ended December 
31, 1990 is presented for purposes of additional analysis and is not a required part of the basic 
financial statements. Such information has been subjected to the auditing procedures applied in our 
audit of the basic financial statements and, in our opinion, is fairly stated in all material respects in 
relation to the basic financial statements taken as a whole. 



^^^^^/-.-<X^ 



KPMG Peat IVIarwick 

Boston, Massachusetts 
April 12,1991 



Balance Sheets 

Decemb'er 3-i, 1990 and 198^> 



Assets 1990 1989 
Current assets: \ " 

Cash and Cash equivalents (note 8) . $ ^ '480,578 503,784 
Accounts receivable: • 

Customers, less allowances of . . • 

~ '$17,382,603 in 1990 and • ^ . 

$12,517,089 in 1989 ■ 51,296,234 45,591,527 
Unbilled earned revenues, less allowances of 
$1,908,716 in 1990 and ^ 

$1,732,419 in 1989 ' ' 11,916,310 10,838,488 

Construction grants receivable ~ ' 5,887,247 12,893,326 

Prepaid expenses 483,109 '1,521,537 

Deferred charges (note 2) . 9,311,472 12,594,773 

Total current assets 79,374,950, 83,943,435 

Trusteed investments (notes 4 and 8) - ' ■ " 113,828,686 107,513;209 

Nontrusteed investments (notes 4 and 8) 4l-,223,681 50,004,590 

Property, plant and equipment, net ' ' - 283,041,005 256,914,295 

Deferred charges (riote 2) • •- 26,326,567 27,355,384 

Bond issue costs, net , ' 4,691,125 4,451,430 

Total assets - - $ 548,486,014 530,182,343 



L.iabiiities and Commission Equity . . - 

Current liabilities: - . : ^ , _ 

Payable from current assets: ' • ' 

■ Accounts payable $ 14,765,186 10,437,048 

Other accrued liabilities -" 6,491,070 7,192,207 

Total ■ 2i;256,256 17,629.255 

Payable from trusteed assets: 

Massachusetts Water Resources Authority assessment 3,175,692 2,976,492 

Current portion of City of Boston bonds ^ 380,000 585,000 

Total 3,555,692 3.561,492 

Current portion of revenue bonds '' 3,540,000 ' 3,305,000 

ETeferred credits (note 2)/ , - 24,428,296 18,426,107 

Total currenrliabilities . 52,780.244 42.921,854 

Long-term debt (note 4): 

City of Boston bonds ' , 1,330,000 • ' 1,710,000 

Revenue bonds " ' - 238,152,737 ^ 241,143,511 

Deferred long-term credits (note 2) ^ , 136,304,850 ^ 125,570,982 

Other long-term liabilities , ' ' ' 1^57.562 .1^249,247 

TptaUther liabilities 377.745,149 '. 369.673.740 

Commission equity: 

Contributed capital . 117,960,621 117,586,749 

Commitments and Contingencies (notes 10 and 11) . , - 

Total liabilities and commission equity $ 548,486,014 530,182,343 

See accompanying notes lo financial staiemenis . , . ' 



Statements of Operations 

For the Years Ended December 3 1 , 1 990 and 1989 



IS 30 



■i98S 



Operating revenues: 

Water and sewer usage 
' Fire pipe 

Other 
Total operating revenues 

Operating expenses: 

Operations ' . ^ 

Maintenance 

MWRA Assessment 

Depreciation and amortization 
Total operating expenses 

Excess operating revenues 

Other revenues ' " 

Excess revenues before interest expense , ' 

Interest expense 

Excess revenues before depreciation add-back and transfer requirements 

Add depreciation on fixed assets acquired by grants 

Excess revenues before transfer requirements 

Excess revenues used to fund reserves and other deferrals (note 2) 

AccumtJated revenues used to ofiset fiiture rates - b^inning of year 



$ 136,822,659 

1,845,393 

2,489,763 

141,157,815 



47,824,134 
6,350,149 

61,520,881 

7,090,212 

122,785,376 

18,372,439 

16,441,629 

•34,814,068 

20,066,709 

14,747,359 

1,580,562 

16,327,921 

(15,676,198) 

6,432,956 



125,251,504 

1,678,379 

870,533 

127,800,416 



- 46,472,452 

4,831,816 

54,716374 

7,136,591 

113,157,233 

14,643,183 
13,132,786 
27,775,969 
- 16,089,852 
11,686,117 

1,490,992 
13,177,109 
(9,740,717) 

2,996,564 



Accumulated revenues used to offset future rates - end of year $ 7,084,679 



6,432,956 



Statements of Comnaission Equit)' 

For the Years Ended December 31.- 1990 and ]98' 



Balance, January 1, 1989 

Contributions in aid of construction 

Depreciation of related property 

Prior year rate deficits recovered in 1989 

Recoveries on pre-commission receivables written-ofFin prior years 
Balance, December 31, 1989 

Contributions in aid of construction 

Depreciation of related property 

Balance, December 31, 1990 







Total 


Contributed 


Accumulated 


Commission 


Capital 


Deficit 


■ Equity 


$ 105,768,355 


(5,546,696) 


100,221,659 


13,309,386 


— 


13,309,386 


(1,490,992) 


' — 


(1,490,992) 


— 


4,856,609 


. 4,856,609 





690,087 


690,087 


1 17,586,749 


117,586,749 


1,954,434 


— 


1,954,434 


(1,580,562) 


_ 


(1,580,562) 


$ 117,960,621 




117,960,621 



Statements of Cash Flows 

For the Years Ended December 31 , 1990 and r989 



1990 



Excess operating revenues 

- Adjustment to reconcile operating income to net cash: 

Excess revenues used to fund reserves and other deferrals 

Depreciation and amortization 

Recovery of accumulated deficit 

Change in assets and liabilities: ■ , ■ 

Accounts receivable 

Unbilled earned revenues 

Construction grants receivable 

Prepaid expenses 

Deferred charges 

Accounts payable , - , 

Other accrued liabilities 

MWRA assessment 

Deferred credits 

Other long-term liabilities 

Other 
Net cash provided by operating activities 

Investing activities: 

Purchase/ (sale) of investments 

Other revenues 
Net cash provided by (used for) investing activities 

Capital and related financing activities: ^ 

Additions to property, plant and equipment 

Proceeds from issuance of bonds 

Payment on bonds, including current maturities 

Payment of debt issuapce costs 

Proceeds of contributions in aid of construction 

Payment of bond interest 
Net cash used for capital and related financing activities 

Net increase (decrease) in cash . 

Cash and cash equivalents, at beginning of year 

Cash and cash equivalents at end of year " 

Supplemental disclosure of cash flow information: 

Cash paid during the year for interest, net of amount capitalized 



$ 18,372,439 


14,643,183 


(16,327,921) 


(13,17.7,109) 


7,090,212 


7,136,591 


— 


5,546,696 


^ (5,704,707) 


(7,193,568) 


■ (1,077,822) 


(3,704,015) 


7,006,079 


(1,109,102) 


343,879 


(447,558) 


3,395,131 


(997,634) 


4,328,138 


4,855,989 


(701,137) 


(1,473,561) 


199,200 


481,265 


16,736,057 


15,901,883 


708,314 


(424,879) 


60,099 


— 


34,427,961 


20,038,181 


2,465,432 


(32,161,911) 


16,4'^ ,629 


13,132,786 


18,907,061 . 


(19,029,125) 


(31,905,17;)) 


(33,846,150) 


— 


39,269,678 


(3,890,000) 


(3,115,000) 




(779,000) 


1,954,434 - 


13,309,386 


(19,517,483) 


(15,543,822) 


(53,358,228) 


(704,908) 


(23,206) 


304,148 


503,784 ' 


-199,636 


$ 480,578 


503,784 


$ 16,313,200 


l'',398,500 



Notes to Financial Statements 

December 31, 1990 and 1989 



(1) Organization, Basis of Presentation and Summary of 

Significant Accounting Principles • • 

The Boston Water and Sewer Commission (the "Commission") has the 
responsibility to provide water and wastewater services on a'fair and equi- 
table basis in the City of Boston (the "City") as, required' under the Boston 
Water and Sewer Reorganization Act of 1 977 (the "Enabling Act"). 

Under the Enabling Act, the Commission is subject to regulation with 
respect to rates, accounting and other matters, where applicable, by the 
Board of Commissioners (the "Board"). The Board regulates the rates that 
the Commission can charge its customers for water and sewer usage. These 
rates-charged to customers are based on the cash required for the 
Commission's operations, debt-service, and reserve contributions. To com- 
ply with the financial reporting requirements of the Board, however, the 
accompanying financial statements are presented on a basis that is consistent 
with generally accepred accounting principles (GAAP) for regulated utilities. 
This repotting pracrice provides for the recognition of certain costs in ac- , 
counting periods other than those in which the costs are incurred. 

To accommodate this rate making process, the Commission follows the 
accounting standards set forth in Financial Accounting Standards Board 
Statement No. 71 ("FAS-yi"), "Accounting for the Effects of Certain Types 
of Regulation". FAS-7 1 allows certain (a) revenues provided for fiiture 
allowable costs to be deferred until the costs are acttially incurred (deferred 
credits) and (b) costs incurred to be capitalized if future recovery is reason- 
ably assured (deferred charges). Revenues and current expenses appearing on 
- the Supplemental Schedule of Revenues and Epenses are presented in the 
same format as utilized in the Commission's budgeting and rate setting 
process. The revenues and expenses show on the Statement of Operations 
are presented prior to adjustments required by FAS-71 (see note 2). A more 
detailed reconciliation between the revenues and expenses of these two 
operating statements is provided below:. 

Revenues Expenses 

As presented_ in the Statement 

of Operations 

Operating revenues/expenses " $141,157,815 "122,785,376 

Otiner revenues/expenses 16,441,629 20,066,709 

Total ~ 157,599,444 142,852,085 



PeclassificationsBnd deferrals 
ContributiorHo reserves 
Provision for worl<ing caprtal 
Bad debt expense ' - 
Excess depreciation over 

bond payments 
Interest expense 
interest income 
Capitalexpenditures 
Excess revenue used to offset 
current rates . 

Other deferrals 

As presented in the 

.Supplemental Schedule 



— , 5,193,000 

" . — ■ 1,579,199 

(16,261,594) (16,261,594) 

— (3,200,212) 

— ' (3,334,055) 
(6,364,985) ' — - 



6,432,956 
(100,248) 



$ 141,305,573 



The Enabling Act requires that any net surplus, as defined by the rate 
setting process, must either be returned to the Cit^ or applied to offset 
water and sewer rates for the following year. The Commission has applied 
$7,084,678 and S6;432,956 for rhe years ended December 31, 1990 and 
1989, respectively, to offser rates in the respective subsequenr years. 

, ;;! Rl-ht.ucs and Earned' Revenues in ILxcess of Billing... 

Water and sewerage fees ate billed to users of the systems on a quarterly 
cycle basis. Revenues are accrued for periods between the terminarion of 
billings for the various cycles and the end'of the year. 

, (hi Trusteed and Nontrusteed Investmei. 

These assets, consisting of direct and unconditionally guaranteed short- 
rerm obligations of the U.S. Government, repurchase agreements and 
money market units secured by government securities, are srared at amor- 
rized cost plus accrued interest. 

icj r'ropert)', I'kuii and Lquipnitr 

Property, plant and equipment is stated at cost. Depreciation is pro- 
vided on the straight-line method based upon the estimated useful lives of 
the various classes of assers. Maintenance and repairs are charged to ex- 
pense as incurredr Major renewals or bettermenrs are capiralized and 
depreciated over their estimated useRil lives. 

The Commission capitalizes interest costs during construction of assets 
for its own use. Interest roralling approximately $1,094,000 and $442,000 
was-capitalized in 1990 and 1989, respectively. 

Itli DepreLi.-.;.:-. " - 

The ranges of estimated useful lives used in computing depreciarion are 
as follows: 

Years 

Water: 

Works , - 60 to 100 

Meters and hydrants " 10 to 40 • 

Sewerage: 

Works ■ ' '40 to 75 

Pumping station '35 

Other- 3 to 15 



Contributions from governmental agencies, individuals and cities 
received in aid of specific construcrion projects, which are not refiindable, 
are included in Commission equiry as conrribured capital. Accordingly, 
depreciation of the related properry is charged directly to Commission 
equity and is not included iri the accompanying statements of operations. 

In 1989, the Commission recovered through revenues an accumulated 
deficit of $5,546,696. This recovery was ner of all previous receipts-that_ 
represented payment of pre-Commission receivables previously written off 
to the accumulated deficit. 

'li.Cash Equiv:ilenii 

The Commission considers all highly liquid, short-term cash invest- 
ments with a maturiry of less than rhree months to be cash equivalents for 
purposes of the cash flow sratement. 



' r-ond Issrie Coki ^ 

Expenses related to the issuance of bonds are amortized on a weighted- ' 
average basis over the life of the bonds, which approximates the effective 
interest method. 

(h) RccLissiOcation^ 

Certain amounts in the 1989 financial statements have been reclassified 
to conform to the 1990 presentation. 

(2) Defert-ed Charges and Credits 

■ As discussed in note 1, the application of FAS-71 results in certain 
revenues and expenses being removed from the Statement of Operations 
and reflected in the balance sheet as either deferred charges or deferred- 
credits. .The current year revenues and expenses that have been removed 
from the Statement of Operations and included on the balance sheets as 
part of deferred charges or deferred credits appear in the line "Excess rev- ' 
enues used to fund required reserves and other deferrals" on the Statement 
of Operations. The major components of this amount are: 

1990 
Contributions to reserves $ 5,193,000 

Provision for working capital 1 ,579, 1 99 

Princfpal payments on long-term debt 3,890,000 

Interest paid from escrow funds, net - (3,342,727) 

Capital expenditures . 7,967,383 

Depreciation (4,197,907) 

Interest income on project and 

escrow funds 6,364,985 

Other (1,777,735) 

S 15,676,198 



• The major components- of the deferred credits included in the accompa- 
nying balance sheet are as follow?: 



1989 



3,213,000 
6,294,360 
-3,115,000 
(5,771,050) 
3,882,321 
(4,366,778)' 

5,146,168 
(1,772,304) 



The major components of the deferred charges included in the accom- 
panying balance sheet are as follows: 



Current deferred.charges: 
Accrued interest expenses 
Accrued-pension expenses 
Accrued legal claims 
Accrued vacation and sick time 

- expenses 
Debt extinguishment expenses 

Total current deferred charges 

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

Total noncurrent deferred charges 



Current deferred credits: 






Reserve deposits made under 


- 


^ 


the terms of the Bond 






Indenture (note 4) 


$ 16,806,000 


11,573,162 


Prior year surplus deferred to 






' subsequent year . - 


7,084,678 


6,432,956 


Other 


537,618 
S 24,428,296 


419,989 


Total current deferred credits 


18,426,107 



Noncurrent deferred credits: • . 

Revenues'raised for capital ■ 
improvements and 

payments on long-term debt $ 78,804,981 69,626,118 

Working capital at inception of 

Commission- ~ 28,985,575 28,985,575 

Provision for additional working capital 26,274,294 24,734,963 

Self insurance and other 2,240,000 2,224,326' 

Total noncurrent deferred credits S 136,304,850 125,570,982 

(3) Property, Plant and Equipment " - -- ' 

The cost of water and sewerage plant and equipment in service and 
related accumulated depreciation at December 31, 1990 and 1989 are as 
follows: ' 

1990 
Water: 

Works '■ . $104,536,336 

JVIeters and hydrants _ 12,473,263 

Total water 



1989 



90,153,870 
10,762,835 



Sewerage; 









Works 


$ 


6,844,425 ^ 


10.186,561 


Pumping station 




215,755 


201,833 


Total sewerage 




^ 427,835 


• 427,835 


Other 




965:831 


818,544 


Total 




. 857,626 


960,00 


Less accumulated depreciation 


_s_ 


9,311,472 


12,594,773 


Total 

Construction in progress 


$ 


16,321,068. 
, 1:664,822 


16,541,824- 
1,664,822 


Total 




8,340,677 ■ 


9,148,738 




_$_ 


26,326,567 


27,355,384 





117,009,599 



166,446,473 
6,798,216 



304,394,277 

41,137,026 
263,257,251 

19,783,754 
8 283,041,005 



136,939,338 

6,798,216 

143,737,554 



256,517,560. 

35.647,669 
220,869,891 

36,044,404 



At the time of its creation, the Commission assumed general obligation 
certificates of indebtedness of the City (the "City bonds") pertaining to the 
water and sewerage works systems. Payments of principal and interest ^te 
made directly to the City in accordance with the original maturity and 
interest schedules. 

A summary of these City bonds as of December 31, 1 990 and 1989 follows: 



City Bonds, bearing interest at rates 
ranging from,5.1 % to 9.5% witli 
"maturity dates ranging from 
December 1990 to December 1999 
Less current installments 
Total general obligation debt of the 
City, net of current installments 



1,710,000 
380,000 



S 1,330,000 



2,295,000 
585,000 



1,710,000 



A summary of revenue bonds of the Commission follows: 

1990 1989 

1 984 Series A, bearing interest at i 
rates ranging from 6.75% to 10.0%, 

with maturity dates ranging from 

January 1, 1.991 to January 1, 2001 $ 21.105,000 22,065,000 

1 985 Series A, bearing a variable interest 
rate (5.85% and 6.6% at December 31 , 

1 990 and 1989, respectively), matunng -' 

in two equal amounts on November 1 , 

201 4 and 201 5 and requiring annual . 

sinking fund contributions tfirough 2014 49,170,000 49,675,000 

1986 Series A, bearing interest at 
rates ranging from 4.75% to 7.88%, 
witfi matunty dates ranging from - 
November 1, 1991 to 2015 ■ 

1988 Series A, bearing interest at 
rates canging from 6.0% to 7.4%, 
with maturity dates ranging from 
November 1, 1991 to 2008 

1 989 Series A, bearing interest at 
' rates ranging from 5.85% to 7.1 %, 

with maturity dates ranging from 
November 1, 1991 to 2019 

Less: 

Current installments 
Total long-term debt 

Less: 

Unamortized issue discount 



80,605,000 



39,890,000 
247,945,000 

3,540,000 
244.405,000 

6,252,263 



40,000,000 
251,250,000 



The 1984 Series A Bonds were issued in order to refund a series of 1980 
System Revenue Bonds. Under the Refunding Trust Agreement, the 1980 
Bondholders have no right, tide, interest or liens in any other fijnds, real or 
personal property or assets of the Commission other than the amounts held 
under the Refunding Trust Agreement and pledged for their benefit there- 
under. , , ' 

The 1985 Series A Bonds were issued to~provide fiinds for projects 
under the Commission's ongoing capital improvement programs and other 
capital and operating needs. The Commission maintains a letter of credit 
to guarantee the principal and interest payments on these variable interest 
rate bonds in the event that the Commission is unable to make such pay- 
ments. 

In August 1986, the Commission issued 1986 Series A General Rev- 
enue 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 capital improvement program and other capital and 
operating needs. In addition, a portion of the proceeds of the 1986 bonds 
were deposited to the 1986 Series A Escrow Account to provide for the 
principal payments of the 1985 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 interest rates provided under the 1985 bonds and 
has secured a guaranteed redemption for the 1985 bonds. , 

In December 1988, the Commission issued 1988 Series A Bonds to 
provide for the defeasance of a portion of the Commission's General Rev- 
enue Bonds 1984 Series A to provide supplementalftinding for the Operat- 
ing Reserve Fund and to pay costs of issuance. Under the 1988 Refijnding 
Trust Agreement, the Commission deposited sufficient funds with the 1984 
Bond Trustee to pay when due the principal and interest on the reilinded 
bonds until the first call date, January 1, 1995. As a result, the refiinded 
bonds are no longer outstanding under the Commission's Resolution. ^ 

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

In the aggregate $106,320,000 remains outstanding at December 31, 
1990 on the portions of the 1980 and 1984 issues that were defeased "in- 
substance". 

The Resolution Establishing Issue of Revenue Bonds adopted by the 
Commission on December 6, 1984 places certain restrictions on the 
Commission's operations. It requires that rates, charges and fees be set at a 
level sufl^icient to meet a net revenue test on an annual basis and requires that 
all revenues, as defined, be deposited in a Revenue Fund maintainedi)y a 
fiscal agent. Amounts held in the Revenue F,und are to be disbursed to and 
withdrawn from other fijnds provided for in the Resolution. The Resolu-- 
tiort provides that all excess cash be held in the Revenue Fund until th? last 
business day of the fiscal year. 'At that tirrie, if certain covenants are met. the 
Commission has the option to remove any excess cash from the Revenue 
Fund and place such cash in a fi.md not resrricted by the Resolution. 



Total revenue debt 



$238,152,737 



241,143,511 



The Commission has options for early redemption of revenue bonds 
starting in 1995 at prices ranging from 100% to 103% of face value. In 
addition, in compliance with the Resolution, the Commission has estab- 
lished both trusteed and nontrusteed fiinds with investments, principally 
short-term securities, which are restricted for payment of specified liabili- 
ties, capital projects or other costs of operations. The major components of 
the trusteed and nontrusteed amounts at December 31, 1990 and 1989 are 
as follows: 



Trusteed: 

U.S. Treasury notes 

U.S. Treasury bills 

Other government obligations 

Money market and 

cash investments 
Commercial paper 
Repurchase agreements 

Nontrusteed: 

U.S. Treasury notes 
U.S. Treasury bills 
Money market and 

cash investments 
Commercial paper 
Repurchase agreements 



$ 31,848,636 



11,336,912 

58,601,842 

4,613,678 

113,828,686 



16,964,007 

687,747 

13,650,707 

41,223,681 

; 155,052,367 



17,004,351 
8,546,636 
11,110,798 

23,758,828 
47,092,596 

107,513,209 

1,546.681 
1,092,642 

12,572,529 

34,792.738 
50,004,590 

157,517,799 



Annuil sinking fund requirements and debt principal maturities for all 
future years are as follow 



1991 
1992 
1993 
1994 
1995 
Thereafter 



illows: 






City 


Revenue 




Bonds 


Bonds 


Total 


$ 380,000 


3,540,000 


3,920,000 


380.000 


4,060,000 


4,440,000 


270.000 


4,360,000 


4,630,000 


270,000 


4,685,000 


4.955,000 


195,000 


5,060,000 


5,255,000 


215.000 


226,240,000 


226,455,000 


$ 1,710,000 


247,945,000 


249,655,000 



(5) Massachusetts Water ResourcesAuthQrity 

The Massachusetts Water Resources Authority (the "Authority") pro- 
vides all the Commission's water supply and sewer treatment requirements 
and assesses the Commission for a portion of its actual operating and 
capital expenses. The assessment is based on the Authority's fiscal year 
(July 1 to June 30) and payments at;e due to the Authority in four install- 
ments in September, November, March and May. Interest is not charged 
on the outstanding balan.ce. The amounts included in the operating state- 
ment for the MWRA assessments for 1990 and 1989 are as follows: 



Assessments allocated on: 
Water usage 
Wastewater usage 

Total 



S 22,880,297 
_ 38,640,584 
S 61,520,881 



21,928,747 
32,787,627 
54,716,374 



During 1990 and 1989, over 73% and 70%, respectively of water 
received from the Authority was billable to customers. Since its inception, 
the Commission has increased the percentage of billable water from 52% in 
1977 to over 73% in 1990 and is continuing to take steps to improve the 
amount of water billable, including replacement of old and defective meters 
and a comprehensive leak detection and repair program. 

t6) Transactions with the City of Boston 

The Commission's ongoing program to meter City facilities has re- 
sulted in billings to nine City departments based on actual consumption of 
■ $2,618,000 and $1,391,000 in 1990 and 1989, respectively. The remain- 
ing City departments were billed $287,000 and $1,593,000 based on 
estimated consumption during 1990 and 1989, respectively. 

The City provides services to the Commission, includig paving and 
facilities rental. Operating costs billed by the City were $2,433,000 and 
$520,000 during both 1990 and 1989. Capital costs billed by the City 
were $4,672,000 and $763,000 during 1990 and 1989, respectively. 



The Commission provides retirement benefits to substantially all of its 
employees through a pension trust fund (the "Trust Fund") or the State- 
Boston Retirement System (the "Boston System"). A dispute concerning 
the Commission's past and fviture obligations to all Commission employees 
covered by the Boston System was settled in 1 986, resulting in a payment 
of $19,100,000 to the Boston System. This payment was fijnded primarily 
through 1985 and 1986 bond proceeds and is recorded as a'deferred charge 
that will be recovered through Riture rates. 

As part of the settlement with the Boston System, the Commission 
annually reimburses the City for the Commission's share of pension ben- ' 
efits paid to Commission employees. The Commission's share is based 
upon the proportion of each employee'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. 

The Commission's covered payroll was approximately $16,-924,000 and 
$14,739,000 in 1990 and 1989, respectively; Total payroll for allCom- 
mission employees vvas approximately $18,629,000 and $17,443,000 in 
1990 and 1989, respectively. In compdiance with Statement No. 5 of the 
Governmental Accounting Standards Board, as of January 1, 1991 4nd 
1990, the Commission updated its actuarial valuation originally performed 
as of January 1, 1989. The valuation and subsequent updates were based 
on 98 retired and inactive employees, 133 vested active employees and 363 
non-vested active employees. Employee contributions are defined under 
Massachusetts General Laws, Chapter 32.- Total employee contributions 
were approximately $1,200,000 and $1,017,000 or 6.4% and 6.9% of 
covered payroll in \990 and 1989, respectively. 

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 rerirement benefit. The Commission's policy is to. 
make additional contributions to the Trust Fund based upon the actuari- 
ally determined cost of future benefits, net. of employee contributions. 

Trust fiind assets at December 31,1 990 and 1 989 are as follows: 



Assets (at fair market value): 
Common stock 
U.S. Government s'ecufities 
Corporate bonds and notes 
Short-term investments 
Cash 
Otlner 

Total 



$ 9,740,375 



609,045 
6,724,988 



8,740,563 
4,378,249 
1,924,029 
1,591,600 
264,957 
289,81 7 - 
17,189,215 



Net assets in excess of the pension benefit obligation applicable to the 
Commission's employees, as of January 1 are determined as follows: 

1991 1990 

Net assets available for benefits 



S 17,074,408 



17,189,215 



Pension benefit obligation: 
Retirees and beneficiaries 
- currently receiving benefits 
Current emiployees: 

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

Net assets in excess of pension 
benefit obligation 



7,118,000 
2,814,000 
13,378,000 



S 3,696,408 



3,213,000 
4,551,000 



7,424,215 



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 salary increase estimated to be payable in the future as a . 
result of employees' service to date. The measure is infended to help users 
assess the funding status of the system on a going concern basis, assess 
progress made in accumulating sufficient assets to pay benefits when due 
and make comparisons among systems. The measure is independent of the 
actuarial funding method used to determine contributions to the pension 
trust fund. 

The pension benefit obligations were computed as part of actuarial updates 
performed as of January 1, 1991 and 1990 using the information contained in 
the January 1 , 1989 actuarial valuation. The significant assumptions tised in 
the calcularion of the pension benefit obligadon as of January 1, 1991 include 
an 8% annually compounded rate of return on present and fijture assets and 
projected salary increases of 6% per-year, compounded annually. Significant' 
actuarialassumptions used to calculate the pension benefit obligadon as of 
January 1, 1990 include a rate of return on investment of present and fumre 
assets of 9% per year compounded annually and projected salary increases of 
7% per year; compounded annually. 

The increase in the pension benefit obligation from the January 1 , 1 990 
calculation is due primarily to the change in the investment return assump- 
tion from 9% to 8%. . ' , 

The Commission's funding policy has been to provide for quarterly 
employer contributions to the Trust Fund based upon an actuarially deter- 
mined rate using the aggregate actuarial cost method. The Commission's 
contributions totalled approximately $930,000 and $990,000 in 1990 and 
1989, respectively, or 5.1% and 6.7% of the covered payroll. Historical 
information on the Commission's pension plan is not available. Historical 
and other financial information on the Boston System can be found in the 
Boston System's June 30, 1990 financial statements. 



(8) Deposits and investmei : 

The Boston Water and Sewer Commission'^ General Revenue Bond 
Resolution, adopted December 6, 1984, as amended, places certain limita- 
tions on the nature of deposits and investments available to the Commis- 
sion. Demand deposits and term deposiis without collateralization can 
only be made with financial institutions meeting certain criteria. Certifi- 
cates of deposit must be fully collateralized and issued by FDIC insured 
banks. Investments can also be made in securities issued by or uncondi- 
tionally guaranteed by the U.S. Government or its Agencies'; public agen- 
cies, municipalities or state obligations carrying the highest bond rating; 
commercial paper rates A-1; P-1, A-Rjted "money market funds; fully 
collateralized investment contracts and certain-futures contracts. 

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

(a) Deposits 

A summary of the amount of the Commission's deposits that are (Cat- 
egory 1 ) fully insured or collateralized with securities held by the Commis- 
sion or its agent in the Commission's name, ((^ategory 2) those deposits 
that are collateralized with securities held by the pledging financial 
institution's trust departmentor agent in the. Commission's name and 
(Category 3) those deposits that are not collateralized as of December 3 1 , 
1990 follows (in thousands): 

Bank Balances 

Category Total Bank Carrying 

Balance Amount 

Cash $ 300 — 3,104 3.404 -1.254 

Money market — ' — 734 734 734 

Total 



$ 300 



2 


3 


— 


3,104 
734 


— 


3,838 



4,138 



(b) 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 
Commission'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): 

Carrying Amount Estimated 

Category Carrying Market 

1 2' 3 Amount Value 

U.S. Government. 

obligations $48,857 — — 48,857 50,644 

U.S. Government 

Agency obligations 48,624 — 48,624 60,235 

Repurchase agreements — 16,886 — 16,886 16,8.86 

Money market — — 26,621 26,621 26,621 

Other investments — 12,557 — 12,557 12,557. 

Total $97,481 29,443 26,621 153,545 166,943 



(9) Lease Commitmei 

The Commission has entered into leases for building space under 
various leases expiring through 1992. These leases have been accounted for 
as operating leases. The Commission also leases office equipment under 
various leases expiring through 1995, that have also been accounted for as 
operating leases. Such leases are expected to be renewed as they expire in 
the normal course of business. 

Minimum lease commitments under all leases with terms in excess of 
one year at December 31,1 990 are as follows: 

1991 ' $ 1,188,267 

1992 777,107 

1 993 1 08, 1 20 

1994 108,120 

1995 106,336 
S 2,287,950 



Rent expense under operating leases amounted to $1,677,000 and 
$1,220,000 in 1990 and i989, respectively. 

A major capital improvement program is currendy in progress. As part 
of this program, the Commission has entered into a number of contracts 
for the design and construction of its facilities. Commitments under these 
contracts aggregate approximately $47 million as of December 31, 1990. 
Capital improvements, 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 $128 million for 1991 through 1992. 
Of this amount, approximately $98 million represents extension and 
improvement projects and $30 million represents renewal and replacement 
projects. The extension and improvement projects will be 40% funded by 
federal and state grants. The remaining amounts will be funded from the 
Commission's bond proceeds and operating revenues. 



The Commission is involved inordinary and routine Iftigation and 
other matters related to its operations and the establishment of rates. Man- 
agement believes that the resolution of these matters will not materially 
affect the financial position of the Commissicvi. 

The Commission has received federafand state grants for specific 
purposes that are subject to review and audit by the grantor agencies. Such 
audits could lead to requests for reimbursement to the grantor agency for 
expenditures disallowed under terms of jhe grant. The Commission be- 
lieves such disallowances, if any, will not be significant. 

The Commission is involved as a defendant in litigation regarding the 
pollution of Boston Harbor. Management believes that, except for in- 
creases in future MWRA assessments related to the litigation, the 
Commission's extensive capital improvement program (see note 10) ad- 
dresses probable actions that the Commission may be required to under- 
take in connection with this litigation. 



Supplemental Schedule of Revenues and Expenses— Rate Basis 

For the Years ended Decemlber 31, 1990 and 1989 



1990 1989 



Revenues: 

Water revenue 

Sewer revenue ^ - ■ 

Less: 

Adjustments 

Discounts 

Bad debt 
Total ' 

Net biOed charges - 

Prior year surplus 
Miscellaneous revenues: 

Late charge revenue 

Investment income 

Fire pipe revenue 

Other income 
Total revenues 

Direct operating 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 

Nonoperating expenses: 

MWRA assessment 

Capital improvements 

Principal payments 

Interest expense 

Deposits to reserve funds' 

Working capital provision 

Deferred interest expense 

Recovery of accumulated deficit 
Total nonoperating expenses 

Total current expenses 

Current year rate surplus 

This s'upplemental schedule.presenis the Commission's revenii 
and expenses on the basis that is prcscnied in the Cdnimlssion 
budget and rate-setting documents. 



$ ^59,959,305 


58,568,444 


76,863,354 


66,683,058 


9,016,613 


9,323,376 


759,587 


566,758 


6,485,394 


5,850,715 


16,261,594 


15,740,849 


120,561,065 


109,510,653 


6,432,956 


2,996,564 


3,810,106 


2,411,481 


6,266,538 


5,575,137 


1,845,393 


1,678,380 


2,389,516 


1,421,737 


141,305,573 


123,593,952 


19,221,885 


16,335,091 


1,179,909 


1,108,150 


2,981,876 


2,900,338 


1,428,448 


1,247,115 


6,350,149 


4,831,816 


396,610 


423,507 


2,067,094 


r,6l7,191 


1,681,940 


1,220,120 


681,434 


298,075 


651,124 


786,642 


354,637 


104,717 


342,672 


446,411 


818,808 


584,478 


38,156,586 


31,903,651 


61,520,881 


54,716,374 


Z,148,575 


3,297,843 


3,890,000 


3,115,000 


13,732,654 


9,772,770 


5,193,000 


3,213,000 


.1,579,199 


6,294,360 


• 3,000,000 


— 


— 


4,847,998 


96,064,309 


85,257,345 


134,220,895 


117,160,996 


$ 7,084,678 


6,432,956 






Boston Water and Sewer Commission 

425 Summer Street 
Boston, MA 02210 

617.330-9400