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Full text of "Annual report"

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MESSAGE FROM THE EXECUTIVE DIRECTOR 



he €nt\re staff at the Boston Water and Sewer Commission is dedicated to 
providing our customers with full value for every dollar we spend. In many 
areas, our 1 991 expenditures decreased from the previous year. 

Nevertheless, Boston residents were presented once again witli substantial increases in their water 
--aiTd^sewer bills. To compound matters, rates are projected to continue their climb in the years ahead. 

Clearly, diligent cost control and efficient delivery of quality sen/ices are not enough to slow rapidly 
rising rates. The Massachusetts Water Resources Authority's Boston Harbor Clean-Up Project is an 
enormous and expensive challenge. Approximately one-third of this effort's $7 billion price tag is 
being passed on to Boston ratepayers. This is the primary reason behind the Commission's dramatic 
rate increases. 




txecutive Director 
Robert J. Cioiek 



Many Boston families and businesses are feeling the impact of higher water and 
sewer bills. Others will soon join them. To provide struggling ratepayers with relief, 
the Commission is implementing a specific ten-point program that desen/es 
immediate attention from state and federal policymakers. Among its major 
elements are recommendations to: 

m Provide state and federal funding for up to 50% of the cost of cleaning up 
our harbors, rivers, and estuaries. 

% Create a Clean Water Trust Fund solely dedicated to providing rate relief. 

m Fully fund the state's Hayes Act to provide at least $1 billion in low-interest 
loans to cities and towns for wastewater construction projerts. 

^ Allow all ratepayers to deduct the cost of water and sewer bills from their 
state and federal taxes— an option now available only to businesses and 
owners of rental property. 

^ Provide rate relief for low-income families through the use of a "utility scnp" 
to help pay for essential utilities— much like the current Food Stamp program. 

Ratepayers can take pride in achieving significant progress toward reclaiming Boston Harbor. By 
repainng and constructing wastewater collection facilities, eliminating illegal sewer connections, and 
improving routine maintenance, the Boston Water and Sewer Commission has made important 
strides toward reducing Harbor pollution. 

For example, the construction of interceptors with increased capacity combined with the 
Commission's tidegate inspection and repair program have virtually eliminated discharge of dry 
weather overflow into the inner Harbor. 

Despite such progress, the financial impact of spiraling rate increases is likely to result in a growing 
ratepayer frustration. If we take meaningful steps now, however, we can perhaps avoid a policy issue 
guaranteed to further complicate an already difficult situation. 

If you want to know more about the Commission's program to provide true rate relief, please let us 
know. We will be glad to share it with you— and show you how to help. 




MEETING THE CHALLENGE: THE MISSION 



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BOSTON 



RESIDENT 




irector of Operations 
Gerard F. Dwyer 



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E^take over operation of 
Boston's water and sewer systems, 
the Commission's original mandate 
was to repair and upgrade tliou- 

sands of miles of aging pipe and outdated 
equipme-nt-\A/hile bringing professionalism and 
financial stability to the delivery of water and 
sewer services. 

A COMPETENT AMD MOTIVATED 
WORKFORCE 

Established as an independent business 
authority, the Boston Water and Sewer 
Commission is overseen by a three-member 
board which sets broad policy and monitors 
budgets and operations. 

An executive director, appointed by the board, 
guides day-to-day activities within the 
Commission's four major departments- 
Executive, Operations, Engineering, and 
Administration and Finance. 

By providing a safe and healthy work 
environment, and opportunities for employees 
to enhance their skills and knowledge, the 
Commission maintains a professional 
workforce of almost 600 full-time employees. 
A strong commitment to affirmative action 
ensures a culturally and ethnically diverse 
workplace. 

More than 85% of the Commission's 
workforce are members of a bargaining unit. 
Employing a cooperative approach, union and 
management representatives work together to 
address matters such as improved quality 
control, efficient performance, and safe 
working conditions. 

MAJOR ACCOMPLISHMENTS OF 1991 

1991 was a year of continued fiscal constraint 
for the Commission. With reduced manpower 
and budget cuts in many areas, emphasis 
remained on improving existing programs and 
services. Only programs that raised revenue, 
controlled costs, improved service, or 
protected the environment received additional 
funding. 

Along with continued repair and renewal of 
the city's water and sewer infrastructure and 
efforts to reduce pollution in Boston Harbor, 
there were many additional operational 
highlights of 1991. 



deputy Director 
Patricia A. Fahy and Staff 




METERING PROGRAMS: To improve accurate 
registration of water consumption and to 
reduce costs, tlie Commission implemented a 
Meter Downsizing Program. Wlierever 
feasible, larger water meters were replaced 
with smaller meters that more accurately 
record water flows during periods of low 
usage. Overall, this program resulted in the 
billing of 1 .4 additional million gallons of 
water each day. 

Installation of 63,057 outside meter reading 
devices and improved meter reading proce- 
dures increased the issuance of water bills 
based on actual meter readings from 64 
percent to 73 percent. 

LEAK DETECTION AND REPAIR: The 

Commission continually inspects its 1,182 
miles of water pipes to locate and repair leaks. 
Leak detection efforts in 1991 reduced water 
loss by 4.75 million gallons per day— about 5 
percent of the Commission's total daily water 
usage. The Commission's Leak Detection 
program has been nationally recognized for its 
contribution to water conservation. 



INCREASED COLLECTIONS: Intensive and 
integrated collections activities improved the 
collection rate for accounts receivable from 94 
percent in 1990 to 98 percent in 1991. 
Outstanding receivables overdue by more than 
180 days were reduced by 10 percent. 

AUTOMATED FINANCIAL MANAGEMENT 
SYSTEM: Installation of an in-house auto- 
mated financial management system was 
begun in 1991 . When completed in 1992, it 
will provide more timely and efficient financial 
reporting and analysis, improving the 
Commission's overall management informa- 
tion systems. 

NEW RATE STRUCTURE: Planning was 
completed in 1991 for a new water and sewer 
rate structure designed to provide customer 
equity, conservation incentives, revenue 
stability, efficient cost allocation, and relief 
from rising rates for customers with limited 
incomes . Upon approval from the Board of 
Commissioners, the new rate structure is 
planned to be fully implemented in 1993. 




PROTECTING THE ENVIRONMENT 



/affirmative Action 

Manager 
Joseph Delgardo 



ROCRESS ON HARBOR CLEANUP 

The Boston Water and Sewer Commission 
takes pride in the many programs it has 
initiated to produce concrete results toward 
t^he 1998 goal of making Boston Harbor safe 
for fishing and swimming. 

During the past five years, the Commission has 
identified and eliminated almost 300 sewer 
connections illegally connected to storm drains 
leading directly to Boston waterways. Dunng 
1992, inspection and testing of 6400 buildings 
along the Harbor and its 22 tributaries will 
identify and correct infiltration and inflow 
sources now contributing to Harbor pollution. 

The Commission's Sewer Discharge Enforce- 
ment Program seeks elimination of large 
grease deposits by inspecting all restaurants 
and commercial kitchens annually to ensure 
grease traps are installed, cleaned, and 
properly operated. 



With support from the MWRA and 
the City of Boston, the Commis- 
sion has established a Waste Oil 
Collection Center to provide 
Boston residents with convenient 
and environmentally safe disposal 
of used motor oil. 




The Commission continues to co- 
sponsor a Household Hazardous 
Waste Collection Day to allow 
home-owners to safely dispose of 
toxic and hazardous materials. 

CLEANER BEACHES 



Although much of the city's 1 50 
acres of beaches are still undesir- 
able and inadequate for safe 
recreation, 1991 was a turning 
point. Coordinated environmental 
protection efforts undertaken by 
the MWRA and the Commission have 
significantly improved water quality at beaches 
in South Boston, Dorchester, and East Boston. 



Also during 1991, the Commission's Executive 
Director was appointed to a newly established 
Beach Commission, a joint state and city effort 
to coordinate improvement of Boston's 
beaches. 

With continued efforts to control sewage 
overflows, eliminate illegal sewer connections, 
and reduce the discharge of other pollutants 
into the storm drain systems, the dream of a 
cleaner Harbor will soon be a reality. 

CONSERVING WATER 

Until March 1989, the MWRA exceeded the 
safe yield limit of its reservoir systems. 
Continued withdrawal of water at those high 
levels would have resulted in the very costly 
necessity to seek additional sources of water 
supply. Alternatively, reducing consumption 
through consen/ation would eliminate the 
requirement. Because the Commission 
purchases every gallon of water it supplies to 
Boston residents from the MWRA, water 
conservation is economically beneficial as well 
as environmentally responsible. 

Programs such as leak detection and repair, 
infrastructure renewal and replacement, a 
progressive rate structure, and education of 
domestic and industrial customers have 
produced profound results. 

Since the Commission was 
established, Boston's water 
consumption has been reduced 
by more than 30 percent. If 
Boston was consuming water at 
the same rate as in 1976— the 
year before the Commission 
was created— ratepayers 
would be paying an additional 
million of dollars each year. 

This conservation effort has 
allowed the Quabbin & 
Wachusetts Resen/oir 
Systems— Boston's primary 
water source — to remain 
above safe yield levels, 
postponing the need to 
find new water supply 
sources. 



CARING ABOUT THE NEIGHBORHOODS 



L 



s water and 
sewer sen/ices 
become increas- 
ingly more expen- 
sive, there is a 
corresponding 
need to ensure 
that ratepayers 
understand the 
Commission's current 
activities and plans for 
the future. 



COMMUMITV OUTREACH 

During 1991, the Commission's Community 
Outreach Program sponsored more than 140 
public meetings to explain water and sewer 
rates, inform residents of upcoming construc- 
tion projects, and discuss neighborhood 
concerns. Many meetings were held during 
evening hours to allow working people to 
attend. 

Throughout the year, the Commission 
conducts office hours at 1 5 convenient 
neighborhood locations. Customers can visit 
to pay bills, ask questions, and apply for rate 
discounts offered to elderly or disabled 
residents. 








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At the central office, the customer service 
program has been revised to improve the 
staff's capacity to track customers' needs and 
complaints. In 1992, the Commission will 
implement a Quality Control Program to 
improve response to dissatisfied customers. 

The Commission also stnves to minimize 
disruption from repair and construction by 
involving neighborhoods and businesses in 
project planning. Work schedules are arranged 
to allow daily life and commerce to proceed as 
smoothly as possible. 

As part of its regular outreach efforts. 
Commission staff prepare and distribute a 
vanety of informational materials, including 
brochures, billing inserts, and special mailings 
to customers. To improve public awareness of 
Commission activity, the news media is kept 
informed of important developments. 

The Commission recognizes its responsibility to 
make a positive contribution to Boston's 
neighborhoods. Its Youth Ennchment Program 
offers summer employment for young people, 
providing needed services with proper 
supen/ision. Elderly or disabled residents 
receive a 25 percent discount on water 
sen/ices — a benefit shared by 14,600 
customers. 



l^irector of Public Affairs 
Ronald A. Catena and Staff 



During 1992, the Commission will institute 
seasonal flushing of water pipes in neighbor- 
hoods with significant rusty water problems. 
The city's 1 1,000 manholes will be inspected 
and repaired to prevent injury to citizens. To 
better integrate the Commission's construction 
plans with neighborhood needs, planning will 
begin for a neighborhood-based capital 
improvement program. 

Perhaps most importantly, the Commission is 
working to provide residents with relief from 
spiraling water and sewer rates by aggressively 
urging state and federal policymakers to adopt 
the recommendations of the Commission's 
comprehensive 10-point rate-relief program. 




UNDERSTANDING WATER AND SEWER RATES 



^UE TO YOUR 
■f'FORTS, ADVICE AND 
'COUNSEL, WE HAVE 

BEEN ABLE TO REDUCE 

OUR ROXBURY 

CLUBHOUSE WATER 

CONSUMPTION 
, BY 28%." 

JOHN E HURLEY 

\ BOYS a GIRLS 
"■LUB OF BOSTON 




he Commission is required to set 
water and sewer rates at levels 
sufficient to meet current 
expenses (including debt service 

and MWRA assessments), to maintain 

reasonable reserve funds, and to provide for 

infrastructure repair and 

renewal. Funds for large 

capital projects are raised 

primarily througfi issuance 

of revenue bonds. 

Almost 90 percent of the 
Commission's annual 
revenue comes from water 
and sewer charges paid by 
Boston residents and 
businesses. The remainder is 
raised from special sen/ice 
fees and charges, invest- 
ment income, and any 
budget surplus from the 
previous year. 

MASSACHUSETTS WATER RESOURCES 
AUTHORITY (MWRA) 

The MWRA was established to provide water 
and sewer services to Eastern Massachusetts. 
Like the Commission, the MWRA is charged 
with improving sen/ice and achieving financial 
stability. In addition, it has pnmary responsibil- 
ity for the Boston Harbor Cleanup Project. 

The staggering $7 billion cost of the Boston 
Harbor Cleanup Project is the pnmary force 
behind rapidly rising water and sewer rates. 
This cost is passed to the 50 communities that 
comprise the MWRA's sewer service district. 

The Commission is the MWRA's single largest 
customer. In 1991, the Commission paid 
about $75 million to the MWRA for services 
that included water supply, wastewater 
collection and treatment, sludge processing, 
and repair and construction of sewage 
treatment facilities. 

Although the Commission and the MWRA 
maintain a close and cooperative working 
relationship, the Commission regularly tests 
and monitors the MWRA's 29 master water 
meters that record Boston's water usage. The 
Commission also carefully reviews the 
MWRA's budget-setting process and 
ratemaking methodology to insure accuracy 
and fairness. 



general Counsel 
Henry C. Luthin 




PROVIDING RATE RELIEF 

To provide customers with a measure of relief 
from climbing rates, the Commission 
maintains a Stabilization Fund to reduce the 
impact of extraordinary cost increases, such as 
annual MWRA water and sewer charges. In 
1991, $1 million was deposited to the 
Stabilization Fund which is intended to provide 
rate relief in future years. 

A new rate structure, set for implementation 
by the Commission in 1993, will strive to 
provide further rate relief for those Boston 
residents least able to pay their water and 
sewer bills, as well as promote water 
conservation goals. 

However, a look at future rate projections 
shows the need for more aggressive steps. The 
MWRA is forecasting rate increases on the 
magnitude of 1 5 to 40 percent over the next 
five years. As a result. Commission rates will 
also continue to rise. 

True rate relief requires bold action along 
several fronts, as proposed by the 
Commission's 10-point plan outlined at the 
beginning of this report. In the absence of 
such action, public support for cleaning up 
Boston Harbor may well dissipate into 
confrontation and anger as rates continue 
to rise. 



ENSURING FINANCIAL STABILITY 






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txecutive Assistant to 

Executive Director 
James Schultz 



ERVATIVE FIMAMCIAL 
MANAGEMENT 

Primary among the Commission's duties is its 
responsibility to ensure fiscal stability. The 
"Saunmission's commitment to conservative 
financial management has regularly resulted in 
a modest budget surplus. This surplus is 
carried over into the next fiscal year to reduce 
rate revenue requirements. 



The Commission maintains 
mandatory operating and debt 
service reserve funds at adequate 
levels. Among these, a Stabiliza- 
tion Fund helps to moderate the 
impact of required rate 
increases. 

Through effective management 
of monies raised to pay large 
expenses such as the MWRA 
assessments and debt sen/ice 
payments, the Commission is 
able to generate investment 
income to help meet its annual 
budget. Investment income in 
1991 totaled $5.5 million. 



Full and fair competition for solicitation and 
awarding of contracts helps to encourage 
careful expenditure of Commission funds. In 
1992, a Vendor Evaluation Program will be 
instituted to ensure the best quality and price 
for goods and services purchased by the 
Commission. 

Installation of an automated financial 
management system-scheduled for completion 
in 1992-will improve financial reporting and 
analysis capabilities and safeguard Commission 
assets. 

AGGRESSIVE BILLING AND COLLECTION 

The Commission vigorously pursues payment 
for its services with a fully computerized billing 
and collections system that features dunning 
letters, telephone contacts, and a late payment 
charge of 14 percent per year on all bills 45 
days past due. 

If necessary, the Commission will terminate a 
customer's service and initiate legal action to 
recover monies owed to it. Before termination, 
customers who demonstrate financial hardship 
are allowed to arrange an extended payment 
plan for overdue bills. 



HIGH BOND RATINGS 

The Commission issues General Revenue 
bonds to finance capital improvements and 
new equipment. Six bond issues totalling 
$295.6 million are currently outstanding. In 
recognition of its sound fiscal management, 
the Commission receives consistently high 
bond ratings from the financial community. 

For its 1991 bond issue, the Commission was 
awarded an "A" rating from Moody's for its 
"solid management" and "demonstrated 
trend of satisfactory financial operation." Fitch 
awarded the Commission an "A+" rating, 
noting its "sound financial position." Standard 
& Poor's rated the Commission an A-. 

These high ratings allow the Commission to 
raise capital improvement funds at lower costs, 
producing significant budget savings to 
mitigate rate increases. 



_„SUBSTANVAL 

IMPROVEMENTS TO 

THE COMMISSION'S 

INFRASTRUCTURE AND 

STRENGTHENED FISCAL 

MANAGEMENT.." 

STANDARD & POORS 




BOARD OF COMMISSIONERS 



mission's tiiree-member board is appointed by the Mayor of 
Boston with approval by the City Council. Each board member serves a 
four-year term and must be a resident of Boston. Commissioners are not 
compensated for their service. 



COMMISSION MEMBERS 

ROXANA MARCHOSKY: Appointed as Chair 
of the Board of Commissioners in 1990, Ms. 
Marchosky is an attorney in private practice. 
She received her undergraduate degree and 
her law degree from Boston University. 

An activist in community affairs, Ms. 
Marchosky has served on numerous boards, 
including La Alianza Hispana, a multi-purpose 
social service agency. 






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VICTORIA L. WILLIAMS: Appointed to the 
Board in February of 1 991 , Ms. Williams is an 
Assistant Commissioner of the Boston Parks 
and Recreation Department. 

Long active in public service, Ms. Williams is 
also a member of the Boston Parks and 
Recreation Commission and has served as 
Chair of the Board of Review for the City of 
Boston's Assessing Department. At the City's 
Youth Activities Commission, Ms. Williams 
worked for many years as a youth counselor. 



MARY C. NEE: First appointed to the Board in 
March of 1985, Ms. Nee has served as Director 
of the Mayor's Office of Capital Planning since 
1984. Ms. Nee has recently been appointed 
Executive Director of the City's Public Facilities 
Department. 

Prior to her appointment as Director of Capital 
Planning, Ms. Nee served as Senior Policy and 
Budget Analyst for the Massachusett's Senate 
Committee on Ways and Means. She is a 
member of the Boston Industrial Development 
Financing Authority and serves as President of 
the Board of the South Boston Neighborhood 
House, Inc. 





INDEPENDENT AUDITORS' REPORT 



THE COMMISSIONERS 
BOSTON WATER AND SEWER COMMISSION: 



We have audited the accompanying balance sheets of 
the Boston Water and Sewer Commission (the 
"Commission") as of December 31, 1991 and 1990 and 
the related statements of operations, Commission 
equity and cash flows for the years 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 audits. 

We conducted our audits in accordance with generally 
accepted auditing standards. Those standards require 
that we plan and perform the audit to obtain reason- 
able 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, the financial statements referred to 
above present fairly, in all material respects, the financial 
position of the Commission at December 31, 1991 and 
1990 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 statements taken as a 
whole. The Supplemental Schedule of Revenues and 
Expenses-Rate Basis is presented for purposes of 
additional analysis and is not a required part of the basic 
financial statements. Sjjch 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. 



April 3, 1992 




BALANCE SHEETS 
DECEMBER 31, 1991 AND 1990 



Current assets: 

Cash and cash equivalents (note 8) 
Accounts receivable: 

Customers, less allowances of $21,511,165 in 1991 
and $17,382,603 in 1990 
Unbilled revenues, less allowances of 

$1,773,707 in 1991 and $1,908,716 in 1990 
Construction grants receivable 
Prepaid expenses 

Total current assets 

Investments (notes 4 and 8) 

Property, plant and equipment, net (note 3) 

Deferred charges (note 2) 

Bond issue costs, net 

Total assets 

LIABILITIES AND COIVimiSSION EQUITY 

Current liabilities: 

Payable from current assets: 
Accounts payable 
Other accrued liabilities 
Current portion of revenue bonds 



Payable from trusteed assets: 

Massachusetts Water Resources Authority assessment 
Current portion of City of Boston bonds 



Total current liabilities 

Long-term debt (note 4) 
Other long-term liabilities 
Total liabilities 

Deferred credits and resen/es (note 2) 

Commission equity: 
Contributed capital 

Commitments and contingencies (notes 10 and 1 1) 

Total liabilities and commission equity 



746,962 



(Restated) 



480,578 



50,699,251 


51,296,234 


14,889,403 


11,916,310 


5,524,961 


5,887,247 


995,591 


483,109 


72,856,168 


70,063,478 


187,393,963 


155,052,367 


305,010,137 


283,041,005 


24,661,745 


28,735,126 


5,520,982 


4,691,125 


$ 595,542,995 


541,583,101 



$ 8,512,005 

8,205,021 

4,360,000 

21,077,026 


14,765,186 
6,491,070 
3,540,000 

24,796,256 


4,132,209 

380,000 

4,512,209 


3,175,692 

380,000 

3,555,692 


25,589,235 


28,351,948 


285,737,413 

1,957,562 

313,284,210 


239,482,737 

1,957,562 

269,792,247 


163,351,811 


153,830,233 


118,906,974 


117,960,621 



$ 595,542,995 



541,583,101 



See accompanying notes to financial statements. 



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STATEMENTS OF OPERATIONS 
FOR THE YEARS ENDED DECEMBER 31, 1991 AND 1990 



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 

Nonoperating revenue (expense): 
Interest income 
Interest expense 
Other 

Total nonoperating revenue (expense) 

Excess revenue before transfer requirements 

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

Net loss 

Add: depreciation on fixed assets acquired by grants 

Net Income 



152,959,799 
1,929,132 
2,213,499 

157,102,430 



58,503,540 

5,395,828 

73,079,059 

7,900,957 

144,879,384 

12.223,046 



17,397,870 
(21,849,864) 



(4,451,994) 

7,771,052 

(9,521,578) 

(1,750,526) 

1,750,526 



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 

(23,911,134) 

(3,058,487) 

(10,527,992) 

7,844,447 



(9,425,009) 

(1,580,562) 

1,580,562 



See accompanying notes to financial statements. 



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STATEMENTS OF COMMISSION EQUITY 
FOR THE YEARS ENDED DECEMBER 31, 1991 AND 1990 



CONTRIBUTED 
CAPITAL 
(Restated) 

Balance, January 1, 1990 $117,586,749 

Contributions in aid of construction 1,954,434 

Depreciation of related property (1,580,562) 

Balance, December 3 1 , 1 990 11 7,960,62 1 

Contributions in aid of construction 2,696,879 

Depreciation of related property (1,750,526) 

Balance, December 31, 1991 , $118,906.974 



See accompanying notes to financial statements. 



o 



STATEMENTS OF CASH FLOWS 
FOR THE VEARS ENDED DECEMBER 31, 1991 AND 1990 



Excess operating revenues 

Adjustments to reconcile operating income to net casin: 
Excess revenues used to fund reserves and other 

deferrals 
Depredation and amortization 
Change in assets and liabilities: 

Accounts receivable 

Unbilled 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: 

Net (purchase)/sale of investments 
Other revenues, primarily interest income 
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 issuance 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 





(Restated) 


$ 12,223,046 


18,372,439 


(9,521,578) 


(9,425,009) 


7,900,957 


7,090,212 


595,983 


(5,704,707) 


(2,973,093) 


(1,077,822) 


362,285 


7,006,079 


(512,482) 


343,879 


3,215,755 


7,239,557 


(6,253,181) 


4,328,138 


1,713,951 


(701,137) 


956,517 


199,200 


9,521,578 


9,833,145 


— 


708,314 


— 


50,099 


17,230,739 


38,272,386 


(32,341,595) 


2,455,432 


17,397,870 


16,441,529 


(14,943,726) 


18,907,061 


(28,597,444) 


(31,905,179) 


50,419,351 


— 


(3,920,000) 


(3,890,000) 


(1,344,875) 


— 


2,696,879 


1,954,434 


(21,274,539) 


(23,351,908) 


(2,020,629) 


(57,202,653) 


256,384 


(23,206) 


480,578 


503,784 


$ 746,962 


480,578 


$ 17,845,036 


16,313,219 



See accompanying notes to financial statements. 



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NOTES TO FINANCIAL STATEMENTS, DECEMBER 31, 1991 AND 1990 



1. ORCANIZATIOIU, BASIS OF PRESEMTATIOM AMD 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 equitable 
basis in the City of Boston (the "City") as required under the Boston Water and 
Sewer Reorganization Act of 1977 (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. The rates charged to 
customers are based on the cash required for the Commission's operations, debt 
sen/ice, and reserve contributions. To comply with the external financial reporting 
requirements of the Board, the accompanying financial statements are presented 
on a basis that is consistent with generally accepted accounting principles (GAAP) 
for regulated utilities. 

To accommodate the rate making process, the Commission follows the 
accounting standards set forth in Financial Accounting Standards Board Statement 
No. 71 ("FAS-71 "), "Accounting for the Effects of Certain Types of Regulation". 
FAS-71 allows certain (a) revenues provided for future allowable costs to be 
deferred until the costs are actually incurred (deferred credits) and (b) costs 
incurred to be capitalized if future recovery is reasonably assured (deferred 
charges). Revenues and current expenses appearing in the Supplemental Schedule 
of Revenues and Expenses-Rate basis are presented in the same format as utilized 
in the Commission's budgeting and rate setting process. The revenues and 
expenses shown on the Statement of Operations are presented on a GAAP basis. 
A 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 


$ 157,102,430 


144,879,384 


Other revenues/expenses 


17,397,870 


21,849,864 


Total 


174,500,300 


166,729,248 


Reclassifications and deferrals: 






Contribution to resen/es ' 


— 


3,604,000 


Provision for working capital 


- 


2,247,128 


Bad debt expense 


(24,130,055) 


(24,130,055) 


Excess depreciation over bond payments 


— 


(4,525,957) 


Interest expense 


— 


(4,407,771) 


Interest income 


(6,434,933) 


— 


Capital expenditures 


- 


9,713,747 


Excess revenue used to offset current 






rates 


7,084,679 


— 


Other deferrals 


6,650 
$151,026,641 


(100,669) 


As presented in the Supplemental Schedule 


149,129,671 



The Enabling Act requires that any net surplus, as defined by the rate 
setting process, be either returned to the City or applied to offset water and 
sewer rates for the following year. The Commission has applied $1,896,970 and 
$7,084,679 for the years ended December 31, 1991 and 1990, respectively, to 
offset rates in the respective subsequent years. 



(a) Revenue Billings 

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

(b) Investments 

Investments, 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 amortized 
cost plus accrued interest. 

(c) Property, Plant and Equipment 

Property, plant and equipment 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 expense as incurred. 
Major renewals or betterments are capitalized and depreciated over their 
estimated useful lives. 

The Commission capitalizes interest costs during construction of assets 
for its own use. Interest totalling approximately $1,094,000 was capitalized in 
1 990. No interest was capitalized in 1 991 . 

(d) Depreciation 

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



Water; 

Works 

Meters and hydrants 
Sewerage: 

Works 

Pumping station 
Other 



Years 

60 to 100 
10 to 40 

40 to 75 

35 
3to15 



(e) Contributed Capital 

Contributions from governmental agencies, individuals and the City of 
Boston, received in aid of specific construction projects that are not refundable, 
are recorded as contributed capital. Accordingly, depreciation of the related 
property is charged directly to contributed capital and appears as an addition to 
net income in the accompanying statements of operations. 

(f) Cash Equivalents 

The Commission considers all highly liquid, short-term cash investments 

with a maturity of less than three months to be cash equivalents for purposes of 

the statement of cash flows. 

(g) Bond Issue Costs 

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) Restatement and Reclassifications 

The 1990 financial statements liave been restated to reflect the write off 
of interest and connpensated absences totalling $6.9 million. These amounts were 
previously reported as deferred debits. Also, certain amounts in the 1990 financial 
statements have been reclassified to conform to the 1991 presentation. 

2. DEFERRED 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 deferred debits or credits. The revenues and 
expenses that have been removed from the Statement of Operations and added 
to the balance sheets as deferred credits appear in the line "Excess revenues used 
to fund required reserves and other deferrals" on the Statement of Operations. 
The components of thiese amounts are: 



3. PROPERTY, PLANT AND EQUIPMENT 

The cost of water and sewerage plant and equipment in service and related 
accumulated depreciation at December 31, 1991 and 1990 are as follows: 



Water: 
Works 

Meters and hydrants 
Total water 

Sewerage: 
Works 

Pumping station 
Total sewerage 



$ 105,342,402 
1 3,624,243 



104,536,336 
12,473,263 



169,209,169 166,446,479 

6,798,216 6,798,216 

176,007,385 173,244,695 



1991 



1990 



Contributions to resen/es 

Interest and compensated absences 

Provision for working capital 

Principal payments on long-term debt 

Interest paid from escrow funds, net 

Capital expenditures 

Depredation 

Interest income on project and escrow funds 

Rate surplus used 

Rate surplus deferred 

Other 



2,247,128 

3,375,000 
(4,407,771) 

9,713,747 
(4,877,786) 

6,434,933 
(7,084,679) 

1,896,970 
(1,379,964) 



5,193,000 
(6,902,912) 

1,579,199 

3,890,000 
(3,342,727) 

7,967,383 
(4,197,907) 

6,364,985 
(6,432,956) 

7,084,679 
(1,777,735) 



$ 9,521,578 9,452,009 



The components of the deferred charges included in the accompanying 
balance sheet are as follows: 



47,593,316 



39,280,020 



14,139,983 
304,394,277 



41,137,026 



265,730,117 263,257,251 



19,783,754 



Other 
Total 

Less accumulated depreciation 
Total 

Construction in progress 

Total 

4. LONG TERM DEBT 



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 sewer systems. Payments of principal and interest are 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 99 1 and 1 990 follows: 



$ 305,010,137 283,041,005 



1991 



Accrued pension expense 
Accrued interest expense 
Debt extinguishment expense 

Total deferred charges 



1990 



1991 



1990 



$ 15,321,068 15,536,823 

— 3,000,000 

8,340,677 9,198,303 

$ 24,661,745 28,735,126 



The activity in and components of the deferred credits included in the 
accompanying balance sheet are as follows: 



City Bonds, bearing interest at rates 

ranging from 5.1 % to 9.5% with maturity 
dates ranging through December 1999 

Less current installments 

Total general obligation debt of the 
City, net of current installments 



1,330,000 1,710,000 
380,000 380,000 



$ 950,000 1,330,000 



Debt service 
.Capital improvements 
Working capital 
Self insurance 
Reduction of future rates 



December 31, Increase December 31, 

1990 (Decrease) 1991 

.115,805,000 3,504,000 20,410,000 

72,439,685 8,858,159 81,297,844 

55,259,859 2,247,128 57,505,997 

2,240,000 — 2,240,000 

7,084,679 (5,187,709) 1,896,970 



Total deferred credits 



$153,830,233 



9,521,578 163,351,811 



A summary of revenue bonds of the Commission follows: 



1984 Series A, bearing interest at 
rates ranging from 7.0% to 10.0%, 
with maturity dates ranging from 
January 1 , 1 992 to January 1 , 2001 

1985 Series A, bearing a variable 
interest rate (3.9% and 5.85% at 
December 31, 1991 and 1990, respectively), 
maturing in two equal amounts on 
November 1, 2014 and 2015 and requiring 
annual sinking fund contributions 
through 2014 

1 986 Series A, bearing interest at rates 
ranging from 6.0% to 7,88%, with maturity 
dates ranging from November 1 , 

1992 to 2015 

1 988 Series A, bearing interest at rates 
ranging from 6.0% to 7.4%, with maturity 
dates ranging from November 1 , 

1992 to 2008 

1989 Series A, bearing interest at rates 
ranging from 6.2% to 7.1%, with maturity 
dates ranging from November 1 , 

1992 to 2019 

1991 Series A, bearing interest at rates 
ranging from 5.0% to 7.0% with maturity 
dates ranging from November 1, 
1992 to 2021 

Less: 

Current installments 
Total long-term revenue bonds 

Less: 

Unamortized issue discount 

Net long-term revenue bonds 



48,525,000 



49,170,000 



80,605,000 



39,775,000 



52,365,000 
296,770,000 



4,360,000 
292,410,000 



7,522,587 



39,890,000 



247,945,000 

3,540,000 
244,405,000 

5,252,263 



$ 284,787,413 238,152,737 



City 


Revenue 




Bonds 


Bonds 


Total 


$ 380,000 


4,350,000 


4,740,000 


270,000 


4,760,000 


5,030,000 


270,000 


5,185,000 


5,455,000 


195,000 


5,785,000 


5,980,000 


65,000 


■ 8,015,000 


8,080,000 


150,000 


268,565,000 


268,815,000 


$ 1,330,000 


296,770,000 


298,100,000 



Annual sinking fund requirements and debt principal maturities for all 
future years are as follows: 



1992 
1993 
1994 
1995 
1996 
Thereafter 



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, 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 1985 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 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 payments. 

In August 1986, the Commission issued 1986 Series A General Revenue 
Bonds (1985 Bonds). This issue was structured as a rolling cross-over refunding 
and new money issue. The 1985 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 1985 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 1 988, the Commission issued 1 988 Series A Bonds to provide 
for the defeasance of a portion of the Commission's General Revenue Bonds 
1984 Series A to provide supplemental funding for the Operating Resen/e Fund 
and to pay costs of issuance. Under the 1988 Refunding Trust Agreement, the 
Commission deposited sufficient funds with the 1 984 Bond Trustee to pay when 
due the principal and interest on the refunded bonds until the first call date, 
January 1, 1995. As a result, the refunded 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 ongoing 
capital improvement program. 

In May 1991, the Commission issued 1991 Series A Bonds to provide funds 
for projects, to provide funds for the Senior Debt Reserve Fund and to pay the 
cost of issuance of the 1991 Series A Bonds. The Commission maintains an 
insurance policy with Financial Guaranty Insurance Company to guarantee 
payment of principal and interest on the Series A Bonds maturing November 1, 
1997 through November 1, 2021. 



In the aggregate $105,420,000 remains outstanding at December 31, 1991 
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 sufficient to 
meet a net revenue 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 cash be held 
in the Revenue Fund until the last business day of the fiscal year. At that time, 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 fund not restricted by the 
Resolution. 

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 established both trusteed 
Snd nontrusteed funds with investments, principally short-term securities, which 
are restricted for payment of specified liabilities, capital projects or other costs of 
operations. The components of the trusteed and nontrusteed investments at 
December 31, 1991 and 1990 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 
Money market and cash investments 
Commercial paper 
Repurchase agreements 



1991 



56,529,126 
1,232,158 

45,491,022 

15,806,819 
4,023,488 

43,218,208 



1990 



7,427,618 
11,336,912 
58,601,842 

4,613,678 



166,300,821 113,828,686 



3,686,493 9,921,220 

17,406,649 16,964,007 

— 687,747 

— 13,650,707 

21,093,142 41,223,681 



$ 187,393,963 155,052,367 



5. MASSACHUSETTS WATER RESOURCES AUTHORITY 

The Massachusetts Water Resources Authority (the "Authority") provides 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 
- are due to the Authority in four installments in September, November, March and 
May. Interest is not charged on the outstanding balance. The amounts included in 
the operating statement for the MWRA assessments for 1991 and 1990 are as 
follows: 



1991 



1990 



Assessments allocated on: 
Water usage 
Wastewater usage 

Total 



$24,801,726 22,880,297 
48,277,333 38,640,584 



$ 73,079,059 61,520,881 



During 1991 and 1990, over 76% and 73%, 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 76% in 
1991 and is continuing to take steps to improve the amount of billable water, 
including replacement of old and defective meters and continuation of a 
comprehensive leak detection and repair program. 

6. 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 $2,569,000 and 
$2,618,000 in 1991 and 1990, respectively. The remaining City departments were 
billed $287,000 based on estimated consumption during 1990. No estimated 
billings were required for 1 991 . 

The City provides services to the Commission, including paving and 
facilities rental. Operating costs billed to the Commission by the City were 
$912,000 and $2,433,000 during 1991 and 1990, respectively. Capital costs 
billed by the City were $1,156,000 and $4,672,000 during 1991 and 1990,. 
respectively. 

7. RETIREMENT BENEFITS 

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 future obligations to all Commission employees covered 
by the Boston System was settled in 1986, resulting in a payment of $19,100,000 
to the Boston System. This payment was funded primarily through 1985 and 1986 
bond proceeds and is recorded as a deferred charge that will be recovered 
through future rates. 



o 



As part of the settlement with the Boston System, the Commission annually 
reimburses the City for the Commission's share of pension benefits 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 sen/ice 
as defined by Chapter 32 of the Massachusetts General Laws. 

The Commission's covered payroll was approximately $18,240,000 and 
$16,924,000 in 1991 and 1990, respectively. Total payroll for all Commission 
employees was approximately $20,246,000 and $18,629,000 in 1991 and 1990, 
respectively. In compliance with Statement No. 5 of the Governmental Accounting 
Standards Board, as of January 1, 1992, the Commission updated its actuarial 
valuation originally performed as of January 1 , 1 991 . The valuation and 
subsequent update were based on 122 retired and inactive employees and 593 
active employees. Employee contributions are defined under Massachusetts 
General Laws, Chapter 32. Total employee contributions were approximately 
$1,314,000 and $1,200,000 or 6.5% and 6.4% of covered payroll in 1991 and 
1 990, 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 retirement benefit. The Commission's policy is to make 
additional contributions to the Trust Fund based upon the actuarially determined 
cost of future benefits, net of employee contributions. 

Trust Fund assets at December 31, 1991 and 1990 are as follows: 



1991 



1990 



Assets (at fair market value): 
Common stock 
Corporate bonds and notes 
Cash 
Other 
Total 



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



$ 13,068,322 


9,740,375 


1,630 


— 


405,833 


609,045 


8,444,920 


6,724,988 


$ 21,920,705 


17,074,408 



1992 



1991 



Net assets available for benefits 

Pension benefit obligation: . 

Retirees and beneficiaries currently 
receiving benefits 
Current employees: 

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



$ 21,920,705 17,074,408 



8,523,000 
3,211,000 



7,118,000 
2,814,000 



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 increases estimated to be paya.ble 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 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 January 1, 1992 pension benefit obligation was computed through an 
actuarial update using the information contained in the January 1, 1991 actuarial 
valuation. The significant assumptions used in the calculation of the pension 
benefit obligations as of January 1 , 1 992 and 1 991 include an 8% annually 
compounded rate of return on present and future assets and projected salary 
increases of 6% per year, compounded annually. 

The Commission's funding policy has been to provide for quarteriy employer 
contributions to the Trust Fund based upon an actuarially determined rate using 
the aggregate actuarial cost method. The Commission's contributions totalled 
approximately $810,000 and $950,000 in 1991 and 1990, respectively, or 5.1% 
and 6.7% of the covered payroll. Historical information on the Commission's 
Pension Trust Fund Plan is not available. Historical and other financial information 
on the Boston System can be found in the Boston System's financial statements. 

8. DEPOSITS AND INVESTMENTS 

The Boston Water and Sewer Commission's General Revenue Bond Resolution, 
adopted December 6, 1 984, as amended, places certain limitations on the nature 
of deposits and investments available to the Commission. Demand deposits and 
term deposits without collateralization can only be made with financial institutions 
meeting certain criteria. Certificates of deposit must be fully collateralized and 
issued by FDIC insured banks. Investments can also be made in securities issued by 
or unconditionally guaranteed by the U.S. Government or its Agencies; public 
agencies, municipalities or state obligations carrying the highest bond rating; 
commercial paper rates A-1 ; P-1 , A-Rated 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. 



15,292,000 13,378,000 



Net assets in excess of pension benefit 
obligation 



$ 6,628,705 



3,696,408 



(a) Deposits 

A summary of the amount of the Commission's deposits that are (Category 1) 
fully insured or collateralized with securities held by the Commission or its agent 
in the Commission's name, (Category 2) those deposits that 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 that are not 
collateralized as of December 31, 1991 follows: 



Banl< Balances 
Category 


Total 

Bank 

Balance 

2,325,338 
8,623,237 

10,948,575 


Carrying 


1 


2 3 


Amount 


Cash $ 700,000 
Money market — 


- 1,625,338 

- 8,623,237 

- 10,248,575 


(194,951) 
10,590,895 


Total $ 700,000 


10,395,944 



(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: 





Carrying Amount 






Estimated 




Category 




Carrying 
Amount 


Market 




1 2 


3 


Value 


U.S. Government 








obligations $ 54,770,630 — 


- 


54,770,530 


55,372,000 


U.S. Government 










Agency 










obligations 


45,491,022 — 


— 


45,491,022 


46,966,000 


Repurchase 










agreements 


— 43,218,205 


— 


43,218,205 


41,050,000 


Money market 


100,000 — 23,441,136 


23,541,136, 


23,541,000 


Other investments 


- 10,723,988 


— 


10,723,988 
177,744,981 


10,699,000 


Total $100,361,652 53,942,193 23,441,136 


177,628,000 



9. LEASE COMMITMENTS 

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 1 995, 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. 

IVIinimum lease commitments under all leases with terms in excess of one 
year at December 31, 1 99 1 are as follows: 



1992 
1993 
1994 
1995 



$ 153,392 
49,482 
13,631 

752 

$ 217,257 



Rent expense under operating leases amounted to $1,624,000 and $1,677,000 
in 1991 and 1990, respectively. 

10. COMMITMENTS 

A major capital improvement program is currently 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 $35 million as of December 31, 1991. 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 $135 million in 1992 and 1993. Of this amount, approximately $98 
million represents extension and improvement projects and $37 million represents 
renewal and replacement projects. The extension and improvement projects will 
be 32% funded by federal and state grants. The remaining amounts will be 
funded from the Commission's bond proceeds and operating revenues. 

11. CONTINGENCIES 

The Commission is involved in ordinary and routine litigation and other 
matters related to its operations and the establishment 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 reimbursement to the grantor agency for expenditures 
disallowed under terms of the grant. The Commission believes such disallow- 
ances, 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 increases in 
future MWRA assessments related to the litigation, the Commission's extensive 
capital improvement program (see note 10) addresses probable actions that the 
Commission may be required to undertake in connection with this litigation. 



o 



SUPPLEMENTAL SCHEDULE OF REVENUES AND EXPENSES - RATE BASIS 
FOR THE YEARS ENDED DECEMBER 31, 1991 AND 1990 



Revenues: 

Water revenue 
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 



$ 64,675,711 


59,959,305 


88,284,088 


76,863,354 


16,659,338 


9,016,613 


514,325 


759,587 


6,956,392 


6,485,394 


24,130,055 


16,261,594 


128,829,744 


120,561,065 


7,084,678 


6,432,956 


5,053,775 


3,810,106 


5,909,162 


6,266,538 


1,929,133 


1,845,393 


2,220,149 


2,389,515 


151,026,641 


141,305,573 



Direct operating expenses: 
Salaries and w/ages 
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 resen/e funds 
Worlcing capital provision 
Deferred interest expense 
Solid fill disposal 

Total nonoperating expenses 

Total current expenses 

Current year rate surplus 



20,087,209 


19,221,885 


1,076,734 


1,179,909 


4,273,41 1 


2,981,876 


1,784,061 


1,428,448 


5,395,827 


6,350,149 


397,508 


396,610 


1,805,933 


2,067,094 


1,618,507 


1,681,940 


825,290 


681,434 


668,213 


651,124 


441,597 


354,637 


357,762 


342,672 


1,301,056 


818,808 


40,033,108 


38,156,586 


73,079,059 


61,520,881 


8,412,691 


7,148,575 


3,375,000 


3,890,000 


14,442,093 


13,732,654 


3,604,000 


5,193,000 


2,247,128 


1,579,199 


3,000,000 


3,000,000 


936,592 


— 


109,096,563 


96,064,309 


149,129,671 


134,220,895 


$ 1,896,970 


7,084,678 



This supplemental schedule presents the Commission's revenues and expenses on 
the basis that is presented in the Commission's budget and rate-setting documents. 



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BOSTON WATER AND SEWER COMMISSION 
425 SUMMER STREET 
BOSTON, MA 02210 
617-330-9400 



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