AGUA SPECIAL UTILITY DISTRICT Comprehensive Annual Financial Report Fiscal Year Ended December 31, 2017 Agua Special Utility District Comprehensive Annual Financial Report For the Year Ended December 31, 2017 ELECTED OFFICIALS County of Hidalgo (Place 3) County of Hidalgo (Place 1) City of Palmview City of Penitas County of Hidalgo (Place 2) City of Mission City of Sullivan Mr. Rogelio Hernandez III Mr. Homero Tijerina Mr. Esequiel Ortiz Jr. Mr. Lloyd A. Loya Mr. Ricardo Ochoa Mr. Cesar Rodriguez Mr. Ivan Sandoval INTERIM GENERAL MANAGER Jose E. Saenz, P.E. CHIEF ACCOUNTANT Dagoberto Soto Jr. INDEPENDENT AUDITORS Burton, McCumber & Longoria, L.L.P. Certified Public Accountants Prepared by: Finance Department President Vice President Treasurer Secretary Director Director Director AGUA SPECIAL UTILITY DISTRICT COMPREHENSIVE ANNUAL FINANCIAL REPORT YEAR ENDED DECEMBER 31, 2017 TABLE OF CONTENTS INTRODUCTORY SECTION Letter of Transmittal ......................................................................................................................................... GFOA Certificate of Achievement ................................................................................................................... Agua SUD Officials .......................................................................................................................................... Organizational Chart ......................................................................................................................................... Texas Map ........................................................................................................................................................ Annual Filing Affidavit .................................................................................................................................... Page iii vi vii viii iv x FINANCIAL SECTION Independent Auditors’ Report .......................................................................................................................... 5 Management’s Discussion and Analysis .......................................................................................................... 8 Basic Financial Statements: Statement of Net Position ............................................................................................................ Statement of Revenues, Expenses and Changes in Net Position ................................................. Statement of Cash Flows ............................................................................................................. 14 16 18 Notes to Basic Financial Statements ......................................................................................................... 22 Required Supplementary Information (RSI): Schedule of Changes in Net Pension Liability and Related Ratios ............................................................ Schedule of Employer Contributions ......................................................................................................... 48 49 Other Supplementary Information (OSI): Budgetary Comparison Schedule – Enterprise Fund (Budget Basis-Non-GAAP) ..................................... 52 Texas Supplementary Information (TSI): TSI-1 Services and Rates............................................................................................................................ TSI-2 Enterprise Fund Expenditures .......................................................................................................... TSI-3 Temporary Investments .................................................................................................................... TSI-4 Taxes Levied and Receivable ........................................................................................................... TSI-5 Bonded Debt Service Requirement by Years ................................................................................... TSI-6 Changes in Long Term Bonded Debt ............................................................................................... TSI-7 Comparative Schedule of Revenues and Expenditure-Enterprise Fund-Five Years ........................ TSI-8 Board Members, Key Personnel, and Consultants ........................................................................... 56 58 59 60 61 73 74 75 STATISTICAL SECTION Financial Trend: Net Position by Component ....................................................................................................................... Revenues, Expenses, and Changes in Net Position ................................................................................... 78 79 Revenue Capacity: Water System – Debt Coverage Ratio ........................................................................................................... Debt Service Per User................................................................................................................................... Utility Rates .................................................................................................................................................. Total Active Connections ............................................................................................................................ 80 81 82 84 Demographic and Economic Information: Ten Largest Customers ................................................................................................................................ Principal Employers .................................................................................................................................... 85 86 Operating Information: Authorized Full Time Positions .................................................................................................................... Capital Assets Statistics ............................................................................................................................... 87 88 Debt Capacity: Outstanding Obligations .............................................................................................................................. 89 REPORTS REQUIRED UNDER GOVERNMENT AUDITING STANDARDS Independent Auditors’ Report on Internal Control Over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards ...................................................................................................................... 99 Board of Directors Rogelio Hernández, III, President Homero Tijerina, Vice-President Lloyd A. Loya, Secretary Agua Special Utility District P. O. Box 4379 Mission, Texas  78573-0075 (956) 585-2459  FAX (956) 585-1516 Esequiel Ortiz, Jr., Treasurer Ricardo Ochoa, Director Cesar Rodríguez, Jr., Director Ivan Sandoval, Director April 30, 2018 Rogelio Hernandez III, President Members of the Board of Directors AGUA Special Utility District 3120 North Abram Road Palmview, Texas 78572 We are pleased to present the Comprehensive Annual Financial Report (CAFR) for AGUA Special Utility District (the District) for the fiscal year ended December 31, 2017. As required by state law, the CAFR includes financial statements which have been audited by a firm of licensed certified public accountants. The financial statements are presented in conformity with generally accepted accounting principles (GAAP) and audited in accordance with Generally Accepted Auditing Standards by the licensed certified public accounting firm of Burton, McCumber & Longoria, L.L.P. The report consists of management’s representation concerning the finances of the District. As a result, management assumes full responsibility for the completeness and reliability of all the information presented in this report. To provide a reasonable basis for making these representations, management of the District has established a comprehensive internal control framework that is designed both to protect the District’s assets from loss, theft, or misuse and to compile sufficient reliable information for the presentation of the District’s financial statements in conformity with generally accepted accounting principles. Because the cost of internal controls should not outweigh their benefits, the District’s comprehensive framework of internal controls is designed to provide reasonable, rather than absolute, assurance that the financial statements will be free from material misstatement. As the Interim General Manager, I assert that, to the best of my knowledge and belief, this financial report is complete and reliable in all material aspects. Burton, McCumber & Longoria have issued an unmodified (“clean”) opinion on the District’s financial statements for the year ended December 31, 2017. The independent auditor’s report is located at the front of the financial section of this report. Management’s discussion and analysis (MD&A) immediately follows the independent auditor’s report and provides a narrative introduction, overview, and analysis of the basic financial statements. MD&A complements this letter of transmittal and should be read in conjunction with it. iii Agua Special Utility District is an equal opportunity Provider and Employer 3120 North Abram Road, Palmview, Texas 78572 PROFILE AGUA Special Utility District (the District) is located in the City of Palmview, Texas and provides potable drinking water and sewer collection services to its customers in Hidalgo and Starr County, Texas and was created in 2005 by the enactment of the Texas Special District Local Laws Code Title 6, Subtitle C, Chapter 7201, Acts 2005, 79th Leg. Ch. 1057 Section 2.01 effective September 1, 2005. Acts 2007 further amended chapter 7201 of the Local Laws Code, 80th Leg. R.S. Ch. 1430 effective June 6, 2007 to provide for the transfer of assets, related liabilities, contractual rights and obligations as well as all legal claims against its predecessor entity, the La Joya Water Supply Corporation. The District is governed by 7 directors who have governance over all activities related to a Texas Water Utility District. They consist of three at large for unincorporated areas, one for the City of Mission, one for the City of Palmview, one for the City of Penitas and one for Sullivan City. Directors are elected to staggered 4 year terms and may not serve more than two consecutive terms. The District is legally separate and is fiscally independent of other state and local governments, it is a primary government and not included in any other governmental reporting entity. The District has no component units. The District adopts an annual operating budget that differs from generally accepted accounting principles in that it includes provision for the purchase of capital assets, payment of principal on debt and transfers to various reserve accounts required by debt covenants. The adopted budget is not a spending limitation under law but rather an operating plan. The District adopts its budget no later than December 31st. LOCAL ECONOMY The District provides water and sewer services not only to the unincorporated areas of Hidalgo and Starr Counties but also to the surrounding cities of Palmview, Peñitas, La Joya, Mission and Sullivan City. The District continues to expand as the surrounding areas are developing and expanding both in residential and commercial development. The population in the surrounding areas continues to increase as new residential subdivision are developed. According to the US Census of 2010, the District served a population of 65,000. As infrastructure is put in place, the served population is expected to grow, especially in the residential area. The District has received $42.2 million in loans and grants from the Texas Water Development Board (TWDB) for the construction of a sewer system in the City of Palmview. Currently the City of Palmview does not benefit from a sanitary sewer collection system. The project will provide sewer collection services within the City of Palmview to approximately 1,600 new connections. The infrastructure will provide for future development that will benefit both the District and the City of Palmview. The current unemployment rate, according to Sperlings Best Places, is 8.20% for the surrounding areas. The largest employer is the La Joya Independent School District with approximately 4,368 employees. iv Agua Special Utility District is an equal opportunity Provider and Employer 3120 North Abram Road, Palmview, Texas 78572 According to Sperlings Best Places, the average household income is $34,952 and the average median age is 29. LONG-TERM FINANCIAL PLANNING The District maintains a Comprehensive Capital Improvement Plan that allows the District to address capital improvements and expansions in the manner that best serves its customers. Based on the current rate structure and service rates, the District is building its reserves to adequately fund major projects without having to borrow or issue bonds for the entire cost of these projects. Until the reserves are fully funded, the District will continue to apply for grants from the TWDB and borrow funds when needed. Maintaining to be financially viable on a fiscal year basis is preeminent towards planning the long-term goals of the District. The District will continue reviewing and making any necessary changes to its rate structure in order to meet operational and future expansion needs while providing the best affordable rates to its customers. AWARDS AND ACKNOWLEDGEMENTS The Government Finance Officers Association of the United States and Canada (GFOA) awarded a Certificate of Achievement for Excellence in Financial Reporting to the District for its comprehensive annual financial report for the fiscal ended December 31, 2016. This is the second consecutive year that the District has received this prestigious award. In order to be awarded a Certificate of Achievement, a governmental entity must publish an easily readable and efficiently organized comprehensive annual financial report. This report must satisfy both generally accepted accounting principles and applicable legal requirements. A Certificate of Achievement is valid for a period of only one year. We believe that our current comprehensive annual financial report continues to meet the Certificate of Achievement Program’s requirements and we are submitting it to the GFOA to determine its eligibility for another certificate. The preparation of this report would not have been possible without the skill, effort, and dedication of the entire staff of the District. We want to thank all the departments for their assistance in providing the data necessary to prepare this report. Respectfully submitted, v Agua Special Utility District is an equal opportunity Provider and Employer 3120 North Abram Road, Palmview, Texas 78572 GB Government Finance Officers Association Certificate of Achievement for Excellence in Financial Reporting Presented to Agua Special Utility District Texas For its Comprehensive Annual Financial Report for the Fiscal Year Ended December 31, 2016 MAP-M Executive Director/CEO Vi AGUA SPECIAL UTILITY DISTRICT Elected Officials County of Hidalgo (Place 3) County of Hidalgo (Place 1) City of Palmview City of Penitas County of Hidalgo (Place 2) City of Mission City of Sullivan Mr. Rogelio Hernandez III Mr. Homero Tijerina Mr. Esequiel Ortiz Jr. Mr. Lloyd A. Loya Mr. Ricardo Ochoa Mr. Cesar Rodriguez Mr. Ivan Sandoval President Vice President Treasurer Secretary Director Director Director Appointed Officials Interim General Manager Jose E. Saenz, P.E. Department Supervisors Chief Accountant Dagoberto Soto Jr. Billing Manager Rodolfo Flores III Cash Collections Supervisor Maria Ruiz Customer Service Supervisor Pamela Perez Water Distribution Supervisor Ramiro Salinas 492/Abram Water Plant Supervisor Aaron Castillo Havana Water Plant Supervisor Antonio Quintana Waste Water Plant Supervisor Jaime Villarreal Warehouse Supervisor Rene Luna vii AGUA SPECIAL UTILITY DISTRICT ORGANIZATIONAL CHART 2017 AGUA SUD Rate Payers AGUA SUD Board Members AGUA SUD Interm General Manager Administrative Assistant Warehouse Supervisor Warehouse Clerk Collections Supervisor Cashiers Billing Supervisor Meter Reader Billing Clerk CSI Clerk Chief Accountant Accounting Accounts Payable Payroll Assistant General Manager Customer Service Supervisor Customer Service Representatives Receptionist viii FM 492/Abram Water Plant Plant Supervisor Water Plant Operators Havana Water Plant Supervisor Water Plant Operators Distribution Supervisor Distribution Crew Leaders Backhoe Operators Distribution Labor Maintenance Sewer Plant Supervisor Waste Water Plant Operators Waste water Lab Technician COUNTY AGUA SUD WATER CCN iV ANNUAL FILING AFFIDAVIT THE STATE OF TEXAS COUNTY OF Hidalgo 1, Rogelio Hernandez of the (Name of Duly Authorized District Representative) Agua Special Utility District (Name of District) hereby swear, or af?rm, that the District above has reviewed and approved at a meeting of the District?s Board of Directors of the District on the 7m day of May, 2018, its annual audit report for the ?scal year ended December 31, 2017 and that copies of the annual audit report have been ?led in the District?s of?ce, located at 3120 North Abram Road Palmview, Texas 78572. This ?ling af?davit and the attached copy of the audit report will be submitted to the Texas Commission on Environmental Quality to satisfy the annual ?ling requirements of Texas Water Code Section 49.194. Date ?ml Rogelio Hernandez resident (Name and Title) Sworn to and to before me th1s (SEAL) mg, (Signature of Notary) 5 My Commission Expires On: i ?1 Notary Public in the State of Texasl q, A I, I A I Burtun Mnliumher up McAilen Brownsville INDEPENDENT REPORT Members of the Board Agua Special Utility District Palmview, Texas 78572 Report on the Financial Statements We have audited the accompanying ?nancial statements Agua Special Utility District as of and for the year ended December 31, 2017, and the related notes to the financial statements, which collectively comprise the District's basic financial statements as listed in the table of contents. Management?s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Auditors? Responsibility Our responsibility is to express an opinion on these ?nancial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to ?nancial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor?s judgment, including the assessment of the risks of material misstatement of the ?nancial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity's preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. Accordingly, we express no such opinion. An audit also inciudes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Agua Special Utility District as of December 31, 2017 and the changes in its financial position and its cash flows for the year then ended in accordance with accounting principles generally accepted in the United States of America. BML Fragoso, S.C. 205 Pecan Boulevard, McAllen,TX 78501 Matamoros, MX 956?618?2300 Other Matters Required Supplementary Information Accounting principles generally accepted in the United States of America require that the management's discussion and analysis and required supplementary information schedules as listed in the table of contents be presented to supplement the basic ?nancial statements. Such information. although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board. who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational. economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America. which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management's responses to our inquiries. the basic financial statements. and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. Other Information Our audit was conducted for the purpose of forming an opinion on the financial statements that collectively comprise the Agua Special Utility District's basic financial statements. The Introductory Section. Other Supplementary Information (OSI), Texas Supplementary Information (TSI) and Statistical Section are presented for purposes of additional analysis as required by the Texas Commission on Environmental Quality (TCEQ) and are not a required part of the basic ?nancial statements. The Other Supplementary Information is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves. and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the Other Supplementary Information is fairly stated in all material respects in relation to the basic ?nancial statements as a whole. The introductory, Texas Supplementary Information and Statistical Sections have not been subjected to the auditing procedures applied in the audit of the basic financial statements and. accordingly. we do not express an opinion or provide any assurance on them. Correction of an Error As described in Note 19 to the financial statements. as it pertains to its construction projects. the District did not capitalize interest costs incurred during the period of construction as required by generally accepting accounting principles. Accordingly. amounts previously reported as capital assets (net of accumulated depreciation). interest expense and resultant effect on net position have been reported in error. An adjustment has been made to net position as of December 31. 2017. to correct the error. Our opinion is not modified with respect to that matter. Other Reporting Required by GovernmentAuditing Standards In accordance with Government Auditing Standards. we have also issued our report dated April 19. 2018. on our consideration of the Agua Special Utility District's internal control over ?nancial reporting and on our tests of its compliance with certain provisions of laws. regulations. contracts. and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the District's internal control over financial reporting and compliance. 8a. ?44.4 1.70;, LLP McAIlen. Texas April 19. 2018 MANAGEMENT’S DISCUSSION AND ANALYSIS This section of the annual financial report presents an overview and analysis of the District’s financial performance and activities for the fiscal year ended December 31, 2017. Financial Highlights ▪ ▪ ▪ ▪ The District’s total position is $86,891,845 at December 31, 2017. This amounted to an increase of $3,628,456 from last year’s restated net position total of $83,263,389. On August 11, 2015, the TWDB awarded Agua SUD a grant in the amount of $29,300,000, G1000252, from the Economically Distressed Area program to finance the wastewater collection system infrastructure in the Eastern portion (Palmview Sewer Project) of the District. Construction began on 2017. On August 11, 2015, the District closed on CWSRF loan $8,150,000, No. L1000423, to finance a.) lift station & force main with L1000143 and LF1000144 b.) 1 MGD buy-in capacity for wastewater treatment at City of Mission’s nearby wastewater plant and c.) the debt portion of the collection system infrastructure which is 93% funded by the EDAP Grant mentioned above. Debt Service Coverage for the preceding 12 months averaged above the minimum rate required by our lenders of 125%. Required Basic Financial Statements This discussion and analysis are intended to serve as an introduction to the District’s basic financial statements. The District’s basic financial statements are comprised of three components: 1) The Statement of Net Position (Balance Sheet) which include all of the District’s assets and liabilities and provides information about the nature and amounts of investments in resources (assets) and obligations to creditors (liabilities); 2) The Statement of Revenues, Expenses and Changes in Net Position shows the business-type activities of the District and provides information regarding income and expenses, both operating and non-operating, that affect the Net Position; and 3) The Statement of Cash Flows. The primary purpose of this statement is to provide information about the District’s cash receipts and cash payments during the period using the direct method of reporting cash flows from operating, investing, and capital and noncapital financing activities. Notes to the Financial Statements Integral to the financial statements are the notes to the basic financial statements. These notes provide additional information that is essential to a full understanding of the financial data provided in the basic statements. The District has prepared notes sufficient to provide the readers of these financial statements a clear picture of the District’s financial position and insight into the results of its operations. These notes comply with the standardized reporting requirements for districts by TCEQ and are in conformity with GAAP. Other Required/Supplementary Information In addition to the basic financial statements and accompanying notes, this section also represents certain required supplementary information by TCEQ which may be beneficial to the reader. This information is in conformity with Generally Accepted Accounting Principles (GAAP). 8 MANAGEMENT’S DISCUSSION AND ANALYSIS Financial Analysis of the District as a Whole Our analysis below focuses on the District’s net position (Table 1) and changes in net position (Table 2) for the year ended December 31, 2017 with a two-year comparison. Net Position - Table 1 Restated 2017 $ 5,385,282 40,700,623 123,486 100,465,020 2016 $ 5,960,362 45,337,034 79,608 96,702,669 146,674,411 148,079,673 166,732 179,700 $ 146,841,143 $ 148,259,373 31,459,612 25,887,656 2,472,789 32,430,743 30,328,247 2,121,413 59,820,057 64,880,402 129,241 115,582 Total liabilities and deferred inflows of resources 59,949,298 64,995,984 Net position: Net investment in capital assets Restricted Unrestricted Total net position 78,242,746 4,376,445 4,272,654 86,891,845 73,721,454 4,602,762 4,939,173 83,263,389 $ 146,841,143 $ 148,259,373 Current and accrued assets Restricted assets Net pension asset Capital assets Total assets Total deferred outflows of resources Total assets and deferred outflows of resources Long-term liabilities outstanding Restricted liabilities Other liabilities Total liabilities Total deferred inflows of resources Total liabilities/deferred inflows of resources and net position 9 MANAGEMENT’S DISCUSSION AND ANALYSIS Changes in the District’s net position can be determined by reviewing the following condensed Statements of Revenue, Expenses and Changes in Net Position for the year ended December 31, 2017 and compared to 2016. Statements of Revenue, Expenses and Changes in Net Position - Table 2 Restated 2016 2017 Revenues: Operating revenues Non-operating revenues Grant revenue-non-capital Interest earned Capital contributions Total revenues $ 9,560,737 14,772 84,239 6,387,315 16,047,063 9,325,500 30,139 32,058 32,552 482,584 9,902,833 2.52% -50.99% -100.00% 158.78% 1223.57% 62.05% 10,951,486 1,467,121 12,418,607 10,762,135 998,199 11,760,334 1.76% 46.98% 5.60% Net increase (decrease) in net position 3,628,456 (1,857,501) 295.34% Net position beginning of year 83,263,389 85,120,890 -2.18% 83,263,389 4.36% Expenses: Operating expenses Non-operating expenses Total Expenses Net position at end of year $ 86,891,845 $ PERCENT CHANGE $ The District Funds Charges for services reflect a 2.52% increase compared to prior year. The increase was attributed primarily to an increase on new connections for services. Capital contributions reflect an increase of 1223.57%. The increase is attributed to the construction expenses for the Palmview Sewer Project that are being paid in grant funds from Texas Water Development Board (TWDB). Also, there were no accepted subdivisions in the year that contributed water and sewer infrastructure to the District. Overall revenues reflect a 62.05% increase compared to fiscal year 2016. Expenses reflect an increase of 5.60% compared to fiscal year 2016. The increase in expenses is attributed mostly to settlment payouts, plus an increase in salaries and benefits due to a 3% Cost of Living Adjustment for all full-time employees adopted for 2017. 10 MANAGEMENT’S DISCUSSION AND ANALYSIS CAPITAL ASSET AND DEBT ADMINISTRATION The following table summarizes the District’s capital assets, net of accumulated depreciation, for the year ended December 31, 2017. Additional Information on the District’s capital assets can be found in Note 5 – Capital Assets Capital Assets - Table 3 Restated Capital Assets 2017 Land & easements $ 2016 2,191,031 $ 2,191,031 Water wells 624,954 624,954 Water rights 4,967,610 4,967,610 136,744,657 136,860,688 998,022 1,025,193 3,405,384 3,464,335 148,931,658 149,133,811 (65,659,011) (62,071,618) 83,272,647 87,062,193 17,192,373 9,640,476 Utility plant structures Office building Office furniture and equipment Subtotal Less: Accumulated Depreciation Construction in progress Net Capital Assets $ 100,465,020 $ 96,702,669 The following table summarized the changes in capital assets. Changes in Capital Assets - Table 4 2017 Balance at beginning of year $ Additions $ 102,460 Retirements $ 11 2016 2015 96,156,513 $ $ 97,119,729 1,711,258 - (3,587,393) 7,551,897 100,465,020 Restated 309,087 (304,613) Depreciation Increase (Decrease) in CIP Balance at end of year 96,702,669 Restated (13,705) (3,989,066) (3,987,444) 4,226,135 96,702,669 1,326,675 96,156,513 $ MANAGEMENT’S DISCUSSION AND ANALYSIS At the end of the current fiscal year, the District had total long-term debt outstanding of $32,430,744. The debt is secured by a pledge of revenues of the water and wastewater systems. The District retired $726,691 in outstanding debt in fiscal year 2017. The following table summarizes the District’s total outstanding debt obligations: Additional information on the District’s total long term debt can be found in Note 11-Long-Term Debt. Outstanding Debt Obligations - Table 5 Balance at January 1, 2017 Notes payable Bonds payable Total $ $ 14,367,435 18,790,000 33,157,435 Additional Obligations and Net Increases $ $ - Balance at December 31, 2017 Retirement and Net Decreases $ $ 381,691 345,000 726,691 $ $ 13,985,744 18,445,000 32,430,744 Amounts Due within One Year $ $ 401,132 570,000 971,132 The District’s outstanding debt is not yet rated. Applications for contract ratings on any new issues have not been made to Moody’s, S&P, or Fitch. The District has the following DUNS Number: 034415998. Economic Factors and Next Year’s Budget The District is in a positive financial position and has met the minimum recommended debt service ratio of 125% during the year. Next year’s budget was adopted based on known and measureable costs and a base year projection of costs in 2017. Projected revenues were based on an average of actual sales over a four (4) year period 2014, 2015, 2016 and 2017. The District continues to monitor drought conditions and will recommend budget adjustments accordingly or possibly temporary rate hikes in order to maintain the current levels of operating, investment in capital, and debt services outlays while meeting the debt service ratio of 125%. Contacting the District’s Financial Management This financial report is designed to provide our citizens, customers and creditors with a general overview of the District’s finances and to demonstrate the District’s accountability for the money it receives. If you have questions about this report or need additional information, you may contact the Interim General Manager, Mr. Jose E. Saenz at (956) 585-2459. 12 AGUA SPECIAL UTILITY DISTRICT STATEMENT OF NET POSITION December 31, 2017 Assets and Deferred Outflows of Resources Current and Accrued Assets: Cash and cash equivalents Investments Accounts receivables (net of allowance) Inventories Accrued interest receivable Total current assets $ Restricted Assets: Cash and cash equivalents Accounts receivables (net of allowance) Total restricted assets 40,568,329 132,294 40,700,623 Noncurrent Assets: Capital assets (net of accumulated depreciation) Net pension asset Total noncurrent assets 100,465,020 123,486 100,588,506 Deferred Outflows of Resources: Deferred outflows related to pension Total Assets and Deferred Outflows of Resources 1,886,308 2,250,000 934,483 309,602 4,889 5,385,282 166,732 166,732 $ 146,841,143 (Continued) 14 AGUA SPECIAL UTILITY DISTRICT STATEMENT OF NET POSITION - Continued December 31, 2017 Liabilities, Deferred Inflows of Resources and Net Position Current and Accrued Liabilities: Accounts payable Accrued expenses Customer deposits Employee deductions Unearned revenue Due to other governments Current portion of long term debt Total current and accrued liabilities Payables from Restricted Assets: Accounts payable Due to other governments Retainage payable Advances from grantors Unearned revenue $ 355,787 322,444 546,016 2,878 230,210 44,322 971,132 2,472,789 Total payables from restricted assets 1,079,834 113,511 306,185 23,747,577 640,549 25,887,656 Total current, accrued liabilities and payable from restricted assets 28,360,445 Noncurrent Liabilities: Long-term debt (net of current portion) Total noncurrent liabilities 31,459,612 31,459,612 Total liabilities 59,820,057 Deferred Inflows of Resources: Deferred inflows related to pension 129,241 129,241 Net Position Net Investment in Capital Assets Restricted for Capital Projects Debt Service Unrestricted Total net position 78,242,746 2,669,373 1,707,072 4,272,654 86,891,845 Total Liabilities, Deferred Inflows of Resources and Net Position The accompanying notes are an integral part of these financial statements. 15 $ 146,841,143 AGUA SPECIAL UTILITY DISTRICT STATEMENT OF REVENUES, EXPENSES AND CHANGES IN NET POSITION For the Year Ended December 31, 2017 Operating Revenue: Metered water sales Non-metered sewer services Meter and related fees earned Miscellaneous fines and fees Other operating income Total Operating Revenue $ Operating Expenses: Administrative Bad debt Bank/merchant charges Contracted services Cost of water Electricity Depreciation/amortization Insurance Miscellaneous Other operating Personnel benefits Professional services Repairs and maintenance Salaries and wages Taxes - payroll TWDB/TCEQ fees Vehicles Total Operating Expenses 8,421,979 354,814 129,327 641,610 13,007 9,560,737 329,313 12,380 83,176 5,860 1,537,230 479,539 3,884,263 161,755 19,464 180,925 472,167 566,694 590,264 2,273,702 172,251 70,679 111,824 10,951,486 Operating Loss $ (1,390,749) (Continued) 16 AGUA SPECIAL UTILITY DISTRICT STATEMENT OF REVENUES, EXPENSES AND CHANGES IN NET POSITION - Continued For the Year Ended December 31, 2017 Non-Operating Revenues (Expenses): Interest & investment income Interest expense Financial service fees Rebates and reimbursements Sale of assets Other Total Non-Operating Revenues (Expenses) $ Loss before contributions 84,239 (947,150) (10,950) (339) 15,111 (509,021) (1,368,110) (2,758,859) Capital contributions: Capital grant revenues Water rights acquisition fees Water and sewer impact fees Total Contributions 6,268,306 109,043 9,966 6,387,315 Change in Net Position 3,628,456 Net Position - Beginning 81,373,357 Prior Period Adjustment 1,890,032 Net Position - Ending $ The accompanying notes are an integral part of these financial statements. 17 86,891,845 AGUA SPECIAL UTILITY DISTRICT STATEMENT OF CASH FLOWS For the Year Ended December 31, 2017 Cash Flows from Operating Activities: Cash received from customers Cash payments to employees for services Cash payments to other suppliers for goods and services Net Cash Provided by Operating Activities $ Cash Flows from Non-Capital Financing Activities: Cash from rebates and reimbursements Cash payments to other Net Cash Used for Non-Capital Financing Activities 9,627,621 (2,922,967) (4,113,156) 2,591,498 (339) (509,021) (509,360) Cash Flows from Capital and Related Financing Activities: Capital fees, water right and impact fees and other capital contributions Principal paid Interest and other financing fees paid Acquisition or construction of capital assets Sale of property Net Cash Used for Capital & Related Financing Activities 555,159 (726,691) (959,853) (6,282,486) 22,858 (7,391,013) Cash Flows from Investing Activities: Purchase of investments Interest on investments Net Cash Provided by Investing Activities (712) 81,230 80,518 Net Decrease in Cash and Cash Equivalents Cash and Cash Equivalents at Beginning of Year Cash and Cash Equivalents at End of Year $ (5,228,357) 47,682,994 42,454,637 (Continued) 18 AGUA SPECIAL UTILITY DISTRICT STATEMENT OF CASH FLOWS - Continued For the Year Ended December 31, 2017 Operating Income (Loss) Adjustments to Reconcile Operating Income to Net Cash Provided by Operating Activities: Depreciation Change in Assets and Liabilities: Decrease (Increase) in Receivables Decrease (Increase) in Inventories Decrease (Increase) in Net Pension Asset Decrease (Increase) in Deferred Outflows Increase (Decrease) in Accounts Payable Increase (Decrease) in Customer Deposits Increase (Decrease) in Accrued Expenses Increase (Decrease) in Employee Deductions Increase (Decrease) in Due to Others Increase (Decrease) in Unearned Revenue Increase (Decrease) in Deferred Inflows Total Adjustments Net Cash Provided (Used) by Operating Activities $ (1,390,749) 3,884,263 Supplemental Disclosures of Cash Flow Information: Cash paid during the year for: Interest Expense The accompanying notes are an integral part of these financial statements. 19 $ (44,151) 33,555 (43,878) 12,968 (9,988) 28,680 12,349 55 18,455 76,280 13,659 3,982,247 2,591,498 $ 719,098 AGUA SPECIAL UTILITY DISTRICT NOTES TO FINANCIAL STATEMENTS December 31, 2017 NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES A. The Entity Agua Special Utility District (“District”) provides potable drinking water and sewer collection services to its customers in Hidalgo and Starr County, Texas and was created in 2005 by the enactment of the Texas Special District Local Laws Code Title 6, Subtitle C, Chapter 7201, Acts 2005, 79th Leg. Ch. 1057 Section 2.01 effective September 1, 2005. Chapter 7201 of the Local Laws Code was further amended by Acts 2007, 80th Leg. R.S. Ch. 1430 effective June 6, 2007 to provide for the transfer of assets, related liabilities, contractual rights and obligations as well as all legal claims against its predecessor entity, the La Joya Water Supply Corporation. The District is governed by 7 directors who have governance over all activities related to a Texas Water District. Directors are elected to staggered 4 year terms, and may not serve more than two consecutive terms. The District is legally separate and is fiscally independent of other state and local governments, it is a primary government and not included in any other governmental reporting entity. The District has no component units. B. Measurement Focus, Basis of Accounting, and Financial Statement Presentation The District’s basic financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America as applied to governmental units in conjunction with the “Water District’s Financial Management Guide” published by the Texas Commission on Environmental Quality. The Governmental Accounting Standards Board (GASB) is the accepted standards setting body for establishing governmental accounting and financial reporting principles. The accounting and financial reporting treatment is determined by the applicable measurement focus and basis of accounting. Measurement focus indicates the type of resources being measured. The basis of accounting indicates the timing of transactions or events for recognition in the financial statements. The District is reported as a special-purpose government engaged in business-type activities. The financial statements of the District measure and report all assets, deferred outflows of resources, liabilities, deferred inflows of resources, revenues, expenses, and gains and losses using the economic resources measurement focus and accrual basis of accounting. C. Implementation of Significant Accounting Policies GASB Statement No. 72, Fair Value Measurement and Application. Statement No. 72 requires that investments be measured at fair value using a consistent definition and valuation techniques. It also defines what assets and liabilities governments should measure at fair value and expands fair value disclosures in financial disclosure notes. GASB Statement No. 73 Accounting and Financial Reporting for Pensions and Related Assets that are not within the scope of GASB Statement 68, and Amendments to certain provisions of GASB Statements 67 and 68. Statement No. 73 establishes requirements for defined benefit pensions that are not within the scope of Statement No. 68, Accounting and Financial Reporting for Pensions, as well as for the assets accumulated for purposes of providing those pensions. 22 AGUA SPECIAL UTILITY DISTRICT NOTES TO FINANCIAL STATEMENTS December 31, 2017 NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) In addition, it establishes requirements for defined contribution pensions that are not within the scope of Statement 68. It also amends certain provisions of Statement No. 67, Financial Reporting for Pension Plans, and Statement 68 for pension plans and pensions that are within their respective scopes. There was no impact on the District’s financial statements as a result of the implementation of Statement No. 73. GASB Statement No. 76 Hierarchy of Generally Accepted Accounting Principles for State and Local Governments. Statement No. 76 was issued to identify—in the context of the current governmental financial reporting environment—the hierarchy of generally accepted accounting principles (GAAP). The “GAAP hierarchy” consists of the sources of accounting principles used to prepare financial statements of state and local governmental entities in conformity with GAAP and the framework for selecting those principles. This Statement reduces the GAAP hierarchy to two categories of authoritative GAAP and addresses the use of authoritative and non-authoritative literature in the event that the accounting treatment for a transaction or other event is not specified within a source of authoritative GAAP. This statement supersedes Statement No. 55, The Hierarchy of Generally Accepted Accounting Principles for State and Local Governments. It also amends Statement No. 62, Codification of Accounting and Financial Reporting Guidance Contained in Pre November 30, 1989 FASB and AICPA Pronouncements, paragraph 64, 74, and 82. There was no impact on the District’s financial statements as a result of the implementation of Statement No. 76. GASB Statement No. 79 Certain External Investment Pools and Pool Participants. Statement No. 79 establishes criteria for external investment pools to qualify for making the election to measure all of their investments at amortized cost for financial reporting purposes. If an external investment pool meets all of the criteria for reporting at amortized cost, pool participants also should measure their investments in that external pool at amortized cost. If an external pool does not meet all the criteria in this statement, pool participants should measure their investments in that pool at fair value, as provided in paragraph 11 of GASB Statement 31. The District’s external pool investments all have met the requirements to be measured at amortized cost. D. Basis of Presentation Net position and revenue, expenses, gains, and losses are classified based on the existence or absence of grantor-imposed restrictions. Net position of the District and changes therein are classified as unrestricted net position. Unrestricted net position represents the portion of expendable funds that is available for support of the operations of the District. When both restricted and unrestricted resources are available for use, it is the District’s policy to use restricted resources first, then unrestricted resources as they are needed. E. Operating and Non-operating Revenue and Expense Policy The District distinguishes operating revenues and expenses from non-operating items. Operating revenues and expenses generally result from providing services in connection with the District’s principal ongoing operating activities. As business-type activities, the District’s operating revenues are defined as the result of exchange transactions with those who purchase, use or 23 AGUA SPECIAL UTILITY DISTRICT NOTES TO FINANCIAL STATEMENTS December 31, 2017 NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) directly benefit from the services provided by the District. Non-operating items include activities that have the characteristic of non-exchange transactions such as grants and contributions and other items that are defined as non-operating by GASB No.9, Reporting Cash Flows of Proprietary and Nonexpendable Trust Funds, and Governmental Entities that Use Proprietary Fund Accounting and GASB 34, Basic Financial Statements and Management Discussion and Analysis for State and Local Governments such as investment income. Transactions for which cash flows are reported as capital and related financing activities, non-capital financing activities, or investing activities are reported as non-operating revenues or non-operating expenses utilizing the direct method. F. Capital Assets Acquisitions with a useful life of greater than one year and over $1,000 are capitalized. Major repairs that extend the useful lives of existing assets are capitalized. Depreciation of fixed assets is provided by the straight-line rates anticipated to recover the cost over the expected useful lives of the assets. Useful lives range from 5 to 10 years for equipment and 20 to 40 years for buildings and plant infrastructure. During the year, $309,927 of interest expense was incurred which was capitalized as current year construction. G. Budgets The District adopts an annual operating budget that differs from generally accepted accounting principles in that it includes provision for the purchase of capital assets, payment of principal on debt and transfers to various reserve accounts required by debt covenants. The adopted budget is not a spending limitation under law but rather an operating plan. H. Cash and Cash Equivalents For purpose of the basic financial statements, cash and cash equivalents include cash, demand deposits, money markets and investments with original maturity dates of three months or less from the date of acquisition. I. Investments Investments in government pools and certificate of deposits are recorded at amortized cost. All other investments are recorded at fair value based upon current market conditions. Fair value is the amount at which a financial instrument could be exchanged in a current transaction between willing parties. J. Unearned Revenue Unearned revenue includes fees collected for subdivisions which have not yet been approved. Subdivision revenues consist of water rights and impact fees that will be recognized whenever the subdivision is approved, and the infrastructure has been accepted into the system. Meter and meter related fees are deferred until the subdivision sells a lot and a service has been applied for and installed at which time the revenue is recognized. 24 AGUA SPECIAL UTILITY DISTRICT NOTES TO FINANCIAL STATEMENTS December 31, 2017 NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) K. Inventory Pipes, meters and other materials are valued at cost or estimated cost. L. Capital Contributions Capital contributions are comprised of federal and state grants, easements and infrastructure from subdividers. The portion of the grants used for capital purposes are reflected as capital contributions in the statement of revenues, expenses and changes in net position. The grants are a mix of reimbursable contributions, and advance grants. Advance grant revenue is recognized as it is earned, and the unearned balance is reflected as Unearned Revenue. Reimbursable grants are recognized as revenue when the costs are incurred and a related receivable is recorded. Assets such as easements and infrastructure from subdividers that are donated are valued at their fair market value on the date contributed. M. Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates. N. Deferred Outflows of Resources and Deferred Inflows of Resources Liabilities In addition to assets, the statement of net position will sometimes report a separate section for deferred outflows of resources. This separate financial statement element, deferred outflows of resources, represents a consumption of net position that applies to a future period(s) and so will not be recognized as an outflow of resources (expense/expenditure) until then. In addition to liabilities, the statement of net position will sometimes report a separate section for deferred inflows of resources. This separate financial statement element, deferred inflows of resources, represents an acquisition of net position that applies to a future period(s) and so will not be recognized as an inflow of resources (revenue) until that time. O. Advances from Grantors Loan forgiveness grant funds under the Clean Water State Revolving Fund program through the Texas Water Development Board and grant amounts received in advance of meeting requirements other than timing and receipts of prepayments continue to be reported as liabilities. Also interest earned on the loan forgiveness funds, bond proceeds and grant funds held in Restricted Escrow and Construction Accounts P. Disclosures About Fair Value of Financial Instruments The following methods and assumptions were used to estimate the fair value of each class of financial instruments: Cash and cash equivalents, accounts receivable, accounts payable and accrued liabilities: The carrying amount approximates fair value because of the short maturity of those instruments. 25 AGUA SPECIAL UTILITY DISTRICT NOTES TO FINANCIAL STATEMENTS December 31, 2017 NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Long-term debt: The carrying amount of long-term debt approximates fair value because the District’s current borrowings rate does not materially differ from the market rates for similar bank borrowings. Q. Compensated Absences All regular full time employees accrue vacation leave after the end of the probation period. The accumulated sick leave balances for full time permanent employees does not vest and is therefore not accrued for accounting purposes. Vacation leave accrues at the following rates: Hours Accrued per Month 6.67 10.00 13.33 Years of Service 0 to 9 10 to 19 20 or over Vacation leave may be taken in the calendar year in which it is earned. The District will allow the carry forward from year to year of an accrued vacation balance equal to the years of service calculation for each eligible employee up to one year. Any vacation time in excess of one year’s accrual balance not used in the calendar year will be lost. R. Pensions The District recognizes a net pension asset for the pension plan in which it participates, which represents the excess of the fiduciary net position over the total pension liability of the pension plan. Changes in the net pension liability during the period are recorded as pension expense, or as deferred inflows or outflows of resources depending on the nature of the change, in the period incurred. Those changes in net pension liabilities that are recorded as deferred inflows or outflows of resources that arise from changes in actuarial assumptions or other inputs and differences between expected or actual experience are amortized over the weighted average remaining service life of all participants in the pension plan and recorded as a component of pension expense beginning with the period in which they occur. Projected earning on qualified pension plan investments are recognized as a component of pension expense. Difference between projected and actual investment earnings are reported as deferred inflows or outflows of resources and amortized as a component of pension expense on a closed basis over a five year period beginning with the period in which the difference occurred. NOTE 2 – DEPOSITS AND INVESTMENTS Investment Accounting Policy The District is required by Government Code Chapter 2256, The Public Funds Investment Act (the “Act” or “PFIA”), to adopt, implement, and publicize an investment policy. That policy must address the following areas: (1) safety of principal and liquidity, (2) portfolio diversification, (3) allowable Investments, (4) acceptable risk levels, (5) expected rates of return, (6) maximum allowable stated maturity of portfolio investments, (7) maximum average dollar-weighted maturity allowed based on the stated maturity date for the portfolio, (8) bid solicitation preferences for certificates of deposit and, (9) stated compliance with this Investment Policy. 26 AGUA SPECIAL UTILITY DISTRICT NOTES TO FINANCIAL STATEMENTS December 31, 2017 NOTE 2 – DEPOSITS AND INVESTMENTS (Continued) The Act requires an annual audit of investment practices. Audit procedures in this area conducted as part of the audit of the basic financial statements disclosed that in the areas of investment practices, management reports, and establishment of appropriate policies, the District adhered to the requirements of the Act. Additionally, investment practices of the District were in accordance with local policies. The Act determines which investments are acceptable for the District. These may include, with certain restrictions, (1) obligations of the U.S. Treasury, certain U.S. agencies, the State of Texas, (2) certificates of deposit, (3) certain municipal securities, (4) money market savings accounts, (5) fully collateralized repurchase agreements with certain criteria, (6) bankers acceptances, (7) mutual funds, (8) investment pools, and (9) guaranteed investment contracts. The District policy authorizes all the State allowable investments. If additional types of securities are approved for investment by public funds by state statute, the District will have to amend its policy before the new investment types can be considered for investment by the District. The District’s investment officers believe the District has complied in all material respects with the requirements of the Act and the District’s investment policies. Custodial Credit Risk Custodial credit risk for deposits is the risk that, in the event of the failure of a depository financial institution, a government will not be able to recover its deposits or will not be able to recover collateral securities that are in the possession of an outside party. The Public Funds Investment Act, the District’s investment policy, and Government Code Chapter 2257 “Collateral for Public Funds” contain legal or policy requirements that would limit the exposure to custodial credit risk for deposits or investments. The District’s funds are required to be deposited and invested under the terms of a depository contract. The depository bank deposits for safekeeping and trust with the District’s agent bank approved pledged securities in an amount sufficient to protect District funds on a day-to-day basis during the period of the contract. The pledge of approved securities is waived only to the extent of the depository bank’s dollar amount of Federal Deposit Insurance Corporation (“FDIC”) insurance. Cash Deposits At December 31, 2017, the carrying amount of the District’s deposits (cash and interest-bearing reserve accounts) was $1,516,259 while the depository bank confirmed a balance of $2,435,917 on all bank deposits at year-end. The entire bank balance was covered by FDIC insurance up to an amount of $250,000 and was fully collateralized with securities held by the District’s Depository Bank in the District’s name up to the PFIA limit of 102%. The District’s investments include $5,936,106 in government pools (TexSTAR), $34,999,472 in money markets and $2,250,000 in certificate of deposits which are recorded at amortized cost. Public funds investment pools in Texas (“Pools”) are established under the authority of the Inter-local Cooperation Act Chapter 79 of the Texas Government Code and are subject to the provisions of the Public Funds Investment Act (the “PFIA”), Chapter 2256 if the Texas Government Code. In addition to other provisions of the PFIA designed to promote liquidity and safety of principal, the PFIA requires Pools to: have an advisory board composed of participants in the pool and other persons who do not have a business relationship with the pool and are qualified to advise the pool; maintain a continuous rating of no 27 AGUA SPECIAL UTILITY DISTRICT NOTES TO FINANCIAL STATEMENTS December 31, 2017 NOTE 2 – DEPOSITS AND INVESTMENTS (Continued) lower that AAA or AAAm or an equivalent rating by at least one nationally recognized rating service; and maintain the market value of its underlying investment portfolio within one half of one percent of the value of its shares. The District’s investment pools meet the criteria described in GASB Statement No. 79 and measures all of their investments at amortized cost. In addition, the pools do not have any limitations or restrictions on withdrawals such as notice periods or maximum transaction amounts. The pools do not impose any liquidity or redemption gates. As of December 31, 2017, the District investments in TexSTAR were rated AAAm by Standards and Poor’s. For the year ended December 31, 2017, cash has been segregated into two categories: Current Cash Equivalents and Restricted Assets - see Note 3 below. Cash on hand Cash on deposit: Operating Reserve for Operations Total Cash on Hand and on Deposit $ 2,800 $ 1,399,591 483,917 1,886,308 Cash on hand consists of petty cash and un-deposited water and wastewater collections received immediately prior to year-end. NOTE 3 – RESTRICTED ASSETS Restricted Assets at December 31, 2017 consists of the following: Cash on Reserves: Reserve for Water Rights Reserve for Capital Improvements Reserve for Impact Fee Capital Improvements Reserve for Construction - TWDB Projects Reserve in Escrow - TWDB Projects Reserve for Debt Service Reserve - TWDB/USDA Loans Reserve for Interest & Sinking Total Cash Reserves Restricted Receivables: Accounts Receivable - also see Note 4 Total Receivables Total Restricted Assets $ $ 1,167,441 24,217 2,404,299 37,776 34,999,472 1,464,716 470,408 40,568,329 $ $ 132,294 132,294 $ 40,700,623 A. Cash on Reserves Reserves for Debt Service are maintained as required by loan agreements, with the following exception: Prior to the inception of the District, the Predecessor Entity failed to fund reserve accounts as required by the loan covenants for the four outstanding USDA-RUS loans that existed. In 2006, the Receiver requested authorization from the United States Department of Agriculture, 28 AGUA SPECIAL UTILITY DISTRICT NOTES TO FINANCIAL STATEMENTS December 31, 2017 NOTE 3 – RESTRICTED ASSETS (Continued) Office of Rural Development to establish a dedicated and restricted debt reserve account for the exclusive purpose of escrowing the required reserves B. Cash from Grants The District received grant funding from the Texas Water Development Board. The funds received will be towards the construction of a Palmview collection system which will transfer waste water to be treated by City of Mission’s sewer plant under an interlocal agreement. Unspent proceeds of these programs that were received in advance of costs incurred are held in escrow accounts which are reflected as restricted assets. C. Restricted Receivables The District bills for water rights and impact fees along with associated contract receivables monthly. As the receivables age, the District will then record an allowance for items over 120 days old and expenses them as bad debt annually. NOTE 4 - ACCOUNTS RECEIVABLE Accounts receivable arising from business activities at December 31, 2017 are as follows: Unrestricted Receivables: Accounts Receivables - Trade Accrued Water Sales Pay Plan Accounts Receivables Less: Allowance for Bad Debt Total Restricted Receivables: Accounts Receivables - Trade Interlocal Receivables Pay Plan Accounts Receivables Less: Allowance for Bad Debt Total $ $ $ $ 653,831 371,157 19,350 (109,855) 934,483 13,737 113,511 17,900 (12,854) 132,294 The allowance for bad debt is based upon historical collection patterns. Delinquent accounts with more than 120 days past due are deemed to be uncollectible. 29 AGUA SPECIAL UTILITY DISTRICT NOTES TO FINANCIAL STATEMENTS December 31, 2017 NOTE 5 –CAPITAL ASSETS Capital assets activity for the year ended December 31, 2017 is as follows: Restated Balance at Jan 1, 2017 Business-type Activities Capital assets, not depreciated: Land & easements Water rights Construction in progress Total capital assets, not depreciated $ Capital assets, being depreciated: Water wells Utility plant infrastructures Office building Office furniture and equipment Transportation equipment Total capital assets, being depreciated Less accumulated depreciation: Water wells Utility plant infrastructures Office building Office furniture and equipment Transportation equipment Total accumulated depreciation Total capital assets, being depreciated, net Business-type Activities Capital Assets, net $ 2,191,031 4,967,610 9,640,476 Additions $ 7,551,897 16,799,117 7,551,897 624,954 136,860,688 1,025,193 2,093,891 1,370,444 6,100 96,360 - 141,975,170 Deletions $ - Transfers $ - - Balance at Dec 31, 2017 $ 2,191,031 4,967,610 17,192,373 - 24,351,014 116,031 33,271 153,024 2,287 - 624,954 136,744,657 998,022 2,037,227 1,368,157 102,460 304,613 - 141,773,017 120,191 59,073,733 302,027 1,592,485 983,182 62,071,618 15,768 3,585,400 32,711 126,452 123,932 3,884,263 108,929 32,630 153,024 2,287 296,870 - 135,959 62,550,204 302,108 1,565,913 1,104,827 65,659,011 79,903,552 (3,781,803) 7,743 - 76,114,006 96,702,669 $ 3,770,094 - $ 100,465,020 $ 7,743 $ Depreciation expense charged to water and wastewater services totaled: $ 3,884,263 for the year ended December 31, 2017. 30 AGUA SPECIAL UTILITY DISTRICT NOTES TO FINANCIAL STATEMENTS December 31, 2017 NOTE 6 – ACCRUED EXPENSES AND CUSTOMER DEPOSITS A. Accrued expenses at December 31, 2017 consisted of the following: Interest Payroll salaries & wages Payroll taxes Compensated absences $ 228,052 32,934 6,684 54,774 $ 322,444 B. Customer deposits at December 31, 2017 consisted of the following: Customer Deposits - memberships Customer Deposits - temporary meters Customer Deposits - services Renter's Security Deposits $ 207,600 12,000 262,356 64,060 $ 546,016 NOTE 7 – DUE TO OTHER GOVERNMENTS A. Amounts billed on behalf of various local government entities not yet collected at December 31, 2017, consist the following: see Note 16 Due to City of La Joya Due to City of Sullivan Due to Hidalgo Mud #1 Due to City of Mission Due to City of Palmview Due to City of Peñitas Total due to other governmnets - restricted $ 9,250 15,315 3,573 2,503 60,044 22,826 $ 113,511 B. At year end, the District had collected $111,416 not yet remitted to local governmental entities and which is recorded as accounts payable at year end. C. Recorded as due to other governments under current and accrued liabilities in the financial statements is payable to TCEQ for $44,322. 31 AGUA SPECIAL UTILITY DISTRICT NOTES TO FINANCIAL STATEMENTS December 31, 2017 NOTE 8 – RISK MANAGEMENT The District is exposed to various uncertainties for losses related to intentional or unintentional torts; theft of, damage to and destruction of real and personal property; errors and omissions; catastrophes and pollution claims for which the District carries commercial insurance through an intergovernmental risk pool. There have been no significant reductions in insurance coverage from the previous year. No negotiated settlements or jury awards have exceeded policy limits. District management is not aware of any pending or alleged claims for which expected liability would exceed the policy limits of the present insurance coverage. NOTE 9 – OFF BALANCE SHEET RISK The District collects charges for its water and wastewater services from local residents. Accordingly, collection could be affected by local economic fluctuations. NOTE 10 – CONTINGENT LIABILITIES AND COMMITMENTS A. State and Federal Funding During the year ended December 31, 2017, the District participated in grant programs funded by the Environmental Protection Agency through the Texas Water Development Board (TWDB). These programs are subject to compliance audits by the grantor agency or their representatives. Audits of these programs have not been conducted by the grantor agency. However, the District’s compliance with applicable grant requirements have been met through submission of approved outlay and progress reports in accordance with the grantor agency’s published guidelines. The amounts, if any, of expenditures which may be disallowed by the granting agency are determined at the time of the approval by the grantor of the outlay reports. B. Litigation and Other Matters The District is involved in various legal proceedings arising from its operations. Management in consultation with its attorneys believes the outcomes will have no material effect on the District’s financial positions. There exists an ongoing investigation by a law enforcement agency into certain actions undertaken by the District. This investigation has not been concluded and results are not available as of the date of this report. C. Construction and Related Commitments At December 31, 2017, the District had the following major construction and related commitments: Project Title TWDB DWSRF Water Works Total Funding Commitments $ 3,967,000 32 Total Funding Remaining Funding Obligated To Date Commitments $ 3,535,000 $ 432,000 AGUA SPECIAL UTILITY DISTRICT NOTES TO FINANCIAL STATEMENTS December 31, 2017 NOTE 11 – LONG-TERM DEBT Individual indebtedness and terms by lenders at December 31, 2017 are comprised of the following: Notes Payable Note payable to USDA Rural Development, originating June 2, 1995 at $377,000, monthly installments of $1,731 including interest at 4.5%. This note is collateralized by Water Utility System Revenues. $ Note payable to USDA Rural Development, originating June 2, 1995 at $1,990,000, monthly installments of $9,135 including interest at 4.5%. This note is collateralized by Water Utility System Revenues. 243,063 1,268,545 Note payable to USDA Rural Development, originating September 27, 2002 at $991,000, monthly installments of $4,500 including interest at 4.5%. This note is collateralized by Water Utility System Revenues. 800,803 Note payable to USDA Rural Development, originating September 27, 2002 at $1,697,500, monthly installments of $7,707 including interest at 4.5%. This note is collateralized by Water Utility System Revenues. 1,371,977 Note payable to Texas Water Development Board, originating August 25, 2006 at $8,915,000, monthly installments of $38,706 for interest; $50,090 monthly payments including interest at 5.21% starting April 1, 2008. This note is collateralized by a first lien note on gross Water Utility System Revenues and a prorated parity first lien mortgage. 7,184,260 Note payable to Texas Water Development Board, originating April 25, 2007 at $1,000,000, with monthly installments of $4,053 for interest; $5,285 monthly payments including interest at 4.864% starting January 1, 2008. This note is collateralized by a parity first lien note on the gross Water Utility System Revenues and a prorated parity first lien mortgage. 810,066 Note payable to Texas Water Development Board, originating July 9, 2008 at $2,500,000, with monthly installments of $10,604 for interest; $12,301 monthly payments including interest at 5.09% a parity first lien note on the gross Water Utility System Revenues and a prorated parity first lien mortgage. 2,307,030 $ 33 13,985,744 AGUA SPECIAL UTILITY DISTRICT NOTES TO FINANCIAL STATEMENTS December 31, 2017 NOTE 11 – LONG-TERM DEBT (Continued) The annual requirements to amortize notes payable debt as of December 31, 2017 are as follows: December 31, 2018 2019 2020 2021 2022 2023-2027 2028-2032 2033-2037 2038-2042 2043-2047 2048-2052 Interest $ 687,856 667,419 645,938 623,359 599,623 2,597,306 1,792,580 825,834 334,089 127,657 6,114 $ 8,907,775 Principal $ 401,133 421,571 443,050 465,628 489,365 2,847,635 3,652,362 3,405,327 1,070,861 610,406 178,406 $ 13,985,744 Total $ 1,088,989 1,088,990 1,088,988 1,088,987 1,088,988 5,444,941 5,444,942 4,231,161 1,404,950 738,063 184,520 $ 22,893,519 Bonds payable Bonds payable to Texas Water Development Board, originating August 27, 2009 at $3,967,000, with bi-annual payments, these Series 2009 Waterworks and Sewer Revenue Bonds are collateralized by a parity first lien note on the gross Water Utility System Revenues and a prorated parity first lien mortgage. There were no installments issued during the year ended December 3, 2017. The remaining unissued coupons in the amount of $432,000 will be issued in future periods – See Note 17. $ 3,020,000 Bonds payable to Texas Water Development Board, originating August 25, 2010 at $1,990,000, with bi-annual payments, this Series 2010 Waterworks and Sewer Revenue Bonds was issued in their entirety during December 31, 2010 and are collateralized by a parity first lien note on the gross Water Utility System Revenues and a prorated parity first lien mortgage. 1,865,000 Bonds payable to Texas Water Development Board, originating June 5th, 2014 at $2,375,000, with bi-annual payments, this Series 2014A Waterworks and Sewer Revenue Bonds was issued in their entirety during December 31, 2014 and are collateralized by a parity first lien note on the gross Water Utility System Revenues and a prorated parity first lien mortgage. 2,310,000 34 AGUA SPECIAL UTILITY DISTRICT NOTES TO FINANCIAL STATEMENTS December 31, 2017 NOTE 11 – LONG-TERM DEBT (Continued) Bonds payable to Texas Water Development Board, originating June 5, 2014 at $3,565,000, with bi-annual payments, this Series 2014 Waterworks and Sewer Revenue Bonds was issued in their entirety during December 31, 2014 and are collateralized by a parity first lien note on the gross Water Utility System Revenues and a prorated parity first lien mortgage. 3,100,000 Bonds payable to Texas Water Development Board, originating August 11, 2015 at $8,150,000, with bi-annual payments, this Series 2015 Waterworks and Sewer Revenue Bonds was issued in their entirety during December 31, 2015 and are collateralized by a parity first lien note on the gross Water Utility System Revenues and a prorated parity first lien mortgage. 8,150,000 $ 18,445,000 The annual requirements to amortize bonds payable debt as of December 31, 2017 are as follows: December 31, 2018 2019 2020 2021 2022 2023-2027 2028-2032 2033-2037 2038-2042 2043-2047 Interest $ $ Principal 547,333 541,814 534,619 525,128 513,433 2,333,647 1,811,507 1,140,214 501,619 74,376 8,523,690 $ 570,000 575,000 600,000 610,000 615,000 3,325,000 3,840,000 3,820,000 3,100,000 1,390,000 $ 18,445,000 Total $ 1,117,333 1,116,814 1,134,619 1,135,128 1,128,433 5,658,647 5,651,507 4,960,214 3,601,619 1,464,376 $ 26,968,690 Changes in long-term debt are summarized as follows: Balance at January 1, 2017 Business-type Activities Notes Payable Bonds Payable Additional Obligations and Net Increases Retirement and Net Decreases Balance at December 31, 2017 Amounts Due within One Year $ 14,367,435 18,790,000 $ - $ 381,691 345,000 $ 13,985,744 18,445,000 $ 401,132 570,000 Long-Term Liabilities, Net $ 33,157,435 $ - $ 726,691 $ 32,430,744 $ 971,132 35 AGUA SPECIAL UTILITY DISTRICT NOTES TO FINANCIAL STATEMENTS December 31, 2017 NOTE 12 – PLEDGE OF REVENUES The District has pledged future waterworks and sewer revenues, net of specified operating expenses, to repay approximately $17,470,500 in water system notes and $19,615,000 million revenue bonds issued at various times as described in Note 11 above. The notes and bonds are payable from both water and sewer revenues. The majority of the debt was incurred primarily for the acquisition, construction and expansion of water treatment or distribution facilities. About $10.5 million is for the planning and buy in of a 1.0 MGD wastewater treatment plant at City of Mission in relation to sewer collection system in Palmview, TX. The total principal and interest remaining to be paid on the combined notes and bonds against which the waterworks and sewer system revenues are pledged is $49,862,209. Principal and interest paid for the current year and net revenues of the system as defined by the bond covenants were $1,985,519 and $2,577,753, respectively. The District met the bond coverage requirement of 125%. NOTE 13 – BOND REDEMPTIONS Series 2009, Series 2010, Series 2014A, 2014 and 2015 Revenues Bonds contain optional bond redemption provisions in whole or in part on bonds maturing on or after August 1, 2020, 2021, 2025, 2025, and 2026 respectively in reverse order of maturities outstanding at the time of such redemption and before their respective scheduled maturity dates. The District does not anticipate that the TWDB notes above will be converted to Exchange Bonds any time prior to those dates. NOTE 14 – COMPLIANCE WITH DEBT SERVICE REQUIREMENTS The following is a summary of debt service reserve requirements as of December 31, 2017: DEBT Total Required Reserve YTD in Reserves Remaining Reserve Commitment (Excess) TWDB - RWAF (3) Notes; (5) Bonds USDA - RUS (2); RECD (2) $ 1,558,194 $ 1,464,716 $ 93,478 NOTE 15 – RETIREMENT PLAN Plan Description a. Agua Special Utility District participates in the Texas County & District Retirement System (TCDRS), which is a statewide, agent multiple-employer, public employee retirement. b. A brief description of benefit terms: 1) All full- and part-time non-temporary employees participate in the plan, regardless of the number of hours they work in a year. Employees in a temporary position are not eligible for membership. 36 AGUA SPECIAL UTILITY DISTRICT NOTES TO FINANCIAL STATEMENTS December 31, 2017 NOTE 15 – RETIREMENT PLAN (Continued) 2) The plan provides retirement, disability and survivor benefits. 3) TCDRS is a savings-based plan. For the district’s plan, 4% of each employee’s pay is deposited into his or her TCDRS account. By law, employee accounts earn 7% interest on beginning of year balances annually. At retirement, the account is matched at an employer set percentage (current match is 200%) and is then converted to an annuity. 4) There are no automatic cost of living adjustments (COLA). Each year, the district may elect an ad hoc COLA for its retirees (if any). There are two COLA types, each limited by actual inflation. 5) Benefit terms are established under the TCDRS Act. They may be amended as of Jan. 1 each year, but must remain in conformity with the Act. c. Membership information is shown in the chart below. d. The District’s contribution rate is calculated annually on an actuarial basis, although the employer may elect to contribute at a higher rate. The Agua Special Utility District contribution rate is based on the TCDRS funding policy adopted by the TCDRS Board of Trustees and must conform with the TCDRS Act. The employee contribution rates are set by the district and are currently 4%. Contributions to the pension plan from the district for 2016 are shown in the Schedule of Employer Contributions under Required Supplementary Information. e. The most recent comprehensive annual financial report for TCDRS can be found at the following link, www.tcdrs.org. Me mbe rs hip Information Number of inactive employees Number of active employees Number of benefit recipients Total participants TCDRS 34 62 2 98 Funding Policy The District has elected the annually determined contribution rate (Variable Rate) plan provisions of the TCDRS Act. The plan is funded by monthly contributions from both employee members and the District based on the covered payroll of employee members. Under the TCDRS Act, the contribution rate of the employer is actuarially determined annually. The employer contributed using the actuarially determined rate of 4.16% for the accounting year in 2017. The deposit rate payable by the employee members remained fixed for the year under audit 2017 at the rate of 4.00% as adopted by the governing body of the District. The employee contributions rate and the employer contribution rate may be changed by the governing body of the District within the options available in the TCDRS Act. 37 AGUA SPECIAL UTILITY DISTRICT NOTES TO FINANCIAL STATEMENTS December 31, 2017 NOTE 15 – RETIREMENT PLAN (Continued) Net Pension Asset: The District’s Net Pension Asset (NPA) was measured as of December 31, 2016 for TCDRS and the Total Pension Liability (TPL) used to calculate the Net Pension Liability was determined by an actuarial valuation as of those dates. Actuarial Methods and Assumptions Used for GASB Calculations All actuarial methods and assumptions used for this GASB analysis were the same as those used in the December 31, 2016 funding valuation, except as noted below. Following are the key assumptions and methods used in this GASB analysis. Valuation Timing Actuarially determined contribution rates as calculated on a calendar year basis as of December 31, two years prior to the end of the fiscal year in which the contributions are reported. Actuarial Cost Method Entry Age Normal Amortized Method Recognition of economic/ demographic gains or losses Recognition of assumptions changes or inputs Straight-Line amortization over Expected Working Life Straight-Line amortization over Expected Working Life Asset Valuation Method Smoothing period Recognition method Corridor 5 years Non-asymptotic None Inflation Same as funding valuation Salary Increases Same as funding valuation Investment Rate of Return 8.10% Cost of Living Adjustments Cost-of-Living Adjustments for Agua Special Utility District are not considerd to be substantively automatic under GASB 68. Therefore, no assumption for future cost-of-living adjustments is included in the GASB caluculations. No assumption for future cost-of-living adjustments is included in the funding valuation. Retirement Age Same as funding valuation Turnover Same as funding valuation Mortality Same as funding valuation 38 AGUA SPECIAL UTILITY DISTRICT NOTES TO FINANCIAL STATEMENTS December 31, 2017 NOTE 15 – RETIREMENT PLAN (Continued) Long-Term Expected Rate of Return The long-term expected rate of return on TCDRS assets is determined by adding expected inflation to expected long-term real returns, and reflecting expected volatility and correlation. The capital market assumptions and information shown below are provided by TCDRS’ investment consultant, Cliffwater LLC. The numbers shown are based on January 2017 information for a 710-year time horizon. Note that the valuation assumption for long-term expected return is re-assessed at a minimum of every four years, and is set based on a 30-year time horizon; the most recent analysis was performed in 2013. Target Allocation (1) Geometric Real Rate of Return (expected minus inflation) (2) US Equities 13.50% 4.70% Private Equity 16.00% 7.70% Global Equities 1.50% 5.00% International Equities-Developed 10.00% 4.70% International Equities-Emerging 7.00% 5.70% Investment-Grade Bonds 3.00% 0.60% High-Yield Bonds 3.00% 3.70% Opportunistic Credit 2.00% 3.83% Direct Lending 10.00% 8.15% Distressed Debt 3.00% 6.70% REIT Equities 2.00% 3.85% Master Limited Partnerships 3.00% 5.60% Private Real Estate Partnerships 6.00% 7.20% Hedge Funds 20.00% 3.85% Asset Class Total 100.00% (1) Target asset allocation adopted at the April 2017 TCDRS Board meeting. (2) Geometric real rates of return in addition to assumed inflation of 2.0% per Cliffwater's 2017 capital market assumptions. 39 AGUA SPECIAL UTILITY DISTRICT NOTES TO FINANCIAL STATEMENTS December 31, 2017 NOTE 15 – RETIREMENT PLAN (Continued) Discount Rate The discount rate is the single rate of return that, when applied to all projected benefit payments results in an actuarial present value of projected benefit payments equal to the total of the following: 1. The actuarial present value of benefit payments projected to be made in future periods in which (a) the amount of the pension plan’s fiduciary net position is projected to be greater than the benefit payments that are projected to be made in that period and (b) pension plan assets up to that point are expected to be invested using a strategy to achieve the long-term rate of return, calculated using the long-term expected rate of return on pension plan investments. 2. The actuarial present value of projected benefit payments not included in (1), calculated using the municipal bond rate. Therefore, if plan investments in a given future year are greater than projected benefit payments in that year and are invested such that they are expected to earn the long-term rate of return, the discount rate applied to projected benefit payments in that year should be the long-term expected rate of return on plan investments. If future years exist where this is not the case, then an index rate reflecting the yield on a 20-year, tax-exempt municipal bond should be used to discount the projected benefit payments for those years. The determination of a future date when plan investments are not sufficient to pay projected benefit payments is often referred to as a depletion date projection. A depletion date projection compares projections of the pension plan’s fiduciary net position to projected benefit payments and aims to determine a future date, if one exists, when the fiduciary net position is projected to be less than projected benefit payments. If an evaluation of the sufficiency of the projected fiduciary net position compared to projected benefit payments can be made with sufficient reliability without performing a depletion date projection, alternative methods to determine sufficiency may be applied. In order to determine the discount rate to be used by the employer we have used an alternative method to determine the sufficiency of the fiduciary net position in all future years. Our alternative method reflects the funding requirements under the employer’s funding policy and the legal requirements under the TCDRS Act. 1. TCDRS has a funding policy where the Unfunded Actuarial Accrued Liability (UAAL) shall be amortized as a level percent of pay over 20-year closed layered periods. 2. Under the TCDRS Act, the employer is legally required to make the contribution specified in the funding policy. 40 AGUA SPECIAL UTILITY DISTRICT NOTES TO FINANCIAL STATEMENTS December 31, 2017 NOTE 15 – RETIREMENT PLAN (Continued) 3. The employer’s assets are projected to exceed its accrued liabilities in 20 years or less. When this point is reached, the employer is still required to contribute at least the normal cost. 4. Any increased cost due to the adoption of a COLA is required to be funded over a period of 15 years, if applicable. Based on the above, the projected fiduciary net position is determined to be sufficient compared to projected benefit payments. Based on the expected level of cash flows and investment returns to the system, the fiduciary net position as a percentage of total pension liability is projected to increase from its current level in future years. Since the projected fiduciary net position is projected to be sufficient to pay projected benefit payments in all future years, the discount rate for purposes of calculating the total pension liability and net pension liability of the employer is equal to the long-term assumed rate of return on investments. This long-term assumed rate of return should be net of investment expenses, but gross of administrative expenses for GASB 68 purposes. Therefore, we have used a discount rate of 8.10%. This rate reflects the long-term assumed rate of return on assets for funding purposes of 8.00%, net of all expenses, increased by 0.10% to be gross of administrative expenses. Sensitivity Analysis of Net Pension Liability with Discount Rate The following presents the net pension liability of the District, calculated using the discount rate of 8.10%, as well as what the District’s net pension liability would be if it were calculated using a discount rate that is 1 percentage point lower (7.10%) or 1 percentage point higher (9.10%) than the current rate. Total pension liability Fiduciary net position Net pension liability/(asset) 1% Decrease 7.10% $ 1,183,132 1,110,864 $ 72,268 41 Current Discount Rate 8.10% $ 987,378 1,110,864 $ (123,486) 1% Increase 9.10% $ 831,754 1,110,864 $ (279,110) AGUA SPECIAL UTILITY DISTRICT NOTES TO FINANCIAL STATEMENTS December 31, 2017 NOTE 15 – RETIREMENT PLAN (Continued) Changes in the Net Pension Asset Changes in the District’s net pension asset for the TCDRS are as follows: Changes in Net Pension Liability / (Asset) Total Pension Liability (a) $ 790,653 Balances as of December 31, 2015 Changes for the year: Service cost Interest on total pension liability Effect of plan changes Effect of economic/demographic gains or losses Effect of assumptions changes or inputs Refund of contributions Benefit payments Administrative expenses Member contributions Net invesment income Employer contributions Other Balances as of December 31, 2016 Fiduciary Net Position (b) $ 870,260 178,911 70,433 (34,623) (14,083) (3,912) $ 987,379 Net Pension Liability/(Asset) (a) - (b) $ (79,607) (14,083) (3,912) (712) 82,256 65,477 94,183 17,396 $ 1,110,865 178,911 70,433 (34,623) 712 (82,256) (65,477) (94,183) (17,396) $ (123,486) Pension Expense and Deferred Outflows of Resources and Deferred Inflows of Resources Related to Pensions: Pension Expense / (Income) Service cost Interest on total pension liability Effect of plan changes Administrative expenses Member contributions Expected investment return net of investment expenses Recognition of deferred inflows/outflows of resources Recognition of economic/demographic gains or losses Recognition of assumption changes or inputs Recognition of investment gains or losses Other Pension expense / (income) January 1 , 2016 to December 31, 2016 $ 178,911 70,433 712 (82,256) (77,446) (20,964) 663 23,349 (17,396) $ 42 76,007 AGUA SPECIAL UTILITY DISTRICT NOTES TO FINANCIAL STATEMENTS December 31, 2017 NOTE 15 – RETIREMENT PLAN (Continued) Deferred Inflows Deferred Outflows of resources of resources . Differences between expected and actual experience Changes in assumptions Net difference between projected and actual earnings Total as of December 31, 2016 measurement date Contributions made subsequent to measurement date Total as of fiscal year end $ 129,241 129,241 129,241 $ $ $ 3,975 69,499 73,474 93,258 166,732 Amounts currently reported as deferred outflows of resources and deferred inflows of resources related to pensions, excluding contributions made subsequent to the measurement date, will be recognized in pension expense as follows: Year ending December 31: 2017 2018 2019 2020 2021 Thereafter Total $ $ 3,047 3,047 107 (17,908) (20,301) (23,760) (55,768) NOTE 16 – INTERLOCAL AGREEMENTS The District has six interlocal agreements in which it is committed to collecting fees for utility services including garbage, trash and brush, and sewer for the following municipalities: The City of La Joya, Texas - Collection of sewer, brush and trash services to customers living within approximately six (6) subdivisions of the District’s CCN for a setup fee of $4 for each new connection, a modification fee of $2, and $1 for each collection transaction. This fee is charged and collected monthly. The City of Palmview, Texas - Collection of garbage services to customers living within the city’s jurisdiction and the District’s CCN for a setup fee of $4 for each new connection, a reinstated account fee for $5.25, a modification fee of $2, and $1 for each collection transaction. This fee is charged and collected monthly. 43 AGUA SPECIAL UTILITY DISTRICT NOTES TO FINANCIAL STATEMENTS December 31, 2017 NOTE 16 – INTERLOCAL AGREEMENTS (Continued) Hidalgo County Municipal Utility District #1 - Collection of sewer services charged to eleven large commercial customers located within the District’s CCN for a fee of 25% of the amounts collected. This fee is charged and collected monthly. The City of Mission, Texas - Collection of sewer services to customers living within the La Homa Road North subdivision of the District’s CCN for a setup fee of $5 for each new connection, or a modification fee of $2, and $1 for each collection transaction. This fee is charged and collected monthly. The City of Sullivan, Texas - Collection of garbage services to customers living within the city’s jurisdiction and the District’s CCN for a setup fee of $4 for each new connection, a reinstated account fee for $5.25, a modification fee of $2, and $1 for each collection transaction. This fee is charged and collected monthly. The City of Peñitas, Texas - Collection of sewer services to customers living within the city’s jurisdiction and the District’s CCN for a setup fee of $5 for each new connection, a reinstated fee of $5, and $1 for each collection transaction. These fees are charged and collected monthly. NOTE 17 – DWSRF BONDS PAYABLE The District closed on a commitment in 2009 from the Texas Water Development Board for the Drinking Water State Revolving Fund Revenue Bonds - Series 2009. Under the provisions of this type of funding mechanism, the District was allowed to issue as many bond coupons in installments as needed to fund the project. During the year ended December 31, 2017, the District did not issue any coupons for this project. The remaining $432,000 will be requested as the various contracts for engineering and construction are started and invoiced until the project is completed – also, see Note 10. NOTE 18 – FORGIVEABLE LOANS At December 31, 2014, the District has an outstanding forgivable loan with the Texas Water Development Board (TWDB) in the amount of $2,375,000 under the Clean Water State Revolving Fund Program CFDA #66.458. $1,234,104 of these proceeds has been expended to date. Expenditures for the current period was a total of $417,229. NOTE 19 – CORRECTION OF AN ERROR When necessary, the District will incur debt to facilitate the construction of significant capital projects. When such debt has been obtained, the District has not capitalized interest costs incurred during the period of construction as required by generally accepting accounting principles. Accordingly, amounts previously reported as capital assets (net of accumulated depreciation), interest expense and net position have been reported in error. An adjustment of 44 AGUA SPECIAL UTILITY DISTRICT NOTES TO FINANCIAL STATEMENTS December 31, 2017 NOTE 19 – CORRECTION OF AN ERROR (Continued) $1,890,032 was made to previously reported net position as of 2017 for interest which should have been capitalized. As interest cost had not been capitalized since at least 2009, this adjustment was determined based on actual and estimated interest amounts based on the best information available. NOTE 20 – SUBSEQUENT EVENTS Subsequent to year end, the following event or transaction occurred. The District received the results of a study which concluded the District could potentially recognize a significant amount of savings if it were to upgrade its existing water meters. Upgrades would include replacing existing water meters with advance metering infrastructure (AMI) meters as well as installing LED lighting fixtures. On April 17, 2018, the District approved the cost of $7,441,256 and related financing associated with these upgrades. Management believes the savings associated with these upgrades will allow for the recovery of the cost and related financing within 15 years. For the purpose of reporting subsequent events, management has considered events occurring up to April 19, 2018, the date the report was available to be issued. No further subsequent events were noted. 45 AGUA SPECIAL UTILITY DISTRICT Schedule of Changes in Net Pension Liability and Related Ratios 2016 Total Pension Liability Service cost Interest on total pension liability Effect of plan changes Effect of assumption changes or inputs Effect of economic/demographic (gains) or losses Benefit payments/refunds of contributions Net change in total pension liability Total pension liability, beginning Total pension liability, ending (a) Fiduciary Net Position Employer contributions Member contributions Investment income net of investment expenses Benefit payments/refunds of contributions Administrative expenses Other Net change in fiduciary net position $ $ $ 178,911 $ 70,433 (34,623) (17,995) 196,726 790,653 987,379 870,262 $ 1,110,866 Net pension liability / (asset), ending = (a) - (b) $ Pensionable covered payroll Net pension liability as a % of covered payroll $ 94,183 $ 82,256 65,477 (17,995) (712) 17,396 240,604 Fiduciary net position, beginning Fiduciary net position, ending (b) Fiduciary net position as a % of total pension liability 2015 $ (123,486) $ 112.51% $ 2,056,394 -6.00% 2014 Year Ended December 31 2011 2010 2013 2012 137,155 54,384 (6,955) (19,522) 165,062 N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A 613,730 778,792 N/A N/A N/A N/A 94,874 $ 79,989 (22,392) (47,614) (598) (101) 104,158 88,872 68,758 39,010 (19,522) (527) 658 177,249 N/A N/A N/A N/A N/A N/A N/A 766,104 870,262 $ 588,855 766,104 (79,608) $ 110.07% 147,099 $ 65,943 (32,736) 5,300 (126,131) (47,614) 11,861 778,792 790,653 $ 1,999,731 -3.98% $ 2009 2008 2007 2006 2005 N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A 12,688 N/A N/A N/A N/A N/A N/A N/A N/A N/A 98.37% N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A $ 1,718,955 0.74% This schedule is presented to illustrate the requirement to show information for 10 years. However, recalculations of prior years are not required, and if prior years are not reported in accordance with the standards of GASB 67/68, they should not be shown here. Therefore, we have shown only years for which the new GASB statements have been implemented. 48 AGUA SPECIAL UTILITY DISTRICT Schedule of Employer Contributions Year Ending December 31 Actuarially Determined Contribution Actual Employer Contribution 45,896 76,659 84,223 91,148 88,872 94,587 94,183 45,896 76,659 84,223 91,148 88,872 94,874 94,183 2010 2011 2012 2013 2014 2015 2016 1 Contribution Deficiency (Excess) (287) - Pensionable Covered Payroll 856,265 1,430,206 1,536,923 1,691,057 1,718,955 1,999,731 2,056,394 1 Year Ending December 31 ` 5.4% 5.4% 5.5% 5.4% 5.2% 4.7% 4.6% Payroll is calculated based on contributions as reported to TCDRS NOTE TO SCHEDULE Valuation Date: Actuarially determined contribution rates are calculated each December 31, two years prior to the end of the fiscal year in which contributions are reported. Methods and assumptions used to determine contribution rates: Actuarial Cost Method Entry age Amortization Method Level percentage of payroll, closed Remaining Amortization Period 2.5 years (based on contribution rate calculated in 12/31/2016 valuation.) Asset Valuation Method 5-year smoothed market Inflation 3.00% Salary Increases Varies by age and service. 4.9% average over career including inflation. Investment rate of Return 8.00%, net of investment expenses, including inflation Retirement Age Members who are eligible for service retirement are assumed to commence receiving benefit payments based on age. The average age at service for recent retirees is 61. Mortality In the 2015 actuarial valuation, assumed life expectancies were adjusted as a result of adopting a new projection scale (110% of the MP-2014 Ultimate Scale) for 2014 and later. Previously Scale AA had been used. The base table is the RP-2000 table projected with Scale AA to 2014. Changes in Plan Provisions Reflected in the Schedule of Employer Constributions No changes in plan provisions. 49 AGUA SPECIAL UTILITY DISTRICT Budgetary Comparison Schedule - Enterprise Fund For the Year Ended December 31, 2017 Budget Basis - Non GAAP Original Budget Revenues: Metered water sales Non-meter sewer services Meter fees Miscellaneous fines and fees Other income Total revenues $ 8,250,000 335,000 117,000 701,485 7,000 9,410,485 Final Budget $ 8,250,000 335,000 117,000 701,485 7,000 9,410,485 Variance Positive (Negative) Actual $ 8,421,979 354,814 129,327 641,610 13,007 9,560,737 $ 171,979 19,814 12,327 (59,875) 6,007 150,252 Expenditures: Auditing/accounting services Auto and truck expense Bad debt Bank & credit card charges Billing cards expense Computers supplies and maintenance Contracted services - other Cost of production Damages and claims Dues, fees and permits Education and training Insurance Management advisory services Miscellaneous, uniforms, etc. Office maintenance Office expense, postage, etc. Professional services Public awareness expense Repairs, rental - plant and equipment Retirement/health insurance benefits & comp absences Salaries - distribution and meter readers Salaries - office and warehouse Salaries - water & sewer plant Salaries - oncall/overtime Small tools & safety equipment Taxes - payroll TCEQ fees Telephone Utilities Water lines repair and maintenance Total expenditures Excess (deficiency) of revenues over expenditures 45,000 109,000 77,000 9,000 93,300 6,300 1,536,050 14,500 32,000 136,300 70,000 36,740 46,000 132,500 450,000 33,000 248,200 458,266 592,946 955,282 582,150 105,417 57,800 184,638 73,000 30,400 477,500 175,000 6,767,289 $ 2,643,196 45,000 108,200 75,000 9,000 96,300 6,300 1,546,050 14,600 32,000 136,300 100,000 43,190 41,800 120,900 405,000 33,200 262,050 461,365 610,732 983,942 598,242 108,462 57,100 189,656 73,000 38,900 474,700 170,000 6,840,989 $ 2,569,496 40,500 111,824 12,380 83,176 5,895 97,130 5,860 1,537,230 2,033 10,999 33,737 159,722 173,043 39,333 40,146 125,986 353,151 39,196 375,125 477,648 615,104 930,947 624,428 97,066 46,693 172,927 70,679 37,768 502,913 244,585 7,067,223 $ 2,493,514 4,500 (3,624) (12,380) (8,176) 3,105 (830) 440 8,820 (2,033) 3,601 (1,737) (23,422) (73,043) 3,857 1,654 (5,086) 51,849 (5,996) (113,075) (16,283) (4,372) 52,995 (26,186) 11,396 10,407 16,729 2,321 1,132 (28,213) (74,585) (226,234) $ (75,982) (Continued) 52 AGUA SPECIAL UTILITY DISTRICT Budgetary Comparison Schedule - Enterprise Fund For the Year Ended December 31, 2017 Budget Basis - Non GAAP (Continued) Final Budget 5,000 2,500 41,000 (31,155,000) (10,000) 430,000 (726,696) (1,258,800) (32,671,996) 5,000 2,500 41,000 (31,155,000) (10,000) 430,000 (726,696) (1,258,800) (32,671,996) 15,111 (339) 84,239 (509,021) (7,654,357) (10,950) (726,691) (947,150) (9,749,158) 10,111 (2,839) 43,239 (509,021) 23,500,643 (950) (430,000) 5 311,650 22,922,838 (30,028,800) (30,102,500) (7,255,644) 22,846,856 $ 30,000,000 7,500 95,000 30,102,500 $ 30,000,000 7,500 95,000 30,102,500 6,268,306 9,966 109,043 6,387,315 $ (23,731,694) 2,466 14,043 (23,715,185) $ 73,700 $ $ (868,329) Non operating revenues (expenses): Sale of assets/surplus property Rebates and reimbursements Interest income Other Capital outlay Financial service fees Bond proceeds Debt service - principal Debt service - interest Total nonoperating revenues (expenses) Excess (deficiency) of revenues and nonoperating revenues over expenditures expenditures and nonoperating expenses Capital contributions: Grant revenue Water & sewer impact fees Water rights acquisition fees Total Capital Contributions Excess (deficiency) of revenues and capital contributions over expenditures Variance Positive (Negative) Original Budget Conversion to GAAP Basis: Non-budgeted item - Depreciation expense Add back capital outlay Add back principal paid on debt Change in Net Position - GAAP Basis Actual - $ $ (868,329) $ (3,884,263) 7,654,357 726,691 3,628,456 $ 53 AGUA SPECIAL UTILITY DISTRICT TSI-1. Services and Rates Fiscal Year Ending December 31, 2017 (unaudited) 1. Services provided by the District during the fiscal year: A. Retail Water B. Retail Wastewater (Sewer) 2. Retail Service Rates A. Water i. Retail Rates for 5/8” meter (or Equivalent) Minimum Minimum Charge Usage $ 16.53 0 $ Flat Rate Y/N N ii. Lifeline Rates for 5/8” meter (or Equivalent) Minimum Minimum Charge Usage 13.75 0 Flat Rate Y/N N District employs winter averaging for water usage? No Total charges per 10,000 gallons usage: Water: $39.50 B. Wastewater (Sewer) i. Retail Rates for Residential meter Minimum Winter Ave. Charge Y/N Lifeline Residential $ 8.19 Y Residential $ 8.19 Y Residential $ 10.92 Y Residential $ 13.65 Y Residential $ 21.84 Y Residential $ 24.57 Y Residential $ 30.04 Y Residential $ 35.50 Y Residential $ 40.96 Y Rate per 1000 Gallons Over Minimum Usage $ 2.15 $ 2.36 $ 2.89 $ 3.41 $ 4.55 Usage Levels 0-3000 3,001-10,000 10,001-20,000 20,001-50,000 50,001-999,999,999 Rate per 1000 Gallons Over Minimum Usage $ $ 2.15 $ 2.36 $ 2.89 $ 3.41 $ 4.55 Usage Levels 0-3000 3,001-5,000 5,001-10,000 10,001-20,000 20,001-50,000 50,001- 999,999,999 Rate per 1000 Gallons Over Minimum Usage $ 2.53 $ 2.53 $ 2.53 $ 2.53 $ 2.53 $ 2.53 $ 2.53 $ 2.53 $ 2.53 Meter Size 3/4" or 5/8" 5/8" 3/4" 1" 1.5" 2" 4" 6" 8" ii. Rates for Commercial meter Rate per Flat Rate 1000 Gallons Y/N Over Minimum Usage Commercial $ 13.65 N $ 2.73 Commercial $ 16.38 N $ 2.73 Commercial $ 19.11 N $ 2.73 Commercial $ 21.84 N $ 2.73 Commercial $ 24.57 N $ 2.73 Commercial $ 30.04 N $ 2.73 Commercial $ 35.50 N $ 2.73 Commercial $ 40.96 N $ 2.73 District employs winter averaging for wastewater usage? Yes, the District adopted winter average sewer rates in 2011 for residential customers only. Minimum Charge Meter Size Over 3/4" 5/8" 3/4" 1" 1.5" 2" 4" 6" 8" (Continued) 56 AGUA SPECIAL UTILITY DISTRICT TSI-1. Services and Rates Fiscal Year Ending December 31, 2017 (unaudited) c. Water and Wastewater Retail Connections: Meter Size Unmetered <_ 3/4" 1" 1.5" 2" 3" 4" 6" 8" 10" Total Water Total Wastewater Total Connections Active connections 15,289 100 8 101 0 22 4 0 0 15,524 1,476 15,289 100 8 101 0 22 4 0 0 15,524 1,476 3. Total Water Consumption during the twelve months of FY2017 (rounded to the nearest thousand): Gallons pumped into system: Less: Account for losses Gallons (net of accounted for losses) 2,002,403,000 (205,224,153) 1,797,178,847 Gallons Billed to customers: Water Accountability Ratio: (gallons billed/gallons pumped net of accounted for losses) 1,782,771,221 99.2% 4. Standby Fees: Not applicable. 5. Location of District: County(ies) in which the District is located: Hidalgo, Starr Is the District located entirely within one county? No Is the District located within a city? Partly City(ies) in which District is located: Mission, Palmview, Penitas, La Joya, Sullivan City Is the District located within a city's ETJ? Partly ETJ's in which the District is located: Mission, Palmview, Penitas, La Joya, Sullivan City Are Board members appointed by an office outside the District? No If yes, by whom? For the terms beginning 2016, the following District board members were elected from each municipality by default election as follows: County of Hidalgo (Place #3) City of Palmview County of Hidalgo (Place #1) City of Penitas County of Hidalgo (Place #2) City of Mission City of Sullivan - Mr. Rogelio Hernandez III Mr. Homero Tijerina Mr. Esequiel Ortiz Jr. Mr. Lloyd A. Loya Mr. Ricardo Ochoa Mr. Cesar Rodriguez Jr. Mr. Ivan Sandoval 57 President Vice President Treasurer Secretary - Appointed Director Director Director - Appointed 2016 2016 2016 2015 2014 2014 2017 AGUA SPECIAL UTILITY DISTRICT TSI-2. Enterprise Fund Expenditures Fiscal Year Ending December 31, 2017 (unaudited) Auditing/accounting services Auto and truck expense Bad debt Bank & credit card charges Billing cards expense Computer supplies and other expenses Contracted services - other Cost of production Damages and claims Depreciation Dues and fees Education and training Financial Service Fees Insurance Interest expense Management advisory services Miscellaneous, uniforms, etc. Office maintenance Office supplies, postage etc. Other Professional services Public awareness expense Repairs, rental - plant and equipment Retirement & health insurance benefits Salaries - distribution and meter readers Salaries - office and warehouse Salaries - water and sewer Salaries - oncall/overtime /compensated absences Small tools & safety equipment Taxes - payroll TCEQ fee Telephone Utilities Water lines repair and maintenance Total Expenditures $ $ Number of persons employed by the District: 71 Full-Time (Not including independent contractors or consultants) 58 1 Part-Time 40,500 111,824 12,380 83,176 5,895 97,130 5,860 1,537,230 2,033 3,884,263 10,999 33,737 10,950 159,722 947,150 173,043 39,333 40,146 125,986 509,021 353,151 39,196 375,125 477,648 615,104 930,947 624,428 97,066 46,693 172,927 70,679 37,768 502,913 244,585 12,418,607 AGUA SPECIAL UTILITY DISTRICT TSI-3. Temporary Investments Fiscal Year Ending December 31, 2017 (unaudited) Type Certificate of Deposit Certificate of Deposit Certificate of Deposit Certificate of Deposit Certificate of Deposit Certificate of Deposit Certificate of Deposit Certificate of Deposit Certificate of Deposit Bank Infinity Federal Credit Union Boston Private Bank & Trust Wells Fargo Bank Israel Discovery Bank Consumer Credit Union JP Morgan Chase Bank Capital One Bank Ally Bank Discover Bank Identification or Certificate Number Cusip: 45673K-AE-6 Cusip: 101120-DJ-9 Cusip: 949763-CM-6 Cusip: 465076-JT-5 Cusip: 21050B-AB-6 Cusip: 48125Y-K7-8 Cusip: 140420-Z3-7 Cusip: 02006L-6F-5 Cusip: 254673-HJ-8 59 Interest Rate Maturity Date 1.15% 0.85% 1.00% 1.45% 1.50% 1.00% 1.80% 2.00% 2.10% 01/17/2018 01/18/2018 02/16/2018 07/06/2018 10/19/2018 03/31/2019 03/16/2020 10/26/2020 12/07/2020 Accrued Interest Receivable at End of Year Balance at End of Year $ $ 250,000 250,000 250,000 250,000 250,000 250,000 250,000 250,000 250,000 2,250,000 $ $ 236 76 103 1,768 123 1,319 904 360 4,889 AGUA SPECIAL UTILITY DISTRICT TSI-4. Taxes Levied and Receivable Fiscal Year Ending December 31, 2017 (unaudited) (Does not apply to Agua SUD) 60 AGUA SPECIAL UTILITY DISTRICT TSI-5. Bonded Debt Service Requirements by Years Fiscal Year Ending December 31, 2017 (unaudited) Series 2009 - 6th Installment - by Year Payment Year 2018 2019 2020 2021 2022 Thereafter Principal Interest Total $ 15,000 - $ 450 - $ 15,450 - $ 15,000 $ 450 $ 15,450 Waterworks and Sewer System Revenue Bonds, Series 2009 - $3,967,000 6th Installment Cumulative - $25,000 Interest Rate: 2.750%-3.000% Date: August 23, 2012 Series 2009 - 7th Installment - by Year Payment Year 2018 2019 2020 2021 2022 Thereafter Principal Interest Total $ 70,000 90,000 95,000 100,000 95,000 - $ 15,908 13,808 10,928 7,698 3,848 - $ 85,908 103,808 105,928 107,698 98,848 - $ 450,000 $ 52,190 $ 502,190 Waterworks and Sewer System Revenue Bonds, Series 2009 - $3,967,000 7th Installment Cumulative - $450,000 Interest Rate: 3.00% - 4.050% Date: February 8, 2013 61 AGUA SPECIAL UTILITY DISTRICT TSI-5. Bonded Debt Service Requirements by Years Fiscal Year Ending December 31, 2017 (unaudited) Series 2009 - 8th Installment - by Year Payment Year 2018 2019 2020 2021 2022 Thereafter Principal Interest Total $ 10,000 30,000 $ 1,665 1,665 1,665 1,665 1,665 1,260 $ 1,665 1,665 1,665 1,665 11,665 31,260 $ 40,000 $ 9,585 $ 49,585 Waterworks and Sewer System Revenue Bonds, Series 2009 - $3,967,000 8th Installment Cumulative - $40,000 Interest Rate: 4.050% - 4.200% Date: April 11, 2013 Series 2009 - 9th Installment - by Year Payment Year 2018 2019 2020 2021 2022 Thereafter Principal Interest Total $ 40,000 $ 1,680 1,680 1,680 1,680 1,680 1,680 $ 1,680 1,680 1,680 1,680 1,680 41,680 $ 40,000 $ 10,080 $ 50,080 Waterworks and Sewer System Revenue Bonds, Series 2009 - $3,967,000 9th Installment Cumulative - $40,000 Interest Rate: 4.200% Date: May 29, 2013 62 AGUA SPECIAL UTILITY DISTRICT TSI-5. Bonded Debt Service Requirements by Years Fiscal Year Ending December 31, 2017 (unaudited) Series 2009 - 10th Installment - by Year Payment Year 2018 2019 2020 2021 2022 Thereafter Principal Interest Total $ 350,000 $ 15,375 15,375 15,375 15,375 15,375 41,176 $ 15,375 15,375 15,375 15,375 15,375 391,176 $ 350,000 $ 118,051 $ 468,051 Waterworks and Sewer System Revenue Bonds, Series 2009 - $3,967,000 10th Installment Cumulative - $350,000 Interest Rate: 4.200%-4.550% Date: June 25, 2013 Series 2009 - 11th Installment - by Year Payment Year 2018 2019 2020 2021 2022 Thereafter Principal Interest Total $ 35,000 $ 1,593 1,593 1,593 1,593 1,593 6,372 $ 1,593 1,593 1,593 1,593 1,593 41,372 $ 35,000 $ 14,337 $ 49,337 Waterworks and Sewer System Revenue Bonds, Series 2009 - $3,967,000 11th Installment Cumulative - $35,000 Interest Rate: 4.550% Date: October 17, 2013 63 AGUA SPECIAL UTILITY DISTRICT TSI-5. Bonded Debt Service Requirements by Years Fiscal Year Ending December 31, 2017 (unaudited) Series 2009 - 12th Installment - by Year Payment Year 2018 2019 2020 2021 2022 Thereafter Principal Interest Total $ 450,000 $ 21,378 21,378 21,378 21,378 21,378 130,178 $ 21,378 21,378 21,378 21,378 21,378 580,178 $ 450,000 $ 237,068 $ 687,068 Waterworks and Sewer System Revenue Bonds, Series 2009 - $3,967,000 12th Installment Cumulative - $450,000 Interest Rate: 4.550%-4.850% Date: November 21, 2013 Series 2009 - 13th Installment - by Year Payment Year 2018 2019 2020 2021 2022 Thereafter Principal Interest Total $ 80,000 $ 3,880 3,880 3,880 3,880 3,880 31,040 $ 3,880 3,880 3,880 3,880 3,880 111,040 $ 80,000 $ 50,440 $ 130,440 Waterworks and Sewer System Revenue Bonds, Series 2009 - $3,967,000 13th Installment Cumulative - $80,000 Interest Rate: 4.850% Date: January 10, 2014 64 AGUA SPECIAL UTILITY DISTRICT TSI-5. Bonded Debt Service Requirements by Years Fiscal Year Ending December 31, 2017 (unaudited) Series 2009 - 14th Installment - by Year Payment Year 2018 2019 2020 2021 2022 Thereafter Principal Interest Total $ 150,000 $ 7,328 7,328 7,328 7,328 7,328 63,769 $ 7,328 7,328 7,328 7,328 7,328 213,769 $ 150,000 $ 100,409 $ 250,409 Waterworks and Sewer System Revenue Bonds, Series 2009 - $3,967,000 14th Installment Cumulative - $150,000 Interest Rate: 4.850%- 4.900% Date: February 11, 2014 Series 2009 - 15th Installment - by Year Payment Year 2018 2019 2020 2021 2022 Thereafter Principal Interest Total $ 195,000 $ 9,628 9,628 9,628 9,628 9,628 93,830 $ 9,628 9,628 9,628 9,628 9,628 288,830 $ 195,000 $ 141,970 $ 336,970 Waterworks and Sewer System Revenue Bonds, Series 2009 - $3,967,000 15th Installment Cumulative - $195,000 Interest Rate: 4.900%-4.950% Date: March 27, 2014 65 AGUA SPECIAL UTILITY DISTRICT TSI-5. Bonded Debt Service Requirements by Years Fiscal Year Ending December 31, 2017 (unaudited) Series 2009 - 16th Installment - by Year Payment Year 2018 2019 2020 2021 2022 Thereafter Principal Interest Total $ 105,000 $ 5,240 5,240 5,240 5,240 5,240 56,650 $ 5,240 5,240 5,240 5,240 5,240 161,650 $ 105,000 $ 82,850 $ 187,850 Waterworks and Sewer System Revenue Bonds, Series 2009 - $3,967,000 16th Installment Cumulative - $105,000 Interest Rate: 4.950%- 5.000% Date: April 17, 2014 Series 2009 - 17th Installment - by Year Payment Year 2018 2019 2020 2021 2022 Thereafter Principal Interest Total $ 205,000 $ 10,370 10,370 10,370 10,370 10,370 120,190 $ 10,370 10,370 10,370 10,370 10,370 325,190 $ 205,000 $ 172,040 $ 377,040 Waterworks and Sewer System Revenue Bonds, Series 2009 - $3,967,000 17th Installment Cumulative - $205,000 Interest Rate: 5.000%-5.100% Date: June 13, 2014 66 AGUA SPECIAL UTILITY DISTRICT TSI-5. Bonded Debt Service Requirements by Years Fiscal Year Ending December 31, 2017 (unaudited) Series 2009 - 18th Installment - by Year Payment Year 2018 2019 2020 2021 2022 Thereafter Principal Interest Total $ 180,000 $ 9,180 9,180 9,180 9,180 9,180 116,280 $ 9,180 9,180 9,180 9,180 9,180 296,280 $ 180,000 $ 162,180 $ 342,180 Waterworks and Sewer System Revenue Bonds, Series 2009 - $3,967,000 18th Installment Cumulative - $180,000 Interest Rate: 5.100% Date: June 26, 2014 Series 2009 - 19th Installment - by Year Payment Year 2018 2019 2020 2021 2022 Thereafter Principal Interest Total $ 60,000 $ 3,060 3,060 3,060 3,060 3,060 39,780 $ 3,060 3,060 3,060 3,060 3,060 99,780 $ 60,000 $ 55,080 $ 115,080 Waterworks and Sewer System Revenue Bonds, Series 2009 - $3,967,000 19th Installment Cumulative - $60,000 Interest Rate: 5.100% Date: August 12, 2014 67 AGUA SPECIAL UTILITY DISTRICT TSI-5. Bonded Debt Service Requirements by Years Fiscal Year Ending December 31, 2017 (unaudited) Series 2009 - 20th Installment - by Year Payment Year 2018 2019 2020 2021 2022 Thereafter Principal Interest Total $ 110,000 $ 5,610 5,610 5,610 5,610 5,610 78,030 $ 5,610 5,610 5,610 5,610 5,610 188,030 $ 110,000 $ 106,080 $ 216,080 Waterworks and Sewer System Revenue Bonds, Series 2009 - $3,967,000 20th Installment Cumulative - $110,000 Interest Rate: 5.100% Date: September 23, 2014 Series 2009 - 21st Installment - by Year Payment Year 2018 2019 2020 2021 2022 Thereafter Principal Interest Total $ 390,000 $ 19,890 19,890 19,890 19,890 19,890 298,095 $ 19,890 19,890 19,890 19,890 19,890 688,095 $ 390,000 $ 397,545 $ 787,545 Waterworks and Sewer System Revenue Bonds, Series 2009 - $3,967,000 21st Installment Cumulative - $390,000 Interest Rate: 5.100% Date: October 9, 2015 68 AGUA SPECIAL UTILITY DISTRICT TSI-5. Bonded Debt Service Requirements by Years Fiscal Year Ending December 31, 2017 (unaudited) Series 2009 - 22nd Installment - by Year Payment Year 2018 2019 2020 2021 2022 Thereafter Principal Interest Total $ 75,000 $ 3,825 3,825 3,825 3,825 3,825 61,200 $ 3,825 3,825 3,825 3,825 3,825 136,200 $ 75,000 $ 80,325 $ 155,325 Waterworks and Sewer System Revenue Bonds, Series 2009 - $3,967,000 22nd Installment Cumulative - $75,000 Interest Rate: 5.100% Date: November 4, 2015 Series 2009 - 23rd Installment - by Year Payment Year 2018 2019 2020 2021 2022 Thereafter Principal Interest Total $ 35,000 $ 1,785 1,785 1,785 1,785 1,785 28,560 $ 1,785 1,785 1,785 1,785 1,785 63,560 $ 35,000 $ 37,485 $ 72,485 Waterworks and Sewer System Revenue Bonds, Series 2009 - $3,967,000 23rd Installment Cumulative - $35,000 Interest Rate: 5.100% Date: February 18, 2016 69 AGUA SPECIAL UTILITY DISTRICT TSI-5. Bonded Debt Service Requirements by Years Fiscal Year Ending December 31, 2017 (unaudited) Series 2009 - 24th Installment - by Year Payment Year 2018 2019 2020 2021 2022 Thereafter Principal Interest Total $ 55,000 $ 2,865 2,865 2,865 2,865 2,865 47,940 $ 2,865 2,865 2,865 2,865 2,865 102,940 $ 55,000 $ 62,265 $ 117,265 Waterworks and Sewer System Revenue Bonds, Series 2009 - $3,967,000 24th Installment Cumulative - $55,000 Interest Rate: 5.100% - 5.250% Date: April 7, 2016 Series 2010 - by Year Payment Year 2018 2019 2020 2021 2022 Thereafter Principal Interest Total $ 40,000 40,000 45,000 45,000 45,000 1,650,000 $ 97,004 95,608 94,112 92,249 90,296 1,103,249 $ 137,004 135,608 139,112 137,249 135,296 2,753,249 $ 1,865,000 $ 1,572,518 $ 3,437,518 Waterworks and Sewer System Revenue Bonds, Series 2010 - $1,990,000 1st Installment Cumulative - $1,990,000 Interest Rate: 2.440% - 5.590% Date: August 25, 2010 70 AGUA SPECIAL UTILITY DISTRICT TSI-5. Bonded Debt Service Requirements by Years Fiscal Year Ending December 31, 2017 (unaudited) CWSRF Series 2014 A - by Year Payment Year 2018 2019 2020 2021 2022 Thereafter Principal Interest Total $ 65,000 65,000 65,000 65,000 65,000 1,985,000 $ 60,179 59,958 59,555 58,898 58,014 761,099 $ 125,179 124,958 124,555 123,898 123,014 2,746,099 $ 2,310,000 $ 1,057,703 $ 3,367,703 CWSRF Series 2014 A - $2,375,000 1st Installment Cumulative - $2,375,000 Interest Rate: 0.030%-3.210% Date: June 5, 2014 DWSRF Series 2014 - by Year Payment Year 2018 2019 2020 2021 2022 Thereafter Principal Interest Total $ 155,000 155,000 160,000 160,000 160,000 2,310,000 $ 76,692 75,700 74,274 72,178 69,522 479,585 $ 231,692 230,700 234,274 232,178 229,522 2,789,585 $ 3,100,000 $ 847,951 $ 3,947,951 DWSRF Series 2014 - $3,565,000 1st Installment Cumulative - $3,565,000 Interest Rate: 0.330%-3.250% Date: June 5, 2014 71 AGUA SPECIAL UTILITY DISTRICT TSI-5. Bonded Debt Service Requirements by Years Fiscal Year Ending December 31, 2017 (unaudited) CWSRF Series 2015 - by Year Payment Year 2018 2019 2020 2021 2022 Thereafter Principal Interest Total $ 225,000 225,000 235,000 240,000 240,000 6,985,000 $ 172,748 172,388 171,398 169,753 167,401 2,301,400 $ 397,748 397,388 406,398 409,753 407,401 9,286,400 $ 8,150,000 $ 3,155,088 $ 11,305,088 CWSRF Series 2015 - $8,150,000 1st Installment Cumulative - $8,150,000 Interest Rate: 0.160%-2.710% Date: August 11, 2015 72 AGUA SPECIAL UTILITY DISTRICT TSI-6. Change in Long-Term Bonded Debt Fiscal Year Ending December 31, 2017 (unaudited) Bond Issues Series 2009 Series 2010 Series 2014 Series 2014 A Series 2015 Interest Rate 3.00% - 5.25% 3.49% - 5.59% 0.64% - 3.25% 0.34% - 3.21% 0.16% - 2.71% Dates Interest Payable 2/1; 8/1 2/1; 8/1 2/1; 8/1 2/1; 8/1 2/1; 8/1 Most Current Maturity Dates 8/1/2017 8/1/2042 8/1/2034 8/1/2044 8/1/2045 Beginning Bonds Outstanding $ Bonds Sold During the Fiscal Year Bonds Retired During the Fiscal Year 3,105,000 $ 1,905,000 - - (85,000) (40,000) $ 3,255,000 $ (155,000) 2,375,000 $ 8,150,000 - - (65,000) - Ending Bonds Outstanding $ 3,020,000 $ 1,865,000 $ 3,100,000 $ 2,310,000 $ 8,150,000 Interest Paid During the Fiscal Year $ 143,045 $ 98,340 $ 77,203 $ 60,198 $ 172,748 Paying Agent's Name and City Series: 2009, 2010, 2014. Wells Fargo Bank, N.A. 2014A, 2015 BOK Financial Dallas, TX Dallas, TX Debt Service Fund cash and temporary investments balances as of December 31, 2017: $ 1,464,716 Average annual debt service payment (principal and interest) for all remaining long-term bonded debt: $ 963,165 73 AGUA SPECIAL UTILITY DISTRICT TSI-7. Comparative Schedule of Revenues and Expenditures Enterprise Fund - Five Years Ended December 31, 2017 (unaudited) Operating Revenue: Metered water sales Non-metered sewer services Construction inspection fees Meter fees Other income Cash over/(short) Total Operating Revenue Operating Expenses: Auditing services Auto and truck expense Bad debt Bank & credit card charges Billing cards expense Computers supplies and other expenses Contracted services - other Cost of production Damages and claims Delivery services Depreciation Dues and fees Education and training Elections expenses Insurance Management advisory services Miscellaneous, uniforms, etc. Office maintenance Office supplies, postage, etc. Professional services Public awareness expense Repairs, rental - plant and equipment Retirement & health insurance benefits Salaries - distribution & meter readers Salaries - office and warehouse Salaries - water and sewer Salaries - overtime /leave/comp absences Small tools & safety equipment Taxes - payroll TCEQ fee Telephone Travel and meeting expenses TWDB - closing costs (amortized) Utilities Water lines maint. & meter installs Total Operating Expenses Operating Income/Loss Nonoperating Revenues (Expenses): Sales of assets / surplus property Grant revenue Rebates and reimbursements Interest income Grant expenses - non capital Financial service fees Casualty loss Administrative overhead Other Interest expense Grant revenue - non capital Total Nonoperating Revenues (Expenses) Income (Loss) before contributions Capital contributions: Capital grant revenues Capital contribution fees Water & sewer impact fees Water rights acquisition fees Total Capital Contributions Net change in net position Restated 2016 Restated 2015 Restated 2014 $ 8,232,956 332,286 117,502 688,900 (30) 9,371,615 $ 7,568,765 332,411 2,900 362,650 491,317 (137) 8,757,905 $ 8,051,377 344,204 5,809 403,808 475,015 (25) 9,280,187 40,500 111,824 12,380 83,176 5,895 97,130 5,860 1,537,230 2,033 3,884,263 10,999 33,737 159,722 173,043 39,333 40,146 125,986 353,151 39,196 375,125 477,648 615,104 930,947 624,428 97,066 46,693 172,927 70,679 37,768 502,913 244,585 10,951,486 (1,390,749) 49,000 100,183 46,115 77,218 8,682 115,367 22,764 1,496,916 673 3,989,066 20,464 27,571 25,755 136,063 8,765 34,071 39,208 143,660 623,880 44,773 431,270 340,781 554,691 894,526 547,994 95,472 43,796 156,047 72,634 37,856 475,995 146,994 10,808,250 (1,436,635) 62,250 123,644 42,201 68,035 3,733 123,861 41,434 1,429,518 1,556 50 3,987,444 11,564 13,620 121,651 62,432 30,271 33,720 133,782 517,786 51,183 107,407 285,562 515,336 787,452 446,683 211,081 42,407 150,288 64,433 36,661 461,904 235,302 10,204,251 (1,446,346) 15,111 (339) 84,239 (10,950) (509,021) (947,150) (1,368,110) (2,758,859) 10,000 20,139 32,552 (9,260) (988,939) 32,058 (903,450) (2,340,085) 6,268,306 9,966 109,043 6,387,315 3,628,456 303,659 88,879 90,045 482,584 (1,857,501) 2017 $ 8,421,979 354,814 129,327 654,617 9,560,737 $ $ $ Restated 2013 Percent of Fund Total Revenues 2016 2015 2014 2013 7,833,902 338,390 14,578 645,824 127,811 (3,060) 8,957,445 88% 4% 0% 1% 7% 0% 100% 88% 4% 0% 1% 7% 0% 100% 86% 4% 0% 4% 6% 0% 100% 87% 4% 0% 4% 5% 0% 100% 87% 4% 0% 7% 1% 0% 100% 94,765 161,330 46,108 65,075 7,802 104,170 4,544 1,470,601 1,702 254 3,978,600 25,768 13,246 37,091 328,283 23,000 15,788 34,641 125,876 987,802 40,935 163,627 88,866 467,388 663,281 415,638 193,333 43,529 145,527 64,368 36,530 12,263 582,076 237,872 10,681,679 (1,401,492) 48,000 172,572 31,216 28,467 5,482 86,862 4,805 1,665,633 3,188 578 3,997,300 12,432 13,047 309,426 4,300 33,645 39,111 132,433 316,362 33,272 119,351 91,422 478,739 631,093 427,657 191,473 35,125 132,299 62,092 42,356 11,446 539,944 144,810 9,845,939 (888,493) 0% 1% 0% 1% 0% 1% 0% 16% 0% 0% 41% 0% 0% 0% 2% 2% 0% 0% 1% 4% 0% 4% 5% 6% 10% 7% 1% 0% 2% 1% 0% 0% 0% 5% 3% 115% -15% 1% 1% 0% 1% 0% 1% 0% 16% 0% 0% 43% 0% 0% 0% 1% 0% 0% 0% 2% 7% 0% 5% 4% 6% 10% 6% 1% 0% 2% 1% 0% 0% 0% 5% 2% 115% -15% 1% 1% 0% 1% 0% 1% 0% 16% 0% 0% 46% 0% 0% 0% 1% 1% 0% 0% 2% 6% 1% 1% 3% 6% 9% 5% 2% 0% 2% 1% 0% 0% 0% 5% 3% 117% -17% 1% 2% 0% 1% 0% 1% 0% 16% 0% 0% 43% 0% 0% 0% 4% 0% 0% 0% 1% 11% 0% 2% 1% 5% 7% 4% 2% 0% 2% 1% 0% 0% 0% 6% 3% 115% -15% 1% 2% 0% 0% 0% 1% 0% 19% 0% 0% 45% 0% 0% 0% 3% 0% 0% 0% 1% 4% 0% 1% 1% 5% 7% 5% 2% 0% 1% 1% 0% 0% 0% 6% 2% 110% -10% 500 2,117 18,342 (80,528) (202,459) (966,000) 80,528 (1,147,500) (2,593,846) 18,311 58,879 1,008 23,827 (54,592) (163,820) (918,347) (1,034,735) (2,436,227) 12,445 49,877 3,432 40,967 (12,973) 79,648 (895,532) (49,877) (772,013) (1,660,506) 0% 0% 0% 1% 0% 0% 0% 0% -5% -10% 0% -14% -29% 0% 0% 0% 0% 0% 0% 0% 0% 0% -11% 0% -10% -25% 0% 0% 0% 0% -1% -2% 0% 0% 0% -11% 1% -13% -30% 0% 1% 0% 0% -1% -2% 0% 0% 0% -10% 0% -11% -26% 0% 1% 0% 0% 0% 0% 0% 1% 0% -10% -1% -9% -19% 1,332,601 99,700 207,103 221,664 1,861,068 (732,778) 183,162 274,135 344,037 315,136 1,116,470 (1,319,757) 1,159,699 634,283 338,089 385,530 2,517,601 857,095 66% 0% 0% 1% 67% 38% 3% 0% 1% 1% 5% -20% 15% 1% 2% 3% 21% -8% 2% 3% 4% 3% 12% -14% 13% 7% 4% 4% 28% 10% 74 $ $ 2017 $ Agua Special Utility District TSI-8 Board members, Key Personnel, and Consultants Fiscal Year Ending 2017 (Unaudited) Complete District Mailing Address: P.O. Box 4379; Mission, TX 78573-0075 District Business Telephone Number: (956) 585-2459 Submission Date of the most recent District Registration Form (TWC Sections 36.054 and 49.054: December 7, 2016 Limit on Fees and Office that a Director may receive during a fiscal year: -0- Term of Office (Elected or Appointed) or Date Hired Fees of Office Paid (2017) Expense Reimbursements (2017) (Elected) 06/16 – 06/20 (Elected) 06/16 – 06/20 (Appointed) 08/15 – 06/18 (Elected) 06/16 – 06/20 (Appointed) 11/17 – 06/18 (Elected) 06/14– 06/18 (Elected) 06/14 – 06/18 $ -0- $ 75.00 President $ -0- $ 165.00 Vice- President $ -0- $ 166.38 Secretary $ -0- $ 91.38 Treasurer $ -0- $ -0- Director $ -0- $ -0- Director $ -0- $ 91.38 Director 10/06/2016 $ 83,376.93 Executive Director Matthew Beatty, Attorney Beatty, Bangle, Strama 09/24/2014 $ 227,921.63 Attorney Javier Pena, Attorney The Pena Law Firm 03/27/2017 $ 32,042.08 Attorney Francisco J. Garza, Attorney 10/09/2016 $ 69,826.17 Attorney Jose E. Saenz CSJ Group 10/15/2016 $ 167,830.00 Engineer Ruben Moreno, CPA Carr, Riggs, & Ingram, L.L.P. 01/21/2009 $ 40,500.00 Auditor Title (2017) Board Members: Rogelio Hernandez III Homero Tijerina Lloyd A. Loya Esequiel Ortiz Ivan Sandoval Ricardo Ochoa Cesar Rodriguez Key Administrative Personnel Oscar Cancino P.E. Consultants: 7 STATISTICAL SECTION (Unaudited) This part of the District’s comprehensive annual financial report presents detailed information as context for understanding what the information in the financial statements, note disclosures, and required supplementary information says about the District’s overall financial health. Contents Page Financial Trends 78-79 These schedules contain trend information to help the reader understand how the District’s financial performance and wellbeing have changed over time. Revenue Capacity 80-84 These schedules contain information to help the reader assess the District’s most significant local revenue source-water fees. Demographic and Economic Information 85-86 These schedules help the reader understand the environment within which the District’s financial activities take place. Operating Information 87-88 These schedules contain service and infrastructure data to help the reader understand how the information the District’s financial report relates to the services the District provides ad the activities it performs. Debt Capacity These schedules present information to help the reader assess the affordability of the District’s current level debt and the Districts ability to issue additional debt in the future. 89-96 AGUA SPECIAL UTILITY DISTRICT Net Position by Component Last Ten Fiscal Years Restated 2016 2017 Business-type Activities Net investment in capital assets Restricted Unrestricted Total Net Position $ $ 78,242,746 4,376,445 4,272,654 86,891,845 $ $ 73,721,454 4,602,762 4,939,173 83,263,389 Restated 2015 $ $ 76,147,479 5,097,983 3,875,428 85,120,890 Restated 2014 $ $ 77,196,831 4,744,169 4,081,936 86,022,936 *Data for FY 2007 is not available. Conversion from La Joya Water Supply to Agua Special Utility District. **Statistical does not show restated fund balance. This is to track prior period adjustments per fiscal year. 78 Restated 2013 $ $ 78,539,940 5,266,321 3,851,837 87,658,098 Restated 2012 $ $ 80,859,232 6,785,696 2,539,891 90,184,819 Restated 2011 Restated 2010 Restated 2009 2008 $ 39,825,666 5,907,363 2,006,055 $ 47,739,084 $ 23,250,419 4,431,789 3,188,875 $ 30,871,083 $ 17,872,766 5,744,006 $ 23,616,772 $ 16,766,669 (218,769) $ 16,547,900 AGUA SPECIAL UTILITY DISTRICT Revenues, Expenses, and Changes in Net Position Last Ten Fiscal Years Operating Revenue Charges for services Total Operating Revenues 2017 Restated 2016 Restated 2015 Restated 2014 Restated 2013 Restated 2012 Restated 2011 Restated 2010 Restated 2009 2008 $ 9,560,737 9,560,737 $ 9,325,500 9,325,500 $ 8,715,703 8,715,703 $ 9,234,079 9,234,079 $ 8,926,229 8,926,229 $ 8,652,439 8,652,439 $ 8,845,469 8,845,469 $ 7,461,901 7,461,901 $ 7,642,368 7,642,368 $ 1,540,747 1,540,747 Operating Expenses: Personnel and benefits Maintenance and operations Cost of Production Depreciation Total Operating Expenses Operating Income/Loss 2,445,953 3,084,040 1,537,230 3,884,263 10,951,486 (1,390,749) 2,589,511 2,686,642 1,496,916 3,989,066 10,762,135 (1,436,635) 2,110,840 2,634,248 1,429,518 3,987,444 10,162,050 (1,446,347) 1,974,033 3,212,337 1,470,601 3,978,600 10,635,571 (1,401,492) 1,952,683 2,199,106 1,665,633 3,997,300 9,814,722 (888,493) 1,903,861 1,805,342 1,545,866 3,879,674 9,134,743 (482,304) 1,602,593 1,850,347 1,463,741 1,321,086 6,237,767 2,607,702 1,535,679 1,852,243 1,454,138 996,418 5,838,478 1,623,423 1,358,880 1,853,947 1,851,085 865,231 5,929,143 1,713,225 345,990 808,835 485,914 207,522 1,848,261 (307,514) Non-Operating Revenues (Expenses) Grant Revenue Interest income Other Capital outlays Grant expenses (non-capital) Interest expense Engineering studies expense Total Nonoperating Revenues (Expenses) 84,239 (505,199) (947,150) (1,368,110) 32,058 32,552 20,879 (988,939) (903,450) 80,528 18,342 (199,841) (80,528) (966,000) (1,147,499) 58,879 23,827 (144,502) (54,592) (918,347) (1,034,735) 49,877 40,967 82,552 (49,877) (895,532) (772,013) 10,409,848 51,222 129,606 (860,386) 9,730,290 14,668,200 95,382 34,169 (839,820) (308,720) 13,649,211 4,399,511 86,257 176,084 (857,348) 3,804,504 2,717,495 60,544 8,146 (658,362) 2,127,823 291,389 19,272 (7,244) (214,672) 88,745 (2,758,859) (2,340,085) (2,593,846) (2,436,227) (1,660,506) 9,247,986 16,256,913 5,427,927 3,841,048 (218,769) 6,387,315 6,387,315 3,628,456 482,584 482,584 (1,857,501) 1,861,068 1,861,068 (732,778) 1,116,470 1,116,470 (1,319,757) 2,517,601 2,517,601 857,095 2,054,952 2,054,952 11,302,938 623,208 623,208 16,880,121 1,815,428 1,815,428 7,243,355 2,127,121 2,127,121 5,968,169 16,766,669 16,766,669 16,547,900 Net Position- Beginning Prior Period Adjustments 83,263,389 - 85,120,890 - 86,022,936 (169,267) 87,658,098 (315,405) 90,184,819 (3,383,816) 47,739,084 31,142,797 30,871,083 (12,120) 23,616,772 10,956 16,547,900 1,100,703 - Net position beginning as restated 83,263,389 85,120,890 85,853,669 87,342,693 86,801,003 78,881,881 30,858,963 23,627,728 17,648,603 - $ 86,891,845 $ 83,263,389 $ 85,120,890 $ 86,022,936 $ 87,658,098 $ 90,184,819 $ 47,739,084 $ 30,871,083 $ 23,616,772 $ 16,547,900 Income (Loss) before contributions Capital Contributions: Capital contributions Total Capital Contributions Changes in Net Position Net position-Ending *Statistical does not show restated fund balance. This is to track prior period adjustments per fiscal year. 79 AGUA SPECIAL UTILITY DISTRICT Water System Debt Coverage Ratio Last Ten Fiscal Years 2017 REVENUES Metered Sales Sewer Revenues Residential Commercial Other Total operating Revenues OPERATING EXPENSES Personnel and benefits Maintenance and operations Cost of Production Total operating expenses $ 8,421,979 $ 320,944 33,870 868,183 9,644,976 $ 2016 $ 8,186,841 $ 296,712 35,574 838,924 9,358,052 $ $ 2,918,120 2,611,873 1,537,230 7,067,223 Available for Debt Service $ Succeeding year annual payment Average annual debt payment 2015 2014 2013 2012 2011 2010 2009 2008 $ 7,568,765 $ 8,051,377 $ 7,833,902 $ 7,759,423 $ 8,071,546 $ 6,702,660 $ 7,187,684 $ 1,446,695 $ 300,165 32,246 832,869 8,734,045 320,105 24,099 862,325 $ 9,257,906 317,099 21,291 794,904 $ 8,967,196 108,364 3,002 832,872 $ 8,703,661 869,305 $ 8,940,851 845,498 $ 7,548,158 515,228 $ 7,702,912 113,324 $ 1,560,019 $ 1,974,033 3,212,337 1,470,601 $ 6,656,971 $ 1,952,683 2,199,106 1,665,633 $ 5,817,422 $ 1,903,861 1,805,342 1,545,866 $ 5,255,069 $ 1,602,593 1,850,347 1,463,741 $ 4,916,681 $ 1,535,679 1,852,243 1,454,138 $ 4,842,060 $ 1,358,880 1,853,947 1,851,085 $ 5,063,912 $ 345,990 808,835 485,914 $ 1,640,739 $ $ $ 2,589,511 2,686,642 1,496,916 6,773,069 $ 2,110,840 2,634,248 1,429,518 6,174,606 2,577,753 $ 2,584,983 $ 2,559,439 $ 2,600,935 $ 3,149,774 $ 3,448,592 $ 4,024,170 $ 2,706,098 $ 2,639,000 $ 2,206,316 $ 1,985,522 $ 1,905,349 $ 1,708,842 $ 1,220,138 $ 1,409,349 $ 1,617,993 $ 1,654,288 N/A N/A $ 1,558,194 $ 1,571,141 $ 1,572,960 $ 1,294,138 $ $ $ $ 937,317 N/A N/A 884,878 899,261 918,329 (80,720) Coverage ratio on succeeding year 1.17 1.30 1.34 1.52 2.58 2.45 2.49 1.64 N/A N/A Coverage ratio on average annual debt 1.65 1.65 1.63 2.01 3.56 3.83 4.38 2.89 N/A N/A Required Coverage Ratio 1.25 1.25 1.25 1.25 1.25 1.25 1.25 1.25 1.25 1.25 Note: "N/A" is for "Not Available" 80 AGUA SPECIAL UTILITY DISTRICT Debt Service Per User Last Ten Fiscal Years 2017 Water Debt Annual Debt Service Total Connections Debt Cost per month Debt cost per year Sewer Debt Annual Debt Service Total Connections Debt Cost per month Debt cost per year $ $ $ $ $ $ 2016 1,847,179 15,524 9.92 118.99 $ 138,340 1,476 7.81 93.73 $ $ $ $ $ 2015 1,767,488 15,339 9.60 115.23 $ 139,576 1,472 7.90 94.82 $ $ $ 2014 1,647,842 15,265 9.00 107.95 $ 135,570 1,477 7.65 91.79 $ $ $ 81 $ $ $ $ 2013 1,344,511 14,970 7.48 89.81 $ 105,691 1,481 5.95 71.36 $ $ $ $ $ 2012 1,327,942 14,749 7.50 90.04 $ 105,209 1,475 5.94 71.33 $ $ $ $ $ 1,574,034 14,411 9.10 109.22 2,764 1,750 0.13 1.58 AGUA SPECIAL UTILITY DISTRICT Utility Rates Last Ten Fiscal Years 2017 2016 2015 2014 2013 2012 2011 2010 RETAIL SERVICE RATES WATER: Retail rates for 5/8" meter or equivalent Minimum charge-zero usage Flat rate Rate per 1,000 gallons over minimum usage: 0-3000 gallons 3,001-10,000 gallons 10,001-20,000 gallons 20,001-50,000 gallons 50,001-999,999,999 gallons Lifeline rates for 5/8" meter or equivalent Minimum charge-zero usage Flat rate Rate per 100 gallons over minimum usage: 0-3000 gallons 3,001-5,000 gallons 5,001-10,000 gallons 10,001-20,000 gallons 20,001-50,000 gallons 50,001-999,999,999 gallons District employs winter averaging for water usage? Total chargers per 10,000 gallons usage: $ 16.53 N $ 16.53 N $ 16.53 N $ 16.53 N $ 16.53 N $ 16.53 N $ 16.53 N $ 16.53 N $ 2.15 2.36 2.89 3.41 4.55 $ 2.15 2.36 2.89 3.41 4.55 $ 2.15 2.36 2.89 3.41 4.55 $ 2.15 2.36 2.89 3.41 4.55 $ 1.90 2.11 2.64 3.16 4.30 $ 1.90 2.11 2.64 3.16 4.30 $ 1.90 2.11 2.64 3.16 4.30 $ 1.90 2.11 2.64 3.16 4.30 $ 13.75 N $ 13.75 N $ 13.75 N $ 13.75 N $ 13.75 N $ 13.75 N $ 13.75 N $ 13.75 N $ 2.15 2.36 2.89 3.41 4.55 $ 2.15 2.36 2.89 3.41 4.55 $ 2.15 2.36 2.89 3.41 4.55 $ 2.15 2.36 2.89 3.41 4.55 $ 1.90 2.11 2.64 3.16 4.30 $ 1.90 2.11 2.64 3.16 4.30 $ 1.90 2.11 2.64 3.16 4.30 $ 1.90 2.11 2.64 3.16 4.30 $ N 39.50 $ N 39.50 82 $ N 39.50 $ N 39.50 $ N 37.00 $ N 37.00 $ N 37.00 $ N 37.00 AGUA SPECIAL UTILITY DISTRICT Utility Rates Last Ten Fiscal Years 2017 WASTEWATER (SEWER): Retail rates for residential meter: Lifeline residential-Minimum charge meter size 3/4" or 5/8" Residential-Minimum charge-meter size 5/8" Residential-Minimum charge-meter size 3/4" Residential-Minimum charge-meter size 1" Residential-Minimum charge-meter size 1.5" Residential-Minimum charge-meter size 2" Residential-Minimum charge-meter size 4" Residential-Minimum charge-meter size 6" Residential-Minimum charge-meter size 8" Rate per 1,000 gallons over minimum usage -ALL METER SIZES Winter average Retail rates for commercial meters: Commercial-Minimum charge-meter size 5/8" Commercial-Minimum charge-meter size 3/4" Commercial-Minimum charge-meter size 1" Commercial-Minimum charge-meter size 1.5" Commercial-Minimum charge-meter size 2" Commercial-Minimum charge-meter size 4" Commercial-Minimum charge-meter size 6" Commercial-Minimum charge-meter size 8" Rate per 1,000 gallons over minimum usage-ALL METERS Winter average 2016 2015 2014 2013 2012 2011 2010 $ 8.19 8.19 10.92 13.65 21.84 24.57 30.04 35.50 40.96 2.53 Y $ 8.19 8.19 10.92 13.65 21.84 24.57 30.04 35.50 40.96 2.53 Y $ 8.19 8.19 10.92 13.65 21.84 24.57 30.04 35.50 40.96 2.53 Y $ 8.19 8.19 10.92 13.65 21.84 24.57 30.04 35.50 40.96 2.53 Y $ 8.19 8.19 10.92 13.65 21.84 24.57 30.04 35.50 40.96 2.53 Y $ 8.19 8.19 10.92 13.65 21.84 24.57 30.04 35.50 40.96 2.53 Y $ 8.19 8.19 10.92 13.65 21.84 24.57 30.04 35.50 40.96 2.53 Y $ - $ 13.65 16.38 19.11 21.84 24.57 30.04 35.50 40.96 2.73 N $ 13.65 16.38 19.11 21.84 24.57 30.04 35.50 40.96 2.73 N $ 13.65 16.38 19.11 21.84 24.57 30.04 35.50 40.96 2.73 N $ 13.65 16.38 19.11 21.84 24.57 30.04 35.50 40.96 2.73 N $ 13.65 16.38 19.11 21.84 24.57 30.04 35.50 40.96 2.73 N $ 13.65 16.38 19.11 21.84 24.57 30.04 35.50 40.96 2.73 N $ 13.65 16.38 19.11 21.84 24.57 30.04 35.50 40.96 2.73 N $ - Note: Fiscal Years 2008-2010 information is not available 83 AGUA SPECIAL UTILITY DISTRICT Total Active Connections Last Ten Fiscal Years 2017 Meter Size Unmetered <_3/4" 1" 1.5" 2" 3" 4" 6" 8" 10" Total connections Total wastewater connections Number of Customers Residential Agricultural Commercial Apartments Schools RV Parks Total water and sewer accounts 2016 2015 2014 2013 2012 2011 2010 15,289 100 8 101 22 4 15,524 15,115 99 8 92 21 4 15,339 14,934 95 10 96 22 4 15,161 14,745 96 10 92 23 4 14,970 14,531 87 10 95 23 3 14,749 14,197 83 10 96 23 2 14,411 13,857 83 10 100 23 2 14,075 13,739 80 9 100 23 2 13,953 1,476 1,476 1,472 1,481 1,475 1,283 - - 2017 14,264 22 859 312 51 16 15,524 2016 14,105 15 839 313 51 16 15,339 2015 13,927 15 831 313 59 16 15,161 2014 13,750 11 821 313 59 16 14,970 2013 13,556 7 811 302 57 16 14,749 2012 13,227 5 803 306 54 16 14,411 2011 12,910 793 303 53 16 14,075 2010 12,802 780 302 53 16 13,953 Gallons pumped into system 2,002,403,000 Less Account for losses (205,224,153) Gallons net of accounted for losses 1,797,178,847 Gallons billed to customers 1,782,771,221 Water accountability ratio 99.20% 2,043,802,000 (194,419,340) 1,849,382,660 1,714,990,141 92.73% 2,452,438,342 (622,785,389) 1,829,652,953 1,507,604,160 82.40% 2,557,961,845 (569,649,296) 1,988,312,549 1,674,102,312 84.20% Note: Fiscal Year 2008 - 2009 information is not available Wastewater connections started in 2012 84 2,751,547,548 (412,732,132) 2,338,815,416 1,785,541,200 76.34% 2,763,065,205 (414,459,781) 2,348,605,424 1,792,877,256 76.34% 2,510,990,647 (376,648,597) 2,134,342,050 1,856,124,500 86.96% 2,319,958,808 (347,993,819) 1,971,964,989 1,443,312,747 73.19% AGUA SPECIAL UTILITY DISTRICT Ten Largest Customers Last Ten Years 2017 2016 2015 2014 2013 2012 2011 2010 INTENTIONALLY LEFT BLANK DUE TO "PROPRIETARY AND CONFIDENTIAL" INFORMATION 85 2009 2008 AGUA SPECIAL UTILITY DISTRICT Principal Employers Current year and 2008 2017 La Joya ISD Rio Queen Citrus Hidalgo County-Subdivisions Wal-Mart HEB Lone Star Citrus Growers Whataburger AGUA Special Utility District Teaching & Mentoring Comm City of La Joya Total Employees 4,368 865 292 287 210 200 95 68 61 50 6,496 Percentage of Total City Employment 48.42% 9.59% 3.24% 3.18% 2.33% 2.22% 1.05% 0.75% 0.68% 0.55% 72.01% Rank 1 2 3 4 5 6 7 8 9 10 La Joya Independent School District CAFR for Fiscal Year 2017 The District provides water to various surrounding cities and rural areas within Hidalgo County. The major employers within the surrounding cities are included above. 86 2008 Employees 4,077 0 0 0 0 0 0 0 62 55 4,194 Rank 1 2 3 Percentage of Total County Employment N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A AGUA SPECIAL UTILITY DISTRICT Authorized Full Time Positions POSITION TITLE Executive Director Asst. Executive Director General Manager Asst. General Manager Community Outreach Coordinator Administrative Assistant Chief Accountant Senior Accounant Junior Accountant Accounts Payable Clerk Payroll Clerk Billing Supervisor Customer Service Inspector Coordinator Billing Clerk Collections Supervisor Cashiers Filing Clerks Customer Service Supervisor Customer Service Representative Receptionist Water Distribution Supervisor Water Distribution Laborers Water Distribution Crew Leaders Water Distribution Backhoe Operators Water Distribution Maintenance Laborers Water Plant Supervisors Water Plant Operators Wastewater Plant Supervisor Wastewater Plant Operators Wastewater Collection Laborer *Wastewater Lab Technician - Part Time Warehouse Supervisor Warehouse Clerks Meter Readers Meter Reader Foreman TOTAL APPROVED POSITIONS 2017 2016 2015 2014 2013 2012 2011 2010 1 1 1 1 1 1 1 1 1 1 1 1 4 1 1 3 1 1 5 4 4 4 2 13 1 3 2 0.5 1 8 1 1 1 1 1 1 1 1 1 1 1 1 1 1 4 1 1 2 1 1 6 3 2 3 2 13 1 2 0.5 1 8 1 1 1 1 1 1 1 1 1 1 1 1 1 1 4 1 1 3 1 1 6 3 2 3 2 13 1 2 0.5 1 8 1 1 1 1 2 1 1 1 1 1 1 4 1 1 3 1 1 5 3 2 2 2 12 1 2 0.5 1 8 1 1 1 1 1 1 1 1 1 1 4 1 1 2 1 1 5 3 2 1 2 12 1 2 0.5 1 8 1 1 1 1 1 1 1 1 1 1 4 1 1 2 1 1 4 2 2 1 2 12 1 2 0.5 1 8 1 1 1 1 1 1 1 1 1 1 4 1 1 2 1 1 4 2 2 1 2 12 1 8 1 1 1 1 1 1 1 1 1 1 3 1 1 2 1 1 4 2 2 1 2 10 1 8 1 71.5 65.5 66.5 61.5 57.5 55.5 52.0 49.0 87 AGUA SPECIAL UTILITY DISTRICT Capital Assets Statistics Last Ten Fiscal Years 2017 WATER Vehicles Water Treatment Plants Miles of water mains Meters Water Towers Ground Storage Booster Stations 2016 2015 2014 2013 2012 2011 19 3 300 14,075 4 N/A N/A N/A 13,953 4 N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A 27 3 579 15,524 4 4 13 27 3 579 15,339 5 4 13 27 3 579 15,161 5 4 13 24 3 579 14,970 5 4 13 19 3 579 14,749 4 4 13 19 3 300 14,411 4 N/A N/A 4 1 9 26 4 1 9 26 3 1 9 26 3 1 9 26 3 1 9 26 3 1 9 26 2 2 3 3 2 2 WASTEWATER Vehicles Wastewater Treatment Plant Lift Stations Miles of wastewater main ADMINISTRATION-GENERAL Vehicles Note: Fiscal Year 2008 information is not available 88 2010 2 2009 12 3 2 N/A N/A 10 3 4 2 AGUA SPECIAL UTILITY DISTRICT Outstanding Obligations Year of Maturity 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 2037 2038 2039 2040 2041 2042 2043 2044 2045 2046 2047 2048 2049 2050 USDA - RUS 91-03 Principal Interest USDA - RUS 91-57 Principal Interest USDA - RECD 91-01 Principal Interest USDA - RECD 91-05 Principal Interest $ 18,339 19,182 20,063 20,984 21,948 22,957 24,011 25,114 26,268 27,475 28,737 30,057 31,438 32,882 34,393 35,973 37,626 39,354 41,162 43,053 45,031 47,100 49,263 51,527 26,866 $ 35,661 34,818 33,937 33,016 32,052 31,043 29,989 28,886 27,732 26,525 25,263 23,943 22,562 21,118 19,607 18,027 16,374 14,646 12,838 10,947 8,969 6,900 4,737 2,473 136 $ 31,387 32,829 34,337 35,915 37,565 39,290 41,095 42,983 44,958 47,023 49,183 51,443 53,806 56,278 58,863 61,568 64,396 67,354 70,449 73,685 77,070 80,611 84,314 88,187 47,388 $ 61,097 59,655 58,147 56,569 54,919 53,194 51,389 49,501 47,526 45,461 43,301 41,041 38,678 36,206 33,621 30,916 28,088 25,130 22,035 18,799 15,414 11,873 8,170 4,297 6,563 $ 53,633 56,097 58,674 61,369 64,188 67,137 70,221 73,447 76,822 80,351 84,042 87,903 91,941 96,165 100,583 105,203 40,769 $ 55,987 53,523 50,946 48,251 45,432 42,483 39,399 36,173 32,798 29,269 25,578 21,717 17,679 13,455 9,037 4,417 4,906 $ 10,040 10,501 10,983 11,488 12,015 12,567 13,145 13,749 14,380 15,041 15,732 16,455 17,211 18,001 18,828 19,693 13,234 $ 10,732 10,271 9,789 9,284 8,757 8,205 7,627 7,023 6,392 5,731 5,040 4,317 3,561 2,771 1,944 1,079 219 $ 800,803 $ 522,199 $ 1,371,977 $ 901,590 $ 1,268,545 $ 531,050 $ 243,063 $ 102,742 89 AGUA SPECIAL UTILITY DISTRICT Outstanding Obligations Year of Maturity 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 2037 2038 2039 2040 2041 2042 2043 2044 2045 2046 2047 2048 2049 2050 TWDB RWAF #1 LO60023 $8.915M Principal Interest TWDB RWAF #2 LO60026 $1M Principal Interest 6th installment Series 2009 Principal Interest TWDB RWAF #3 L080009 $2.5M Principal Interest $ 232,270 244,664 257,720 271,472 285,959 301,218 317,292 334,223 352,058 370,845 390,634 411,479 433,437 456,566 480,929 506,593 533,626 562,101 441,174 $ 368,806 356,411 343,355 329,603 315,116 299,857 283,783 266,852 249,017 230,230 210,441 189,596 167,639 144,509 120,146 94,483 67,450 38,974 9,632 $ 24,566 25,788 27,071 28,417 29,831 31,314 32,872 34,507 36,223 38,025 39,916 41,902 43,986 46,174 48,470 50,881 53,412 56,069 58,857 61,785 $ 38,859 37,637 36,354 35,008 33,594 32,111 30,553 28,918 27,202 25,400 23,509 21,523 19,439 17,251 14,955 12,544 10,013 7,356 4,567 1,640 $ 30,898 32,510 34,202 35,983 37,859 39,832 41,908 44,092 46,387 48,805 51,350 54,024 56,838 59,800 62,916 66,197 69,645 73,271 77,090 81,107 85,332 89,779 94,457 99,378 104,558 110,004 115,737 121,768 128,109 134,788 141,807 36,599 $ 116,714 115,104 113,410 111,628 109,753 107,780 105,705 103,521 101,224 98,807 96,264 93,588 90,773 87,812 84,696 81,418 77,969 74,340 70,522 66,505 62,279 57,833 53,155 48,234 43,056 37,608 31,876 25,846 19,501 12,826 5,803 311 $ 15,000 $ 450 $ 7,184,260 $ 4,085,900 $ 810,066 $ 458,433 $ 2,307,030 $ 2,305,861 $ 15,000 $ 450 90 AGUA SPECIAL UTILITY DISTRICT Outstanding Obligations 7th installment Series 2009 Principal Interest Year of Maturity 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 2037 2038 2039 2040 2041 2042 2043 2044 2045 2046 2047 2048 2049 2050 8th installment Series 2009 Principal Interest 9th Installment Series 2009 Principal Interest 10th Installment Series 2009 Principal Interest $ 70,000 90,000 95,000 100,000 95,000 $ 15,908 13,808 10,928 7,698 3,848 $ 10,000 30,000 $ 1,665 1,665 1,665 1,665 1,665 1,260 $ 40,000 $ 1,680 1,680 1,680 1,680 1,680 1,680 $ 40,000 115,000 120,000 75,000 $ 15,375 15,375 15,375 15,375 15,375 15,375 13,695 8,693 3,413 $ 450,000 $ 52,190 $ 40,000 $ 9,585 $ 40,000 $ 10,080 $ 350,000 $ 118,051 91 AGUA SPECIAL UTILITY DISTRICT Outstanding Obligations 11th Installment Series 2009 Principal Interest Year of Maturity 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 2037 2038 2039 2040 2041 2042 2043 2044 2045 2046 2047 2048 2049 2050 12th Installment Series 2009 Principal Interest 13th Installment Series 2009 Principal Interest 14th Installment Series 2009 Principal Interest $ 35,000 $ 1,593 1,593 1,593 1,593 1,593 1,593 1,593 1,593 1,593 $ 15,000 130,000 135,000 145,000 25,000 $ 21,378 21,378 21,378 21,378 21,378 21,378 21,378 21,378 21,378 20,695 14,585 8,173 1,213 $ 80,000 $ 3,880 3,880 3,880 3,880 3,880 3,880 3,880 3,880 3,880 3,880 3,880 3,880 3,880 $ 45,000 105,000 $ 7,328 7,328 7,328 7,328 7,328 7,328 7,328 7,328 7,328 7,328 7,328 7,328 7,328 5,145 $ 35,000 $ 14,337 $ 450,000 $ 237,068 $ 80,000 $ 50,440 $ 150,000 $ 100,409 92 AGUA SPECIAL UTILITY DISTRICT Outstanding Obligations 15th Installment Series 2009 Principal Interest Year of Maturity 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 2037 2038 2039 2040 2041 2042 2043 2044 2045 2046 2047 2048 2049 2050 16th Installment Series 2009 Principal Interest 17th Installment Series 2009 Principal Interest 18th Installment Series 2009 Principal Interest $ 50,000 145,000 $ 9,628 9,628 9,628 9,628 9,628 9,628 9,628 9,628 9,628 9,628 9,628 9,628 9,628 9,628 7,178 $ 20,000 85,000 $ 5,240 5,240 5,240 5,240 5,240 5,240 5,240 5,240 5,240 5,240 5,240 5,240 5,240 5,240 5,240 4,250 $ 85,000 120,000 $ 10,370 10,370 10,370 10,370 10,370 10,370 10,370 10,370 10,370 10,370 10,370 10,370 10,370 10,370 10,370 10,370 6,120 $ 60,000 120,000 $ 9,180 9,180 9,180 9,180 9,180 9,180 9,180 9,180 9,180 9,180 9,180 9,180 9,180 9,180 9,180 9,180 9,180 6,120 $ 195,000 $ 141,970 $ 105,000 $ 82,850 $ 205,000 $ 172,040 $ 180,000 $ 162,180 93 AGUA SPECIAL UTILITY DISTRICT Outstanding Obligations 19th Installment Series 2009 Principal Interest Year of Maturity 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 2037 2038 2039 2040 2041 2042 2043 2044 2045 2046 2047 2048 2049 2050 20th Installment Series 2009 Principal Interest 21st Installment Series 2009 Principal Interest 22nd Installment Series 2009 Principal Interest $ 60,000 $ 3,060 3,060 3,060 3,060 3,060 3,060 3,060 3,060 3,060 3,060 3,060 3,060 3,060 3,060 3,060 3,060 3,060 3,060 $ 10,000 100,000 $ 5,610 5,610 5,610 5,610 5,610 5,610 5,610 5,610 5,610 5,610 5,610 5,610 5,610 5,610 5,610 5,610 5,610 5,610 5,100 $ 95,000 205,000 90,000 $ 19,890 19,890 19,890 19,890 19,890 19,890 19,890 19,890 19,890 19,890 19,890 19,890 19,890 19,890 19,890 19,890 19,890 19,890 19,890 15,045 4,590 $ 75,000 $ 3,825 3,825 3,825 3,825 3,825 3,825 3,825 3,825 3,825 3,825 3,825 3,825 3,825 3,825 3,825 3,825 3,825 3,825 3,825 3,825 3,825 $ 60,000 $ 55,080 $ 110,000 $ 106,080 $ 390,000 $ 397,545 $ 75,000 $ 80,325 94 AGUA SPECIAL UTILITY DISTRICT Outstanding Obligations 23rd Installment Series 2009 Principal Interest Year of Maturity 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 2037 2038 2039 2040 2041 2042 2043 2044 2045 2046 2047 2048 2049 2050 24th Installment Series 2009 Principal Interest Series 2009 Total Principal Interest Series 2010 Principal Series 2014 Interest $ 35,000 $ 1,785 1,785 1,785 1,785 1,785 1,785 1,785 1,785 1,785 1,785 1,785 1,785 1,785 1,785 1,785 1,785 1,785 1,785 1,785 1,785 1,785 $ 15,000 40,000 $ 2,865 2,865 2,865 2,865 2,865 2,865 2,865 2,865 2,865 2,865 2,865 2,865 2,865 2,865 2,865 2,865 2,865 2,865 2,865 2,865 2,865 2,100 $ 85,000 90,000 95,000 100,000 105,000 110,000 115,000 120,000 125,000 130,000 135,000 145,000 150,000 155,000 165,000 170,000 180,000 190,000 195,000 205,000 215,000 40,000 $ 140,710 138,160 135,280 132,050 128,200 123,947 119,327 114,325 109,045 103,356 97,246 90,834 83,874 76,598 69,003 60,835 52,335 43,155 33,465 23,520 13,065 2,100 $ 40,000 40,000 45,000 45,000 45,000 50,000 50,000 55,000 55,000 60,000 60,000 65,000 70,000 75,000 75,000 80,000 85,000 90,000 95,000 100,000 105,000 110,000 115,000 125,000 130,000 $ 97,004 95,608 94,112 92,249 90,296 88,275 85,955 83,610 80,921 78,176 75,122 72,038 68,665 64,997 61,029 57,024 52,672 52,048 43,152 37,984 32,544 26,832 20,683 14,255 7,267 $ 35,000 $ 37,485 $ 55,000 $ 62,265 $ 3,020,000 $ 1,890,430 $ 1,865,000 $ 1,572,518 95 AGUA SPECIAL UTILITY DISTRICT Outstanding Obligations Year of Maturity 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 2037 2038 2039 2040 2041 2042 2043 2044 2045 2046 2047 2048 2049 2050 Series 2014 Principal Series 2014A Principal Interest Interest Total Agua Debt Interest Series 2015 Principal Interest Principal $ 155,000 155,000 160,000 160,000 160,000 165,000 170,000 175,000 180,000 180,000 185,000 195,000 200,000 205,000 210,000 220,000 225,000 $ 76,692 75,700 74,274 72,178 69,522 66,402 62,838 58,843 54,433 49,645 44,623 39,276 33,485 27,385 20,989 14,353 7,313 $ 65,000 65,000 65,000 65,000 65,000 70,000 70,000 70,000 70,000 75,000 75,000 80,000 80,000 80,000 85,000 85,000 90,000 90,000 95,000 100,000 100,000 105,000 105,000 110,000 115,000 115,000 120,000 $ 60,179 59,958 59,555 58,898 58,014 56,942 55,640 54,205 52,651 50,999 49,131 47,189 45,053 42,853 40,597 38,166 35,701 33,046 30,373 27,504 24,434 21,314 18,017 14,699 11,201 7,532 3,852 $ 225,000 225,000 235,000 240,000 240,000 240,000 240,000 245,000 245,000 260,000 260,000 260,000 275,000 275,000 280,000 295,000 295,000 305,000 315,000 315,000 330,000 335,000 345,000 350,000 365,000 375,000 385,000 395,000 $ 172,748 172,388 171,398 169,753 167,401 164,377 160,945 157,177 153,036 148,577 143,533 138,229 132,691 126,641 120,426 113,930 106,939 99,829 92,357 84,513 76,544 68,063 59,353 50,279 40,969 31,187 21,100 10,705 $ $ 3,100,000 $ 847,951 $ 2,310,000 $ 1,057,703 $ 8,150,000 $ 3,155,088 $ 96 971,133 996,571 1,043,050 1,075,628 1,104,365 1,149,315 1,185,544 1,233,115 1,272,096 1,332,565 1,374,594 1,438,263 1,503,657 1,555,866 1,619,982 1,696,108 1,687,708 1,473,149 1,388,732 979,630 957,433 807,490 793,034 824,092 788,812 600,004 620,737 516,768 128,109 134,788 141,807 36,599 32,430,744 $ $ 1,235,189 1,209,233 1,180,557 1,148,487 1,113,056 1,074,616 1,033,150 989,034 941,977 892,176 839,051 783,291 724,099 661,596 596,050 527,192 459,979 388,524 318,941 271,412 233,249 194,915 164,115 134,237 109,192 76,327 56,828 36,551 19,501 12,826 5,803 311 17,431,465 Total $ $ 2,206,322 2,205,804 2,223,607 2,224,115 2,217,421 2,223,931 2,218,694 2,222,149 2,214,073 2,224,741 2,213,645 2,221,554 2,227,756 2,217,462 2,216,032 2,223,300 2,147,687 1,861,673 1,707,673 1,251,042 1,190,682 1,002,405 957,149 958,329 898,004 676,331 677,565 553,319 147,610 147,614 147,610 36,910 49,862,209 Burtnn Mn?umhar lungnria, up McAllen Brownsville INDEPENDENT REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENTAUDITING STANDARDS Members of the Board Agua Special Utility District Palmview, Texas 78572 We have audited, in accordance with the auditing standards generally accepted in the United States of America and the standards applicable to ?nancial audits contained in Government Auditing Standards issued by the Comptroller General of the United States, the financial statements of Agua Special Utility District as of and for the year ended December 31, 2017 and the related notes to the financial statements, which collectively comprise the Agua Special Utility District?s basic ?nancial statements and have issued our report thereon dated April 19, 2018. Internal Control over Financial Reporting in planning and performing our audit of the financial statements, we considered the District's internal control over financial reporting (internal control) to determine the audit procedures that are appropriate in the circumstances for the purpose of expressing our opinion on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the District's internal control. Accordingly, we do not express an opinion on the effectiveness of the District's internal control. A de?ciency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, misstatements on a timely basis. A material weakness is a de?ciency, or a combination of deficiencies, in internal control such that there is a reasonable possibility that a material misstatement of the entity?s financial statements will not be prevented, or detected and corrected on a timely basis. A significant deficiency is a deficiency, or a combination of de?ciencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance. Our consideration of internal control was for the limited purpose described in the first paragraph and was not designed to identify all deficiencies in internal control that might be material weaknesses or significant deficiencies and therefore, material weaknesses or significant de?ciencies may exist that have not been identi?ed. Given these iimitations, during our audit we did not identify any deficiencies in internal control that we consider to be material weaknesses. We did identify certain deficiencies in internal control, described in the accompanying schedule of findings and responses that we consider to be significant deficiencies. (2017-01, 2017-002, 2017?3, 2017-4, 2017- 5, 2017-6, 2017-7, 2017-8, 2017-9) Compliance and Other Matters As part of obtaining reasonable assurance about whether the District?s financiai statements are free from material misstatement, we performed tests of its compliance with certain provisions of laws, reguiations, contracts, and grant agreements, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The results of our tests disclosed instances of noncompliance or other matters that are required to be reported under GovernmentAuditing Standards and which are described in the accompanying schedule of findings and responses as item 2017-001. BML Fragoso, S.C. Matamoros, MX 205 Pecan Boulevard, McAllen, TX 78501 956-618?2300 - 99 District?s Response to Findings The District's response to the ?ndings identi?ed in our audit is described in the accompanying schedule of ?ndings and responses. The District's response was not subjected to the auditing procedures applied in the audit of the ?nancial statements and, accordingly, we express no opinion on it. Purpose of this Report The purpose of this report is solely to describe the scope of our testing of internal control and compliance and the results of that testing. and not to provide an opinion on the effectiveness of the entity's internal control or on compliance. This report is an integral part of an audit performed in accordance with GovernmentAuditing Standards in considering the entity's internal control and compliance. Accordingly, this communication is not suitable for any other purpose. 84:. MM florngf.? Texas April 19, 2018 100 AGUA SPECIAL UTILITY DISTRICT  SCHEDULE OF FINDINGS AND RESPONSES  FOR THE YEAR ENDED DECEMBER 31, 2017    Finding No: 2017-01 Employment Contracts and Settlement Payments   Criteria and Condition: Government Auditing Standards define “abuse” as “behavior that is deficient or improper when compared with behavior that a prudent person would consider reasonable and necessary business practice given the facts and circumstances.” The District paid a settlement payment of $489,000 to two employees with whom the District entered into employment contracts. The act of entering into these employment contracts appears to fall within the definition of abuse. Cause and Effect: In February 2017, Legislation (Senate Bill 814) had been introduced which, depending on its final passage, may have required the District to no longer employ a number employees. It appears the District’s Executive Director is given wide latitude by the District’s governing documents and while the legislation was pending, he executed employment contracts dated May 1, 2017 with two at-will employees. This bill was passed and was signed into law in June of 2017 with an effective date of September 1, 2017. The execution of these contracts and the terms contained therein are considered unreasonable and unnecessary, thus falling within the definition of abuse for several reasons including:      The employment contracts were signed prior to the known outcome of the final version or ultimate passage of the bill. The length of term (5 years). Allowed for increases in monthly pay which was inconsistent with how other employee salary needs were being addressed. It was not customary for the District to enter into employment contracts beyond that of the Executive Director and prior to May 1, 2017, the positions held by these employees were never subject to an employment contract. If ultimately the final version of Bill 814 required these employees be replaced, the skill set necessary to fulfill their job responsibilities was readily available in the labor market. Recommendation: In fulfilling its responsibilities, the Board should consider providing greater oversight over certain actions taken by the District’s Executive Director, including limiting the Executing Director’s ability to enter into contracts on behalf of the District. The Board should consider amending the District’s by-laws to ensure that such limitations are in place. Views of Responsible Officials: See response and corrective action plan.       101 AGUA SPECIAL UTILITY DISTRICT  SCHEDULE OF FINDINGS AND RESPONSES  FOR THE YEAR ENDED DECEMBER 31, 2017    Finding No: 2017-02 Authorized Check Signors   Criteria and Condition: Only employees, authorized by the Board of Directors, should be signors on the Districts’ bank accounts. Cause and Effect: An Executive Director who is no longer with the District continues to appear as an authorized signor of the District’s bank accounts. The District’s depository institution did not receive a formal request from the District requesting the former Executive Director be removed as an authorized signor. Our audit procedures did not detect checks which were signed by the former Executive Director after his separation from the District. Recommendation: Due care and follow up should be made when there are changes in the authorized signors of the District’s bank accounts to ensure there is a formal and documented request to the bank to make the appropriate changes. Views of Responsible Officials: See response and corrective action plan. Finding No: 2017-03 Unsigned Checks Criteria and Condition Checks should never be released without an authorized signature. Two separate checks, each dated February 6, 2017, totaling $150 were issued without signature. These checks were cashed by the payee. Cause and Effect The District’s processes and procedures did not prevent or detect the issuance of unsigned checks. Although the amounts are insignificant, the issuance of checks without signature is a deficiency in internal control. 102 AGUA SPECIAL UTILITY DISTRICT  SCHEDULE OF FINDINGS AND RESPONSES  FOR THE YEAR ENDED DECEMBER 31, 2017    Recommendation Those responsible for the preparation, authorization and issuance of checks should ensure all checks contain an authorize signature prior to release. Views of Responsible Officials: See response and corrective action plan. Finding No: 2017-04 Inventory Reports Criteria and Condition The ability of the District’s software system to print inventory reports from prior periods is important in ensuring a proper audit trail. A detailed inventory report as of end of year was not printed and maintained in the District’s records. Cause and Effect The District’s software is limited in its ability to print past inventory reports. Per discussion with management, printing of inventory reports is time sensitive. This limits the District ability to review inventory amounts from prior periods and provide an audit trail. Recommendation The District should contact its software vendor to ensure inventory reports can be printed for prior periods in order a review of inventory balances can be performed and to ensure the existence of an audit trail. Views of Responsible Officials: See response and corrective action plan. Finding No: 2017-05 Unearned Subdivisions Revenue Criteria and Condition Fees collected from developers for a new subdivision are recognized as revenue once the infrastructure has been completed and the subdivision is accepted by the District. The balance of Unearned Subdivision Revenue that has remained unchanged since 2007, totals $201,849. Cause and Effect The monitoring of subdivision revenue is important to ensuring monies related to this process are properly administered. As the balance has remained unchanged since 2007, it would suggests this process should be improved. 103 AGUA SPECIAL UTILITY DISTRICT  SCHEDULE OF FINDINGS AND RESPONSES  FOR THE YEAR ENDED DECEMBER 31, 2017    Recommendation We recommend a review of the balance to determine if amounts are due to developers or whether the amount should represent additional revenue to the District. Views of Responsible Officials: See response and corrective action plan. Finding No: 2017-06 Capital Asset Capitalization Policy Criteria and Condition The District’s asset capitalization policy is inconsistent with the District’s by-laws. Cause and Effect The consistent application of a fixed asset capitalization policy is critical in ensuring costs related to capital assets cost are capitalized properly. Section 5.09 of the District’s by-laws outlines the capitalization policy to be followed and includes items with a useful life of greater than one year and a cost greater than $1,000. The capitalization threshold currently followed by the District are items with a useful life of greater than one year and a cost greater than $500. Recommendation We recommend the District follow the asset capitalization policy set forth in its by-laws. Views of Responsible Officials: See response and corrective action plan. Finding No: 2017-07 Procurement of Goods and Services Criteria and Condition The District’s procurement policy outlines the requirement to obtain verbal or written quotes or bids for purchases within specified dollar ranges. Procurement for professional services require a qualifications based selection. We noted 13 instances where documentation could not be provided as evidence procedures were followed. Further, we noted the procurement policy does not set forth a general requirement to obtain new quotes or bids after a certain period of time. 104 AGUA SPECIAL UTILITY DISTRICT  SCHEDULE OF FINDINGS AND RESPONSES  FOR THE YEAR ENDED DECEMBER 31, 2017    Cause and Effect In some instances, the procurement of goods and services occurred in previous years, where procurement documentation was not maintained. The lack of documented evidence of the procurement process does not provide the appropriate audit trail for testing and may result in management override of controls in this area. Not having updated quotes or bids may result in the District not purchasing goods at the lowest price at the time. Recommendation We recommend the District maintain documentation on quotes or bids obtained as part of the procurement process. For professional services, we recommend the qualifications assessment be maintained on file. In addition, we recommend the District evaluate the need for obtaining new quotes or bids after a certain period of time has passed. Views of Responsible Officials: See response and corrective action plan. Finding No: 2017-08 IT Controls Criteria and Condition Controls should be in place to ensure electronic data is properly safeguarded and readily available if an unexpected event occurs. We noted the following areas of improvement in controls in this area:    The District’s IT consulting organization maintains control of the Admin Passcode to the Network. A mutual agreement between the District’s IT consulting organization and the District should exist in the form of a written policy to describe the action the District should take in the event of an emergency should someone on site require the Admin passcode. The District does not have a written IT policy documenting policies and procedures including passwords, email use, document storage, user management and backup policies. A formal written disaster recovery plan is not in place to ensure the District is able to resume operations and avoid data loss in the event of a disaster. Cause and Effect The District’s ability to safeguard its electronic data is critical for the District to operate. Failure to maintain adequate controls to safeguard data may have an adverse effect on the District’s ability to meet its operation and reporting objectives. 105 AGUA SPECIAL UTILITY DISTRICT  SCHEDULE OF FINDINGS AND RESPONSES  FOR THE YEAR ENDED DECEMBER 31, 2017    Recommendation We recommend (1) a written policy be provided by the District’s IT consulting organization to the District describing the action the District should take in the case of an emergency should someone on site require the Admin passcode to the network; (2) the District document IT policies to include a policies regarding passwords, email use, document storage, user management, and backups. The policy should be reviewed annually and a signed copy be maintained in the employee’s HR file; and (3) the District develop a disaster recovery plan that covers the actions to be taken in the event of different disaster scenarios impacting their facilities, network, data and key personnel. The disaster recovery plan should be tested on an annual basis and sampling of scenarios should be tested quarterly. Views of Responsible Officials: See response and corrective action plan.   Finding No: 2017-09 Approval of Employee Hires Criteria and Condition Only individuals, whether employees or consultant contractors, authorized by the Board directly or through approved policies, should approve the hiring of employees. We noted two instances where the supporting documentation indicated the approval of hiring was performed by two separate individuals who were not formally authorized to do so either directly by the Board or through existing policy. Cause and Effect The District does not have a plan addressing hiring decisions when the organization lacks an Executive Director or General Manager. This can lead to misunderstandings where approvals are necessary to ensure the continuity of the hiring process. In one instance, an employee’s file included documentation that the interim general manager verbally approved the hiring prior to the interim general manager being formally hired by the Board. The interim general manager indicates that verbal approval was not made. In a separate instance, a board member’s initials were noted on an internal memo prepared by a District employee requesting approval to hire an employee. 106 AGUA SPECIAL UTILITY DISTRICT  SCHEDULE OF FINDINGS AND RESPONSES  FOR THE YEAR ENDED DECEMBER 31, 2017    Recommendation We recommend the District develop a formal plan addressing hiring decisions when the organization lacks an Executive Director or General Manager. This plan should include a brief discussion of the Board’s role in the hiring process as it is a generally accepted best practice that Board Members not be involved in internal processes related to employee hiring. Views of Responsible Officials: See response and corrective action plan.     107 Board of Directors Agua Special Utility District P. O. Box 4379 _Mission, Texas _ 78573-0075 (956) 585-2459 _ FAX (956) 585-1516 Rogelio Hernández, III, President Homero Tijerina, Vice-President Lloyd A. Loya, Secretary Esequiel Ortiz, Jr., Treasurer Ricardo Ochoa, Director Cesar Rodríguez, Jr., Director Ivan Sandoval, Director AGUA SPECIAL UTILITY DISTRICT CORRECTIVE ACTION PLAN FOR THE YEAR ENDED DECEMBER 31, 2017 ___________________________________________ Findings related to the Financial Statements 2017-01 Employment Contracts and Settlement Payments The Executive Director in 2017 was granted the authority to contract and hire the personnel he deemed necessary to the Districts operation. The Executive Directors authority is provided by State Statute. That executive director has separated from the District and the Board of Directors has eliminated the Executive Director Management model. The Board of Director has established a General Manager Management model as was originally created for the District when the entity was created after the Receivership of its predecessor. The Board of Directors will consider the recommendations and obtain legal advice on amending the District's by-laws. Contact Person: General Manager, 956-585-2459 Proposed Completion Date: December 31, 2018 2017-02 Authorized Check Signors The District's goal is to ensure that its Finance Department follows internal policies and procedures to ensure authorized signers are current with the District's bank accounts. The Interim General Manager has identified that the Finance Department failed to follow policies and procedures by not requesting an agenda item for board action on authorized signers. An agenda item will be presented at the next board meeting to address the issue and direction has been provided to Finance to ensure that the department follows policies and procedures. Contact Person: Dagoberto Soto Jr., 956-585-2459 Proposed Completion Date: July 1, 2018 108 Agua Special Utility District is an equal opportunity Provider and Employer 3120 North Abram Road, Palmview, Texas 78572 2017-03 Unsigned Checks The District's goal is to ensure that its Finance Department follows internal policies and procedures to ensure that checks will never be released without an authorized signature. The Interim General Manager has identified that the Finance Department failed to follow policies and procedures by not reviewing the checks before being released by Finance. Direction has been provided to Finance to ensure that the department follows policies and procedures to ensure that prior to release of any checks they contain an authorizing signature. Contact Person: Dagoberto Soto Jr., 956-585-2459 Proposed Completion Date: Not Applicable 2017-04 Inventory Reports The District's software system has been in place since 2010, the Executive Director and the Assistant Executive Director did not ensure that the proper software system was in place. The Interim General Manager has met with the IT consultant to see if they have the capacity to provide the District the software. The District will follow the recommendation. Contact Person: General Manager, 956-585-2459 Proposed Completion Date: December 31, 2018 2017-05 Unearned Subdivisions Revenue The District's goal is to ensure that its Finance Department follows internal policies and procedures to ensure that any unearned subdivisions revenue collected from developers are properly monitored. The Interim General Manager will meet with Finance and any and all departments related to the process of properly administering these revenues. Contact Person: General Manager, 956-585-2459 Proposed Completion Date: December 31, 2018 2017-06 Capital Asset Capitalization Policy The District's goal is to ensure that its Finance Department follows internal policies and procedures to ensure that the Asset Capitalization policy in the District's by-laws are followed. The Interim General Manager has identified that the Finance Department failed to follow policies and procedures by not following the Asset Capitalization policy. The Interim General Manager with the assistance of the Finance Department will ensure that the policy is followed. Contact Person: Dagoberto Soto Jr., 956-585-2459 Proposed Completion Date: December 31, 2018 109 Agua Special Utility District is an equal opportunity Provider and Employer 3120 North Abram Road, Palmview, Texas 78572 2017-07 Procurement of Goods and Services The District will follow the recommendation and during the tenure of the Interim General Manager since January 1, 2018 to present the procurement policies have been and will continue to be followed. Contact Person: General Manger, 956-585-2459 Proposed Completion Date: Not Applicable 2017-08 IT Controls The District's software system and IT Controls has been in place for over five years and previous Executive Director's and the Assistant Executive Director's did not ensure that the proper software system and IT Controls were in place. The Interim General Manager has met with the IT consultant to see if they have the capacity to provide the District the software and IT controls. The District will follow the recommendation. Contact Person: General Manager, 956-585-2459 Proposed Completion Date: December 31, 2018 2017-09 Approval of Employee Hires The District will present the recommendations to the Board of Directors and obtain legal advice on amending the District’s By-Laws. Contact Person: General Manager, 956-585-2459 Proposed Completion Date: December 31, 2018 110 Agua Special Utility District is an equal opportunity Provider and Employer 3120 North Abram Road, Palmview, Texas 78572