HomeMy WebLinkAbout2015 - 27245 LBWL Lansing Board of Water and Light Basic FS - 0615 - FINAL Nil
Hometown People. Hometown Power.
Board of Water and Light -
City of Lansing, Michigan
Financial Report
with Additional Information
June 30, 2015
Board of Water and Light - City of Lansing, Michigan
Contents
Report Letter 1-2
Management's Discussion and Analysis 3-5
Basic Financial Statements
Statement of Net Position 6-7
Statement of Revenues, Expenses, and Changes in Net Position 8
Statement of Cash Flows 9-10
Pension Trust Funds - Statement of Net Position I I
Pension Trust Funds - Statement of Changes in Net Position 12
Notes to Financial Statements 13-55
Required Supplemental Information 56
Defined Benefit Plan Schedules 57-58
Retiree Benefit Plan and Trust Schedule 59
Additional Information 60
Income Available for Revenue Bond Debt Retirement 61
Detail of Statement of Revenues and Expenses 62-63
Detail of Statement of Changes in Net Position 64
Pension Trust Funds - Detail of Statement of Net Position 65
Pension Trust Funds - Detail of Statement of Changes in Net Position 66-67
Independent Auditor's Report
To the Honorable Mayor, Members of
the City Council, and Commissioners
of the Board of Water and Light
City of Lansing, Michigan
Report on the Financial Statements
We have audited the accompanying financial statements of the Enterprise Fund and Pension Fiduciary
Funds of the Board of Water and Light - City of Lansing, Michigan (the "BWL") as of and for the years
ended June 30, 2015 and 2014, and the related notes to the financial statements, which collectively
comprise the BWL'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.
Auditor's Responsibility
Our responsibility is to express an opinion on these financial statements based on our audits. We
conducted our audits in accordance with auditing standards generally accepted in the United States of
America. Those standards require that we plan and perform the audits 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 financial 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 includes 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
respective financial position of the Enterprise Fund and Pension Fiduciary Funds of the BWL as of June
30, 2015 and 2014 and the respective changes in its financial position and cash flows for the years then
ended, in accordance with accounting principles generally accepted in the United States of America.
I
To the Honorable Mayor, Members of
the City Council, and Commissioners
of the Board of Water and Light
City of Lansing, Michigan
Emphasis of Matter
As discussed in Note 16 to the financial statements, in 2015, the BWL adopted GASB Statement No. 68,
Accounting and Financial Reporting for Pensions - an Amendment of GASB Statement No. 27. Our opinion is
not modified with respect to this matter.
Other Matters
Required Supplemental Information
Accounting principles generally accepted in the United States of America require that the management's
discussion and analysis and other required supplemental information as identified in the table of contents,
be presented to supplement the basic financial statements. Such information, although not a part of the
basic financial statements, is required by the Governmental Accounting Standards Board,which 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
supplemental 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 opinions on the financial statements that collectively
comprise the BWL's basic financial statements. The accompanying additional information, as identified in
the table of contents, is presented for the purpose of additional analysis and is not a required part of the
basic financial statements.
The additional information, as identified in the table of contents, 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 additional information, as identified in the table of contents, is fairly stated in all material
respects in relation to the basic financial statements as a whole.
PLLC
August 31, 2015
2
Board of Water and Light - City of Lansing, Michigan
Management's Discussion and Analysis
This section explains the general financial condition and results of operations for the Lansing
Board of Water and Light (the "BWL"). The BWL includes the consolidated operations of the
electric, water, steam, and chilled water utilities. The notes to financial statements following this
section are essential reading for a complete understanding of the financial and operational results
for fiscal year 2015.
Overview of Business
The BWL owns and operates an electric system which generates, purchases, and distributes
electric power and energy and provides electric service to over 96,000 residential, commercial,
and industrial customers in the greater Lansing area. The BWL generated 63 percent of its retail
and wholesale sales from existing generation assets and purchased additional electric generation
through its participation in the MISO markets, membership in the Michigan Public Power
Agency, which includes the BWL's partial ownership of Detroit Edison's Belle River Plant, and
through its landfill gas renewable energy purchase agreement with Granger Electric of Lansing.
The BWL owns and operates water wells, a raw water transmission system, water conditioning
facilities, and an extensive water distribution system serving potable water to over 55,000
residential, commercial, and industrial customers in the greater Lansing area.
The BWL owns and operates steam generation boilers, a steam transmission and distribution
system serving over 164 customers, and a chilled water facility and distribution piping system
serving 19 customers in the City of Lansing.
Capital Expenditures
Capital expenditures are driven by the need to replace, expand, or maintain the generation,
transmission, and distribution systems of the BWL to meet customer utility needs and to
maintain a satisfactory level of service reliability. The BWL invests essentially all revenues not
paid out for operations and maintenance expense, nonoperating expenses, or debt service back
into capital improvements for the water, electric, steam, and chilled water systems. Gross
capital expenditures were $65.9 and $59.1 million in fiscal years 2015 and 2014, respectively.
The BWL generally pays the major portion of the cost of its capital improvements from internally
generated funds and a lesser portion from the proceeds of revenue bonds that are issued from
time to time.
Detailed financial information for the separate utilities of water, electric, steam, and chilled
water can be found in the additional information section beginning on page 60.
3
Board of Water and Light - City of Lansing, Michigan
Management's Discussion and Analysis (Continued)
Condensed Financial Information (dollars in millions)
June 30 %Change
2015 2014 2013 2014 to 2015
Assets
Utility plant $ 715.0 $ 699.3 $ 684.1 2.2
Other assets 337.9 360.8 372.9 (6.3)
Total assets 1,052.9 1,060.1 1,057.0 (0.7)
Deferred Outflows of Resources 1.0 1.2 1.7 (16.7)
Liabilities
Long-term liabilities 368.6 383.2 403.4 (3.8)
Other liabilities 65.2 69.5 71.4 (6.2)
Total liabilities 433.8 452.7 474.8 (4.2)
Deferred Inflows of Resources 24.9 26.1 8.1 (4.6)
Net Position
Net investment in capital assets 354.7 342.7 342.1 3.5
Restricted for debt service 77.7 76.0 69.7 2.2
Unrestricted 162.8 163.8 163.9 (0.6)
Net position $ 595.2 $ 582.5 $ 575.7 2.2
Note: GAS13 68 was implemented in FYI 5, but was not reflected retroactively in FYI 3 in the table above.
Utility plant increased by $55 million due to normal construction; however, this was offset by
depreciation, thus net plant only increased by$15.7 million.
Other assets decreased by $22.9 million. The decrease is largely attributable to the
disbursement of revenue bond funds during the year to pay for costs of capital improvements.
4
Board of Water and Light - City of Lansing, Michigan
Management's Discussion and Analysis (Continued)
Condensed Financial Information (dollars in millions) (Continued)
Year Ended June 30 %Change
2015 2014 2013 2014 to 2015
Results of Operations
Operating revenues $ 353.5 $ 348.0 $ 331.7 1.6
Operating expenses 309.0 310.9 295.7 (0.6)
Nonoperating expense- Net (31.9) (38.4) (17.3) 16.9
Changes in Net Position $ 12.6 $ (1.3) $ 18.7 (1,069.2)
*Note: GASB 68 was implemented in FY 15, but was not reflected retroactively in FY 13 in the table above.
Operating revenues increased over last year's due to utility rate increases.
Nonoperating expenses decreased by $6.6 million from fiscal year 2014. In 2014, a loss on
disposal of assets associated with the reconstruction of our Haco customer service facility was
recognized, which caused the decrease in expenses in 2015.
Budget - The BWL commissioners approved a $288.4 million operating expense budget
(excluding depreciation and impairment) for fiscal year 2015. Actual expenses (excluding
depreciation) were $269.8 million or 6.4 percent less than budget. The net capital improvement
budget was $65.4 million for fiscal year 2015 and actual net capital expenditures were
approximately$58.5 million.
Financing Activities - During fiscal year 2015, there were no significant financing activities.
5
Board of Water and Light - City of Lansing, Michigan
Statement of Net Position
June 30
2015 2014
Assets
Current Assets
Restricted cash and cash equivalents (Notes 4 and 1 1) $ 52,752,941 $ 51,773,756
Cash and cash equivalents(Notes 4 and 1 1) 55,925,376 51,545,956
Investments(Notes I and 1 1) 91,585,641 91,030,822
Accounts receivable- Net(Note 1) 22,014,605 23,602,383
Estimated unbilled accounts receivable(Note 1) 18,280,777 17,157,806
Inventories(Note 1) 25,860,743 23,474,266
Other 3,344,122 3,617,737
Total current assets 269,764,205 262,202,726
Other Assets
Recoverable energy asset(Note 6) 4,652,068 2,797,695
Recoverable revenue of Central Utilities
Complex(Note 6) (7,241,153) (4,255,372)
Recoverable environmental remediation (Note 6) 18,616,005 23,626,611
Special deposit 11,380,000 14,225,000
Net pension asset(Note 8 and 16) 8,284,230 11,188,702
Other 8,123,949 4,220,485
Total other assets 43,815,099 51,803,121
Noncurrent Restricted Assets(Investments) (Notes 4 and 1 1) 24,263,950 46,828,045
Utility Plant(Note 1)
Water 296,802,952 288,627,287
Electric 804,947,799 773,262,520
Steam 67,510,134 64,685,056
Chilled water 33,622,140 32,917,461
Common facilities 87,132,519 75,026,577
Central Utilities Complex 76,079,000 76,079,000
Total 1,366,094,544 1,310,597,901
Less accumulated depreciation 665,849,130 624,749,51 1
Net 700,245,414 685,848,390
Construction in progress (Note 3) 14,781,967 13,439,221
Total utility plant 715,027,381 699,287,611
Total assets 1,052,870,635 1,060,121,503
Deferred Outflows of Resources-
Bond refunding loss being amortized 1,032,273 1,228,706
See Notes to Financial Statements. 6
Board of Water and Light - City of Lansing, Michigan
Statement of Net Position (Continued)
June 30
2015 2014
Liabilities and Net Position
Current Liabilities
Accounts payable $ 32,695,192 $ 32,120,138
Current portion of long-term debt(Note 5) 13,299,345 17,824,253
Accrued payroll and related taxes 2,756,033 3,725,544
Customer deposits 2,678,145 2,674,858
Unearned revenue 1,127,500 -
Accrued compensated absences(Note 1) 4,092,441 3,916,658
Accrued interest 8,547,591 9,261,217
Total current liabilities 65,196,247 69,522,668
Compensated Absences- Less current portion (Note 1) 6,916,286 7,182,984
Other Long-term Liabilities
Workers'compensation 2,200,000 2,000,000
Environmental remediation liability(Note 9) 10,172,203 10,356,249
Other 2,314,711 2,327,615
Total other long-term liabilities 14,686,914 14,683,864
Long-term Debt- Less current portion (Note 5) 347,044,294 361,310,213
Total liabilities 433,843,741 452,699,729
Deferred Inflows of Resources
Regulated operations- Revenue intended to cover
future costs(Note 6) 22,667,354 18,944,163
Net pension asset deferrals(Notes 8 and 16) 2,201,407 7,143,206
Total deferred inflows of resources 24,868,761 26,087,369
Net Position
Net investment in capital assets 354,683,742 342,717,240
Restricted for debt service(Note 4) 77,016,891 76,037,706
Unrestricted 163,489,773 163,808,165
Total net position $ 595,190,406 $ 582,563,111
See Notes to Financial Statements. 7
Board of Water and Light - City of Lansing, Michigan
Statement of Revenues, Expenses, and Changes in Net Position
Year Ended June 30
2015 2014
Operating Revenues (Note 1)
Water $ 37,910,106 $ 37,246,939
Electric 295,047,904 289,154,465
Steam 14,959,212 16,324,128
Chilled water 5,568,287 5,397,411
Total operating revenues 353,485,509 348,122,943
Operating Expenses
Production:
Fuel, purchased power, and other operating expenses 163,336,653 165,199,058
Maintenance 24,415,690 17,045,140
Transmission and distribution:
Operating expenses 7,006,002 11,829,786
Maintenance 13,864,024 11,262,716
Administrative and general 61,297,460 66,583,248
Depreciation and impairment(Note 1) 39,104,343 38,997,186
Total operating expenses 309,024,172 310,917,134
Operating Income 44,461,337 37,205,809
Nonoperating Income (Expenses)
Investment income 1,351,006 1,866,462
Other income(expense) 1,534,922 (5,974,385)
System capacity fee 9,223,075 9,222,989
Bonded debt interest expense (14,995,574) (15,334,915)
Amortization - Central Utilities Complex (8,057,715) (7,642,715)
Return on equity(Note 7) (20,840,065) (20,608,093)
Other interest expense (49,691) (41,555)
Total nonoperating expenses- Net (31,834,042) (38,512,212)
Net Income (Loss) (Changes in Net Position) 12,627,295 (1,306,403)
Net Position - Beginning of year-As restated (Note 16) 582,563,1 1 1 583,869,514
Net Position - End of year $ 595,190,406 $ 582,563,1 1 1
See Notes to Financial Statements. 8
Board of Water and Light - City of Lansing, Michigan
Statement of Cash Flows
Year Ended June 30
2015 2014
Cash Flows from Operating Activities
Cash from customers:
Water $ 38,932,520 $ 37,669,771
Electric 293,138,1 1 1 296,772,164
Steam 15,71 1,107 14,041,374
Chilled water 5,425,898 4,960,008
Total cash from customers 353,207,636 353,443,317
Cash paid to suppliers:
Suppliers of coal,freight,and purchased power (140,537,274) (134,722,274)
Other suppliers (69,814,422) (85,526,501)
Total cash paid to suppliers (210,351,696) (220,248,775)
Cash paid to employees (63,947,564) (51,598,018)
Return on equity(Note 7) (20,840,065) (20,608,093)
Cash from customer deposits 3,287 301,524
Interest on customer deposits (49,691) (41,555)
Net cash provided by operating activities 58,021,907 61,248,400
Cash Flows from Capital and Related Financing Activities
Proceeds from new borrowings - 208,084
Planned, bonded,and annual construction (59,916,047) (59,277,580)
Principal payments on debt (18,594,394) (18,031,042)
System capacity fees 9,223,075 9,222,989
Interest on debt (15,709,200) (15,380,966)
Net cash used in capital and
related financing activities (84,996,566) (83,258,515)
Cash Flows from Noncapital Financing Activities
Proceeds from the sale of emissions allowances 36 25,826
Proceeds from the Belle River Project and other 8,972,944 6,676,122
Net cash provided by noncapital financing activities 8,972,980 6,701,948
Cash Flows from Investing Activities
Proceeds from the sale and maturity of investments 160,938,876 160,1 16,297
Interest received 2,003,345 3,696,174
Purchase of investments (139,581,937) (142,564,173)
Net cash provided by investing activities 23,360,284 21,248,298
Net Increase in Cash and Cash Equivalents 5,358,605 5,940,131
Cash and Cash Equivalents- Beginning of year 103,319,712 97,379,581
Cash and Cash Equivalents- End of year $ 108,678,317 $ 103,319,712
See Notes to Financial Statements. 9
Board of Water and Light - City of Lansing, Michigan
Statement of Cash Flows (Continued)
Year Ended June 30
2015 2014
Balance Sheet Classifications
Restricted cash and cash equivalents $ 52,752,941 $ 51,773,756
Cash and cash equivalents 55,925,376 51,545,956
Cash and Cash Equivalents- End of year $ 108,678,317 $ 103,319,712
Reconciliation of Operating Income to Net Cash from Operating Activities:
Year Ended June 30
2015 2014
Operating income $ 44,461,337 $ 37,205,809
Adjustments to reconcile operating income to net cash from
operating activities:
Payment in lieu of taxes(Note 7) (20,840,065) (20,608,093)
Depreciation and impairment 39,104,343 38,997,186
Sewerage collection fees 1,088,442 977,373
Interest on customer deposits (49,691) (41,555)
Decrease(increase) in assets:
Accounts receivable(Note 1) 1,61 1,029 (276,896)
Unbilled accounts receivable(Note 1) (1,122,971) (1,062,563)
Inventories (2,386,479) (728,273)
Customer deposits 3,287 301,524
Special deposit 2,845,000 -
Net pension asset 2,904,472 4,098,930
Other (5,484,222) 5,51 1,475
Decrease in liabilities and deferred inflows of resources:
Accounts payable and other accrued expenses (218,674) (2,771,029)
Net pension asset deferrals (4,941,799) -
Other 1,047,898 (355,488)
Total adjustments 13,560,570 24,042,591
Net cash provided by operating activities $ 58,021,907 $ 61,248,400
See Notes to Financial Statements. 10
Board of Water and Light - City of Lansing, Michigan
Pension Trust Funds - Statement of Net Position
June 30
2015 2014
Assets
Receivable- Investment interest receivable $ 305,573 $ 331,781
Investments at fair value:
Money market collective trust fund 8,564,513 8,904,375
U.S.government obligations 22,121,544 23,639,025
Corporate bonds and notes 32,582,122 32,558,775
Mutual funds 138,830,601 133,962,556
Stable value 31,844,948 33,607,203
Equities 163,468,806 165,310,705
Current liability - (13,000)
Self-directed brokerage account 1,376,730 1,147,041
Participant notes receivable 3,888,351 4,082,709
Total investments 402,677,615 403,199,389
Net Position - Held in trust for pension
and other employee benefits $ 402,983,188 $ 403,531,170
See Notes to Financial Statements. I I
Board of Water and Light - City of Lansing, Michigan
Pension Trust Funds - Statement of Changes in Net Position
Year Ended June 30
2015 2014
Increases
Investment income:
Net appreciation in fair
value of investments $ 886,489 $ 53,252,318
Interest and dividend income 11,816,649 10,1 12,195
Net investment income 12,703,138 63,364,513
Employer contributions 15,219,154 19,539,305
Participant rollover contributions 1,345,481 2,395,693
Other 307,138 249,450
Total increases 29,574,911 79,423,734
Decreases
Benefits paid to participants 28,168,455 26,398,589
Loan defaults 125,254 120,280
Participants' note and administrative fees 1,829,184 1,742,851
Total decreases 30,122,893 27,315,465
Net (Decrease) Increase in Net Position Held in Trust (547,982) 52,108,269
Net Position Held in Trust for Pension
and Other Employee Benefits
Beginning of year 403,531,170 351,422,901
End of year $ 402,983,188 $ 403,531,170
See Notes to Financial Statements. 12
Board of Water and Light - City of Lansing, Michigan
Notes to Financial Statements
June 30, 2015 and 2014
Note I - Significant Accounting Policies
The following is a summary of the significant accounting policies used by the Board of
Water and Light (the "BWL"):
Reporting Entity - The BWL, a related organization of the City of Lansing, Michigan
(the "City"), is an administrative board established by the City Charter. The City Charter
grants the BWL full and exclusive management of the electric, water, steam, and chilled
water services of the City. The commissioners of the governing board are appointed by
the mayor with approval of the City Council. The BWL provides water, steam, chilled
water, and electric services to the City and surrounding townships. The governing board
(Board of Commissioners) has the exclusive authority to set rates for the services
provided. The financial statements include the financial activities of the electric, water,
steam, and chilled water operations of the BWL. The financial statements also include
the financial activities of the BWL Pension Trust Funds. The BWL is exempt from taxes
on income because it is a municipal entity.
Fund Accounting - The BWL accounts for its activities in two different fund types, in
order to demonstrate accountability for how we have spent certain resources - separate
funds allow us to show the particular expenditures that specific revenues were used for.
The funds are aggregated into two fund types:
Proprietary fund includes the enterprise fund (which provides goods or services to users
in exchange for charges or fees).
Fiduciary funds
• The Defined Contribution Plan and Defined Benefit Plan, which accumulate
resources for benefit payments to retirees
• The VEBA, which accumulates resources for future retiree health care payments to
retirees
Basis of Accounting - Proprietary funds and fiduciary funds use the economic
resources measurement focus and the full accrual basis of accounting. Revenue is
recorded when earned and expenses are recorded when a liability is incurred,
regardless of the timing of related cash flows. In addition, the utilities meet the criteria
and, accordingly, on July 1, 2012, the BWL adopted the accounting and reporting
requirements of GASB 62, paragraphs 476-500.
13
Board of Water and Light - City of Lansing, Michigan
Notes to Financial Statements
June 30, 201 S and 2014
Note I - Significant Accounting Policies (Continued)
The BWL follows the accounting and reporting requirements of GASB 62, paragraphs
476-500, which require that the effects of the ratemaking process be recorded in the
financial statements. Such effects primarily concern the time at which various items
enter into the determination of net income in order to follow the principle of matching
costs and revenues. Accordingly, the BWL records various regulatory assets and
liabilities to reflect the regulator's actions (see Note 6). Management believes that the
BWL meets the criteria for continued application of GASB 62 paragraphs 476-500, but
will continue to evaluate its applicability based on changes in the regulatory and
competitive environment.
System of Accounts - The BWL's accounts are maintained substantially in accordance
with the Uniform Systems of Accounts of the Federal Energy Regulatory Commission
for its electric and steam systems and in accordance with the Uniform Systems of
Accounts of the National Association of Regulatory Utility Commissioners for the water
and chilled water systems. The chart of accounts dictates how the BWL classifies
revenue and expense items in the statement of revenues, expenses, and changes in net
assets as operating and nonoperating.
Operating Classification - Operating revenues and expenses generally result from
providing services and producing and delivering goods in connection with the principal
ongoing operations. The principal operating revenues are charges to customers for sales
and services. Operating expenses include the cost of sales and services, administrative
expenses, and depreciation on capital assets. All revenues and expenses not meeting this
definition are reported as nonoperating revenues and expenses.
Report Presentation - This report includes the fund-based statements of the BWL. In
accordance with government accounting principles, a government-wide presentation
with program and general revenues is not applicable to special purpose governments
engaged only in business-type activities.
Specific Balances and Transactions
Cash and Cash Equivalents - The BWL considers demand deposits and current
restricted funds, which consist of cash and highly liquid investments with an original
maturity of 90 days or less, as cash and cash equivalents for financial statement
purposes.
14
Board of Water and Light - City of Lansing, Michigan
Notes to Financial Statements
June 30, 2015 and 2014
Note 1 - Significant Accounting Policies (Continued)
Investments - The BWL has established special purpose funds designated to meet
anticipated operating requirements. In addition, BWL management has established a
future construction fund designated to meet future construction requirements. These
funds consist principally of commercial paper and United States government securities
and are segregated as follows:
Carrying Value
2015 2014
Designated purpose:
Coal inventory fluctuation $ 4,598,714 $ 4,529,062
Litigation, environmental, and uninsured losses 18,589,552 18,306,887
Future water facilities 3,745,990 3,688,651
Subtotal 26,934,256 26,524,600
Special purpose - Future construction 64,651,385 64,506,222
Total $ 91,585,641 $ 91,030,822
Accounts Receivable - Accounts receivable are stated at net invoice amounts. A
general valuation allowance is established based on an analysis of the aged receivables
and historical loss experience. All amounts deemed to be uncollectible are charged to
expense in the period that determination is made. Accounts receivable are not deemed
uncollectible until they are approximately 270 days past due and have remained
completely unpaid throughout the BWL's collection policy. The components of accounts
receivable for 2015 and 2014 are as follows:
2015 2014
Customer receivables $ 18,491,745 $ 20,102,775
Sewerage collections 2,159,867 2,545,497
Combined sewer overflow - City of Lansing (944,583) (944,583)
Miscellaneous 4,307,576 3,898,694
Less allowance for doubtful accounts (2,000,000) (2,000,000)
Net $ 22,014,605 $ 23,602,383
15
Board of Water and Light - City of Lansing, Michigan
Notes to Financial Statements
June 30, 2015 and 2014
Note 1 - Significant Accounting Policies (Continued)
Special Deposit - The BWL contracted with Consumer's Energy to install a new gas
pipeline in 2011 and funded construction of this pipeline and incurred $15,900,000 at
that time. The BWL will subsequently be reimbursed for all but $1,675,000 of those
costs provided minimum consumption requirements are met over the subsequent five-
year period beginning in 2015. During the year ended June 30, 2015, the BWL received
the first refund in the amount of $2,845,000 after meeting minimum consumption
requirements. The remaining $1 1,380,000 has been recorded as a long-term other asset
which is anticipated to be refunded over the next four years based on current
projections indicating that actual consumption will be much larger than minimum
requirements.
Inventories - Inventories are stated at weighted average cost and consist of the
following at June 30:
2015 2014
Coal $ 11,275,408 $ 8,234,376
Gas 936,671 1,162,717
Materials and supplies 13,648,664 14,077,173
Total $ 25,860,743 $ 23,474,266
Utility Plant - The utility plant is stated on the basis of cost, which includes
expenditures for new facilities and those which extend the useful lives of existing facilities
and equipment. Expenditures for normal repairs and maintenance are charged to
maintenance expense as incurred.
Depreciation of the utility plant is computed using the straight-line method based on
estimated useful lives, except for depreciation related to the Central Utilities Complex,
which is computed in accordance with GASB 62 paragraphs 476-500. The resulting
provisions for depreciation in 2015 and 2014, expressed as a percentage of the average
depreciable cost of the related assets, are as follows:
Average Rate (Percent)
Life (Years) 2015 2014
Classification of utility plant:
Water 4-100 1.8 1.9
Electric 4-50 3.4 3.5
Steam 5-50 3.5 3.3
Chilled water 5-50 3.4 3.5
Common facilities 4-50 4.1 5.7
Central Utilities Complex 15 6.7 6.7
16
Board of Water and Light - City of Lansing, Michigan
Notes to Financial Statements
June 30, 2015 and 2014
Note 1 - Significant Accounting Policies (Continued)
When units of property are retired, their costs are removed from the utility plant and
charged to accumulated depreciation.
The tables below reflect the capital asset activity of the utility plant categories for the
years ended June 30, 2015 and 2014:
Capital Asset Activity for Year Ended June 30,2015
Capital Assets Capital Assets
FY Start Transfers Acquisition Retirement FY End
Water $ 288,627,287 $ 25,014 $ 9,096,693 $ (946,042) $ 296,802,952
Electric 773,262,520 51,658 34,925,022 (3,291,401) 804,947,799
Steam 64,685,056 - 3,136,196 (31 1,1 18) 67,510,134
Chilled 32,917,461 704,679 - 33,622,140
Common 75,026,577 (76,672) 12,628,678 (446,064) 87,132,519
CUC 76,079,000 - - 76,079,000
Total $ 1,310,597,901 $ $ 60,491,268 $ (4,994,625) $ 1,366,094,544
Accumulated Depreciation for Year Ended June 30,2015
Deprc./Amort.
Accum.Deprc. Depreciation and Impairment Depreciation Accum.Deprc.
FY Start Transfer for Year Retirement FY End
Water $ (84,984,612) $ (25,014) $ (5,147,689) $ 522,729 $ (89,634,586)
Electric (420,474,747) 3,099 (27,158,634) 2,254,187 (445,376,095)
Steam (12,551,842) - (2,313,839) 88,162 (14,777,519)
Chilled (7,887,640) - (1,140,043) - (9,027,683)
Common (37,987,471) 21,915 (3,344,139) 211,580 (41,098,1 15)
CUC (60,863,199) - (5,071,933) (65,935,132)
Total $ (624,749,511) $ - $ (44,176,277) $ 3,076,658 $ (665,849,130)
17
Board of Water and Light - City of Lansing, Michigan
Notes to Financial Statements
June 30, 2015 and 2014
Note 1 - Significant Accounting Policies (Continued)
Capital Asset Activity for Year Ended June 30,2014
Capital Assets Capital Assets
FY Start Transfers Acquisition Retirement FY End
Water $ 263,328,526 $ (1,348) $ 27,554,400 $ (2,254,291) $ 288,627,287
Electric 758,023,493 (6,830,315) 27,644,816 (5,575,474) 773,262,520
Steam 61,507,777 (1,653,867) 5,302,400 (471,254) 64,685,056
Chilled 32,798,019 - 119,442 - 32,917,461
Common 70,715,557 8,485,530 4,784,103 (8,958,613) 75,026,577
CUC 76,079,000 - - - 76,079,000
Total $ 1,262,452,372 $ - $ 65,405,161 $ (17,259,632) $ 1,310,597,901
Accumulated Depreciation for Year Ended June 30,2014
Accum.Deprc. Depreciation Deprc./Amort. Depreciation Accum.Deprc.
FY Start Transfer for Year Retirement FY End
Water $ (81,568,989) $ (460) $ (5,154,328) $ 1,739,165 $ (84,984,612)
Electric (398,329,070) (1,599) (26,428,251) 4,284,173 (420,474,747)
Steam (10,489,756) 14,807 (2,092,601) 15,708 (12,551,842)
Chilled (6,751,047) - (1,136,593) - (7,887,640)
Common (38,418,953) (12,748) (4,185,413) 4,629,643 (37,987,471)
CUC (55,791,266) - (5,071,933) (60,863,199)
Total $ (591,349,081) $ - $ (44,069,1 19) $ 10,668,689 $ (624,749,51 1)
Accrued Compensated Absences - The BWL records a liability for estimated
compensated absences that are attributable to services already rendered and that are
not contingent on a specific event that is outside the control of the BWL and its
employees. This liability is accrued as employees earn the rights to such benefits. The
BWL estimates the total current and noncurrent portions of the liability to be
$1 1,008,727 and $1 1,099,642 as of June 30, 2015 and 2014, respectively.
Capital Contributions - Capital contributions represent nonrefundable amounts
received for the purpose of construction for the utility plant. These contributions are
from third parties, including amounts from customers, grant programs, and insurance
proceeds from damage. Electric, water, and steam contributions are credited against the
related assets or recorded as a separate regulatory liability and will offset the
depreciation of the related assets over the estimated useful lives. This treatment is
consistent with the BWL's ratemaking policy and is thus permitted under GASB 62
paragraphs 476-500.
18
Board of Water and Light - City of Lansing, Michigan
Notes to Financial Statements
June 30, 201 S and 2014
Note I - Significant Accounting Policies (Continued)
Deferred Outflows/Inflows of Resources - 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 and so will not be recognized
as an outflow of resources (expense/expenditure) until then. The BWL has one item that
qualifies for reporting in this category. The deferred outflows of resources relates to
deferred losses on refunding.
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 and so will not be recognized as an inflow of resources (revenue) until that
time. The BWL has the following items that qualify for reporting in this category: the
deferred inflows of resources related to costs that have been incurred and will be billed
to customers in the future related to the renewable energy plan and energy optimization,
chiller plant, and Wise Road items described in Note 6, and deferred inflows of resources
related to the net pension asset described in Note 8.
Net Position - Equity is classified as net position and displayed in three components:
• Net Investment in Capital Assets (net of related debt) - Consists of capital
assets, net of accumulated depreciation, and reduced by the outstanding balances of
any bonds that are attributable to the acquisition, construction, or improvement of
those assets.
• Restricted for Debt Service - Consists of net position with constraints placed on
their use by revenue bond resolution.
• Unrestricted - All other net position that does not meet the definition of
"restricted" or "net investment in capital assets."
Net Position Flow Assumption - Sometimes the BWL will fund outlays for a particular
purpose from both restricted (e.g., restricted bond) and unrestricted resources. In
order to calculate the amounts to report as restricted net position and unrestricted net
position in the proprietary fund financial statements, a flow assumption must be made
about the order in which the resources are considered to be applied. It is the BWL's
policy to consider restricted net position to have been depleted before unrestricted net
position is applied.
19
Board of Water and Light - City of Lansing, Michigan
Notes to Financial Statements
June 30, 201 S and 2014
Note I - Significant Accounting Policies (Continued)
Unbilled Accounts Receivable and Revenue - Unbilled accounts receivable at
June 30, 2015 and 2014 represents the estimated amount of accounts receivable for
services that have not been billed as of the balance sheet date. The amounts are a result
of a timing difference between the end of the financial statement cycle (month end) and
the billing cycle (various dates within the month for each billing period). Accordingly, the
current year revenue from customers whose billing period ends after June 30 for
services rendered prior to June 30 will be recognized in the current period.
Interutility Transactions - The water, electric, steam, and chilled water operations of
the BWL bill each other for services provided and these services are reported as
revenue to the generating operation and expense to the consuming operation. Such
internal billings aggregated $7,956,814 and $9,037,781 in 2015 and 2014, respectively,
and are not eliminated in the statement of revenues, expenses, and changes in net
assets.
Emissions Allowance - The Environmental Protection Agency has granted emission
allowances to the BWL related to the emission of certain pollutants. No amounts are
recorded at the date of the grant. The BWL estimates the allowances needed for future
years. As appropriate, the BWL may purchase additional allowances or sell the
estimated future excess allowances. The purchase and sale of allowances by emission
type are accounted for separately and are not offset against transactions involving
allowances of different emission types. Purchased allowances net of proceeds from the
sale of related allowances are recorded as an asset and will be expensed during the
applicable period. Proceeds from the sale of allowances are recognized as income at the
time of sale.
The BWL recognized a gain of $36 and $25,826 as of June 30, 2015 and 2014,
respectively, from the sale of allowances and has recorded an intangible asset of$0 as of
June 30, 2015 and 2014 for purchased allowances related to future periods.
Significant Customers - The BWL has one customer which accounts for
approximately 8 percent and 9 percent of the BWL's total revenue for the years ended
June 30, 2015 and 2014, respectively.
Use of Estimates - The preparation of financial statements in conformity with
accounting principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenue and expenses during the
reporting period. Actual results could differ from those estimates.
20
Board of Water and Light - City of Lansing, Michigan
Notes to Financial Statements
June 30, 201 S and 2014
Note I - Significant Accounting Policies (Continued)
Reclassifications - Certain amounts presented in the prior year data have been
reclassified in order to be consistent with the current year's presentation. See Note 16
for further information.
Note 2 - Rate Matters
Rates charged to customers are established solely by the governing board. The BWL has
agreed to set rates sufficient to meet certain requirements of the bond resolutions for
the outstanding revenue bonds.
Note 3 - Construction in Progress
Construction in progress consists of projects for expansion or additions to the utility
plant. The estimated additional cost to complete various projects is approximately
$75,074,000 and $52,122,000 at June 30, 2015 and 2014, respectively, including
commitments on existing construction contracts approximating $9,173,000 and
$19,257,000 at June 30, 2015 and 2014, respectively. These projects will be funded
through operational cash flow, including the project funds reported as other assets.
There are additional commitments on projects in the process of being constructed that
are not included above. Refer to Note 9 for these commitments.
21
Board of Water and Light - City of Lansing, Michigan
Notes to Financial Statements
June 30, 2015 and 2014
Note 4 - Restricted Assets
Restricted assets are required under the 2005A, 2008A, 201 IA, 2012A, and 2013A
Revenue Bond resolutions and the related Nonarbitrage and Tax Compliance
Certificates. These assets, which consist of cash, commercial paper, and United States
government securities, are segregated into the following funds:
Carrying Value
Required at
June 30, 2015 2015 2014
Current:
Operations and Maintenance Fund $ 33,195,350 $ 88,301,618 $ 80,126,021
Bond and Interest Redemption Fund 19,557,591 19,689,041 23,193,691
Total current 52,752,941 107,990,659 103,319,712
Noncurrent:
201 IA Construction Fund - - 22,564,095
Bond Reserve Fund 24,263,950 24,951,608 24,263,950
Total noncurrent 24,263,950 24,951,608 46,828,045
Total $ 77,016,891 $ 132,942,267 $ 150,147,757
The carrying value in excess of the required value for the current portion is reported as
cash and cash equivalents or investments for the year ended June 30, 2015.
The restrictions of the various funds are as follows:
• Operations and Maintenance Fund - By the end of each month, this fund shall
include sufficient funds to provide for payment of the succeeding month's expenses.
• Bond and Interest Redemption Fund - Restricted for payment of the current
portion of bond principal and interest on the 2005A, 2008A, 2009A, 2011 A, 2012A,
and 2013A Revenue Bonds.
• 201 IA Construction Fund - Restricted for payment of costs of the bonded
projects and costs of issuance of the bonds.
• Bond Reserve Fund - Shall include sufficient funds to cover the maximum annual
principal and interest requirements of the 2005A, 2008A, 2011 A, 2012A, and 2013A
Revenue Bonds. The Nonarbitrage and Tax Compliance Certification stipulates that
the amount in the fund shall be valued at amortized cost to meet this requirement.
As of June 30, 2015, the cost basis in the fund was $25,302,514.
22
Board of Water and Light - City of Lansing, Michigan
Notes to Financial Statements
June 30, 2015 and 2014
Note S - Long-term Debt
Long-term debt as of June 30 consists of the following:
2015 2014
Water Supply, Steam, Chilled Water, and Electric Utility
System Revenue Bond, Series 2013A, due in annual principal
installments beginning July 1, 2013 through July 1, 2026, plus
interest at rates ranging from 2.00%to 5.00% $ 20,830,000 $ 21,085,000
Water Supply, Steam, Chilled Water, and Electric Utility
System Revenue Bond, Series 2012A, due in annual principal
installments beginning July 1, 2013 through July 1, 2018, plus
interest at rates ranging from 2.00%to 5.00% 16,355,000 16,960,000
Water Supply, Steam, Chilled Water, and Electric Utility
System Revenue Bond, Series 201 IA, due in annual principal
installments beginning July 1, 2015 through July 1, 2041, plus
interest at rates ranging from 3.00%to 5.50% 250,000,000 250,000,000
Water Supply, Steam, Chilled Water, and Electric Utility
System Revenue Bond, Series 2009A, due in annual principal
installments due serially through July 1, 2016, plus interest at
a rate of 5.34% 11,215,000 18,985,000
Water Supply Utility System Revenue Bonds, Series 2008A,
due serially beginning July 1, 2012 and continuing through
July 1, 2032, plus interest at rates ranging from 3.00% to
5.00% 39,985,000 39,990,000
Water Supply, Steam, and Electric Utility System Revenue
Bonds, Series 2005A, due serially beginning July 1, 2011 and
continuing through July 1, 2014, plus interest at rates ranging
from 4.00%to 5.00% - 5,520,000
23
Board of Water and Light - City of Lansing, Michigan
Notes to Financial Statements
June 30, 2015 and 2014
Note S - Long-term Debt (Continued
2015 2014
Promissory note, due to the City of Lansing in semi-annual
installments through October 1, 2024, plus interest at a rate
of 2.50% $ 9,554,048 $ 10,173,301
Township contract water service obligation with interest
due semiannually at 6.00% and portions of principal due
annually, with final payment in May 2015 - 40,000
Granger III Corporation for ash hauling services due in
monthly installments ranging from $150,000 to$250,000 1,650,712 4,650,712
City of Lansing agreement for the enhancement of the flood
warning system, $10,000 annually with final payment in 2016 10,000 20,000
Total 349,599,760 367,424,013
Less current portion (13,299,345) (17,824,253)
Plus current portion of premium on bonds 966,576 966,576
Plus unamortized premium 9,777,303 10,743,877
Total long-term portion $ 347,044,294 $ 361,310,213
The fair value of the long-term debt based on the quoted market prices for similar issues
for debt of the same remaining maturities is estimated to be $425,756,849 and
$423,049,941 at June 30, 2015 and 2014, respectively.
The unamortized premium and deferral on refunded bonds is being amortized over the
life of the bonds, using the effective-interest method.
24
Board of Water and Light - City of Lansing, Michigan
Notes to Financial Statements
June 30, 2015 and 2014
Note S - Long-term Debt (Continued)
Aggregate principal and interest payments applicable to long-term debt are as follows:
Principal Interest Total
2016 $ 13,299,345 $ 16,875,993 $ 30,175,338
2017 1 1,523,300 16,224,949 27,748,249
2018 8,860,005 15,765,701 24,625,706
2019 9,244,935 15,491,004 24,735,939
2020 7,712,842 15,334,272 23,047, 1 14
2021-2025 43,951,859 71,043,958 1 14,995,817
2026-2030 55,673,602 59,709,787 115,383,389
2031-2035 69, 163,872 44,957,340 1 14,121,212
2036-2040 88,030,000 26,085, 125 1 14,1 15, 125
2041-2042 42, 140,000 3,507,625 45,647,625
Total $ 349,599,760 $ 284,995,754 $ 634,595,514
The 2008A, 201 IA, 2012A, and 2013A bonds require the BWL to establish a reserve
account equal to the highest annual principal and interest requirements of such issues.
As of June 30, 2015, the balance of this reserve account was $24,951 ,608 (see Note 4).
The 2009A bonds were a private placement issue and have no reserve requirement.
All Water Supply and Electric Utility System Revenue Bonds were issued by authority of
the BWL. Except for the Series 2009A Subordinate Lien Revenue Refunding Bond, all
bonds were issued on a parity basis and are payable solely from the net revenue of the
combined water, electric, chilled water, and steam operations of the BWL.
The 2013A Bond is payable in annual installments in the years 2015 to 2027, inclusive,
and shall not be subject to optional redemption prior to maturity. The bonds, or
portions of the bonds in multiples of $5,000 maturing in the years 2025 and thereafter
shall be subject to redemption prior to maturity at the option of the BWL in any order
of maturity as the BWL may determine and within any maturity by lot, on any date on
after July 1, 2023 at the redemption price of par plus accrued interest to the date fixed
for redemption.
25
Board of Water and Light - City of Lansing, Michigan
Notes to Financial Statements
June 30, 2015 and 2014
Note S - Long-term Debt (Continued)
The 2012A Bond is payable in annual installments in the years 2013 to 2018, inclusive,
and shall not be subject to optional redemption prior to maturity.
The Series 201 IA Bond is payable in annual installments in the years 2015 to 2022,
inclusive, and shall not be subject to optional redemption prior to maturity. The Bonds
maturing on or after July 1, 2022 shall be subject to redemption at the option of the
BWL as a whole or in part at any time and by lot within a maturity at par plus interest
accrued to the redemption date.
The Series 2009A Bond is payable in annual installments in the years 2010 to 2016,
inclusive, and shall not be subject to optional redemption prior to maturity.
The Series 2008A Bonds maturing in the years 2012 to 2028, inclusive, shall not be
subject to optional redemption prior to maturity. The bonds, or portions of bonds in
multiples of $5,000 maturing in the years 2019 to 2032, inclusive, shall be subject to
redemption at the option of the BWL in such order of maturity as the BWL shall
determine and within a single maturity by lot on any date on or after July 1, 2018, at par
plus accrued interest to the date fixed for redemption.
The BWL may redeem certain outstanding Water Supply and Electric Utility System
Revenue Bonds prior to maturity. The Series 2005A Bonds were redeemed at maturity
during the year ended June 30, 2015.
26
Board of Water and Light - City of Lansing, Michigan
Notes to Financial Statements
June 30, 201 S and 2014
Note S - Long-term Debt (Continued)
The long-term debt activity for the year ended June 30, 2015 is as follows:
Revenue Other
Bonds Notes Total
Beginning balance $ 364,250,463 $ 14,884,003 $ 379, 134,466
Additions - - -
Reductions (15,121,594) (3,669,233) (18,790,827)
Ending balance $ 349,128,869 $ 11,214,770 $ 360,343,639
Due within one year $ 11,010,000 $ 2,289,345 $ 13,299,345
The BWL has pledged substantially all revenue, net of operating expenses, to repay the
revenue bonds. Proceeds from the bonds provided financing for the construction of the
utility plant. The bonds are payable solely from the net revenues of the BWL. The
remaining principal and interest to be paid on the bonds total $634,595,514. During the
current year, net revenues of the BWL were $66,776,903 compared to the annual debt
requirements of$29,150,574.
Note 6 - Costs/Credits Recoverable in Future Years
Central Utilities Complex
The BWL accounts for amortization of its Central Utilities Complex (CUC), which is a
separate operating unit of the BWL, under the regulatory basis of accounting as per
GASB 62. The BWL has recorded recoverable (revenue) amortization of $(7,241,153)
and $(4,255,372) at June 30, 2015 and 2014, respectively. Under an agreement with a
BWL customer, the bonded debt related to the construction of the CUC will be
reimbursed through payments to be received from this customer through 2017. The
recoverable (revenue) amortization balance represents the difference between
calculated straight-line amortization expense and the reimbursement payments received
from the customer at year end.
Environmental Remediation
The GASB 49 environmental remediation liability related to a landfill site operated by
the BWL was approved for regulated entity accounting under GASB 62 during the year
ended June 30, 2004. As of June 30, 2015 and 2014, $20,848,000 in total costs has been
recoverable as a regulatory asset.
27
Board of Water and Light - City of Lansing, Michigan
Notes to Financial Statements
June 30, 201 S and 2014
Note 6 - Costs/Credits Recoverable in Future Years (Continued)
As of June 30, 2015 and 2014, the amounts remaining to be recovered in rates were
$37,756 and $1,470,035, respectively. The BWL reviews the adequacy of its rates to
recover its cost of service on an annual basis.
During the year ended June 30, 2006, the GASB 49 environmental remediation liability
related to a second landfill was approved for regulated entity accounting under GASB
62. The balance of the regulatory asset at June 30, 2015 and 2014 was $14,176,684 and
$17,793,606 respectively. The BWL reviews the adequacy of its rates to recover its cost
of service on an annual basis. During the year ended June 30, 2009, regulatory
accounting as per GASB 62 was authorized by the Board of Commissioners to collect
rates for all environmental remediation sites. The balance as of June 30, 2015 and 2014
for additional sites was $4,401,565 and $4,362,970, respectively.
Recoverable Cost Adjustments
During the year ended June 30, 2005, the Board of Commissioners approved the use of
regulatory accounting as per GASB 62 in accounting for the BWL's energy cost
adjustment (ECA), power chemical adjustment (PCA), and fuel cost adjustment (FCA).
These affect the amount to be billed to retail electricity, water, and steam customers to
reflect the difference between the BWL's actual material costs and the amounts
incorporated into rates. This resulted in recoverable assets of $4,652,068 and
$2,797,695 at June 30, 2015 and 2014, respectively. This amount represents costs to be
billed to customers in future years because actual costs of providing utilities were higher
than the costs incorporated into the BWL's rates.
Renewable Energy Plan (REP) and Energy Optimization (EO)
During the year ended June 30, 2010, the Board of Commissioners approved the
implementation of regulatory accounting as per GASB 62 to account for Public Act 295
of 2008 (PA. 295). PA. 295 set forth requirements for all Michigan utilities to meet the
new renewable energy standards and undertake energy optimization programs. As a
municipally owned electric utility, the BWL was required to file a proposed energy plan
with the Michigan Public Service Commission (MPSC) and this plan was approved on
July 1, 2009. These changes will affect the amount to be billed to electric customers.
This resulted in deferred inflow of resources of $6,953,049 and $6,421,464 as of June
30, 2015 and 2014, respectively.
28
Board of Water and Light - City of Lansing, Michigan
Notes to Financial Statements
June 30, 201 S and 2014
Note 6 - Costs/Credits Recoverable in Future Years (Continued)
Chiller Plant
During the year ended June 30, 2010, the BWL chose to use regulatory accounting as
per GASB 62 to recognize the contribution in aid of construction (CIAC) for the
development of a new chilled water plant. This resulted in recoverable inflow of
resources of$2,202,716 and $2,422,987 as of June 30, 2015 and 2014, respectively. The
BWL will recognize this as revenue monthly over the life of the new chilled water plant
to offset depreciation expense.
Wise Road
During the year ended June 30, 2012, the BWL chose to use regulatory accounting as
per GASB 62 to recognize the insurance proceeds for the damaged equipment at the
Wise Road Water Conditioning Plant (see Note 14). This resulted in recoverable inflow
of resources of $13,51 1,589 and $10,099,712 as of June 30, 2015 and 2014. The BWL
will recognize this as revenue monthly over the life of the new equipment to offset
depreciation expense.
Note 7 - Transactions with the City of Lansing, Michigan
Operations - The BWL recognized revenue of$9,834,276 and $8,075,705 in 2015 and
2014, respectively, for water, electric, and steam services provided to the City. The
BWL incurred expenses for sewerage services purchased from the City of$964,302 and
$924,809 in 2015 and 2014, respectively.
Additionally, the BWL bills and collects sewerage fees for the City. In connection with
these services, the BWL received sewerage collection fees of $I,087,668 and $968,545
in 2015 and 2014, respectively, included in other income.
Payment in Lieu of Taxes - Effective July 1, 1992, the BWL entered into an agreement
with the City to provide an annual payment of a return on equity in accordance with a
formula based on net billed retail sales from its water, steam heat, and electric utilities
for the preceding 12-month period ending May 31 of each year. Effective March 1, 2002,
the formula to calculate the amount owed to the City for payment in lieu of taxes will
also include wholesale revenue generated from the BWL's electric, water, steam, and
chilled water utilities for the preceding 12-month period ending May 31 of each year.
Subject to the provisions of Act 94 Public Acts of 1933, as amended, and the BWL's
various bond covenants, this amount is payable to the City no later than June 30 of each
year. Under terms of this agreement, the BWL paid to the City$20,840,065 in 2015 and
$20,608,093 in 2014 of operational cash flow in excess of debt service requirements.
29
Board of Water and Light - City of Lansing, Michigan
Notes to Financial Statements
June 30, 201 S and 2014
Note 8 - Retirement Plans
The BWL has three retirement plans. The BWL administers a tax-qualified, single-
employer, noncontributory, defined benefit public employee retirement pension plan
(the "Defined Benefit Plan"), and the BWL has a tax-qualified, single-employer,
noncontributory, defined contribution public employee retirement pension plan (the
"Defined Contribution Plan"). The BWL also has a tax-qualified, single-employer,
defined benefit plan to administer and fund retiree healthcare benefits (the "Retiree
Benefit Plan and Trust").
Defined Benefit Plan
Plan Description - The BWL Board of Commissioners administers the Defined Benefit
Plan - a noncontributory single-employer defined benefit pension plan for employees of
the BWL. The benefit terms were established by the BWL and may be amended by
future BWL actions.
The Plan for Employees' Pensions of the Board of Water and Light - City of Lansing,
Michigan - Defined Benefit Plan issues a publicly available financial report that includes
financial statements and required supplementary information. That report may be
obtained by writing to the Board of Water and Light, Chief Financial Officer, P.O. Box
13007, Lansing, Michigan 48901-3007.
Management of the Plan is vested in the BWL, which consists of eight members
appointed by the mayor of the City of Lansing, Michigan.
Effective July 1, 1999, the Defined Benefit Plan was amended to include a medical
benefit component, in addition to the normal retirement benefits, to fund a portion of
the postretirement obligations for certain retirees and their beneficiaries. The funding of
the medical benefit component is limited to the amount of excess pension plan assets
available for transfer, as determined by the actuary. No medical benefits were paid by
the Defined Benefit Plan during the years ended June 30, 2015 and 2014.
Employees Covered by Benefit Terms - At February 28, 2015 and 2014 (the most
recent actuarial valuation for funding purposes), Defined Benefit Plan membership
consisted of the following:
2015 2014
Inactive plan members or beneficiaries
currently receiving benefits 398 413
Inactive plan members entitled to but not 8 9
yet receiving benefits
Active plan members 14 17
Total 420 439
30
Board of Water and Light - City of Lansing, Michigan
Notes to Financial Statements
June 30, 2015 and 2014
Note 8 - Retirement Plans (Continued
The Defined Benefit Plan, by resolution of the board of commissioners, was closed to
employees hired subsequent to December 31, 1996, and a defined contribution plan was
established for employees hired after December 31, 1996. Effective December 1, 1997,
all active participants in this plan were required to make an irrevocable choice to either
remain in this plan (defined benefit) or move to the newly established defined
contribution plan. Those participants who elected to move to the defined contribution
plan received lump-sum distributions from this plan that were rolled into their accounts
in the newly established defined contribution plan. Of the 760 employees who were
required to make this election, 602 elected to convert their retirement benefits to the
newly established defined contribution plan. As a result of this action, effective
December 1, 1997, the board of commissioners transferred $75,1 16,470 to the newly
established defined contribution plan, reflecting the plan participants' accumulated
benefits as of said date.
Benefits Provided - The Defined Benefit Plan provides retirement, early retirement,
disability, termination, and death benefits. The Plan provides for an annual benefit upon
normal retirement age equal to the product of the total number of years of credited
service multiplied by a percentage equal to 1.80 percent of the highest annual pay during
the last 10 years of service, paid in equal monthly installments.
Payments will either be non-increasing or increase only as follows: (a) By an annual
percentage increase that does not exceed the annual percentage increase in a cost-of-
living index that is based on prices of all items and issued by the Bureau of Labor
Statistics; (b) To the extent of the reduction in the amount of the employee's payments
to provide for a survivor benefit upon death, but only if the beneficiary whose life was
being used to determine the distribution period described in subsection 8 dies or is no
longer the employee's beneficiary pursuant to a qualified domestic relations order within
the meaning of Internal Revenue Code Section 414(p); (c) To provide cash refunds of
employee contributions upon the employee's death; or (d) To pay increased benefits that
result from a plan amendment.
Contributions - Article 9, Section 24 of the State of Michigan constitution requires that
financial benefits arising on account of employee service rendered in each year be funded
during that year. Accordingly, the BWL Pension Board retains an independent actuary to
determine the annual contribution. The actuarially determined rate is the estimated
amount necessary to finance the costs of benefits earned by plan members during the
year, with an additional amount to finance any unfunded accrued liability. There was no
contribution required for the years ended June 30, 2014 and 2015. Plan documents do
not require participant contributions.
31
Board of Water and Light - City of Lansing, Michigan
Notes to Financial Statements
June 30, 201 S and 2014
Note 8 - Retirement Plans (Continued)
Investment Policy - The Plan's policy in regard to the allocation of invested assets is
established and may be amended by the BWL by a majority vote of its members. It is the
policy of the board to pursue an investment strategy that manages risk through the
prudent diversification of the portfolio across a broad selection of distinct asset classes.
The Plan's investment policy discourages the use of cash equivalents, except for liquidity
purposes, and aims to refrain from dramatically shifting asset class allocations over short
time spans. The following was the BWL's adopted asset allocation policy as of June 30,
2015 and 2014:
Target
Asset Class Allocation
Fixed income 30.80%
Domestic equity 55.00%
International equity 14.20%
Net Pension Asset - The components of the net pension asset of the BWL at June 30,
2015 and 2014 were as follows (in thousands):
2015 2014
Total pension liability $ 65,395 $ 69,341
Plan fiduciary net position 73,679 80,530
BWL's net pension asset $ (8,284) $ (11,189)
Plan fiduciary net position, as a percentage of 1 12.67% 1 16. 14%
the total pension liability
The BWL has chosen to use June 30, 2015 as its measurement date for fiscal year 2015.
The June 30, 2015 reported net pension asset was determined using a measure of the
total pension liability and the pension net position as of June 30, 2015. The June 30, 2015
total pension liability was determined by an actuarial valuation as of February 28, 2015,
which used update procedures to roll forward the estimated liability to June 30, 2015.
The BWL has chosen to use June 30, 2014 as its measurement date for fiscal year 2014.
The June 30, 2014 reported net pension asset was determined using a measure of the
total pension liability and the pension net position as of June 30, 2014. The June 30, 2014
total pension liability was determined by an actuarial valuation as of February 28, 2014,
which used update procedures to roll forward the estimated liability to June 30, 2014.
32
Board of Water and Light - City of Lansing, Michigan
Notes to Financial Statements
June 30, 2015 and 2014
Note 8 - Retirement Plans (Continued
Changes in the net pension asset during the measurement years were as follows (in
thousands):
Increase (Decrease)
Total Pension Plan Net Net Pension
Changes in Net Pension Asset Liability Position Liability(Asset)
Balance at June 30, 2013 $ 67,280 $ 75,424 $ (8,144)
Changes for the year:
Service cost 349 - 349
Interest 4,751 - 4,751
Differences between expected 964 - 964
and actual experience
Changes in assumptions 4,538 - 4,538
Net investment income - 14,243 (14,243)
Benefit payments, including refunds (8,541) (8,541) -
Administrative expenses - (596) 596
Net changes 2,061 5,106 (3,045)
Balance at June 30, 2014 $ 69,341 $ 80,530 $ (11,189)
Changes for the year:
Service cost 274 - 274
Interest 4,919 - 4,919
Differences between expected (1,093)
and actual experience (1,093)
Net investment income - 1,771 (1,771)
Benefit payments, including refunds (8,046) (8,046) -
Administrative expenses - (576) 576
Net changes (3,946) (6,851) 2,905
Balance at June 30, 2015 $ 65,395 $ 73,679 $ (8,284)
33
Board of Water and Light - City of Lansing, Michigan
Notes to Financial Statements
June 30, 201 S and 2014
Note 8 - Retirement Plans (Continued)
Pension Expense and Deferred Outflows of Resources and Deferred Inflows of
Resources Related to Pensions - For the year ended June 30, 2015, the BWL
recognized a pension expense of ($2,037,327). At June 30, 2015, the BWL reported
deferred outflows of resources and deferred inflows of resources related to pensions
from the following sources:
Deferred Deferred
Outflows of Inflows of
Resources Resources
Net difference between projected and actual earnings
on pension plan investments $ - $ (2,201,407)
For the year ended June 30, 2014, the BWL recognized pension expense of$4,098,930.
At June 30, 2014, the BWL reported deferred outflows of resources and deferred
inflows of resources related to pensions from the following sources:
Deferred Deferred
Outflows of Inflows of
Resources Resources
Net difference between projected and actual earnings
on pension plan investments $ - $ (7,143,206)
Amounts reported as deferred inflows of resources related to pensions will be
recognized in pension expense as follows:
Years Ending
June 30
2016 $ 996,802
2017 996,802
2018 996,802
2019 (788,999)
34
Board of Water and Light - City of Lansing, Michigan
Notes to Financial Statements
June 30, 201 S and 2014
Note 8 - Retirement Plans (Continued)
Actuarial Assumptions - The total pension liability in the June 30, 2015 and June 30,
2014 actuarial valuation was determined using the following actuarial assumptions,
applied to all periods included in the measurement:
Inflation 3.00%
Salary increases 6.44%-10.26%
Investment rate of return 7.50%
Mortality rates were based on the Healthy and Disabled, RP-2014 Mortality Table with
MP-2014 Improvement scale.
The most recent experience review was completed in 2014. Since the Defined Benefit
Plan covered 14 active participants in fiscal year 2015 and 17 active participants in fiscal
year 2014, assumptions like termination, retirement, and disability have an immaterial
impact on the results and have not been changed.
Discount Rate - The discount rate used to measure the total pension liability was 7.5
percent. The projection of cash flows used to determine the discount rate assumed that
BWL contributions will be made at rates equal to the actuarially determined
contribution rates.
Projected Cash Flows
Based on those assumptions, the Defined Benefit Plan's fiduciary net position was
projected to be available to make all projected future benefit payments of current active
and inactive employees. Therefore, the long-term expected rate of return on the
Defined Benefit Plan investments was applied to all periods of projected benefit
payments to determine the total pension liability.
35
Board of Water and Light - City of Lansing, Michigan
Notes to Financial Statements
June 30, 201 S and 2014
Note 8 - Retirement Plans (Continued)
The long-term expected rate of return on Defined Benefit Plan investments was
determined using a building-block method in which best-estimate ranges of expected
future real rates of return (expected returns, net of pension plan investment expense
and inflation) are developed for each major asset class. These ranges are combined to
produce the long-term expected rate of return by weighting the expected future real
rates of return by the target asset allocation percentage and by adding expected
inflation. Best estimates of arithmetic real rates of return as of June 30, 2015 and 2014
for each major asset class included in the Defined Benefit Plan's target asset allocation, as
disclosed in the Defined Benefit Plan's financial statements, are summarized in the
following table:
Long-term
Expected Real
Asset Class Rate of Return
Fixed income 2.00%
Domestic equity 6.40%
International equity 6.80%
Sensitivity of the Net Pension Asset to Changes in the Discount Rate - The
following presents the net pension asset of the BWL at June 30, 2015, calculated using
the discount rate of 7.5 percent, as well as what the BWL's net pension asset would be if
it were calculated using a discount rate that is I percentage point lower (6.5 percent) or
I percentage point higher (8.5 percent) than the current rate:
I% Decrease Current Discount I% Increase
(6.50 %) Rate (7.50 %) (8.50%)
Net pension asset of the BWL
(in thousands) $ (3,053) $ (8,284) $ (13,128)
36
Board of Water and Light - City of Lansing, Michigan
Notes to Financial Statements
June 30, 201 S and 2014
Note 8 - Retirement Plans (Continued)
The following presents the net pension asset of the BWL at June 30, 2014, calculated
using the discount rate of 7.5 percent, as well as what the BWL's net pension asset
would be if it were calculated using a discount rate that is I percentage point lower (6.5
percent) or I percentage point higher (8.5 percent) than the current rate:
I% Decrease Current Discount I% Increase
(6.50 %) Rate (7.50 %) (8.50%)
Net pension asset of the BWL
(in thousands) $ (5,315) $ (11,189) $ (16,603)
Defined Benefit Plan Fiduciary Net Position - Detailed information about the
Defined Benefit Plan's fiduciary net position is available in the separately issued financial
report. For the purpose of measuring the net pension asset and deferred inflows of
resources related to pension and pension expense, information about the Defined
Benefit Plan's fiduciary net position and addition to/deduction from fiduciary net position
has been determined on the same basis of accounting as they are reported by the
Defined Benefit Plan. The Defined Benefit Plan uses the economic resources
measurement focus and the full accrual basis of accounting. Investments are stated at fair
value. Contribution revenue is recorded as contributions are due, pursuant to legal
requirements. Benefit payments and refunds of employee contributions are recognized
as expense when due and payable in accordance with the benefit terms.
Defined Contribution Plan
The Defined Contribution Plan was established by the BWL in 1997 under Section 5-203
of the City Charter. The Defined Contribution Plan covers substantially all full-time
employees hired after December 31, 1996. In addition, 602 employees hired before
January 1, 1997 elected to convert their retirement benefits from the Defined Benefit
Plan effective December 1, 1997.
The Plan for Employees' Pensions of the Board of Water and Light - City of Lansing,
Michigan - Defined Contribution Plan issues a publicly available financial report. That
report may be obtained by writing to the Board of Water and Light, Chief Financial
Officer, P.O. Box 13007, Lansing, Michigan 48901-3007.
The Defined Contribution Plan operates as a money purchase pension plan and meets
the requirements of Sections 401(a) and 501(a) of the IRC of 1986, as amended from
time to time.
37
Board of Water and Light - City of Lansing, Michigan
Notes to Financial Statements
June 30, 201 S and 2014
Note 8 - Retirement Plans (Continued)
For employees hired before January 1, 1997, the BWL is required to contribute 15.0
percent of the employees' compensation. For employees hired after January 1, 1997, the
BWL is required to contribute 8.1 percent of the employees' compensation. In addition,
the BWL is required to contribute 3.0 percent of the employees' compensation for all
employees who are not eligible to receive overtime pay and 0.5 percent of the
employees' compensation for all nonbargaining employees. No participant contributions
are required.
During the years ended June 30, 2015 and 2014, the BWL contributed $5,548,360 and
$5,467,824, respectively. The BWL's contributions are recognized in the period that the
contributions are due.
Basis of Accounting - The Defined Contribution Plan's financial statements are
prepared using the accrual method of accounting in accordance with Governmental
Accounting Standards Board (GASB) Statement No. 67, Financial Reporting for Pension
Plans.
Valuation of Investments and Income Recognition - The Defined Contribution Plan
investments are stated at market value based on closing sales prices reported on
recognized securities exchanges on the last business day of the year, or, for listed
securities having no sales reported and for unlisted securities, upon the last reported bid
prices on that date. The mutual funds are valued at quoted market prices, which
represent the net asset values of shares held by the Defined Contribution Plan at year
end.
Purchases and sales of investments are recorded on a trade-date basis. Interest income
is accrued when earned. Dividend income is recorded on the ex-dividend date.
Regulatory Status - The Defined Contribution Plan is not subject to the reporting
requirements of the Employee Retirement Income Security Act of 1974 (ERISA) as it has
been established for the benefit of a governmental unit.
38
Board of Water and Light - City of Lansing, Michigan
Notes to Financial Statements
June 30, 201 S and 2014
Note 8 - Retirement Plans (Continued)
Retiree Benefit Plan and Trust
The Retiree Benefit Plan and Trust (the "Plan") is a single-employer defined benefit
healthcare plan. The Plan provides medical, dental, and life insurance benefits in
accordance with Section 5-203 of the City Charter. Substantially all of the BWL's
employees may become eligible for healthcare benefits and life insurance benefits if they
reach normal retirement age while working for the BWL. There were 725 participants
eligible to receive benefits at June 30, 2015 and 698 participants eligible at June 30,
2014.
In October 1999, the BWL formed a Voluntary Employee Benefit Administration (VEBA)
trust for the purpose of accumulating assets sufficient to fund retiree healthcare
insurance costs in future years. During the years ended June 30, 2015 and 2014, the cost
to BWL of maintaining the Retiree Benefit Plan was $9,670,794 and $9,266,529, of
which respectively, was incurred as direct costs of benefits.
The Retiree Benefit Plan and Trust of the Board of Water and Light - City of Lansing,
Michigan issues a publicly available financial report. That report may be obtained by
writing to the Board of Water and Light, Chief Financial Officer, P.O. Box I3007,
Lansing, Michigan 48901-3007.
Basis of Accounting - The plan statements are prepared using the accrual basis of
accounting.
Investment Valuation and Income Recognition - Plan investments are reported at
fair value. Securities traded on a national or international exchange are valued at the last
reported sales price. Purchases and sales of investments are recorded on a trade-date
basis. Appreciation or depreciation of investments is calculated based on the beginning
of the period's fair value of investments.
39
Board of Water and Light - City of Lansing, Michigan
Notes to Financial Statements
June 30, 2015 and 2014
Note 8 - Retirement Plans (Continued
Funding Policy - The BWL adopted a process for funding the retiree benefits using
both a VEBA trust and, to the extent permitted by law, excess pension assets in the
Defined Benefit Pension Plan. Additional contributions to the VEBA trust from BWL
operating funds to supplement Section 420 transfers will not exceed the recommended
annual contribution amount required to cover current service of active participants and
amortize the unfunded accrued liability over 30 years. The required contribution is
based on a projected pay-as-you-go financing requirement with an additional amount to
prefund benefits. No participant contributions are required.
The Plan's annual other postemployement benefit (OPEB) cost is calculated based on
the annual required contribution (ARC), an amount actuarially determined in accordance
with the parameters of GASB Statement 45. The ARC represents a level of funding that,
if paid on an ongoing basis, is projected to cover normal costs each year and amortize
any unfunded actuarial liabilities over a period of 30 years.
Actuarial Assumptions - Actuarial valuations of an ongoing plan involve estimates of
the value of reported amounts and assumptions about the probability of the occurrence
of events far into the future. Examples include assumptions about future employment,
mortality, and the healthcare cost trend. Amounts determined regarding the funded
status of the plan and the annual required contributions of the employer are subject to
continual revision as actual results are compared with past expectations and new
estimates are made about the future. The schedule of funding progress, presented as
required supplementary information following the notes to the financial statements,
presents multiyear trend information about whether the actuarial value of plan assets is
increasing or decreasing over time relative to the actuarial accrued liabilities for benefits.
Projections of benefits for financial reporting purposes are based on the substantive plan
(the plan as understood by the employer and the plan members) and include the types
of benefits provided at the time of each valuation and the historical pattern of sharing of
benefit costs between the employer and plan members to that point. The actuarial
methods and assumptions used include techniques that are designed to reduce the
effects of short-term volatility in actuarial accrued liabilities, consistent with the long-
term perspective of the calculations.
40
Board of Water and Light - City of Lansing, Michigan
Notes to Financial Statements
June 30, 201 S and 2014
Note 8 - Retirement Plans (Continued)
The Plan has calculated the accrued actuarial liability and required contribution using
certain methods and assumptions. Benefit payments have been computed using the
individual entry age normal method. The assets have been valued in the actuary report
using the fair market value. The healthcare cost trend rates used range from 5.0 to 9.0
percent for the years ended June 30, 2015 and 2014.
Contribution trend information is as follows (in thousands):
Percentage of
Annual OPEB
Fiscal Year Annual OPEB Annual OPEB Cost Net OPEB
Ended Cost Contributed Contributed Obligation
6/30/2012 $ 15,744 $ 15,854 101% $ (150)
6/30/2013 13,994 14,045 100% (201)
6/30/2014 9,202 9,268 101% (267)
6/30/2015 5,765 9,671 168% (4,173)
Funded Status and Funding Progress - Actuarial valuations of an ongoing plan
involve estimates of the value of reported amounts and assumptions about the
probability of the occurrence of events far into the future. Significant actuarial
assumptions used in determining the annual OPEB cost include (a) rate of return on the
investments of present and future assets of 7.5 percent, compounded annually, (b)
projected healthcare trend rates ranging from 5.0 percent to 9.0 percent, and (c)
amortization method level dollar over a 30-year period.
Funding status and funding progress trend information is as follows (in thousands):
Unfunded
Actuarial Actuarial
Actuarial Accrued Accrued Funded
Valuation Date Asset Value Liability Liability Ratio
2/28/2012 $ 1 10,029 $245,418 $ 135,389 44.83%
2/28/2013 123, 195 207,864 84,669 59.27%
2/28/2014 148,307 194,365 46,058 76.30%
2/28/2015 157,565 200, 196 42,631 78.71%
41
Board of Water and Light - City of Lansing, Michigan
Notes to Financial Statements
June 30, 201 S and 2014
Note 8 - Retirement Plans (Continued)
Other Postretirement Benefits
The BWL offers its employees a deferred compensation plan, created in accordance
with IRC 457, which is administered by a trustee, the ICMA Retirement Corporation.
The BWL makes contributions of $1,000 annually for the employees as of January I of
each year, during the month of January. The BWL also will match employee
contributions at one dollar for every one dollar up to $1,250 in a calendar year.
Note 9 - Commitments and Contingencies
At June 30, 2015 and 2014, the BWL has two letters of credit in the amounts of
$1,000,000 and $817,220 issued to the Michigan Department of Natural Resources. The
letters of credit were issued to satisfy requirements of the Michigan Department of
Natural Resources to provide financial assurance to the State of Michigan for the cost of
closure and postclosure monitoring and maintenance of a landfill site operated by the
BWL.
Through monitoring tests performed on the landfill sites operated by the BWL, it has
been discovered that the sites are contaminating the groundwater. The contamination
does not pose a significant health risk, but does lower the quality of the groundwater.
The BWL is currently in the process of applying for approval from the State of Michigan
to remediate the sites. The BWL has estimated the total cost for remediation, including
closure and postclosure cost of the landfills, and has recorded a liability of $10,128,442
and $10,312,492 for the years ended June 30, 2015 and 2014, respectively. Certain
remediation activities have commenced and are in progress. The landfill sites are no
longer receiving waste products. Landfill closure and postclosure requirements are
associated with the Michigan Department of Environmental Quality. Annual postclosure
costs of these landfill sites are not expected to exceed $380,000 annually and are
included in the liability above. Estimates will be revised as approvals are received from
the State. In accordance with the regulatory basis of accounting as per GASB 62 (see
Note 1), the BWL recorded a corresponding regulatory asset (see Note 6).
The BWL previously announced a program to upgrade existing lead pipes throughout
the BWL service area. The program is scheduled to be complete in two years at an
estimated remaining cost of $1 1,367,000. There is no legal obligation to replace the
pipes, therefore no liability has been recorded.
42
Board of Water and Light - City of Lansing, Michigan
Notes to Financial Statements
June 30, 201 S and 2014
Note 9 - Commitments and Contingencies (Continued)
The BWL is subject to various laws and regulations with respect to environmental
matters such as air and water quality, soil contamination, solid waste disposal, handling
of hazardous materials, and other similar matters. Compliance with these various laws
and regulations could result in substantial expenditures. The BWL has established a
Designated Purpose Fund (see Note 1), of which one of the purposes of the fund is to
meet extraordinary expenditures resulting from responsibilities under environmental
laws and regulations. Management believes that all known or expected responsibilities to
these various laws and regulations by the BWL will be sufficiently covered by the
Designated Purpose Fund and the environmental remediation liability.
The BWL is involved in various other legal actions which have arisen in the normal
course of business. Such actions are usually brought for claims in excess of possible
settlement or awards, if any, that may result. After taking into consideration legal
counsel's evaluation of pending actions, management has recorded an adequate reserve
as of June 30, 2015 and 2014 in regard to specific pending legal cases.
The BWL has entered into contracts to purchase coal totaling $1 1 ,841,667 through
December 31, 2017. In addition, the BWL has entered into contracts for the rail services
related to shipping the coal. Commitments for future rail services to be purchased are
approximately$9,639,000 through December 2016.
Note 10 - Power Supply Purchase
In 1983, the BWL entered into 35-year power supply and project support contracts with
the Michigan Public Power Agency (MPPA), of which the BWL is a member. Under the
agreement, the BWL has the ability to purchase power from MPPA, will sell power to
MPPA at an agreed-upon rate, and will purchase 64.29 percent of the energy generated
by MPPA's 37.22 percent ownership in Detroit Edison's Belle River Unit #1 (Belle
River), which became operational in August 1984.
43
Board of Water and Light - City of Lansing, Michigan
Notes to Financial Statements
June 30, 201 S and 2014
Note 10 — Power Supply Punccase (Continued)
Under the terms of its contract, the BWL must make minimum annual payments equal
to its share of debt service and its share of the fixed operating costs of Belle River. The
estimated required payments presented below assume no early calls or refinancing of
existing revenue bonds and a 3.0 percent annual inflation of fixed operating costs, which
include expected major maintenance projects.
Estimated
Debt Fixed Total
Year Service Operating Costs Required
2016 $ 26,515,502 $ 12,521,064 $ 39,036,566
2017 23,720,173 13,603,908 37,324,081
2018 18,257,255 14,732,532 32,989,787
Total $ 68,492,930 $ 40,857,504 $ 109,350,434
In addition to the above required payments, the BWL must pay for fuel, other operating
costs, and transmission costs related to any kilowatt hours (KWHs) purchased under
these contracts.
The BWL recognized expenses for 2015 and 2014 of $53,051,047 and $52,549,164,
respectively, to purchase power under the terms of this contract. The price of this
power was calculated on a basis, as specified in the contracts, to enable MPPA to
recover its production, transmission, and debt service costs.
In connection with the Belle River purchase, in December 2002, MPPA issued
$280,180,000, principal amount, of its Belle River Project Refunding Revenue Bonds,
2002 Series A, with rates ranging from 2.125 percent to 5.25 percent to advance refund
$330,850,000 of outstanding 1993A and B bonds.
The BWL has entered into agreements with Granger Electric Company to purchase
power generated from landfill gases. The agreements will expire as of June 30, 2028 and
September 30, 2028. The minimum power to be purchased in the contract is 3.2
megawatts, with the option to purchase up to 12 megawatts depending on capacity. The
price of the electricity is based on the BWL's cost of electricity generation. The total
amount of electricity expected to be purchased from these contracts is estimated at
$140,000,000.
44
Board of Water and Light - City of Lansing, Michigan
Notes to Financial Statements
June 30, 2015 and 2014
Note 1 I - Cash, Investments, and Fair Value Disclosure
Michigan Compiled Laws Section 129.91 (Public Act 20 of 1943, as amended) authorizes
local governmental units to make deposits and invest in the accounts of federally insured
banks, credit unions, and savings and loan associations that have offices in Michigan. A
local unit is allowed to invest in bonds, securities, and other direct obligations of the
United States or any agency or instrumentality of the United States; certificates of
deposit, savings accounts, deposit accounts, or depository receipts of an eligible financial
institution; repurchase agreements; bankers' acceptances of United States banks;
commercial paper rated within the two highest classifications, which matures not more
than 270 days after the date of purchase; obligations of the State of Michigan or its
political subdivisions, which are rated as investment grade; and mutual funds composed
of investment vehicles that are legal for direct investment by local units of government in
Michigan.
The operating cash investment policy adopted by the BWL in accordance with Public
Act 20, as amended, and the Lansing City Charter has authorized investment in bonds
and securities of the United States government, certificates of deposit, time deposits,
and bankers' acceptances of qualified financial institutions, commercial paper rated AI by
Standard & Poor's and P I by Moody's, repurchase agreements using bonds, securities,
and other obligations of the United States or an agency or instrumentality of the United
States, and liquid asset accounts managed by a qualified financial institution using any of
these securities. The BWL's deposits and investment policies are in accordance with
statutory authority.
The BWL's cash and investments are subject to several types of risk, which are
examined in more detail below:
Risks at June 30, 2015
Custodial Credit Risk of Bank Deposits - Custodial credit risk is the risk that in the
event of a bank failure, the BWL's deposits may not be returned to it. The BWL requires
that financial institutions must meet minimum criteria to offer adequate safety to the
BWL. At year end, the BWL had $1,666,654 of bank deposits that were uninsured and
uncollateralized. The BWL evaluates each financial institution with which it deposits
funds and only those institutions meeting minimum established criteria are used as
depositories.
45
Board of Water and Light - City of Lansing, Michigan
Notes to Financial Statements
June 30, 2015 and 2014
Note 1 I - Cash, Investments, and Fair Value Disclosure (Continued)
Custodial Credit Risk of Investments - Custodial credit risk is the risk that, in the
event of the failure of the counterparty, the BWL will not be able to recover the value of
its investments or collateral securities that are in the possession of an outside party. The
BWL does not have a policy for custodial credit risk. At year end, the following
investment securities were uninsured and unregistered, with securities held by the
counterparty or by its trust department or agent, but not in the BWL's name:
Type of Investment Cost Basis How Held
U.S. government or agency bond or notes $ 91,596,540 Counterparty
Interest Rate Risk - Interest rate risk is the risk that the value of investments will
decrease as a result of a rise in interest rates. The BWL's investment policy restricts
investments to a maximum maturity of five years unless matched to a specific cash flow.
At year end, the average maturities of investments are as follows:
Investment Fair Value Less than I year 1-5 years 6-10 years
Pooled investment funds(if not 2a-7) $ 71,850,969 $ 71,850,969 $ - $ -
U.S.government or agency
bond or note $ 91,435,063 29,617,760 $ 61,817,303 $ -
Interest Rate Risk - Pension Trust Funds
Weighted Average
Investment Fair Value Maturity (in years)
U.S. government or agency bond $ 22,121,544 11.91
Money market trust funds 7,958,648 Less than I year
Corporate bonds 32,582,122 14.13
46
Board of Water and Light - City of Lansing, Michigan
Notes to Financial Statements
June 30, 201 S and 2014
Note I I - Cash, Investments, and Fair Value Disclosure (Continued)
Credit Risk - State law limits investments in commercial paper to the top two ratings
issued by nationally recognized statistical rating organizations. As of year end, the credit
quality ratings of debt securities (other than the U.S. government) are as follows:
Rating
Investment Fair Value Rating Organization
Pooled investment funds $ 71,850,969 AAA S&P
Concentration of Credit Risk - As of year end, no more than 5 percent of the BWL's
investments are invested in any one commercial paper issue.
47
Board of Water and Light - City of Lansing, Michigan
Notes to Financial Statements
June 30, 201 S and 2014
Note I I - Cash, Investments, and Fair Value Disclosure (Continued)
Credit Risk - Pension Trust Funds
Rating
Investment Fair Value Rating Organization
Mutual funds $ 138,830,601 Not Rated Not Rated
Government or agency bond 22,121,544 Not Rated Not Rated
Stable value 31,844,948 AA S&P
Corporate bonds - Not Rated Not Rated
Corporate bonds 3,509,599 AAA S&P
Corporate bonds 12,528,632 AA+ S&P
Corporate bonds 709,117 AA S&P
Corporate bonds 441,815 AA- S&P
Corporate bonds 1,424,862 A+ S&P
Corporate bonds 2,614,518 A S&P
Corporate bonds 3,513,1 1 1 A- S&P
Corporate bonds 2,559,638 BBB+ S&P
Corporate bonds 1,982,318 BBB S&P
Corporate bonds 1,195,013 BBB- S&P
Corporate bonds 262,236 BB+ S&P
Corporate bonds 109,150 BB S&P
Corporate bonds 279,092 BB- S&P
Corporate bonds 102,069 B+ S&P
Corporate bonds 141,348 B S&P
Corporate bonds 574,676 B- S&P
Corporate bonds - CCC+ S&P
Corporate bonds 508,305 CCC S&P
Corporate bonds 126,625 D S&P
Foreign Currency Risk - The BWL does not hold investments in foreign entities,
currency, or debt.
48
Board of Water and Light - City of Lansing, Michigan
Notes to Financial Statements
June 30, 2015 and 2014
Note 1 I - Cash, Investments, and Fair Value Disclosure (Continued)
Risks at June 30, 2014
Custodial Credit Risk of Bank Deposits - Custodial credit risk is the risk that in the
event of a bank failure, the BWL's deposits may not be returned to it. The BWL requires
that financial institutions must meet minimum criteria to offer adequate safety to the
BWL. At June 30, 2014, the BWL had $12,590,239 of bank deposits that were uninsured
and uncollateralized. The BWL evaluates each financial institution with which it deposits
funds and only those institutions meeting minimum established criteria are used as
depositories.
Custodial Credit Risk of Investments - Custodial credit risk is the risk that, in the
event of the failure of the counterparty, the BWL will not be able to recover the value of
its investments or collateral securities that are in the possession of an outside party. The
BWL does not have a policy for custodial credit risk. At year end, the following
investment securities were uninsured and unregistered, with securities held by the
counterparty or by its trust department or agent, but not in the BWL's name:
Type of Investment Cost Basis How Held
U.S. government or agency bond or notes $ 102,168,958 Counterparty
Interest Rate Risk - Interest rate risk is the risk that the value of investments will
decrease as a result of a rise in interest rates. The BWL's investment policy restricts
investments to a maximum maturity of five years unless matched to a specific cash flow.
At year end, the average maturities of investments are as follows:
Less than
Fair Value I Year 1-5 Years 6-10 years
Pooled investment funds (if not 2a-7) $ 59,126,052 $ 59,126,052 $ - $ -
U.S. government or agency
bond or note 101,633,888 5,753,547 94,780,419 1,099,922
Commercial paper 29,003,071 29,003,071 - -
49
Board of Water and Light - City of Lansing, Michigan
Notes to Financial Statements
June 30, 201 S and 2014
Note I I - Cash, Investments, and Fair Value Disclosure (Continued)
Interest Rate Risk - Pension Trust Funds
Weighted Average
Investment Fair Value Maturity (in years)
U.S. government or agency bond $ 23,639,025 1 1.87
Money market trust funds 8,662,335 Less than I year
Corporate bonds 32,558,775 14.02
Credit Risk - State law limits investments in commercial paper to the top two ratings
issued by nationally recognized statistical rating organizations. As of year end, the credit
quality ratings of debt securities (other than the U.S. government) are as follows:
Rating
Investment Fair Value Rating Organization
Pooled investment funds $ 59, 126,052 AAA S&P
Commercial paper 1,365,956 A I/P I S&P
4,994,396 Al +/P I S&P
2,996,083 AI/PI S&P
4,993,739 AI/PI S&P
1,313,050 AI/PI S&P
3,246,733 AI/PI S&P
4,098,924 Al +/P I S&P
2,997,393 Al +/P I S&P
2,996,798 A I/P I S&P
Concentration of Credit Risk - As of year end, no more than 5 percent of the BWL's
investments are invested in any one commercial paper issue.
50
Board of Water and Light - City of Lansing, Michigan
Notes to Financial Statements
June 30, 201 S and 2014
Note I I - Cash, Investments, and Fair Value Disclosure (Continued)
Credit Risk - Pension Trust Funds
Rating
Investment Fair Value Rating Organization
Mutual funds $ 133,962,556 Not Rated Not Rated
Government or agency bond 23,639,025 Not Rated Not Rated
Stable value 33,607,203 AA S&P
Corporate bonds - Not Rated Not Rated
Corporate bonds 3,689,662 AAA S&P
Corporate bonds 12,190,600 AA+ S&P
Corporate bonds 627,423 AA S&P
Corporate bonds 518,898 AA- S&P
Corporate bonds 1,426,951 A+ S&P
Corporate bonds 2,412,053 A S&P
Corporate bonds 3,918,625 A- S&P
Corporate bonds 2,300,585 BBB+ S&P
Corporate bonds 1,884,206 BBB S&P
Corporate bonds 1,392,016 BBB- S&P
Corporate bonds 217,513 BB+ S&P
Corporate bonds 315,865 BB S&P
Corporate bonds 171,619 BB- S&P
Corporate bonds 80,813 B+ S&P
Corporate bonds 63,000 B S&P
Corporate bonds 142,363 B- S&P
Corporate bonds - CCC+ S&P
Corporate bonds 1,141,078 CCC S&P
Corporate bonds 65,505 CC S&P
Foreign Currency Risk - The BWL does not hold investments in foreign entities,
currency, or debt.
51
Board of Water and Light - City of Lansing, Michigan
Notes to Financial Statements
June 30, 201 S and 2014
Note 12 - Estimated Liability for Excess Earnings on Water Supply and
Electric Utility System Revenue Bonds
In accordance with Section 148(f)(2) of the IRC of 1986, as amended, the BWL is
required on each anniversary date (July 1) of the Water Supply, Electric Utility, and
Steam Utility System Revenue Bonds, Series 2008A, 201 IA, 2012A, and 2013A to
compute amounts representing the cumulative excess earnings on such bonds. That
amount essentially represents a defined portion of any excess of interest earned on
funds borrowed over the interest cost of the tax-exempt borrowings. Expense is
charged (credited) annually in an amount equal to the estimated increase (decrease) in
the cumulative excess earnings for the year. On every fifth anniversary date and upon
final maturity of the bonds, the BWL is required to remit to the Internal Revenue Service
the amount of any cumulative excess earnings computed on the date of such maturity
plus an amount equal to estimated interest earned on previous years' segregated funds.
The estimated liability for excess earnings was $0 at June 30, 2015 and 2014. In
accordance with the requirements of the bond indenture, the BWL is required to set
aside any current year additions to this estimated liability in a rebate fund within 60 days
of the anniversary date of the bonds.
Note 13 - Risk Management and Insurance
The BWL is exposed to various risl<s of loss related to property loss, torts, errors and
omissions, and employee injuries (worl<ers' compensation), as well as medical benefits
provided to employees. The BWL has purchased commercial insurance for certain
general liability, business auto, excess liability, property and boiler and machinery, public
officials and employee liability claims, specific excess health insurance claims, and specific
excess workers' compensation claims, subject to policy terms, limits, limitations, and
deductibles. The BWL is self-insured for most worl<ers' compensation and health
insurance claims. The BWL has various levels of stop loss coverage that limits the BWL's
exposure as it relates to self-insured claims. Settled claims relating to the commercial
insurance have not exceeded the amount of insurance coverage in any of the past three
fiscal years.
52
Board of Water and Light - City of Lansing, Michigan
Notes to Financial Statements
June 30, 2015 and 2014
Note 13 - Risk Management and Insurance (Continued)
The BWL estimates the liability for self-insured workers' compensation and health
insurance claims that have been incurred through the end of the fiscal year, including
claims that have been reported as well as those that have not yet been reported.
Changes in the estimated liability for the past two fiscal years were as follows:
Workers'Compensation Health Insurance
2015 2014 2013 2015 2014 2013
Unpaid claims-
Beginning ofyear $ 2,000,000 $ 2,000,000 $ 2,000,000 $ 1,637,276 $ 1,590,814 $ 1,606,994
Incurred claims,
incurred but not
reported 554,773 864,854 1,077,383 20,853,299 18,340,955 18,644,371
Claim payments (354,773) (864,854) (1,077,383) (21,302,403) (18,294,493) (18,660,551)
Unpaid claims-
End of year $2,200,000 $2,000,000 $2,000,000 $ 1,188,172 $ 1,637,276 $ 1,590,814
Note 14 - Wise Road Reconstruction Project
In July 2011, the Wise Road water treatment plant was damaged by a chemical spill. The
piping and electrical systems were damaged and are being replaced or repaired. The
estimate to replace or repair the damaged equipment is approximately $21.1 million, of
which $17.5 million has been recouped from our insurance carrier.
Note 15 - Upcoming Pronouncements
In February 2015, the Governmental Accounting Standards Board issued GASB
Statement No. 72, Fair Value Measurement and Application. The requirements of this
Statement will enhance comparability of financial statements among governments by
requiring measurement of certain assets and liabilities at fair value using a consistent and
more detailed definition of fair value and acceptable valuation techniques. This
Statement also will enhance fair value application guidance and related disclosures in
order to provide information to financial statement users about the impact of fair value
measurements on a government's financial position. GASB Statement No. 72 is required
to be adopted for years beginning after June 15, 2015. The BWL is currently evaluating
the impact this standard will have on the financial statements when adopted during the
BWL's 2016 fiscal year.
53
Board of Water and Light - City of Lansing, Michigan
Notes to Financial Statements
June 30, 201 S and 2014
Note I S - Upcoming Pronouncements (Continued)
In June 2015, the GASB issued two new standards addressing accounting and financial
reporting by state and local governments for postemployment benefits other than
pensions (OPEB). GASB Statement No. 74, Financial Reporting for Postemployment
Benefit Plans other than Pension Plans, addresses reporting by OPEB plans whereas GASB
Statement No. 75, Accounting and Financial Reporting for Postemployment Benefits Other
Than Pensions, addresses accounting and reporting by employer governments that
provide OPEB benefits to their employees. Along with the currently required statement
of fiduciary net position and statement of changes in fiduciary net position, OPEB plans
will now be required to include in the financial statement more extensive footnote
disclosures and required supplementary information related to the measurement of the
OPEB liabilities for which assets have been accumulated. In addition, the BWL will, after
adoption of GASB 75, recognize on the face of the financial statements its net OPEB
liability. The BWL is currently evaluating the impact these standards will have on the
financial statements when adopted. GASB 74 is effective for fiscal years beginning after
June 15, 2016 whereas GASB 75 is effective one year later.
54
Board of Water and Light - City of Lansing, Michigan
Notes to Financial Statements
June 30, 2015 and 2014
Note 16 - Change in Accounting
During the current year, the BWL adopted GASB Statement No. 68, Accounting and
Financial Reporting for Pensions. As a result, the statements now include an asset for our
overfunded defined benefit plan legacy costs. Some of the changes in this net pension
asset will be recognized immediately as part of the pension expense measurement, and
other changes will be deferred and recognized over future years. Refer to the Defined
Benefit Plan section of Note 8 for further details.
As a result of implementing this statement, the following line items have been added to
the statement of Net Position:
As of June 30, As of June 30,
Item 2015 2014
Deferred inflows of resources - Net
pension asset deferrals $ 2,201,407 $ 7,143,206
Net Pension Asset 8,284,230 11,188,702
As this statement is applied retroactively, the financial statements for the year ended June
30, 2014 have been restated to apply the changes noted associated with the net pension
asset.
The effect of this change is as follows:
Net Position-June 30, 2013,as originally reported $ 575,725,088
GASB 68 adjustment to record net pension asset as of June 30, 3013 8,144,426
Net Position -June 30, 2013,as restated $ 583,869,514
Net Income-June 30, 2014,as originally reported $ 2,792,527
GASB 68 adjustment to record net pension expense for the year ended June 30, 2014
(included in administrative and general expense) (4,098,930)
Net Loss-June 30, 2014,as restated $ (1,306,403)
55
Required Supplemental Information
56
Board of Water and Light - City of Lansing, Michigan
Required Supplemental Information
Defined Benefit Plan - Schedule of Changes in the
BWL Net Pension Asset and Related Ratios
Last Ten Fiscal Years
(in thousands)
2015 2014 2013 2012* 2011* 2010* 2009* 2008* 2007* 2006*
Total Pension Liability
Service cost $ 274 $ 349 $ 407 $ - $ - $ - $ - $ - $ - $ -
Interest 4,919 4,751 5,085
Changes in benefit terms - - -
Differences between expected and actual experience (1,093) 964 (1,716)
Changes in assumptions** - 4,538 -
Benefit payments,including refunds (8,046) (8,541) 7,777
Net Change in Total Pension Liability (3,946) 2,061 (4,001)
Total Pension Liability-Beginning of year 69,341 67,280 71,281
Total Pension Liability-End of year 65,395 69,341 67,280
Plan Fiduciary Net Position
Contributions-Employer - - -
Contributions-Member - - -
Net investment income 1,771 14,243 10,170
Administrative expenses (576) (596) (536)
Benefit payments,including refunds (8,046) (8,541) (7,777)
Other - -
Net Change in Plan Fiduciary Net Position (6,850) 5,106 1,857
Plan Fiduciary Net Position-Beginning of year 80,529 75,424 73,567
Plan Fiduciary Net Position-End of year 73,679 80,530 75,424
BWL Net Pension Asset-Ending $ (8,284) $ (I 1,189) $ (8,144) $
Plan Fiduciary Net Position as a%of Total Pension Liability 1 12.67% 1 16.14% 1 12.10% % % % % % % %
Covered Employee Payroll 1,018 1,225 1,684
BWL's Net Pension Asset as a%of Covered Employee Payroll (814%) (913%) (484%) % % % % % % %
*GASB Statement No.68 was implemented as of June 30,2015. Information from 2006-2012 is not available and this schedule will be presented on a prospective basis.
**Related to change in the mortality assumption from the RP2000CH table projected to 2018 with Scale AA to the RP-2014 table projected generationally with Scale MP-2014
57
Board of Water and Light - City of Lansing, Michigan
Required Supplemental Information
Defined Benefit Plan - Schedule of Employer Contributions
Last Ten Fiscal Years
(in thousands)
2015 2014 2013 2012 2011 2010 2009 2008 2007 2006
Actuarially determined contribution $ $ $ $ $ 86 $ 2,109 $ $ $ $
Contributions in relation to the actuarially determined contribution 86 2,109
Contribution Deficiency(Excess) $ - $ - $ - $ - $ - $ - $ - $ - $ $
Covered Employee Payroll 1,018 1,225 1,684 2,101 2,398 2,660 3,089 3,162 3,391 3,942
Contributions as a Percentage of Covered Employee Payroll - % - % - % - % 3.59% 79.29% - % - % - % - %
58
Board of Water and Light - City of Lansing, Michigan
Required Supplemental Information
Retiree Benefit Plan and Trust Schedule
Years Ended June 30, 2015 and 2014
The schedule of funding progress is as follows:
Unfunded
Actuarial Actuarial
Actuarial Accrued Accrued Funded
Valuation Date Asset Value Liability Liability Ratio
2/28/2012 $ 110,029 $245,418 $ 135,389 44.83%
2/28/2013 123, 195 207,864 84,669 59.27%
2/28/2014 148,307 194,365 46,058 76.30%
2/28/2015 157,565 200, 196 42,631 78.71 %
59
Additional Information
60
Board of Water and Light - City of Lansing, Michigan
Income Available for Revenue Bond Debt Retirement
Year Ended June 30
2015 2014
Income - Before capital contributions per statement
of revenues, expenses, and changes in net assets $ 12,627,295 $ (1,306,403)
Adjustments to Income
Depreciation and impairment 39,104,343 38,997,186
Interest on long-term debt:
Notes 49,691 41,555
Revenue bonds 14,995,574 15,334,915
Total additional income 54,149,608 54,373,656
Income Available for Revenue Bonds and Interest
Redemption $ 66,776,903 $ 53,067,253
Debt Retirement Pertaining to Revenue Bonds
Principal $ 14,155,000 $ 13,385,000
Interest 14,995,574 15,334,915
Total $ 29,150,574 $ 28,719,915
Percent Coverage of Revenue Bonds and Interest
Requirements 229 185
61
Board of Water and Light - City of Lansing, Michigan
Detail of statement of Revenues and Expenses
Years Ended June 30, 2015 and 2014
Combined Water
2015 2014 2015 2014
Operating Revenues
Water $ 37,910,106 $ 37,246,939 $ 37,910,106 $ 37,246,939
Electric:
Retail 266,878,053 257,333,075 - -
Sales for resale 28,169,851 31,821,390
Steam 14,959,212 16,324,128
Chilled water 5,568,287 5,397,41 1
Total operating revenues 353,485,509 348,122,943 37,910,106 37,246,939
Operating Expenses
Production:
Fuel,purchased power,and
other operating expenses 163,336,653 165,199,058 8,104,909 8,957,388
Maintenance 24,415,690 17,045,140 3,134,979 2,981,167
Transmission and distribution:
Operating expenses 7,006,002 11,829,786 1,419,800 1,478,877
Maintenance 13,864,024 11,262,716 3,582,512 3,554,104
Administrative and general 61,297,460 66,583,248 10,875,024 1 1,709,798
Depreciation and impairment 39,104,343 38,997,186 6,155,947 6,529,406
Total operating expenses 309,024,172 310,917,134 33,273,171 35,210,740
Operating Income 44,461,337 37,205,809 4,636,935 2,036,199
Nonoperating Income(Expenses)
Investment income 1,351,006 1,866,462 219,281 279,183
Other income 1,534,922 (5,974,385) 921,168 (199,915)
System capacity fee 9,223,075 9,222,989 807,942 807,934
Bonded debt interest expense (14,995,574) (15,334,915) (1,858,926) (2,299,249)
Amortization-Central Utilities Complex (8,057,715) (7,642,715) (705,856) (669,502)
Payment in lieu of taxes (20,840,065) (20,608,093) (2,248,922) (2,230,811)
Other interest expense (49,691) (41,555) (4,366) (4,039)
Total nonoperating expense (31,834,042) (38,512,212) (2,869,679) (4,316,399)
Net Income(Loss) $ 12,627,295 $ (I,306,403) $ 1,767,256 $ (2,280,200)
62
Detail of Statement of Revenues and Expenses (Continued)
Years Ended June 30, 2015 and 2014
Electric Steam Chilled Water
2015 2014 2015 2014 2015 2014
266,878,053 257,333,075 - -
28,169,851 31,821,390 - -
- - 14,959,212 16,324,128 - -
- - - - 5,568,287 5,397,411
295,047,904 289,154,465 14,959,212 16,324,128 5,568,287 5,397,411
147,658,997 145,645,050 6,103,489 9,019,050 1,469,258 1,577,570
20,499,896 13,322,981 544,181 548,042 236,634 192,950
5,235,380 10,057,156 350,822 293,753 - -
9,979,670 7,262,321 301,536 421,252 306 25,039
49,245,600 53,414,153 984,240 1,190,697 192,596 268,600
29,178,160 28,887,165 2,451,617 2,200,476 1,318,619 1,380,139
261,797,703 258,588,826 10,735,885 13,673,270 3,217,413 3,444,298
33,250,201 30,565,639 4,223,327 2,650,858 2,350,874 1,953,113
1,023,221 1,386,482 58,070 123,840 50,434 76,957
586,071 (2,846,705) (186,030) (2,920,159) 213,713 (7,606)
7,712,335 7,712,263 702,798 702,792 -
(10,744,870) (1 1,828,91 1) (2,044,620) (428,751) (347,158) (778,004)
(6,737,861) (6,390,838) (613,998) (582,375) -
(17,386,779) (17,200,740) (871,399) (849,248) (332,965) (327,294)
(45,153) (37,516) (172) - -
(25,593,036) (29,205,965) (2,955,351) (3,953,901) (415,976) (1,035,947)
$ 7,657,165 $ 1,359,674 $ 1,267,976 $ (I,303,043) $ 1,934,898 $ 917,166
63
Board of Water and Light - City of Lansing, Michigan
Detail of Statement of Changes in Net Position
Combined Water Electric Steam Chilled Water
Net Position -June 30,2013,as originally reported $ 575,725,088 $ 94,250,278 $ 486,560,920 $ (4,003,088) $ (1,083,022)
GASB 68 adjustment to record net pension asset
as of June 30,2013(Note 16) 8,144,426 1,677,752 5,991,040 452,830 22,804
Net Position-June 30,2013,as restated 583,869,514 95,928,030 492,551,960 (3,550,258) (1,060,218)
Income(loss),as restated (1,306,403) (2,280,200) 1,359,674 (1,303,043) 917,166
Net Position-June 30,2014,as restated 582,563,1 1 1 93,647,830 493,91 1,634 (4,853,301) (143,052)
Income(loss) 12,627,295 1,767,256 7,657,165 1,267,976 1,934,898
Net Position-June 30,2015 $ 595,190,406 $ 95,415,086 $ 501,568,799 $ (3,585,325) $ 1,791,846
64
Board of Water and Light - City of Lansing, Michigan
Pension Trust Funds - Detail of Statement of Net Position
June 30, 2015
Defined Defined Benefit
Contribution Plan Plan VEBA Total
Assets
Receivable- Investment interest receivable $ $ 104,768 $ 200,805 $ 305,573
Investments at fair value:
Money market collective trust fund 2,321,310 6,243,203 8,564,513
U.S.government obligations 6,659,203 15,462,341 22,121,544
Corporate bonds and notes 1 1,312,551 21,269,571 32,582,122
Mutual funds 136,010,607 925,065 1,894,929 138,830,601
Stable value 31,844,948 - - 31,844,948
Equities - 52,356,437 111,112,369 163,468,806
Current liability - - - -
Self-directed brokerage account 1,376,730 - 1,376,730
Participant notes receivable 3,888,351 - 3,888,351
Total investments 173,120,636 73,574,566 155,982,413 402,677,615
Net Position- Held in trust for pension
and other employee benefits $ 173,120,636 $ 73,679,334 $ 156,183,218 $ 402,983,188
June 30, 2014
Defined Defined Benefit
Contribution Plan Plan VEBA Total
Assets
Receivable- Investment interest receivable $ $ 120,156 $ 21 1,625 $ 331,781
Investments at fair value:
Money market collective trust fund 3,192,936 5,71 1,439 8,904,375
U.S.government obligations 7,354,686 16,284,339 23,639,025
Corporate bonds and notes 1 1,844,906 20,713,869 32,558,775
Mutual funds 130,442,786 1,260,129 2,259,641 133,962,556
Stable value 33,607,203 - - 33,607,203
Equities - 56,770,168 108,540,537 165,310,705
Current liability - (13,000) - (13,000)
Self-directed brokerage account 1,147,041 - 1,147,041
Participant notes receivable 4,082,709 - 4,082,709
Total investments 169,279,739 80,409,825 153,509,825 403,199,389
Net Position- Held in trust for pension
and other employee benefits $ 169,279,739 $ 80,529,981 $ 153,721,450 $ 403,531,170
65
Board of Water and Light - City of Lansing, Michigan
Pension Trust Funds - Detail of Statement of
Changes in Net Position
Year Ended June 30, 2015
Defined Defined
Contribution Plan Benefit Plan VEBA Total
Increases
Investment income:
Net appreciation in
fair value of investments $ 21,201 $ 215,209 $ 650,079 $ 886,489
Interest and dividend income 7,295,819 1,556,214 2,964,616 11,816,649
Net investment income 7,317,020 1,771,423 3,614,695 12,703,138
Employer contributions 5,548,360 - 9,670,794 15,219,154
Participant rollover contributions 1,345,481 - - 1,345,481
Other 307,138 - - 307,138
Total increases 14,517,999 1,771,423 13,285,489 29,574,91 1
Decreases
Benefits paid to participants 10,451,713 8,045,948 9,670,794 28,168,455
Loan defaults 125,254 - - 125,254
Participants'note and administrative fees 100,135 576,122 1,152,927 1,829,184
Total decreases 10,677,102 8,622,070 10,823,721 30,122,893
Net Increase(Decrease)in Net Position
Held in Trust 3,840,897 (6,850,647) 2,461,768 (547,982)
Net Position Held in Trust for Pension
and Other Employee Benefits
Beginning of year 169,279,739 80,529,981 153,721,450 403,531,170
End of year $ 173,120,636 $ 73,679,334 $ 156,183,218 $ 402,983,188
66
Board of Water and Light - City of Lansing, Michigan
Pension Trust Funds - Detail of Statement of
Changes in Net Position
Year Ended June 30, 2014
Defined Defined
Contribution Plan Benefit Plan VEBA Total
Increases
Investment income:
Net appreciation in
fair value of investments $ 17,907,856 $ 12,570,312 $ 22,774,150 $ 53,252,318
Interest and dividend income 5,545,714 1,672,852 2,893,629 10,1 12,195
Total investment income 23,453,570 14,243,164 25,667,779 63,364,513
Employer contributions 5,467,824 - 9,266,529 14,734,353
Participant rollover contributions 1,053,879 - 1,053,879
Other 270,989 - 270,989
Total increases 30,246,262 14,243,164 34,934,308 79,423,734
Decreases
Benefits paid to participants 7,645,1 16 8,541,275 9,266,529 25,452,920
Loan defaults 1 19,694 - - 119,694
Participants'note and administrative fees 96,155 595,925 1,050,771 1,742,851
Total decreases 7,860,965 9,137,200 10,317,300 27,315,465
Net Increase in Net Position Held in Trust 22,385,297 5,105,964 24,617,008 52,108,269
Net Position Held in Trust for Pension
and Other Employee Benefits
Beginning of year 146,894,442 75,424,017 129,104,442 351,422,901
End of year $ 169,279,739 $ 80,529,981 $ 153,721,450 $ 403,531,170
67