HomeMy WebLinkAbout2018 - LBWL Lansing Board of Water and Light - Lansing final financial statement Hometown People. Hometown Power.
Board of Water and Light — City of
Lansing, Michigan
Financial Report
with Additional Information
As of and for the Years Ended June 30, 2018
and 2017
Board of Water and Light — City of Lansing, Michigan
Contents
Independent Auditor's Report 1 -2
Required Supplemental Information
Management's Discussion and Analysis 3-5
Basic Financial Statements
Statements of Net Position 6-7
Statements of Revenues, Expenses, and Changes in Net Position 8
Statements of Cash Flows 9-10
Pension Trust Funds - Statements of Net Position 1 1
Pension Trust Funds - Statements of Changes in Net Position 12
Notes to Financial Statements 1 3-68
Required Supplemental Information 69
Schedule of Changes in the Net Pension Asset 70
Schedule of Employer Contributions to the Net Pension Asset 71
Schedule of Changes in the Net OPEB Liability 72
Schedule of Employer Contributions to the Net OPEB Liability 73
Additional Information 74
Income Available for Revenue Bond Debt Retirement 75
Detail of Statements of Revenues and Expenses 76-77
Detail of Statements of Changes in Net Position 78
Pension Trust Funds - Detail of Statements of Net Position 79
Pension Trust Funds - Detail of Statement of Changes in Net
Position 80-81
MP
BAKER TI LLY
INDEPENDENT AUDITORS' REPORT
To the Honorable Mayor, Members of
the City Council, and Commissioners
Lansing Board of Water and Light
City of Lansing, Michigan
We have audited the accompanying financial statements of Lansing Board of Water and Light enterprise fund
and its fiduciary funds, as of and for the years ended June 30, 2018 and 2017, and the related notes to the
financial statements, which collectively comprise the Lansing Board of Water and Light's basic financial
statements as listed in the table of contents.
Management's Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation of these financial statements in
accordance with accounting principles generally accepted in the United States of America; this includes the
design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of
financial statements that are free from material misstatement, whether due to fraud or error.
Auditors'Responsibility
Our responsibility is to express opinions 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 auditors'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 Lansing Board of Water and Light'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
Lansing Board of Water and Light'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 opinions.
Bi,,d,p,,d,,,t memberf I
AKER TILLY
INTERNATIONAL
Opinions
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial
position of Lansing Board of Water and Light as of June 30, 2018 and 2017, and the respective changes in
financial position and cash flows thereof for the years then ended in accordance with accounting principles
generally accepted in the United States of America.
Emphasis of Matter
As discussed in Note 1 to the financial statements, Lansing Board of Water and Light has adopted the
provisions of GASB Statement No. 75, Accounting and Financial Reporting for Postemployment Benefits Other
Than Pensions, effective July 1, 2016. Net position as of June 30, 2016 has been restated due to the
implementation. Our opinions are not modified with respect to this matter.
Other Matters
Required Supplementary Information
Accounting principles generally accepted in the United States of America require that the required
supplementary information as listed 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 who considers it to be an essential part of financial reporting for
placing the basic financial statements in an appropriate operational, economic, or historical context. We have
applied certain limited procedures to the required supplementary information in accordance with auditing
standards generally accepted in the United States of America, which consisted of inquiries of management
about the methods of preparing the information and comparing the information for consistency with
management's responses to our inquiries, the basic financial statements, and other knowledge we obtained
during our audit of the basic financial statements. We do not express an opinion or provide any assurance on
the information because the limited procedures do not provide us with sufficient evidence to express an opinion
or provide any assurance.
Additional Information
Our audits were conducted for the purpose of forming opinions on the financial statements as a whole. The
supplemental information, listed in the table of contents as additional information, is presented for purposes of
additional analysis and is not a required part of the basic financial statements. Such information is the
responsibility of management and was derived from and relates directly to the underlying accounting and other
records used to prepare the basic financial statements. The 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 is fairly stated in all material respects in relation to the basic financial
statements as a whole.
U�
Madison, Wisconsin
September 11, 2018
2
Lansing Board of Water and Light
Management's Discussion and Analysis
This section explains the general financial condition and results of operations for the Lansing
Board of Water and Light ("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
the years ended June 30, 2018 and 2017.
Overview of Business
The BWL owns and operates an electric system which generates, purchases, and distributes
electric energy to over 97,000 retail customers in the greater Lansing area, and wholesale
customers through participation in the Midcontinent Independent System Operator, Inc. (MISO),
which is BWL's regional electric grid. The BWL generated 67 percent of its retail and wholesale
sales from existing generation assets. Additional electric generation was supplied through BWL's
membership in the Michigan Public Power Agency, which includes BWL's partial ownership of
Detroit Edison's Belle River Plant, and through MISO. The BWL maintains a diversified renewable
energy portfolio which includes wind, solar, landfill gas, and hydro-electric generation. The
combination of renewable energy generation and energy efficiency programs support BWL's
adopted plan to provide 30% clean energy in 2020 and 40% in 2030.
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 56,000
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 170 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 high 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. Gross capital expenditures were $92.3 and $51 .9 million in fiscal years 2018 and
2017, respectively.
The BWL generally pays the cost of its capital improvements from internally generated funds
however revenue bonds are issued from time to time to support large projects or special needs
such as construction of generation facilities.
Please refer to Independent Auditors' report.
3
Lansing Board of Water and Light
Management's Discussion and Analysis (Continued)
Detailed financial information for the separate utilities of water, electric, steam, and chilled water
can be found in the Additional Information section of this financial report.
Condensed Financial Information (dollars in millions)
As of June 36 % Change
2619 Restated 2617 2016 201710 2018
Assets
Utility plant 719.3 690.4 690.7 % 5.7
Other assets 295.9 332.9 342.1 (10.8)
Total assets 1,015.1 1,013.2 1,032.8 0.3
Deferred Outflow of Resources 7.4 6.6 3.8 12.1
Liabilities
Long-term liabilities 355.6 380.0 357.4 (6.4)
Other liabilities 61.3 56.6 57.1 8.3
Total liabilities 415.9 436.6 414.5 (4.5)
Deferred Inflow of Resources 35.2 26.9 26.6 34.6
Net Position
Net investment in capital assets 418.1 369.5 367.1 13.2
Restricted for debt service 42.8 38.7 38.3 16.6
Unrestricted 109.E 148.2 190.7 (26.6)
Net position 570.5 556.4 596.1 % 2.5
Capital expenditures in FY2018 exceeded depreciation, impairments and retirements thereby
increasing utility plant by $38.9 million. Fiscal year 2017 balances were restated due to the
implementation of GASB No. 75. Fiscal year 2016 balances are shown as originally reported. The
changes in the Deferred Outflow/Inflow of Resources is attributable to GASB No. 75 net OPEB
liability. These deferrals reflect differences between projected and actual experience, changes in
actuarial assumptions, and differences between projected and actual investment earnings on plan
investments. They are amortized through expense as described in Note 8.
Please refer to Independent Auditors' report.
4
Lansing Board of Water and Light
Management's Discussion and Analysis (Continued)
Condensed Financial Information (dollars in millions) (Continued)
For the Year Ended June 36 % Change
2018 Restated 2617 2616 2017to 2018
Result of Operations
Operating Revenue 353.1 371.4 366.9 % (4.9)
Operating Expense 325.5 342.4 327.1 (4.9)
Nonoperating expense - Net -13.4 -22.7 -32.9 (41.6)
Changes in Net Position 14.1 6.4 0.9 96 120.3
Operating revenue decreased by $18.3 million primarily due to a decrease in wholesale sales with
the remaining attributed to a decrease in retail demand. Net Income increased by $7.7 million
because of reduced impairments and reduced operating expense. FY2018 Nonoperating expense
includes more than $13.3 million in bonded debt interest expense. In FY2017 and FY2016
impairments of the Eckert and Erickson Power Stations, and Customer Care Initiative drove
Nonoperating expense to uncharacteristically high levels.
Budget - The BWL Commissioners approved a $267.3 million operating expense budget
(excluding depreciation) for fiscal year 2018. Actual expenses (excluding depreciation) were
$261 .5 million. The capital improvement budget, net of customer contributions in aid of
construction, was $139.5 million for FY2018, and actual net capital expenditures were $88.9
million. The difference between the capital budget and actual spend is due to a change in the
project timeline for a new combined cycle natural gas power plant.
Financing Activities - In June of 2018, Revenue Bond Anticipation Notes Series 2018 were
issued to fund project start-up costs for a new combined cycle natural gas power plant. The
2018 Note Series will provide funding for up to $100 million in project costs for a period of up
to 18 months. Prior to the end of the 18-month period, Revenue Bonds will be issued to
extinguish the outstanding notes and provide additional project funding for the plant and other
system improvements. The new 250 MW plant is currently budgeted at $450 million and is
scheduled to begin operation in FY 2021 .
Please refer to Independent Auditors' report.
5
Board of Water and Light - City of Lansing, Michigan
Statements of Net Position
As of June 30
2018 Restated 2017
Assets
Current Assets
Restricted cash and investments (Notes 2 and 3) $ 50,550,600 $ 47,380,541
Cash and investments (Notes 1 and 2) 48,127,904 57,522,888
Designated cash and investments (Notes 1 and 2) 88,774,893 108,059,622
Accounts receivable - Net (Note 1) 24,560,286 24,571,987
Estimated unbilled accounts receivable (Note 1) 19,748,294 17,334,540
Inventories (Note 1) 23,921,728 25,421,903
Other 4,742,077 4,400,379
Total current assets 260,425,782 284,691,860
Other Assets
Recoverable environmental remediation (Note 6) 2,983,786 6,321,595
Special deposit (Note 1) 41,165 5,690,000
Net pension asset (Note 8) 6,616,482 9,029,155
Other(Note 1) 2,593,739 2,723,987
Total other assets 12,235,172 23,764,737
Noncurrent Restricted Assets (Investments)(Notes 2 and 3) 24,151,912 24,384,188
Utility Plant(Notes 1 and 4)
Water 316,440,019 309,243,104
Electric 730,148,451 687,921,365
Steam 78,115,677 71,614,976
Chilled water 34,078,066 34,023,916
Common facilities 92,072,756 92,329,375
Total 1,250,854,969 1,195,132,736
Less accumulated depreciation 570,038,862 534,316,387
Net 680,816,107 660,816,349
Construction in progress (Note 10) 38,518,401 19,591,830
Total utility plant 719,334,508 680,408,179
Total assets 1,016,147,374 1,013,248,964
Deferred Outflows of Resources -
Bond refunding loss being amortized 1,859,964 2,116,754
Net pension deferred outflows (Note 8) 1,932,329 -
Net OPEB deferred outflows (Note 8) 3,655,764 4,468,156
Total deferred outflows of resources 7,448,057 6,584,910
See Notes to Financial Statements. 6
Board of Water and Light - City of Lansing, Michigan
Statements of Net Position (Continued)
As of June 30
2018 Restated 2017
Liabilities and Net Position
Current Liabilities
Accounts payable $ 34,829,022 $ 29,923,625
Current portion of long-term debt (Note 5) 9,360,459 9,614,677
Accrued payroll and related taxes 2,311,346 2,182,199
Customer deposits 2,202,779 2,072,804
Accrued compensated absences (Note 1) 4,810,006 4,874,356
Accrued interest 89,998 227,323
Accrued interest (payable from restricted assets) 7,729,600 7,733,536
Total current liabilities 61,333,210 56,628,520
Compensated Absences- Less current portion (Note 1) 7,313,587 7,305,531
Other Long-term Liabilities
Workers' compensation 2,200,000 2,200,000
Environmental remediation liability (Note 9) 7,321,928 7,608,844
Net OPEB liability (Note 8) 19,447,441 31,989,335
Other 1,375,055 2,073,349
Total other long-term liabilities 30,344,424 43,871,528
Long-term Debt- Less current portion (Note 5) 317,880,899 328,752,913
Total liabilities 416,872,120 436,558,492
Deferred Inflows of Resources
Revenue intended to cover future costs (Note 6) 17,921,615 18,879,619
Recoverable energy asset (Note 6) 4,908,441 1,237,957
Net pension deferred inflows (Note 8) - 31,205
Net OPEB deferred inflows (Note 8) 13,395,378 6,744,787
Total deferred inflows of resources 36,225,434 26,893,568
Net Position
Net investment in capital assets 418,105,026 369,476,728
Restricted for debt service (Note 3) 42,821,000 38,711,808
Unrestricted 109,571,851 148,193,278
Total net position $ 570,497,877 $ 556,381,814
See Notes to Financial Statements. 7
Board of Water and Light - City of Lansing, Michigan
Statements of Revenues, Expenses, and Changes in Net Position
For the Year Ended June 30
2018 Restated 2017
Operating Revenues(Note 1)
Water $ 41,524,143 $ 40,738,054
Electric 293,261,408 312,925,177
Steam 12,072,017 11,404,174
Chilled water 6,225,356 6,362,308
Total operating revenues 353,082,924 371,429,713
Operating Expenses
Production:
Fuel, purchased power, and other operating expenses 142,679,119 161,787,983
Maintenance 16,474,970 18,725,293
Transmission and distribution:
Operating expenses 7,929,917 10,139,726
Maintenance 19,983,487 15,839,208
Administrative and general 73,638,904 71,417,820
Return on equity (Note 7) 20,561,871 21,862,457
Depreciation (Note 1) 44,255,255 42,598,423
Total operating expenses 325,523,523 342,370,910
Operating Income 27,559,401 29,058,803
Nonoperating Income (Expenses)
Investment income 834,087 914,829
Other(expense) income (883,318) 478,719
Impairment on Power Stations (Note 4) - (9,337,129)
Bonded debt interest expense (13,331,897) (14,703,367)
Other interest expense (62,210) (51,446)
Total nonoperating expenses - Net (13,443,338) (22,698,394)
Net Income (Changes in Net Position) 14,116,063 6,360,409
Net Position - Beginning of year as restated 556,381,814 550,021,405
Net Position - End of year $ 570,497,877 $ 556,381,814
See Notes to Financial Statements. 8
Board of Water and Light - City of Lansing, Michigan
Statements of Cash Flows
For the Year Ended June 30
2018 2017
Cash Flows from Operating Activities
Cash received from customers 358,158,868 377,684,831
Cash paid to suppliers (202,605,345) (214,663,814)
Cash paid to employees (58,221,626) (61,976,765)
Return on equity(Note 7) (20,561,871) (21,862,457)
Cash from customer deposits 129,975 (231,622)
Interest on customer deposits (62,210) (51,446)
Net cash provided by operating activities 76,837,791 78,898,727
Cash Flows from Capital and Related Financing Activities
Proceeds from new borrowings 50,001 2,201,662
Planned, bonded, and annual construction (77,627,731) (50,209,767)
Principal payments on debt (9,883,645) (11,024,805)
Interest on debt (15,952,433) (16,846,591)
Net cash used in capital and
related financing activities (103,413,808) (75,879,501)
Cash Flows from Investing Activities
Proceeds from the sale and maturity of investments 76,471,402 62,633,076
Interest received 639,673 863,383
Purchase of investments (75,237,572) (61,836,299)
Net cash provided by investing activities 1,873,503 1,660,160
Net Increase in Cash and Cash Equivalents (24,702,514) 4,679,386
Cash and Cash Equivalents - Beginning of year 104,903,429 100,224,043
Cash and Cash Equivalents - End of year $ 80,200,915 $ 104,903,429
See Notes to Financial Statements. 9
Board of Water and Light - City of Lansing, Michigan
Statements of Cash Flows (Continued)
For the Year Ended June 30
2018 2017
Balance Sheet Classifications
Restricted cash and investments $ 50,550,600 $ 47,380,541
Cash and investments 48,127,904 57,522,888
Designated cash and investments 88,774,893 108,059,622
Noncurrent restricted assets 24,151,912 24,384,188
Total cash and investments $ 211,605,309 $ 237,347,239
Less noncash investments (131,404,394) (132,443,810)
Cash and Cash Equivalents - End of year $ 80,200,915 $ 104,903,429
Reconciliation of Operating Income to Net Cash For the Year Ended June 30
from Operating Activities 2018 2017
Operating income $ 27,559,401 $ 29,058,803
Adjustments to reconcile operating income to net cash from
operating activities:
Other nonoperating (1,846,895) 970,484
Depreciation 44,255,255 42,598,423
Sewerage collection fees 963,577 988,652
Interest on customer deposits (62,210) (51,446)
Decrease (increase) in assets:
Accounts receivable (Note 1) 11,701 (1,403,328)
Unbilled accounts receivable (Note 1) (2,413,754) 2,191,935
Inventories 1,500,175 (354,167)
Special deposit 5,648,835 2,845,000
Net pension asset 2,412,673 (4,765,165)
Other 3,126,359 4,831,671
(Decrease) increase in liabilities and deferred outflows/inflows of resources:
Accounts payable and other accrued expenses 472,056 1,287,691
Customer deposits 129,975 (231,622)
Net pension asset deferrals (1,963,534) 2,961,423
Other postemployment benefits liability and deferrals (5,078,911) (2,031,269)
Other 2,123,088 1,642
Total adjustments 49,278,390 49,839,924
Net cash provided by operating activities $ 76,837,791 $ 78,898,727
Noncash Capital and Financing Activities
Impairment on Power Station $ - $ 9,337,129
Refunding bonds issued - 33,591,885
See Notes to Financial Statements. 10
Board of Water and Light - City of Lansing, Michigan
Pension Trust Funds - Statements of Net Position
As of June 30
2018 2017
Assets
Receivable - investment interest receivable $ 553,132 $ 578,207
Trade receivable-due from broker 11,853 134,461
Investments at fair value:
Cash and money market trust fund 3,876,413 4,016,370
U.S. government obligations 34,494,449 38,104,494
Fixed income securities 47,121,007 45,862,887
Mutual funds 252,188,400 220,413,178
Stable value 35,135,911 35,270,975
Partnership - 1,117,790
Common stock 62,052,966 74,379,228
Self-directed brokerage account 2,144,556 1,826,494
Participant notes receivable 3,649,872 3,899,938
Total investments 440,663,574 424,891,354
Liabilities
Trade payable -due to broker 154,385 105,260
Net Position - Held in trust for pension
and other employee benefits $ 441,074,174 $ 425,498,762
See Notes to Financial Statements. 11
Board of Water and Light - City of Lansing, Michigan
Pension Trust Funds - Statements of Changes in Net Position
For the Year Ended June 30
2018 2017
Increases
Investment income(loss):
Net appreciation (depreciation)
in fair value of investments $ 17,115,698 $ 35,624,583
Interest and dividend income 14,665,987 10,178,156
Net investment income(loss) 31,781,685 45,802,739
Employer contributions 16,930,215 15,626,391
Participant rollover contributions 1,648,509 1,051,032
Interest from participant notes receivable 156,090 156,466
Total increases 50,516,499 62,636,628
Decreases
Retiree benefits paid 33,737,868 28,924,101
Loan defaults 209,514 72,325
Participants' note and administrative fees 993,705 1,114,932
Total decreases 34,941,087 30,111,358
Change in Net Position Held in Trust 15,575,412 32,525,270
Net Position Held in Trust for Pension
and Other Employee Benefits
Beginning of year 425,498,762 392,973,492
End of year $ 441,074,174 $ 425,498,762
See Notes to Financial Statements. 12
Board of Water and Light — City of Lansing, Michigan
Notes to Financial Statements
As of and for the Years Ended June 30, 2018 and 2017
Note 1 - Significant Accounting Policies
The following is a summary of the significant accounting policies used by the Board of
Water and Light ("BWL"):
Reporting Entity - The BWL, a related organization of the City of Lansing, Michigan
("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 it has spent certain resources, separate
funds allow the BWL to show the particular expenditures that specific revenues were
used for. The funds are aggregated into two fund types:
Enterprise funds provide goods or services to users in exchange for charges or fees.
Fiduciary Funds
1 . The Defined Contribution Plan and Defined Benefit Plan, which accumulate
resources for benefit payments to retirees
2. The Voluntary Employees' Beneficiaries Associates ("VEBA"), which accumulates
resources for future retiree health care payments to retirees
Basis of Accounting - Enterprise 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
As of and for the Years Ended June 30, 2018 and 2017
Note 1 - 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.
In June 2015, the GASB issued statement No. 75 - Accounting and Financial Reporting
for Postemployment Benefits Other Than Pensions. The objective of this Statement is to
improve accounting and financial reporting by state and local governments for
postemployment benefits other than pensions (other postemployment benefits or
OPEB). It also improves information provided by state and local governmental
employers about financial support for OPEB that is provided by other entities. This
standard was implemented effective July 1 , 2016 for the enterprise fund.
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 position
as operating and nonoperating.
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.
14
Board of Water and Light — City of Lansing, Michigan
Notes to Financial Statements
As of and for the Years Ended June 30, 2018 and 2017
Note 1 - Significant Accounting Policies (Continued)
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, return on equity, 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.
Investments are stated at fair value, which is the amount at which an investment could
be exchanged in a current transaction between two willing parties. Fair values are
based on methods and inputs as discussed in Note 2. Adjustments necessary to record
investments at fair value are recorded in the operating statement as increases or
decreases in investment income. Market values may have changed significantly after
year end.
15
Board of Water and Light — City of Lansing, Michigan
Notes to Financial Statements
As of and for the Years Ended June 30, 2018 and 2017
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
2018 2017
Designated purpose:
Coal inventory fluctuation $ 4,667,1 14 $ 4,684,100
Litigation, environmental, and uninsured losses 18,867,177 18,936,117
Future water facilities 3,802,319 3,816,307
Subtotal 27,336,610 27,436,524
Special purpose - Future construction 61,438,283 80,623,098
Total $ 88,774,893 $ 108,059,622
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 2018 and 2017 are as follows:
2018 2017
Customer receivables $ 20,1 18,859 $ 18,680,026
Sewerage collections 2,367,863 2,282,599
Miscellaneous 3,573,564 5,109,362
Less allowance for doubtful accounts (1,500,000) (1,500,000)
Net $ 24,560,286 $ 24,571,987
16
Board of Water and Light — City of Lansing, Michigan
Notes to Financial Statements
As of and for the Years Ended June 30, 2018 and 2017
Note 1 - Significant Accounting Policies (Continued)
Special Deposit - The BWL contracted with Consumer's Energy to install a new gas
pipeline in 2011 and at that time funded construction of this pipeline and incurred
$1 5,900,000 in costs. The BWL will subsequently be reimbursed for all but $1 ,675,000
of those costs provided minimum consumption requirements are met over the initial 5
year period. The remaining deposit was returned to the BWL during fiscal year 2018.
The long-term other asset for the Consumer's Energy deposit recorded was $0 and
$5,690,000 in 2018 and 2017, respectively. The BWL has $41 ,165 of miscellaneous
other deposits at year end.
Inventories - Inventories are stated at weighted average cost and consist of the
following at June 30:
2018 2017
Coal $ 10,207,127 $ 10,692,936
Gas 478,312 631,759
Materials and supplies 13,236,289 14,097,208
Total $ 23,921,728 $ 25,421,903
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. Interest incurred during the construction phase is
reflected in the capitalized value of the capital assets constructed. Capital assets are
generally defined as assets with an initial, individual cost of more than $5,000 and an
estimated life in excess of one year.
17
Board of Water and Light — City of Lansing, Michigan
Notes to Financial Statements
As of and for the Years Ended June 30, 2018 and 2017
Note 1 - Significant Accounting Policies (Continued)
Depreciation - Depreciation of the utility plant is computed using the straight-line
method based on estimated useful lives. The resulting provisions for depreciation in
2018 and 2017, expressed as a percentage of the average depreciable cost of the
related assets, are as follows:
Average Rate (Percent)
Life
(Years) 2018 2017
Classification of utility plant
Water 4-100 2.1 1.8
Electric 4-50 4.3 4.0
Steam 5-50 3.2 3.4
Chilled water 5-50 3.5 3.5
Common facilities 4-50 5.2 4.6
When units of property are retired, their costs are removed from the utility plant and
charged to accumulated depreciation.
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
$12,123,593 and $12,179,887 as of June 30, 2018 and 2017, 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
As of and for the Years Ended June 30, 2018 and 2017
Note 1 - Significant Accounting Policies (Continued)
Deferred Outflows/Inflows of Resources - In addition to assets, the statement of net
position reports 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 three items that
qualify for reporting in this category. The deferred outflows of resources relate to
deferred losses on refunding, pension related deferrals under GASB 68, and OPEB
related deferrals under GASB 75.
In addition to liabilities, the statement of net position reports' 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, pension related deferrals under
GASB 68, and OPEB related deferrals under GASB 75.
Net Position - Equity is classified as net position and displayed in three components:
• Net Investment in Capital Assets - 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 enterprise 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
As of and for the Years Ended June 30, 2018 and 2017
Note 1 - Significant Accounting Policies (Continued)
Net Pension Asset - A net pension asset is recorded in accordance with GASB Statement
No. 68. The asset is the difference between the actuarial total pension liability and the
Plan's fiduciary net position as of the measurement date. See Note 8 for additional
information.
Other Assets - Other assets consists of a deposit held with the Michigan Public Power
Agency (MPPA) related to the Belle River project.
Long-Term Obligations - Long-term debt and other obligations are reported as
liabilities. Bond premiums and discounts are amortized over the life of the bonds using
the straight-line method. Gains or losses on prior refundings are amortized over the
remaining life of the old debt or the life of the new debt, whichever is shorter. The
balance at year end for premiums and discounts is shown as an increase or decrease in
the liability section of the statement of net position. The balance at year end for the
loss on refunding is shown as a deferred outflow in the balance sheet.
Unbilled Accounts Receivable and Revenue - Unbilled accounts receivable at June 30,
2018 and 2017 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 July 1 will be recognized in the current period.
Postemployment Benefits Other Than Pensions (OPEB) - For purposes of measuring the
net OPEB liability, deferred outflows of resources and deferred inflows of resources
related to OPEB, and OPEB expense, information about the fiduciary net position of the
Lansing Board of Water and Light Retiree Benefit Plan and Trust (the "Plan"), a trust fund
of the BWL, and additions to/deductions from the Plan fiduciary net position have been
determined on the same basis as they are reported by the Plan. For this purpose, the
Plan recognizes benefit payments when due and payable in accordance with the benefit
terms. Investments are reported at fair value, except for money market investments and
participating interest-earning investment contracts that have a maturity at the time of
purchase of one year or less, which are reported at cost.
20
Board of Water and Light — City of Lansing, Michigan
Notes to Financial Statements
As of and for the Years Ended June 30, 2018 and 2017
Note 1 - Significant Accounting Policies (Continued)
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 $8,448,086 and $8,693,989 in 2018 and 2017, respectively, and
are not eliminated in the statement of revenues, expenses, and changes in net assets.
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.
Reclassifications - Certain amounts presented in the prior year data may have been
reclassified in order to be consistent with the current year's presentation.
Note 2 - 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.
21
Board of Water and Light — City of Lansing, Michigan
Notes to Financial Statements
As of and for the Years Ended June 30, 2018 and 2017
Note 2 - Cash, Investments, and Fair Value Disclosure (Continued)
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 Al by
Standard & Poor's and P1 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.
Michigan Cooperative Liquid Assets Securities System (MI CLASS) reports the fair value of
its underlying assets annually. Participants in the MI CLASS have the right to withdraw
their funds in total on one day's notice. At June 30, 2018 and 2017, the fair value of the
MI CLASS' assets were substantially equal to the utility's share. Michigan CLASS is rated
AAAm by Standard and Poor's. The BWL also has cash and investments with
Governments of Michigan Investing Cooperatively (GovMIC). The GovMIC cash and
investments are recorded at amortized cost which approximates fair value.
The BWL's cash and investments are subject to several types of risk, which are
examined in more detail below:
BWL's Cash and Investments (exclusive of fiduciary funds)
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, 2018 and 2017, the BWL had $1 9,701 ,949 and $1 ,650,050,
respectively, of bank deposits that were uninsured and uncol lateral ized. 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.
22
Board of Water and Light — City of Lansing, Michigan
Notes to Financial Statements
As of and for the Years Ended June 30, 2018 and 2017
Note 2 - Cash, Investments, and Fair Value Disclosure (Continued)
At June 30, 2018, 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 $132,387,636 Counterparty
At June 30, 2017, 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 $ 134,304,527 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 weighted average life of five years unless matched to a
specific cash flow.
At June 30, 2018, the average maturities of investments are as follows:
Less than
Investment Fair Value 1 year 1-5 years 6-10 years
Pooled investment funds $ 20,793,790 $20,793,790 $ - $ -
U.S. treasury bonds 88,550,287 26,479,857 62,070,430 -
U.S. agency bonds/notes 32,474,931 12,706,097 14,832,980 4,935,854
Commercial paper 4,177,853 4,177,853 - -
Supra national agency bonds 7,1 84,565 380,005 6,804,560 -
Mutual funds 22,671,252 22,671,252 - -
Total $ 175,852,678 $87,208,854 $ 83,707,970 $ 4,935,854
23
Board of Water and Light — City of Lansing, Michigan
Notes to Financial Statements
As of and for the Years Ended June 30, 2018 and 2017
Note 2 - Cash, Investments, and Fair Value Disclosure (Continued)
At June 30, 2017, the average maturities of investments are as follows:
Less than
Investment Fair Value 1 year 1-5 years 6-10 years
Pooled investment funds $ 41,448,433 $41,448,433 $ - $ -
U.S. treasury bonds 91,325,108 16,239,430 75,085,678 -
U.S. agency bonds/notes 44,379,571 17,462,537 25,794,936 1,122,098
Commercial paper 17,854,457 17,854,457 - -
Supra national agency bonds 1,974,548 - 1,974,548 -
Mutual funds 3,1 55,031 3,1 55,031 - -
Total $ 200,137,148 $96,159,888 $ 102,855,162 $ 1,122,098
Credit Risk - State law limits investments in commercial paper to the top two ratings
issued by nationally recognized statistical rating organizations.
As of June 30, 2018, the credit quality ratings of debt securities are as follows:
Rating
Investment Fair Value Rating Organization
Pooled investment funds $20,793,790 AAA S&P
U.S. treasury bonds 88,550,287 AA+ (Aaa) S&P (Moody's)
U.S. agency bonds/notes 32,474,931 AA+ S&P
Commercial paper 4,177,853 Al S&P
Supra national agency bonds 7,1 84,565 AAA S&P
Mutual funds 22,671,252 AAAM S&P
24
Board of Water and Light — City of Lansing, Michigan
Notes to Financial Statements
As of and for the Years Ended June 30, 2018 and 2017
Note 2 - Cash, Investments, and Fair Value Disclosure (Continued)
As of June 30, 2017, the credit quality ratings of debt securities are as follows:
Rating
Investment Fair Value Rating Organization
Pooled investment funds $47,145,988 AAA S&P
U.S. treasury bonds 38,056,849 AA+ S&P
U.S. agency bonds/notes 45,283,538 AA+ S&P
Commercial paper 7,447,318 Al /Al + S&P
Supra national agency bonds 2,008,658 AAA S&P
Mutual funds 124,840 AAAM S&P
Concentration of Credit Risk - Concentration of credit risk is the risk of loss attributable
to the magnitude of a government's investment in a single issuer. As of June 30, 2018
and 2017, the BWL's investment portfolio was concentrated as follows:
Investment 2018 2017
Fannie Mae 9% 11
Freddie Mac 8% 9%
GovMIC 13% 2%
Fair Value
The BWL categorizes its fair value measurements within the fair value hierarchy
established by generally accepted accounting principles. The hierarchy is based on the
valuation inputs used to measure the fair value of the asset. Level 1 inputs are quoted
prices in active markets for identical assets; Level 2 inputs are significant other
observable inputs; Level 3 inputs are significant unobservable inputs.
25
Board of Water and Light — City of Lansing, Michigan
Notes to Financial Statements
As of and for the Years Ended June 30, 2018 and 2017
Note 2 - Cash, Investments, and Fair Value Disclosure (Continued)
The following investments are recorded at fair value using the Matrix Pricing Technique.
June 30, 2018
Investment Level Level Level Total
U.S. Treasury Bonds $ - $ 88,550,287 $ - $ 88,550,287
Supra National Agency Bonds - 7,1 84,565 - 7,1 84,565
Federal Agency Mortgage-Backed - 2,812,408 - 2,81 2,408
Security
Federal Agency Collateralized Mortgage - 4,058,966 - 4,058,966
Obligation
Federal Agency Bond/Note - 25,603,557 - 25,603,557
Commercial Paper - 4,1 77,853 - 4,1 77,853
Total investments at fair value level $ - $1 32,387,636 $ - $1 32,387,636
June 30, 2017
Investment Level 1 Level Level Total
U.S. Treasury Bonds $ - $ 91,325,108 $ - $ 91,325,108
Supra National Agency Bonds - 1,974,548 - 1,974,548
Federal Agency Mortgage-Backed - 877,870 - 877,870
Security
Federal Agency Collateralized Mortgage - 1,589,459 - 1,589,459
Obligation
Federal Agency Bond/Note - 41,912,242 - 41,912,242
Commercial Paper - 1 7,854,457 - 1 7,854,457
Total investments at fair value level $ - $1 55,533,684 $ - $1 55,533,684
26
Board of Water and Light — City of Lansing, Michigan
Notes to Financial Statements
As of and for the Years Ended June 30, 2018 and 2017
Note 2 - Cash, Investments, and Fair Value Disclosure (Continued)
Fiduciary Fund Investments
Interest Rate Risk - Pension Trust Funds
At June 30, 2018, the average maturities of investments are as follows:
Weighted Average
Investment Fair Value Maturity(in years)
U.S. government or agency bond $ 34,494,449 1 3.6S
Fixed income securities 47,121,007 13.19
Mutual Fund - Bond Funds 18,870,972 4.8
Money market trust funds 3,876,413 Less than 1 year
At June 30, 2017, the average maturities of investments are as follows:
Weighted Average
Investment Fair Value Maturity(in years)
U.S. government or agency bond $ 38,104,494 13.64
Fixed income securities 45,862,887 1 3.1 9
Mutual Fund - Bond Funds 19,198,075 5.5
Money market trust funds 4,016,366 Less than 1 year
27
Board of Water and Light — City of Lansing, Michigan
Notes to Financial Statements
As of and for the Years Ended June 30, 2018 and 2017
Note 2 - Cash, Investments, and Fair Value Disclosure (Continued)
Credit Risk - Pension Trust Funds
As of June 30, 2018, the credit quality ratings of debt securities (other than the U.S.
government) are as follows:
Rating
Investment Fair Value Rating Organization
Mutual funds $ 145,098,563 Not rated Not rated
U.S. government - implicitly 1 3,481,910 AA+ S&P
guaranteed
U.S. government - implicitly 416,305 AA- S&P
guaranteed
Stable value 35,1 35,911 AA S&P
Fixed income securities 4,234,231 AAA S&P
Fixed income securities 18,869,605 AA+ S&P
Fixed income securities 2,573,800 AA S&P
Fixed income securities 576,738 AA- S&P
Fixed income securities 1,070,268 A+ S&P
Fixed income securities 4,502,135 A S&P
Fixed income securities 3,680,285 A- S&P
Fixed income securities 5,862,108 BBB+ S&P
Fixed income securities 3,983,612 BBB S&P
Fixed income securities 1,663,516 BBB- S&P
Fixed income securities 8,030 1313+ S&P
Fixed income securities 6,540 13+ S&P
Fixed income securities 90,140 13- S&P
Money market trust funds 3,876,410 Not rated Not rated
28
Board of Water and Light — City of Lansing, Michigan
Notes to Financial Statements
As of and for the Years Ended June 30, 2018 and 2017
Note 2 - Cash, Investments, and Fair Value Disclosure (Continued)
As of June 30, 2017, the credit quality ratings of debt securities (other than the U.S.
government) are as follows:
Rating
Investment Fair Value Rating Organization
Mutual funds $ 1 36,451,476 Not rated Not rated
U.S. government - implicitly 15,099,899 AA+ S&P
guaranteed
U.S. government - implicitly 412,491 AA+ S&P
guaranteed
Stable value 35,270,975 AA- S&P
Fixed income securities 2,907,825 AAA S&P
Fixed income securities 16,843,409 AA+ S&P
Fixed income securities 1,530,029 AA S&P
Fixed income securities 1,609,659 AA- S&P
Fixed income securities 971,866 A+ S&P
Fixed income securities 5,118,520 A S&P
Fixed income securities 3,700,024 A- S&P
Fixed income securities 7,879,776 BBB+ S&P
Fixed income securities 3,494,473 BBB S&P
Fixed income securities 1,704,316 BBB- S&P
Fixed income securities 8,170 BB+ S&P
Fixed income securities 94,820 CCC S&P
Money market trust funds 4,016,366 Not rated Not rated
Fair Value - Pension Trust Funds
The framework for measuring fair value provides a fair value hierarchy that prioritizes
the inputs to valuation techniques used to measure fair value. The hierarchy gives the
highest priority to unadjusted quoted prices in active markets for identical assets or
liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). The three
levels of the fair value hierarchy under authoritative guidance are described as follows:
Level 1 - Inputs to the valuation methodology are unadjusted quoted market prices
for identical assets in active markets that the Plan has the ability to
access.
29
Board of Water and Light — City of Lansing, Michigan
Notes to Financial Statements
As of and for the Years Ended June 30, 2018 and 2017
Note 2 - Cash, Investments, and Fair Value Disclosure (Continued)
Level 2 - Inputs to the valuation methodology include:
> quoted prices for similar assets or liabilities in active markets;
> quoted prices for identical or similar assets or liabilities in inactive
markets;
> inputs other than quoted prices that are observable for the asset or
liability;
> inputs that are derived principally from or corroborated by observable
market data by correlation or other means.
> If the asset or liability has a specified (contractual) term, the level 2
input must be observable for substantially the full term of the asset or
liability
Level 3 - Inputs to the valuation methodology are unobservable and significant to
the fair value measurement.
The asset's or liability's fair value measurement level within the fair value hierarchy is
based on the lowest level of any input that is significant to the fair value measurement.
Valuation techniques maximize the use of relevant observables and minimize the use
of unobservable inputs.
The following is a description of the valuation methodologies used for assets measured
at fair value. There have been no changes in the methodologies used at June 30, 2018
and 2017:
Money market fund, growth funds, and international funds: Valued at the quoted net
asset value ("NAV") of shares held by the Plan at year end.
Partnership: Valued using either NAV, valuations provided by management reflecting
the partnership's share of capital account balance, or the income and market approach.
Common stock, corporate bonds and notes, U.S. government obligations, and fixed
income securities: Valued at the most recent closing price reported on the market on
which individual securities are traded.
Mutual funds: Valued at the daily closing price as reported by the fund. Mutual funds
held by the Plan are open-end mutual funds that are registered with the Securities and
Exchange Commission. These funds are required to publish their daily NAV and to
transact at that price. The mutual funds held by the Plan are deemed to be actively
traded.
30
Board of Water and Light — City of Lansing, Michigan
Notes to Financial Statements
As of and for the Years Ended June 30, 2018 and 2017
Note 2 - Cash, Investments, and Fair Value Disclosure (Continued)
Stable value fund.-The Plus Fund is a collective fund that seeks to maintain a stable net
asset value. It invests primarily in a diversified portfolio of stable-value investments,
including traditional guaranteed investment contracts (traditional GICs), separate
account GICs, synthetic GICs backed by fixed income securities or investments, and
short-term investment funds, including money market mutual funds.
Guaranteed Lifetime Income fund:The Retirement Income Advantage Fund seeks both
moderate capital growth and current income. It invests in a separate account under a
group variable annuity. The separate account, in turn, invests in a mix of registered
funds and a collective trust fund with an allocation of approximately 60% domestic and
foreign equities and 40% fixed income.
Self-directed brokerage account: The self-directed brokerage account allows
participants of the Plan the option of selecting a more personalized and broad range of
investment choices. The investments within the account consist of corporate stocks,
which are valued at the most recent closing price reported on the market on which
individual securities are traded.
The preceding methods may produce a fair value calculation that may not be indicative
of net realizable value or reflective of future fair values. Furthermore, while the Plan
believes its valuation methods are appropriate and consistent with other market
participants, the use of different methodologies or assumptions to determine the fair
value of certain financial instruments could result in a different fair value measurement
at the reporting date.
31
Board of Water and Light — City of Lansing, Michigan
Notes to Financial Statements
As of and for the Years Ended June 30, 2018 and 2017
Note 2 - Cash, Investments, and Fair Value Disclosure (Continued)
The following table sets forth by level, within the fair value hierarchy, the Plan's assets
at fair value as of June 30, 2018 and 201 7:
June 30, 2018
Investment Type Level 1 Level 2 Level 3 Total
Cash and money market trust fund $ 3 $ 3,876,410 $ - $ 3,876,413
U.S. government obligations - 34,494,449 - 34,494,449
Fixed income securities - 47,121,007 - 47,121,007
Mutual funds 145,098,563 98,451,175 - 243,549,738
Common stocks 62,052,966 - - 62,052,966
Self-directed brokerage account 2,144,556 - - 2,144,556
Total investments by fair
value level $ 209,296,088 $ 183,943,041 $ - 393,239,129
Investments measured at the net
asset value (NAV)
Stable value 35,1 35,91 1
Guaranteed lifetime income 8,638,662
Total investments measured at fair value $ 437,01 3,702
June 30, 2017
Investment Type Level 1 Level 2 Level 3 Total
Cash and money market trust fund $ 4 $ 4,016,366 $ - $ 4,016,370
U.S. government obligations - 38,104,494 - 38,104,494
Fixed income securities - 45,862,887 - 45,862,887
Mutual funds 1 36,451,476 75,470,692 - 211,922,168
Partnership - - 1,117,790 1,117,790
Common stocks 74,379,228 - - 74,379,228
Self-directed brokerage account 1,826,494 - - 1,826,494
Total investments by fair
value level $ 212,657,202 $ 163,454,439 $ 1,117,790 377,229,431
Investments measured at the net
asset value (NAV)
Stable value 35,270,975
Guaranteed lifetime income 8,491,010
Total investments measured at fair value $ 420,991,416
32
Board of Water and Light — City of Lansing, Michigan
Notes to Financial Statements
As of and for the Years Ended June 30, 2018 and 2017
Note 2 - Cash, Investments, and Fair Value Disclosure (Continued)
Investments Measured Using NAV per Share Practical Expedient: The stable value fund
and guaranteed lifetime income fund use NAV per share as a practical expedient to
measuring fair value. The stable value fund had a fair value of $35,135,911 and
$35,270,975 as of June 30, 2018 and 2017, respectively and the guaranteed lifetime
income fund had a fair value of $8,638,662 and $8,491 ,010, respectively. These funds
have no unfunded commitments, the redemption frequency is daily, and there is no
redemption notice period.
Note 3 - Restricted Assets
Restricted assets are required under the 2008A, 2011 A, 2012A, 2013A, and 201 7A
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, 2018 2018 2017
Current
Operations and Maintenance Fund $ 34,236,000 $ 82,175,293 $ 88,852,839
Bond and Interest Redemption Fund 16,314,600 16,503,211 16,050,590
Total current 50,550,600 98,678,504 104,903,429
Noncurrent
Bond Reserve Fund 24,044,200 24,151,912 24,384,188
Total noncurrent 24,044,200 24,151,912 24,384,188
Total $ 74,594,800 $ 122,830,416 $ 129,287,617
The carrying value in excess of the required value for the current portion is reported as
cash and cash equivalents or investments for the years ended 2018 and 2017.
33
Board of Water and Light — City of Lansing, Michigan
Notes to Financial Statements
As of and for the Years Ended June 30, 2018 and 2017
Note 3 - Restricted Assets (Continued)
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 2008A, 2009A, 2011 A, 2012A, 2013A, and
201 7A Revenue Bonds.
• Bond Reserve Fund - Shall include sufficient funds to cover the maximum annual
principal and interest requirements of the 2008A, 2011 A, 2012A, 2013A, and
2017A 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, 2018, the cost basis in the fund was $24,475,928.
Note 4 - Utility Plant
The tables below reflect the capital asset activity of the utility plant categories for the
years ended June 30, 2018 and 201 7:
Capital Asset Activity for Year Ended June 30, 2018
Capital Assets Capital Assets
FY Start Transfers Acquisition Retirement FY End
Water $ 309,243,104 $ 2,446,138 $ 5,369,363 $ (618,586) $ 316,440,019
Electric 687,921,365 7,822,325 39,936,364 (5,531,603) 730,148,451
Steam 71,614,976 917,849 6,343,874 (761,022) 78,1 1 5,677
Chilled 34,023,916 - 54,150 - 34,078,066
Common 92,329,375 869,060 4,103,668 (5,229,347) 92,072,756
AUC 19,591,830 (67,862,791) 86,789,362 - 38,518,401
Total $ 1,214,724,566 $ (55,807,419) $142,596,781 $ (12,140,558) $ 1,2 89,3 73,3 70
34
Board of Water and Light — City of Lansing, Michigan
Notes to Financial Statements
As of and for the Years Ended June 30, 2018 and 2017
Note 4 - Utility Plant (Continued)
Accumulated Depreciation for Year Ended June 30, 2018
Depr. / Amort.
Accum. Depr. Depreciation and Impairment Depreciation Accum. Depr.
FY Start Transfer for Year Retirement FY End
Water $ (101,610,740) $ 60,509 $ (6,51 7,356) $ 402,202 $ (107,665,385)
Electric (355,1 12,374) 41,362 (30,3 73,3 32) 4,276,603 (381,167,741)
Steam (18,877,713) - (2,410,469) 205,104 (21,083,078)
Chilled (11,409,281) - (1,179,524) - (12,588,805)
Common (47,306,279) (101,871) (4,757,200) 4,631,497 (47,533,853)
Total $ (534,316,387) $ - $ (45,237,881 ) $ 9,51 5,406 $ (570,038,862)
Non-depreciable assets - Included in the table above are non-depreciable assets of
$1 ,210,196 for water, $14,760,199 for electric, $124,224 for steam, and $412,339 for
common facilities.
Erickson Power Station Impairment - In 2017, the BWL agreed to close the Erickson
Power Station by 2025 as a result of a settlement with the Sierra Club in support of
BWL's strategic plan. As a result, BWL recorded an impairment of $9,337,129 in 2017
using the service units approach to measure the impairment.
35
Board of Water and Light — City of Lansing, Michigan
Notes to Financial Statements
As of and for the Years Ended June 30, 2018 and 2017
Note 4 - Utility Plant (Continued)
Capital Asset Activity for Year Ended June 30, 2017
Capital Assets Capital Assets
FY Start Transfers Acquisition Retirement FY End
Water $ 302,165,777 $ (17,127) $ 7,454,989 $ (360,535) $ 309,243,104
Electric 774,429,214 2,307 29,073,790 (115,583,946) 687,921,365
Steam 68,557,331 - 3,569,514 (511,869) 71,614,976
Chilled 33,998,140 - 25,776 - 34,023,916
Common 88,752,432 14,820 5,328,467 (1,766,344) 92,329,375
AUC 15,583,201 (45,452,536) 49,461,165 - 19,591,830
CUC 76,079,000 - - (76,079,000) -
Total $ 1,359,565,095 $ (45,452,536) $ 94,913,701 $ (194,301,694) $ 1,214,724,566
Accumulated Depreciation for Year Ended June 30, 2017
Depr. / Amort.
Accum. Depr. Depreciation and Impairment Depreciation Accum. Depr.
FY Start Transfer for Year Retirement FY End
Water $ (95,504,108) $ 12,935 $ (6,394,657) $ 275,090 $ (101,610,740)
Electric (430,593,001) 1,885 (29,510,774) 104,989,516 (355,112,374)
Steam (16,612,421) - (2,368,154) 102,862 (18,877,713)
Chilled (10,231,244) - (1,178,037) - (1 1,409,281)
Common (44,920,836) (14,820) (4,129,425) 1,758,802 (47,306,279)
CUC (71,007,065) - (2,113,306) 73,120,371 -
Total $ (668,868,675) $ - $ (45,694,353) $ 180,246,641 $ (534,316,387)
Non-depreciable assets - Included in the table above are non-depreciable assets of
$1 ,203,638 for water, $13,588,273 for electric, $124,224 for steam, and $412,339 for
common facilities.
36
Board of Water and Light — City of Lansing, Michigan
Notes to Financial Statements
As of and for the Years Ended June 30, 2018 and 2017
Note 5 - Long-term Debt
Long-term debt as of June 30 consists of the following:
2018 2017
Water Supply, Steam, Chilled Water and Electric Utility
System Revenue Refunding Bonds, Series 2017A, due in
annual principal installments beginning July 1, 2019 and
continuing through July 1, 2032, plus interest at a rate of
5.00%. Original amount of issue $30,365,000. $ 30,365,000 $ 30,365,000
Water Supply, Steam, Chilled Water, and Electric Utility
System Revenue Refunding Bonds, Series 2013A, due in
annual principal installments beginning July 1, 2014 through
July 1, 2026, plus interest at rates ranging from 2.00% to
5.00%. Original amount of issue $21,085,000. 16,560,000 18,025,000
Water Supply, Steam, Chilled Water, and Electric Utility
System Revenue Refunding Bonds, 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%. Original amount of issue $17,370,000. 5,310,000 10,375,000
Water Supply, Steam, Chilled Water, and Electric Utility
System Revenue Bonds, Series 2011A, due in annual
principal installments beginning July 1, 2015 through July 1,
2041, plus interest at rates ranging from 3.00% to 5.50%.
Original amount of issue $250,000,000. 249,985,000 249,990,000
Water Supply, Steam, Chilled Water, and Electric 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%. Original 1,745,000 3,420,000
amount of issue $40,000,000.
37
Board of Water and Light — City of Lansing, Michigan
Notes to Financial Statements
As of and for the Years Ended June 30, 2018 and 2017
Note 5 - Long-term Debt (Continued)
2018 2017
Promissory note, due to the City of Lansing in semi-annual
installments through October 1, 2024, plus interest at a rate
of 2.50%. Original amount of issue $13,225,385. $ 7,389,778 $ 8,932,605
Lansing Economic Development Corp due in monthly
installments of$4,500 through 2022. 18,000 22,500
Charter Township of Lansing Special Assessment pertaining
to the Groesbeck II Park Drain. Due in annual installments
ranging from $132,000 to $291,000 with final payment in
2044. 3,410,245 3,536,560
Bond anticipation note for a future issuance of revenue
bonds pertaining to a natural gas combined cycle facility and
other system improvements. 50,001 -
Total 314,833,024 324,666,665
Less current portion (9,360,459) (9,614,677)
Plus unamortized premium 12,408,334 13,700,925
Total long-term portion $ 317,880,899 $ 328,752,913
The unamortized premium and deferral on refunded bonds is being amortized over the
life of the bonds, using the straight-line method.
38
Board of Water and Light — City of Lansing, Michigan
Notes to Financial Statements
As of and for the Years Ended June 30, 2018 and 2017
Note 5 - Long-term Debt (Continued)
Aggregate principal and interest payments applicable to long-term debt are as follows:
Principal Interest Total
2019 $ 9,360,459 $ 15,598,174 $ 24,958,633
2020 7,658,795 15,183,315 22,842,110
2021 7,942,341 14,851,321 22,793,662
2022 8,247,081 14,495,683 22,742,764
2023 8,623,538 14,094,419 22,717,957
2024-2028 49,498,683 63,842,850 1 1 3,341,533
2029-2033 62,226,465 50,244,683 112,471,148
2034-2038 80,391,527 32,642,713 113,034,240
2039-2043 80,631,527 14,536,231 95,167,758
2044-2045 252,608 17,039 269,647
Total $ 314,833,024 $ 235,506,428 $ 550,339,452
The 2008A, 201 IA, 201 2A, 201 3A, and 201 7A 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, 2018, the balance of this reserve account was $24,1 51 ,912 (see
Note 3).
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 201 7A Bonds are payable in annual installments in the years 2019 through 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 or subject to mandatory
redemption in the years 2028 and thereafter, 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 , 2027 at par plus accrued interest
to the fixed date for redemption.
39
Board of Water and Light — City of Lansing, Michigan
Notes to Financial Statements
As of and for the Years Ended June 30, 2018 and 2017
Note 5 - Long-term Debt (Continued)
The 2013A Bonds are payable in annual installments in the years 2014 to 2024,
inclusive, and shall not be subject to optional redemption prior to maturity. The bonds
maturing on or after July 1 , 2024 shall be subject to redemption at the option of the
BWL on or after July 1 , 2023 as a whole or in part at any time and by lot within a
maturity at par plus accrued interest to the redemption date.
The 2012A Bonds are 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 Bonds are 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 on or after July 1 , 2021 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 2008A Bonds maturing in the years 2012 to 2018, 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 long-term debt activity for the year ended June 30, 2018 is as follows:
Revenue Other
Bonds Notes Total
Beginning balance $ 325,875,924 $ 1 2,491,666 $ 338,367,590
Additions - 50,001 50,001
Reductions (9,502,588) (1,673,645) (1 1,1 76,233)
Ending balance $ 316,373,336 $ 10,868,022 $ 327,241,358
Due within one year $ 8,585,000 $ 775,459 $ 9,360,459
40
Board of Water and Light — City of Lansing, Michigan
Notes to Financial Statements
As of and for the Years Ended June 30, 2018 and 2017
Note 5 - Long-term Debt (Continued)
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 $550,339,452. During
the current year, net revenues of the BWL were $71 ,765,425 compared to the annual
debt requirements of $24,044,200.
The long-term debt activity for the year ended June 30, 2017 is as follows:
Revenue Other
Bonds Notes Total
Beginning balance $ 337,152,291 $ 12,595,471 $ 349,747,762
Additions 35,757,547 36,000 35,793,547
Reductions (47,033,914) (139,805) (47,173,719)
Ending balance $ 325,875,924 $ 1 2,491,666 $ 338,367,590
Due within one year $ 8,210,000 $ 1,404,677 $ 9,614,677
Advance Refunding
On February 15, 2017, Series 2017A Revenue Refunding Bonds in the amount of
$30,365,000 were issued with an average yield rate of 2.58% to advance refund
$34,680,000 of the outstanding Series 2008A Revenue Bonds with an average yield rate
of 4.77%. The net proceeds, along with approximately $1 .3 million of restricted funds
on hand, were used to purchase U.S. government securities. Those securities were
deposited in an irrevocable trust with an escrow agent to provide for all future debt
service payments on the old bonds. As a result, that portion of the old bonds are
considered defeased and the liability for that portion of the old bonds has been removed
from the statement of net position.
The cash flow requirements on the old bonds prior to the advance refunding was
$51 ,558,250 from 2017 through 2032. The cash flow requirements on the new bonds
are $44,947,061 from 2017 through 2032. The advance refunding resulted in an
economic gain of $4,020,830. The bonds are callable on July 1 , 2018. At June 30, 2018,
$34,680,000 of the bonds outstanding are considered defeased.
41
Board of Water and Light — City of Lansing, Michigan
Notes to Financial Statements
As of and for the Years Ended June 30, 2018 and 2017
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 $0 and $0 at
June 30, 2018 and 2017, respectively. Under an agreement with a BWL customer, the
bonded debt related to the construction of the CUC was reimbursed through payments
received from this customer through 2017. The recoverable (revenue) amortization
balance represented the difference between calculated straight-line amortization
expense and the reimbursement payments received from the customer at year end. The
CUC was sold to the customer in fiscal 2017 under the terms of the agreement.
Environmental Remediation
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, 2018 and 2017 was $620,768 and
$1 ,858,705, 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, 2018 and 2017
for additional sites was $2,363,018 and $4,462,890, respectively. The BWL reviews the
adequacy of its rates to recover its cost of service on an annual basis.
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 power supply cost
recovery (PSCR) adjustment, power chemical adjustment (PCA), and fuel cost
adjustment (FCA). These affect the amount to be billed to retail electric, 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
$(4,908,441) and $0 ,237,957) at June 30, 2018 and 2017, respectively. This amount
represents costs to be billed (credited) to customers in future years because actual
costs of providing utilities were higher (lower) than the costs incorporated into the
BWL's rates.
42
Board of Water and Light — City of Lansing, Michigan
Notes to Financial Statements
As of and for the Years Ended June 30, 2018 and 2017
Note 6 - Costs/Credits Recoverable in Future Years (Continued)
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 $5,652,720 and $5,407,828 as of June 30,
2018 and 2017, respectively.
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. The remaining recoverable inflow of
resources of $1 ,541 ,901 and $1 ,762,172 as of June 30, 2018 and 2017, 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 13). The remaining recoverable inflow of
resources as of June 30, 2018 and 2017 was $10,726,994 and $11 ,709,619,
respectively.
43
Board of Water and Light — City of Lansing, Michigan
Notes to Financial Statements
As of and for the Years Ended June 30, 2018 and 2017
Note 7 - Transactions with the City of Lansing, Michigan
Operations - The BWL recognized revenue of $8,492,561 and $8,1 54,863 in 2018 and
2017, respectively, for water, electric, and steam services provided to the City. The BWL
incurred expenses for sewerage services purchased from the City of $839,024 and
$91 3,190 in 2018 and 2017, respectively.
Additionally, the BWL bills and collects sewerage fees for the City. In connection with
these services, the BWL received sewerage collection fees of $963,577 and $988,652 in
2018 and 2017, respectively, included in other income.
Return on Equity - Effective July 1 , 1992, the BWL entered into an agreement with the
City to provide 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. The return on equity represents
compensation to the City for a permanent easement granted to the BWL. Effective
March 1 , 2002, the formula to calculate the amount owed to the City for return on
equity 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 in semi-annual
installments. Under terms of this agreement, the BWL paid to the City $20,561 ,871 in
2018 and $21 ,862,457 in 2017 of operational cash flow in excess of debt service
requirements.
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
("Defined Benefit Plan"), and the BWL has a tax-qualified, single-employer,
noncontributory, defined contribution public employee retirement pension plan
("Defined Contribution Plan"). The BWL also has a tax-qualified, single-employer,
defined benefit plan to administer and fund retiree healthcare benefits ("Retiree Benefit
Plan and Trust").
44
Board of Water and Light — City of Lansing, Michigan
Notes to Financial Statements
As of and for the Years Ended June 30, 2018 and 2017
Note 8 - Retirement Plans (Continued)
Defined Benefit Plan
Plan Description - The BWL administers the Lansing Board of Water and Light Defined
Benefit Plan and Trust for Employees' Pensions ("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 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.
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, 2018 and 2017.
Employees Covered by Benefit Terms - At February 28, 2018 and 2017 (the most recent
actuarial valuation for funding purposes), Defined Benefit Plan membership consisted of
the following:
2018 2017
Inactive plan members or beneficiaries
currently receiving benefits 352 368
Inactive plan members entitled to but not
yet receiving benefits 4 6
Active plan members 8 8
Total 364 382
45
Board of Water and Light — City of Lansing, Michigan
Notes to Financial Statements
As of and for the Years Ended June 30, 2018 and 2017
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 $75,116,470 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 retains an independent actuary to
determine the annual contribution. The actuarially determined contribution 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, 2017 and 2018. Plan
documents do not require participant contributions.
46
Board of Water and Light — City of Lansing, Michigan
Notes to Financial Statements
As of and for the Years Ended June 30, 2018 and 2017
Note 8 - Retirement Plans (Continued)
Net Pension Asset - The components of the net pension asset of the BWL at June 30,
2018 and June 30, 2017 were as follows (in thousands):
2018 2017
Total pension liability $ 55,751 $ 56,895
Plan fiduciary net pension 62,367 65,924
Plan's net pension asset $ (6,616) $ (9,029)
Plan fiduciary net position, as a percentage of
the total pension liability 1 1 1.87% 1 1 5.87%
The BWL has chosen to use June 30, 2018 as its measurement date for fiscal year 2018.
The June 30, 2018 reported net pension asset was determined using a measure of the
total pension liability and the pension net position as of June 30, 2018. The June 30,
2018 total pension liability was determined by an actuarial valuation as of February 28,
2018, which used update procedures to roll forward the estimated liability to June 30,
2018.
The BWL has chosen to use June 30, 2017 as its measurement date for fiscal year 2017.
The June 30, 2017 reported net pension asset was determined using a measure of the
total pension liability and the pension net position as of June 30, 2017. The June 30,
2017 total pension liability was determined by an actuarial valuation as of February 28,
2017, which used update procedures to roll forward the estimated liability to June 30,
2017.
47
Board of Water and Light — City of Lansing, Michigan
Notes to Financial Statements
As of and for the Years Ended June 30, 2018 and 2017
Note 8 - Retirement Plans (Continued)
Changes in the net pension asset during the measurement years were as follows:
(in thousands)
Total Pension Plan Net Net Pension
Liability Position Asset
Balance at June 30, 2016 $ 61,178 $ 65,442 $ (4,264)
Changes for the year:
Service cost 112 - 112
Interest 4,317 - 4,317
Differences between expected - - -
and actual experience (383) - (383)
Changes in assumptions (857) - (857)
Net investment income - 8,271 (8,271)
Benefit payments, including refunds (7,472) (7,472) -
Administrative expenses - (31 7) 317
Miscellaneous other charges - - -
Net changes (4,283) 482 (4,765)
Balances at June 30, 201 7 $ 56,895 $ 65,924 $ (9,029)
Changes for the year:
Service cost $ 50 $ - $ 50
Interest 4,031 - 4,031
Differences between expected
and actual experience (230) - (230)
Changes in assumptions 1,419 - 1,419
Net investment income - 3,112 (3,112)
Benefit payments, including refunds (6,414) (6,414) -
Administrative expenses - (255) 255
Miscellaneous other charges - - -
Netchanges (1,144) (3,557) 2,413
Balance at June 30, 2018 $ 55,751 $ 627367 $ (6,616)
48
Board of Water and Light — City of Lansing, Michigan
Notes to Financial Statements
As of and for the Years Ended June 30, 2018 and 2017
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, 2018, the BWL recognized
pension expense of $81 1 ,903. At June 30, 2018, the BWL reported deferred outflows of
resources and deferred inflows of resources related to pensions from the following
sources:
Deferred Outflows Deferred Inflows
of Resources of Resources
Net difference between projected and actual earnings
on pension plan investments $ 1,932,329 $ -
For the year ended June 30, 2017, the BWL recognized pension expense of
$(1 ,934,026). At June 30, 2017, the BWL reported deferred outflows of resources and
deferred inflows of resources related to pensions from the following sources:
Deferred Outflows Deferred Inflows
of Resources of Resources
Net difference between projected and actual earnings
on pension plan investments $ - $ 31,205
49
Board of Water and Light — City of Lansing, Michigan
Notes to Financial Statements
As of and for the Years Ended June 30, 2018 and 2017
Note 8 - Retirement Plans (Continued)
Amounts reported as deferred outflows of resources and deferred inflows of resources
related to pensions will be recognized in pension expense as follows:
Years Ending
June 30
2019 $ 1,408,903
2020 619,901
2021 (41 3,803)
2022 317,328
Total $ 1,932,329
Actuarial Assumptions - The total pension liability in the June 30, 2018 and June 30,
2017 actuarial valuation was determined using the following actuarial assumptions,
applied to all periods included in the measurement:
2018 2017
Inflation 3.00% 3.00%
Salary increases 3.50% 3.50%
Investment rate of return 7.00% 7.50%
Mortality rates were based on the Healthy and Disabled, RP-2014 Mortality Table with
MP-2017 Improvement Scale.
The most recent experience review was completed in 2014. Since the Defined Benefit
Plan covered 8 active participants in fiscal year 2018 and 8 active participants in fiscal
year 2017, assumptions like termination, retirement, and disability have an immaterial
impact on the results and have not been changed.
50
Board of Water and Light — City of Lansing, Michigan
Notes to Financial Statements
As of and for the Years Ended June 30, 2018 and 2017
Note 8 - Retirement Plans (Continued)
Discount Rate - The discount rate used to measure the total pension liability was 7
percent and 7.5 percent in 2018 and 2017, respectively. 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 asset.
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, 2018 and 2017
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:
2018 Long-term 2017 Long-term
Expected Real Rate Expected Real Rate
Asset Class of Return of Return
Fixed income 2.74% 2.54%
Domestic equity 8.16% 7.94%
International equity 8.73% 8.66%
Real estate 5.91% 5.88%
Multi-sector 3.60% -
Absolute return 3.82% -
51
Board of Water and Light — City of Lansing, Michigan
Notes to Financial Statements
As of and for the Years Ended June 30, 2018 and 2017
Note 8 - Retirement Plans (Continued)
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, 2018, calculated using the
discount rate of 7.0 percent, as well as what the BWL's net pension asset would be if it
were calculated using a discount rate that is 1 percentage-point lower (6.0 percent) or
1 percentage-point higher (8.0 percent) than the current rate:
Current
1% Decrease Discount Rate 1% Increase
(6.00%) (7.00%) (8.00%)
Net pension liability(asset) of the
BWL $ (1,539,264) $ (6,616,482) $ (9,466,780)
The following presents the net pension asset of the BWL at June 30, 2017, 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 1 percentage-point lower
(6.5 percent) or 1 percentage-point higher (8.5 percent) than the current rate:
Current
1% Decrease Discount Rate 1% Increase
(6.50%) (7.50%) (8.50%)
Net pension liability(asset) of the
BWL $ (4,900,393) $ (9,029,155) $ (12,878,570)
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, deferred outflows of resources,
and deferred inflows or 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 have been determined on the same basis 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.
52
Board of Water and Light — City of Lansing, Michigan
Notes to Financial Statements
As of and for the Years Ended June 30, 2018 and 2017
Note 8 - Retirement Plans (Continued)
Defined Contribution Plan
The Lansing Board of Water and Light Employees' Defined Contribution Pension Plan
and Trust ("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 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.
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 9.5 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, 2018 and 2017, the BWL contributed $6,534,888 and
$6,052,720, 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.
53
Board of Water and Light — City of Lansing, Michigan
Notes to Financial Statements
As of and for the Years Ended June 30, 2018 and 2017
Note 8 - Retirement Plans (Continued)
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.
Retiree Benefit Plan and Trust (OPEB)
Plan Description - The Post-Retirement Benefit Plan and Trust for Eligible Employees of
Lansing Board of Water and Light ("Retiree Benefit Plan and Trust") 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 728
participants eligible to receive benefits at June 30, 2018 and 658 participants eligible at
June 30, 2017.
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, 2018 and 2017, the
cost to BWL of maintaining the Retiree Benefit Plan was $10,395,327 and $9,573,671 ,
of which respectively, was incurred as direct costs of benefits.
The Retiree Benefit Plan and Trust 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.
54
Board of Water and Light — City of Lansing, Michigan
Notes to Financial Statements
As of and for the Years Ended June 30, 2018 and 2017
Note 8 - Retirement Plans (Continued)
Benefits Provided - The Plan provides medical, dental, and life insurance benefits in
accordance with Section 5-203 of the City Charter. Benefits are provided through third-
party insurers, and the full cost of the benefits is covered by the plan.
Employees covered by benefit terms. At June 30, 2018, the following employees were
covered by the benefit terms:
Active plan members (not eligible to receive benefits) 703
Disabled participants 77
Retired participants 506
Surviving spouses 145
Total 1 .431
At June 30, 2017, the following employees were covered by the benefit terms:
Active plan members (not eligible to receive benefits) 713
Disabled participants 76
Retired participants 453
Surviving spouses 129
Total 1 .371
Contributions - Section 5-203 of the City Charter grants the authority to establish and
amend the contribution requirement to the BWL. The BWL establishes its minimum
contribution based on an actuarially determined rate. For the years ended June 30,
2018 and 2017, the actual contribution rates of the BWL were 18.7 percent and 17.6
percent of covered-employee payroll, respectively.
Net OPEB Liability - The BWL has chosen to use June 30, 2018 as its measurement date
for fiscal year 2018. The June 30, 2018 reported net pension liability was determined
using a measure of the total OPEB liability and the OPEB net position as of June 30,
2018. The June 30, 2018 total OPEB liability was determined by an actuarial valuation as
of February 28, 2018, which used update procedures to roll forward the estimated
liability to June 30, 2018.
55
Board of Water and Light — City of Lansing, Michigan
Notes to Financial Statements
As of and for the Years Ended June 30, 2018 and 2017
Note 8 - Retirement Plans (Continued)
The BWL has chosen to use June 30, 2017 as its measurement date for fiscal year 2017.
The June 30, 2017 reported net OPEB liability was determined using a measure of the
total OPEB liability and the OPEB net position as of June 30, 2017. The June 30, 2017
total OPEB liability was determined by an actuarial valuation as of February 28, 2018.
Actuarial Assumptions - The total OPEB liability in the June 30, 2018 and June 30, 2017
actuarial valuations were determined using the following actuarial assumptions, applied
to all periods included in the measurements, unless otherwise specified:
Inflation 3.0 percent
Payroll Growth 9.3%growth at age 25 and decreases to 6.4%for
ages 60+. This percentage includes general wage
inflation and merit/productivity increases.
Investment rate of return 7.5 percent, net of OPEB plan investment expense,
including inflation
Healthcare cost trend rates FYE Medical / RX Part B Dental
2019 9.00% 3.00% 5.00%
2020 8.50% 3.25% 4.75%
2021 8.00% 3.50% 4.50%
2022 7.50% 3.75% 4.25%
2023 7.00% 4.00% 4.00%
2024 6.50% 4.25% 4.00%
2025 6.00% 4.50% 4.00%
2026 5.50% 4.75% 4.00%
2027 5.00% 5.00% 4.00%
Mortality rates were based on the RPH-2016 Total Dataset Mortality Table fully
generational using Scale MP-2016 (RPH-2016 table is created based on RPH-2014
Total Dataset Mortality Table with 8 years of MP-2014 mortality improvement backed
out, adjusted to 2010 using MP-201 7 projection scale).
Best actuarial practices call for a periodic assumption review and BWL completed an
experience study in 2017.
56
Board of Water and Light — City of Lansing, Michigan
Notes to Financial Statements
As of and for the Years Ended June 30, 2018 and 2017
Note 8 - Retirement Plans (Continued)
BWL's policy in regard to the allocation of invested assets is established and may be
amended by the BWL by a majority vote of the Board of Commissioners. It is the policy
of the BWL to pursue an investment strategy that reduces risk through the prudent
diversification of the portfolio across a broad selection of distinct asset classes. The
following was the adopted asset allocation policy as of June 30, 2018 and 201 7:
Asset Class Target Allocation
U.S. Equities 40%
Non-U.S. Equities 20%
Global Fixed Income 25%
Commercial Real Estate 1 5%
The long-term expected rate of return on OPEB 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 OPEB 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. The best estimates
of arithmetic real rates of return for each major asset class as of June 30, 2018 are
summarized in the following table:
Long-Term
Expected Real
Asset Class Rate of Return
Core bonds 2.7%
Multi-Sector 3.6
Absolute return 3.8
U.S. large cap equity 7.5
U.S. small cap equity 8.8
Non-U.S. equity 8.7
Core real estate 5.9
57
Board of Water and Light — City of Lansing, Michigan
Notes to Financial Statements
As of and for the Years Ended June 30, 2018 and 2017
Note 8 - Retirement Plans (Continued)
For the June 30, 2017 valuation, the long-term expected rate of return was 7.50%. The
discount rate used when the OPEB plan investments are insufficient to pay for future
benefit payments was selected from the range of indices as shown in the table below,
where the range is given as the spread between the lowest and highest rate shown. The
final equivalent single discount rate used for the June 30, 2017 valuation was 7.50%
with the expectation that BWL will continue contributing the actuarially determined
contribution and/or paying for the pay-go cost.
Asset Class Long-Term Expected Real Rate of Return
S&P Municipal Bond 20-year 2.71
High Grade Rate Index
Fidelity 20-year Go Municipal 2.92%
Bond Index
Actual Discount Rate Used 7.50%
Discount rate - The discount rate used to measure the total OPEB liability as of June 30,
2018 and 2017 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. Based on those assumptions, the OPEB plan's
fiduciary net position was projected to be available to make all projected OPEB payments
for current active and inactive employees. Therefore, the long-term expected rate of
return on OPEB plan investments was applied to all periods of projected benefit
payments to determine the total OPEB liability.
58
Board of Water and Light — City of Lansing, Michigan
Notes to Financial Statements
As of and for the Years Ended June 30, 2018 and 2017
Note 8 - Retirement Plans (Continued)
Increase (Decrease)
Plan
Total OPEB Fiduciary Net OPEB
Liability Net Position Liability
(a) (b) (a)-(b)
Balances at 6/30/2017 $ 205,624,392 $ 1 73,635,057 $ 31,989,335
Changes for the year:
Service cost 4,826,401 - 4,826,401
Interest 15,039,052 - 15,039,052
Differences between expected and
actual experience (9,879,514) - (9,879,514)
Changes in assumptions (1,727,939) - (1,727,939)
Contributions-employer - 10,395,327 (10,395,327)
Contributions-employee - - -
Net investment income - 11,038,903 (11,038,903)
Benefit payments (10,395,327) (10,395,327) -
Administrative expense - (634,336) 634,336
Netchanges (2,137,327) 10,404,567 (12,541,894)
Balances at 6/30/2018 $ 203,487,065 $ 184,039,624 $ 19,447,441
59
Board of Water and Light — City of Lansing, Michigan
Notes to Financial Statements
As of and for the Years Ended June 30, 2018 and 2017
Note 8 - Retirement Plans (Continued)
Increase (Decrease)
Plan
Total OPEB Fiduciary Net OPEB
Liability Net Position Liability
(a) (b) (a)-(b)
Balances at 6/30/2016 $ 194,588,307 $ 156,300,342 $ 38,287,965
Changes for the year:
Service cost 3,130,487 - 3,130,487
Interest 14,226,364 - 14,226,364
Differences between expected and
actual experience 5,280,548 - 5,280,548
Changes in assumptions (2,027,643) - (2,027,643)
Contributions-employer - 9,573,671 (9,573,671)
Contributions-employee - -Net investment income - 18,039,508 (1 8,039,508)
Benefit payments (9,573,671) (9,573,671) -
Administrative expense - (704,793) 704,793
Net changes 11,036,085 17,334,715 (6,298,630)
Balances at 6/30/2017 $ 205,624,392 $ 173,635,057 $ 31,989,335
Sensitivity of the net OPEB liability (asset) to changes in the discount rate - The
following presents the net OPEB liability (asset) of BWL, as well as what BWL's net OPEB
liability (asset) would be if it were calculated using a discount rate that is 1-percentage
point lower (6.5 percent) or 1 percentage point higher (8.5 percent) than the current
discount rate (7.5 percent) as of June 30, 2018 and 2017:
60
Board of Water and Light — City of Lansing, Michigan
Notes to Financial Statements
As of and for the Years Ended June 30, 2018 and 2017
Note 8 - Retirement Plans (Continued)
June 30, 2018
1% Decrease Current Discount Rate 1% Increase
Net OPEB Liability (asset) $43,845,533 $19,447,441 $(991 ,597)
June 30, 2017
1% Decrease Current Discount Rate 1% Increase
Net OPEB Liability $57,428,880 $31 ,989,336 $10,788,919
Sensitivity of the net OPEB liability (asset) to changes in the healthcare cost trend rates
- The following presents the net OPEB liability (asset) of BWL, as well as what BWL's net
OPEB liability (asset) would be if it were calculated using healthcare cost trend rates that
are 1-percentage-point lower (8.0 percent decreasing to 4.0 percent) or 1-percentage-
point higher (10.0 percent decreasing to 6.0 percent) than the current healthcare cost
trend rates as of June 30, 2018 and 201 7:
June 30, 2018
1% Decrease Healthcare Cost Trend Rates 1% Increase
Net OPEB Liability (asset) $(2,824,476) $19,447,441 $46,517,181
June 30, 2017
1% Decrease Healthcare Cost Trend Rates 1% Increase
Net OPEB Liability $9,860,495 $31 ,989,336 $58,978,628
OPEB plan fiduciary net position - Detailed information about the OPEB plan's fiduciary
net position is available in the separately issued Post-Retirement Benefit Plan and Trust
for Eligible Employees of Lansing Board of Water and Light June 30, 2018 GASB 74/75
Report, issued July 25, 2018.
61
Board of Water and Light — City of Lansing, Michigan
Notes to Financial Statements
As of and for the Years Ended June 30, 2018 and 2017
Note 8 - Retirement Plans (Continued)
For the year ended June 30, 2018, the Plan recognized OPEB expense of $5,316,416. At
June 30, 2018, the Plan reported deferred outflows of resources and deferred inflows of
resources related to OPEB from the following sources:
Deferred Deferred
Outflows Inflows of
of Resources Resources
Differences between expected and actual
experience $ 3,655,674 $ 8,331,001
Changes of assumptions - 2,860,855
Net difference between projected and actual
earnings on OPEB plan investments - 2,203,522
Total $ 3,655,674 $ 13,395,378
Amounts reported as deferred outflows of resources and deferred inflows of resources
related to OPEB will be recognized in OPEB expense as follows:
Year Ended June 30:
2019 $ (2,184,101)
2020 (2,1 84,101)
2021 (2,1 84,101)
2022 (926,831)
2023 (1,569,1 27)
Thereafter (691,443)
For the year ended June 30, 2017, the Plan recognized OPEB expense of $5,551 ,672. At
June 30, 2017, the Plan reported deferred outflows of resources and deferred inflows of
resources related to OPEB from the following sources:
Deferred Deferred
Outflows Inflows of
of Resources Resources
Differences between expected and actual
experience $ 4,468,156 $ -
Changes of assumptions - 1,71S,698
Net difference between projected and actual
earnings on OPEB plan investments - 5,029,089
Total $ 4,468,156 $ 6,744,787
62
Board of Water and Light — City of Lansing, Michigan
Notes to Financial Statements
As of and for the Years Ended June 30, 2018 and 2017
Note 8 - Retirement Plans (Continued)
Other Postretirement Benefits
The BWL offers its employees a deferred compensation plan, created in accordance with
IRC 457. The BWL makes contributions of $1 ,000 annually for the employees as of
January 1 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 ,500 in a calendar year.
Note 9 - Commitments and Contingencies
At June 30, 2018 and 2017, the BWL has two letters of credit in the amounts of
$817,000 and $1 ,000,000 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 received landfill closure approval as well as interim remediation approval. The
BWL has estimated the total cost for remediation, including closure and postclosure
cost of the landfills, and has recorded a liability of $7,321 ,928 and $7,608,844 for the
years ended June 30, 2018 and 2017, 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).
63
Board of Water and Light — City of Lansing, Michigan
Notes to Financial Statements
As of and for the Years Ended June 30, 2018 and 2017
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, 2018 and 2017 in regard to specific pending legal cases.
The BWL has entered into contracts to purchase coal totaling $9,792,000 through
December 31 , 2020. 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 $18,066,000 through December 2019.
Construction in progress consists of projects for expansion or additions to the utility
plant. The estimated additional cost to complete various projects is approximately
$492,873,000 and $120,767,000 at June 30, 2018 and 2017, respectively, including
commitments on existing construction contracts approximating $122,664,000 and
$12,676,000 at June 30, 2018 and 2017, respectively. These projects will be funded
through revenue bonds and 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.
Environmental Protection Agency (EPA) Notice of Finding of Violation
On March 19, 2015, the EPA served the BWL with a Notice of Finding of Violation
specifically focused on BWL's Erickson capital projects. As of the date of the financial
statements the matter is still being negotiated. The BWL anticipates a settlement cost
of $275,000 and mitigation costs of $400,000. The mitigation costs will be incurred
over 3 years once the matter is settled and the entire cost is included in the financial
statements as presented.
64
Board of Water and Light — City of Lansing, Michigan
Notes to Financial Statements
As of and for the Years Ended June 30, 2018 and 2017
Note 10 - Power Supply Purchase
In 1983, the BWL entered into power supply and project support contracts with 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 Plant (Belle River), which became operational in August
1984.
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.
Debt Service Estimated Fixed Total
Year and Capital Operating Costs Required
2019 $ - $ 13,737,534 $ 13,737,534
Total $ - $ 13,737,534 $ 13,737,534
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 2018 and 2017 of $36,653,466 and $53,418,377,
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.
65
Board of Water and Light — City of Lansing, Michigan
Notes to Financial Statements
As of and for the Years Ended June 30, 2018 and 2017
Note 10 - Power Supply Purchase (Continued)
The BWL has entered into agreements with Energy Developments Limited, formerly
Granger Electric Company, to purchase power generated from landfill gases. The
agreements will expire as of June 30, 2028 and September 30, 2028. The power to be
purchased in the contract is 11 .2 megawatts. The estimated total cost of electricity
expected to be purchased for the remainder of these contracts is $80,058,000.
Note 11 - 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, 2011 A, 201 2A, 201 3A, and 201 7A
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, 2018 and 2017. 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.
66
Board of Water and Light — City of Lansing, Michigan
Notes to Financial Statements
As of and for the Years Ended June 30, 2018 and 2017
Note 12 - Risk Management and Insurance
The BWL is exposed to various risks of loss related to property loss, torts, errors and
omissions, and employee injuries (workers' 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 workers' compensation
and health insurance claims. Settled claims relating to the commercial insurance have
not exceeded the amount of insurance coverage in any of the past three fiscal years.
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
2018 2017 2016 2018 2017 2016
Unpaid claims - $ 2,200,000 $ 2,200,000 $ 2,200,000 $ 1,167,466 $ 1,167,466 $ 1,188,172
Beginning of year
Incurred claims,
including claims
incurred but not
reported 128,524 86,951 348,038 14,494,539 13,838,436 13,797,887
Claim payments (128,524) (86,951) (348,038) (14,494,539) (13,838,436) (13,818,593)
Unpaid claims -
End of year $ 2,200,000 $ 2,200,000 $ 2,200,000 $ 1,167,466 $ 1,167,466 $ 1,167,466
The liability for health insurance is included with accounts payable on the statement of
net position.
Note 13 - Upcoming Pronouncements
GASB has approved GASB Statement No. 83, Certain Asset Retirement Obligations,
Statement No. 84, Fiduciary Activities, Statement No. 85, Omnibus, Statement No. 86,
Certain Debt Extinguishment Issues, and Statement No. 87, Leases. When they become
effective, application of these standards may restate portions of these financial
statements.
67
Board of Water and Light — City of Lansing, Michigan
Notes to Financial Statements
As of and for the Years Ended June 30, 2018 and 2017
Note 14 - Restatement of Net Position
The BWL adopted GASB Statement No. 75 effective July 1 , 2016. Net position as of
June 30, 2016 has been restated as follows:
Net Position -June 30, 2016 (as reported) $596,090,470
Reverse GASB No. 45 OPEB asset (7,781 ,100)
Record GASB No. 75 net OPEB liability (38.287,965)
Net Position -June 30, 2016 (as restated) $550,021 .405
Net income of the prior year was increased by $2,031 ,269.
68
Required Supplemental Information
69
Lansing Board of Water and Light
Defined Benefit Plan and Trust for Employees' Pensions
Required Supplemental Information(Unaudited)
Schedule of Changes in the Net Pension Asset
Last Ten Fiscal Years
(in thousands)
2018 2017 2016 2015 2014 2013 2012* 2011* 2010* 2009*
Total Pension Liability
Service cost $ 50 $ 113 $ 223 $ 274 $ 349 $ 407 $ $ $ $
Interest 4,031 4,317 4,625 4,919 4,751 5,085
Changes in benefit terms - - - - - -
Differences between expected and actual experience (230) (383) 299 (1,093) 964 (1,716)
Changes in assumptions 1,419 (857) (1,468) - 4,538 -
Benefit payments,including refunds (6,414) (7,473) (7,896) (8,046) (8,541) (7,777)
Net Change in Total Pension Liability (1,144) (4,283) (4,217) (3,946) 2,061 (4,001)
Total Pension Liability -Beginning of year 56,895 61,178 65,395 69,341 67,280 71,281
Total Pension Liability -End of year 55,751 56,895 61,178 65,395 69,341 67,280
Plan Net Position
Contributions-Employer - - - - - -
Contributions-Member - - - - - -
Net investment income 3,112 8,272 47 1,771 14,243 10,170
Administrative expenses (255) (317) (388) (576) (596) (536)
Benefit payments,including refunds (6,414) (7,473) (7,896) (8,045) (8,541) (7,777)
Other
Net change in Net Position Held in Trust (3,557) 482 (8,237) (6,850) 5,106 1,857
Net Position Restricted for Pensions-Beginning of year 65,924 65,442 73,679 80,529 75,424 73,567
Net Position Restricted for Pensions -End of year 62,367 65,924 65,442 73,679 80,530 75,424
BWL Net Pension Asset-Ending $ (6,616) $ (9,029) $ (4,264) $ (8,284) $ (11,189) $ (8,144) $ $ $ $
Plan Net Position as a%of Total Pension Liability 111.87% 115.87% 106.97% 112.67% 116.14% 112.10%
Covered Employee Payroll $ 603 $ 586 $ 772 $ 1,018 $ 1,225 $ 1,684 $ $ $ $
BWL's Net Pension Asset as a%of Covered Employee Payroll (1,097%) (1,541%) (552%) (814%) (913%) (484%)
*GASB Statement No.67 was implemented as of June 30,2014. Information from 2009-2012 is not available and this schedule will be presented on a prospective basis.
70
Lansing Board of Water and Light
Defined Benefit Plan and Trust for Employees' Pensions
Required Supplemental Information (Unaudited)
Schedule of Employer Contributions to the Net Pension Asset
Last Ten Fiscal Years
(in thousands)
2018 2017 2016 2015 2014 2013 2012 2011 2010 2009
Actuarially determined contribution $ $ $ $ $ $ $ $ 86 $ 2,109 $
Contributions in relation to the actuarially determined contribution 86 2,109
Contribution Deficiency(Excess) $ $ $ $ $ $ $ $ - $ - $
Covered Employee Payroll $ 603 $ 586 $ 772 $ 1,018 $ 1,225 $ 1,684 $ 2,101 $ 2,398 $ 2,660 $ 3,089
Contributions as a Percentage of Covered Employee Payroll - % - % - % - % - % - % - % 3.59% 79.29% - %
71
Post-Retirement Benefit Plan and Trust for
Eligible Employees of Lansing Board of Water and Light
Required Supplemental Information (Unaudited)
Schedule of Changes in the Net OPEB Liability
Last Ten Fiscal Years
(in thousands)
2018 2017 2016` 2015' 2014" 2013' 2012" 201V 2010* 2009'
Total OPEB Liability
Service cost $ 4,827 $ 3,130 $ $ $ $ $ $ $ $
Interest 15,039 14,226
Changes in benefit terms - -
Differences between expected and actual experience (9,880) 5,281
Changes in assumptions (1,728) (2,027)
Benefit payments,including refunds (10,395) (9,574)
Net Change in Total OPEB Liability (2,137) 11,036
Total OPEB Liability-Beginning of year 205,624 194,588
Total OPEB Liability-End of year 203,487 205,624
Trust Net Position
Contributions-Employer 10,395 9,574
Contributions-Member - -
Net investment income 11,039 18,040
Administrative expenses (634) (705)
Benefit payments,including refunds (10,395) (9,574)
Other
Net change in Net Position Held in Trust 10,405 17,335
Trust fiduciary net position-Beginning of year 173,635 156,300
Trust fiduciary net position-End of year 184,040 173,635
BWL Net OPEB Liability-Ending $ 19,447 $ 31,989 $ - $ $ - $ $ - $ $ - $
Trust Fiduciary Net Position as a%of Total OPEB Liability 90.44% 84.44% % % % % % % % %
Covered Employee Payroll $ 55,650 $ 54,383 $ $ $ $ $ $ $ $
BWL's Net OPEB Liability as a%of Covered Employee Payroll 34.95% 58.82% % % % % % % % %
`GASB Statement No.75 was implemented as of June 30,2016. Information from 2009-2016 is not available and this schedule will be presented on a prospective basis.
72
Post-Retirement Benefit Plan and Trust for
Eligible Employees of Lansing Board of Water and Light
Required Supplemental Information (Unaudited)
Schedule of Employer Contributions to the Net OPEB Liability
Last Ten Fiscal Years
(in thousands)
Employer Contributions Difference of Percentage of Actual
Fiscal Yeai Required to Actual Covered Employee Contributions to
Ended Required Actual Contributions Payroll Covered Payroll
6/30/2009* $ 18,132 $ 17,866 $ (266) $
6/30/2010* 21,291 21,318 27 -
6/30/2011 17,300 17,236 (64) 47,213 37%
6/30/2012 15,744 15,854 110 46,885 34%
6/30/2013 13,994 14,045 51 47,468 30%
6/30/2014 9,200 9,268 68 46,971 20%
6/30/2015 5,762 9,671 3,909 50,885 19%
6/30/2016 5,788 9,423 3,635 53,893 17%
6/30/2017 7,508 9,574 2,066 54,383 18%
6/30/2018 7,535 10,395 2,860 55,650 19%
*GASB Statement No.75 was implemented as of June 30,2016. Information from 2009-2010 is not available and this schedule will be presented on a prospective basis.
73
Additional Information
74
Board of Water and Light - City of Lansing, Michigan
Income Available for Revenue Bond Debt Retirement
For the Year Ended June 30
2018 2017
Income - Before capital contributions per statement
of revenues, expenses, and changes in net position $ 14,116,063 $ 6,360,409
Adjustments to Income
Depreciation and impairment 44,255,255 51,935,552
Interest on long-term debt:
Notes 62,210 51,446
Revenue bonds 13,331,897 14,703,367
Total additional income 57,649,362 66,690,365
Income Available for Revenue Bonds and Interest
Redemption $ 71,765,425 $ 73,050,774
Debt Retirement Pertaining to Revenue Bonds
Principal $ 8,585,000 $ 8,210,000
Interest 15,295,875 16,049,511
Total $ 23,880,875 $ 24,259,511
Percent Coverage of Revenue Bonds and Interest
Requirements 301 301
75
Board of Water and Light - City of Lansing, Michigan
Combined Water
2018 2017 2018 2017
Operating Revenues
Water $ 41,524,143 $ 40,738,054 $ 41,524,143 $ 40,738,054
Electric:
Retail 271,414,998 280,955,243 - -
Sales for resale 21,846,410 31,969,934 - -
Steam 12,072,017 11,404,174 - -
Chilled water 6,225,356 6,362,308 - -
Total operating revenues 353,082,924 371,429,713 41,524,143 40,738,054
Operating Expenses
Production:
Fuel, purchased power, and
other operating expenses 142,679,119 161,787,983 8,900,728 8,782,872
Maintenance 16,474,970 18,725,293 3,303,312 3,074,073
Transmission and distribution:
Operating expenses 7,929,917 10,139,726 1,639,903 1,392,291
Maintenance 19,983,487 15,839,208 3,211,987 2,827,509
Administrative and general 73,638,904 71,417,820 12,964,161 10,966,026
Return on Equity 20,561,871 21,862,457 2,465,989 2,429,849
Depreciation 44,255,255 42,598,423 6,717,444 6,657,053
Total operating expenses 325,523,523 342,370,910 39,203,524 36,129,673
Operating Income 27,559,401 29,058,803 2,320,619 4,608,381
Nonoperating Income(Expenses)
Investment income 834,087 914,829 (28,686) 98,653
Other(expense)income (883,318) 478,719 733,527 923,068
Impairment on Eckert Plant - - - -
Impairment on Erickson Plant - (9,337,129) - -
Bonded debt interest expense (13,331,897) (14,703,367) (1,391,610) (1,758,663)
Amortization-Central Utilities Complex - - - -
Other interest expense (62,210) (51,446) (7,070) (4,419)
Total nonoperating expense (13,443,338) (22,698,394) (693,839) (741,361)
Net Income(Loss) $ 14,116,063 $ 6,360,409 $ 1,626,780 $ 3,867,020
76
Detail of Statements of Revenues and Expenses
For the Years Ended June 30, 2018 and 2017
Electric Steam Chilled Water
2018 2017 2018 2017 2018 2017
271,414,998 280,955,243 - - - -
21,846,410 31,969,934 - - - -
- - 12,072,017 11,404,174 - -
- - - - 6,225,356 6,362,308
293,261,408 312,925,177 12,072,017 11,404,174 6,225,356 6,362,308
127,702,294 146,768,880 4,637,601 4,450,412 1,438,496 1,785,819
12,257,504 14,887,491 722,446 409,666 191,708 354,063
5,977,257 8,442,706 312,757 304,729 - -
16,329,536 12,569,323 441,964 442,376 - -
58,806,770 58,674,904 1,300,400 1,346,580 567,573 430,310
17,067,336 18,418,803 652,087 625,702 376,459 388,103
33,825,801 32,004,536 2,525,735 2,538,286 1,186,275 1,398,548
271,966,498 291,766,643 10,592,990 10,117,751 3,760,511 4,356,843
21,294,910 21,158,534 1,479,027 1,286,423 2,464,845 2,005,465
848,930 695,357 22,278 88,579 (8,435) 32,240
(1,289,108) (270,184) (549,009) (397,548) 221,272 223,383
(9,337,129)
(9,508,962) (10,339,513) (1,855,996) (1,966,111) (575,329) (639,080)
(55,119) (47,003) (21) (24) - -
(10,004,259) (19,298,472) (2,382,748) (2,275,104) (362,492) (383,457)
$ 11,290,651 $ 1,860,062 $ (903,721) $ (988,681) $ 2,102,353 $ 1,622,008
77
Board of Water and Light - City of Lansing, Michigan
Detail of Statements of Changes in Net Position
Combined Water Electric Steam Chilled Water
Net Position-June 30,2016,as restated $ 550,021,405 $ 88,611,523 $ 461,923,972 $ (3,968,012) $ 3,453,922
Income(loss)before contributions 6,360,409 3,867,020 1,860,062 (988,681) 1,622,008
Net Position-June 30,2017 556,381,814 92,478,543 463,784,034 (4,956,693) 5,075,930
Income(loss)before contributions 14,116,063 1,626,780 11,290,651 (903,721) 2,102,353
Net Position-June 30,2018 $ 570,497,877 $ 94,105,323 $ 475,074,685 $ (5,860,414) $ 7,178,283
78
Board of Water and Light - City of Lansing, Michigan
Pension Trust Funds - Detail of Statements of Net Position
As of June 30,2018
Defined
Contribution Defined
Plan Benefit Plan VEBA Total
Assets
Receivable-investment interest receivable $ $ 148,763 $ 404,369 $ 553,132
Trade receivable-due from broker 11,853 - 11,853
Investments at fair value:
Cash and money market trust fund 1,890,701 1,985,712 3,876,413
U.S.government obligations 7,966,488 26,527,961 34,494,449
Fixed income securities 12,372,866 34,748,141 47,121,007
Mutual funds 153,737,225 26,341,508 72,109,667 252,188,400
Stable value 35,135,911 - - 35,135,911
Partnership - - - -
Common stock - 13,634,806 48,418,160 62,052,966
Self-directed brokerage account 2,144,556 - - 2,144,556
Participant notes receivable 3,649,872 3,649,872
Total investments 194,667,564 62,206,369 183,789,641 440,663,574
Liabilities
Trade payable-due to broker - - 154,385 154,385
Net Position-Held in trust for pension
and other employee benefits $ 194,667,564 $62,366,985 $ 184,039,625 $441,074,174
As of June 30,2017
Defined
Contribution Defined
Plan Benefit Plan VEBA Total
Assets
Receivable-investment interest receivable $ $ 153,010 $ 425,197 $ 578,207
Trade receivable-due from broker 46,051 88,410 134,461
Investments at fair value:
Cash and money market trust fund 1,088,909 2,927,461 4,016,370
U.S.government obligations 9,053,469 29,051,025 38,104,494
Fixed income securities 12,156,276 33,706,611 45,862,887
Mutual funds 144,942,486 22,381,599 53,089,093 220,413,178
Stable value 35,270,975 - - 35,270,975
Partnership - 1,117,790 - 1,117,790
Common stock - 19,938,242 54,440,986 74,379,228
Self-directed brokerage account 1,826,494 - - 1,826,494
Participant notes receivable 3,899,938 3,899,938
Total investments 185,939,893 65,736,285 173,215,176 424,891,354
Liabilities
Trade payable-due to broker - 11,533 93,727 105,260
Net Position-Held in trust for pension
and other employee benefits $ 185,939,893 $65,923,813 $ 173,635,056 $ 425,498,762
79
Board of Water and Light - City of Lansing, Michigan
Pension Trust Funds - Detail of Statement of
Changes in Net Position
For the Year Ended June 30, 2018
Defined
Contribution Defined
Plan Benefit Plan VEBA Total
Increases
Investment income(loss):
Net appreciation (depreciation)
in fair value of investments $ 8,851,973 $ 1,521,207 $ 6,742,518 $ 17,115,698
Interest and dividend income 8,778,719 1,590,883 4,296,385 14,665,987
Net investment income(loss) 17,630,692 3,112,090 11,038,903 31,781,685
Employer contributions 6,534,888 - 10,395,327 16,930,215
Participant rollover contributions 1,648,509 - - 1,648,509
Interest from participant notes receivable 156,090 - - 156,090
Total increases 25,970,179 3,112,090 21,434,230 50,516,499
Decreases
Retiree benefits paid 16,928,587 6,413,954 10,395,327 33,737,868
Loan defaults 209,514 - - 209,514
Participants' note and administrative fees 104,407 254,964 634,334 993,705
Total decreases 17,242,508 6,668,918 11,029,661 34,941,087
Change in Net Position Held in Trust 8,727,671 (3,556,828) 10,404,569 15,575,412
Net Position Held in Trust for Pension
and Other Employee Benefits
Beginning of year 185,939,893 65,923,813 173,635,056 425,498,762
End of year $ 194,667,564 $62,366,985 $ 184,039,625 $ 441,074,174
80
Board of Water and Light - City of Lansing, Michigan
Pension Trust Funds - Detail of Statement of
Changes in Net Position
For the Year Ended June 30, 2017
Defined
Contribution Defined
Plan Benefit Plan VEBA Total
Increases
Investment income(loss):
Net appreciation (depreciation)
in fair value of investments $ 15,347,096 $ 6,553,152 $ 13,724,335 $ 35,624,583
Interest and dividend income 4,144,461 1,718,523 4,315,172 10,178,156
Net investment income(loss) 19,491,557 8,271,675 18,039,507 45,802,739
Employer contributions 6,052,720 - 9,573,671 15,626,391
Participant rollover contributions 1,051,032 - - 1,051,032
Interest from participant notes receivable 156,466 - - 156,466
Total increases 26,751,775 8,271,675 27,613,178 62,636,628
Decreases
Retiree benefits paid 11,877,805 7,472,625 9,573,671 28,924,101
Loan defaults 72,325 - - 72,325
Participants' note and administrative fees 93,067 317,072 704,793 1,114,932
Total decreases 12,043,197 7,789,697 10,278,464 30,111,358
Change in Net Position Held in Trust 14,708,578 481,978 17,334,714 32,525,270
Net Position Held in Trust for Pension
and Other Employee Benefits
Beginning of year 171,231,315 65,441,835 156,300,342 392,973,492
End of year $ 185,939,893 $65,923,813 $ 173,635,056 $ 425,498,762
81