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ALEXANDRIA RENEW ENTERPRISES 2014 Comprehensive Annual Financial Report For the Years Ended September 30, 2014 and 2013

ALEXANDRIA RENEW ENTERPRISES Alexandria, Virginia COMPREHENSIVE ANNUAL FINANCIAL REPORT FOR THE YEARS ENDED SEPTEMBER 30, 2014 AND 2013

Prepared by the Finance Department

CONTENTS INTRODUCTORY SECTION

LETTER FROM THE CEO……………………..…………………………………………………………….............................................................1-2 LETTER OF TRANSMITTAL…………………………………………………………………………………..………………………………………………………3-4 DIRECTORY OF PRINCIPAL OFFICIALS…………………………………………………………………………………………………….…………..........5-6 ORGANIZATION CHART…………………………………………………………………………………………………………………………...…….................7 CERTIFICATE OF ACHIEVEMENT FOR

EXCELLENCE IN FINANCIAL REPORTING………………………………………………………………………………………………………….………....8

FINANCIAL SECTION

INDEPENDENT AUDITOR’S REPORT…………………………………………………………………………………………………….……….….11 and 12

MANAGEMENT’S DISCUSSION AND ANALYSIS…………………………………………..……………................................................ 13-27

BASIC FINANCIAL STATEMENTS Statement of Net Position………………………………………………………………………..……………………………………………………….……..30 Statement of Revenues, Expenses and Changes in Net Position……………………………..….………..………………………………….. 31 Statement of Cash Flows……………………………………………………………………………………………………………………………… 32 and 33 Statement of Fiduciary Net Position

and Statement of Changes in Fiduciary Net Position……….…………………….…………………………………………………….……..34 Notes to Financial Statements…………………………………………………………………….………………………………………….……………35-62

SUPPLEMENTARY INFORMATION

Schedules of Funding Progress - Virginia Retirement System and

Other Post-Employment Benefits…………………………………………………………………..……………………………………..…………….64 STATISTICAL SECTION (UNAUDITED)

Timeline……………………………………………………………………………………………………..…………………………………………………………... 66 Financial Trends…………………………………………………………………………………………………………………………………………… 67 and 68 Revenue Capacity Information……………………………………………………………………………………………………………………………. 69-70 Debt Capacity Information………………………………………………………………………………….........................................................71 Demographic and Economic Information……………………………………………………………….………………………………….... 72 and 73 Operating Information……………………………………………………………………………………………………………………………………….. 74-76

INTRODUCTORY SECTION

ALEXANDRIA RENEW ENTERPRISES

DIRECTORY OF PRINCIPAL OFFICIALS

September 30, 2014

BOARD OF DIRECTORS

John Hill - Chairman Thomas Van Wagner - Vice Chairman

William Dickinson - Secretary/Treasurer Matt Ries

Bruce Johnson

Shahram Mohsenin, Fairfax County Representative

CHIEF EXECUTIVE OFFICER (CEO)

Karen L. Pallansch, P.E., BCEE

INDEPENDENT AUDITORS

Brown, Edwards & Company, L.L.P.

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ALEXANDRIA RENEW ENTERPRISES BOARD OF DIRECTORS

Pictured from top left to right: Chairman John Hill, Vice Chairman Thomas Van Wagner Bottom Row from left to right: Mr. William Dickinson (Secretary/Treasurer), Mr. Bruce Johnson,

and Mr. Matt Ries

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FINANCIAL SECTION

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MANAGEMENT’S DISCUSSION AND ANALYSIS

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Alexandria Renew Enterprises Management’s Discussion and Analysis Summary of Organization and Business On May 15, 2012, the Board of Alexandria Sanitation Authority approved an amendment to its bylaws to permit the use of “Alexandria Renew Enterprises” as the trade name of the organization. Alexandria Renew Enterprises (the Authority) is a public body organized and created under the Virginia Water and Waste Authorities Act of the Code of Virginia of 1950 as amended. The Authority was created by the City Council of the City of Alexandria (the City) in 1952. The purpose of the Authority is to “acquire, construct, improve, extend, operate and maintain a sewage disposal system.” Five citizen members appointed by the Alexandria City Council to four-year staggered terms govern the Authority. In 1953, the Authority and neighboring Fairfax County signed a service agreement in which the Authority would build a sewage treatment plant and the County would have reserved treatment capacity and share in the annual operating costs of the plant in proportion to its actual use as measured by the volume of sewage it contributed. The Service Agreement was last amended and restated in October 1998. The major provisions relating to the County’s reserved capacity (60%), the payment of capital, asset additions, (i.e. upgrade costs), and the calculation of its share of operating costs remained unchanged. The Authority receives no financial support from the City and has no taxing power. The revenues of the Authority are derived from wastewater treatment charges based on metered water consumption of Alexandria users of the system, fixed fee Bay Protection charges based on customer water meter size and payments from Fairfax County for its proportional share of operating expenses. Audit Assurance The unmodified (i.e. clean) opinion of our independent external auditors, Brown, Edwards, & Company L.L.P., is included in this report. The financial section presents management’s discussion and analysis of the Authority’s financial condition and activities for the fiscal years (FY) ended September 30, 2014 and 2013. This information should be read in conjunction with the financial statements. Financial Highlights Management believes the Authority’s financial position is strong. The Authority maintained strong debt service coverage and was in compliance with all debt covenants required by borrowing agreements. The following are key financial highlights:

The Authority treated 13.21 and 12.81 billion gallons of wastewater during the years ended September 30, 2014 and 2013, respectively. This represents a 3.12% increase in wastewater treated, consistent with an increase of rainfall in the area, of 21.15% for 49.2 inches rainfall in the fiscal year ended September 30, 2014 versus 39.0 inches in 2013. The Authority experienced a slight increase in its number of accounts to 26,848 customers up 2% over 2013.

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Alexandria Renew Enterprises Management’s Discussion and Analysis (Continued)

Financial Highlights (Continued)

The Board raised the 2014 wastewater treatment volume usage rate from $6.36 by approximately 2.4%

to $6.51 (per 1,000 gallons water usage) and eliminated the quarterly account service charge of $6.78. The effect of this change for most residential customers was considered a flat year over year service cost change, with commercial customers receiving a modest cost increase. The Board also increased wastewater treatment rates by approximately 2% for fiscal 2015 and fiscal 2016. Alexandria Renew residential rates consisted of a per 1,000 gallon wastewater treatment charge of $6.51 and a Bay Protection charge of $25.15 per quarter. The Bay Protection charge was implemented as a fixed charge to recover capital expenditures required to help restore the health of the Chesapeake Bay. Commercial customers pay a fixed fee Bay Protection charge based on meter size with an increasing rate for larger water meters.

Fairfax County contributed 6.69 and 6.63 billion gallons of wastewater during the years ended September

30, 2014 and 2013, respectively. This represents a 0.98% increase over fiscal year 2013 and is within the County’s contracted allocation.

Debt service coverage, on the accrual basis was 2.13 and 2.32 for the years ended September 30, 2014 and 2013, respectively, which exceeded the 1.1 required by the Financing Agreement with the Virginia Resources Authority for loans from the Virginia Water Facilities Revolving Fund (VWFRF).

Total assets as of September 30, 2014 and 2013 were $737.5 million and $650.7 million, respectively. Total assets exceeded liabilities in the amount of $589.3 million and $525.7 million, as of September 30, 2014 and 2013, respectively (i.e. net position). Of the total net position, $34.7 million and $37.3 million were unrestricted and were available to support short-term operations for the years ended September 30, 2014 and 2013, respectively. The increase in total assets is a result of the continued construction of the State of the Art Nitrogen Upgrade projects (SANUP) the Authority’s nutrient management facilities including plant, equipment and infrastructure additions.

Capital assets net of depreciation and amortization increased $72.2 million in 2014 and $31.9 million in 2013 over the prior fiscal years. The increases are primarily due to the continued build out of the SANUP projects.

Wastewater Treatment Charges of $37.61 million were 1.42% lower in 2014 than in 2013 consistent with the decrease in wastewater billed. Contributing to the revenue decrease was a continuing water conservation effort by customers who installed more efficient plumbing equipment and sustainable products that resulted in a reduction in the amount of billed water.

Payments from Fairfax County of $10.95 million during fiscal year 2014 represented the County’s share of operating costs based upon their proportional contribution to plant total flow. Fairfax County payments amounted to $10.66 million in fiscal year 2013. This increase in the County’s payment is a result of higher operating costs for fiscal year 2014. Payments from the County were $10.66 million during fiscal year 2013 and $10.5 million in fiscal year 2012.

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Financial Highlights (Continued)

The Authority received $1 million in additional compensation under its land sale development rights

agreement with the Development Company. The Authority’s final development rights compensation is to be determined by an appraisal at a future closing with the Development Company. During 2013, the Authority received its initial land sale development rights payments from Developers. A series of commercial and residential development projects will be constructed next to the new Nutrient Management Facility west of the main plant. The Nutrient Management Facility is part of the Authority’s SANUP project that is scheduled to open in 2015. The 170,000 square feet of jointly purchased land and development rights sold for $15,203,750 including $4,340,678 attributed to jointly owned property (Fairfax County and Alexandria purchased land).

Total operating expenses, excluding depreciation and amortization, for fiscal year 2014 increased 4.6% compared to fiscal year 2013. The increase in operating expenses of $1,118,000 was due primarily to addition in the Authority’s personnel service costs of $425,760; general, administrative and customer service expenses of $758,000; increase in utility costs of $106,000; and an addition in operating charges of $186,000 by Arlington County. The Authority’s operations maintenance cost decreased $271,000 and there was a decline in chemical expenses of $62,000.

Required Financial Statements

The Authority’s financial statements are prepared using generally accepted accounting principles for governmental units operated as a governmental enterprise. As a result, the financial statements of the Authority report financial information using enterprise accounting methods similar to those used by private sector companies. These statements offer short and long-term financial information about its activities. The statement of net position includes all of the Authority’s assets and liabilities and provides information about the nature and amounts of investments in resources (assets) and obligations to Authority creditors (liabilities). It also provides the basis for computing rate of return, evaluating the capital structure of the Authority and assessing the liquidity and financial flexibility of the Authority. All of the current year’s revenues and expenses are accounted for in the statement of revenue, expenses, and changes in net position. This statement measures the success of the Authority’s operations over the past year and can be used to determine whether the Authority has successfully recovered all its costs through its wastewater treatment rates and other fees. The Authority’s rates are based on a cost of service rate study that was completed in 2010. This rate study is updated at least annually or more often as circumstances warrant. The final required financial statement is the statement of cash flows. The primary purpose of this statement is to provide information about the Authority’s cash receipts and cash payments during the reporting period. The statement reports cash receipts, cash payments, and net changes in cash resulting from operating, investing, and financing activities, and the total change in cash during the reporting period. The Authority established an OPEB Trust Fund to fund its Other Post-Employment Benefits (OPEB) liability in future years. The trust fund was established by the Authority with the Virginia Pooled OPEB Trust Fund (Trust), sponsored by the Virginia Municipal League and the Virginia Association of Counties. The trust is an investment permitted for participating municipal employers to accumulate assets to pay future OPEB benefits to retirees and their beneficiaries. The financial statements include a “Statement of Fiduciary Net

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Required Financial Statements, continued

Position as of September 30, 2014 and a Statement of Changes in Fiduciary Net Position, for the Year Ending September 30, 2014. The notes to the financial statements provide required disclosures and other information that are essential to a full understanding of material data provided in the statements. The notes present information about the Authority’s accounting policies, significant account balances and activities, material risks, obligations, commitments, contingencies and subsequent events, if any. Financial Analysis: The following comparative condensed financial statements and other selected information provide key financial data and indicators for management, monitoring and planning. The following table reflects the Authority’s net position at September 30, 2014 and 2013:

Condensed Statements of Net Position (Balance Sheet)(in Millions of Dollars)

2014 2013 $ Change % ChangeCurrent assets 52.37$ 42.31$ 10.06$ 23.80 %Restricted assets 17.01 12.67 4.34 34.30 %Investments 17.05 16.89 0.16 0.90 %Plant and equipment, net 651.08 578.89 72.19 12.50 %

Total assets 737.51 650.76 86.75 13.30 %

Current liabilities 41.74 24.53 17.21 70.20 %Long-term debt 106.42 100.48 5.94 5.90 %

Total Liabilities 148.16 125.01 23.15 18.50 %

Net Investment in capital assets 537.78 471.88 65.90 14.00 %Restricted 16.80 16.49 0.31 1.90 %Unrestricted 34.77 37.38 (2.61) (7.00) %

Total Net Position 589.35$ 525.75$ 63.60$ 12.10 %

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Alexandria Renew Enterprises Management’s Discussion and Analysis (Continued) Financial Analysis (Continued) The following table reflects the Authority’s net position at September 30, 2013 and 2012: Condensed Statements of Net Position (Balance Sheet)(in Millions of Dollars)

2013 2012 $ Change % ChangeCurrent assets 42.31$ 31.41$ 10.90$ 34.70 %Restricted assets 12.67 17.34 (4.67) (26.90) %Investments 16.89 4.07 12.82 314.60 %Plant and equipment, net 578.89 546.95 31.94 5.80 %

Total assets 650.76 599.77 50.99 8.50 %

Current liabilities 24.53 19.96 4.57 22.90 %Long-term debt 100.48 105.15 (4.67) (4.40) %

Total Liabilities 125.01 125.11 (0.10) (0.10) %

Net Investment in capital assets 471.88 435.45 36.43 8.40 %Restricted 16.49 15.79 0.70 4.40 %Unrestricted 37.38 23.42 13.96 59.60 %

Total Net Position 525.75$ 474.66$ 51.09$ 10.80 %

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Alexandria Renew Enterprises Management’s Discussion and Analysis (Continued) Financial Analysis (Continued) The following table summarizes the changes in revenue and expenses for fiscal years 2014 and 2013:

Condensed Statements of Revenues, Expenses and Changes in Net Position(in Millions of Dollars)

2014 2013 $ Change % ChangeOperating Revenues:

Wastewater Treatment Fees 37.61$ 38.15$ (0.54) (1.40) %Fairfax County Wastewater Fees 10.96 10.66 0.30 2.80 %

Total Operating Revenues 48.57 48.81 (0.24) (0.50) %

Operating Expenses:Depreciation and Amortization expenses 9.55 10.16 (0.61) (6.00) %Other Operating Expenses 25.59 24.47 1.12 4.60 %

Total Operating Expenses 35.14 34.63 0.51 1.50 %

Operating Income 13.43 14.18 (0.75) (5.30) %

Non-operating Revenues (Expenses)Investment Income 0.28 0.06 0.22 372.10 %Non-operating Expenses (2.27) 11.97 (14.24) (119.00) %

Total Non-Operating Revenues (Expenses) (1.99) 12.03 (14.02) (116.50) %

Changes in Net Position before Capital Contributions 11.44 26.21 (14.77) (56.40) %

Capital Contributions 52.16 24.88 27.28 109.70 %

Changes in Net Position 63.60 51.09 12.51 24.50 %

Net Position: Beginning 525.75 474.66 51.09 10.80 % Ending 589.35$ 525.75$ 63.60$ 12.10 %

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Alexandria Renew Enterprises Management’s Discussion and Analysis (Continued) Financial Analysis (Continued) The following table summarizes the changes in revenue and expenses for fiscal years 2013 and 2012: Condensed Statements of Revenues, Expenses and Changes in Net Position (in Millions of Dollars)

2013 2012 $ Change % ChangeOperating Revenues:

Wastewater Treatment Fees 38.15$ 33.06$ 5.09 15.40 %Fairfax County Wastewater Fees 10.66 10.51 0.15 1.40 %

Total Operating Revenues 48.81 43.57 5.24 12.00 %

Operating Expenses:Depreciation and Amortization expenses 10.16 9.65 0.51 5.30 %Other Operating Expenses 24.47 24.93 (0.46) (1.80) %

Total Operating Expenses 34.63 34.58 0.05 0.10 %

Operating Income 14.18 8.99 5.19 57.70 %

Non-operating Revenues (Expenses)Investment Income 0.06 0.13 (0.07) (53.80) %Non-operating Expenses 11.97 (3.95) 15.92 (403.00) %

Total Non-Operating Revenues (Expenses) 12.03 (3.82) 15.85 (414.90) %

Changes in Net Position before Capital Contributions 26.21 5.17 21.04 407.00 %

Capital Contributions 24.88 19.12 5.76 30.10 %

Changes in Net Position 51.09 24.29 26.80 110.30 %

Net Position: Beginning 474.66 450.37 24.29 5.40 % Ending 525.75$ 474.66$ 51.09$ 10.80 %

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Alexandria Renew Enterprises Management’s Discussion and Analysis (Continued) Financial Analysis (Continued) The following table summarizes other selected information of the Authority for fiscal years 2014 and 2013:

Other Selected Information2014 2013 Difference % Change

Selected data:Employees at year end 99 94 5 5.32 %Alexandria accounts 26,848 26,330 518 1.97 %Wastewater treated (millions of gallons) 13,213 12,813 400 3.12 %Portion contributed by

Fairfax County (millions of gallons) 6,698 6,633 65 0.98 %Percentage contributed by

Fairfax County 50.69 % 51.77 % -1.08 % -2.09 %

Rates, Residential Customers:Charge per 1000 gallons of

water consumption 6.51$ 6.36$ 0.15$ 2.36 %Account service charge (quarterly)

per bill rendered -$ 6.78$ (6.78)$ -100 %Base Charge (quarterly) 25.15$ 25.15$ -$ 0 %

Average residential customer bill (based on 9,000 water usage):Per year 364.97$ 356.68$ 8.29$ 2.32 %Per quarter 91.24$ 89.17$ 2.07$ 2.32 %Per month 30.41$ 29.72$ 0.69$ 2.32 %

Rates, Commercial Customers:Charge per 1000 gallons of

water consumption 6.51$ 6.36$ 0.15$ 2.36 %Account service charge (monthly)

per bill rendered -$ 6.78$ (6.78)$ -100 %Base Charge

Water Meter Size Quarterly Quarterly5/8" 75.45$ 75.45$ 3/4" 75.45$ 75.45$

1" 188.62$ 188.62$ 1-1/2" 377.25$ 377.25$

2" 603.59$ 603.59$ 3" 1,131.74$ 1,131.74$ 4" 1,886.23$ 1,886.23$ 6" 3,772.50$ 3,772.50$ 8" 6,036.00$ 6,036.00$

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Alexandria Renew Enterprises Management’s Discussion and Analysis (Continued) General Trends and Significant Events The Authority’s service area in the City of Alexandria can be referred to as mature. The City is over 250 years old and for the most part is built out. While there are several tracts of underdeveloped land, the flows from these parcels, when developed, will not increase the Authority’s sewage disposal charge revenue significantly. This is especially true given the trend for water conservation and sustainability efforts within our community. The number of the Authority’s Alexandria accounts increased by 518, which represents a 1.97% increase from fiscal year 2013. The current number of accounts, 26,848, represents a 4.94% increase for the ten-year period beginning with fiscal year 2004. Previously, the number of the accounts decreased in fiscal year 2013 by 50, which represents a 0.19% decrease over fiscal year 2012. Financial Condition The Authority’s financial condition remained strong at year-end with adequate liquid assets and a reasonable level of unrestricted net position. The current financial condition, operating plans and upgrade plans to meet future water quality requirements are well balanced and under control. Total assets grew $86.75 million (13.30%) and $50.99 million (8.5%) during fiscal years 2014 and 2013, respectively. Net position increased by $63.60 million during fiscal year 2014, with a substantial portion of the change resulting from an increase in net investment in capital assets. Additional information on the Authority’s capital assets can be found in Notes 1 and 5 of the Notes to Financial Statements. In prior years, net position increased by $51.09 million during fiscal year 2013, with a substantial portion of the change resulting from an increase in net investment in capital assets and current assets principally cash. Results of Operations

Operating revenues: The Authority’s revenues from operations fall into two main categories: 1) Wastewater Treatment and Bay Protection charges to customers in Alexandria which are based upon metered water consumption; these are billed monthly and quarterly for commercial and residential accounts, respectively; and 2) The Authority charges Fairfax County for wastewater treatment for its share of operating expenses based upon metered flow to the plant. Capital contributions: Fairfax County pays for 60% of the cost of capital improvements to the plant, such as the current upgrade, based upon a contractual agreement with the Authority. These payments are recorded as non-operating revenues in the Statement of Revenues, Expenses and Changes in Net Position. Capital contributions also include Capital grants provided to the Authority by the Commonwealth of Virginia, Department of Environmental Quality. Total capital contributions amounted to $52.16 million and $24.88 million for the years ended September 30, 2014 and 2013, respectively including $7.90 million and $2.53 million from VDEQ.

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Alexandria Renew Enterprises Management’s Discussion and Analysis (Continued) Results of Operations (Continued) Expenses: 2014-2013 Comparison: Total operating expenses, excluding depreciation and amortization, increased by $1.12 million or 4.6% over fiscal year 2013. The Authority’s personnel services, which include wages, retirement, and insurance, were 35.5% of the total operating expenses of $35.15 million for fiscal year 2014 and 34.8% of the total operating expenses for 2013. 2013-2012 Comparison: Total operating expenses, excluding depreciation and amortization, decreased by $0.46 million, or 1.80%, over fiscal year 2012. The Authority’s personnel services, which include wages, retirement, and insurance, were 34.8% of the total operating expenses of $34.63 million for fiscal year 2013 and 33.2% of the total operating expenses for 2012. Capital Assets The Authority maintains investments in a broad range of capital assets, which includes land, buildings, sanitary intercepting sewer lines and force mains, pumping stations, a water reclamation facility, machinery and equipment, computers and vehicles. The Authority also owns capacity rights at the Arlington Water Pollution Control Facility. By a service agreement with Arlington County, the City of Alexandria and Alexandria Renew Enterprises, the Authority pays for 8.5% of the cost of capital improvements to the Arlington plant. Additional information on the Authority’s capital assets can be found in Notes 1 and 5 of the Notes to Financial Statements. The Authority is currently in the planning and detailed design processes of an upgrade required to improve treatment of the water to meet new standards imposed by the Chesapeake Bay restoration. This project will have phased construction packages and last upwards of seven years. The Authority maintains its equipment annually on a prioritized basis through a committed improvements, renewals and replacements fund. By agreement, Fairfax County invests a percentage of the total facility assets into this fund for adequate reinvestment to insure continuing compliance with regulations. The Authority finances its capital assets through rates and charges, Fairfax County capital contributions, long term debt (Bonds), a bank line of credit and, when available, capital grants. Long Term Debt

As of September 30, 2014, the Authority had $113.3 million in short-term and long-term debt. Principal payments were made on outstanding debt for $7.8 million and new debt of $14.1 million resulted in a net increase of $6.3 million in debt over fiscal year 2013.

As of September 30, 2013, the Authority had $107.01 million in short-term and long-term debt. Principal payments were made on outstanding debt for $7.4 million and new debt of $3.6 million resulted in a net decrease of $3.8 million in debt over fiscal year 2012.

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Alexandria Renew Enterprises Management’s Discussion and Analysis (Continued) One area that demonstrates the Authority’s financial strength, ability to pay current debt service (principal and interest), and future borrowing capability is seen in its Revenue Covenant, which is currently a strong 2.13. This covenant requires the Authority to “establish, fix, charge and collect rates, fees and other charges for the use of and for services furnished by the System so that in each fiscal year net revenues are not less than 1.1 times the debt service (principal and interest) for the fiscal year.” The graph below provides an indication of how much principal and interest are due each year until the revenue bonds mature in 2039.

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Alexandria Renew Enterprises Management’s Discussion and Analysis (Continued) Results of Operations (Continued)

Additional information on the Authority’s debt can be found in Notes 6 and 9 to the Financial Statements. Budget Information

The Authority prepares an annual budget and submits it to its Board of Directors for approval every May for the fiscal period starting October 1st through September 30th every year. The budget receives final approval by the Board in its September meeting prior to the start of the fiscal period. The Alexandria Renew Board does not have the authority to create “appropriations bills or ordinances” but approves the annual budget to ensure compliance with environmental regulations, compliance with its debt trust agreements and to recover the organization’s cost of delivering service.

The Authority has two major sources of revenues, including wastewater treatment charges paid by Alexandria customers and reimbursements of a proportion of expenses by Fairfax County. Under the Service Agreement, Fairfax County pays a percentage of operating expenses based upon flow volume. Fairfax County also pays sixty percent (60%) of the annual deposit into the Improvement, Renewal & Replacement Fund and the same percentage into the Capital Improvement Fund.

The following table calculates the Revenue Covenant for the fiscal years 2014 and 2013:(in millions)

2014 2013 % Change

Unrestricted Operating Revenue 48.57$ 48.81$ (0.50) %

Total Operating Expenses

(Less Depreciation and Replacements) 25.59 24.47 4.57 %Net Revenue 22.98$ 24.34$ (5.60) %

Annual Debt Service 10.80$ 10.51$ 2.74 %

Revenue Covenant (Minimum 1.4 allowed) 2.13 2.32 (8.11) %

The following table calculates the Revenue Covenant for the fiscal years 2013 and 2012:

(in millions)

2013 2012 % Change

Unrestricted Operating Revenue 48.81$ 43.57$ 12.03 %

Total Operating Expenses

(Less depreciation and replacements) 24.47 24.93 (1.85) %Net Revenue 24.34$ 18.64$ 30.58 %

Annual Debt Service 10.51$ 10.92$ (3.75) %

Revenue Covenant (Minimum 1.4 allowed) 2.32 1.71 35.67 %

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Alexandria Renew Enterprises Management’s Discussion and Analysis (Continued) The Authority’s Budget is a modified accrual basis document with revenues established based upon cash available resources. Customers are billed on a quarterly basis based upon customer water usage determined by meter water flow usage data. The Authority’s Budget includes sources/revenues for new debt issues that for accounting purposes are not shown as revenues but are included on the Statement of Net Position to comply with GAAP. Likewise, capital project spending and debt service principal payments are treated as expenses for budget purposes but are Statement of Net Position items for GAAP compliance purposes. The Authority’s budget expense classifications are in several cases different than the Financial Statement presentation as is the case for Personnel Services, Business Support and Professional Services.

Certain expenses for construction have been estimated net of contractual retainage not paid by contract terms until projects are complete. In some cases, the Authority has issued debt for its share of construction cost (Net of Fairfax share) through the Virginia Resources Authority (VRA). Bond proceeds are reimbursable by VRA to the Authority for progress payments made to contractors based upon submission of payment documents to the Virginia Department of Environmental Quality (DEQ). The Authority’s budget included a $2,500,000 loan for its Reclaimed Water capital project that for GAAP purposes is not recognized as accrual basis revenues in the fiscal period. The following Statement of “Consolidated Enterprise Budget” is presented to compare 2014 operations to budget estimates:

FY 2014 FY 2014Actual Final Budget Variance Variance %

Revenues and Other Sources:Wastewater Treatment charges 37,606,611$ 36,688,500$ 918,111$ -2%Fairfax County:

Operating 10,953,398 10,816,400 136,998 -1% IR & R 2,184,600 2,184,600 - 0%

Total 50,744,609$ 49,689,500$ 1,055,109$ -2%

Expenditures: Personnel services 13,063,195 13,563,814 (500,619) 4%Fuel, Power & Utilities 3,224,653 2,700,000 524,653 -18%Chemicals 1,660,137 1,505,000 155,137 -10%Operations Maintenance (includes Product Support) 2,225,072 2,359,262 (134,190) 6%Business Support 1,399,477 1,200,924 198,553 -15%Professional Services 1,438,891 1,235,000 203,891 -15%Arlington Sewage Disposal 1,641,233 1,651,700 (10,467) 1%Alex only Improvement, Renewal & Replacement 36,364 175,000 (138,636) 51%Joint Improvement, Renewal & Replacement 4,063,720 6,022,326 (1,958,606) 37%Alex only Capital Projects (Net) 4,002,813 3,386,500 616,313 -8%Joint Capital Projects (Net) 70,496,761 69,285,000 1,211,761 -2%

Total 103,252,316$ 103,084,526$ 167,790$ 0%

Nonoperating Revenues (Expenditures):Investment income 283,273 183,300 99,973 -44%Debt Principal Payments (7,810,804) (7,613,900) (196,904) -2%Debt Interest expense (3,725,770) (3,784,600) 58,830 1%Proceeds from Debt 14,094,979 16,670,000 (2,575,021) 20%Grants 8,075,005 8,000,000 75,005 -4%Fairfax County Capital Project transfer 41,901,391 40,911,000 990,391 -2%Other Income 1,000,000 - 1,000,000 0%

Total 53,818,074$ 54,365,800$ (547,726)$ 1%

Excess (Deficiency) of Revenues 1,310,367$ 970,774$

CONSOLIDATED ENTERPRISE BUDGET FY 2014

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Alexandria Renew Enterprises Management’s Discussion and Analysis (Continued) Final Comments Fiscal year 2014 continued a trend of strong financial performance by the Authority. This strong performance is needed for the Authority to maintain flexibility in future borrowing decisions, ensure that there is an appropriate reserve for operating expenses, and that we continue to provide for the effects of time and usage on the significant investment in equipment that is made as we continue upgrade efforts. Contacting the Authority’s Financial Management: This financial report is designed to provide our citizens, customers, and creditors with a general overview of the Authority’s finances and to demonstrate the Authority’s accountability for the money it receives. If you have any questions about this report or need additional financial information, contact the Alexandria Renew Enterprises, 1500 Eisenhower Avenue, Alexandria, Virginia 22314. You can also call 703.549.3381, or visit us on the web at www.alexrenew.com.

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BASIC FINANCIAL STATEMENTS

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2014 2013 AssetsCurrent Assets

Cash & Equivalents, Unrestricted 31,217,645$ 26,944,891$ Cash & Equivalents, Restricted 8,600,980 4,677,278 Accounts Receivable 13,467,469 8,597,900 Prepaid Expenses 805,580 709,524 Inventory 273,802 259,223 Investments:

Restricted 3,010,219 3,776,321 Unrestricted 1,776,261 5,051,914

Due from Fairfax County 6,607,177 5,798,770 Total Current Assets 65,759,133$ 55,815,821$ Non-current Assets

Investments:Restricted 5,397,926$ 4,213,914$ Unrestricted 15,271,485 11,843,326

Capital Assets, Net of Depreciation 651,084,163 578,892,676 Total Non-current Assets 671,753,574$ 594,949,916$

Total Assets 737,512,707$ 650,765,737$

Liabilities and Net PositionCurrent Liabilities

Current Maturities of Long Term Debt 8,246,878$ 7,783,346$ Accrued Interest Payable 480,297 573,851 Accrued Paid Time Off 988,985 696,779 Accounts Payable 30,526,933 13,869,928 Line of Credit 1,030,439 1,030,439 Due to City of Alexandria 470,224 585,767

Total Current Liabilities 41,743,756$ 24,540,110$

Long-term LiabilitiesOther Post Employment Benefits 2,158,331 1,976,737 Bonds Payable, Less Current Portion, Net 104,021,925 98,197,073 Accrued Paid Time Off, Less Current Portion 233,948 298,030

Total Long-term Liabilities 106,414,204$ 100,471,840$

Total Liabilities 148,157,960$ 125,011,950$

Net Position, as Restated (Note 13)Net Investment in Capital Assets 537,784,921 471,881,818 Restricted:

Operating 4,035,954 3,982,905 Parity Debt Service 2,265,129 1,873,254 Improvement, Renewal & Replacement 10,498,386 10,629,987

Unrestricted 34,770,357 37,385,823 Total Net Position 589,354,747$ 525,753,787$ Total Liabilities and Net Position 737,512,707$ 650,765,737$

See Notes to Financial Statement.


Statement of Net PositionYear Ended September 30, 2014

(With Comparative Totals for Year Ended September 30, 2013)

30

2014 2013Operating Revenues

Wastewater Treatment Fees 37,606,611$ 38,146,580$ Fairfax County Wastewater Fees 10,953,398 10,660,584 Miscellaneous 6,044 3,480

Total Operating Revenues 48,566,053$ 48,810,644$

Operating ExpensesPersonnel Services 12,464,250$ 12,038,490$ Utilities 3,224,653 3,118,336 Chemicals 1,660,137 1,721,743 Operations Maintenance 903,709 1,174,900 Arlington Sewage Disposal 1,641,233 1,455,427 Sludge Disposal 873,754 871,127 Amortization 983,004 951,392 Depreciation 8,566,803 9,207,401 Construction and Replacements, Sewage Disposal Systems 224,741 252,512 General, Administrative, Customer Service and Other 4,594,881 3,836,600

Total Operating Expenses 35,137,165$ 34,627,928$

Operating Income 13,428,888$ 14,182,716$

Non-operating Revenues (Expenses)Investment Income 283,273$ 58,128$ Interest on Debt (2,887,878) (3,212,620) Loss on Sale of Capital Assets (384,320) (19,611) Sale of Property and Development Rights 1,000,000 15,203,750

Total Non-operating Revenues (Expenses) (1,988,925)$ 12,029,647$

Change in Net Position Before Capital Contributions 11,439,963$ 26,212,363$ Capital Contributions 52,160,996$ 24,882,239$

Change in Net Position 63,600,959$ 51,094,602$

Net Position

Beginning 525,753,787$ 474,659,185$ Ending 589,354,747$ 525,753,787$

Statement of Revenues, Expenses and Changes in Net Position


Year Ended September 30, 2014



31

2014 2013Cash Flows from Operating Activities

Cash Received from Customers 37,939,373 37,052,837$ Cash Received from Fairfax County for Operations 10,620,386 10,639,024 Cash Received from Other Sources 6,044 589,247 Payments to Suppliers for Goods and Services (13,179,889) (15,025,574) Payments to Employees for Services (12,007,406) (11,803,947)

Net Cash Provided by Operations 23,378,508$ 21,451,587$

Cash Flows from Capital and Related Financing ActivitiesAcquisition/Construction of Capital Assets (73,497,087) (39,068,444)$ Contribution from Fairfax County 51,162,883 21,970,188 Proceeds from State Grants 2,986,234 1,409,662 Proceeds from Sale of Property 1,000,000 15,203,750 Net Proceeds from Debt Issuance 14,094,979 2,837,991 Principal Payment on Line of Credit 30,439 Principal Payments on Debt (7,810,804) (7,069,243) Interest Paid on Debt (2,986,829) (3,156,466)

Net Cash Used in Capital and Related Financing Activities (15,050,624) (7,842,123)$

Cash Flows from Investing ActivitiesProceeds from Sales and Maturities of Investments 45,384,342 69,344,728 Purchase of Investments (45,799,043) (82,496,415) Interest Received on Investments 283,273 58,128

Net Cash Used in Investing Activities (131,428) (13,093,559)

Net Increase in Cash and Cash Equivalents 8,196,456 515,905

Cash and Cash EquivalentsBeginning of Year 31,622,169 31,106,264

End of Year 39,818,625 31,622,169



Statement of Cash FlowsYear Ended September 30, 2014


32

2014 2013Reconcilation of Operating Income to Net CashProvided by Operating Activities:

Operating Income 13,428,888$ 14,182,716$ Adjustments to reconcile operating income to Net Cash

Provided by Operating Activities:Amortization 983,004 951,392 Depreciation 8,566,803 9,207,401 Changes in Assets and Liabilities

Decrease (Increase) In Accounts Receivable 219,202 (1,093,743) Increase In Inventory (14,579) (16,918) Decrease (Increase) In Prepaid Expense (96,056) 236,522 Increase In Due from Fairfax County (333,012) (21,560) Decrease (Increase) In Accrued Paid Time Off 275,250 (29,779) Decrease (Increase) In Accounts Payable and Accrued Expenses 53,854 (2,681,270) Increase in Other Post Employment Benefits 181,594 131,059 Increase in Customer Deposits 229,103 - (Decrease) Increase in Payable to City of Alexandria Customer Collections (115,543) 585,767

Net Cash Provided by Operating Activities 23,378,508$ 21,451,587$

Noncash Capital and Related Financing ActivitiesCapital asset purchases included in accounts payable at year end 16,597,584$ 3,021,892$ Reimbursement of capital grants due to Fairfax County included

in accounts payable at year end 12,048,613$ 4,163,314$ Capitalized interest 879,217$ 632,755$


Statement of Cash Flows (continued)Year Ended September 30, 2014


33


OPEB Trust FundASSETS

Assets held in trust, at fair valueInvestment in pooled funds 385,678$

Total assets 385,678$

NET POSITIONHeld in trust for other post-employment benefits 385,678$

Total net position 385,678$

OPEB Trust FundADDITIONS/REDUCTIONS

Contributions from employer 382,000$ Investment Income -

Net appreciation in fair value of investments 4,702 Less investment expenses 1,024

Net investment income 3,678

Total Additions 385,678$

Change in net position 385,678$

Total Net Position Held in Trust for Other Post-employmentBenefits - beginning of year -

Total Net Position Held in Trust for Other Post-employmentBenefits - end of year 385,678$


STATEMENT OF CHANGES IN FIDUCIARY NET POSITIONYear Ended September 30, 2014

STATEMENT OF FIDUCIARY NET POSITIONSeptember 30, 2014

34

Notes to Financial Statements Note 1. Description of Entity and Significant Accounting Policies

Description of Entity As of May 15, 2012, the Authority Board amended its bylaws to adopt the name of “Alexandria Renew Enterprises” as the official trade name of the Authority. Alexandria Renew Enterprises (the Authority) is a special governmental unit created by the City Council of Alexandria, Virginia (City Council) in 1952 for the purpose of constructing, operating and maintaining a wastewater treatment system for the City of Alexandria, Virginia. The Authority is chartered by the State Corporation Commission and is an independent public body. The Authority is governed by five board members who serve staggered terms and are appointed by the City Council. Although the members of the Authority are appointed by the City Council, the Authority is not part of the City’s reporting entity and not considered a component unit under GASB Statement No. 14. No component units are included in the Authority’s financial statements. The following is a summary of the Authority’s significant accounting policies: Basis of Presentation and Accounting The Authority’s financial statements are presented on the accrual basis in accordance with accounting principles generally accepted in the United States of America as applicable to the enterprise fund of governmental units. The primary activities of the Authority are accounted for within a single proprietary (enterprise) fund. Proprietary funds are used to account for operations that are (a) financed and operated in a manner similar to private business enterprises where the intent of the governing body is that the cost (expenses, including depreciation) of providing goods or services to the general public on a continuing basis be financed or recovered primarily through user charges; or (b) where the governing body has decided that periodic determination of revenues earned, expenses incurred, and/or net income is appropriate for capital maintenance, public policy, management control, accountability, or other purposes. The accounting and financial reporting treatment applied to the Authority is determined by its measurement focus. The transactions of the Authority are accounted for on a flow of economic resources measurement focus. With this measurement focus, all assets and all liabilities associated with the operations are included on the statement of net position. Net position (i.e., total assets, net of total liabilities) are segregated into net investment in capital assets, restricted and unrestricted components. The Authority also has a fiduciary fund for assets held by the Authority in a trustee capacity for its employees. The OPEB trust fund accounts for the receipt and disbursement of assets held in trust for the other post-employment benefit (OPEB) plan of the Authority.

35

Notes to Financial Statements Note 1. Description of Entity and Significant Accounting Policies, continued

Revenues and Expenses Operating revenues and expenses consist of those revenues and expenses that result from the ongoing principal operations of the Authority. Operating revenues consist primarily of charges for services. Non-operating revenues and expenses consist of those revenues and expenses that are related to financing and investing types of activities and result from non-exchange transactions or ancillary activities.

In accordance with an agreement with Fairfax County, the Authority recognizes as revenue the County’s proportionate share of current operating expenses.

Cash and Cash Equivalents

The Authority considers all highly liquid investments with maturity of three months or less from date of purchase to be cash equivalents. Inventory Inventory, consisting of items held for consumption, are valued at cost using the first-in, first-out method. Investments

Investments are stated at fair value, plus accrued interest in accordance with GASB Statement No. 31, Accounting and Financial Reporting for Certain Investments and for External Investment Pools. Financial Policy In August 2010 the Board of the Authority revised its financial policy to increase its restricted cash reserves. Currently, the Bond Indenture requires that the Authority keep 60 days of operating expenses in reserve and the Authority has appropriately restricted these amounts. The Authority’s new internal policy requires its restricted cash reserves to increase to 120 days of operating expenses or $8,071,908 at year end; however, only the amounts that are required by the debt agreements are shown as restricted in the financial statements. Investment Policy In accordance with the Code of Virginia and other applicable law, including regulations, the Authority’s investment policy (Policy) permits investments in U.S. Treasury Securities, U.S. agency securities, municipal obligations, prime quality commercial paper, banker’s acceptances with domestic banks, corporate notes at least AA, negotiable certificates of deposit of domestic banks, money market funds registered under the Federal Investment act of 1940, repurchase agreements collateralized by the U. S. Treasury and Federal Agency obligations, and the State Treasurer’s Local Government Investment Pool (the Virginia LGIP, a 2a-7 like pool).

36


Investment Policy, continued Pursuant to Sec. 2.1-234.7 of the Code of Virginia, the Treasury Board of the Commonwealth sponsors the LGIP and has delegated certain functions to the State Treasurer. The LGIP reports to the Treasury Board at their regularly scheduled monthly meetings and the fair value of the position in LGIP is the same as the value of the pool shares (i.e., the LGIP maintains a stable net asset value of $1 per share).

The Policy limits investment maturities to five years maximum maturity for any investment, unless the Board of Directors approves an exception in writing. The investment policy establishes the maximum percentage of the portfolio permitted in each of the following instruments:

U.S. Treasury Obligations 100%, no limitation Federal Agency Obligations 100%, 35% issuer limit Municipal Obligations 10%, 3% issuer limit Commercial Paper 25%, 3% issuer limit Bankers’ Acceptance 25%, 3% issuer limit Corporate Notes 10%, 3% issuer limit Negotiable Certificates of Deposit 10%, 50% issuer limit Money Market Mutual Funds 100%, 50% issuer limit Repurchase Agreements 35%, 35% issuer limit Local Government Investment Pool (LGIP) 100%, no limitation

Capital Assets

Purchased or constructed property, plant and equipment with a cost greater than $5,000 and an estimated useful life of 5 years or more is capitalized and recorded at historical cost. Interest related to costs and major improvements, renewals and replacements is capitalized as a cost of the project. Depreciation is computed on the straight-line basis over the estimated useful lives of the related assets. The estimated useful lives are as follows: Plant & Infrastructure 67 years Machinery & Equipment 5 - 10 years Capital assets also include intangible assets such as purchased capacity rights for the Arlington sewer treatment plant upgrade and expansion. Intangible assets are amortized over 40 years.

Accrued Paid Time-Off Benefit

The Authority converted its employee vacation and sick time benefit to a “paid time-off benefit (PTO)” during the fiscal year. The policy permits employees to accumulate a limited amount of earned but unused PTO benefits, which will be paid to employees upon separation from service. The accrued PTO Benefit is included in the Statement of Net Position as a liability. Employee accrued vacation hours earned less 75% of maximum hours earned were paid out to employees during the fiscal year to reduce the accrued liability. The accrued PTO benefit payable is included in the following table:

37


Unpaid Sick Leave

Personnel policies provide the Authority employees with varying amounts of sick leave. No reimbursement is made upon termination of employees for accumulated sick leave. However, 25% of the accumulated sick leave of qualified retiring employees and qualified resigning employees with equal or greater than 20 years of service is added to any retirement benefit received. A portion of this liability for those employees who have reached the years of service qualification is included in the Statement of Net Position as a liability. Changes in accrued unpaid sick leave are as follows:

Allocation of Expenses For purposes of the statement of revenues, expenses and changes in net position, payroll taxes and fringe benefits were allocated to operations and administration based on direct salaries. Restricted Net Position Certain funds have been or will be created (for internal purposes) in accordance with the flow of funds provisions of a Master Indenture of Trust executed in connection with bonds issued by the Authority to finance the installation of upgrade facilities for wastewater treatment and related costs. The following is a summary of those internal funds:

Operating Fund The Operating Fund pays operating expenses for administration and operation and maintenance of the Sewage Disposal System as they become due. By the fifth business day before the end of each month, the Authority transfers an amount to bring the balance on deposit to one-sixth of the current annual amount budgeted for operating expenses, in accordance with the provisions outlined by the Master Indenture of Trust. The balance of the Operating Fund as of September 30, 2014 and 2013 was $4,035,954 and $3,982,905, respectively.

Balance Balance Current9/30/13 Increases Decreases 9/30/14 Portion

751,089$ 680,216$ (495,518)$ 935,787$ 701,840$

Balance Balance Current9/30/13 Increases Decreases 9/30/14 Portion

243,720$ 66,531$ (23,106)$ 287,145$ 287,145$

38


Parity Debt Service Fund The Parity Debt Service Fund is created for debt that is in parity to revenue bonds pursuant to the Master Indenture of Trust. This fund is used to pay interest and principal payments for the Virginia Revolving Loan Fund when they become due. By the fifth business day before the end of the month, the Authority transfers an amount to bring the balance on deposit equal to the interest and principal accrued until the payment is due. The balance of the Parity Debt Service Fund as of September 30, 2014 and 2013 was $2,265,129 and $1,873,254, respectively.

Improvement, Renewal and Replacement Fund The purpose of this fund is to provide for payment of capital improvements, costs of renewals and replacements, and improvements to the treatment plant portion of the Sewage Disposal System that is used jointly by the Authority and Fairfax County. The contribution to the fund is .7% of the total amount of capital expenditures made subsequent to October 1, 1997 for the joint portion of the system. The Authority funds this contribution at 40% and Fairfax County at 60%. The balance of the Improvement, Renewal and Replacement Fund as of September 30, 2014 and 2013 was $10,498,386 and $10,629,987, respectively. Construction Fund The Construction Fund was established to pay for the constructing of any improvement to the portion of the plant used jointly by the Authority and Fairfax County. Certain cash and investments are restricted to meet the requirements of the Master Indenture of Trust.

Estimates The preparation of financial statements 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 revenues and expenses during the reporting period. Actual results could differ from those estimates.

Note 2. Cash on Deposit

Deposits with banks are covered by the Federal Deposit Insurance Corporation (FDIC) and collateralized in accordance with the Virginia Security for Public Deposits Act (the “Act”) Section 2.2-4400 et. seq. of the Code of Virginia. Under the Act, banks and savings institutions holding public deposits in excess of the amount insured by the FDIC must pledge collateral to the Commonwealth of Virginia Treasury Board. Financial institutions may choose between two collateralization methodologies and depending upon that choice, will pledge collateral that ranges in the amounts from 50% to 130% of excess deposits. Accordingly, all deposits are considered fully collateralized.

39

Notes to Financial Statements Note 3. Receivables and Payables

Receivables and payables were composed of the following as of September 30, 2014 and 2013:

Note 4. Investments

Investments consist of the following at September 30, 2014 and 2013:

2014 2013Accounts receivable:

Billed Customer services 2,229,913$ 3,632,230$ Unbilled Customer services 3,731,166 2,149,809 Due from Other Governments 7,452,042 2,329,021 Other 54,347 486,840

13,467,468$ 8,597,900$

Accounts payable:Vendors 30,260,192$ 13,650,312$

Accrued expenses:Payroll, payroll taxes and other 266,741$ 219,615$

Total accounts payable and accrued expenses 30,526,933$ 13,869,927$

Investment Type 2014 2013Certificates of Deposit 2,097,869$ 2,196,953$ Commercial Paper 449,943 2,745,612 Corporate Notes 2,208,305 1,857,171 Mutual Funds 2,314,492 1,440,464 US Agencies 13,802,230 12,227,114 US Treasuries 4,465,953 4,031,227 LGIP 117,099 116,981 Municipal Bonds - 269,953 Total 25,455,891 24,885,475

40

Notes to Financial Statements Note 4. Investments, continued

Custodial Credit Risk Custodial credit risk is the risk that, in the event of the failure of the counterparty to a transaction, a government will not be able to recover the value of investment or collateral securities that are in the possession of an outside party. At September 30, 2014 and 2013, none of the Authority’s investments are exposed to custodial credit risk. Interest Rate Risk The Authority’s investments as of September 30, 2014 and 2013 are classified by interest rate risk as detailed below:

Investment Type Rating Rating Agency

Credit Exposure as a % of Total Investments

U.S. Treasuries AA+/Aaa S& P/ Moody's 16.20%Municipal Bonds AAA/Aaa S& P/ Moody's 1.08%U.S. Agencies AA+/Aaa S& P/ Moody's 49.13%Corporate Notes AA-/Aa3 S& P/ Moody's 7.46%Commerical Paper A-1/P-1 S& P/ Moody's 11.03%Cerificate of Deposit A-1/P-1 S& P/ Moody's 8.83%LGIP AAAm Standard & Poor's 0.47%Mutual Funds AAA Standard & Poor's 5.79%

2014Investment Type Fair Value Less Than One Year 1-3 Years 4-5 Years Total

Certificates of Deposit 2,097,869$ 550,569$ 1,547,300$ -$ 2,097,869$ Commercial Paper 449,943 449,943 449,943 Corporate Notes 2,208,305 - 2,208,305 - 2,208,305 Mutual Funds 2,314,492 2,314,492 - - 2,314,492 US Agencies 13,802,230 1,354,377 9,594,990 2,852,862 13,802,230 US Treasuries 4,465,953 - 2,060,692 2,405,262 4,465,953 LGIP 117,099 117,099 - - 117,099 Municipal Bonds - Total 25,455,891$ 4,786,480$ 15,411,287$ 5,258,124$ 25,455,891$

Reconciliation of InvestmentsInvestments - restricted 8,408,145 3,010,219 4,025,428 1,372,498 8,408,145 Investments 17,047,746 1,776,261 11,385,859 3,885,626 17,047,746

Total 25,455,891$ 4,786,480$ 15,411,287$ 5,258,124$ 25,455,891$

2013Investment Type Fair Value Less Than One Year 1-3 Years 4-5 Years Total

Certificates of Deposit 2,196,953 1,100,655 1,096,299 - - 2,196,953$ Commerical Paper 2,745,612 2,745,612 2,745,612 Corporate Notes 1,857,171 - - 1,857,171 - - 1,857,171 Mutual Funds 1,440,464 1,440,464 - - - - 1,440,464 US Agencies 12,227,114 599,380 4,352,322 7,275,412 12,227,114 US Treasuries 4,031,227 2,824,384 1,206,843 - - 4,031,227 LGIP 116,981 116,981 - - - - 116,981 Municipal Bonds 269,953 - - 269,953 269,953

24,885,475$ 8,827,475$ 8,782,587$ 7,275,412$ 24,885,475$

Reconciliation of InvestmentsInvestments - restricted 7,969,555 3,775,205 2,294,012 1,900,338 7,969,555 Investments 16,915,920 5,052,270 6,488,575 5,375,074 16,915,919

Total 24,885,475$ 8,827,475$ 8,782,587$ 7,275,412$ 24,885,475$

41

Notes to Financial Statements Note 5. Capital Assets

Changes in capital assets are as follows:

Balance, Balance,September 30, September 30,

2013 Additions Reductions 2014Capital assets, not being depreciated:

Land 39,966,378$ 54,317$ -$ 40,020,695$ Construction in progress 78,290,530 78,357,306 (17,512,593) 139,135,243

Total capital assets, notbeing depreciated 118,256,908$ 78,411,623$ (17,512,593)$ 179,155,938$

Capital assets, being depreciatedPlant & Infrastructure 563,855,128$ 15,691,912$ (453,000)$ 579,094,040$ Plant Equipment & Office Equipment 7,901,367 4,662,227 (62,375) 12,501,219$

Total capital assets, beingdepreciated 571,756,495$ 20,354,139$ (515,375)$ 591,595,259$

Less accumulated depreciation for:Plant & Infrastructure (141,246,576)$ (8,219,721)$ 69,011$ (149,397,286)$ Plant Equipment & Office Equipment (4,282,787) (347,082) 62,375 (4,567,494)

(145,529,363)$ (8,566,803)$ 131,386$ (153,964,780)$ Total capital assets

being depreciated, net 426,227,133$ 11,787,336$ (383,989)$ 437,630,479$

Capital assets, being amortizedCapacity rights 38,463,786$ 867,904$ -$ 39,331,690$

Less accumulated amortization for:Capacity rights (4,055,150)$ (978,794)$ -$ (5,033,944)$

Total capital assetsbeing amortized, net 34,408,636$ (110,890)$ -$ 34,297,746$

Total capital assets 578,892,676$ 90,088,069$ (17,896,582)$ 651,084,163$

42

Notes to Financial Statements Note 5. Capital Assets, continued

Arlington County Purchased Capacity Rights

The Authority has entered into agreements with Arlington County, in which capacity was purchased for the rights to use Arlington County’s wastewater treatment plant. These costs are capitalized as an intangible asset. Arlington County holds title to the plant.

Balance, Balance,September 30, September 30,

2012 Additions Reductions 2013Capital assets, not being depreciated:

Land 39,966,378$ - -$ - -$ 39,966,378$ Construction in progress 43,274,177 38,536,888 (3,520,535) 78,290,530

Total capital assets, notbeing depreciated 83,240,555$ 38,536,888$ (3,520,535)$ 118,256,908$

Capital assets, being depreciatedPlant & Infrastructure 558,786,555$ 5,088,184$ (19,611)$ 563,855,128$ Machinery & Equipment 7,696,505 204,862 - - 7,901,367

Total capital assets, beingdepreciated 566,483,060$ 5,293,046$ (19,611)$ 571,756,495$

Less accumulated depreciation for:Plant & Infrastructure (132,339,889)$ (8,906,687)$ - -$ (141,246,576)$ Machinery & Equipment (3,982,073) (300,714) - - (4,282,787)

(136,321,962)$ (9,207,401)$ - -$ (145,529,363)$ Total capital assets

being depreciated, net 430,161,098$ (3,914,355)$ (19,611)$ 426,227,132$

Capital assets, being amortizedCapacity rights 36,663,238$ 1,800,548$ - -$ 38,463,786$

Less accumulated amortization for:Capacity rights (3,119,813)$ (935,337)$ - -$ (4,055,150)$

Total capital assetsbeing amortized, net 33,543,425$ 865,211$ - -$ 34,408,636$

Total capital assets 546,945,078$ 35,487,744$ (3,540,146)$ 578,892,676$

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Notes to Financial Statements Note 6. Long-Term Debt

On March 15, 1999, the Authority executed a new Master Indenture of Trust for the purpose of issuing sewer revenue bonds from time to time. These bonds will provide funds to pay the cost, or any part of the cost, of the Sewage Disposal System additions or improvements or to refund indebtedness and obligations previously incurred for such purposes. The Authority has issued and sold sewer revenue bonds to the Virginia Water Facilities Revolving Fund, acting by and through the Virginia Resources Authority (VRA). The Master Indenture of Trust constitutes a contract among the Authority, the Trustee and VRA governing bond issuance. Sewer bonds consist of the following at September 30, 2014 and 2013: 2014 2013 Sewer revenue bond, Series 1998A, $9,000,000; secured equally and ratably with other bond issues by pledge of revenues of the Authority; semi-annual installments of $334,540, including principal and interest at 4% due through March 2019. $ 2,690,461 $ 3,250,892 Sewer revenue bond, Series 2000A, $25,000,000; secured equally and ratably with other bond issues by pledge of revenues of the Authority; semi-annual installments of $889,850, including principal and interest at 3.5% due through March 2020. 8,833,977 10,266,767 Sewer revenue bond, Series 2000B, $60,400,000; by pledge of revenues of the Authority; interest only payments due March 2002 and March 2005; semi-annual installments of approximately $2,405,000, including principal and interest at 3.85% due through September 2022. 36,738,303 39,797,218 Sewer revenue bond, Series 2004, $22,000,000; secured equally and ratably with other bond issues by pledge of revenues of the Authority; semi-annual installments of $742,125, including principal and interest beginning March 2006 at 3.10% due through September 2024. 12,678,704 13,745,059 Sewer revenue bond, Series 2006A, $3,000,000; secured equally and ratably with other bond issues by pledge of revenues of the Authority; semi-annual installments of $105,060, including principal and interest beginning in March 2006 at 3.10% due through September 2024. 1,794,873 1,945,833

44

Notes to Financial Statements Note 6. Long-Term Debt, continued

2014 2013 Sewer revenue bond, Series 2006B, $12,000,000; secured equally and ratably with other bond issues by pledge of revenues of the Authority; semi-annual installments of $412,313 at 3.10% due through March 2027. 8,438,377 9,012,928 Sewer revenue bond, Series 2008B, $9,265,000; secured equally and ratably with other bond issues by pledge of revenues of the Authority; annual installments of $181,569 to $595,081, including principal and interest, increasing annually, beginning October 2009 at an average interest cost of 5.37% due through October 2038. 8,480,000 8,655,000 Sewer revenue bond, Series 2009, $15,000,000; secured equally and ratably with other bond issues by pledge of revenues of the Authority; semi-annual installments of $536,250 beginning March 2011 at 3.55% due through September 2030. 12,214,020 12,836,306 Sewer revenue bond, Series 2011, $8,115,767; secured equally and ratably with other bond issues by pledge of revenues of the Authority; semi-annual installments of $260,604 beginning March 2014 at 2.35% due through September 2033. 7,946,249 6,535,786 Sewer revenue bond, Series 2014A, $12,500,000; secured equally and ratably with other bond issues by pledge of revenues of the Authority; semi-annual installments of $392,261 beginning March 2016 at 2.1% due through September 2035. 12,500,000 - Sewer revenue bond, Series 2014B, $2,500,000; secured equally and ratably with other bond issues by pledge of revenues of the Authority; semi-annual installments of $78,452 beginning March 2016 at 2.1% due through September 2035. 15,000 - $ 112,329,964 $ 106,045,789

Less unamortized discounts (61,161) (65,370) $ 112,268,803 $ 105,980,419

45

Notes to Financial Statements Note 6. Long-Term Debt, continued

Future debt service requirements for principal and interest for each debt outstanding as of September 30, 2014 are as follows:

Years Ending

September 30, Principal Interest Principal Interest Principal Interest Principal Interest Principal Interest

2015 573,678 59,875 4,664,313 1,680,430 1,099,668 384,583 743,808 249,311 180,000 429,038

2016 587,238 46,315 4,843,573 1,504,382 1,134,022 350,229 762,573 230,545 185,000 421,759

2017 601,119 32,433 5,029,744 1,321,551 1,169,449 314,802 781,819 211,299 195,000 412,297

2018 615,329 18,224 5,223,092 1,131,676 1,205,983 278,268 801,558 191,559 205,000 402,047

2019 313,098 3,679 5,744,341 934,485 1,243,658 240,593 821,804 171,314 215,000 392,222

2020-2024 20,067,216 1,400,263 6,095,126 584,003 4,431,346 534,244 1,235,000 1,793,359

2025-2029 730,798 11,327 1,890,342 67,154 1,585,000 1,433,547

2030-2034 2,045,000 961,609

2035-2039 2,635,000 356,347

2,690,462$ 160,526$ 45,572,279$ 7,972,787$ 12,678,704$ 2,163,805$ 10,233,250$ 1,655,426$ 8,480,000$ 6,602,225$

1998 Loan 2000 Loan 2004 Loan 2006 Loan 2008 Loan

46

Notes to Financial Statements

Note 6. Long-Term Debt, continued

Principal Interest Principal Interest Principal Interest Principal Interest Principal Interest

644,573 427,927 336,718 184,491 - - 378 8,242,758 3,416,033

667,659 404,842 344,397 176,812 261,011 524,335 784 158 8,786,256 3,659,377

691,571 380,930 352,538 168,672 530,272 254,249 646 295 9,352,158 3,096,528

716,339 356,161 360,871 160,338 541,467 243,055 660 282 9,670,299 2,781,610

741,995 330,505 369,402 151,808 552,897 231,625 674 268 10,002,869 2,456,499

4,128,149 1,234,354 1,982,189 623,859 2,944,569 978,040 3,589 1,118 40,887,184 7,149,240

4,623,734 440,221 2,227,805 378,243 3,268,774 653,835 3,984 723 14,330,437 2,985,050

1,972,328 105,422 3,628,675 293,934 4,422 285 7,650,425 1,361,250

772,335 12,185 241 3 3,407,576 368,535

12,214,020$ 3,574,940$ 7,946,248$ 1,949,645$ 12,500,000$ 3,191,258$ 15,000$ 3,509$ 112,329,964$ 27,274,121$

Total2014B Loan2014A Loan2009 Loan 2011 Loan

47


Note 6. Long-Term Debt, continued The changes in debt for the years ended September 30, 2014 and 2013 are as follows:

Interest due under the above obligations was $3,725,770 and $3,806,605 for the years ended September 30, 2014 and 2013, respectively. During fiscal years 2014 and 2013, the Authority was in compliance with the covenants associated with the outstanding bond indentures.

Note 7. Net Position Net Position represents the difference between assets and liabilities. The classification of net position at September 30, 2014 and 2013 was as follows:

Balance BalanceSeptember 30, September 30, Due Within

2013 Additions Reductions 2014 One Year

106,045,789$ 14,094,979$ (7,810,804)$ 112,329,964$ 8,242,758$

(65,370) - - 4,210 (61,161) 4,120 105,980,419$ 14,094,979$ (7,806,595)$ 112,268,803$ 8,246,878$

Balance BalanceSeptember 30, September 30, Due Within

2012 Additions Reductions 2013 One Year

110,562,773$ 2,837,991$ (7,354,975)$ 106,045,789$ 7,779,136$

(69,667) - - 4,297 (65,370) 4,210 110,493,106$ 2,837,991$ (7,350,678)$ 105,980,419$ 7,783,346$

2014 2013Net Investment in Capital Assets:

Net Property and Equipment in Service 651,084,163$ 578,892,676$ Less:

Revenue Bonds Payable (112,268,803) (105,980,419) Line of Credit (1,030,439) (1,030,439)

537,784,921$ 471,881,818$ Restricted:

Operating 4,035,954$ 3,982,905$ Parity Debt Service 2,265,129 1,873,254 Improvement, Renewal and Replacement 10,498,386 10,629,987

16,799,469$ 16,486,146$

Unrestricted 34,770,357$ 37,385,823$

48


Note 8. Virginia Retirement Plan

Plan Description The Authority contributes to the Virginia Retirement System (VRS), an agent and cost-sharing multiple-employer defined benefit pension plan administered by the Virginia Retirement System (the “System”). All full-time, salaried permanent (professional) employees of public school divisions and employees of participating employers are automatically covered by VRS upon employment. Members earn one month of service credit for each month they are employed and they and their employer are paying contributions to VRS. Members are eligible to purchase prior public service, active duty military service, certain periods of leave and previously refunded VRS service as service credit in their plan. Within the VRS Plan, the System administers three different benefit plans for local government employees – Plan 1, Plan 2, and Hybrid. Each plan has a different eligibility and benefit structure as set out below: VRS PLAN 1 About VRS Plan 1 – VRS Plan 1 is a defined benefit plan. The retirement benefit is based on a member’s age, creditable service and average final compensation at retirement using a formula. Employees are eligible for VRS Plan 1 if their membership date is before July 1, 2010, and they were vested as of January 1, 2013. Hybrid Opt-In Election – VRS non-hazardous duty covered plan members were allowed to make an irrevocable decision to opt into the Hybrid Retirement Plan during a special election window held January 1 through April 30, 2014. The Hybrid Retirement Plan’s effective date for eligible Plan 1 members who opted in was July 1, 2014. If eligible deferred members returned to work during the election window, they were also eligible to opt into the Hybrid Retirement Plan. Members who were eligible for an optional retirement plan (ORP) and had prior service under VRS Plan were not eligible to elect the Hybrid Retirement Plan and remain as plan members or ORP. Retirement Contributions – Members contribute up to 5.00% of their compensation each month to their member contribution account through a pre-tax salary reduction. Some school divisions and political subdivisions elected to phase in the required 5.00% member contribution; all employees will be paying the full 5.00% by July 1, 2016. Member contributions are tax-deferred until they are withdrawn as part of a retirement benefit or as a refund. The employer makes a separate actuarially determined contribution to VRS for all covered employees. VRS invests both member and employer contributions to provide funding for the future benefit payment.

49


Note 8. Virginia Retirement Plan (Continued)

Plan Description (Continued) VRS PLAN 1 (continued) Vesting – Vesting is the minimum length of service a member needs to qualify for a future retirement benefit. Members become vested when they have at least five years (60 months) of creditable service. Vesting means members are eligible to qualify for retirement if they meet the age and service requirements for their plan. Members also must be vested to receive a full refund of their member contribution account balance if they leave employment and request a refund. Members are always 100% vested in the contributions that they make.

Calculating the Benefit – The Basic Benefit is calculated based on a formula using the member’s average final compensation, a retirement multiplier and total service credit at retirement. It is one of the benefit payout options available to a member at retirement. An early retirement reduction factor is applied to the Basic Benefit if the member retires with a reduced retirement benefit or selects a benefit payout option other than the Basic Benefit. Average Final Compensation – A member’s average final compensation is the average of the 36 consecutive months of highest compensation as a covered employee. Service Retirement Multiplier – The retirement multiplier is a factor used in the formula to determine a final retirement benefit. The retirement multiplier for non-hazardous duty members is 1.70%. The retirement multiplier for sheriffs and regional jail superintendents is 1.85%. The retirement multiplier of eligible political subdivision hazardous duty employees other than sheriffs and regional jail superintendents is 1.70% or 1.85% as elected by the employer. Normal Retirement Age – Age 65. Earliest Unreduced Retirement Eligibility – Members who are not in hazardous duty positions are eligible for an unreduced retirement benefit at age 65 with at least five years of creditable service or at age 50 with at least 30 years of creditable service. Hazardous duty members are eligible for an unreduced retirement benefit at age 60 with at least five years of creditable service or age 50 with at least 25 years of creditable service. Earliest Reduced Retirement Eligibility – Members may retire with a reduced benefit as early as age 55 with at least five years of creditable service or age 50 with at least 10 years of creditable service.

50


Note 8. Virginia Retirement Plan (Continued) Plan Description (Continued) VRS PLAN 1 (Continued) Cost-of-Living Adjustment (COLA) in Retirement – The Cost-of-Living Adjustment (COLA) matches the first 3.00% increase in the Consumer Price Index for all Urban Consumers (CPI-U) and half of any additional increase (up to 4.00%) up to a maximum COLA of 5.00%. For members who retire with an unreduced benefit or with a reduced benefit with at least 20 years of creditable service, the COLA will go into effect on July 1 after one full calendar year from the retirement date. For members who retire with a reduced benefit and who have less than 20 years of creditable service, the COLA will go into effect on July 1 after one calendar year following the unreduced retirement eligibility date. The COLA is effective July 1 following one full calendar year (January 1 to December 31) under any of the following circumstances: • The member is within five years of qualifying for an unreduced retirement benefit as of

January 1, 2013.

• The member retires on disability.

• The member retires directly from short-term or long-term disability under the Virginia Sickness and Disability Program (VSDP).

• The member is involuntarily separated from employment for causes other than job

performance or misconduct and is eligible to retire under the Workforce Transition Act or the Transitional Benefits Program.

• The member dies in service and the member’s survivor or beneficiary is eligible for a monthly death-in-service benefit. The COLA will go into effect on July 1 following one full calendar year (January 1 to December 31) from the date the monthly benefit begins.

• The member dies in service and the member’s survivor or beneficiary is eligible for a monthly death-in-service benefit. The COLA will go into effect on July 1 following one full calendar year (January 1 to December 31) from the date the monthly benefit begins.

Disability Coverage – Members who are eligible to be considered for disability retirement and retire on disability, the retirement multiplier is 1.70% on all service, regardless of when it was earned, purchased or granted. VSDP members are subject to a one-year waiting period before becoming eligible for non-work related disability benefits. Purchase of Prior Service – Members may be eligible to purchase service from previous public employment, active duty military service, an eligible period of leave or VRS refunded service as creditable service in their plan. Prior creditable service counts toward vesting, eligibility for retirement and the health insurance credit. Only active members are eligible to purchase prior service. When buying service, members must purchase their most recent period of service first. Members also may be eligible to purchase periods of leave without pay.

51


Note 8. Virginia Retirement Plan (Continued) Plan Description (Continued) VRS PLAN 2 VRS Plan 2 is the same as VRS Plan 1 except for the following: Employees are eligible for VRS Plan 2 if their membership date is on or after July 1, 2010, or their membership date is before July 1, 2010, and they were not vested as of January 1, 2013. Average Final Compensation – A member’s average final compensation is the average of their 60 consecutive months of highest compensation as a covered employee.

Service Retirement Multiplier – For non-hazardous duty members the retirement multiplier is 1.65% for creditable service earned, purchased or granted on or after January 1, 2013. Normal Retirement Age – Normal Social Security retirement age. Earliest Unreduced Retirement Eligibility – Members who are not in hazardous duty positions are eligible for an unreduced retirement benefit when they reach normal Social Security retirement age and have at least five years of creditable service or when their age and service equal 90.

Earliest Reduced Retirement Eligibility – Members may retire with a reduced benefit as early as age 60 with at least five years of creditable service.

Cost-of-Living Adjustment (COLA) in Retirement – The Cost-of-Living Adjustment (COLA) matches the first 2.00% increase in the CPI-U and half of any additional increase (up to 2.00%), for a maximum COLA of 3.00%. Disability Coverage – Members who are eligible to be considered for disability retirement and retire on disability, the retirement multiplier is 1.65% on all service, regardless of when it was earned, purchased or granted. VSDP members are subject to a one-year waiting period before becoming eligible for non-work related disability benefits. HYBRID RETIREMENT PLAN

The Hybrid Retirement Plan is the same as VRS Plan 1 except for the following:

About the Hybrid Retirement Plan – The Hybrid Retirement Plan combines the features of a defined benefit plan and a defined contribution plan. Most members hired on or after January 1, 2014 are in this plan, as well as VRS Plan 1 and VRS Plan 2 members who were eligible and opted into the plan during a special election window.

• The defined benefit is based on a member’s age, creditable service and average final compensation at retirement using a formula.

52


Note 8. Virginia Retirement Plan (Continued) Plan Description (Continued) HYBRID RETIREMENT PLAN (continued) About the Hybrid Retirement Plan (continued)

• The benefit from the defined contribution component of the plan depends on the member and employer contributions made to the plan and the investment performance of those contributions.

• In addition to the monthly benefit payment payable from the defined benefit plan at retirement, a member may start receiving distributions from the balance in the defined contribution account, reflecting the contributions, investment gains or losses, and any required fees.

Eligible Members – Employees are in the Hybrid Retirement Plan if their membership date is on or after January 1, 2014. This includes:

• State employees.* • School division employees. • Political subdivision employees.* • Judges appointed or elected to an original term on or after January 1, 2014. • Members in VRS Plan 1 or VRS Plan 2 who elected to opt into the plan during the

election window held January 1 – April 30, 2014; the plan’s effective date for opt-in members was July 1, 2014.

*Non-Eligible Members Some employees are not eligible to participate in the Hybrid Retirement Plan. They include:

• Members of the State Police Officers’ Retirement System (SPORS). • Members of the Virginia Law Officers’ Retirement System (VaLORS). • Political subdivision employees who are covered by enhanced benefits for

hazardous duty employees.

Those employees eligible for an optional retirement plan (ORP) must elect the ORP plan or the Hybrid Retirement Plan. If these members have prior service under VRS Plan 1 or VRS Plan 2, they are not eligible to elect the Hybrid Retirement Plan and must select VRS Plan 1 or VRS Plan 2 (as applicable) or ORP.

Retirement Contributions – A member’s retirement benefit is funded through mandatory and voluntary contributions made by the member and the employer to both the defined benefit and the defined contribution components of the plan. Mandatory contributions are based on a percentage of the employee’s creditable compensation and are required from both the member and the employer. Additionally, members may choose to make voluntary contributions to the defined contribution component of the plan, and the employer is required to match those voluntary contributions according to specified percentages.

53


Note 8. Virginia Retirement Plan (Continued) Plan Description (Continued) HYBRID RETIREMENT PLAN (Continued) Creditable Service

Defined Benefit Component: Under the defined benefit component of the plan, creditable service includes active service. Members earn creditable service for each month they are employed in a covered position. It also may include credit for prior service the member has purchased or additional creditable service the member was granted. A member’s total creditable service is one of the factors used to determine their eligibility for retirement and to calculate their retirement benefit. It also may count toward eligibility for the health insurance credit in retirement, if the employer offers the health insurance credit. Defined Contribution Component: Under the defined contribution component, creditable service is used to determine vesting for the employer contribution portion of the plan.

Vesting Defined Benefit Component: Defined benefit vesting is the minimum length of service a member needs to qualify for a future retirement benefit. Members are vested under the defined benefit component of the Hybrid Retirement Plan when they reach five years of creditable service. VRS Plan 1 or VRS Plan 2 members with at least five years of creditable service who opted into the Hybrid Retirement Plan remain vested in the defined benefit component. Defined Contribution Component: Defined contribution vesting refers to the minimum length of service a member needs to be eligible to withdraw the employer contributions from the defined contribution component of the plan. Members are always 100% vested in the contributions that they make. Upon retirement or leaving covered employment, a member is eligible to withdraw a percentage of employer contributions to the defined contribution component of the plan, based on service.

• After two years, a member is 50% vested and may withdraw 50% of employer contributions.

• After three years, a member is 75% vested and may withdraw 75% of employer contributions.

Defined Contribution Component: (continued)

• After four or more years, a member is 100% vested and may withdraw 100% of

employer contributions. Distribution is not required by law until age 70½.

54


Note 8. Virginia Retirement Plan (Continued) Plan Description (Continued) HYBRID RETIREMENT PLAN (Continued) Calculating the Benefit Defined Contribution Component: The benefit is based on contributions made by the member and any matching contributions made by the employer, plus net investment earnings on those contributions. Average Final Compensation – Same as VRS Plan 2. It is used in the retirement formula for the defined benefit component of the plan. Service Retirement Multiplier – The retirement multiplier is 1.00%. For members that opted into the Hybrid Retirement Plan from VRS Plan 1 or VRS Plan 2, the applicable multipliers for those plans will be used to calculate the retirement benefit for service credited in those plans. Normal Retirement Age Defined Benefit Component: Same as VRS Plan 2. Defined Contribution Component: Members are eligible to receive distributions upon leaving employment, subject to restrictions. Earliest Unreduced Retirement Eligibility Defined Benefit Component: Members are eligible for an unreduced retirement benefit when they reach normal Social Security retirement age and have at least five years of creditable service or when their age and service equal 90. Defined Contribution Component: Members are eligible to receive distributions upon leaving employment, subject to restrictions.

Earliest Reduced Retirement Eligibility Defined Benefit Component: Members may retire with a reduced benefit as early as age 60 with at least five years of creditable service. Defined Contribution Component: Members are eligible to receive distributions upon leaving employment, subject to restrictions.

Cost-of-Living Adjustment (COLA) in Retirement Defined Benefit Component: Same as VRS Plan 2. Defined Contribution Component: Not applicable.

55


Note 8. Virginia Retirement Plan (Continued) Plan Description (Continued) HYBRID RETIREMENT PLAN (Continued) Disability Coverage – Eligible political subdivision and school division (including VRS Plan 1 and VRS Plan 2 opt-ins) participate in the Virginia Local Disability Program (VLDP) unless their local governing body provides an employer-paid comparable program for its members. State employees (including VRS Plan 1 and VRS Plan 2 opt-ins) participating in the Hybrid Retirement Plan are covered under the Virginia Sickness and Disability Program (VSDP), and are not eligible for disability retirement. Hybrid members (including VRS Plan 1 and VRS Plan 2 opt-ins) covered under VSDP or VLDP are subject to a one-year waiting period before becoming eligible for non-work related disability benefits. The system issues a publicly available comprehensive annual financial report (CAFR) that includes financial statements and required supplementary information for the plans administered by VRS. A copy of the most recent report may be obtained from the VRS website at http://www.varetire.org/Pdf/Publications/2013-annual-report.pdf, or by writing to the System’s Chief Financial Officer at P.O. Box 2500, Richmond, VA, 23218-2500. Funding Policy Plan members are required by Title 51.1 of the Code of Virginia (1950), as amended, to contribute 5.00% of their compensation toward their retirement. All or part of the 5.00% member contribution may be assumed by the employer. Beginning July 1, 2012 new employees were required to pay the 5.00% member contribution. In addition, for existing employees, employers were required to begin making the employee pay the 5.00% member contribution. This could be phased in over a period of up to 5 years and the employer is required to provide a salary increase equal to the amount of the increase in the employee-paid member contribution. In addition, the Authority is required to contribute the remaining amounts necessary to fund its participation in the VRS using the actuarial basis specified by the Code of Virginia and approved by the VRS Board of Trustees. The Authority’s contribution rate for the fiscal year ended June 30, 2014 was 9.92% of the annual covered payroll. Annual Pension Cost For the fiscal year ended September 30, 2014, the Authority’s annual pension cost of $836,706 for VRS was equal to the required and actual contributions.

56

http://www.varetire.org/Pdf/Publications/2013-annual-report.pdf


Note 8. Virginia Retirement Plan (Continued) Annual Pension Cost – (Continued)

The FY 2014 required contribution was determined as part of the June 30, 2011 actuarial valuation using the entry age actuarial cost method. The actuarial assumptions at June 30, 2011 included (a) an investment rate of return (net of administrative expenses) of 7.00%, (b) projected salary increases ranging from 3.75% to 5.60% per year for local general government employees, 3.75% to 6.20% per year for teachers, and 3.50% to 4.75% per year for employees eligible for enhanced benefits available to law enforcement officers, firefighters, and sheriffs, and (c) a cost-of-living adjustment of 2.50% per year for Plan 1 employees and 2.25% for Plan 2 employees. Both the investment rate of return and the projected salary increases also include an inflation component of 2.50%. The actuarial value of the Authority’s assets is equal to the modified market value of assets. This method uses techniques that smooth the effects of short-term volatility in the market value of assets over a five-year period. The Authority’s unfunded actuarial accrued liability is being amortized as level percentage of projected payroll on a closed basis. The remaining amortization period at June 30, 2013 for the Unfunded Actuarial Accrued liability (UAAL) was 30 years. Funded Status and Funding Progress For the Authority’s employees, as of September 30, 2014, the most recent actuarial valuation date, the plan was 79.55% funded. The actuarial accrued liability for benefits was $46,025,222, and the actuarial value of assets was $36,612,123, resulting in a net underfunding (UAAL) – on actuarial accrued asset of $9,413,099. The covered payroll (annual payroll of active employees covered by the plan) was $8,434,533, and the ratio of the UAAL to the covered payroll was 111.60%. For the Authority’s employees, as of September 30, 2013, the actuarial valuation date, the plan was 73.41% funded. The actuarial accrued liability for benefits was $45,136,677, and the actuarial value of assets was $33,133,483, resulting in an unfunded actuarial accrued liability (UAAL) of $12,003,194. The covered payroll (annual payroll of active employees covered by the plan) was $8,500,781, and the ratio of the UAAL to the covered payroll was 141.20%.

Annual Percentage NetPension of APC Pension

September 30, Cost (APC) Contributed Obligation2012 855,662$ 100% - -$ 2013 838,916$ 100% - -$ 2014 836,706$ 100% - -$

Three-Year Trend Information

57


Funded Status and Funding Progress (Continued) The schedule of funding progress, presented as required supplemental information (RSI) following the notes to the financial statements, presents multiyear trend information about whether the actuarial value of the plan assets is increasing or decreasing over time relative to the actuarial accrued liability (AAL) for benefits.

Note 9. Other Post-Employment Benefits

The Authority provides limited post-retirement benefits such as health and life insurance to retirees who have five or more years of service with the Authority. The Authority pays 20% of medical insurance costs of retirees with five to twenty years of service and 40% of medical insurance costs of retirees with greater than twenty years of service. The remaining amounts of insurance premiums are paid by the retiree. Prior to fiscal 2013 the Authority also provided a post-retirement life insurance benefit to retirees. The Authority has discontinued its post retirement life insurance coverage for retirees. The Authority had an actuarial valuation of post-employment benefits performed as of September 30, 2013. GASB Statement No. 45 does not require pre-funding of OPEB liabilities. As a result, the Authority has elected not to pre-fund OPEB liabilities at this time and continues to fund the OPEB costs on a pay as you go basis. The difference between the OPEB annual expense and cash payments for OPEB benefits is treated as a liability in the financial statements. At September 30, 2014 and 2013, the Authority has recorded a liability of $2,158,331 and $1,976,737, respectively, on the Statement of Net Position. The Authority’s annual OPEB cost was $256,000 and $261,563 for the health insurance plan, for fiscal years ending September 30, 2014 and 2013, respectively. The pay as you go cost for the Authority’s OPEB benefits was $74,406 and $130,504 for the health insurance plan, for the years ending September 30, 2014 and 2013, respectively. The percentage of annual OPEB cost contributed is 29% and 50%, respectively, for the fiscal years ending September 30, 2014 and 2013. In accordance with GASB Statement No. 45, the Authority’s OPEB expense is calculated based on the annual required contribution (ARC). The ARC represents a level of funding that, if paid on an on-going basis, is projected to cover normal cost each year and amortize any unfunded actuarial accrued liabilities (UAAL) over a period not to exceed thirty years. Actuarial Methods and Assumptions Projections of benefits for financial reporting purposes are based on the substantive plan (the plan as understood by the employer and the plan members) and include the types of benefits provided at the time of each valuation and the historical pattern of sharing of benefit costs between the employer and plan members at that point. The actuarial methods and assumptions used include techniques that are designed to reduce the effects of short-term volatility in actuarial accrued liabilities and the actuarial value of assets, consistent with the long-term perspective of the calculations.

58


Note 9. Other Post-Employment Benefits, continued In the actuarial valuation, the entry age normal actuarial cost method was used. The valuation results are based on discount rate of 3.0%, an annual payroll growth rate of 3%, and an annual healthcare cost trend rate of 9% initially, decreasing annually to a rate of 5% after seven years. An inflation rate of 2.5% is used in the assumptions. The unfunded liability is amortized over an open period of 30 years at a level percentage of pay. Actuarial valuations of an on-going plan involve estimates of the value of reported amounts and assumptions about the probability of occurrence of events far into the future. Examples include assumptions about future employment, mortality and the healthcare cost trend. Amounts determined regarding the funded status of the plan and the annual required contributions of the employer are subject to continual revisions as actual results are compared with past expectations and new estimates are made for the future. The schedule of funding progress, presented as required supplementary information following the notes to the financial statements, presents trend information that shows whether the actuarial value of plan assets is increasing or decreasing over time relative to the actuarial accrued liabilities for benefits. The following table shows the calculation of the net OPEB obligation at September 30:

As of September 30, 2013, the most recent actuarial valuation date, the plan was not funded. The actuarial value of assets was $0 resulting in an unfunded actuarial accrued liability (UAAL) of $3,793,763. The covered payroll was $8,944,084 and the ratio of the UAAL to covered payroll was $42.2%.

During 2014, the Authority established a trust fund to fund the cost of OPEB. The trust fund was established by the Authority with the Virginia Pooled OPEB Trust Fund (Trust), sponsored by the Virginia Municipal League and the Virginia Association of Counties. The Trust is established as an investment vehicle for participating employers to accumulate assets to fund OPEB Plan assets for purposes of GASB Statement No. 45 are segregated and restricted in a trust, in which (a) contributions to the plan are irrevocable, (b) assets are dedicated to providing benefits to retirees and their beneficiaries, and (c) assets are legally

September 30,

Annual Required

Contribution (ARC)

Add: Interest on prior years OPEB

Obligation

Less: Adjustment to

ARC

Annual OPEB Costs

Pay as You Go OPEB Cost (Contributions)

Increase in Net OPEB

Obligations

Net OPEB Obligations End of Year

2014 264,566 59,302 (67,868) 256,000 (74,406) 181,594 2,158,331

2013 269,561 55,370 (63,368) 261,563 (130,504) 131,059 1,976,737

2012 486,691 44,228 (50,617) 480,302 (108,900) 371,402 1,845,678

2011 622,792 29,577 (36,929) 615,440 (127,080) 488,360 1,474,276

2010 599,096 14,811 (18,173) 595,734 (103,507) 492,227 985,916

2009 576,157 - - - - 576,157 (82,468) 493,689 493,689

Annual Percentage Net OPEBOPEB of Annnual OPEB Obligations

September 30, Costs Contributions End of Year2014 256,000$ 29.00% 2,158,331$ 2013 261,563$ 23.00% 1,976,737$ 2012 480,302$ 23.00% 1,845,678$

Three-Year Trend Information

59


Note 9. Other Post-Employment Benefits, continued

protected from creditors of the employer or plan administrator, for the payment of benefits in accordance with terms of the plan. Investment decisions for the fund’s assets are made by the Board of Trustees. The Board of Trustees established investment objectives, risk tolerance and asset allocation policies in light of the investment policy, market and economic conditions, and generally prevailing prudent investment practices. The Board of Trustees also monitors the investments to ensure adherence to the adopted policies and guidelines. In addition, the Trustees review, monitor, and evaluate the performance of the investments and its investment advisors in light available investment opportunities, market conditions and publicly available indices for the generally accepted evaluation and measurement of such performance. Specific investment information for the Trust can be obtained by writing to VML/VACo Finance Program, 1108 East Main Street, Richmond, Virginia 23219.

Note 10. Line of Credit

The Authority maintained its Bank Line of Credit under the same terms as in prior year. The interest rate is a variable rate calculated for each month as 73% of the one-month LIBOR rate plus 98 basis points. The rate was 0.83% and 0.85% at September 30, 2014 and 2013, respectively. The Authority has pledged net revenues to secure the payment of principal and interest. The revolving credit agreement constitutes subordinate debt under the Master Indenture of Trust discussed in Note 6.

The Authority’s line of credit was established to provide for funds to meet cash flow needs for construction activity as required. Activity on this line of credit for the years ended September 30, 2014 and 2013 consists of the following:

Interest of $8,695 and $8,770 was paid on the line of credit during the fiscal years ended September 30, 2014 and 2013, respectively.

Note 11. Risk Management The Authority is exposed to various risks of loss related to torts; theft of, damage to and destruction of assets; errors and omissions; injuries to employees; and natural disasters. These risks are covered by commercial insurance purchased from independent third parties. There have been no significant reductions in insurance coverage from the prior year. Settled claims have not exceeded insurance coverage in the past three years.

2014 2013

Balance, beginning 1,030,439$ 1,000,000$ Increases - - 30,439 Decreases - - - -

Balance, ending 1,030,439$ 1,030,439$

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Note 12. Commitments and Contingencies Waste-to-Energy Facility In 1984, as an accommodation to the City of Alexandria and Arlington County, the Authority agreed to be a party to an agreement to construct a waste-to-energy facility. The Authority’s main role is to help meet imposed funding requirements. During 1985, the facility was sold to a private equity owner. As a condition of the sale, Alexandria Renew Enterprises and the Arlington Solid Waste Authority will hold the title to the facility until the obligation of the purchase agreements are met. In 1998, two series of revenue bonds were issued on behalf of the waste-to-energy facility. The Series 1998A revenue bonds were issued to refund the original Series 1954 bonds. Series 1998B bonds were issued to finance capital improvements, including retrofitting the facility with certain air pollution control equipment. In accordance with the agreements, at no time will the revenues or assets of the Authority be obligated or used to satisfy the debts and liabilities of the waste-to-energy facility. Other During the current fiscal year, the Authority entered into various construction contracts. As of September 30, 2014, approximately $6.61 million is outstanding for work that has not yet been completed. From time to time, the Authority is involved in various legal actions arising in the normal course of business. In the opinion of management, such matters will not have a material effect upon the financial position of the Authority.

Note 13. Restatement of Net Position

Ending net position for the year ended September 30, 2012 has been restated to properly reflect amounts in accordance with implementing GASB Statement No. 65, Items Previously Reported as Assets and Liabilities. This standard requires that the debt issuance be recognized as an expense in the period incurred, except any portion related to prepaid insurance costs. Bond issuance costs that were capitalized as a part of various debt issuances in prior years were required to be retroactively expensed, resulting in a decrease in net position of $154,333 for both September 30, 2013 and October 1, 2012.

61


Note 14. New Governmental Accounting Standards Board (GASB) Pronouncements

GASB Statement No. 68, Accounting and Financial Reporting for Pension Plans replaces the requirements of GASB Statements No. 27 and No. 50 as they relate to governments that provide pensions through pension plans administered as trusts or similar arrangements that meet certain criteria. The statement requires governments providing defined benefit pensions to recognize the long-term obligation for pension benefits as a liability for the first time, and to more comprehensively and comparably measure the annual costs of pension benefits. The statement also enhances accountability and transparency through revised and new note disclosures and required supplementary information, including disclosing descriptive information about the types of benefits provided, how contributions to the pension plan are disclosures and required supplementary information, including disclosing descriptive information about the types of benefits provided, how contributions to the pension plan are determined, and assumptions and methods used to calculate the pension liability. This statement will be effective for the year ending June 30, 2015. GASB Statement No. 69, Government Combinations and Disposals of Government Operations was issued to provide governmental guidance on governmental combinations and disposals of governmental operations that does not conflict with GASB Statement No. 34. The objective of this Statement is to improve financial reporting by addressing accounting and financial reporting for government combinations and disposals of government operations. A disposal of a government’s operations results in the removal of specific activities of a government. This Statement requires disclosures to be made about government combinations and disposals of government operations to enable financial statement users to evaluate the nature and financial effects of those transactions. This Statement will be effective for the year ending June 30, 2015. GASB Statement No. 71, Pension Transition for Contributions Made Subsequent to the Measurement Date – an amendment of GASB Statement No. 68 was issued to address an issue regarding an application of the transition provisions of GASB Statement No. 68, Accounting and Financial Reporting for Pensions. This Statement amends GASB Statement No. 68 to require that, at transition, a government recognize a beginning deferred outflow of resources for its pension contributions, if any, made subsequent to the measurement date of the beginning net pension liability. The requirements of this Statement will eliminate the source of a potential significant understatement of restated beginning net position and expense in the first year of implementation of Statement 68 in the accrual-basis financial statements of employers and non-employer contributing entities. This Statement will be effective for the year ending June 30, 2015. Management has not yet evaluated the effects, if any, of adopting these standards.

Note 15. Subsequent Events

The Authority is currently in the application process with the Virginia Revolving Loan Fund to continue to finance its capital program.

62

SUPPLEMENTARY SECTION

63

ActuarialAccrued UAAL as a

Actuarial Actuarial Liability Unfunded PercentageValuation Value (AAL) AAL Funded Covered of Covered

Date of Assets Entry Age (UAAL) Ratio Payroll PayrollJune 30 ( a ) ( b ) ( b-a ) ( a/b ) ( c ) [(b-a)/c]

2004 22,786,318$ 20,525,924$ (2,260,394)$ 11.01 % 6,658,177$ (33.95) %2005 23,521,687 27,007,914 3,486,227 87.09 % 7,135,059 48.86 %2006 24,995,555 27,586,729 2,591,174 90.61 % 7,132,052 36.33 %2007 28,404,542 31,288,056 2,883,514 90.78 % 8,126,370 35.48 %2008 31,717,101 34,428,790 2,711,689 92.12 % 8,597,495 31.54 %2009 32,435,739 37,765,246 5,329,507 85.89 % 9,060,442 58.82 %2010 32,620,483 41,532,353 8,911,870 78.54 % 7,894,472 112.89 %2011 32,847,080 42,330,315 9,483,235 77.60 % 7,337,903 129.24 %2012 32,456,963 44,610,179 12,153,216 72.76 % 7,745,925 156.90 %2013 33,133,483 45,136,677 12,003,194 73.41 % 8,500,781 141.20 %2014 36,612,123 46,025,222 9,413,099 79.55 % 8,434,533 111.60 %

Actuarial UAAL as aActuarial Accrued Unfunded Percentage

Actuarial Value Liability AAL Funded Covered of CoveredValuation of Assets (AAL) (UAAL) Ratio Payroll Payroll

Date ( a ) ( b ) ( b-a ) ( a/b ) ( c ) [(b-a)/c]

9/30/2008 - -$ 8,191,842$ 8,191,842$ - - % 9,158,860$ 89.40 %9/30/2009 - - 8,628,501 8,628,501 - - % 8,912,552 94.20 %9/30/2010 - - 9,063,771 9,063,771 - - % 9,318,343 97.30 %9/30/2011 - - 7,772,056 7,772,056 - - % 7,789,594 99.80 %9/30/2012 - - 8,114,534 8,114,534 - - % 8,212,207 98.81 %9/30/2013 - - 3,793,763 3,793,763 - - % 8,944,084 42.42 %

Schedule of Funding Progress - Other Post Employment Benefits

Required Supplementary Information(Unaudited - See Accompanying Independent Auditor's Report)

Schedule of Funding Progress - Virginia Retirement System


64

STATISTICAL SECTION (UNAUDITED)

65

66

Alexandria Renew Enterprises Statistical Section

Financial Trends Financial trend information is intended to assist users in understanding how the Authority’s net position has changed over time. The tables below disclose comparative financial data. TABLE 1

2014 2013(1) 2012 2011 2010 2009 2008 2007 2006 2005Assets Current Assets 65,759,133$ 55,815,821$ 48,735,050$ 49,878,801$ 40,936,857$ 29,036,214$ 23,043,703$ 23,639,988$ 20,711,317$ 17,272,843$ Non-current Assets 671,753,574 594,949,916 551,185,919 531,506,570 529,716,752 508,054,514 472,111,155 468,933,019 471,170,047 472,618,050 Total Assets 737,512,707$ 650,765,737$ 599,920,969$ 581,385,371$ 570,653,609$ 537,090,728$ 495,154,858$ 492,573,007$ 491,881,364$ 489,890,893$

Liabilities Current Liabilities 41,743,756$ 24,535,900$ 19,960,226$ 22,766,941$ 21,561,196$ 16,763,091$ 12,866,266$ 11,315,849$ 11,601,742$ 22,069,487$ Long-term Liabilities 106,414,204 100,476,050 105,147,225 108,100,791 113,707,151 106,392,180 92,416,302 98,553,566 102,159,807 103,449,536 Total Liabilities 148,157,960$ 125,011,950$ 125,107,451$ 130,867,732$ 135,268,347$ 123,155,271$ 105,282,568$ 109,869,415$ 113,761,549$ 125,519,023$

Net Position

Net Investment in Capital Assets 537,784,921$ 471,881,818$ 435,451,972$ 403,409,766$ 395,087,048$ 382,932,818$ 364,871,030$ 359,840,983$ 359,054,970$ 347,647,952$ Restricted Net Position 16,799,469 16,486,146 15,795,460 16,426,547 13,827,081 9,463,057 10,445,651 10,888,604 11,507,755 8,720,691 Unrestricted Net Position 34,770,357 37,540,156 23,566,086 30,681,326 26,471,133 21,539,582 14,555,609 11,974,005 7,557,090 8,003,227 Total Net Position 589,354,747$ 525,908,120$ 474,813,518$ 450,517,639$ 435,385,262$ 413,935,457$ 389,872,290$ 382,703,592$ 378,119,815$ 364,371,870$

Total Liabilities and Net Position 737,512,707$ 650,920,070$ 599,920,969$ 581,385,371$ 570,653,609$ 537,090,728$ 495,154,858$ 492,573,007$ 491,881,364$ 489,890,893$

Source: Alexandria Renew EnterprisesNotes: (1)These totals are as previously reported. A prior period adjustment was required in 2013 which modified these amounts.

Condensed Statements of Net PositionLast Ten Fiscal Years

67

Alexandria Renew Enterprises Statistical Section Financial Trends (Continued) TABLE 2

Last Ten Fiscal Years

2014 2013(1) 2012 2011 2010 2009 2008 2007 2006 2005Operating Revenues Waste Water Treatment Service Charges 48,560,009$ 48,807,164$ 43,082,976$ 44,093,367$ 42,312,986$ 41,715,325$ 39,690,012$ 37,732,681$ 32,026,238$ 31,492,565$ Other 6,044 3,480 486,114 139,808 33,211 10,118 21,929 11,900 305,532 303,446 Total Operating Revenues 48,566,053$ 48,810,644$ 43,569,090$ 44,233,175$ 42,346,197$ 41,725,443$ 39,711,941$ 37,744,581$ 32,331,770$ 31,796,011$

Non-operating Revenues Investment Income 283,273$ 58,128$ 132,671$ 150,169$ 175,253$ 237,065$ 733,564$ 1,236,613$ 905,585$ 481,581$ Sale Of Property 1,000,000 15,203,750 199,600 Capital Contribution 52,160,997 24,882,239 19,121,393 5,831,343 15,278,723 19,565,293 3,022,634 1,759,696 16,715,099 16,295,571 Total Non-operating Revenues 53,444,270$ 40,144,117$ 19,254,064$ 6,181,112$ 15,453,976$ 19,802,358$ 3,756,198$ 2,996,309$ 17,620,684$ 16,777,152$

Total Revenues 102,010,323$ 88,954,761$ 62,823,154$ 50,414,287$ 57,800,173$ 61,527,801$ 43,468,139$ 40,740,890$ 49,952,454$ 48,573,163$

Operating Expenses Personnel Services 12,464,250$ 12,038,490$ 11,468,523$ 10,767,106$ 11,984,116$ 11,906,871$ 11,029,141$ 10,379,489$ 8,844,751$ 8,657,982$ Utilities 3,224,653 3,118,336 3,191,548 3,122,233 2,894,032 3,739,917 3,874,631 3,558,767 4,053,959 3,199,573 General and Administration 4,594,881 3,836,600 3,614,145 3,060,621 2,646,080 3,673,599 3,347,052 3,564,800 3,970,737 3,691,293 Other 5,303,574 5,475,709 6,658,616 5,477,530 5,518,656 5,280,280 5,517,226 5,977,560 6,785,341 7,031,707 Total Operating Expenses 25,587,358$ 24,469,135$ 24,932,832$ 22,427,490$ 23,042,884$ 24,600,667$ 23,768,050$ 23,480,616$ 23,654,788$ 22,580,555$

Non-operating Expenses Depreciation/Amortization 9,549,807$ 10,158,793$ 9,645,068$ 9,419,173$ 9,263,777$ 8,912,081$ 8,757,792$ 8,626,400$ 8,471,500$ 7,714,100$ Interest/Other Expenses 3,272,198 3,232,231 3,949,375 4,022,480 4,043,707 3,951,887 3,773,599 4,050,097 4,078,221 4,544,558 Total Non-operating Expenses 12,822,005$ 13,391,024$ 13,594,443$ 13,441,653$ 13,307,484$ 12,863,968$ 12,531,391$ 12,676,497$ 12,549,721$ 12,258,658$

Total Expenses 38,409,363$ 37,860,159$ 38,527,275$ 35,869,143$ 36,350,368$ 37,464,635$ 36,299,441$ 36,157,113$ 36,204,509$ 34,839,213$

Change in Net Position 63,600,960$ 51,094,602$ 24,295,879$ 14,545,144$ 21,449,805$ 24,063,167$ 7,168,698$ 4,583,777$ 13,747,945$ 13,733,950$

Total Net Position, Beginning of Year 525,753,787$ 474,813,518$ 450,517,639$ 435,972,495$ 413,935,457$ 389,872,290$ 382,703,592$ 378,119,815$ 364,371,870$ 350,637,920$

Total Net Position, End of Year 589,354,747$ 525,908,120$ 474,813,518$ 450,517,639$ 435,385,262$ 413,935,457$ 389,872,290$ 382,703,592$ 378,119,815$ 364,371,870$

Source: Alexandria Renew EnterprisesNotes: (1)These totals are as previously reported. A prior period adjustment was required in 2013 which modified these amounts.

Condensed Statements of Revenues, Expenses and Changes in Net Position

68

Alexandria Renew Enterprises Statistical Section Revenue Capacity Information

Revenue capacity information is provided to assist users in understanding the factors affecting the Authority’s ability to generate sources of revenue. The Authority strives to cover operating and capital costs with user fees. User fees are set by the Board of Directors and are based upon the recommendation of a Rate Study designed to recover the Authority’s cost of service and capital cost. The most recent Rate Study was completed in 2010 and established user fees on October 1, 2010. User fees are comprised of three components including Wastewater Treatment Charge, the fixed rate Bay Protection Charge and the account service charge. The County of Fairfax customers are billed directly by Fairfax and the Authority bills a pro rata share of its operating expenses to the County. The Wastewater Treatment Charge is assessed to all customers based upon metered per gallon water usage, except that residential customers are assessed based upon a winter quarter average usage (per 1,000 gallons units). A residential customer, therefore, is billed at the greater of its winter quarter per gallon average usage or 9,000 gallons. Commercial customers are billed based on the actual amount of per gallon water usage. The Bay Protection Charge was assessed for the first time beginning on October 1, 2010, and is assessed as a fixed fee per quarter according to water meter size. The following table represents comparative user rate charges.

TABLE 3

Fiscal Year

Wastewater Treatment Usage

Charge* Service Charge**2014 $ 6.51 -$ 2013 6.36 - 2012 6.36 6.782011 6.36 5.272010 6.36 4.512009 6.11 4.42 2008 5.82 4.33 2007 5.39 4.25 2006 4.49 4.17 2005 4.06 4.17 2004 3.72 4.00

FY 2015 FY 2014Base Charge Monthly Quarterly

Residential Customers 8.38$ 25.15$

Commercial Customers Water Meter Size5/8" 25.15 75.45 3/4" 25.15 75.45

1" 62.87 188.62 1-1/2" 125.75 377.25

2" 201.20 603.59 3" 377.25 1,131.74 4" 628.74 1,886.23 6" 1,257.50 3,772.50 8" 2,892.25 6,036.00

*Based on 1,000 gallons of consumption.**Per BillSource: Alexandria Renew Enterprises

Last Ten Fiscal Years (in dollars)User Charges

69


TABLE 4

Name Type 2014 2013 2012 2011 2010 2009 2008 2007

Southern Towers Apartments 0.88% 1.13% 1.17% 1.01% 0.89% 1.10% 0.89% 1.03%Watergate at Landmark Condos 0.52% 0.57% 0.53% 0.52% 0.50% 0.46% 0.60% 0.60%The Seasons Condos 0.21% 0.22% 0.29% 0.28% - - 0.20% 0.28% 0.30%SBAF Apartments - - - - 0.27% 0.28% 0.26% 0.30% - - - - JBG Willow Run Condos 0.18% 0.22% 0.20% 0.27% - - 0.21% - - - - The 4600 Condomium Condos - - 0.23% - - 0.24% 0.22% 0.22% 0.22% 0.25%Alsco, Inc. Business - - - - 0.20% 0.22% 0.21% 0.24% 0.24% 0.20%Tower 2000 Apartments - - 0.23% 0.24% 0.20% 0.17% 0.17% 0.25% 0.20%Davidson Hotel Company Hotel - - 0.19% 0.17% 0.19% 0.20% 0.21% - - 0.20%Alexandria Hospital Hospital 0.19% 0.25% - - - - 0.19% 0.20% 0.24% - Cuisine Solutions Business - - 0.16% 0.17% - - - - - - - - 0.20%Alexandria Knolls West Condos - - - - - - 0.19% - - - - - - - - The Fountain Condominium Condos - - 0.17% 0.19% - - - - - - - - - - ARHA Municipal Govt 0.31% - - - - - - - - - - - - - - Home Properties Newport Village Apartments 0.26% - - - - LONDON PARK Apartments 0.23% - - - - - - - - - - 0.22% 0.20%LCOR Business - - 0.21% - - - - - - - - 0.22% - - Mid-Atlantic Coca-Cola Bottling Plant - - - - - - - - - - - - - - 0.27%AP EOS 21, LLC 0.47% - - - - - - - - - - - - - - AVENTINE OWNER LLC 0.25% - - - - - - - - - - - - - -

MG Usage 462,735 428,893 419,674 426,740 416,900 414,454 505,518 436,136 Other Customer Usage 12,750,383 12,383,798 11,886,963 12,262,774 12,967,482 12,089,326 12,316,911 12,193,864

Total Usage 13,213,118 12,812,691 12,306,637 12,689,514 13,384,382 12,503,780 12,822,429 12,630,000

Source: Alexandria Renew Enterprises

Ten Principal Customers by YearShown as Percentage of Revenue

70


Debt Capacity Information Debt capacity information is intended to assist users in understanding the Authority’s debt burden and the ability to issue new debt. The ultimate guarantors of the Authority’s debt are its customers.

TABLE 5

Outstanding Debt

# of Customers

Outstanding debt per

Customer

VRA Revolving Loan Fund & SRF 103,849,964$ 26,848 3,868.07$

VRA Pooled Financing Program 8,480,000 26,848 315.85$

Total 112,329,964$ 26,848 4,183.92$


Outstanding Debt Per CustomerSeptember 30, 2014

TABLE 6

2014 2013 2012 2011 2010 2009 2008 2007 2006 2005

Pledged revenue 48,566,053$ 48,810,644$ 43,569,090$ 44,233,175$ 42,346,197$ 41,725,443$ 39,711,941$ 37,744,581$ 32,331,770$ 31,796,011$

Operating expenses (25,587,358) (24,469,135) (24,932,832) (22,427,490) (23,042,884) (24,600,667) (23,768,050) (23,480,616) (23,654,788) (22,580,555)

Net revenues 22,978,695 24,341,509 18,636,258 21,805,685 17,892,349 17,155,201 16,102,270 14,418,452 8,827,285 9,353,571

Principal and Interest Requirements 10,797,633 10,507,144 10,924,517 11,182,678 10,159,813 9,588,780 9,139,498 8,728,160 8,642,050 8,705,511

Debt coverage 2.13 2.32 1.71 1.95 1.76 1.79 1.76 1.65 1.02 1.07


Pledged Revenue Coverage (1.40 Required)

71


Demographic and Economic Information Demographic and economic information is intended to assist users in understanding the socio-economic environment in which the Authority operates.

TABLE 7

Calendar Year Population Calendar Year Population

1950 61,787 2009 144,1001960 91,023 2010 139,9661970 110,938 2011 141,2871980 103,217 2012 144,3011990 111,183 2013 146,2942000 128,283 2014 148,892

Source: U.S. Bureau of Census, "General Population Characteristics"

Demographic StatisticsJune 30, 2013

Population

TABLE 8

PersonalIncome Per Capita

Fiscal Year ($100) Income2014 12,115,212$ -$ 2013 11,760,450 - 2012 10,758,922 80,952 2011 10,627,334 78,383 2010 10,441,443 76,362 2009 10,178,071 70,846 2008 10,204,006 72,220 2007 9,507,531 70,632 2006 8,835,057 65,141 2005 7,776,966 61,147

The BEA has revised these numbers.Source: U.S. Bureau of Economic Analysis (BEA), most recent Per Capita data is for 2012.

Population Indicators

72


Demographic and Economic Information (continued)

Table 9

Percentage of Percentage ofTotal City Total City

Employees(1) Employment(2) Nine Years Ago Employees(1) Employment(2)

LARGEST PUBLIC EMPLOYERS1,000 & over 3.41% U.S. Department of Defense 1,000 & over 10.00%1,000 & over 3.41% City of Alexandria 1,000 & over 2.50%1,000 & over 3.41% Alexandria Public Schools 1,000 & over 2.30%

2,538 2.88% WMATA (Metro) 1,000 & over 1.30%2,285 2.59% Northern Virginia Community College 500-999 1.10%

500-999 0.85% U.S. Department of Agriculture 500-999 0.70%500-999 0.85% U.S. Postal Service 250-499 0.40%

17.40% 18.30%

LARGEST PRIVATE EMPLOYERS1,000 & over 3.41% The Alexandria Hospital 1,000 & over 1.70%

500 - 999 0.85% Institute for Defense Analysis 1,000 & over 1.30%500 - 999 0.85% American Diabetes Association 500-999 1.00%500 - 999 0.85% Center for Naval Analysis 500-999 0.70%500 - 999 0.85% Boat Owners Association of the U.S. 500-999 0.60%250-499 0.43% Public Broadcasting System 500-999 0.60%250-499 0.43%

7.66% 5.90%

(1) Employment ranges are given to ensure confidentiality.(2) Percentages are based on the midpoint of employment range.

City of Alexandria Principal EmployersCurrent Year (as of July 1, 2014 and Nine Years Ago)

Current YearLARGEST PUBLIC EMPLOYERSU.S. Department of CommerceU.S. Department of DefenseWMATACity of AlexandriaAlexandria Public SchoolsNorthern Virginia Community CollegeU.S. Department of Agriculture

LARGEST PRIVATE EMPLOYERSINOVA Health System

Catholic Diocese of Arlington

Source: Virginia Employment Commission

ABM Janitorial Services M Inc.Institute for Defense AnalysisGrant Thornton LLPCNA CorporationOblon Spivak McClelland PC

Table 10

2014 4.6%2013 4.7%2012 4.6%2011 4.8%2010 4.8%2009 2.8%2008 2.9%2007 2.2%2006 2.6%2005 3.1%

Source: Virginia Employment Commission

City of Alexandria Unemployment RateLast Ten Years

73

Operating Information

Operating information is intended to provide information about the Authority’s operations.

TABLE 11

2014 2013 2012Process

Chief Maint/Ops, Facility Mgr, Ops Manager, Process Mgr 4 3 2Administrative Assistant 0 0 2Interceptors/Pump Stations/Chem Feed 10 11 12All Settling Tanks 0 0 0Operating Shift D 5 5 5Operating Shift B 6 5 5Engineering Programs Coordinator 0 0 1Maintenance Manager 1 1 10Thickening/Dewater/Prepast/Digestion 6 8 8BRB's/Blowers/UV 8 10 8Campus Controls 0 0 4Operating Shift C 5 5 5Operating Shift A 5 5 0Process Tech Candidates 0 0 2Planners/Schedulers 2 2 3Operating Shift E 1 0 0Apprentices 14 8 0

EngineeringEngr Program Director 1 1 0Engineering 4 4 1Information Systems 2 2 2Program Manager 1 1 1

Quality ServicesManager 0 0 1Quality Assurance 1 1 1Laboratory 5 5 6Environmental Programs Coordinator 0 0 0

FinanceChief Financial Officer 1 1 1Controller 1 1 1Senior/Staff Accountant 2 1 1Executive Assistant 1 1 1Purchasing Manager, Buyer, Contracts 3 2 3

Human ResourcesHuman Resources 3 3 4Safety Manager 1 1 1

AdministrationAdministration 5 5 3Customer Service 1 2 1

99 94 95


Number of Employees by ActivityYears Ended September 30

74

Operating Information (Continued)

Note: The amount of wastewater treated includes flow generated by City of Alexandria customers and portions of Fairfax County which is outside of the City. The amount of wastewater that flows outside the city (Fairfax) is metered and included in Table 12 above.

TABLE 12

Fiscal Year Customer Accounts MG Treated Fairfax - MG Treated2014 26,848 13,213 66982013 26,330 12,813 66332012 26,380 12,307 65342011 26,222 12,690 71342010 25,916 13,384 75182009 25,312 12,504 71092008 25,879 12,822 68262007 25,123 12,630 70202006 27,240 13,061 70922005 25,768 13,470 73002004 25,584 14,260 7876



Number of Customers and ConsumptionFor the Fiscal Year Ending September 30,

75

Operating Information (continued)

TABLE 13

Wastewater treatment capacity:Design Capacity 54 MGD (million gallons per day)

Asset: Capacity:

Four Mile Run Pump Station Pump Station Firm pumping capacity 11.3 MGDSlater's Lane Pump Station Pump Station Firm pumping capacity .75 MGDPotomac Yard Pump Station Pump Station Firm pumping capacity 9.5 MGDMark Center Pump Station Firm pumping capacity 1.6 MGD

Bush Hill Service Chamber Lift Station Firm pumping capacity .36 MGDJefferson at Carlyle Mills Service Chamber Lift Station Firm pumping capacity 1.0 MGD

Holmes Run Trunk Sewer Gravity Sewer Design Capacity 69.4 MGDCommonwealth Interceptor Gravity Sewer & Force Main Design Capacity 24 MGDPotomac Yard Trunk Sewer Gravity Sewer Design Capacity 11 MGDPotomac Interceptor Gravity Sewer Design Capacity 16 MGD

Alexandria City owns the collection system; Alexandria Renew Enterprises owns the interceptingsewer system, the pump stations and the treatment facility.



Wastewater Treatment Capacity and Infrastructure Assets OwnedFor the Fiscal Year Ending September 30, 2014

76

ALEXANDRIA RENEW ENTERPRISES 1500 EISENHOWER AVE. ALEXANDRIA, VA 22314 703-549-3381 WWW.ALEXRENEW.COM TWITTER: ALEXRENEWCEO FACEBOOK: ALEXANDRIA RENEW ENTERPRISES

http://www.alexrenew.com/

Documents

ALEXANDRIA RENEW ENTERPRISES 2014 Comprehensive … › system › files › filedepot › 4 › alexrenew_cafr_2014_final.pdf2014 Comprehensive Annual Financial Report . For the Years