CLEAN WATER SERVICES...CLEAN WATER SERVICES (A Component Unit of Washington County, Oregon) Comprehensive Annual Financial Report For the fiscal year ended June 30, 2013Combining Schedule

CLEAN WATER SERVICES (A Component Unit of Washington County, Oregon)

Comprehensive Annual Financial Report

For the fiscal year ended June 30, 2013

Prepared by:

Business Operations Department


Table of Contents

Page(s)

INTRODUCTORY SECTION:

Letter of Transmittal I Board of Directors and Principal Officer X GFOA Certificate of Achievement for Excellence in Financial Reporting XI Organizational Chart XII

FINANCIAL SECTION:

INDEPENDENT AUDITOR’S REPORT 1 - 3

MANAGEMENT’S DISCUSSION & ANALYSIS 4 - 15

BASIC FINANCIAL STATEMENTS: Statement of Net Position 16 Statement of Revenues, Expenses and Changes in Net Position 17 Statement of Cash Flows 18 Notes to Basic Financial Statements 19-40

REQUIRED SUPPLEMENTARY INFORMATION: Schedule of Funding Progress: - Other Post Employment Benefits 41

SUPPLEMENTAL INFORMATION:

COMBINING SCHEDULES: Combining Schedule of Net Position 42 Combining Schedule of Revenues, Expenses and Changes in Net Position 43 Combining Schedule of Cash Flows 44

BUDGETARY SCHEDULES:

Description of Budgetary Funds 45-46 Schedules of Revenues and Expenditures - Budget and Actual: General Fund 47 Storm and Surface Water Management Fund 48 Master Plan Update Debt Service Fund 49 Revenue Pension Bond Debt Service Fund 50 Liability Reserve Fund 51 Capital Expenditure Reserve Sanitary Sewer Fund 52 Sanitary Sewer LID Construction Fund 53 Surface Water Management LID Construction Fund 54 Sanitary Sewer Construction Fund 55 Tualatin Basin Water Supply Capital Project Construction Fund 56 Capital Expenditure Reserve Storm and Surface Water Management Fund 57 Surface Water Management Construction Fund 58 Reconciliation of Revenues and Expenditures (Budgetary Basis)

to Increase in Net Position (GAAP Basis) 59

CLEAN WATER SERVICES

(A Component Unit of Washington County, Oregon)

Table of Contents Page(s) STATISTICAL SECTION:

Description of Statistical Section 60 FINANCIAL TRENDS

Net Position by Component 61 Changes in Net Position 62 Operating Revenues by Source 63 Operating Expenses 64 Nonoperating Revenues and Expenses 65

REVENUE CAPACITY Monthly Sewer and Storm/Surface Water Rates 66 System Development Charges and Revenues 67 Ten Largest Individual Ratepayers 68

DEBT CAPACITY Ratios of Outstanding Debt by Type 69 Pledged Revenue Coverage 70-71

DEMOGRAPHICS & ECONOMICS Demographic Statistics 72 Major Employment Industries in Washington County 73

OPERATING Administrative, Support and Operational Staff FTE 74 Summary of Treatment Plant Capacities 75 Operating and Capital Indicators 76

AUDIT COMMENTS AND DISCLOSURES REQUIRED

BY STATE REGULATIONS 77-78

INTRODUCTORY

SECTION

November 27, 2013

To Board of Directors, Ratepayers and Interested Parties:

We are pleased to submit the Comprehensive Annual Financial Report of Clean Water Services (the District), a component unit of Washington County, Oregon, for the year ended June 30, 2013, together with the report thereon of the District’s independent auditors.

This report was prepared by Clean Water Services’ Business Operations Department in accordance with the provisions of Oregon Revised Statutes Chapter 297. District management assumes full responsibility for the accuracy of the data and the reliability of the presentations and all disclosures contained in this report. To provide a reasonable basis for making these representations, management of the District has established a comprehensive internal control framework that is designed both to protect the District’s assets from loss, theft, or misuse and to compile sufficient reliable information for the preparation of the District’s financial statements in conformity with the accounting principles generally accepted in the United States of America. Because the cost of internal control should not exceed anticipated benefits, the objective is to provide reasonable, rather than absolute, assurance that the financial statements are free of any material misstatements. We believe the data is accurate and complete in all material respects and that it presents fairly the financial position, results of operations and cash flows of the District for the year ended June 30, 2013. This report should be read in conjunction with Management’s Discussion and Analysis which begins on page 4.

Independent Audit

The provisions of Oregon Revised Statutes Chapter 297, known as the “Municipal Audit Law”, require that an independent audit of the District’s records be made within six months following the close of the fiscal year, with approved extensions. The auditors are appointed by the Board of Directors following a public competitive request for proposal process. The firm of Merina & Company, LLP has completed its fifth audit of the District’s financial statements which is incorporated into the financial section of this report.

The firm of Merina & Company, LLP has issued an unmodified opinion on the District’s financial statements for the year ended June 30, 2013. The independent auditor’s report is located at the front of the financial section of this report.

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Transmittal Letter To Board of Directors, Ratepayers and Interested Parties: (Continued)

DISTRICT PROFILE

Clean Water Services is a county service district, which, in close cooperation with cities within its service area, provides sanitary sewer and surface water management utility services for the urbanized portion of Washington County (County) and small portions of the City of Portland, the City of Lake Oswego, and Multnomah and Clackamas counties. Clean Water Services’ service area encompasses most of the developed part of the Tualatin River watershed, an area of approximately 123 square miles and more than 95 percent of Washington County’s population. Cities located within and served by the District are as follows: Banks, Beaverton, Cornelius, Durham, Forest Grove, Gaston, Hillsboro, King City, North Plains, Sherwood, Tigard, Tualatin, and small portions of Lake Oswego and Portland.

The District began operation as Unified Sewerage Agency of Washington County on February 4, 1970 after its formation was authorized by popular vote. On July 1, 1990 it assumed responsibility for surface water management. Effective June 5, 2001, Unified Sewerage Agency of Washington County changed its name to “Clean Water Services.” The name change was made to better reflect the roles and responsibilities for providing cost-effective, environmentally sensitive management of water resources in the Tualatin River Basin.

The Clean Water Services’ Board of Directors is comprised of the same individuals who are elected to the Board of County Commissioners of Washington County. Although Clean Water Services maintains a close working relationship with Washington County, the District is a separately managed and financed municipal corporation under Oregon Revised Statutes Chapter 451. Administration and management of the District is the responsibility of the General Manager, who is appointed by the Board of Directors. Under the criteria of the Governmental Accounting Standards Board (GASB), the District is considered a component unit of Washington County for financial reporting purposes.

Operational and technical input to the Board is provided by Clean Water Services’ Advisory Commission (CWAC), a Board-appointed commission of 15 members. Accounting Systems & Budgetary Control

Clean Water Services’ accounting records are maintained by fund on a modified accrual accounting basis for budgetary reporting purposes. For financial reporting purposes, the financial statements are presented on a full accrual basis.

The Board of Commissioners is required to adopt a final budget prior to the beginning of the fiscal year. This annual budget serves as the foundation of the District’s financial planning and control. The legal level of budgetary control is by fund and organizational unit or other specified category, in accordance with Oregon Revised Statutes Local Budget Law.

For budgetary and legal purposes, the activities are accounted for in the funds described below:

• General Fund - accounts for normal recurring sewerage operations (also referred to as the Operating Fund).

• Storm and Surface Water Management Fund - accounts for normal storm and surface water

management operations.

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• Master Plan Update Debt Service Fund - accounts for the redemption of bond principal and

interest. • Liability Reserve Fund - accounts for the District’s self-insurance programs. • Capital Expenditure Reserve Funds - (one each for Sanitary and Surface Water Management)

and Capital Replacement Funds - account for the recovery of capital costs for maintenance, upkeep and improvement of the systems.

• Tualatin Basin Water Supply Capital Project Fund – accounts for the transactions of the Tualatin Basin Water Supply Project, which is a joint project to provide additional water volume to enable continued compliance with water quality requirements.

• Sanitary Sewer (LID) Construction Fund, Surface Water Management (LID) Construction Fund,

and Sanitary Sewer and Surface Water Management Construction Funds - account for capital construction expenditures by the District, or for capital construction expenditures made for the benefit of property owners in the case of the Sanitary Sewer and Surface Water Management LID Construction Funds.

• Revenue Pension Bond Debt Service Fund - accounts for the payment of the Series 2004 Revenue Pension Bonds used to finance the District’s unfunded actuarial liability in Oregon’s Public Employees Retirement System.

ECONOMIC CONDITION AND OUTLOOK Washington County, the second most populous county in Oregon, continues to be one of the fastest growing counties in the state. The economy of the District's service area reflects a diversity of industries including agriculture, high technology, sports apparel and services. Major employment industries in Washington County include wholesale/retail trade (18%), professional and business services (15%), computer and electronic equipment manufacturing (11%), healthcare and social services (10%), government services (9%) and leisure and hospitality (8%). Developments in the global, national and local economic picture have had an impact on Washington County unemployment rates, which have fallen from a high of 10.1 percent in 2009 to a rate of 6.6 percent in June 2013. Although not immune from the recession, Washington County generated 17 percent of the new jobs in Oregon between 2009 and 2010 and per capita personal income is holding steady and showing signs of modest growth. Despite the current weakness in the economy, however, the region-wide population growth trend has remained steady. Although official population estimates for special districts are not available, Clean Water Services’ estimates the population of its service area at approximately 542,000. Population growth within the District’s service area has consistently outpaced population growth within the region over the past decade or more, and is expected to add an additional 250,000 people by 2030.

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LONG RANGE FINANCIAL PLANNING AND RELEVANT FINANCIAL POLICIES

To ensure Clean Water Services is poised for the future to respond to continued economic growth at affordable customer rates, District rate increases are planned to be regular, predictable and relatively affordable, with capital plans that are phased so that revisions can be made to improve operational efficiencies and respond to changes in customer demand. In concert with the above, fund balances shall be kept at levels that provide appropriate working capital, funding for operating contingencies and planned capital improvements, while ensuring favorable credit ratings and maintaining strong coverage ratios. Moreover, financial forecasts are conservatively constructed so the District does not overestimate concomitant revenue growth.

The District’s policies on rates and careful management of resources have allowed the District to limit estimated average annual combined residential sanitary sewer and surface water management fee increases for the last ten years to less than 4.06 percent.

MAJOR NEW AND ONGOING INITIATIVES

Investing in Watershed Health

Clean Water Services has spent more than 40 years pursuing a cohesive strategy to advance the health of the Tualatin River Watershed for 542,000 residents in 12 cities. Through innovation, scientific knowledge and creativity we work to improve environmental health and value for our customers. These efforts have paid dividends for water quality, public health, and our community—the Tualatin River is healthier than it has been in generations and has become a valued recreational asset.

Investing in Infrastructure, Public Health and the Environment

In the last 10 years, Clean Water Services and our partner Cities have invested more than $100 million to expand, replace and upgrade our community’s four wastewater treatment facilities, 40 pump stations, 832 miles of sewer lines, and 491 miles of storm sewers.

2012-13 Achievements

• Cleaned more than 25 billion gallons of wastewater. • Recycled 31 dry tons of biosolids a day on to agricultural fields in the Willamette Valley and

eastern Oregon to improve soil condition and crop production. • Monitored nearly 1,000 strict permit conditions at each treatment facility, including monthly,

weekly and daily limits established to protect the Tualatin River. • Swept more than 13,000 miles of streets; cleaned more than 15,500 catch basins and collected

material equivalent to 830 dump truck loads to keep pollutants out of our river and streams. • Issued 324 permits to new homes and businesses connecting to the sewer system.

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Investing in Public Involvement & Education

Clean Water Services reaches out to the community to encourage residents to join our efforts in protecting public health, enhancing the region’s environmental quality of life, and planning for the region’s water future.


• Since 2010, Clean Water Services has conducted nearly 6,000 online interviews with ratepayers to gauge public values and expectations of the District’s programs, policies, priorities, and performance.

• The award-winning Tualatin River Rangers program reached 4,190 students and an estimated 8,300 adults at nearly 60 percent of the elementary schools in the Tualatin Basin.

• Nearly 32,000 Clean Water Connection electronic newsletters were sent to subscribers with tips and information on watershed protection and enhancement, proper disposal practices, and community events.

• Almost 1,000 people from around the world toured Clean Water Services treatment facilities to learn how wastewater is cleaned at a higher level than 98% of the nation’s facilities.

Investing in Resource Recovery

Wastewater treatment have transformed over the last decade, moving from waste disposal to a growing recognition as resource recovery facilities that produce clean water, recover valuable nutrients, and produce clean, renewable energy. Clean Water Services is on the leading edge of this transformation:


• Provided 52 million gallons of irrigation water to more than 250 acres of athletic fields, golf courses and parks from the Durham Advance Wastewater Treatment Facility.

• The Durham and Rock Creek Resource Recovery Facilities recycled phosphorus and ammonia to produce 320 tons of Crystal Green® fertilizer for sale to the commercial nursery and turf industry.

• Generated 11 million kWh of renewable energy by capturing digester gas from the Rock Creek and Durham facilities to meet 15 percent of the District’s electrical demands.

• Launched Clean Water Grow™, a slow-release fertilizer that helps reduce nutrient runoff to waterways by gently releasing nutrients as plants use them. It’s Clean Water Services’ opportunity to provide ratepayers with a product—a critical part of which is harvested from our treatment plants—that can help further reduce the amount of phosphorus runoff into streams. The fertilizer is offered at a discounted rate for ratepayers as a dividend on the innovation investment they have made in building the nation’s most advanced resource recovery facilities at the Durham and Rock Treatment Facilities.

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Investing in Science

Together with the USGS, DEQ and the Washington County Watermaster, Clean Water Services has conducted comprehensive water quality and flow monitoring of the Tualatin River and its tributaries for more than two decades. This integrated monitoring program has allows water resource managers to be more responsive to the needs and potential of the watershed.


• The Water Quality Laboratory collected more than 40,000 treatment plant, surface water and industrial samples and performed nearly 185,000 chemical, biological and physical analyses to assure the health and safety of Tualatin River watershed and its residents.

• Working with the Watermaster and consultants, Clean Water Services managed and maintained more than 30 stream flow gauging stations to continuously measure the flow in the Tualatin River, Dairy, Fanno, Rock, Bronson, Beaverton, Gales, Chicken, and many other Tualatin River tributaries.

• Monitored more than two dozen water quality parameters at 30 sites on the Tualatin River and its tributaries on a twice per month basis.

• Worked with the USGS to gather continuous, real-time water quality data in the Tualatin River and major tributaries.

Investing in Community and Building Partnerships

Clean Water Services is building innovative partnerships to create a shared vision and strategy to advance the health of the Tualatin River Watershed:


• Working with the Tualatin Conservation District over 32 miles of stream corridors have been restored in active agricultural areas. This works provides temperature, water quality and habitat benefits along sensitive tributaries of the Tualatin River.

• As a founding member of the Intertwine Alliance, Clean Water Services worked closely with a broad coalition of public agencies, private businesses and nonprofits to develop the region’s first comprehensive Conservation Strategy. .

• Working with our City, non-profit and agricultural partners, planted more than 750,000 native trees and shrubs along streams, wetlands and the river to filter pollutants, provide shade and create riparian habitat.

Controlling Costs

Clean Water Services continues to focus on reducing the long-term operating costs of the utility through innovation, using new technology and reorganizing the workforce.


• Eliminated 7.8 full-time positions since 2010. • Reduced the number of employees per customer served by more than 35 percent from a high

of 9 employees per 10,000 residents in 1998 to less than 6 employees per 10,000 today.

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Regulatory Climate

In February 2004, the Oregon Department of Environmental Quality (DEQ) issued Clean Water Services the nation’s first integrated, municipal, watershed-based permit under the Clean Water Act. This innovative permit integrates the District’s four municipal wastewater treatment facilities and the municipal stormwater system permits into an integrated bundle, which changes the regulatory framework to allow the District greater flexibility to take advantage of creative approaches and new solutions, such as the following:

• Water quality credit trading between the Rock Creek Advanced Waste Water Treatment Plant (WWTP) and the Durham Advanced WWTP for various parameters.

• Water quality credit trading for thermal loads between treatment facilities and the release of stored water from Hagg Lake and Barney Reservoirs.

• Water quality credit trading for thermal loads between treatment facilities and streamside shading improvements outside and inside the District’s service boundary.

• Establishes performance benchmarks for the stormwater management activities of the District, its partner cities and Washington County as a whole.

• Consolidation of regulatory reporting requirements.

The watershed-based permit expired in 2009 and is on administrative extension, pending renewal by DEQ. The District is working to extend the advantages of the integrated elements for protecting and enhancing the watershed in the renewed permit. Regulatory changes, including new, more stringent water quality standards for the protection of human health, more aggressive stormwater management requirements, and the stricter controls on wet weather flow management will pose new challenges to the District in maintaining regulatory compliance and meeting the overall ecological objectives for the Tualatin basin.

Securing Water for the Future - Tualatin Basin Water Supply Project

The Tualatin Basin Water Supply Partners continue to work with the U.S. Bureau of Reclamation and Congress to secure Scoggins Dam/Hagg Lake and meet the region’s long term water needs. Hagg Lake—a federal facility—is Washington County’s primary water source and a central component to region’s water supply system. Hagg Lake provides drinking water to 400,000 residents; irrigates 17,000 acres of farmland; and is central to Clean Water Services ability to meet the community’s environmental goals and obligations under the Clean Water Act. In addition to Reclamation, the local partners include Clean Water Services, the Tualatin Valley Irrigation District, Cities of Hillsboro and Beaverton and other repayment contractors. The Scoggins Dam project emerged as a priority in the President’s FY 2012 budget and was also included in FY 2013 and the proposed FY 2014 budgets. The Partners have secured nearly $2 million in federal funding to support their ongoing efforts.

Water Quality Requirements

The Environmental Quality Commission (EQC) has adopted Total Maximum Daily Loads (TMDLs) for phosphorus and ammonia-nitrogen in the Tualatin River to protect water quality and restore impaired beneficial uses of the river. The TMDLs define the quality of effluent that the District’s treatment plants may discharge to the Tualatin River. Limits are the most restrictive during the dry weather season. The TMDL structure targets in-stream concentration for phosphorus and maintaining

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adequate dissolved oxygen in the river. Hydraulic loading and mass limits affect compliance during peak wintertime flows.

Limits set on the Durham and Rock Creek Wastewater Treatment Plants’ effluent are some of the most stringent in the United States for phosphorus and ammonia-nitrogen. As a result, the District currently provides a higher level of wastewater treatment than 98 percent of the treatment facilities in the nation.

User Charges Clean Water Services’ Board of Directors is authorized by state law to set fees and charges for connection to, and use of, the public sewer system and connection to, and/or use of, the public facilities and public services related to surface water management, including storm water drainage. The District is 100 percent fee and charge supported. The District bills for all residential and non-industrial commercial customers in the unincorporated areas and in the smaller “franchise” cities of North Plains, Banks, Gaston, Durham, and King City. The cities of Beaverton, Tigard, Hillsboro, Tualatin, Forest Grove, Cornelius and Sherwood bill for services to residential and non-industrial commercial customers within their respective corporate limits and remit a portion of fees collected to the District by agreement. The cities of Portland and Lake Oswego bill residential and non-industrial customers within the District’s service area and remit a portion of fees collected to the District by agreement. The District directly bills all industrial permit holders. Clean Water Services establishes a basic schedule of rates and charges annually, and the Cities of Beaverton, Tigard, Hillsboro, Tualatin, Forest Grove, Cornelius and Sherwood bill according to District developed schedules. These seven largest cities may also approve additional supplemental charges. The Cities of Portland and Lake Oswego may bill at different rates but remit funds for District customers based on District rates. The monthly billing rate for residential and commercial sewer customers is calculated by adding a consumption component to a base rate component. The District’s average residential, commercial and industrial sewer rates for fiscal year 2013 increased by approximately 3.7 percent from fiscal year 2012.

Industrial customers are billed for domestic wastewater flows in a manner that is essentially identical to the process outlined above for residential and other non-industrial customers. Industrial and commercial customers with high-waste flows and high-strength wastes are monitored for permit compliance (including onsite pretreatment) and billed based on four components: volume, biochemical oxygen demand, suspended solids, and customer service.

Surface Water Management (SWM) fees are based on measured impervious surface areas, including roofs, paved areas such as parking lots and roads, and charged against an average residential measurement (2,640 square feet) or equivalent service unit (ESU). The rate charged for SWM services is $5.75 per month per ESU, an increase of 9.5% or $.50 per month to the average residential customer’s bill from fiscal year 2012. Residences are typically charged a flat 1.0 ESU rate.

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AWARDS

The Government Finance Officers Association of the United States of America and Canada (GFOA) awarded a Certificate of Achievement for Excellence in Financial Reporting to Clean Water Services for its Comprehensive Annual Financial Report (CAFR) for the fiscal year ended June 30, 2012. This was the 26th consecutive year that the District has achieved this prestigious award. In order to be awarded a Certificate of Achievement, a government must publish an easily readable and efficiently organized CAFR. The report must satisfy both generally accepted accounting principles and applicable legal requirements.

A Certificate of Achievement is valid for a period of one year only. We believe that our current CAFR continues to meet the Certificate of Achievement Program’s requirements and we are submitting it to the GFOA to determine its eligibility for another certificate.

In addition, the District’s Adopted Budget Document for the Fiscal Year 2012-13 received the Distinguished Budget Presentation Award from GFOA. This was the 25th consecutive year that the District has achieved this prestigious award. In order to qualify, the budget document must be judged proficient as a policy document, a financial plan, an operations guide and a communications device.

ACKNOWLEDGMENTS

Clean Water Services would like to thank the entire Finance Team whose professionalism, dedication and efficiency are responsible for the preparation of this report.

The District closes with a word of thanks for the continuing support of the Board of Directors in providing District staff with the tools necessary to assist in the careful stewardship of public resources.

Respectfully submitted,

Bill Gaffi General Manager

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Diane Taniguchi-Dennis Deputy General Manager

Mark Poling Business Operations Director

Clean Water Services (A Component Unit of Washington County, Oregon)

Governing Body in accordance with ORS 451.485

Board of Directors

Washington County, Oregon 155 North First Avenue Hillsboro, OR 97124

Directors as of June 30, 2013

ELECTED: Term Expires

Andy Duyck, Chairman December 31, 2014 Dick Schouten, District 1 Director December 31, 2016 Greg Malinowski, District 2 Director December 31, 2014 Roy Rogers, District 3 Director December 31, 2016 Bob Terry, District 4 Director December 31, 2014

APPOINTED: Bill Gaffi, General Manager

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District Organization Chart

Laboratory Services Division

Treatment Plant Services Division

Finance & Accounting

Information Technology

Government & Public Affairs

Human Resources

Risk & Benefits

Wastewater Treatment

Department

Conveyance Systems

Department

Field Operations Division

Engineering Services Division

Operations Division

Mechanical Maintenance

Division

Source Control

Legal

Fleet & Purchasing

Watershed Management Department

Business Services Department

Clean Water Services Customers

Board of DirectorsClean Water

Services Advisory Commission

General Manager

Deputy General Manager

Regulatory Affairs Department

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FINANCIAL SECTION

INDEPENDENT AUDITOR’S

REPORT

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5499 AMY STREET • WEST LINN, OREGON 97068 • PHONE: (503) 723-0300 • FAX: (503) 723-9946 WWW.MERINACPAS.COM

INDEPENDENT AUDITOR’S REPORT

Board of Commissioners

Clean Water Services (A component unit of Washington County, Oregon) Hillsboro, Oregon

We have audited the accompanying financial statements of Clean Water Services, a component unit of Washington County, Oregon (the District) as of and for the year ended June 30, 2013, and the related notes to the financial statements, which collectively comprise the District’s basic financial statements as listed in the table of contents.

Management’s Responsibility for the Financial Statements

Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.

Auditor’s Responsibility

Our responsibility is to express opinion on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.

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PARTNERS

KAMALA K. AUSTIN, CPA • TONYA M. MOFFITT, CPA

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We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Opinion

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the business-type activities of the District, as of June 30, 2013, and the respective changes in financial position and cash flows thereof, for the year then ended in accordance with accounting principles generally accepted in the United States of America.

Other Matters

Required Supplementary Information

Accounting principles generally accepted in the United States of America require that the management’s discussion and analysis and required supplementary information, as listed in the table of contents, be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board, who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the management’s discussion and analysis in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management’s responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance.

The required supplementary information, as listed in the table of contents, is the responsibility of management and was derived from and relate directly to the underlying accounting and other records used to prepare the financial statements. The information has been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the information is fairly stated in all material respects in relation to the basic financial statements as a whole.

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Other Information

Our audit was conducted for the purpose of forming opinion on the financial statements that collectively comprise the District’s basic financial statements. The introductory section, supplementary information, and statistical section are presented for purposes of additional analysis and are not a required part of the basic financial statements.

The supplementary information is the responsibility of management and was derived from and relate directly to the underlying accounting and other records used to prepare the financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the information is fairly stated, in all material respects, in relation to the basic financial statements as a whole.

The introductory and statistical sections have not been subjected to the auditing procedures applied in the audit of the basic financial statements and, accordingly, we do not express an opinion or provide any assurance on them.

Other Reporting Required by Oregon Revised Statutes

In accordance with Minimum Standards for Audits of Oregon Municipal Corporations, we have also issued our report dated November 27, 2013, on our consideration of the District’s internal control over financial reporting and on tests of its compliance with the provisions of Oregon Revised Statutes as specified in Oregon Administrative Rules OAR 162-10-000 to 162-10-320. However, providing an opinion on compliance with those provisions was not an objective of our audit and, accordingly, we do not express such an opinion.

Merina & Company, LLP West Linn, Oregon November 27, 2013

MANAGEMENT’S

DISCUSSION

AND ANALYSIS

CLEAN WATER SERVICES A Component Unit of Washington County, Oregon

MANAGEMENT’S DISCUSSION AND ANALYSIS Fiscal Year Ended June 30, 2013

As management of Clean Water Services (the District), a component unit of Washington County, Oregon, we offer readers of the District’s financial statements this narrative overview and analysis of the financial activities for the fiscal year ended June 30, 2013. We encourage readers to consider the information presented here in conjunction with additional information that we have furnished in our letter of transmittal (which can be found on pages I-IX of this report), and in the financial statements and notes to the basic financial statements (which immediately follow this discussion).

Financial Highlights

• The assets of the District exceeded its liabilities at the close of the fiscal year by $567.9 million (net position). Of this amount, $79.6 million represents unrestricted net position, which may be used to meet the District’s ongoing obligations to ratepayers and creditors.

• The District’s total net position increased by $45.3 million during fiscal year 2013, mainly due to net proceeds from current year operations and capital contributions from developers.

• The District’s total net capital assets increased $9.6 million primarily due to capital assets constructed and purchased in the current year totaling $51.8 million, and contributions of infrastructure systems and easements by developers totaling $4.3 million less District contributions of capital assets and loss on disposal totaling $6.7 million and current year depreciation and amortization of $39.8 million.

• Debt service coverage for senior and subordinate debt was 3.04 and 7.30 respectively, which exceeded the 1.2 and 1.1 required by the bond covenants.

• Operating revenues total $117.1 million, an increase of $10.1 million. This is primarily attributed to a rate increases for sanitary and storm service charges during the year.

• Operating expenses total $94.1 million, an increase of $3.5 million. The primary contributing factor is the increase in labor and fringe benefits.

• Long-term debt decreased by $24.1 million due to payment of outstanding bonds in the amount of $22.6 million. The District had $273.4 million in net debt outstanding at year-end.

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MANAGEMENT’S DISCUSSION AND ANALYSIS (Continued) Fiscal Year Ended June 30, 2013

Overview of the Financial Statements

This discussion and analysis is intended to serve as an introduction to Clean Water Services’ basic financial statements. The basic financial statements consist of the Statement of Net Position, Statement of Revenues, Expenses and Changes in Net Position, Statement of Cash Flows and Notes to Basic Financial Statements. The notes explain in more detail some of the information in the financial statements.

Financial Statements

The Statement of Net Position includes all of the District’s assets and liabilities and provides information about the nature and amounts of investments in resources (assets) and the obligations to the District’s creditors (liabilities). They also provide the basis for computing rate of return, evaluating the capital structure of the District and assessing the liquidity and financial flexibility of the District.

All of the current year’s revenues and expenses are accounted for in the Statement of Revenues, Expenses and Changes in Net Position. This statement measures the success of the District’s operations over the past year and can be used to determine whether the District has successfully recovered all its costs through its user fees and other charges, and its profitability and credit worthiness.

The last financial statement is the Statement of Cash Flows. The primary purpose of this statement is to provide information about the District’s cash receipts and cash payments during the reporting period. The statement reports cash receipts, cash payments and net changes in cash resulting from operations, investing and financing activities and provides answers to such questions as where did the cash come from, what was the cash used for and what was the change in cash balance during the reporting period.

Clean Water Services maintains two operations, Sanitary Sewer and Surface Water Management (SWM), which the District accounts for and discloses separately in the Combining and Individual Schedules on pages 42–44 of this report. These statements offer short and long-term financial information about the activities of the two operations.

Notes to Basic Financial Statements

The notes provide additional information that is essential to a full understanding of the data provided in the government-wide statements. The Notes to Basic Financial Statements can be found on pages 19-40 of this report.

Other Information

In addition to the basic financial statements and accompanying notes, this report also presents certain required supplementary information concerning the District’s other post-employment health benefits and budgetary comparisons. Required supplementary information can be found on page 41 of this report.

5



Financial Analysis

Financial Position

As noted earlier, net position over time, may serve as a useful indicator of financial position. In the case of Clean Water Services, assets exceeded liabilities by $567.9 million at the close of the most recent fiscal year, an increase of $45.3 million over the prior year. The table below provides a summary of net position at fiscal year-end.

Net Position(in Thousands)

2013 2012 Amount %

ASSETSCurrent assets $ 218,945 $ 210,564 $ 8,381 4.0%Noncurrent assets Capital assets, net 623,314 613,721 9,593 1.6% Investment in joint venture 2,721 2,799 (78) -2.8% Other noncurrent assets 16,291 15,431 860 5.6%

Total assets 861,271 842,515 18,756 2.2%

LIABILITIESCurrent liabilities 33,575 45,914 (12,339) -26.9%Noncurrent liabilities 259,740 273,975 (14,235) -5.2%

Total liabilities 293,315 319,889 (26,574) -8.3%

NET POSITIONInvested in capital assets

net of related debt 391,886 388,941 2,945 0.8%Restricted 96,440 68,909 27,531 40.0%Unrestricted 79,630 64,776 14,854 22.9%

Total net position, end of year $ 567,956 $ 522,626 $ 45,330 8.7%

Change

6



Net Position

By far the largest portion of Clean Water Services’ net position (69 percent) reflects its investment in capital assets (e.g., treatment facilities, collection and conveyance systems, land, sewer lines, stormwater management improvements, buildings, plant and office equipment and automotive equipment), less any related outstanding debt used to acquire or construct those assets. Clean Water Services uses these capital assets to provide services to ratepayers; consequently, these assets are not

available for future spending. Although Clean Water Services’ investment in capital assets is reported net of related debt, it should be noted that the resources needed to repay this debt must be provided from services to customers (ratepayers) or other sources, since the capital assets themselves cannot be used to liquidate these liabilities.

An additional portion of Clean Water Services’ net position (17 percent) represents resources that are subject to external restrictions on how they may be used. These restricted net assets include System Development Charges (SDC’s) collected from District customers when they connect to the sanitary sewer system to pay the cost of infrastructure expansion as needed to meet demands of population growth and to share cost burdens with existing customers for collection and treatment systems already built, funds restricted for debt service, and funds restricted for capital asset construction.

The remaining balance of unrestricted net position ($79.6 million or 14 percent) may be used to meet the District’s ongoing obligations to ratepayers and creditors.

7



8

Results of Operations

In addition to the analysis of net assets provided above it is useful to analyze the financial operations that took place during the year. The following table provides a summary of the changes in net position:

2013 2012 Amount %

REVENUES

Operating revenues:

Service fees $ 110,305 $ 101,258 $ 9,047 8.9%

Amortization of prepaid bond premium 1,745 1,679 66 3.9%

Other revenues 5,048 4,092 956 23.4%

Total operating revenues 117,098 107,029 10,069 9.4%

Nonoperating revenues:

Interest income 517 1,562 (1,045) -66.9%

Total revenues 117,615 108,591 9,024 8.3%

EXPENSES

Operating expenses 94,068 90,554 3,514 3.9%

Nonoperating expenses:

Interest 8,241 7,050 1,191 16.9%

Loss on disposal of capital assets 3,774 115 3,659 3181.7%

Loss on equity in joint venture 77 73 4 5.5%

Capital Donations 2,845 922 1,923 208.6%

Total expenses 109,005 98,714 10,291 10.4%

Income before contributions 8,610 9,877 (1,267) -12.8%

Capital contributions 36,720 15,217 21,503 141.3%

Increase in net assets 45,330 25,094 20,236 80.6%

Net position, beginning of period 522,626 497,532 25,094 5.0%

Net position, end of period $ 567,956 $ 522,626 $ 45,330 8.7%

Change

Changes in Net Position

(in Thousands)



Revenues

Total revenues for FY 2013, including operating revenues, nonoperating revenues and contributed capital, totaled $154.3 million, an increase of approximately 24.6% over FY 2012. This increase in total revenues was primarily due to an increase of $21.5 million in capital contributions and $9 million in service fees due to utility rate increases for both sewer and storm services.

Sanitary & SWM Service Charges: Operating revenue consists mainly of user charges for sewage and storm service fees. Monthly service charge revenues increased by 8.9%, totaling $110.3 million. This

increase was primarily related to the sanitary sewer rate increase of 3.7% and a corresponding rate increase for the SWM service charge of 9.5% along with customer growth.

Capital Contributions: This revenue source includes System Development Charges (SDC’s), developer donated

infrastructure, donated easements and third party contributions for District projects. Capital contributions totaled $36.7 million, an increase of $21.5 million, or 141% compared to the prior year, mainly due to an increase in SDC’s collected over $20 million, or 168.9% with increased development and purchased temporary capacity by City of Portland to meet Fanno Creek Pump Station flow discharge needs.

Other Income: This revenue source includes all other fees, grant revenues, subsidy payments and refunds. Other income increased by $1.0 million, or 17.7%. In FY 2013, the Districted collected over $0.7 million from Energy Trust of Oregon for energy cost savings, which was a one-time revenue source for the District.

Investment Income: Investment income totaled $0.5 million in 2013, a decrease of $1.0 million compared to 2012, attributed to relatively flat interest rates and investment valuation losses at year-end.

9



Expenses

Total expenses for FY 2013, including operating expenses, non-operating expenses and donated capital, totaled $109 million, an increase of approximately 10.4% over FY 2012.

Operating costs increased by $3.5 million or 3.9%. This increase was due primarily to an increase in depreciation and amortization expense by $2.6 million in FY 2013 as assets were put into service and transitioned from Construction-in-Process, which decreased by $28.9 million during FY 2013. All other operating costs including supplies and services were relatively flat or decreased during the year.

Non-operating costs increased by $6.8 million or 83%. Bond debt service interest expense increased by $1.2 million mainly due to a full year’s debt service payments on the Series 2011A and 2011B debt issued in August 2011, loss on disposal of assets increased by $3.7 million due to the write-off of costs related to the Tualatin Basin Water Supply Study as main partners and water purveyors including City of Hillsboro and Tualatin Valley Water District transition to a plan to meet future water needs from the Willamette River, and capital donations to others increased by $1.9 million. Capital donations include project costs incurred by the District on joint construction projects with other local jurisdictions. Once the project is complete, the asset is donated to the jurisdiction that owns the asset and will continue to maintain it.

The District’s financial condition remains strong, with adequate liquid assets for ongoing operations, treatment plants and collection systems functioning at a level necessary to meet demand and a reasonable level of unrestricted net position. The current financial condition, support staff capabilities and Operating and Capital Improvement Plans (CIP) needed to meet anticipated growth within the service area are well balanced and under control.

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Capital assets

As of year-end, the District has $623.3 million (net of accumulated depreciation and amortization) invested in capital assets, as reflected in the table below. Capital assets include treatment facilities, collection and conveyance systems, land, sewer lines, stormwater management improvements, buildings, plant and office equipment, automotive equipment and intangible assets including easements and patents. Total additions to capital assets from current year activity, before depreciation and amortization, were $51.8 million. The net change in capital assets from current year activity was an increase of $9.6 million over FY 2012.

2013 2012 Amount %

Land $ 15,654 $ 12,720 $ 2,934 23.1%Easements 1,690 933 757 81.1%Construction in progress 91,360 120,242 (28,882) -24.0%Buildings and improvements 27,475 27,844 (369) -1.3%Land improvements 69,765 72,150 (2,385) -3.3%Treatment plants 249,989 209,235 40,754 19.5%Sewer lines 136,241 135,222 1,019 0.8%Plant equipment 26,607 29,289 (2,682) -9.2%Automotive equipment 1,536 1,609 (73) -4.5%Plans and studies 1,971 3,532 (1,561) -44.2%Office equipment 881 945 (64) -6.8%Temporary Easements 63 - 63 - Patents 82 - 82 - Total capital assets $ 623,314 $ 613,721 $ 9,593 1.6%

Change

Capital Assets(Net of Depreciation and Amortization)

(in Thousands)

11



Major capital additions during FY 2013 included the following:

Additional information on Clean Water Services capital assets can be found in note 4 on page 27 of this report.

Rock Creek Tertiary West-East Pipeline $ 10,676,102 Rock Creek Operatons & Maint. Bldg 5,822,641 Forest Grove Treatment Wetland 3,165,190 Noth Plains Gravity & Force Main 2,996,128 N Hillsboro Land Acquisition 2,464,017 Durham Phase 5D New Cogen 2,665,811 Metzger Trunk-Phase II 2,393,417 S Hillsboro Inflow & Infiltration Abatement 1,629,556 Hillsboro UV Light Disinfection System 1,401,819 North Plains Pump Station & Forcemain 1,352,123 Rock Creek Digester & Gravity Thickner 1,268,547 89th & Spruce Sanitary System Storage Facility 795,495 Kinnaman Rehab Phase II 714,879 Durham Solids Bldg Odor Control 798,411 Bethany Area Sewer Project 782,656 West Basin Facility Plan 563,593

$ 39,490,385

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Long-term debt

Debt outstanding at year-end is summarized in the table below. Revenue bonds, which are the District’s principal source of debt financing, are paid from sanitary sewer system operating revenues.

As of year-end, the District had total net bonded debt outstanding of $273.4 million versus $297.5 million at the end of fiscal year 2012, and of that amount $13.3 million is due within one year. The District made the final payment on the 1997 Series A and 1997 Series One bonds payable during fiscal year 2013, which results in a lower debt service payment in fiscal year 2014. All of this debt (i.e., revenue bonds) is secured solely by specified revenue sources of the sanitary sewer operations.

Sewer revenue bonds are expected to be the preferred debt instrument for the District. The next bond issue is scheduled for fiscal year 2015. The District’s revenue bonds issued in August 2011 received excellent bond credit ratings of AA (Standard & Poors) and Aa2 (Moody’s). Historically, District bond credit ratings have been enhanced by funding required debt service reserves with bond surety insurance policies. District bond surety providers experienced significant credit rating downgrades in recent years, which created the need to fund debt service reserve requirements on the District’s most recent issues with cash from bond proceeds. This change in practice will also enhance the District’s capacity to market future bond issues.

Additional information on Clean Water Services long-term debt can be found in note 6 on pages 28-31 of this report.

2013 2012 Amount %

Sewer revenue bonds $ 258,223 $ 282,017 $ (23,794) -8.4%Revenue pension bonds 15,215 15,480 (265) -1.7%

Total $ 273,438 $ 297,497 $ (24,059) -8.1%

Change

Long-term Debt(Net of Premiums, Discounts, and Deferred Amounts on Refunding)

(in Thousands)

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Economic Factors and Next Year's Budgets and Rates

• The adopted budget for 2014 reflects a 3% increase in operating expenses. This increase is primarily due to increased labor costs of $1.7 million or 5.1%, which reflects two year of wage increases. During the previous budget cycle the District was involved in collective bargaining negotiations with the Union and did not increase wages in the FY 2013 budget, therefore, the increase includes approximately $.7 million in wages and payroll costs for the prior year. The budget also reflects an increase in payments to the Public Employee Retirement System (PERS) of approximately $1.0 million based on new rates issued by PERS effective July 1, 2013. After approval of the fiscal year 2014 budget, the Oregon State Legislature approved Senate Bill 822 which lowered the District’s anticipated PERS costs for FY 2013-14. Materials and services remained relatively flat over the prior year and capital outlay increased by $82,000 or 26.9% for equipment purchases.

• Budgeted positions for fiscal year 2014 increased by 1.5 FTE, or .5% from the prior year.

• Adopted sanitary sewer fee rates increased by 3% for fiscal year 2014. This will add an estimated $1.13 per month to the average residential customer’s bill. Storm water maintenance fees are increasing by 8.7%, which will add an estimated 50 cents per month to the average residential customer’s bill.

• The District has budgeted for an estimated $53.6 million in new sanitary sewer system improvements and $3.3 million in new surface water management system improvements in FY 2014. These investments are planned to increase system capacity, meet regulatory requirements for water quality, and enhance overall watershed health.

• The adopted budget for FY 2014 reflects a reduction in debt service of approximately $10.1 million to just under $26.1 million in total. Two Series 1997 bonds reached maturity during the prior budget year leading to a reduction in debt service.

All of these factors were considered in preparing Clean Water Services’ budget for the 2014 fiscal year.

The District annually prepares a 10-year financial outlook that incorporates capital improvement planning (CIP) with operational planning. The 10-year CIP plans are developed using new project requests and updates to the status of existing projects. The CIP plans are developed by division and program managers and reviewed with recommendations as to projects needing funding incorporated into the financial forecast. Project spending is then matched with either cash reserves or debt financing. Depending upon the reserves needed, the financial plan then becomes a model of integrating productivity improvements, growth projections, rate increases, debt restructuring and debt financing of capital. The first year of the CIP becomes the basis for the next year’s budget with respect to investments in capital improvements.

The current 10-year forecast projects that estimated future sanitary operating revenues will safely cover operating expenses and all current and future debt service requirements. The current 10-year

14



forecast for SWM operations indicates ending reserves will slowly increase if the District caps SWM capital expenditures at $2.0 million per year through FY 2015 with modest annual increases going forward and continues to increase the SWM rates annually consistent with the recent trending at $0.50 per ESU. The District will continue to evaluate the need for capital expenditures and options for funding costs in the future.

Requests for Information

The financial report is designed to provide a general overview of Clean Water Services’ finances for all those with an interest in the District’s finances. Questions concerning any of the information provided in this report or requests for additional information should be addressed to the Business Operations Department Director, Clean Water Services, 2550 SW Hillsboro Highway, Hillsboro, Oregon 97123.

15

BASIC

FINANCIAL STATEMENTS

Current assets:$ 58,130,038

16,416,472 961,856 583,673 124,092 51,070 183,543 582,590

Current assets ‐ unrestricted 77,033,334

139,932,836 1,557,809

42,916 378,600

Current assets ‐ restricted 141,912,161

Total current assets 218,945,495

Noncurrent assets:

Land 15,654,246 Permanent easements 1,689,641 Construction in progress 91,359,833

514,465,533 Intangible assets, net of accumulated amortization 145,230

Net capital assets 623,314,483

2,721,399 11,375,830

Prepaid expense 521,613 1,619,793 286,441

1,330,957 204,280 663,654 287,769

Total noncurrent assets 642,326,219

Total assets $ 861,271,714

Current liabilities:$ 3,557,781

4,021,034 10,500

2,991,427 14,501,611

Current liabilities ‐ payable from unrestricted assets 25,082,353

8,409,007 83,278

Current liabilities ‐ payable from restricted assets 8,492,285

Total current liabilities 33,574,638

Noncurrent liabilities:258,936,821

553,343 250,000

Total noncurrent liabilities 259,740,164

Total liabilities 293,314,802

Net position:391,885,915

Restricted for:82,691,852 13,749,048

Unrestricted 79,630,097

Total net position 567,956,912

Total liabilities and net position $ 861,271,714

Receivable from City of HillsboroReceivable from Washington CountyReceivable from City of Forest GroveReceivable from Clean Water Institute

Bonds payable, net

Accounts payableAccrued payrollAccrued self insurance

Liabilities and Net Position

Accrued self insurance

Net investment in capital assets

Capital constructionDebt service

Accrued interest payable Current portion of bonds payable, net

Accounts payable ‐ from restricted assetsAccrued interest payable‐ from restricted assets

Postemployment benefits other than pensions

Unamortized bond issuance costsAssessments and contracts receivable

Current portion receivable from City of Forest GrovePrepaid expenses

Cash and investments‐restrictedConnection fees receivable‐restrictedContributions receivable from local governments‐restrictedBuild America Bonds (BABs) subsidy receivable‐restricted

Capital assets, not being depreciated or amortized:

Capital assets, net of accumulated depreciation

Investment in joint venturePrepaid pension obligation

Assets

June 30, 2013

CLEAN WATER SERVICES(A Component Unit of Washington County, Oregon)

Statement of Net Position

Current portion receivable from Washington County

Cash and investmentsAccounts receivable (net of allowance for uncollectibles)Materials and supplies inventoryCurrent portion prepaid pension obligationCurrent portion unamortized bond issuance costs

See notes to basic financial statements16

Operating revenues:$ 110,305,564

1,745,080 5,047,677

Total operating revenues 117,098,321

Operating expenses:29,844,695 4,738,941 7,943,524 4,444,731 2,066,305 516,479 632,242

3,607,150 39,844,468

429,817

Total operating expenses 94,068,352

Operating income 23,029,969

Nonoperating revenues (expenses):517,151

(3,773,629) (77,434)

(8,241,335) (2,844,919)

Total nonoperating expense (14,420,166)

Income before contributions 8,609,803

Capital contributions ‐ SDC's and developer 36,720,405

Change in net position 45,330,208

Net position, beginning of period 522,626,704

Net position, end of period $ 567,956,912

Loss on equity in joint ventureInterest expenseCapital donations ‐ intergovernmental agreements

ChemicalsDepreciation and amortization expenseAmortization of prepaid bond costs

Investment incomeNet (loss) on disposal of capital assets

Professional servicesSuppliesAdministrative costsRepairs and maintenanceInsurance

Service feesAmortization of prepaid bond premiumOther

Labor and fringe benefitsUtilities

For the year ended June 30, 2013


Statement of Revenues, Expenses

and Changes in Net Position



Cash flows from operating activities:$ 108,751,747

(24,596,804) (29,451,470)

5,083,756

Net cash from operating activities 59,787,229

Cash flows from noncapital financing activities:(930,240)

Cash flows from capital and related financing activities:(45,907,277) (22,605,000) (12,683,598)

19,093 27,737,470

74,264

Net cash from capital and related financing activities (53,365,048)

Cash flows from investing activities:505,303

Net decrease in cash and investments 5,997,244

Cash and investments, beginning of year 192,065,630

Cash and investments, end of year $ 198,062,874

$ 58,130,038 139,932,836

Total cash and investments $ 198,062,874

Reconciliation of operating income to net cash from operating activities:

$ 23,029,969

Adjustments to reconcile operating income to net cashfrom operating activities:

39,844,468 1,310

137,955 (1,453,217)

583,673 17,272 36,077

4,123

(1,557,940) (86,429)

(555,140) (213,020)

(1,872)

36,757,260

$ 59,787,229

$ 4,327,926 (77,434)


Statement of Cash Flows


Received from customersPayments to suppliersPayments to employees for servicesOther operating revenue

Interest paid on pension bonds

Acquisition and construction of capital assetsPrincipal paid on bondsInterest paid on bondsInterest received on assessments and contractsCapital contributed by customers and citiesProceeds from sale of capital assets

Interest on investments

Unrestricted cash and investmentsRestricted cash and investments

Operating income

Depreciation and amortization

Amortization of prepaid bond costsAmortization of prepaid bond premium/discountAmortization of prepaid pension obligations

Amortization of prepaid electric

Postemployment benefit costs other than pensionsBABs subsidyDeferred revenueChanges in assets and liabilities:

Accounts receivable

Net cash from operating activities

Schedule of non-cash capital and related financing activities:Contributions of capital assets by developersLoss on equity in joint venture

Materials and supplies inventoryPrepaid expensesAccrued expensesAccounts payable

Total adjustments

CLEAN WATER SERVICES (A Component Unit Of Washington County, Oregon)

NOTES TO BASIC FINANCIAL STATEMENTS

Fiscal Year Ended June 30, 2013

(1) Description of the District

The District

Clean Water Services (the District) (formerly known as the Unified Sewerage Agency of Washington County), a Component Unit of Washington County, Oregon was formed February 4, 1970 under the provisions of Oregon Revised Statutes (ORS) Chapter 451 to operate a sanitary sewer system in the Tualatin River Drainage Basin. Sixteen individual sanitary districts were consolidated to form the District. Subsequently, thirteen municipalities selected the District to perform sewage collection and treatment of waste. As required by ORS 451.485 the Washington County Board of Commissioners is the governing body of the District. Principal funding sources are charges to users and system development charges (SDCs).

The District, under the criteria of the Governmental Accounting Standards Board (GASB) is considered a component unit of Washington County, Oregon (County), and is presented in the Comprehensive Annual Financial Report of the County as a discretely presented component unit.

Reporting Entity

On March 2, 2010, the Clean Water Services Board of Directors instructed the District to form Clean Water Institute (CWI). The General Manager of the District currently serves as the Executive Director for CWI. One of the District’s Board Members currently serves on CWI’s Board.

CWI is a nonprofit 501(c)(3) formed to advance watershed restoration and resource recovery through innovative strategies and to promote scientific research, education, and environmental protection activities that benefit watersheds throughout the country and around the world. For the fiscal year ended June 30, 2013, the transactions between the District and CWI are deemed to be immaterial, and therefore, CWI is not reported as a component unit of the District.

(2) Summary of Significant Accounting Policies

(a) Basis of Presentation and Accounting

The District's financial statements are maintained on a flow of economic resources measurement focus. With this measurement focus, all assets and liabilities are included in the Statement of Net Position. The Statement of Revenues, Expenses and Changes in Net Position presents increases (e.g. revenues) and decreases (e.g. expenses) in total net position.

The District’s financial statements are presented on the accrual basis of accounting. Under the accrual basis of accounting, revenues are recorded at the time they are earned and expenses are recorded at the time liabilities are incurred.

The District follows all GASB pronouncements.

19


NOTES TO BASIC FINANCIAL STATEMENTS (continued)


(2) Summary of Significant Accounting Policies (continued)

(a) Basis of Presentation and Accounting (continued)

The District reports the following operating segments:

• The sanitary sewer operations segment accounts for the activities of the District which manage the public sanitary system. The District operates 4 sewage treatment plants, 40 pump stations, and maintains responsibility for 754 miles of sanitary gravity mains, 63 miles of force mains, and 15 miles of reuse mains.

• The surface water management operations segment accounts for the activities of the District which manage the storm sewer system and other surface water issues. The District maintains 491 miles of closed storm sewer conveyances.

(b) Budget

Oregon Local Budget Law requires the District to prepare and adopt a budget by individual funds prior to July 1 of the budget year. The resolution authorizing appropriations, adopted in the categories of operating expenses, debt service, capital outlay, contingency and operating transfers for each fund sets the level by which expenditures cannot legally exceed appropriations. Appropriations lapse at the end of the fiscal year. The District’s budget is prepared on the modified accrual basis of accounting.

Unexpected additional resources may be added to the original budget through the use of a supplemental budget and appropriation resolution. A supplemental budget, greater than 10% of the fund’s original budget, requires hearings before the public, publications in newspapers and approval by the Board of Directors. Original and supplemental budgets may be modified by the use of appropriation transfers between the levels of control. Such transfers require approval by the Board of Directors. During the fiscal year ended June 30, 2013, the Board approved one appropriation transfer.

(c) Operating vs. Nonoperating Revenues and Expenses

The District has defined operating revenues to include all service charges and other applicable charges for services directly attributable to providing either sanitary or surface water management services, plan check, product sales or other related activity.

Operating expenses are defined as those expenses directly related to providing services including administrative expenses and depreciation and amortization, and excludes personnel services utilized directly for capital projects which are charged to capital assets.

Nonoperating revenues and expenses are not directly attributable to the services provided. This includes investment interest, capital contributions, gain (loss) on disposal of capital assets, gain (loss) on equity in joint ventures and non-operating grant revenue.

(d) Cash and Investments

The District’s cash and investments are comprised of pooled funds held and invested by 1) the Washington County Department of Support Services, Finance Division, 2) the State of Oregon Treasurer’s Local Government Investment Pool, and 3) Tualatin Valley Water District as a fiscal agent. The District has stated its investments at fair value.

20




(2) Summary of Significant Accounting Policies (continued)

(d) Cash and Investments (continued)

Interest earned on investments is allocated monthly by the County based upon the District’s average monthly cash balance.

(e) Accounts Receivable

Accounts receivable represent user charges which are recognized as earned. An allowance for doubtful accounts is established for amounts deemed to be uncollectible, based on historical collection percentages. At June 30, 2013, the allowance was $310,000.

(f) Materials and Supplies Inventory

Inventories of operating supplies and repair parts are valued at the lower of cost (average cost) or market and are charged against operations as used.

(g) Assessments Receivable

Assessments receivable represent amounts assessed against property owners for local sewer improvements. An allowance for doubtful accounts is not deemed necessary as the assessments represent liens against the property. Outstanding assessments are payable over ten to twenty years at interest rates ranging from 3.5% to 6.46%.

(h) Restricted Assets and Liabilities

Assets, the use of which is restricted to specific purposes by state statute, bond indenture, or other outside party, and related liabilities, are segregated on the Statement of Net Position.

(i) Capital Assets

Capital asset items purchased are valued at historical cost or estimated historical cost if actual historical cost is not available. Contributed capital assets are recorded at estimated fair market value at the time received.

Major additions, improvements and replacements including related plans and studies are capitalized. Normal maintenance and repairs are charged to operations as incurred. Gains or losses realized from disposal of capital assets are reflected in the Statement of Revenues, Expenses and Changes in Net Assets. Assets costing more than $5,000 are capitalized and depreciated over their useful lives.

Depreciation is computed on capital assets placed in service using the straight-line method over their estimated useful lives as follows:

Sewer lines 50 years Treatment plants 25 years Land improvements 25 years Plans and studies 5-25 years Buildings 20 years Plant and office equipment 5-10 years Automotive equipment 5 years

21




(2) Summary of Significant Accounting Policies (Continued)

(j) Intangible Capital Assets

The District implemented Governmental Accounting Standards Board (GASB) Statement No. 51, Accounting and Financial Reporting for Intangible Assets, in fiscal year ended June 30, 2009. Intangible assets, including easements, water rights, patents and internally generated computer software, are reported in the financial statements.

Intangible assets purchased are valued at historical cost or estimated historical cost if actual historical cost is not available. Contributed intangible assets are recorded at estimated fair market value at the time received.

Intangible capital assets with an individual cost of $5,000 and a useful life of more than five years are capitalized and amortized over their useful lives. Intangible assets with indefinite lives are not amortized. Additions or improvements and other capital outlays that significantly extend the useful life of an asset, or that significantly increase the capacity of an asset are capitalized. Normal maintenance and repairs are charged to operations as incurred.

Amortization on exhaustible intangible capital assets is reported on the straight-line basis over the estimated useful life of the asset. One-half year’s amortization is taken in the year of acquisition and disposal of the asset. Gains or losses realized from disposal of intangible capital assets are reflected in the Statement of Revenues, Expenses and Changes in Net Position.

(k) Investments in Joint Ventures

Investments in joint ventures with other governments are reported at cost plus or minus the District’s share of operating income or loss (equity method).

(l) Premium and Discount on Bonds Payable

Premiums and discounts are amortized by the effective interest method over the life of the respective debt instruments. Bonds payable are reported net of the applicable bond premium or discount.

(m) Post-employment Benefits Other than Pensions

The entity’s net Other Post-Employment Benefits (OPEB) Obligation is recognized as a long-term liability in the government-wide financial statements and in the proprietary fund statements, the amount of which is actuarially determined.

The District offers health benefits to retirees under age 65 as well as their qualified dependents, as required by state law. The District’s subsidized retiree health benefits are not pre-funded and are reported on a pay-as-you-go basis.

22





(n) Contributions Other Than Capital Assets

Contributions which represent non-exchange transactions are comprised of the following:

Customers – Sewer line and storm and surface water management connection fees from sewer patrons and sewer pipe installation fees from developers.

Capital Grants – Funds received from federal and state agencies restricted for acquisition and construction of sewage facilities.

Contributions from Local Governments – Funds received from cities and Washington County for shared construction costs of collection systems owned and maintained by the District, and for other projects with regional benefit undertaken by the District.

(o) Insurance

The District is insured under a guaranteed cost plan for workers' compensation and for costs in excess of insurance policy retention (deductible) limits on fire loss, property damage, and all risk coverage (theft, vandalism, etc.). The District currently provides for estimated losses from pending claims on all self-insured retention risks which are reported as a current expense and liability.

Incurred but not reported (IBNR) claims for general and employment liability are claims that are incurred through the end of the fiscal year but not reported until after that date and are reported as noncurrent liabilities.

(p) Accrued Compensated Absences

The District allows employees to accumulate earned but unused vacation and sick leave benefits and compensatory time balances. Unused sick pay is not recognized as a liability because it does not vest. Accumulated compensation for overtime and vacation pay accrued at the end of each year is used within one year and is reported as a current expense and liability.

(q) Prepaid Pension Obligation

In 2004 the District issued limited tax pension obligation bonds. Proceeds were used to make a supplemental lump-sum payment to the Oregon Public Employees Retirement System (PERS). The intent was to prepay the amortization of the District’s share of the PERS’ unfunded actuarial liability. Amortization of this supplemental lump-sum payment will be recognized as pension expense over 30-years.

(r) Net Position

Net position comprises various net earnings from operating and nonoperating revenues, expenses and contributions of capital. Net position is classified in the following three components: net investment in capital assets; restricted net position; and unrestricted net position.

Net investment in capital assets consists of all capital assets, net of accumulated depreciation and reduced by outstanding debt (revenue bonds and other debt obligations) less unspent debt proceeds, that is attributable to the acquisition, construction and improvement of those assets. Restricted net position consists of net assets for which constraints are placed thereon by external parties, such as lenders, grantors, contributors, laws, regulations and enabling legislation. Unrestricted net position consists of all other net assets not included in the above categories.

23





(s) Use of Estimates

The preparation of the financial statements, in conformity with accounting principles generally accepted in the United States of America, requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities on 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.

(3) Cash and Investments

Washington County, Oregon maintains a common cash and investment pool for all County funds including those of the District. The types of investments in which the County may invest are restricted by State of Oregon Statutes and a Board adopted investment policy. Authorized investments include general obligations of the United States Government and its agencies, certain bonded obligations of Oregon municipalities, banker’s acceptances, certain high-grade commercial paper, repurchase agreements, and the State of Oregon Treasurer's Local Government Investment Pool (LGIP), among others. The District also maintains restricted cash in reserves with the Tualatin Valley Water District as a fiscal agent for the District.

Cash and investments for the District at June 30, 2013 are as follows: Petty cash $ 3,750 Cash with fiscal agent 331,684 Payments in transit (1) (325,753) Investments 198,053,193 $ 198,062,874

(1) Payments in transit at year-end remain investments with the County until payments clear the bank.

Cash and investments are reflected on the statement of net position as follows: Cash and investments $ 58,130,038 Restricted cash and investments 139,932,836 $ 198,062,874

Investments at June 30, 2013 were as follows: State of Oregon Treasurer's Local Government Investment Pool

$

40,237,245

Washington County investment pool 157,815,948 Total investments $ 198,053,193

(a) Investment in the Oregon State Treasurer’s Local Government Investment Pool

The State of Oregon Local Government Investment Pool (LGIP) is not registered with the U.S. Securities and Exchange Commission as an investment company. The Oregon Revised Statutes and the Oregon Investment Council govern the Pool’s investment policies. The State Treasurer is the investment officer for the Pool and is responsible for all funds in the Pool. These funds must be invested and the investments managed, as a prudent investor would, exercising reasonable care, skill and caution. Investments in the fund are further governed by portfolio guidelines issued by the Oregon Short Term Fund Board.

24




(3) Cash and Investments (Continued)

(a) Investment in the Oregon State Treasurer’s Local Government Investment Pool (continued)

The table below outlines the LGIP’s investment maturity limitations and the actual maturities at June 30, 2013:

Allowableper Policy Actual

LGIP Maturity: Up to 93 days Minimum of 50% 71% 94 days to 1 year Maximum of 25% 9% 1 to 3 years Maximum of 25% 20%

Cost approximates the District’s fair value and its value of pool share in the LGIP.

(b) Cash and investments include pooled cash and investments held by Washington County, Oregon, on behalf of the District

Disclosures relating to Interest Rate Risk: Interest rate risk is the risk that would adversely affect the fair value of an investment should market interest rates change. Generally, the longer the maturity of an investment, the greater the sensitivity of its fair value to changes in market interest rates. District management believes the liquidity in the portfolio is sufficient to meet cash flow requirements and preclude the District from having to sell investments below original cost for that purpose. The District relies upon their treasurer, Washington County, to monitor the interest rate risk inherent in its portfolio by comparing the maturity dates of its investments to the minimum maturity dates outlined in the investment policy.

The table below outlines the investment maturity limitations and the actual maturities of the Washington County investment pool at June 30, 2013:

Maturity: Less than 30 days 10% 24% Less than 1 year 25% 32% 5 years or less 100% 100%Weighted Average Maturity 2.0 years 1.8 years

MinimumAllowed Actual

Disclosures relating to Credit Risk: This is the risk that an issuer of an investment will not fulfill its obligation to the holder of the investment. Credit risk is measured by the assignment of a rating by a nationally recognized rating organization and is minimized by purchasing only those securities, which are rated by three of the nationally recognized credit rating agencies, at the time of purchase. The District’s investment policy specifies ratings – Standard & Poor’s = minimum AA-, and Moody’s Investors Services = minimum Aa3.

25




(3) Cash and Investments (Continued)

(b) Cash and investments include pooled cash and investments held by Washington County, Oregon, on behalf of the District (continued)

Presented below is the actual rating at year-end for each investment type in which the District’s funds are invested by Washington County (dollars in thousands):

TotalRating by Standard & Poor's InvestedInvestment Service AAA AA Not Rated Value

Federal Agency Coupon Securities $9,024 141,878 - 150,902 77%Corporate notes - 6,914 - 6,914 3%State of Oregon Local Government Investment Pool (LGIP) - - 40,237 40,237 20%

Total Investments $9,024 148,792 40,237 198,053 100%

Allocation%

For more detailed information, reference should be made to the Washington County Comprehensive Annual Financial Report for June 30, 2013.

26




(4) Capital Assets

Activity in capital assets for the year ended June 30, 2013 is as follows:

Non-depreciable capital assets:Land $ 12,719,819 - 2,934,427 15,654,246 Easements 933,422 704,019 52,200 1,689,641 Construction in progress 120,242,374 51,802,528 (74,006,192) (6,678,877) 91,359,833

Total non-depreciable capital assets 133,895,615 52,506,547 (71,019,565) (6,678,877) 108,703,720

Depreciable capital assets:Buildings and improvements 53,312,970 - 2,210,210 - 55,523,180 Land improvements 155,061,070 2,425,776 1,140,748 - 158,627,594 Treatment plants 515,767,843 - 60,172,651 - 575,940,494 Sewer lines 202,151,362 1,133,226 3,973,740 - 207,258,328 Plant equipment 69,154,694 - 2,356,747 (14,510) 71,496,931 Automotive equipment 9,994,317 - 613,306 (201,052) 10,406,571 Plans and studies 12,986,139 - - - 12,986,139 Office equipment 18,893,123 - 439,132 (812,150) 18,520,105

Total depreciablecapital assets 1,037,321,518 3,559,002 70,906,534 (1,027,712) 1,110,759,342

Less accumulated depreciation for:Buildings and improvements (25,468,547) (2,579,188) - - (28,047,735) Land improvements (82,910,811) (5,952,119) - - (88,862,930) Treatment plants (306,532,704) (19,418,362) - - (325,951,066) Sewer lines (66,929,914) (4,087,738) - - (71,017,652) Plant equipment (39,866,100) (5,031,583) - 7,255 (44,890,428) Automotive equipment (8,385,483) (685,819) - 201,052 (8,870,250) Plans and studies (9,453,969) (1,560,859) - - (11,014,828) Office equipment (17,948,296) (496,094) - 805,470 (17,638,920)

Total accumulated depreciation (557,495,824) (39,811,762) - 1,013,777 (596,293,809)

Total depreciable assets, net 479,825,694 (36,252,760) 70,906,534 (13,935) 514,465,533

Amortizable capital assets:Temporary easements - 64,905 - - 64,905 Patents - - 113,031 - 113,031

Total amortizablecapital assets - 64,905 113,031 - 177,936

Less accumulated amortization for:Temporary easements - (1,623) - - (1,623) Patents - (31,083) - - (31,083)

Total accumulated amortization - (32,706) - - (32,706)

Total amortizable assets, net - 32,199 113,031 - 145,230

Total capital assets, net $ 613,721,309 16,285,986 - (6,692,812) 623,314,483

Balance07/01/12 Retirements

Ending

06/30/13Balance

Additions Transfers

(5) Joint Ventures

The Barney Reservoir Joint Ownership Commission (the Commission) was formed to own, operate, and expand the J.W. Barney Reservoir. Ownership of the joint venture is comprised of the District (10%), Tualatin Valley Water District (35%), and the cities of Hillsboro (31%), Forest Grove (2 ½%), and Beaverton (21 ½%). The Commission is governed by one member from each entity. The District’s year-end equity investment in the Commission was $2,721,399.

Financial statements for the Commission may be obtained from the City of Hillsboro, Finance Department at 150 East Main Street, Hillsboro, Oregon, 97123.

27




(6) Bonds Payable

The District has issued revenue bonds in accordance with ORS 451.545. The District’s revenue bonds are payable exclusively from the District’s net sewer revenue as defined in the bond indenture agreements.

Legal Debt Margin The District’s legal debt limitation, as defined by Oregon Revised Statutes 451.545, shall not exceed 13 percent of the true cash value of all property assessed within the District’s boundaries. The limitation applies to the aggregate of all outstanding General Obligation Bonds. The legal debt limit and debt margin for the District are both $7.919 billion at June 30, 2013, because the District had no outstanding general obligation debt.

The details of the individual bond issues are as follows:

Issue Original Installment Pledged forBonds Date Issue Payments Repayment Purpose

Sewer Revenue Bonds:

1996 SeriesSenior Lien 10/01/96 50,000,000 Annually Net sewer Sewer capital 3.8-5.625 %

through 2017 revenue improvement1997 Series ASenior Lien 10/01/97 47,060,000 Annually Net sewer Refunding 3.8-5.75 %

through 2013 revenue1997 Series OneSubordinate Lien 10/01/97 45,435,000 Annually Net sewer Refunding 3.8-5.75 %

through 2013 revenue2004 SeriesSenior Lien 07/1/04 26,455,000 Annually Net sewer Refunding 2.0-5.25 %

through 2028 revenue2009 Series ASenior Lien 03/25/09 58,755,000 Annually Net sewer Sewer capital 3.0-5.25 %

through 2028 revenue improvement2010 Series ASenior Lien 04/28/10 8,895,000 Annually Net sewer Sewer capital 3.0-5.0 %

through 2016 revenue improvement2010 Series BSenior Lien 04/28/10 90,260,000 Annually Net sewer Sewer capital 3.97-5.801 %

through 2036 revenue improvement2011 Series ASenior Lien 08/24/11 30,255,000 Annually Net sewer Refunding 2.0-5.0 %

through 2022 revenue2011 Series BSenior Lien 08/24/11 50,000,000 Annually Net sewer Sewer capital 2.5-5.0 %

through 2033 revenue improvementRevenue Pension Bonds:2004 Series 5/27/04 15,990,000 Annually Gross sewer Pension 4.596-6.095 %

through 2028 revenue liability

423,105,000$

RatesInterest

28




(6) Bonds Payable (Continued)

Bond principal and interest transactions for the year ended June 30, 2013 are as follows:Outstanding Outstanding Due

June 30, Matured and June 30, within Long-termBonds 2012 Issued Paid 2013 one year portion

Sewer Revenue:1997 Series A 9,920,000 - 9,920,000 - - - 1997 Series One 6,850,000 - 6,850,000 - - - 2004 Series 17,450,000 - 3,140,000 14,310,000 3,310,000 11,000,000 2009 Series A 58,755,000 - - 58,755,000 2,535,000 56,220,000 2010 Series A 8,895,000 - - 8,895,000 2,850,000 6,045,000 2010 Series B 90,260,000 - - 90,260,000 - 90,260,000 2011 Series A 30,255,000 - 2,430,000 27,825,000 2,590,000 25,235,000 2011 Series B 50,000,000 - - 50,000,000 1,655,000 48,345,000

Revenue Pension: 2004 Series 15,480,000 - 265,000 15,215,000 330,000 14,885,000

$ 287,865,000 - 22,605,000 265,260,000 13,270,000 251,990,000

Current and future maturities at June 30, 2013 are summarized as follows:

Current maturities - face value $ 13,270,000

Less unamortized bond discount (11,023)

Less deferred discount in refunding -

Less deferred loss in 2004 refunding (195,545)


Add unamortized bond premium 1,505,610

$ 14,501,611

Future maturities - face value $ 251,990,000

Less unamortized bond discount (22,045)

Less deferred discount in refunding -



Add unamortized bond premium 7,848,832

$ 258,936,821

29




Future maturities of bond principal and interest at June 30, 2013 are as follows:

Fiscal Year 2004 2009A 2010A 2010B 2011A 2011B

Total Sewer Revenue

Bonds

2004 Revenue Pension Bonds Total Principal

Principal

2014 3,310,000$ 2,535,000$ 2,850,000$ -$ 2,590,000$ 1,655,000$ 12,940,000$ 330,000$ 13,270,000$

2015 3,480,000 2,625,000 2,965,000 - 2,640,000 1,700,000 13,410,000 405,000 13,815,000

2016 3,660,000 2,735,000 3,080,000 - 2,775,000 1,755,000 14,005,000 480,000 14,485,000

2017 3,860,000 2,845,000 - 3,300,000 2,915,000 1,815,000 14,735,000 565,000 15,300,000

2018 - 2,975,000 - 3,385,000 3,060,000 1,890,000 11,310,000 660,000 11,970,000

2019-2023 - 17,355,000 - 18,425,000 13,845,000 10,845,000 60,470,000 5,010,000 65,480,000

2024-2028 - 22,475,000 - 21,540,000 - 13,605,000 57,620,000 7,765,000 65,385,000

2029-2033 - 5,210,000 - 25,735,000 - 16,735,000 47,680,000 - 47,680,000

2034-2038 - - - 17,875,000 - - 17,875,000 - 17,875,000

14,310,000 58,755,000 8,895,000 90,260,000 27,825,000 50,000,000 250,045,000 15,215,000 265,260,000

Bond discount, deferred amount in refunding and bond premium, net 8,178,432

Bonds Payable, net 273,438,432$

Fiscal Year 2004 2009A 2010A 2010B 2011A 2011B

Total Sewer Revenue

Bonds

2004 Revenue Pension Bonds Total Interest

Interest

2014 651,550$ 2,805,238$ 299,950$ 4,791,823$ 1,287,650$ 2,038,088$ 11,874,299$ 916,063$ 12,790,362$

2015 481,800 2,714,713 198,475 4,791,823 1,195,750 1,991,900 11,374,461 897,678 12,272,139

2016 298,725 2,607,513 77,000 4,791,823 1,060,375 1,940,075 10,775,511 874,711 11,650,222

2017 101,325 2,495,913 - 4,726,318 918,125 1,877,450 10,119,131 847,010 10,966,141

2018 - 2,364,638 - 4,591,082 768,750 1,803,350 9,527,820 813,839 10,341,659

2019-2023 - 9,351,496 - 20,558,932 1,426,875 7,624,700 38,962,003 3,346,528 42,308,531

2024-2028 - 4,220,413 - 15,622,842 - 4,864,075 24,707,330 1,396,973 26,104,303

2029-2033 - 130,250 - 9,002,958 - 1,727,100 10,860,308 - 10,860,308

2034-2038 - - - 1,580,918 - - 1,580,918 - 1,580,918

1,533,400 26,690,174 575,425 70,458,519 6,657,525 23,866,738 129,781,781 9,092,802 138,874,583

Total Principal and Interest 15,843,400 85,445,174 9,470,425 160,718,519 34,482,525 73,866,738 379,826,781 24,307,802 404,134,583

30




(6) Bonds Payable (Continued)

Sewer revenue bond indenture agreements require the District to maintain net operating revenues, as defined in the indenture agreements, in each fiscal year at least equal to 1.2 times annual debt service on the Senior Lien Bonds and 1.1 times annual debt service on the Subordinate Lien Bonds and to maintain adequate insurance on the facilities. Additionally the bond indenture agreements establish that bonds are secured by a pledge from the District to maintain separate Senior Lien and Subordinate Lien reserve accounts in an amount equal to annual debt service for each class of bonds. The District has fulfilled the reserve requirements by obtaining surety bonds as allowed by the bond indenture agreements for all bond issues except the Series 2009A issued in fiscal year 2009, the Series 2010A and 2010B issued in fiscal year 2010, and the Series 2011B issued in fiscal year 2011, which were funded with debt proceeds of $5.3 million, $0.6 million, $5.8 million, and $1.8 million, respectively.

The District has set aside bond reserves equivalent to $138,486 per month starting May 1, 2010, and continued until October, 2012, when the Series 1997A Bonds matured. This District funded these reserves in response to the drop in credit ratings of Ambac below investment grade, which caused a Reserve Credit Event for the Ambac Reserve Credit facility. The District used the excess cash in the bond reserve account to make the final bond payment on the Series 1997A and 1997 Series One Bonds on October 1, 2012. The remaining bonds and sureties are insured by National Public Finance Guaranty Corp (NPFG).

Build America Bonds The District issued $99,155,000 in Senior Lien Sewer Revenue Bonds in fiscal year 2010 including $8,895,000 in tax exempt Series 2010A and $90,260,000 in federally taxable Series 2010B. The Series 2010B Bonds are issued as “Build America Bonds” (BABs) and are eligible under current federal law for a 35% interest subsidy. The District is not able to reduce the annual debt service or maximum annual debt service by the amount of the interest subsidies received for purposes of determining compliance with the District’s rate covenant and the tests for issuing additional Senior Lien Parity Obligations.

The federal interest subsidy was reduced by 8.7% for the October 1, 2013 bond interest payment, which reduced the subsidy by approximately $72, 900. This was in response to the requirements of the Balanced Budget and Emergency Deficit Control Act of 1985. The District will receive Federal subsidy payments totaling approximately $24,660,000 over the remaining life of the issue. This subsidy may be reduced in the future based on federal balanced budget constraints.

Pension related debt The revenue pension bond agreement issued in May 2004 requires debt service to be paid from gross sewer revenues. Accordingly, debt service for these bonds will be treated as operating expenses in determining debt service coverage in future periods.

Prior year defeased debt In prior years, the District defeased certain bonds by placing the proceeds of refunding bonds in an irrevocable trust to provide for all future debt service on the defeased bonds. Accordingly, the trust account assets and the related liability for those defeased bonds are not included in the District's financial statements. As of June 30, 2013, $46,395,000 of defeased bonds remain outstanding.

31




(7) Deferred compensation plan

During 1977 the District adopted, and has made subsequent amendments to, the Clean Water Services Deferred Compensation Plan. This plan is created in accordance with IRS code section 457(b), and was most recently amended and restated effective January 1, 2002. The General Manager, and the Risk and Benefits Manager of the District are the Trustee and Administrators of the plan. Plan contributions and assets are set aside in trust, with the custodial trustee and administrator, Great West Life, for the exclusive benefit of participants and beneficiaries.

The plan generally covers any full-time employee working 37.5 or more hours per week, and any regular part-time employee working fewer than 40 hours per week. The plan permits participating employees to contribute up to 100% of gross pay or the statutorily prescribed annual dollar limit whichever is smaller. The District may, at its discretion, make employer contributions. The District’s plan as currently adopted does not provide for employer contributions. Plan contributions and earnings thereon are available to participating employees upon termination of employment, retirement, death, or unforeseen emergency.

Contributions from plan members during fiscal year 2013 were $1,112,168.

(8) Pension Plan

Pension Plan Description

Substantially all District employees, after six months of employment, are participants in the State of Oregon Public Employees Retirement System (PERS). The District’s policy is to fund pension costs as determined by actuarial valuations.

The District contributes to the Oregon Public Employees Retirement System (PERS) and to the Oregon Public Service Retirement Plan (OPSRP). PERS is a cost sharing multiple-employer defined benefit public employee retirement system established under Oregon Revised Statues 238.600. OPSRP is a hybrid retirement plan with two components: the Pension Program (defined benefit; established and maintained as a tax-qualified governmental defined benefit plan) and the Individual Account Program (defined contribution; established and maintained as a tax-qualified governmental defined contribution plan). A defined benefit plan is benefit-based and uses predictable criteria such as a pension determined by salary multiplied by length of service multiplied by a factor. A defined contribution plan has no guarantee.

OPSRP is administered by PERS. PERS acts as a common investment and administrative agent for public employers in the State of Oregon. Benefits are established by state statute.

The 2003 Oregon Legislature established OPSRP. Public employees hired on or after August 29, 2003 become part of OPSRP, unless membership was previously established in PERS. The 1995 Oregon Legislature established a different level of benefits for employees who began their six-month waiting period on or after January 1, 1996. This level is called Tier Two.

The defined contribution portion of OPSRP is provided to all members who are PERS or OPSRP eligible. State statute requires that covered employees contribute 6.0% of their annual covered salary to the IAP plan effective January 1, 2004. Those employees who had established a PERS membership prior to the creation of OPSRP will retain their existing PERS accounts, but member contributions made after the beginning of 2004 will be deposited into the members IAP account.

32




(8) Pension Plan (continued)

Pension Plan Description (continued)

Benefits generally vest after five years of continuous service. Retirement is allowed at age fifty-eight with unreduced benefits but retirement is generally available after age fifty-five with reduced benefits. Retirement benefits based on salary and length of service are calculated using a formula and are payable in a lump sum or monthly using several payment options. PERS also provides death and disability benefits. These benefit provisions and other requirements are established by state statute.

Both PERS and OPSRP are administered by the Oregon Public Employees Retirement Board (OPERB). The comprehensive annual financial report of the funds administered by the OPERB may be obtained by writing to the Oregon Public Employees Retirement System, P.O. Box 23700, Tigard, OR 97281-3700, by calling 1-888-320-7377, or by accessing the PERS web site at http://oregon.gov/PERS/.

Funding Policy

The rate of employer contributions to PERS is determined periodically by PERS based on actuarial valuations performed at least every two years. Contributions to PERS have historically been made based on the annual required contribution and were charged to expense as funded.

In fiscal years 2000 and 2004, the District contributed $2,232,293 and $15,277,911 in excess of the annual required contribution. Pursuant to the requirements of GASB Statement No. 27, Accounting for Pensions by State and Local Government Employers, these contributions in excess of the annual required contributions were recorded as prepaid pension assets which are reported on the Statement of Net Position as prepaid pension obligation. This prepaid pension asset is being amortized over 30 years on the straight-line method.

Risk Pooling and Revised PERS Contribution Rates

The District participates in the State and Local Government Rate Pool (SLGRP). The SLGRP was created by legislative act of the State of Oregon and provided local governments the option to pool their PERS related assets and liabilities with others that elected to participate in the pool. Contribution rates are determined based on the overall experience of the pool versus the potentially more volatile experience of individual employers.

33

http://oregon.gov/PERS/




(8) Pension Plan (Continued)

Annual Pension Cost

For fiscal year 2013, the District’s annual pension costs of $2,354,014, was equal to its actual contributions of $1,770,341 plus $583,673 in amortization of prepaid pension assets. The District’s annual pension costs were equal to the annual required contributions (ARC).

The required contribution was determined as part of the actuarial valuation at December 31, 2009 using the projected unit credit actuarial cost method. Significant actuarial assumptions used in the valuation included: (a) rate of return on the investment of present and future assets of 8%, (b) asset valuation method based on market value, (c) projected salary increases which include 3.75% per year in addition to salary increases due to promotions and longevity that may vary by age and service, (d) post-retirement benefit increases of 2% per year (the maximum allowable), (e) consumer price inflation of 2.75% per year, (f) healthcare cost inflation trend rate of 7.0% in 2010 decreasing to 4.5% in 2029, and (g) amortization of the unfunded actuarially accrued liability as a level percentage of payroll over 20 years for PERS and 16 years for OPSRP.

Both the PERS and OPSRP defined benefit pension plans utilize a contribution rate stabilization method to restrict the degree of change to new contribution rates. The new contribution rate will not increase or decrease from the prior contribution rate by more than the greater of 3 percentage points or 20 percent of the current rate. If the funded percentage drops below 70% or increases above 130%, the range of the potential rate adjustment doubles. If the funding percentage is between 70% and 80% or between 120% and 130%, the size of the rate collar is increased on a graded scale.

Three-year trend information for the years ended June 30 is presented below.

Fiscal Year

2013 2012 2011

District contribution rate: Tier I/Tier II 7.65% 7.65% 0.99%

District contribution rate: OPSRP 6.74% 6.74% 2.24%

Employee contribution 6.00% 6.00% 6.00%

District payroll covered by ORPERS (approximate) $ 24,141,544 $ 24,467,825 $ 23,806,513

Annual Pension Cost (APC) 2,354,014 2,380,426 902,349

Percentage of APC contributed 100.00% 100.00% 100.00%

Net Pension Obligation 0 0 0

Prepaid Pension Obligation 11,961,000 12,544,000 13,127,000

34




(9) Other Post-Employment Benefits (OPEB)

(a) Post-Employment Healthcare Plan

Plan Description The District does not have a formal post-employment benefits plan for any employee groups, however the District offers health benefits to retirees under age 65 as well as their qualified dependents at the same rate provided to current employees, as required by Oregon Revised Statutes 243.303. Retirees electing to remain on the District sponsored health plans pay the entire premium for that coverage in order to maintain coverage. Even though the District does not pay any portion of the retiree premium there is an implicit rate subsidy with respect to retired employees because the medical premium rates charged are less than they would be if the retirees were in a separately rated health plan. Actual medical premium rates are determined by blending both active employee and retiree experience. This “plan” is a single-employer plan and is not a stand-alone plan, and therefore, does not issue its own financial statements.

The number of plan participants are as follows:

Active participants 299Retired employees 24

Total participants 323

Funding Policy The District collects insurance premiums from all retirees each month. The District then pays the health insurance premiums for all retirees at the blended rate for each family classification. The required contributions to the plan include the entity’s pay-as-you-go amount, an amount paid by retirees and an additional amount calculated to pre-fund future benefits as determined by the actuary.

For fiscal year 2012/2013, the District contributed $116,720 consisting of retiree payments. The District has elected to not pre-fund the actuarially determined future cost amount of $553,343.

The required monthly contributions of the plan members were as follows for the year ended June 30, 2013.

Health InsuranceProvidence Kaiser

Employee $ 422.89 $ 509.64 Employee + 1 858.54 1,039.66 Full Family 1,205.48 1,452.47

35




(9) Other Post-Employment Benefits (OPEB) (Continued)

(a) Post-Employment Healthcare Plan (Continued)

Annual OPEB Cost and Net OPEB Obligation The District’s annual other post employment benefit (OPEB) cost is calculated based on the annual required contribution (ARC) of the District, an amount actuarially determined in accordance with the parameters of GASB Statement No. 45. The ARC represents a level of funding that, if paid on an ongoing basis, is projected to cover normal cost each year and amortize any unfunded actuarial liabilities over a thirty year period.

The annual OPEB cost and net OPEB obligation at June 30, 2013 was as follows:

Annual required contribution $ 156,078

Interest on net OPEB Obligation 21,443 Adjustment to annual required contribution (43,529)Annual OPEB cost 133,992Contributions made 116,720

Increase in net OPEB obligation 17,272

Net OPEB obligation, beginning of year 536,071

Net OPEB obligation, end of year $ 553,343

The District’s annual OPEB cost, the percentage of annual OPEB cost contributed to the plan and the net OPEB obligation for the last three fiscal years ended were as follows:

Fiscal

Annual

Percent of Annual

Net

Year

OPEB

OPEB Cost

OPEB

Ended

Cost

Contribution

Obligation

6/30/2013

$ 133,992

87%

$ 553,343

6/30/2012

129,943

83%

536,071

6/30/2011

172,095

81%

514,305

Funding status and Funding Progress As of July 1, 2011, the most recent actuarial valuation date, the plan was funded on a pay-as-you-go basis, and therefore, had no assets. The actuarial accrued liability for benefits was $1,548,140 and also equaled the unfunded actuarial accrued liability (UAAL). The annual payroll of active employees covered by the plan (covered payroll) was $21,608,777 and the ratio of the UAAL to the covered payroll was 7.2%.

Actuarial valuations of the ongoing 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 about the future.

36





(a) Post-Employment Healthcare Plan (Continued)

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 plan members) and include the types of benefits provided at the time of each valuation and the historical pattern of sharing of benefit costs between the employer and plan members to that point. The actuarial methods and assumptions used include techniques that are designed to reduce the effects of short-term volatility in actuarial results consist with the long-term perspective of the calculations.

In the July 1, 2011 valuation, the projected unit credit actuarial cost method was used, with accrued benefits allocated in equal proportion over the participant’s years of service from hire to expected retirement. The actuarial assumptions included (a) a 4 percent accrued liability discount rate, (b) a 3.5 percent inflation component, and (c) healthcare cost trend rate of 8.5 percent for 2012 grading down over nineteen years to 5 percent. The Unfunded Actuarial Accrued Liability (UAAL) is being amortized over an open period of thirty years as a level percentage of payroll for Non-Represented Retirees, and over a closed period of eight years as a flat dollar amount for Represented Retirees.

Actuarial Actuarial Actuarial Unfunded AnnualValuation Value of Accrued Liability Funded Covered UAAL as

Date Assets Liability (AAL) (UAAL) Ratio Payroll % of Payroll

7/1/2011 - 1,548,140 1,548,140 0.0% 21,608,777 7.2%

(b) Retirement Health Insurance Account (RHIA)

Plan Description As a member of Oregon Public Employees Retirement System (OPERS), the District contributes to the Retirement Health Insurance Account (RHIA) for each of its eligible employees. RHIA is a cost-sharing multiple-employer defined benefit other post-employment benefit plan administered by OPERS. RHIA pays a monthly contribution toward the cost of Medicare companion health insurance premiums of eligible retirees. Oregon Revised Statute (ORS) 238.420 established this trust fund. Authority to establish and amend the benefit provisions of RHIA reside with the Oregon Legislature. The plan is closed to new entrants after January 1, 2004. OPERS issues a publicly available financial report that includes financial statements and required supplementary information. That report may be obtained by writing to the Oregon Public Employees Retirement System, P.O. Box 23700, Tigard, OR 97281-3700, by calling 1-888-320-7377, or by accessing the PERS web site at http://oregon.gov/PERS/.

Funding Policy Because RHIA was created by enabling legislation (ORS 238.420), contribution requirements of the plan members and the participating employers were established and may be amended only by the Oregon Legislature. ORS require that an amount equal to $60 or the total monthly cost of Medicare companion health insurance premiums coverage, whichever is less, shall be paid from the RHIA established by the employer, and any monthly cost in excess of $60 shall be paid by the eligible retired member in the manner provided in ORS 238.410. To be eligible to receive this monthly

37

http://oregon.gov/PERS/





(b) Retirement Health Insurance Account (RHIA) (continued)

payment towards the premium cost the member must: (1) have eight years or more of qualifying service in PERS at the time of retirement or receive a disability allowance as if the member had eight years or more of creditable service in PERS, (2) receive both Medicare Part A and B coverage, and (3) enroll in a PERS-sponsored health plan. A surviving spouse or dependent of a deceased PERS retiree who was eligible to receive the subsidy is eligible to receive the subsidy if he or she (1) is receiving a retirement benefit or allowance from PERS or (2) was insured at the time the member died and the member retired before May 1, 1991.

Participating employers are contractually required to contribute to RHIA at a rate assessed each year by OPERS, currently 0.59% of annual covered payroll. The OPERS Board of Trustees sets the employer contribution rate based on the annual required contribution of the employers (ARC), an amount actuarially determined in accordance with the parameters of GASB Statement No. 45. The ARC represents a level of funding that, if paid on an ongoing basis, is projected to cover normal cost each year and amortize any unfunded actuarial liabilities (or funding excess) of the plan over a closed period not to exceed thirty years. The District’s contributions to RHIA for the years ended June 30, 2011, 2012 and 2013 were $69,000, $144,000 and $142,000 which equaled the required contributions each year.

(10) Risk Management/Insured Risks

It is the policy of the District to periodically assess the proper combination of commercial insurance and retention of risk to cover losses to which it may be exposed. The District currently utilizes two government entity self-insured risk pools through Special Districts Association of Oregon (SDAO) for its workers’ compensation and liability insurance. The District purchases a commercial insurance policy for all-risk property coverage. A self-insurance reserve is maintained to pay the retained amount (deductible) of any insured loss and payments for those losses that are either uninsured or uninsurable. The District maintains retention levels of $50,000 per occurrence on its liability insurance coverage and $1,000,000 per occurrence on its property coverage. The District has earmarked approximately $4.8 million of its unrestricted net assets for future uninsured risks at June 30, 2013.

The District’s liabilities are reported when it is both probable that a loss has occurred and the amount of that loss can be reasonably estimated. Liabilities include an amount for claims that have been incurred but not reported. Liabilities are reevaluated periodically to consider current settlements, frequency of claims, past experience and economic factors. During the past three fiscal years, there were no settlements which exceeded insurance coverage.

38




(10) Risk Management/Insured Risks (Continued)

Changes in the balances of the District’s claims liabilities during fiscal years 2012 and 2013 were as follows:

Fiscal year

Beginning

of fiscal year liability

Current claims and changes in estimates

Claims payments

Balance at fiscal

year-end

2012-2013 $ 265,800 71,889 (77,189) 260,500 2011-2012 253,864 45,119 (33,183) 265,800

(11) Net Position

Net position represents the difference between assets and liabilities. The components of net position at June 30, 2013 were as follows:

Investment in Capital Assets, Net of Related Debt: Net capital assets in service $ 623,314,483 Less: Revenues bonds payable, net (258,223,433) Unspent bond proceeds 35,182,478 Accounts payable for capital assets (8,387,613)

$ 391,885,915

Restricted for Capital Acquisition and Debt Service: Restricted Assets $ 143,085,697 Deductions Liabilities payable from restricted asset proceeds (46,644,797)

$ 96,440,900

(12) Related Party Transactions

Washington County performs certain fiscal and accounting services, partnering in capital projects and provides certain facility related services, for which the District was charged approximately $2,287,000 during fiscal 2013.

On September 21, 2010, the District entered into an Operating Agreement with the Clean Water Institute (CWI). Under the Operating Agreement, the District may provide resources to conduct work for CWI. Upon mutual agreement, the District and CWI may enter into agreements which shall describe the particular scope of services to be performed by the District for CWI. The District may also provide staff and resources to provide administrative support to CWI and charge CWI for such support. The District has billed CWI $7,000 for such services under the Operating Agreement as of June 30, 2013.

On October 26, 2010, the District entered into a loan agreement with CWI. The agreement allows for loans and/or advances from the District to CWI of up to $400,000 over the next four fiscal years. Interest on outstanding loan balances due from CWI to the District are calculated monthly and based on 1.1 times the average monthly Oregon Local Government Investment Pool (LGIP) rates. As of June 30, 2013 the District had loaned CWI $350,000 and CWI was charged $2,877 in interest. CWI made payments totaling $64,965 leaving a loan balance of $287,769 and accrued interest of $143 as of June 30, 2013.

39




(12) Related Party Transactions (continued)

On September 21, 2010, the District entered into an Assignment Agreement with CWI, which assigned certain intellectual property rights to CWI. The agreement requires CWI to share future revenues generated from the licensing of these intellectual property rights with the District. The District has not received any such revenues as of June 30, 2013.

Clean Water Institute billed the District approximately $6,900 for professional services during fiscal year 2013.

(13) Commitments and Contingencies

The District is involved as a defendant in several claims and disputes which, for the most part, are normal to the District’s activities. Management intends to vigorously contest these matters and does not believe their ultimate resolution will have a material effect upon the District’s financial position or results of operations.

The District is committed for approximately $51.0 million for various construction projects at June 30, 2013.

(14) Operating Leases

The District leases various equipment, buildings and land under cancelable and noncancelable operating leases. Total costs for such leases were approximately $66,000 for the year ended June 30, 2013. The future approximate minimum lease payments for these leases are as follows:

Fiscal Year Amount

2014 $ 66,000

2015 69,000

2016 69,000

2017 69,000

$ 273,000

40

REQUIRED

SUPPLEMENTARY

INFORMATION


Required Supplementary Information

Schedule of Funding ProgressOther Post Employment Benefits

Unfunded ActuarialUnfunded Accrued Liability

Actuarial Actuarial Actuarial Actuarial (Asset) as a PercentValuation Value of Accrued Accrued Funded Covered of CoveredDate Assets Liability Liability (Asset) Ratio Payroll Payroll7/1/2011 ‐$ 1,548,140$ 1,548,140$ 0 % 21,608,777$ 7.2 %7/1/2009 ‐ 1,884,808 1,884,808 0 20,314,357 9.37/1/2007 ‐ 4,641,261 4,641,261 0 18,702,037 24.8

41

SUPPLEMENTAL

INFORMATION Combining Schedules

42

Combining Schedule of Net Position

June 30, 2013

Sanitary Surface WaterAssets Sewer Management Total

Current assets:$ 54,677,071 3,452,967 58,130,038

14,962,917 1,453,555 16,416,472 961,856 - 961,856 583,673 - 583,673 124,092 - 124,092

51,070 - 51,070 183,543 - 183,543 582,590 - 582,590

72,126,812 4,906,522 77,033,334

137,518,746 2,414,090 139,932,836 1,557,809 - 1,557,809

32,336 10,580 42,916 378,600 - 378,600

Current assets - restricted 139,487,491 2,424,670 141,912,161

Total current assets 211,614,303 7,331,192 218,945,495

Noncurrent assets:

Land 15,654,246 - 15,654,246 Permanent easements 710,631 979,010 1,689,641 Construction in progress 87,978,624 3,381,209 91,359,833

443,374,601 71,090,932 514,465,533 Intangible assets, net of accumulated amortization 81,948 63,282 145,230

Net capital assets 547,800,050 75,514,433 623,314,483 2,721,399 - 2,721,399

11,375,830 - 11,375,830 Prepaid expense 521,613 - 521,613

1,619,793 - 1,619,793 286,441 - 286,441

1,330,957 - 1,330,957 204,280 - 204,280 663,654 - 663,654 287,769 - 287,769

Total noncurrent assets 566,811,786 75,514,433 642,326,219

Total assets $ 778,426,089 82,845,625 861,271,714

Current liabilities:Accounts payable $ 3,556,739 1,042 3,557,781 Accrued payroll 4,021,034 - 4,021,034 Accrued self insurance 10,500 - 10,500 Accrued interest payable 2,991,427 - 2,991,427 Current portion of bonds payable, net 14,501,611 - 14,501,611

Current liabilities - payable from unrestricted assets 25,081,311 1,042 25,082,353

Accounts payable- from restricted assets 8,151,485 257,522 8,409,007 Accrued interest payable-from restricted assets 83,278 - 83,278

Current liabilities - payable from restricted assets 8,234,763 257,522 8,492,285

Total current liabilities 33,316,074 258,564 33,574,638

Noncurrent liabilities:Bonds payable, net 258,936,821 - 258,936,821 Postemployment benefits other than pensions 553,343 - 553,343 Accrued self insurance 250,000 - 250,000

Total noncurrent liabilities 259,740,164 - 259,740,164

Total liabilities 293,056,238 258,564 293,314,802

Net position:Net investment in capital assets 316,629,003 75,256,912 391,885,915 Restricted net assets 94,273,752 2,167,148 96,440,900 Unrestricted 74,467,096 5,163,001 79,630,097

Total net position 485,369,851 82,587,061 567,956,912 Total liabilities and net position $ 778,426,089 82,845,625 861,271,714

Current assets - unrestricted


Cash and investmentsAccounts receivable (net of allowance for

uncollectibles)Materials and supplies inventoryCurrent portion prepaid pension obligationCurrent portion unamortized bond issuance costsCurrent portion receivable from Washington CountyCurrent portion receivable from City of Forest GrovePrepaid expenses

Cash and investments-restrictedConnection fees receivable-restrictedContributions receivable from local governments-restrictedBABs subsidy receivable-restricted

Capital assets, not being depreciated or amortized:

Liabilities and Net Position

Capital assets, net of accumulated depreciation

Receivable from City of Hillsboro

Prepaid pension obligation

Unamortized bond issuance costsAssessments and contracts receivable

Receivable from Washington CountyReceivable from City of Forest GroveReceivable from Clean Water Institute

Investment in joint venture

43


Combining Schedule of Revenues, Expenses


Sanitary Surface WaterSewer Management Total

Operating revenues:$ 100,519,134 9,786,430 110,305,564

1,745,080 - 1,745,080 4,339,738 707,939 5,047,677

Total operating revenues 106,603,952 10,494,369 117,098,321

Operating expenses:23,762,775 6,081,920 29,844,695

4,588,517 150,424 4,738,941 7,007,149 936,375 7,943,524 4,111,536 333,195 4,444,731 1,365,536 700,769 2,066,305

454,727 61,752 516,479 575,899 56,343 632,242

3,593,948 13,202 3,607,150 33,382,098 6,462,370 39,844,468

429,817 - 429,817

79,272,002 14,796,350 94,068,352

27,331,950 (4,301,981) 23,029,969

506,964 10,187 517,151 (3,695,822) (77,807) (3,773,629)

(77,434) - (77,434) (8,241,335) - (8,241,335) (2,134,039) (710,880) (2,844,919)

(13,641,666) (778,500) (14,420,166)

13,690,284 (5,080,481) 8,609,803

33,188,737 3,531,668 36,720,405

46,879,021 (1,548,813) 45,330,208

438,490,830 84,135,874 522,626,704

$ 485,369,851 82,587,061 567,956,912

Income (loss) before contributions

Capital contributions - SDC's and developer

Change in net position

Net position, beginning of period

Net position, end of period

Total nonoperating revenues (expenses)

ChemicalsDepreciation and amortizationAmortization of prepaid bond costs

Total operating expenses

Operating income (loss)

Nonoperating revenues (expenses):Investment incomeNet gain (loss) on disposal of capital assetsLoss on equity in joint ventureInterest expenseCapital donations - intergovernmental agreements

Insurance


and Changes in Net Position

Service feesAmortization of prepaid bond premiumOther

Labor and fringe benefitsUtilitiesProfessional servicesSuppliesAdministrative costsRepairs and maintenance

44


Combining Schedule of Cash Flows


Sanitary Surface WaterSewer Management Total

$ 99,080,968 9,670,779 108,751,747 (22,344,490) (2,252,314) (24,596,804) (23,369,550) (6,081,920) (29,451,470)

4,375,817 707,939 5,083,756

Net cash from operating activities 57,742,745 2,044,484 59,787,229

(930,240) - (930,240)

(45,265,585) (641,692) (45,907,277) (22,605,000) - (22,605,000) (12,683,598) - (12,683,598)

19,086 7 19,093 27,990,358 (252,888) 27,737,470

74,264 - 74,264

financing activities (52,470,475) (894,573) (53,365,048)

495,115 10,188 505,303

4,837,145 1,160,099 5,997,244

187,358,672 4,706,958 192,065,630

$ 192,195,817 5,867,057 198,062,874

$ 54,677,071 3,452,967 58,130,038 137,518,746 2,414,090 139,932,836

$ 192,195,817 5,867,057 198,062,874

$ 27,331,950 (4,301,981) 23,029,969

33,382,098 6,462,370 39,844,468 1,310 1,310

137,955 - 137,955 (1,453,217) - (1,453,217)

583,673 - 583,673 17,272 - 17,272 36,077 - 36,077

4,123 - 4,123

(1,442,289) (115,651) (1,557,940) (86,429) - (86,429)

(555,140) - (555,140) (213,020) - (213,020)

(1,618) (254) (1,872)

30,410,795 6,346,465 36,757,260

$ 57,742,745 2,044,484 59,787,229

$ 1,213,319 3,114,607 4,327,926 (77,434) - (77,434)

Interest paid on pension bonds

Cash flows from capital and related financing activities:

Cash flows from noncapital financing activities:

Cash flows from operating activities:Received from customersPayments to suppliersPayments to employees for servicesOther operating revenue

Acquisition and construction of capital assets

Total cash and investments

Reconciliation of operating income (loss) to net cash fromoperating activities:

Interest on investments

Principal paid on bonds Interest paid on bonds

Proceeds from sale of capital assets

Net cash from capital and related

Cash flows from investing activities:

Interest received on assessments and contractsCapital contributed by customers and cities

Prepaid expensesAccrued expenses

Operating income (loss)

Adjustments to reconcile operating income (loss) to net cash

Net increase (decrease) in cash and investments

Cash and investments, beginning of year

Cash and investments, end of year

Unrestricted cash and investmentsRestricted cash and investments

Amortization of prepaid electric

from operating activities:

Loss on equity in joint venture

Depreciation and amortization

Total adjustments

Net cash from operating activities

Schedule of non-cash capital and related financing activities:Contributions of capital assets by developers

Accounts payable

Amortization of prepaid bond costsAmortization of prepaid bond premium/discountAmortization of prepaid pension obligationPostemployment benefit costs other than pensionsBABs subsidyDeferred revenueChanges in assets and liabilities:

Accounts receivableMaterials and supplies inventory

SUPPLEMENTAL

INFORMATION Budgetary Schedules


DESCRIPTION OF BUDGETARY FUNDS

June 30, 2013

Legal requirements set forth in Oregon Budget Law require the District to prepare and adopt a budget by individual funds. Therefore, activities of the District, for budgetary and legal purposes, are accounted for in the funds described below.

General Fund

This fund accounts for the District’s normal recurring sanitary sewer operations. The primary source of revenue is sewer service fees.

Storm and Surface Water Management (SWM) Fund

The SWM Fund provides for storm and surface water management in the Tualatin River Basin. Its primary source of revenue is SWM service fees.

Master Plan Update Debt Service Fund

The Master Plan Update Debt Service Fund accounts for the redemption of sewer revenue bonds and interest thereon. The primary resource is sewer revenues transferred from the General Fund.

Revenue Pension Bond Debt Service Fund

The Revenue Pension Bond Debt Service Fund accounts for the redemption of sewer revenue pension related bonds and interest thereon. The primary resource is sewer revenues transferred from the General Fund.

Liability Reserve Fund

The Liability Reserve Fund accounts for the District’s expense incurred under its self-insurance programs for:

• Fire loss, property damage, and all risks (theft, vandalism, etc.) up to a self-insured retention limit of $1.0 million.

• Workers’ compensation claims relating to job injuries.

The primary resources are interest earnings, insurance settlements and transfers from other funds.

Capital Expenditure Reserve (Sanitary Sewer) Fund

The Capital Expenditure Reserve (Sanitary Sewer) Fund accounts for the recovery of capital costs for maintenance and upkeep of the sewerage system. The primary resources are connection fees and earnings on investments.

45


DESCRIPTION OF BUDGETARY FUNDS (Continued)

June 30, 2012

Sanitary Sewer LID Construction Fund

The LID Construction Fund accounts for sanitary sewer capital construction expenditures for benefited property owners. The primary resources are from the sale of bonds or bond anticipation notes and assessment collections.

Surface Water Management LID Construction Fund

The LID Construction Fund accounts for surface water management construction expenditures for benefited property owners. The primary resources are from the sale of bonds or bond anticipation notes and assessment collections.

Sanitary Sewer Construction Fund

The Sanitary Sewer Construction Fund provides for the construction of projects financed from a combination of revenue bond proceeds, sanitary system development charges and transfers from the General Fund.

Tualatin Basin Water Supply Capital Project Construction Fund

The Tualatin Basin Water Supply Capital Project Construction Fund provides financing for capital improvements to provide additional water volume in the Tualatin River, enabling continued compliance with the water quality requirements. The partners funding the project include the District, the Cities of Hillsboro and Beaverton, the Tualatin Valley Water District and the US Bureau of Reclamation.

Capital Expenditure Reserve Storm and Surface Water Management Fund

The Capital Expenditure Reserve Storm and Surface Water Management Fund provides for the construction and extension of storm water systems and facilities. Primary revenue resources are connection fees and interest earnings.

Surface Water Management Construction Fund

The Surface Water Management Construction Fund provides for the construction of projects primarily financed by system development charges and transfers from the SWM operating fund.

46

47


General Fund 101

Schedule of Revenues and Expenditures - Budget and Actual


VarianceInitial Final positive

Budget Budget Actual (negative)

Revenues:Sewer service fees $ 97,853,926 97,853,926 100,621,135 2,767,209 Interest earned 300,936 300,936 165,196 (135,740) Septage charges 485,921 485,921 607,549 121,628 Plan check fees 49,872 49,872 133,663 83,791 Grants, contributions, & assessments 300,000 300,000 439,237 139,237 Other 760,000 760,000 1,829,596 1,069,596

Total revenues 99,750,655 99,750,655 103,796,376 4,045,721

Expenditures:Personnel Services 33,612,957 33,612,957 29,255,242 4,357,715 Materials and services 24,100,100 25,100,100 24,440,606 659,494 Capital outlay 2,749,200 2,749,200 1,178,609 1,570,591 Contingency 9,069,339 8,069,339 - 8,069,339

Total expenditures 69,531,596 69,531,596 54,874,457 14,657,139

Excess of revenues over expenditures 30,219,059 30,219,059 48,921,919 18,702,860

Other financing sources (uses):Transfers from other funds 9,075,670 9,075,670 8,241,171 (834,499) Transfers to other funds (46,937,836) (46,937,836) (41,960,698) 4,977,138

Total other financing sources (uses) (37,862,166) (37,862,166) (33,719,527) 4,142,639

Net change in fund balance (7,643,107) (7,643,107) 15,202,392 22,845,499

Fund balance, beginning of year, as previously reported 41,482,632 41,482,632 44,447,213 2,964,581

Restatement (1) - - (26,208) (26,208)

Fund balance, beginning of year, as restated 41,482,632 41,482,632 44,421,005 2,938,373

Fund balance, end of year $ 33,839,525 33,839,525 59,623,397 25,783,872

(1) The District has restated its beginning fund balance to properly report prepaid electrity costs recognized on a budgetary basisas a decrease in expense in the prior year.

48


Storm and Surface Water Management Fund 201





Revenues:Stormwater service fees $ 9,541,962 9,541,962 9,686,945 144,983 Erosion control fees 160,632 160,632 170,660 10,028 Plan check fees 50,545 50,545 132,314 81,769 Interest earned 47,516 47,516 5,740 (41,776) Other 466,090 466,090 770,393 304,303

Total revenues 10,266,745 10,266,745 10,766,052 499,307

Expenditures:Other 200,000 200,000 32,829 167,171 Contingency 456,283 456,283 - 456,283

Total expenditures 656,283 656,283 32,829 623,454


Other financing (uses):Transfers to other funds (10,325,670) (10,325,670) (9,491,171) 834,499

Net change in fund balance (715,208) (715,208) 1,242,052 1,957,260

Fund balance, beginning of year 2,234,196 2,234,196 2,997,869 763,673


49


Master Plan Update Debt Service Fund 111




Budget Budget Actual (negative)Revenues:

Interest earned $ 148,611 148,611 35,973 (112,638) Build America Bonds subsidy 1,677,138 1,677,138 1,641,061 (36,077)

Total revenues 1,825,749 1,825,749 1,677,034 (148,715)

Expenditures:Debt payments 35,023,599 35,023,599 35,023,598 1 Contingency 1,751,180 1,751,180 - 1,751,180


Excess of expenditures over revenues (34,949,030) (34,949,030) (33,346,564) (1,899,896)

Other financing sources:Transfers from other funds 31,417,561 31,417,561 26,539,823 (4,877,738)

Net change in fund balance (3,531,469) (3,531,469) (6,806,741) (3,275,272)

Fund balance, beginning of year 19,029,114 19,029,114 23,048,315 4,019,201

Fund balance, end of year $ 15,497,645 15,497,645 16,241,574 743,929

50


Revenue Pension Bond Debt Service Fund 114





Revenues:Interest earned $ 6,019 6,019 1,188 (4,831)

Expenditures:Debt payments 1,195,240 1,195,240 1,195,240 - Contingency 59,762 59,762 - 59,762

Total expenditures 1,255,002 1,255,002 1,195,240 59,762

Excess of expenditures over revenues (1,248,983) (1,248,983) (1,194,052) 54,931

Other financing sources:Transfers from other funds 1,195,240 1,195,240 1,195,240 -

Net change in fund balance (53,743) (53,743) 1,188 54,931

Fund balance, beginning of year 527,053 527,053 580,992 53,939

Fund balance, (deficit) end of year $ 473,310 473,310 582,180 108,870

51


Liability Reserve Fund 102





Revenues:Interest earned $ 31,677 31,677 10,162 (21,515) Payments from third parties 5,382 5,382 - (5,382) Insurance reimbursement - - 38,110 38,110 Worker's compensation refunds 25,832 25,832 - (25,832)

Total revenues 62,891 62,891 48,272 (14,619)

Expenditures:Claim costs 810,000 810,000 68,815 741,185 Contingency 324,000 324,000 - 324,000

Total expenditures 1,134,000 1,134,000 68,815 1,065,185

Excess of expenditures over revenues (1,071,109) (1,071,109) (20,543) 1,050,566

Other financing sources:Transfers from other funds 250,000 250,000 250,000 -

Net change in fund balance (821,109) (821,109) 229,457 1,050,566



52


Capital Expenditure Reserve Sanitary Sewer Fund 107





Revenues:Connection fees $ 9,060,830 9,060,830 31,649,985 22,589,155 Interest earned 63,355 63,355 90,479 27,124

Total revenues 9,124,185 9,124,185 31,740,464 22,616,279

Expenditures:Contingency 1,672,776 1,672,776 - 1,672,776


Other financing uses:Transfers to other funds (7,772,414) (7,772,414) (7,772,414) -

Net change in fund balance (321,005) (321,005) 23,968,050 24,289,055




53


Sanitary Sewer LID Construction Fund 108





Revenues:Assessment liens, principal $ 167,977 167,977 - (167,977) Interest earned 68,037 68,037 10,911 (57,126)

Total revenues 236,014 236,014 10,911 (225,103)

Expenditures:Capital outlay 200,000 200,000 16,190 183,810 Other 50,000 50,000 - 50,000 Contingency 100,000 100,000 - 100,000


Excess (deficiency) of revenues over expenditures and net change in fund balance (113,986) (113,986) (5,279) 108,707


Fund balance, end of year $ 1,531,795 1,531,795 1,649,436 117,641


54


Surface Water Management LID Construction Fund 208





Revenues:Interest earned $ 6,810 6,810 1,366 (5,444)

Expenditures:Capital outlay 10,500 10,500 - 10,500 Contingency 100,000 100,000 - 100,000

Total expenditures 110,500 110,500 - 110,500

Excess (deficiency) of revenues over expenditures and net change in fund balance (103,690) (103,690) 1,366 105,056


Fund balance, end of year $ 558,901 558,901 665,559 106,658


55


Sanitary Sewer Construction Fund 112





Revenues:Interest earned $ 934,484 934,484 192,232 (742,252) Contributions from developers 619,409 619,409 212,428 (406,981) Other 50,000 50,000 31,733 (18,267)

Total revenues 1,603,893 1,603,893 436,393 (1,167,500)

Expenditures:Capital outlay 51,486,005 51,486,005 44,487,392 6,998,613 Other 100,000 100,000 55,000 45,000 Contingency 5,148,600 5,148,600 - 5,148,600


Excess of expenditures over revenues (55,130,712) (55,130,712) (44,105,999) 11,024,713

Other financing sources (uses):Transfers from other funds 21,648,049 21,648,049 21,648,049 -

Net change in fund balance (33,482,663) (33,482,663) (22,457,950) 11,024,713

Fund balance, beginning of year 100,231,719 100,231,719 105,439,716 5,207,997



56


Tualatin Basin Water Supply Capital Project Construction Fund 115





Revenues:Interest earned $ 2,534 2,534 824 (1,710) Rental income - - 1,952 1,952 Contributions from partners 275,600 275,600 109,458 (166,142)

Total revenues 278,134 278,134 112,234 (165,900)

Expenditures:Capital outlay 400,000 400,000 158,934 241,066 Other 75,000 75,000 - 75,000 Contingency 23,750 23,750 - 23,750


Excess of expenditures over revenues (220,616) (220,616) (46,700) 173,916

Other financing sources:Transfers from other funds 199,400 199,400 100,000 (99,400)

Net change in fund balance (21,216) (21,216) 53,300 74,516




57


Capital Expenditure Reserve Storm and SurfaceWater Management Fund 207





Revenues:Connection fees $ 126,363 126,363 172,502 46,139 Interest earned 15,839 15,839 - (15,839) Other 75,000 75,000 - (75,000)

Total revenues 217,202 217,202 172,502 (44,700)

Expenditures:Contingency 52,500 52,500 - 52,500

Excess of revenues over expenditures 164,702 164,702 172,502 7,800

Other financing (uses):Transfers to other funds (350,000) (350,000) (350,000) -

Net change in fund balance (185,298) (185,298) (177,498) 7,800





Surface Water Management Construction Fund 212





Revenues:Other $ 50,000 50,000 - (50,000) Interest 31,677 31,677 3,136 (28,541) Reimbursement from developers 105,134 105,134 11,388 (93,746)

Total revenues 186,811 186,811 14,524 (172,287)

Expenditures:Capital outlay 2,727,500 2,727,500 1,469,847 1,257,653 Other 50,000 50,000 - 50,000

Contingency 138,875 138,875 - 138,875


Excess of expenditures over revenues (2,729,564) (2,729,564) (1,455,323) 1,274,241

Other financing sources:Transfers from other funds 1,600,000 1,600,000 1,600,000 -

Net change in fund balance (1,129,564) (1,129,564) 144,677 1,274,241


Fund balance, end of year $ 324,297 324,297 1,792,692 1,468,395


58

59


Reconciliation of Revenues and Expenditures(Budgetary Basis) to Increase in Net Position (GAAP Basis)


Fund Revenues Expenditures Net

101 General Fund $ 103,796,376 54,874,457 48,921,919 201 Storm and Surface Water Management Fund 10,766,052 32,829 10,733,223 111 Master Plan Update Debt Service Fund 1,677,034 35,023,598 (33,346,564) 114 Revenue Pension Bond Debt Service Fund 1,188 1,195,240 (1,194,052) 102 Liability Reserve Fund 48,272 68,815 (20,543) 107 Capital Expenditure Reserve (Sanitary Sewer) Fund 31,740,464 - 31,740,464 108 Sanitary Sewer LID Construction Fund 10,911 16,190 (5,279) 208 Surface Water Management LID Construction Fund 1,366 - 1,366 112 Sanitary Sewer Construction Fund 436,393 44,542,392 (44,105,999) 115 Tualatin Basin Water Supply Capital Project Construction Fund 112,234 158,934 (46,700) 207 Capital Expenditure Reserve Storm and Surface Water

Management Fund 172,502 - 172,502 212 Surface Water Management Construction Fund 14,524 1,469,847 (1,455,323)

$ 148,777,316 137,382,303 11,395,013

Add (deduct) items to reconcile to increase in net positionon a GAAP basis:

Expenditures capitalized 46,720,568 Interest capitalized 5,081,960 Bond principal paid 22,605,000 Contributions of capital assets 3,559,002 Contributions of intangible assets 768,924 Donation of Capital Assets (2,844,919) Loss on disposal of capital assets (3,847,893) Loss on equity in joint venture (77,434) Net postemployment benefits costs other than pension (17,272) Net accrued performance bonus 248,896 Depreciation (39,811,762) Amortization of intangibles (32,706) Amortization of prepaid bond costs (429,817) Amortization of prepaid bond premium 1,745,080 Amortization of prepaid pension costs (583,673) Accrued bond interest payable 290,544 Contract receivable from CWI 37,769 Prepaid electric -Durham 524,238 Amoritization of prepaid electric (1,310)

Increase in net position $ 45,330,208


STATISTICAL SECTION


STATISTICAL SECTION June 30, 2013

This part of Clean Water Services’ Comprehensive Annual Financial Report presents detailed information as a context for understanding what the information in the financial statements, note disclosures, and required supplementary information says about the District’s overall financial health. This section contains the following tables and information:

Financial Trends

These schedules contain trend information to help the reader understand how the District’s financial performance and well-being have changed over time.

Revenue Capacity

These schedules contain trend information to help the reader assess the District’s most significant local revenue source, the District sewer rate.

Debt Capacity

These schedules present information to help the reader assess the affordability of the District’s current levels of outstanding debt and the District’s ability to issue additional debt in the future.

Demographic and Economic Information

These schedules offer demographic and economic indicators to help the reader understand the environment within which the District’s financial activities take place.

Operating Information

These schedules contain service and infrastructure data to help the reader understand how the information in the District’s financial report relates to the services the District provides and the activities it performs.

Sources

Unless otherwise noted, the information in these schedules is derived from the Comprehensive Annual Financial Reports for the relevant year. The District implemented GASB Statement No. 34 in 2001; schedules presenting government-wide information include information beginning in that year.

60

FINANCIAL TRENDS

CLEAN W

ATER SER

VICES

(A Componen

t Unit of Washington County, O

regon)

Net Position by Component

Last Ten

Fiscal Yea

rs

Primary governmen

t2013

2012

2011

2010

2009

2008

2007

2006

2005

2004

(as restated

)(as restated

)(as restated

)(as restated

)

Net investmen

t in capital assets

$391,885,915

388,941,070

381,066,548

390,670,167

385,725,001

390,805,703

357,300,700

322,491,155

303,111,274

274,870,933

Restricted

96,440,900

68,909,370

61,775,675

49,038,025

42,178,008

23,253,984

27,282,621

56,394,449

57,006,435

55,585,840

Unrestricted

79,630,097

64,776,264

54,690,331

49,053,092

54,331,451

51,809,458

59,180,335

47,433,620

47,894,059

44,967,912

Total primary governmen

t net position

$567,956,912

522,626,704

497,532,554

488,761,284

482,234,460

465,869,145

443,763,656

426,319,224

408,011,768

375,424,685

Source: District financial records

61

Fiscal Year

CLEA

N W

ATER

SER

VICE

S (A

Com

pone

nt U

nit o

f Was

hing

ton

Coun

ty, O

rego

n)

Chan

ges i

n N

et P

ositi

onLa

st T

en F

isca

l Yea

rs

Fisc

al

Year

Ope

ratin

g Re

venu

esO

pera

ting

Expe

nses

Ope

ratin

g In

com

e

Tota

l N

onop

erat

ing

Reve

nues

/ (E

xpen

ses)

Inco

me/

(Los

s)

befo

re C

apita

l Co

ntrib

utio

nsCa

pita

l Co

ntrib

utio

nsCh

ange

in N

et

Posi

tion

2013

$11

7,09

8,32

194

,068

,352

23,0

29,9

69(1

4,42

0,16

6)8,

609,

803

36,7

20,4

0545

,330

,208

2012

107,

029,

050

90,5

54,0

1416

,475

,036

(6,5

98,3

45)

9,87

6,69

115

,217

,459

25,0

94,1

5020

1110

3,37

3,53

589

,766

,997

13,6

06,5

38(1

4,08

7,71

5)(4

81,1

77)

9,25

2,44

78,

771,

270

2010

96,3

29,0

8088

,092

,976

8,23

6,10

4(7

,809

,866

)42

6,23

86,

100,

586

6,52

6,82

420

0989

,584

,555

82,9

66,6

126,

617,

943

(6,0

14,7

92)

603,

151

15,7

62,1

6416

,365

,315

62

2008

84,7

53,8

0978

,282

,300

6,47

1,50

9(6

,036

,886

)43

4,62

321

,670

,866

22,1

05,4

8920

0781

,652

,086

74,0

18,6

327,

633,

454

(5,7

80,6

87)

1,85

2,76

717

,527

,076

19,3

79,8

4320

0677

,617

,042

70,5

75,1

127,

041,

930

(6,0

05,3

16)

1,03

6,61

417

,463

,719

18,5

00,3

3320

0573

,090

,466

63,3

91,3

799,

699,

087

(9,5

80,0

49)

119,

038

16,9

69,4

7717

,088

,515

2004

68,7

40,4

7060

,100

,215

8,64

0,25

5(1

0,69

1,04

0)(2

,050

,785

)10

,684

,427

8,63

3,64

2

Sour

ce: D

istric

t fin

anci

al re

cord

s

CLEA

N W

ATER

SER

VICE

S (A

Com

pone

nt U

nit o

f Was

hing

ton

Coun

ty, O

rego

n)

Ope

ratin

g Re

venu

es b

y So

urce

Last

Ten

Fis

cal Y

ears

Fisc

al Y

ear

Serv

ice

Fees

Oth

erSu

btot

alSe

rvic

e Fe

esO

ther

Subt

otal

Dist

rict T

otal

2013

$10

0,51

9,13

46,

084,

818

106,

603,

952

9,78

6,43

070

7,93

910

,494

,369

117,

098,

321

2012

92,4

98,3

595,

031,

139

97,5

29,4

988,

759,

882

739,

670

9,49

9,55

210

7,02

9,05

020

1190

,102

,698

4,75

1,45

694

,854

,154

7,90

0,10

861

9,27

38,

519,

381

103,

373,

535

2010

85,9

56,6

602,

612,

125

88,5

68,7

857,

137,

108

623,

187

7,76

0,29

596

,329

,080

2009

80,4

39,2

841,

752,

735

82,1

92,0

196,

623,

154

769,

382

7,39

2,53

689

,584

,555

2008

76,2

46,3

571,

049,

813

77,2

96,1

706,

803,

780

653,

859

7,45

7,63

984

,753

,809

2007

71,5

64,6

702,

290,

158

73,8

54,8

286,

958,

589

838,

669

7,79

7,25

881

,652

,085

2006

68,3

79,6

301,

515,

735

69,8

95,3

656,

836,

082

885,

595

7,72

1,67

777

,617

,043

2005

63,5

46,2

491,

875,

368

65,4

21,6

176,

841,

301

827,

548

7,66

8,84

973

,090

,466

63

2004

59,8

50,8

061,

571,

120

61,4

21,9

266,

605,

777

712,

767

7,31

8,54

468

,740

,470

Sour

ce: D

istric

t fin

anci

al re

cord

sSani

tary

Sew

er F

unds

Stor

m/S

urfa

ce W

ater

Man

agem

ent F

unds

CLEA

N W

ATER

SER

VICE

S (A

Com

pone

nt U

nit o

f Was

hing

ton

Coun

ty, O

rego

n)

Ope

ratin

g Ex

pens

esLa

st T

en F

isca

l Yea

rs

Fisc

al

Year

Labo

r &

Bene

fits

Util

ities

Prof

essi

onal

Se

rvic

esCh

emic

als

Oth

er

Ope

ratin

g Ex

pens

es(1

)

Subt

otal

, be

fore

De

prec

iatio

n/Am

ortiz

atio

nDe

prec

iatio

n/Am

ortiz

atio

nTo

tal O

pera

ting

Expe

nses

2013

$29

,844

,695

4,73

8,94

17,

943,

524

3,60

7,15

08,

089,

574

54,2

23,8

8439

,844

,468

94,0

68,3

5220

1229

,997

,509

4,77

5,98

97,

547,

526

3,27

4,77

97,

677,

188

53,2

72,9

9137

,281

,023

90,5

54,0

1420

1129

,237

,212

4,64

8,20

77,

746,

575

3,06

2,87

77,

119,

112

51,8

13,9

8337

,953

,014

89,7

66,9

9720

1028

,574

,294

4,75

1,02

28,

288,

032

3,16

1,18

17,

953,

642

52,7

28,1

7135

,364

,805

88,0

92,9

7620

0927

,711

,838

4,63

3,18

27,

735,

526

3,01

8,49

27,

197,

134

50,2

96,1

7232

,670

,440

82,9

66,6

1220

0824

,573

,218

5,03

2,35

27,

185,

849

2,80

3,78

47,

261,

233

46,8

56,4

3631

,425

,864

78,2

82,3

0020

0722

,937

,504

4,58

1,05

87,

093,

836

2,33

1,91

66,

329,

670

43,2

73,9

8530

,744

,648

74,0

18,6

3320

0621

,900

,082

4,15

1,25

76,

158,

026

2,25

5,50

15,

237,

368

39,7

02,2

3330

,872

,878

70,5

75,1

1120

0520

,717

,588

3,67

1,16

26,

002,

941

1,71

4,39

74,

839,

524

36,9

45,6

1226

,445

,767

63,3

91,3

79

64

2004

19,7

10,3

253,

580,

471

5,70

6,71

61,

803,

209

4,81

2,38

435

,613

,105

24,4

87,1

1060

,100

,215

(1) O

ther

Ope

ratin

g Ex

pens

es in

clud

e su

pplie

s, a

dmin

istra

tive

cost

s, re

pairs

and

mai

nten

ance

, ins

uran

ce a

nd a

mor

tizat

ion

of p

repa

id b

ond

cost

s.

Sour

ce: D

istric

t fin

anci

al re

cord

s

CLEA

N W

ATER

SER

VICE

S (A

Com

pone

nt U

nit o

f Was

hing

ton

Coun

ty, O

rego

n)

Non

oper

atin

g Re

venu

es a

nd E

xpen

ses

Last

Ten

Fis

cal Y

ears

Fisc

al

Year

Inve

stm

ent

Inco

me

Gai

n/Lo

ss o

n di

spos

al o

f as

sets

Oth

erIn

tere

st

Expe

nse

Tota

l N

onop

erat

ing

Expe

nses

2013

$51

7,15

1(3

,773

,629

)(2

,922

,353

)(8

,241

,335

)(1

4,42

0,16

6)20

121,

562,

181

(115

,549

)(9

94,7

50)

(7,0

50,2

27)

(6,5

98,3

45)

2011

1,49

7,43

354

,443

(4,4

64,3

23)

(11,

175,

268)

(14,

087,

715)

2010

1,38

6,56

732

,256

(70,

163)

(9,1

58,5

26)

(7,8

09,8

66)

2009

2,29

1,29

975

,584

(70,

066)

(8,3

11,6

09)

(6,0

14,7

92)

2008

3,08

2,02

1(5

36)

(81,

703)

(9,0

36,6

68)

(6,0

36,8

86)

2007

4,64

2,64

3(3

42,0

09)

98,9

10(1

0,18

0,23

1)(5

,780

,687

)20

063,

323,

195

1,55

5,03

513

0,02

3(1

1,01

3,56

9)(6

,005

,316

)20

052,

006,

502

83,4

070

(11,

669,

958)

(9,5

80,0

49)

65

2004

1,09

0,19

017

8,80

223

,167

(11,

983,

199)

(10,

691,

040)

Sour

ce: D

istric

t fin

anci

al re

cord

s

REVENUE CAPACITY

CLEAN W

ATER SER

VICES

(A Componen


regon)

Monthly Sewer an

d Storm

/Surface W

ater Rates

Last Ten

Fiscal Yea

rs

2013

2012

2011

2010

2009

2008

2007

2006

2005

2004

Sewer Rates

Residential Customers

Base Charge

$24.37

23.52

22.46

21.30

20.12

19.14

18.46

17.81

17.21

16.63

(per Equivalen

t Dwelling Unit)

Usage Charge

$1.62

1.56

1.50

1.42

1.35

1.31

1.27

1.23

1.19

1.15

(per CCF = 748 gallons)

Total A

verage M

onthly Charge

$37.33

36.00

34.46

32.66

30.95

29.62

28.62

27.65

26.73

25.83

(at 8,000 gallons average)

Industrial Customers

Usage Charge

$2.740

2.640

2.530

2.400

2.273

2.175

2.101

2.030

1.961

1.895

(per 100 cu. ft. of metered

discharge)

Chem

ical Oxygen Dem

and Charge

$0.141

0.136

0.130

0.123

0.117

0.112

0.108

0.104

0.100

0.097

(per pound over 800 m

g/L)

Suspen

ded

Solids Charge

$0.215

0.199

0.190

0.190

0.180

0.172

0.166

0.160

0.155

0.150

(per pound over 400 m

g/L)

Surface / Storm

Water Rates

Service Charge

$5.75

5.25

4.75

4.25

4.00

4.00

4.00

4.00

4.00

4.00

(per Equivalen

t Service Unit)

The District's Board of Directors is authorized under state statute to fix fees and charges for connection to and use of

the public sew

er system by properties that are served by, or are capable of being served

by the District's sewage

disposal system.

Source: D

istrict records

66

Fiscal Year

CLEAN W

ATER SER

VICES

(A Componen


regon)

System Development Charges an

d Revenues

Last Ten

Fiscal Yea

rs

Fiscal year

Percent

Percent

Percent

ended

Connection

Total

increase

Connection

Total

increase

Connection

Total

increase

June 30

fee

amount

(decrease)

fee

amount

(decrease)

fee

amount

(decrease)

2013

$500

$172,558

7.00

%$

4,665

$31,649,985

171.17

%$

5,165$

31,822,543

168.93

%2012

500

161,269

57.76

4,500

11,671,613

61.09

5,000

11,832,882

61.04

2011

500

102,221

(1.89)

4,100

7,245,462

(20.65)

4,600

7,347,683

(20.44)

2010

500

104,193

18.46

3,600

9,131,098

20.29

4,100

9,235,291

20.26

2009

500

87,957

(67.12)

3,100

7,591,185

(3.52)

3,600

7,679,142

(5.61)

2008

500

267,527

(2.55)

2,800

7,868,133

(8.16)

3,300

8,135,660

(7.99)

2007

500

274,522

(9.80)

2,700

8,567,662

(26.16)

3,200

8,842,184

(25.74)

2006 (1)

500

304,336

(36.41)

2,600

11,602,494

(22.22)

3,100

11,906,830

(22.66)

2005

500

478,590

65.76

2,500

14,916,159

60.22

2,900

15,394,749

60.39

2004

500

288,721

(15.44)

2,400

9,309,872

(27.07)

2,800

9,598,593

(26.77)

(1) As restated

Source: D

istrict records

67

Storm

/Surface W

ater Man

agement

Sanitary Sewer

Combined

CLEAN W

ATER SER

VICES

(A Componen


regon)

Ten Largest In

dividual Ratepayers

Curren

t Yea

r and Ten

Yea

rs Ago

Customer

Amount

%Customer

Amount

%Intel Corporation ‐ Ronler Acres Cam

pus

$ 5,273,468

4.78%

Intel Corporation ‐ Ronler Acres

$ 2,025,142

3.05%

Pacific Foods of Oregon

829,037

0.75%

Jireh Sem

iconductor, Inc.

416,001

0.63%

Intel Corporation ‐ Aloha Cam

pus

685,243

0.62%

Intel Corporation ‐ Aloha Cam

pus

303,924

0.46%

Resers Fine Foods ‐ Jenkins Rd

591,965

0.54%

Maxim

Integrated

Products

253,525

0.38%

Maxim

Integrated

Products

585,539

0.53%

Viasystem

s 189,131

0.28%

Jireh Sem

iconductor

391,050

0.35%

Pacific Foods of Oregon

83,882

0.13%

SolarW

orld Industries America Inc.

349,448

0.32%

Triquint Semiconductor

81,360

0.12%

Triquint Semiconductor

193,727

0.18%

Fujim

i Corporation

66,434

0.10%

Viasystem

s 172,487

0.16%

Resers Fine Foods ‐ Jenkins Rd

63,008

0.09%

TOK America

94,187

0.09%

Gray and Company

53,464

0.08%

Subtotal (10 largest industrial ratep

ayers)

9,166,151

8.31%

Subtotal (10 largest industrial ratep

ayers)

3,535,870

5.32%

Balance from other customers(1)

101,139,413

91.69%

Balance from other customers(1)

62,920,713

94.68%

Grand Totals

$ 110,305,564

100.00%

Grand Totals

$ 66,456,583

100.00%

(1) Includes Residen

tial Customers and W

holesale Customers (other cities).

Source: D

istrict financial records

Fiscal Year 2013

Fiscal Year 2004

68

DEBT CAPACITY

CLEAN W

ATER SER

VICES

(A Componen


regon)

Ratios of Outstanding Debt by Type

Last Ten

Fiscal Yea

rs

Fiscal year

General

Ban

croft

As a Share

ended

Obligation

Improvement

Revenue

Pension

Per

of Personal

June 30

Bonds

Bonds

Bonds

Bonds

Contracts

Amount

Cap

ita

Income

2013

$‐

‐ $

250,045,000

$

15,215,000

$

‐

$265,260,000

$

489

N/A

2012

‐

‐

272,385,000

15,480,000

‐

287,865,000

542

1.27%

2011

‐

‐

248,160,000

15,685,000

‐

263,845,000

497

1.23%

2010

‐

‐

268,425,000

15,835,000

‐

284,260,000

537

1.37%

2009

‐

‐

188,445,000

15,935,000

‐

204,380,000

393

0.94%

2008

‐

‐

147,830,000

15,990,000

‐

163,820,000

321

0.79%

2007

‐

‐

165,205,000

15,990,000

196,282

181,391,282

362

0.94%

2006

‐

‐

181,880,000

15,990,000

385,865

198,255,865

405

1.11%

2005

‐

‐

197,880,000

15,990,000

569,037

214,439,037

447

1.29%

2004

‐

‐

213,295,000

15,990,000

746,015

230,031,015

487

1.45%

N/A ‐ Inform

ation not available as of printing

Source: District financial records, Portland State Population Research Cen

ter, and Bureau

of Economic Analysis

Total

69


Pledged‐Revenue CoverageLast Ten Fiscal Years

2013 2012 2011 2010

OPERATING REVENUES(1):

Rate revenue $ 100,519,134 92,498,359 90,102,698 85,956,660

System development charges 31,649,985 11,671,613 7,245,462 9,131,098

Other revenue 2,660,567 1,656,815 2,219,722 1,581,278

Total Operating revenues 134,829,686 105,826,787 99,567,882 96,669,036

OPERATING EXPENSES(1):

Labor and fringe benefits 24,958,015 24,860,163 23,557,917 23,104,049

Utilities 4,588,517 4,610,517 4,507,906 4,603,445

Professional services 7,007,149 6,504,014 6,591,481 6,848,295

Supplies 4,111,536 3,584,252 3,099,887 3,610,806

Administrative costs 1,365,536 1,266,169 1,216,905 1,264,781

Repair and maintenance 454,727 415,946 278,912 349,032

Insurance 575,899 584,027 537,178 618,005

Chemicals 3,593,948 3,269,986 3,061,660 3,155,413

Total operating expenses 46,655,327 45,095,074 42,851,846 43,553,826

Net operating income 88,174,359 60,731,713 56,716,036 53,115,210

NONOPERATING INCOME (EXPENSE)(1):

Interest income 506,964 1,523,061 1,445,822 1,324,665

Other income (3,695,822) 19,356 54,443 45,158

Total nonoperating income (3,188,858) 1,542,417 1,500,265 1,369,823

Total available for debt service $ 84,985,501 62,274,130 58,216,301 54,485,033

DEBT SERVICE

SENIOR BONDS

1992 Revenue Bonds‐Series A $ ‐ ‐ ‐ ‐

1996 Revenue Bonds‐Series 1996 ‐ ‐ ‐ ‐

1997 Revenue Bonds‐Series A 10,205,200 10,199,500 10,202,750 10,206,963

2001 Revenue Bonds‐Series 2001 ‐ 2,654,750 4,393,600 4,385,056

2004 Revenue Bonds‐Series 2004 3,952,800 3,966,300 3,958,614 3,953,303

2009 Revenue Bonds‐Series 2009A 2,843,263 2,843,263 2,843,263 2,890,650

2010 Revenue Bonds‐Series 2010A 356,950 356,950 330,179 ‐

2010 Revenue Bonds‐Series 2010B 4,791,823 4,791,823 4,432,437 ‐

2011 Revenue Bonds‐Series 2011A 3,767,850 794,588 ‐ ‐

2011 Revenue Bonds‐Series 2011B 2,058,775 1,200,952 ‐ ‐

Total Senior Debt Service $ 27,976,661 26,808,126 26,160,843 21,435,972

Senior Debt Service Coverage 3.04 2.32 2.23 2.54

JUNIOR BONDS

1992 Revenue Bonds‐Series One $ ‐ ‐ ‐ ‐

1997 Revenue Bonds‐Series One 7,046,938 7,049,888 7,051,563 7,053,112

Total Junior Debt Service $ 7,046,938 7,049,888 7,051,563 7,053,112

Junior Debt Service Coverage 7.30 4.27 3.80 4.08

(1) As defined in Resolutions and Orders No. 87‐53, 89‐58, 92‐55, and 09‐7. Revenues and expenses reported are for Sanitary Sewer

activities only.

Source: District records

70

2009 2008 2007 2006 2005 2004

80,439,284 76,246,357 71,564,670 68,379,630 63,546,249 59,850,806

7,591,187 7,868,133 8,567,738 11,681,298 14,916,159 9,309,872

1,453,554 1,009,194 1,865,116 1,290,861 995,542 974,334

89,484,025 85,123,684 81,997,524 81,351,789 79,457,950 70,135,012

23,617,007 20,810,508 19,885,823 18,881,855 18,377,958 16,355,606

4,487,204 4,917,736 4,480,362 4,063,985 3,598,395 3,499,731

6,010,866 6,344,719 6,569,665 4,575,406 4,639,537 4,773,690

3,736,093 3,749,776 2,486,247 2,012,162 1,793,477 1,705,920

1,451,818 1,365,570 2,065,497 1,618,274 1,538,926 1,409,379

187,265 156,214 94,261 137,246 170,252 186,647

714,417 665,878 654,102 525,068 610,216 576,416

3,011,128 2,794,825 2,324,554 2,255,501 1,712,600 1,784,649

43,215,798 40,805,226 38,560,511 34,069,498 32,441,361 30,292,038

46,268,227 44,318,458 43,437,013 47,282,291 47,016,589 39,842,974

1,917,023 2,334,393 3,731,956 2,705,026 1,680,278 905,953

59,480 ‐ 21,489 ‐ ‐ ‐

1,976,503 2,334,393 3,753,445 2,705,026 1,680,278 905,953

48,244,730 46,652,851 47,190,458 49,987,318 48,696,867 40,748,927

3,093,000 7,776,000 2,322,212 7,468,425 7,466,785 7,465,145

2,620,152 2,615,930 2,619,305 2,615,833 2,619,890 4,035,992

7,112,181 2,423,631 7,878,594 2,733,500 2,735,761 2,737,786

4,377,488 4,383,188 4,382,688 4,383,887 4,381,888 4,381,788

1,336,177 1,331,978 1,332,577 1,333,077 1,346,758 ‐

‐ ‐ ‐ ‐ ‐ ‐

‐ ‐ ‐ ‐ ‐ ‐

‐ ‐ ‐ ‐ ‐ ‐

‐ ‐ ‐ ‐ ‐ ‐

‐ ‐ ‐ ‐ ‐ ‐

18,538,998 18,530,727 18,535,376 18,534,722 18,551,082 18,620,711

2.60 2.52 2.55 2.70 2.63 2.19

‐ ‐ ‐ ‐ 4,427,693 4,427,310

7,050,544 7,049,862 7,052,219 7,053,025 2,625,046 2,621,510

7,050,544 7,049,862 7,052,219 7,053,025 7,052,739 7,048,820

3.69 3.46 3.54 3.93 3.75 2.61

71

DEMOGRAPHICS AND ECONOMICS

72


Demographic StatisticsLast Ten Fiscal Years

Fiscal year Personalended Population income Per capita Unemployment

June 30 (estimated) (in thousands) income rate2013 542,845 N/A N/A 6.6%2012 536,370 23,042,656$ 42,639$ 7.2%2011 531,070 21,521,570 40,484 8.1%2010 529,710 20,537,924 39,142 9.0%2009 519,925 21,624,353 41,923 10.1%2008 511,075 20,598,236 40,481 5.0%2007 500,585 19,358,528 38,545 4.4%2006 489,785 17,885,150 36,443 4.5%2005 480,200 16,639,370 34,650 5.3%2004 472,600 15,918,356 33,559 6.5%

N/A - Information not available as of printing

Source - Portland State Population Research Center, Bureau of Economic Analysis, and Oregon Employment Department

73


Major Employment Industries in Washington CountyCurrent Year and Ten Years Ago

% of Total % of TotalConstruction 12,459 5% 12,995 5%Manufacturing:

Wood and Lumber 1,031 1,630Metals 2,964 2,625Food 1,594 1,745Rubber/Plastic 1,601 1,969Computer and Electronic Equipment/Instruments 26,951 26,210Machinery 3,658 3,552Other 6,381 7,862

Total Manufacturing 44,180 18% 45,593 20%Trade, Transportation, and Utilities:

Wholesale Trade 17,470 16,626Retail Trade 28,604 26,727Transportation and Utilities 3,738 4,840

Total Trade, Transportation, and Utilities 49,812 19% 48,193 22%Information:

Publishing 3,163 3,275Telecommunications 2,136 1,952Other (broadcasting, ISP's, etc.) 2,413 1,444

Total Information 7,712 3% 6,671 3%Financial Activities:

Finance and Insurance 10,945 9,326Real Estate 2,997 3,611

Total Financial Activities 13,942 6% 12,937 6%Professional and Business Services 38,558 15% 29,489 13%Educational Services 5,111 2% 3,958 2%Healthcare and Social Assistance 24,515 10% 17,559 8%Leisure and Hospitality 20,612 8% 17,874 8%Other Services (agriculture, repairs, private homes, misc.) 11,217 4% 11,367 5%Government (federal, state, and local) 21,756 9% 17,361 8%

TOTAL EMPLOYMENT 249,874 100% 223,997 100%

* Fiscal Year 2013 information includes data through 12/31/12

Source: Oregon Employment Department Labor Market Information System (OLMIS)

Annual Average 2013 * 2004

Annual Average

OPERATING

CLEA

N W

ATER

SER

VICE

S (A

Com

pone

nt U

nit o

f Was

hing

ton

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ty, O

rego

n)Ad

min

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ativ

e, S

uppo

rt a

nd O

pera

tiona

l Sta

ff FT

ELa

st T

en F

isca

l Yea

rs

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al y

ear

ende

dJu

ne 3

0N

umbe

rPe

rcen

tN

umbe

rPe

rcen

tN

umbe

rPe

rcen

tN

umbe

rPe

rcen

tN

umbe

rPe

rcen

t

2013

3110

%57

18%

192

61%

3210

%31

210

0%20

1234

11%

5217

%18

157

%49

15%

316

100%

2011

4013

%53

17%

175

55%

4815

%31

610

0%20

1042

13%

4915

%17

856

%49

16%

319

100%

2009

4213

%49

15%

178

56%

4916

%31

910

0%20

0838

12%

4916

%17

256

%48

16%

308

100%

2007

3411

%49

16%

164

54%

5418

%30

110

0%20

0644

15%

5819

%15

251

%44

15%

298

100%

2005

4315

%58

20%

150

51%

4315

%29

410

0%20

0443

15%

5218

%14

951

%46

16%

290

100%

Sour

ce:

Dist

rict r

ecor

ds

74

Adm

inis

trat

ive

staf

fTo

tal s

taff

Supp

ort s

taff

Ope

ratio

ns st

aff

Capi

tal s

taff

CLEA

N W

ATER

SER

VICE

S (A

Com

pone

nt U

nit o

f Was

hing

ton

Coun

ty, O

rego

n)

Sum

mar

y of

Tre

atm

ent P

lant

Cap

aciti

esFi

scal

Yea

r End

ing

June

30,

201

3

Annu

alAv

erag

eD

ry w

eath

erAv

erag

eW

et w

eath

erav

erag

edr

y w

eath

erde

sign

wet

wea

ther

desi

gnPe

ak d

ayPe

ak d

esig

nflo

w (M

GD

)flo

w (M

GD

)ca

paci

ty (M

GD

)1

flow

(MG

D)

capa

city

(MG

D)

1flo

w (M

GD

)flo

w (M

GD

)2

Durh

am25

.8

22

.7

30

.0

28

.9

47

.0

71

.9

14

0.0

Rock

Cre

ek31

.7

27

.7

45

.0

35

.7

57

.5

78

.8

20

0.0

Fore

st G

rove

3.8

2.

5

—

5.

0

20.0

17.5

20.0

Hills

boro

4.3

3.

4

—

5.

1

14.0

11.7

14.0

Dist

rict t

otal

s65

.6

56

.3

75

.0

74

.7

13

8.5

17

9.9

37

4.0

MG

D –

Mill

ion

Gal

lons

Per

Day

1Th

e de

sign

capa

city

stat

istic

s rep

ort s

yste

m fl

ows t

hat a

re tr

eate

d in

the

plan

ts a

nd re

flect

per

mit

requ

irem

ents

bas

ed o

n th

e tim

e of

the

year

.Th

e Di

stric

t ope

rate

s und

er se

para

te p

erm

its fo

r the

dry

wea

ther

and

wet

wea

ther

seas

ons.

The

dry

wea

ther

seas

on h

as m

ore

rest

rictiv

e pe

rmit

requ

irem

ents

and

requ

ires h

ighe

r qua

lity

trea

tmen

t of f

low

s. T

his r

esul

ts in

low

er sy

stem

cap

acity

in d

ry w

eath

er m

onth

s as c

ompa

red

to w

et w

eath

erca

paci

ty.

The

Fore

st G

rove

and

Hill

sbor

o tr

eatm

ent p

lant

s are

clo

sed

and

non-

perm

itted

dur

ing

the

dry

wea

ther

seas

on a

nd fl

ows a

re d

iver

ted

toRo

ck C

reek

.2

The

peak

des

ign

flow

refle

cts m

axim

um h

ydra

ulic

flow

thro

ugh

the

plan

ts.

Thes

e flo

ws m

ay n

ot b

e fu

lly tr

eate

d.

Sour

ce-D

istric

t rec

ords

Plan

t

75

CLEA

N W

ATER

SER

VICE

S(A

Com

pone

nt U

nit o

f Was

hing

ton

Coun

ty, O

rego

n)

Ope

ratin

g an

d Ca

pita

l Ind

icat

ors

Last

Ten

Fis

cal Y

ears

2013

2012

2011

2010

2009

2008

2007

2006

2005

2004

Was

tew

ater

Tre

atm

ent

Num

ber o

f Tre

atm

ent P

lant

s4

44

44

44

44

4N

umbe

r of P

ump

Stat

ions

4041

4141

4040

3939

3937

Dry

Wea

ther

Des

ign

Capa

city

(MG

D)75

7571

.371

.371

.371

.370

.269

67.9

67.9

Aver

age

Dry

Wea

ther

Flo

w (M

GD)

56.3

54.1

56.4

56.7

51.9

53.1

51.3

51.4

56.2

51.4

Unu

sed

capa

city

(mill

ions

of g

allo

ns)

1921

1515

1918

1918

1217

Perc

enta

ge o

f cap

acity

util

ized

75%

72%

79%

80%

73%

74%

73%

74%

83%

76%

Conv

eyan

ce S

yste

ms

Num

ber o

f Sys

tem

Dev

elop

men

t per

mits

5934

2544

5492

100

102

113

71N

umbe

r of C

onne

ctio

ns79

380

464

070

366

31,

004

1,20

31,

550

1,70

31,

545

Tota

l mile

s of s

ewer

line

832

837

826

811

796

791

790

770

759

711

Tota

l mile

s of s

torm

wat

er li

ne49

149

048

747

446

946

445

344

042

339

4

Dis

tric

t-W

ide

Estim

ated

Num

ber o

f EDU

's se

rvic

ed27

7,03

227

1,22

326

9,13

026

7,23

726

4,54

026

1,30

525

8,47

125

4,93

624

9,81

324

3,41

7

Oth

er P

rogr

ams

Rive

r Ran

gers

pro

gram

#

of S

tude

nts

4,25

83,

251

3,78

73,

883

3,72

54,

071

3,11

12,

531

2,94

22,

073

#

of S

choo

ls58

4754

4041

4836

1520

21St

orm

dra

in S

tenc

iling

#

of d

rain

s ste

ncile

d60

31,

191

1,11

31,

338

1,47

71,

049

2,43

72,

128

624

300

N/A

- in

form

atio

n no

t ava

ilabl

eM

GD

- Mill

ion

Gal

lons

Per

Day

EDU

- Eq

uiva

lent

Dw

ellin

g U

nit

Sour

ce-D

istric

t Rec

ords

Fisc

al Y

ear

76

AUDIT COMMENTS AND DISCLOSURES

REQUIRED BY STATE REGULATIONS

77

5499 AMY STREET • WEST LINN, OREGON 97068 • PHONE: (503) 723‐0300 • FAX: (503) 723‐9946 WWW.MERINACPAS.COM

INDEPENDENT AUDITOR’S REPORT REQUIRED BY OREGON STATE REGULATION

We have audited the basic financial statements of Clean Water Services, a component unit of Washington County, Oregon (the District), as of and for the year ended June 30, 2013 and have issued our report thereon dated November 27, 2013. We conducted our audit in accordance with auditing standards generally accepted in the United States of America.

Compliance As part of obtaining reasonable assurance about whether the District’s financial statements are free of material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts, and grants, including the provisions of Oregon Revised Statutes as specified in the Oregon Administrative Rules 162-10-000 through 162-10-320 of the Minimum Standards for Audits of Oregon Municipal Corporations, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion.

We performed procedures to the extent we considered necessary to address the required comments and disclosures which included, but were not limited to the following:

Deposits of public funds with financial institutions (ORS Chapter 295).

Indebtedness limitations, restrictions, and repayments.

Budgets legally required (ORS Chapter 294).

Insurance and fidelity bonds in force or required by law.

Programs funded from outside sources.

Highway revenues used for public highways, roads, and streets. The District does not receive highway funds.

Authorized investment of surplus funds. (ORS Chapter 294).

Public contracts and purchasing (ORS Chapters 279A, 279B, and 279C).

Accountability for collecting or receiving money by elected officials. The District does not have any elected officials collecting or receiving money.

CCEERRTTIIFFIIEEDDPPUUBBLLIICCAACCCCOOUUNNTTAANNTTSSAANNDDCCOONNSSUULLTTAANNTTSS

PARTNERS

KAMALA K. AUSTIN, CPA • TONYA M. MOFFITT, CPA

78

In connection with our testing, nothing came to our attention that caused us to believe the District was not in substantial compliance with certain provisions of laws, regulations, contracts, and grants, including the provisions of Oregon Revised Statutes as specified in the Oregon Administrative Rules 162-10-000 through 162-10-320 of the Minimum Standards for Audits of Oregon Municipal Corporations.

OAR 162-10-0230 Internal Control

Management of the District is responsible for establishing and maintaining effective internal control over financial reporting. In planning and performing our audit, we considered the District’s internal control over financial reporting as a basis for designing our auditing procedures for the purpose of expressing our opinion on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the District’s internal control over financial reporting. Accordingly, we do not express an opinion on the effectiveness of the District’s internal control over financial reporting.

A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct misstatements on a timely basis. A material weakness is a deficiency or combination of deficiencies in internal control, such that there is a reasonable possibility that a material misstatement of the entity’s financial statements will not be prevented, or detected and corrected on a timely basis.

Our consideration of internal control over financial reporting was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control over financial reporting that might be deficiencies, significant deficiencies or material weaknesses and therefore, there can be no assurance that all deficiencies, significant deficiencies, or material weaknesses have been identified. We did not identify any deficiencies in internal control over financial reporting that we consider to be material weaknesses, as defined previously.

This report is intended solely for the information and use of the Board of Commissioners, Oregon Secretary of State Audits Division, and management, and is not intended to be and should not be used by anyone other than these specified parties.

Merina & Company, LLP West Linn, Oregon November 27, 2013

Documents

CLEAN WATER SERVICES...CLEAN WATER SERVICES (A Component Unit of Washington County, Oregon) Comprehensive Annual Financial Report For the fiscal year ended June 30, 2013Combining Schedule