Popular Annual Financial Report 2008 by Northeast Ohio Regional Sewer District

once gray. now green.

2008 popular annual northeast ohio financial report regional sewer district

TABLE OF CONTENTS

Letter from the Executive Director

Profile of the District

District Officials

Major Achievements and Initiatives

Communities Served by the District

District Service Area Map

Historical Number of Customer Accounts

Annual Metered Billing Quantities

Largest Customers of the District

Revenues and Expenses

Financial Highlights

Investment Policy

Revenues, Expenses, and Changes in Net Assets

Capital Assets and Outstanding Debt

Capital Asset Statistics

Sewage Service Rates

Miscellaneous Operating Statistics

LETTER FROM THE EXECUTIVE DIRECTOR

September 22, 2009 The information in this unaudited Popular Annual Financial Report (PAFR) has been compiled from our 2008 Comprehensive Annual Financial Report (CAFR). This and other financial reports can also be found online at neorsd.org. We have presented this information in several formats to further our commitment to financial responsibility and transparency, which is especially important during these economically challenging times. On June 22, 1969, the Cuyahoga River caught fire and sparked national attention to the state of our environment. In the 40 years since, we have been proud of the role the Sewer District has played in the environmental rebirth of the river and Lake Erie, as we have seen a transformation from that gray and bleak outlook to a future of life and sustainability. So it was fitting that last year was also the first of our new Strategic Plan, which outlines our commitment to transparency, accountability and environmental stewardship through 2013. We are dedicated six goals over this five years, all of which will advance our missionâ&#x20AC;&#x201D;to serve our customers by leading effective wastewater and stormwater management that protects the health and environment of our region while enhancing quality of life. You can learn more about us and download a copy of our Strategic Plan at neorsd.org/about. The preparation of this report would not have been possible without the efficient and dedicated services of the entire staff of the Finance department. I would like to express our appreciation to all members of the departments who assisted and contributed to the preparation of this report, including the Communications team responsible for its design. Credit must also be given to the Board of Trustees for its unfailing support for maintaining the highest standards of professionalism in the management of the Districtâ&#x20AC;&#x2122;s finances.

Julius Ciaccia Executive Director

Northeast Ohio Regional Sewer District | 3

PROFILE OF THE DISTRICT

The Northeast Ohio Regional Sewer District is an independent political subdivision of and organized under the laws of the State of Ohio, specifically Chapter 6119 of the Ohio Revised Code. Originally named the Cleveland Regional Sewer District, it was created in 1972 for the purpose of assuming the operation and management of certain wastewater collection, treatment, and disposal facilities serving the Cleveland metropolitan area. Prior to 1972, these facilities were owned and operated by the City of Cleveland.

CREDIT: John Gonzalez

The Districtâ&#x20AC;&#x2122;s service area covers approximately 350 square miles. It encompasses 97% of the City of Cleveland and all or portions of 60 suburban communities in Cuyahoga and Summit Counties. The area contains a residential service population in excess of one million persons and includes a diverse group of service, information, biotechnology, manufacturing, and processing industries. The District treats more wastewater than any other wastewater treatment system in the State of Ohio.

4 | 40 years of progress along the Cuyahoga River

DISTRICT OFFICIALS

2008 Board of Trustees

(l. to r.) Mayor Gary W. Starr

Anthony D. Liberatore, Jr.

Mayor Thomas J. Longo, Vice President

Mayor Dean E. DePiero, Secretary

Ronald D. Sulik

Sheila J. Kelly

Darnell Brown, President

See our 2009 Board members and profiles at neorsd.org/board

Senior Staff

Julius Ciaccia Executive Director

F. Michael Bucci Deputy Executive Director

Jennifer Demmerle Director of Finance

Marlene Sundheimer Director of Law

Constance Haqq Director of Administration & External Affairs

Frank Greenland Director of Watershed Programs

Kellie Rotunno Director of Engineering & Construction

David McNeeley Director of Operations & Maintenance

Douglas Dykes Director of Human Resources

Humberto Sanchez Director of Information Technology

Northeast Ohio Regional Sewer District | 5

MAJOR ACHIEVEMENTS AND INITIATIVES for the year 2008

2009-2013 Strategic Plan aligns priorities with new vision In 2008, Executive Director Julius Ciaccia, along with the District’s leadership team, developed a plan to chart the organization’s direction for the next five years. The 20092013 Strategic Plan focuses the organization on greater service to our customers, stressing accountability, transparency, and environmental stewardship.

Safety, performance, reporting earn awards in 2008 During 2008 and 2009, the District’s three treatment plants received awards for the previous years’ performance from the National Association of Clean Water Agencies. Our Southerly, Easterly, and Westerly plants earned back-to-back (2007, 2008) Peak Performance Silver Awards, recognizing facilities with one or fewer National Pollutant Discharge Elimination System permit violations in a year. The Ohio Water Environment Association (OWEA) presented two Safety Awards to District departments—our Easterly facility, and our Collection Systems staff—in 2008 for their high safety standards and sound practices. For the 13th consecutive year, the Government Finance Officers Association of the United States and Canada awarded a Certificate of Achievement for Excellence in Financial Reporting for our 2007 Comprehensive Annual Financial Report. The GFOA also awarded its Distinguished Budget Presentation Award to the District for the second year in a row.

As we declare in our mission statement: We will serve out customers by leading effective wastewater and stormwater management that protects the health and environment of our region while enhancing quality of life. Our vision is to be the leading environmental organization that sustainably manages our region’s water resources to protect public health and promote economic development. The full five-year plan can be downloaded online at www.neorsd.org/about. New program aimed at improving management of Capital Improvement Plan’s data, resources During 2008, the District initiated a project to procure the services of a professional program manager to implement the 2009-2013 Capital Plan. Program Management will help the District manage and implement its nearly $1 billion capital improvement program and the associated available funds. The primary goal of Program Management is to improve the District’s efforts in providing an efficient and cost-effective management of information, data, and resources to better manage and implement its Capital Improvement Program. You can download the complete Capital Improvement Plan

from our website at www.neorsd.org/cip. Proposed 30-Year Combined Sewer Overflow (CSO) Program To date, the District has invested approximately $415 million on capital improvement projects for CSO control. Additional investments at District wastewater treatment plants and the construction of interceptors and associated intercommunity relief sewers projects, at a cost of approximately $475 million, have resulted in further reductions of CSO volume. In March 2005, the District Board approved a 30-year schedule to design and construct a $1.6 billion CSO Long Term Control Plan (LTCP) to limit pollution caused by CSOs. The CSO LTCP calls for the construction of 103 miles of tunnels and connecting sewers throughout 65 construction projects and is designed to reduce targeted annual CSO discharges by 88 percent within 20 years after construction. As of December 2008, the District estimates the CSO LTCP to cost $2.3 billion considering escalation.

ENVIRONMENTALSTEWARDSHIP|FISC 6 | 40 years of progress along the Cuyahoga River

Community outreach, meetings increase as stormwater management program evolves In 2008, the District procured services to help develop a Stormwater Management Program. The District’s Court Order required the District to “develop a detailed integrated capital improvement plan for regional management of wastewater collection and storm drainage”. The District has focused on the regional wastewater portion of this mandate, investing more than $2.3 billion since its inception on wastewaterrelated projects. To address the regional stormwater portion of this mandate, the District is currently engaged in a Regional Stormwater Management Implementation Project. This project is designed to outline the steps necessary for the District to assume responsibility for regional stormwater management, which will help the region better manage stormwater-related problems such as flooding, erosion, and nonpoint source pollution. The District is currently discussing the details of the proposed regional

stormwater management program with its member communities. Pending Board of Trustee approval of the proposed program, implementation is currently planned for mid-2010. Renewable-energy facility will reduce emissions, conserve resources u

Approximately 100,000 wet tons of biosolids (sewage sludge) are removed from the wastewater at the District’s three wastewater treatment plants on an annual basis. Of this amount, roughly 90% is burned in the District’s six multiple-hearth biosolids incinerators and the balance is hauled to a municipal solid waste landfill for disposal.

Renewable Energy Facility (REF) that will supply power generated by the incineration process to the Southerly WWTC. The new REF and incinerator facility

should be in service in 2013 and has a current total project cost estimate of approximately $197 million.

CREDIT: Jamie Danelishen

A District Residuals Management Study completed in 2005 determined that the District’s most cost effective long-term biosolids management option is to continue incineration, with landfilling as a secondary option. As a result, the District is undertaking a program to replace four existing incinerators located at the Southerly Wastewater Treatment Plant with three new state-of-the-art fluid bed incinerators. The final design of the project included a facility to house waste heat boilers and a turbine generator to create a

Our Southerly wastewater treatment plant currently operates four incinerators which are more than 35 years old, and are nearing the end of their useful service life. In 2013, they will be replaced by three new energy-efficient incinerators and the heat in the new incinerators’ exhaust gases will be used to generate electricity.

CALRESPONSIBILITY|FINANCIALTRANSPARENCY Northeast Ohio Regional Sewer District | 7

Communities served by the District and estimated population served NORTHEAST December 31, 2008OHIO REGIONAL SEWER DISTRICT COMMUNITIES SERVED BY THE DISTRICT AND ESTIMATED POPULATION SERVED DECEMBER 31, 2008 Estimated Service Municipality Population (1) SUBDISTRICT 1 Cleveland 437,047 SUBDISTRICT 2 Bath Township - (3) Beachwood 13,611 Bedford - (3) Bedford Heights - (3) Berea 18,494 Boston Heights 578 (4) Bratenahl 1,289 Brecksville 14,843 Broadview Heights 17,869 (2) Brook Park 18,994 Brooklyn 11,218 Brooklyn Heights 1,645 Cleveland Heights 46,159 Columbia Township 939 (3) Cuyahoga Heights 497 East Cleveland 20,324 Euclid 1,967 (2) Garfield Heights 29,009 Gates Mills 320 (2) Glenwillow - (4) Highland Heights 9,981 Highland Hills 1,244 Hudson 9,231 (2) Independence 7,636 Lakewood - (3) Linndale 99 Lyndhurst 14,201 Macedonia 8,192 Maple Heights 24,604 Mayfield Heights 18,487

Municipality

Mayfield Village Middleburg Heights Newburgh Heights North Randall North Royalton Northfield Northfield Center Township Oakwood Olmsted Falls Olmsted Township Orange Parma Parma Heights Pepper Pike Richfield Village Richfield Township Richmond Heights Sagamore Hills Township Seven Hills Shaker Heights Solon South Euclid Strongsville Twinsburg Twinsburg Township University Heights Valley View Walton Hills Warrensville Heights Willoughby Hills Total Subdistrict 2

Total estimated service population

Estimated Service Population (1)

3,335 16,149 2,427 810 6,409 3,810 4,380 3,052 8,549 6,753 544 81,480 21,448 2,156 3,267 1,102 3,694 7,942 11,550 27,250 162 22,697 27,713 203 13,155 2,181 2,383 14,107 590,139 1,027,186

(1) Based on 2000 U.S. Census Block Data as presented in the Northeast Ohio Areawide Coordinating Agency (NOACA) using the NEORSD Service Area Boundary. (2) Estimated population for that portion of the municipality within the service area of the District. (3) Service population not applicable. District serves commercial properties only. (4) Part of the community is not within the District service area. Service population to be determined by ongoing service area verification project. Source: District administrative records

8 | 40 years of progress along the Cuyahoga River

(2)

(2) (2) (2) (2)

(2) (2) (4) (2)

(2) (2) (3) (2)

(3)

WICKLIFFE EUCLID

WILLOUGHBY HILLS

HIGHLAND HEIGHTS

RICHMOND HEIGHTS

Lake Erie EAST CLEVELAND CLEVELAND HEIGHTS

SOUTH EUCLID

MAYFIELD

MAYFIELD HEIGHTS

GATES MILLS

LYNDHURST UNIVERSITY HEIGHTS BAY VILLAGE

PEPPER PIKE

LAKEWOOD

SHAKER HEIGHTS

ROCKY RIVER

BEACHWOOD CLEVELAND

NEWBURGH HEIGHTS CUYAHOGA HEIGHTS

WESTLAKE FAIRVIEW PARK

NORTH RANDALL

LINNDALE

HIGHLAND HILLS

ORANGE MORELAND HILLS

WARRENSVILLE HEIGHTS

BROOKLYN

NORTH OLMSTED

GARFIELD HEIGHTS

BROOKLYN HEIGHTS

BROOK PARK

BEDFORD HEIGHTS

MAPLE HEIGHTS

HUNTING VALLEY

WOODMERE

BENTLEYVILLE

BEDFORD SOLON PARMA OLMSTED TOWNSHIP

BEREA

MIDDLEBURG HEIGHTS

PARMA HEIGHTS

SEVEN HILLS INDEPENDENCE

VALLEY VIEW

WALTON HILLS

OAKWOOD

OLMSTED FALLS

GLENWILLOW NORTHFIELD VILLAGE BROADVIEW HEIGHTS STRONGSVILLE

NORTH ROYALTON

TWINSBURG MACEDONIA

BRECKSVILLE

NORTHFIELD CENTER TWP. RICHFIELD TWP. RICHFIELD TWP. LIVERPOOL TOWNSHIP

BRUNSWICK

HINCKLEY TOWNSHIP

BOSTON TOWNSHIP

TWINSBURG TOWNSHIP

BOSTON HEIGHTS

PENINSULA

RICHFIELD VILLAGE

HUDSON

BRUNSWICK HILLS TOWNSHIP BATH TOWNSHIP

EASTERLY WASTEWATER TREATMENT PLANT INTERCEPTOR SYSTEM

Easterly Interceptor Doan Valley Interceptor Dugway Interceptor Heights-Hilltop Interceptors & ICRS E.140th-Hayden/E.152nd-Ivanhoe Interceptors

Lakeshore-Nottingham Interceptors SOUTHERLY WASTEWATER TREATMENT PLANT INTERCEPTOR SYSTEM

Big Creek Interceptor Cuyahoga Valley Interceptor Mill Creek Interceptor Mill Creek Tunnel Under construction Southwest, West Leg Interceptors & ICRS Southerly Interceptor WESTERLY WASTEWATER TREATMENT PLANT INTERCEPTOR SYSTEM

Low Level Interceptor Northwest Interceptor Westerly Interceptor Walworth Run Interceptor

McMonagle Administration Building – 3900 Euclid Avenue Environmental & Maintenance Services Center – 4747 E. 49th Street Easterly Treatment Plant – 14021 Lakeshore Boulevard Southerly Treatment Plant – 6000 Canal Road Westerly Treatment Plant – 5800 W. Memorial Shoreway Easterly service area Southerly service area Westerly service area

FOR MORE INFORMATION, VISIT www.NEORSD.org / REVISED 6/09

COLUMBIA TOWNSHIP

SAGAMORE HILLS

Northeast Ohio Regional Sewer District | 9

Historical number of customer accounts 2006-2008 2003

2004

2005

2006

1999

2007

2000

2008

2001

2002

Subdistrict 1 132,541 Cleveland 137,746 (1)

133,054

129,428136,234130,616132,801128,142136,332

133,611

4 Master Meter4 - Suburbs (2) 4 175,652 Direct175,293 179,035 Service - Suburbs (1)

4 4 3 4 4 4 179,337170,032187,895171,712183,792174,264

4 175,194

175,656

179,039 Subtotal

179,341170,036187,899171,716183,795174,268

175,198

312,093

308,769306,270318,515304,517311,937310,600

308,809

Subdistrict 2

175,297

308,197 Total 313,043 Customers

(1) 2006 excludes inactive accounts. (2) The Master Meter OHIO Suburbs, which bill their customers separately, had approximately 16,624 accounts at the end of 2006. Master NORTHEAST REGIONAL SEWER DISTRICT Meter communities are East Cleveland, Hudson, Richfield Village and Summit County. The City of Hudson became a Master Meter ANNUAL METERED BILLING QUANTITIES community in 1998. Commencing January 2008, the City of East Cleveland became a direct service community billed by the City of Cleveland in SubDistrict II. LAST TEN YEARS

(IN THOUSANDS OF CUBIC FEET) Source: District accounting records.

Annual metered billing quantities (in thousands of cubic feet) 2006-2008 2003

2004

2005

2006 1999

2007 2000

2008 2001

2002

(1) 2000 through 2006 exclude inactive accounts. Subdistrict 1 (2) The Master Meter Suburbs, which bill their customers separately, had approximately 2,495,126 Cleveland 2,379,632 2,370,567 2,209,563 2,217,887 2,191,406 2,919,241 2,815,865 2,665,282 (3) 2,662,602 16,624 accounts at the end of 2006. Master Meter communities are East Cleveland, Hudson, Richfield Village and Summit County. The City of Hudson became a Subdistrict 2 Master Meter community in 1998. Commencing January 2008, the City of East Cleveland 2,287,825 Direct 2,241,819 2,288,026 (3) 2,215,147 2,250,184 2,237,084 Service - Suburbs 2,553,481 2,427,096 2,387,609 2,231,962 became a direct service community billed by the City of Cleveland in SubDistrict II. 311,185 Master 309,366 311,109 320,559 Meter - Suburbs (1) 312,566 (2) 288,738 357,254 Source: District accounting records. 2,599,010

195,815 289,805

296,942

2,551,185Subtotal 2,599,135

2,535,706 2,866,047

2,538,922 2,784,350

2,432,899 2,677,414

2,528,904

5,094,136 Total 4,930,817 Service Area 4,969,702

4,745,269 5,785,288

4,756,809 5,600,215 74

4,624,305 5,342,696

5,191,506

(1) Consumption of Master Meter Suburbs is presented at 80% of total consumption which is the billing basis. Commencing January 2008, the City of East Cleveland became a direct service community billed by the City of Cleveland in SubDistrict 2. Source: District accounting records.

10 | 40 years of progress along the Cuyahoga River

(1) Consumption of Master Meter Suburbs is presented at 80% of total

NORTHEAST OHIO REGIONAL SEWER DISTRICT LARGEST CUSTOMERS OF THE DISTRICT Largest customers AS OF DECEMBER 31, 2008 of the DistricT December 31, 2008 and NINE YEARS PRIOR 2008 CONSUMPTION MCF (1)

AMOUNT BILLED

RANK

PERCENTAGE OF OPERATING REVENUE

SUBDISTRICT 1 Cuyahoga Metropolitan Housing Agency (2) University Hospitals (2) Cleveland Clinic (2) Mittal Steel (ISG Cleveland) City of Cleveland Water Filtration Plants Cleveland Board of Education Cuyahoga County (2) Case Western Reserve University Metro Health Medical Centers Ferro Corporation (2) Dominion Cleveland Thermal Energy Cleveland State University (2) Veterans Administration Hospitals (2) Inland Waters of Ohio Property Management Rental Columbus Road Realty Holiday Inn (2) General Electric Company LTV Steel Synthetic Products Sherwin Williams Company Pure Tech Systems / Research Oil Company Clean Harbors of Cleveland Inc. Mt Sinai Medical Center Longwood Apartments Inc. RT Development Total Subdistrict 1

86,337.2 41,748.2 40,208.8 27,473.9 28,362.5 26,376.3 21,458.5 21,074.8 18,960.3 17,914.9 15,184.0 10,786.1 8,355.5 4,800.8 6,630.3 6,546.3 6,709.4 4,771.8 393,699.6

$3,889,068 $1,857,670 1,816,683 1,251,904 1,240,935 1,178,062 974,237 961,903 848,258 782,439 705,874 502,674 367,737 299,419 298,996 285,268 274,241 206,349 $17,741,717

1 2 4 5 6 8 9 10 12 13 15 16 17 19 20 21 22 26 -

2.3% 1.1% 1.1% 0.8% 0.7% 0.7% 0.6% 0.6% 0.5% 0.5% 0.4% 0.3% 0.2% 0.2% 0.2% 0.2% 0.2% 0.1% 10.7%

SUBDISTRICT 2 Ford Motor Corporation Aluminum Corporation of America NASA John H Glenn Research Center Forest City Management (2) Eaton Estates/ Nagy Park K & D Group Fairhill Towers LLC (Zehman & Wolfe Management) The Pearl Management Company General Motors Corporation Total Subdistrict 2

50,905.1 31,952.4 23,774.1 18,182.1 9,275.9 6,707.9 5,597.5 5,384.0 151,779.0

$1,823,571 1,204,973 899,633 736,551 344,754 248,945 218,730 201,822 $5,678,979

3 7 11 14 18 23 24 25 -

1.1% 0.7% 0.5% 0.4% 0.2% 0.1% 0.1% 0.1% 3.4%

545,478.6

$23,420,696

Grand Total

14.1%

(1) One (1) MCF = one thousand cubic feet = 7,480 gallons. (2) Amount represents Subdistrict 1 and Subdistrict 2 billings combined. Customer is listed in the Subdistrict where majority of consumption occurs. Source: District accounting records and City of Cleveland Division of Water billing records.

60 Northeast Ohio Regional Sewer District | 11

2008

Net assets at end of year

Amount

19,648

20,361

(713)

(3.5%)

1,260,299

1,239,938

20,361

1.6%

$1,279,947

$1,260,299

$19,648

1.6%

Change in net assets Net assets at beginning of year

2007

NORTHEAST OHIO REGIONAL SEWER DISTRICT

REVENUES thousands) Operating (in revenue consists of user charges for sewage service fees based on water consumption. Operating expenses reflect the cost of providing these services. For the year ended December 31, 2008: Management’s Discussion and Analysis 

Operating revenue increased by $7,102,943 (4.5%) compared to 2007. in The Condensed Statements of Revenues, Expenses and Changes Netincrease Assets was due mainly to higher billing rates in 2008. For the years ended December 31,  Non-operating revenue increased by $29,142 (0.18%). Non-operating revenue consists of interest (In Thousands) income, non-operating grants, and the change in fair value of investments. Interest income decreased by $702,589 (5.7%) due to lower interest rates on available balances for investment.Change The decrease in 2007 % fair value of investments for 2008 was $824,991 2008 (26.2%) lower in 2007. ThisAmount decrease is expected to continue to the recession. Non-operating grant19,648 revenue increased $1,556,722 (713) (4,448.6%) due to 20,361 (3.5%) Change in net due assets the receipt of funds for Water Resource Sponsorship program in 2008. Net at beginning of year 1,239,938 20,361 of operating 1.6%  assets Operating expenses increased $7,695,986 (6.0%)1,260,299 compared to 2007. Main components expenses increased $1,279,947 $1,260,299 $19,648 1.6% Net assets at end of yearas follows: • Salaries and Wages increased $1,377,736 (4.1%) • Utilities increased $1,739,589 due toservice increasefees usage and higher rates.consumption. Operating revenue consists of user charges (9.2%) for sewage based on water • Professional and Contractual expenses increased $3,918,742 (26.5%) due mainly to an Operating expenses reflect the cost of providing these services. For the year ended December 31, 2008: adjustment to construction in progress account related to costs of studies initially capitalized that by needed to be reclass operatingto expenses in increase accordance GASB  Operating revenue increased $7,102,943 (4.5%)to compared 2007. The waswith due mainly Statement 51. to higher billing rates inNo. 2008.  Non-operating revenue expensesincreased increasedby$149,829 (0.58%). Non-operating Interest expense increased by of$173,553 $29,142 (0.18%). revenue consists interest (0.8%). Losses on equipment disposals decreased $287,912 (61.5%) due mainly to disposals of income, non-operating grants, and the change in fair value of investments. Interest income decreased obsolete equipment 2007.interest Non-operating grant expense increased $264,188 The (28.1%) due in to by $702,589 (5.7%) parts due toinlower rates on available balances for investment. decrease expenses for West Creek Restoration project. fair value of investments for 2008 was $824,991 (26.2%) lower in 2007. This decrease is expected to EXPENSES (indue thousands) continue to the recession. Non-operating grant revenue increased $1,556,722 (4,448.6%) due to the receipt of funds for Water Resource Sponsorship program in 2008. The following table on the increased next page$7,695,986 summarizes the changes in to revenues and expenses for of theoperating District Operating expenses (6.0%) compared 2007. Main components betweenexpenses 2007 andincreased 2006. as follows: • Salaries and Wages increased $1,377,736 (4.1%) • Utilities increased $1,739,589 (9.2%) due to increase usage and higher rates. • Professional and Contractual expenses increased $3,918,742 (26.5%) due mainly to an adjustment to construction in progress account related to costs of studies initially capitalized that needed to be reclass to operating expenses in accordance with GASB Statement No. 51.  Non-operating expenses increased $149,829 (0.58%). Interest expense increased by $173,553 (0.8%). Losses on equipment disposals decreased $287,912 (61.5%) due mainly to disposals of obsolete equipment parts in 2007. Non-operating grant expense increased $264,188 (28.1%) due to expenses for West Creek Restoration project. The following table on the next page summarizes the changes in revenues and expenses for the District 7 between 2007 and 2006.

12 | 40 years of progress along the Cuyahoga River 7

Direct-billed sewer service fees $13,832

Septic tank and municipal sludge fees $549

0.3%

8.3%

Direct-billed sewer service fees $13,063

Miscellaneous $285

8.2%

Septic tank and municipal sludge fees $525

0.3%

Miscellaneous $245

5.9%

City of Cleveland sewer service fees

85.3%

6.3%

74.9%

14.9%

City of Cleveland sewer service fees

Loss on disposals of equipment $469

$135,186

1.8%

85%

2007 total operating revenue $159,055

2008 total operating revenue $166,157

Interest revenue $11,715

Increase in fair value of investments $2,332

Other billing agents sewer service fees $10,036

$141,646

10.2%

0.2%

Other billing agents sewer service fees $9,845

Non-operating grants $1,592

2008 total non-operating revenue $15,639

2007 total non-operating EXPENSES $25,838

Non-operating grant-expenses $940

3.6% Interest expense on long-term debt $24,429

94.6%

2007 total operating EXPENSES $128,466

2008 total operating EXPENSES $136,161 Salaries & Depreciation wages $35,102

$44,448

32.6%

Benefits $11,494

4.2% 13.8%

33.7%

8.3%

26.3%

Utilities $20,633

15.2%

Professional & contractual $14,809

11.5%

Assets exceeded liabilities by $1,279,946,551

Retirements of debt principal were $37,502,945

4.6% Non-operating grants $35

0.2%

Utilities $18,893

14.7% Increase in fair value of investments $3,158

20.2% FINANCIAL HIGHLIGHTS as of 12.31.08

Non-operating grant-expenses $1,204

Interest expense on long-term debt $24,602

2007 total non-operating revenue $15,610

5.5%

8.4%

0.7%

94.7%

Other $7,046

Other $5,757

Professional & contractual $18,727

Benefits $10,732

Salaries & wages

Depreciation $33,725 $43,261

25.8%

Loss on disposals of equipment $181

2008 total non-operating EXPENSES $25,987

Operating revenue increased by $7,102,943

Interest revenue $12,417

79.6%

Operating expenses increased by $7,695,986

Northeast Ohio Regional Sewer District | 13

INVESTMENT POLICY The Northeast Ohio Regional Sewer District, giving due regard to the safety and risk of various types of investments, invests the maximum available funds in conformance with the Ohio Revised Code. The District looks to attain the highest interest rates at the time the investments are made. The District pursues to take advantage of investment interest as a significant supplement to the District’s basic sources of revenue to meet operational and capital demands. The District’s portfolio is designed and managed in a manner responsive to the public trust and consistent with the Ohio Revised Code. Investments shall be made with the following primary objectives, in order of importance: • • • • •

Preservation of capital and protection of principal Security of District funds and investments Maintenance of sufficient liquidity to meet operating needs Reasonable diversification of investments to minimize risk Maximization of return on the portfolio CDs $31.2

CDs $11.4

10.9%

3.9%

Government Agency Securities $175.0

Government Agency Securities $198.6

61.2% Star Ohio $79.8

27.9%

67.9% Star Ohio $82.3

28.2% 2008 INVESTMENTS $286,064,138

14 | 40 years of progress along the Cuyahoga River

2007 INVESTMENTS $292,351,602

Supplementary Information Schedule of Revenues, Expenses and Changes in Net Assets-Budget to Actual Revenues, expenses, and changes in net assets to actual) For the year ended December 31,(budget 2008 For the year ended December 31, 2008

Original Budget Revenues: User Charges: Billed Unbilled Other Revenues

$ 167,298,635 2,207,217

Total Revenues Expenses: Salaries and Wages Benefits Power Materials and Supplies Collection Fees Gas Chemicals Repairs and Maintenance Solids Handling Water Professional Services Insurance Judgments and Awards Other Operating Expenses Capitalized Construction Costs Depreciation Total Operating Expenses Excess of Revenues Over Operating Expenses

Final Budget

167,298,635 2,207,217

Variance with Final Budget Positive (Negative)

Actual

161,494,785 3,828,996 833,463

(5,803,850) 3,828,996 (1,373,754)

169,505,852

166,157,244

(3,348,608)

36,298,076 11,709,540 10,654,010 4,401,097 6,000,000 7,577,800 1,679,329 3,692,159 2,663,426 1,223,568 5,343,750 1,105,000 100,000 3,829,043 (3,494,734) 46,000,000

35,102,015 11,493,925 11,101,067 4,261,239 5,435,973 7,801,361 1,268,036 3,036,704 861,768 1,021,701 8,991,475 1,097,763 18,812 3,739,637 (3,518,438) 44,448,564

1,196,061 215,615 (447,057) 139,858 564,027 (223,561) 411,293 655,455 1,801,658 201,867 (3,647,725) 7,237 81,188 89,406 23,704 1,551,436

138,782,064

136,161,602

2,620,462

30,723,788

29,995,642 $

(728,146)

Northeast Ohio Regional Sewer District | 15

NORTHEAST OHIO REGIONAL SEWER DISTRICT CAPITAL assets AND OUTSTANDING DEBT Management’s Discussion and Analysis Capital Assets At the end of 2008, the District had $1,493,782,987 invested in capital assets. This amount represents a net increase of approximately $8.1 million, or 0.6% over 2007. Refer to Notes 2 and 5 to the audited financial statements for more detailed information on capital assets. Capital Assets at December 31, (Net of Depreciation, in Thousands)

2008 Land

Change Amount %

2007

$8,950

Construction in Progress Interceptor Sewer Lines Buildings, structures and improvements

194,457 776,495 368,730

184,276 764,732 377,308

10,181 11,763 (8,578)

5.6% 1.6% (2.3%)

Sewage treatment and other equipment

145,151

150,427

(5,276)

(3.5%)

Totals

NORTHEAST OHIO REGIONAL SEWER DISTRICT$8,090 $1,493,783 $1,485,693

0.6%

Management’s Discussion and Analysis Major additions in 2008, at cost included: Debt Mill Administration Creek Tunnel $1,300 Southerly/Westerly Interceptors Relining, Replacement Atand December 31, 2008 the District had total debt outstanding of $595,064,591 compared to 7,579 $603,361,142 at Hydraulics December 31, 2007. This represents a decrease of $8,296,551. Loans from the Ohio Water Development SoutherlyWater Incineration Improvements 3,149 Authority Pollution Control LoanDesign Fund decreased $1,182,251; total debt retirements were $37,502,945. Westerly Interceptor 1,521and the fair The carrying value ofBox the Culvert long-term portion of debt at December 31, 2008 was $564,606,888 value of the long-term debt was $562,806,201. Easterly Interceptor Hydra Improvements 2,190 Second Stage31, Aeration Tank Rehabhad total debt outstanding of $603,361,142 compared to 4,753 At December 2007 the District $481,874,602 at Easterly Affluent Screw Pumps Rehab an increase of $121,486,540. In 2007, loans from 1,674 December 31, 2006. This represents the Ohio Water Development Authority Water Pollution Control Loan Fund increased $485,093; total debt retirements were Heights/Hilltop Operational Evaluation Project 1,954 $31,076,641. The carrying value of the long-term portion of debt at December 31, 2007 was $572,365,514 Easterly Final Clarifier Rehab 1,206 and the fair value of the long-term debt was $575,670,008. Southerly Second State Settling Tank Rehab 4,476 This information should be read in conjunction with Note 6 to the audited financial statements Manhole Rehabilitation 1,052 for more detailed information on long-term debt. Roof Renovations-Southerly/EMSC/PSTN 1,361 MCI Repair/Vista Branch Design Outstanding Debt at December 31, 1,219 (In Thousands) Big Creek Improv Trestle #2 Replacement 2,805 Flats East Bank Project

2,439 2008

Revenue Bonds

$177,985

Ohio Water Development Authority Loans Water Pollution Control Loans Payable Total Debt Economic Factors

2007

$38,678 2006 $184,905 $63,525

0 417,080

194 418,262

573 417,777

$595,065

$603,361

$481,875

In February, 2007 the District’s Board of Trustees approved a schedule of rate increases for the five years 2007 through 2011. Effective March 1, 2007, rates charged to District customers increased 9.7 percent to 16 | 40 years of progress along $30.85 per mcf for Citythe of Cuyahoga Cleveland River customers, and 7.7 percent to $35.10 per mcf for the suburban customers. Effective January 1, 2008, rates charged to District customers increased 9.8 percent to $33.85 per

NORTHEAST OHIO REGIONAL SEWER DISTRICT Capital assetASSET statisticS CAPITAL STATISTICS 2006-2008 LAST TEN YEARS 2002 2003 2004 2005 Number of Buildings Operations Southerly Plant 36 36 35 36 Easterly Plant 16 18 18 18 17 17 17 Westerly Plant 17 Outlying Pump Buildings 6 6 5 5 Total Operations 75 77 75 76 Administration District Administration 2 2 1 1 Environmental Maintenance 4 and 4 Services Center 4 4 Total Offices 6 6 5 5 81 Total Buildings 83 80 81 0 3.75 0.53 Miles of Interceptor Sewers Installed Annually* Number of Outlying Systems Sewage Collection System Interceptor Sewers 21 & Tunnels21 21 Inter-Community 17Relief Sewers 17 18 27 27 25 Automated Regulators 7 6 Pumping Stations7 Force Mains 3 3 3 Total Sewage Collection System 75 75 73 Support Facilities Floatables Control5 Sites 5 5 Biofilter Odor Control Sites 5 5 7 Rain Gauge Sites25 25 25 Lakeview Dam 1 1 1 Total Support Facilities 36 36 38 111Total Outlying 111 Systems111 Acres of Land Operations 311.2 311.2 311.2 Southerly Plant 77.7 77.7 Easterly Plant 77.7 14.5 14.5 Westerly Plant14.5 Administration 1.5 1.5 2.6 District Administration Environmental14.7 Maintenance14.7 and Services14.7 Center Total Acres, Operations419.6 and Administration 419.6 420.7

5.04

1999 2006

2000 2007

2001 2008

3636 1718 1716 65 7675

3636 1718 1616 65 7575

3638 1718 1616 65 7577

21 34 55 8180

21 44 65 8180

21 44 65 8182

3.250.89

3.180.99

2.88 3.52

21 21 25 6 3 76

2021 1324 2925 76 23 7179

2021 1324 2925 76 33 7279

2021 1724 2925 76 33 7679

10 8 25 1 44 120

010 58 2525 11 3144 102 123

510 58 2525 11 3644 108 123

510 58 2525 11 3644 112 123

311.2 77.7 14.5

311.2 311.2 77.7 77.7 14.5 13.4

311.2 311.2 77.7 77.7 14.5 14.5

2.6 14.7 420.7

2.6 1.5 14.7 14.7 418.5 420.7

1.52.6 14.7 14.7 418.5 420.7

1.52.6 14.7 14.7 419.6 420.7

*Total interceptor sewers are in excess of 200 miles. Source: District accounting and engineering records.

7170

Northeast Ohio Regional Sewer District | 17

NORTHEAST OHIO REGIONAL SEWER DISTRICT Sewage service rates SEWAGE SERVICE RATES 1999-2008 RATE HISTORY - LAST TEN YEARS Fiscal Years During Which Rates Were Effective

SUBDISTRICT 1 Standard Homestead (2) Rate (1) % Change Rate (1) % Change 6.4 6.7 7.4 7.5 7.6 7.1 9.5 9.6

24.50 26.60 27.95 29.40 30.95 32.60 35.10 37.85

4.5 8.6 5.1 5.2 5.3 5.3 7.7 7.8

1999 19.60 7.4 13.35 2000 - 2002 21.10 7.7 14.25 2003 22.70 7.6 15.30 2004 24.40 7.5 16.45 2005 26.20 7.4 17.70 2006 28.10 7.3 18.95 2007 30.85 9.8 20.75 2008 33.85 9.7 DISTRICT 22.75 NORTHEAST OHIO REGIONAL SEWER EGIONAL SEWER DISTRICT NORTHEAST OHIO REGIONAL SEWER DISTRICT SEWAGE SERVICE RATES ATES SEWAGE SERVICE RATES RATE HISTORY - LAST TEN YEARS ST TEN YEARS RATE HISTORY LAST TENcubic YEARS (1) Per thousand feet (MCF) of water consumed.

SUBDISTRI Standard Rate (1) % Change R

(2) These rates were first established in the 1991 fiscal year. Fiscal SUBDISTRICT 12 SUBDISTRI SUBDISTRICT SUBDISTRICT 1 Years Fiscal Years SUBDISTRICT 1 SUBDISTRICT 2 During Which(2) Standard Homestead Standard Standard Homestead Standard Homestead (2) (2) During Which Industrial Waste Standard Homestead (2) Standard Homestead (2) Surcharge Rate Rates ate (1) % Change Rate (1)Were%Effective Change Rate (1) (1) % % Change Change Rate Rate (1) (1) % % Change Change Rate (1) % Change R Rates Were Effective Rate (1) % Change Rate (1) % Change Rate (1) % Change Rate (1) % Change An additional charge is billed to industrial and other types of customers discharging wastewater which contains substances r

19.60 21.10 22.70 24.40 26.20 28.10 30.85 33.85

7.4 1999 7.7 2000 - 2002 2003 7.6 2004 7.5 2005 7.4 2006 7.3 2007 9.8 2008 9.7

extensive from residential customers. 1999 7.4 13.35 treatment than 6.4 effluent19.60 24.50 4.5

13.35 6.4 24.50 4.5 16.70 6.4 19.60 7.4 13.35 6.4 24.50 4.5 16.70 6.4 The amount of this Industrial Waste Surcharge is calculated in accordance with formulas in the Rate Resolution wh 2000 - 2002 21.10 7.7 14.25 6.7 26.60 8.6 14.25 6.7 26.60 8.6 17.80 6.6 set forth 21.10 7.7 14.25 6.7 26.60 8.6 17.80 6.6 concentrations of suspended solids, biological oxygen and chemical oxygen based 2003 22.70 7.6 15.30 7.4 27.95on waste loading 5.1 determ 15.30 22.70 7.4 7.6 27.95 5.1demand 5.1demand 15.30 7.4 18.7027.95 5.1 18.70 5.1 or otherwise. 2004 7.5 5.2 5.3 16.45 24.40 7.5 7.5 24.40 29.40 16.45 7.5 5.2 7.5 16.45 19.7029.40 5.3 5.2 29.4019.70 Minimum Quarterly 7.6 Billing 2005 7.6 5.3 5.6 17.70 26.20 30.95 17.70 7.4 5.3 7.6 17.70 20.8030.95 5.6 5.3 30.9520.80 7.4 26.20 Each customer of the District is28.10 charged a minimum quarterly amount for sewage7.1 service equal to the class of service rate a 2006 7.3 18.95 32.60 5.3 5.3 18.95 7.1 32.60 5.3 21.90 5.3 28.10 7.3 18.95 7.1 32.60 5.3 21.90 metered usage9.5 of 1,000 cubic feet (7,480 gallons). 2007 9.5 7.7 7.5 20.75 water 35.10 7.7 9.5 20.75 23.5535.10 7.5 7.7 35.1023.55 30.85 9.8 30.85 20.75 9.8 2008 9.6 7.8 7.9 22.75 33.85 9.6 9.7 33.85 37.85 22.75 9.7 7.8 9.6 22.75 25.4037.85 7.9 7.8 37.8525.40

Source: District accounting records.

(1)feet Per(MCF) thousand cubicconsumed. feet (MCF) of water consumed. CF) of water consumed. (1) Per thousand cubic of water rates in were blished in (2) the 1991 Thesefiscal rates year. were (2) first These established the first 1991established fiscal year. in the 1991 fiscal year. Industrial Waste Surcharge Industrial Waste Surcharge

Anand additional charge is billed to industrial other to types of customers discharging which contains substanceswhich requiring moresubstances r additional chargeand iswastewater billed industrial and other types ofwastewater customers discharging wastewater contains o industrial other types of An customers discharging which contains substances requiring more extensive customers. treatment than effluenttreatment from residential customers. extensive than effluent from residential customers. nt from residential The amount of this Industrial Waste Surcharge is calculated in the accordance with formulas set forth the formulas Rate Resolution which take intoResolution account wh amount ofwith thisformulas Industrial calculated in accordance set forth in the Rate Waste Surcharge is calculated inThe accordance setWaste forth Surcharge in RateisResolution which take intoinwith account concentrations of suspended solids, biological oxygen demand and chemical oxygen demand based on waste loading determined by analysis suspended solids, biological and chemical oxygen demand based on waste loading determ lids, biological oxygen demandconcentrations and chemical of oxygen demand based on wasteoxygen loadingdemand determined by analysis or otherwise. or otherwise. Minimum Quarterly Billing Minimum Quarterly Billing Each customer of the District isfor charged a minimum quarterly sewage service equalfor to the of service ratetoapplicable to service the customer of the Districtequal is charged a minimum quarterly amount equal the class of rate a s charged a minimum quarterlyEach amount sewage service to theamount class offorservice rate applicable to sewage theclassservice metered water usage of 1,000 cubic feet (7,480 gallons). metered water usage of 1,000 cubic feet (7,480 gallons). ubic feet (7,480 gallons).

cords.

Source: District accounting records. Source: District accounting records.

18 | 40 years of progress along the Cuyahoga River

NORTHEAST OHIO REGIONAL SEWER DISTRICT MISCELLANEOUS OPERATING STATISTICS NORTHEAST OHIO REGIONAL SEWER DISTRICT MISCELLANEOUS OPERATING STATISTICs LAST TEN YEARS MISCELLANEOUS OPERATING STATISTICS 2005-2008 LAST TEN YEARS 2003

2004

2005

TREATMENT PLANT FLOW Billions of gallons of sewage TREATMENT PLANT FLOW treated per plant: Billions of gallons of sewage 40.4 40.6 Easterly treated per plant: 43.1 44.2 Southerly Easterly 11.0 Westerly 10.5 Southerly 94.5 95.3 Total Westerly Total

2006 1999

2007 2000

2008 2001

2002

1999

2000

2001

2002

38.4 46.6 10.4 95.4

34.4 38.0 45.8 40.0 38.0 9.611.4 40.0 89.8 89.4 11.4 89.4

35.3 40.9 45.3 39.2 40.9 10.0 12.0 39.2 90.6 92.1 12.0 92.1

36.1 36.7 43.8 38.9 36.7 10.8 11.1 38.9 90.7 86.7 11.1 86.7

37.3 37.2 37.3 10.4 37.2 84.9 10.4 84.9

12,633,690 12,740,642 12,754,011 Total sewage treated, in MCFs (1)

11,951,872 12,005,348

12,312,834 12,112,299

11,590,909 12,125,668

11,350,267

11,951,872

12,312,834

11,590,909

11,350,267

4,745,269 5,785,288

4,756,809 5,600,215

4,624,305 5,342,696 (3)

5,191,506

5,785,288

5,600,215

5,342,696 (3)

5,191,506

404435 70 46 435 50 38 46 17 38 20 44 66 8 9 66 7 9 - 620594 594 676620

396420 65 45 420 42 35 45 15 35 21 56 73 8 9 73 8 9 - 611582 582 662625

363400 57 48 400 47 35 48 14 35 19 46 76 14 10 76 16 10 58 634569 569 660595

382 54 382 48 54 41 48 19 41 20 19 9 20 9 573 573 634

620

625

595

634

Total sewage treated, in MCFs (1) 5,094,136 MCFs billed,4,930,817 total District 4,969,948 (4) MCFs billed, total District STAFFING LEVELS Number of employees: STAFFING LEVELS 383 Plant Operations404 & Maintenance 412 Number of employees: Engineering 61 66 66 Plant Operations & Maintenance Finance 49 50 49 Engineering Human Resources47 (2, 5) 44 21 Finance Information Technology (2) 20 18 19 Human Resources (2, 5) District Administration 18 17 43 Information Technology (2) Legal 8 8 9 District Administration Communications &-Community Relations 4 Legal Watershed Programs- (6) Communications & Community Relations Total 583 610 623 Watershed Programs (6) Total Budgeted employees, 637 677total District672 Budgeted employees, total District

(1) Conversion factor: 1 MCF (thousand cubic feet) = 7,480 gallons. (2) Reclassified from District Administration beginning in 2002. (1) Conversion factor: 1 MCF (thousand cubic feet) = 7,480 gallons. (3) Restated 2001 for consumption adjustment in the City of Cleveland, Subdistrict 1. (2) Reclassified from District Administration beginning in 2002. (4) Restated 2005 for City of Cleveland Subdistrict 2 and City of Cleveland Heights. (3) Restated 2001 for consumption adjustment in the City of Cleveland, Subdistrict 1. (5) Safety and Security reclassified from Human Resources to District Administration beginning in 2005. (4) Restated 2005 for City of Cleveland Subdistrict 2 and City of Cleveland Heights. (6) Watershed Programs reclassified from Plant Operations & Maintenance (5) Safety and Security reclassified from Human Resources to District Administration beginning in 2005. (6) Watershed Programs reclassified from Plant Operations & Maintenance Source: Various District records. Source: Various District records.

66 Sewer District 2009. Photo credits include Jamie Printed locally on recycled stock. Designed by John Gonzalez, Northeast Ohio Regional Danelishen, Jennifer Elting, John Gonzalez, Mike Gonzalez, Lutraila Hobbs, Carl Minardo, Dan Wiglusz, Michael Uva, and NEORSD archives.

NORTHEAST OHIO REGIONAL SEWER DISTRICT

M I S S I O N

We will serve our customers by leading effective wastewater and stormwater management that protects the health and environment of our region while enhancing quality of life. 3900 Euclid Avenue | Cleveland, OH 44115 | 216.881.2560 also available online : www.neorsd.org/annual08