Western Virginia Water Authority's CAFR 2017 by Western Virginia Water Authority

WESTERN VIRGINIA WATER AUTHORITY ROANOKE, VIRGINIA Comprehensive Annual Financial Report Year Ended June 30, 2017

Prepared by:

Tammy Lawfield Assistant Director of Finance Jennifer Meeks Senior Accountant

WESTERN VIRGINIA WATER AUTHORITY Comprehensive Annual Financial Report Year Ended June 30, 2017 Table of Contents Page Introductory Section Authority Officials Letter of Transmittal Organizational Chart Certificate of Achievement Financial Section Independent Auditors' Report Management's Discussion and Analysis Basic Financial Statements Exhibit 1 Statement of Net Position Exhibit 2 Statement of Revenues, Expenses and Changes in Net Position Exhibit 3 Statement of Cash Flows Notes to Financial Statements Required Supplementary Information Schedule of the Authority's Proportionate Share of the Net Pension Liability - VRS Schedule of Employer Contributions - VRS Notes to Required Supplementary Information - VRS Schedule of the Authority's Proportionate Share of the Net Pension Liability - Roanoke City Pension Plan Schedule of Employer Contributions - Roanoke City Pension Plan Schedule of OPEB Funding Progress Other Supplementary Information Supporting Schedules Schedule 1 Schedule of Revenues, Expenses and Changes in Net Position - Budget and Actual - Water Fund Schedule 2 Schedule of Revenues, Expenses and Changes in Net Position - Budget and Actual - Water Pollution Control Fund

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WESTERN VIRGINIA WATER AUTHORITY Comprehensive Annual Financial Report Year Ended June 30, 2017 Table of Contents Page Statistical Section Table 1 Net Position by Component—Last Ten Fiscal Years Table 2 Changes in Net Position—Last Ten Fiscal Years Table 3 Operating Revenues by Source—Last Ten Fiscal Years Table 4 Operating Expenses—Last Ten Fiscal Years Table 5 Nonoperating Revenues and Expenses—Last Ten Fiscal Years Table 6 Annual Capital Contributions by Source—Last Ten Fiscal Years Table 7 Water Produced, Consumed and Wastewater Treated—Last Ten Fiscal Years Table 8 Number of Customers—Last Ten Fiscal Years Table 9 Schedule of User Rates—Last Ten Fiscal Years Table 10 Principal Customers Table 11 Ratios of Outstanding Debt by Type—Last Ten Fiscal Years Table 12 Schedule of Debt Service & Coverage—Last Ten Fiscal Years Table 13 Demographic Statistics—Last Ten Fiscal Years Table 14 Principal Area Employers Table 15 Number of Employees by Identifiable Activity—Last Ten Fiscal Years Table 16 Operating Statistics—Last Ten Fiscal Years Table 17 Schedule of New Connections—Last Ten Fiscal Years Table 18 Water Consumption and Wastewater Flow by Customer Group—Last Ten Fiscal Years Compliance Section Independent Auditors' Report on Internal Control Over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards Independent Auditors' Report on Compliance for Each Major Program and on Internal Control over Compliance Required by the Uniform Guidance Schedule of Expenditures of Federal Awards Schedule of Findings and Questioned Costs

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WESTERN VIRGINIA WATER AUTHORITY

(A Governmental organization established March 2, 2004 under the Water and Wastewater Authorities Act, Chapter 51, Title 15.2, 1950 Code of Virginia, As Amended)

MEMBERS Donald L. Davis, Chair

John P. Bradshaw, Jr., Vice Chair

Wayne F. Bowers

Harvey D. Brookins, Jr.

Steve Clinton

Thomas C. Gates

Randall M. Hancock

Shirley Holland OFFICIALS

Executive Director, Water Operations Executive Director, Wastewater Services Secretary Assistant Secretary Treasurer

Gary L. Robertson Mike T. McEvoy Gayle Shrewsbury Sarah Baumgardner Tammy Lawfield

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FINANCE & ADMINISTRATION

November 10, 2017 To the Honorable Chairman, Members of the Board of Directors, Customers and Interested Parties: We are pleased to submit the Comprehensive Annual Financial Report (CAFR) of the Western Virginia Water Authority (Authority) for the fiscal year ended June 30, 2017. The CAFR was prepared by the Authority in conformity with U.S. Generally Accepted Accounting Principles (GAAP) and with emphasis on disclosure of the financial activities of the Authority. Responsibility for both the completeness and reliability of the information, including all disclosures, rest with the Authority, and is based upon a comprehensive framework of internal control that has been established for this purpose. Because the cost of internal controls 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. To the best of our knowledge and belief, the enclosed financial data is accurate in all material respects and fairly presents the financial position, results of operations and cash flows of the Authority. All disclosures necessary to enable the reader to gain an understanding of the Authority’s financial activities have been included. The basic financial statements have been audited by our independent auditors, Robinson, Farmer, Cox Associates, who have issued an unmodified (“clean”) opinion on the financial statements of the Authority as of and for the year ended June 30, 2017. The audit was conducted in accordance with auditing standards generally accepted in the United States of America, the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States; and Specifications for Audits of Authorities, Boards and Commissions, issued by the Auditor of Public Accounts of the Commonwealth of Virginia. The annual audit is planned and performed to obtain reasonable, rather than absolute, assurance that the basic financial statements of the Western Virginia Water Authority are free of any material misstatement. The independent auditors’ report is located at the front of the financial section of this report. Management’s Discussion and Analysis (MD&A) immediately follows the independent auditors’ report and provides a narrative introduction, overview, and analysis of the basic financial statements. This letter of transmittal is designed to complement the MD&A and should be read with it. Profile The Authority was formed by the Council of the City of Roanoke and the Board of Supervisors of the County of Roanoke on July 1, 2004 as a regional water authority to establish and operate a water and sewer disposal system and related facilities. The Authority was chartered in 2004 pursuant to the Virginia Water and Waste Authorities Act, Chapter 51 title 15.2 of the Code of Virginia 1950 as amended. The Authority is authorized to acquire, finance, construct, manage and maintain a fully integrated water, wastewater, septage disposal and related facilities pursuant to the Act. Additional information on the formation of the Authority is covered under Note 1 of the Notes to Financial Statements. On November 5, 2009 Franklin County joined as a member of the Authority when the involved parties reorganized under amended and restated Articles of Incorporation. Botetourt County joined as a member in the Authority on July 1, 2015.

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The Authority’s Board of Directors consists of eight members; three of which are appointed by the City Council of Roanoke, three appointed by the Board of Supervisors of the County of Roanoke, one member is appointed by the Board of Supervisors of the County of Franklin and one member is selected by the Board of Supervisors of the County of Botetourt. Board terms are four years. Regular meetings of the Board of Directors are normally held monthly. The Authority is administered by two Executive Directors, one for water operations and one for wastewater operations, who serve at the pleasure of the Board. The Executive Directors have the direct supervision of all employees of the Authority, are responsible for the operation of the Authority, and the establishment of guidelines for efficient and sound fiscal management. The Authority provides citizens in the Roanoke area and portions of Franklin and Botetourt Counties with a dependable supply of water. The Authority treats and delivers 20 million gallons of drinking water per day for 62,163 customer accounts. Major water sources include the Spring Hollow reservoir, Carvins Cove reservoir, Falling Creek / Beaver Dam Creek reservoirs and Crystal Spring. Other sources include various groundwater wells and water purchased from the Bedford County Public Service Authority for a portion of the Authority’s customers in Franklin County. Current rated system treatment capacity is approximately 58 million gallons per day (MGD). The Spring Hollow reservoir was constructed in 1993 and consists of a 243 foot high by 990 foot long roller-compacted concrete dam with a working volume of 3.2 billion gallons. Water is pumped from the Roanoke River for storage, and the safe yield of this reservoir is 19.4 MGD. The treatment facility was constructed in 1996 and has a capacity of 18 MGD. The Carvins Cove reservoir was completed in the late 1940s and includes an 80 foot high dam with a 6.47 billion gallon impoundment. Tinker Creek tunnel, constructed in 1966 and the Catawba Creek tunnel, constructed in 1974 enable additional source water to be impounded. The reservoir has a safe yield of between 14 and 18 MGD. The reservoir is also used for limited recreation purposes. The treatment facility capacity is 28 MGD. Falling Creek / Beaver Dam Creek reservoirs have a combined storage volume of 520 million gallons. The Falling Creek reservoir was constructed in 1900 and the Beaver Dam Creek reservoir was completed in 1926. Both are clay core, rock filled dams and have a combined safe yield of 1.45 MGD. Treatment facility capacity is comparable to the yield. Construction was completed on the Falling Creek dam and spillway in 2011. Crystal Spring has a safe yield of 3.5 MGD and uses membrane filtration with a capacity of 4.84 MGD. Crystal Spring is located on the north side of Mill Mountain in the City of Roanoke. The Authority also maintains 1,202 miles of water mains, 75 pumping stations and 5,492 fire hydrants in the service area. The Authority began operations in Franklin County during fiscal year 2009. The Authority purchased several private water systems in the Smith Mountain Lake area and began operations in January 2009. In May 2009, the County of Franklin and the Authority entered into a water system transfer agreement where the County conveyed the ownership of the transmission and distribution system along State Route 122 from the Franklin – Bedford County line to Westlake Town Center to the Authority. The plan also authorizes the Authority to proceed to develop line extensions in the area which will interconnect some of the private systems purchased by the Authority. The Scruggs Road water line extension was completed in 2010.

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This water line interconnects the customers in the Westlake Town Center with several of the water systems in the Smith Mountain Lake area. The Authority authorized the acquisition of the Petrus Water Systems and the Lake Watch Wastewater System in November 2015. At that time, the Authority assumed operation of the Land’s End water system, and that system was interconnected to the existing Contentment Island and Lakeside system in June 2016. Petrus and the Authority are in the process of transitioning ownership of the remaining systems to the Authority. Botetourt County officially joined the Authority on July 1, 2015. A new pump station on Roanoke Boulevard was constructed and put it into service on December 12, 2015 enabling water from Carvins Cove to serve the Greenfield area. After an interconnection was installed, the Tinkerview Gardens community began receiving Carvins Cove water on January 20th. The Botetourt service area expanded as the Authority authorized the acquisition of the Eagle Rock Water Company in January 2016, a water system serving 84 accounts with two additional locations that are vacant. The Eagle Rock wastewater facility was previously acquired by the Authority when Botetourt County joined the Authority. The Roanoke Regional Water Pollution Control Facility serves the City of Roanoke, Roanoke County, the City of Salem, the Town of Vinton and portions of Botetourt County. The Water Authority treats 38 million gallons of wastewater a day from throughout the valley for its 55,889 sewer customers (more than 186,000 residents including bulk contracts described below). The facility’s permitted capacity was increased to 55 MGD with the completion of a three year construction project. The original plan was constructed in 1951, and major upgrades were made in 1959, 1977, 1998, 2004, 2007 and in 2016. The most recent upgrade, the Peak Flow Enhancement Project, allows the Roanoke Regional Water Pollution Control Plant to treat and discharge more flow to the Roanoke River during high river stage events. The project involved construction of a new chlorine contact basin, new effluent screw pumps and modifications to the Biological Aerated Filter (BAF). The Authority’s collection system consists of 974 miles of sewer gravity mains, over 25,649 manholes, 30 lift stations. The Authority has bulk wastewater treatment agreements with the City of Salem and the Town of Vinton. These jurisdictions share in the Regional Wastewater Treatment Plant capacity and plant upkeep. The agreements include the cost of treatment and the capital maintenance on the regional facility. In December 2008, Franklin County and the Authority entered into an operating agreement for the Westlake Village Central Sewer System covering the Westlake Overlay area of Franklin County. Under the agreement, the Authority contracted to purchase and to operate the wastewater system which is being financed by the County. Additional collection system lines were constructed in 2010 to provide service to more customers. At the formation of the Authority in 2004, a six - year rate equalization plan was developed to achieve equal user rates for customers in the City of Roanoke and Roanoke County by 2010. This has been completed with the Authority’s customers in the City of Roanoke and Roanoke County now having the same user rates. Customers in Franklin County are under a separate user rate schedule. Botetourt County customers follow the same sewer rate schedule as the customers in the City of Roanoke and Roanoke County and Botetourt water customers are under a separate user rate schedule.

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Economic Condition and Outlook The Western Virginia Water Authority is located in the Roanoke Valley in South Western Virginia. The valley is located between the Blue Ridge Mountains on the east and the Alleghany Mountains to the west, with Interstate 81 running north and south. The Authority’s service area is contained in the Roanoke Metropolitan Statistical Area (RMSA). Area attractions include Smith Mountain Lake to the east and the Blue Ridge Parkway runs through the service area. The Roanoke area is the region’s rail center and is the largest metropolitan area in western Virginia. The RMSA has a 2016 estimated population of 313,698 which includes the Cities of Roanoke and Salem and the Counties of Roanoke, Botetourt, Franklin and Craig. For 2017, the City of Roanoke’s estimated population was 99,644, Roanoke County’s population was estimated to be 93,924, Franklin County’s population was estimated to be 56,205 and Botetourt County’s population was estimated to be 33,176. The Authority serves approximately 85% of the (RMSA). The principal employers of the area are the industries of manufacturing, retail trade, health care and government. Both the City and Counties of Roanoke and Franklin are proactive in attracting and developing new businesses which will lead to economic growth. Unemployment as of June 30, 2017 was estimated to be 4.5% for the City of Roanoke, 3.6% for the County of Roanoke, 4.1% for the County of Franklin and 3.7% for the County of Botetourt. During the period the Virginia average was 3.6% and the national average was 4.4%. The Executive Directors for Water Operations and Wastewater Services would like to note a number of accomplishments and achievements completed through the dedication and determination of the employees of the Western Virginia Water Authority (Authority). Major improvements, enhancements and expansions have been made to the water distribution and wastewater collection systems, as well as the treatment plants, to the benefit of all customers. Awards The Authority’s Operation Challenge team placed first in the National Water Environment Federation Operations Challenge event in New Orleans. After placing first in the Virginia event, they were invited to compete in the national event, and they came in first place overall. Congratulations Kevin Thomasson, Wayne Brown, Lacy Burnette, Randy Williams and Steve Lofaro. The team was featured on the cover of the December edition of Water Environment & Technology magazine. Mr. McEvoy and Mr. Robertson received the Vision in Leadership award from the Roanoke Valley-Alleghany Regional Commission. This inaugural award was given for leadership in making our community a better place to live and having a significant impact in one of our four key goal areas of Workforce Development, Economic Development, Health and Wellness and Natural Assets. The Roanoke Regional Water Pollution Control Plant received its 8th consecutive Platinum Award from the National Association of Clean Water Agencies (NACWA). Since 2012, the plant has been Platinum rated, the highest honor given by NACWA for sanitary sewer treatment and operations.

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The Authority received the Government Finance Officer’s Association’s (GFOA) Award of Excellence for Reporting for the Authority’s Comprehensive Annual Financial Report again this year. This award has been received each year of the Authority’s operation. After winning the Mid Atlantic Chapter APWA Equipment Road-E-O Backhoe contest, Jason Justice (Field Operations) was invited to participate in the August 29 APWA national Road-E-O competition in Orlando Florida. While he didn’t place, he represented the WVWA well. Regional Initiatives An Open House and Dedication Event was held May 11th for the Smith Mountain Lake Water Treatment Facility (SML facility). The SML facility is the first jointly owned and operated water treatment facility in the Commonwealth. The Bedford Regional Water Authority and the Western Virginia Water Authority understood the best way to meet the drinking water and fire protection needs of the region’s current and future customers was to work together. Under the partnership concept signed in May 2014, the two water authorities equally share the ownership and the operation of the new Smith Mountain Lake Water Treatment Facility. While only 1.7 million gallons of water are currently being treated per day, this facility can be expanded to 6-million gallons per day within the framework of the new building, and there is room on the property to expand treatment to 12-million gallons per day as water demand grows. The Authority expanded its operation throughout Franklin County with the formal acquisition of 18 utility systems formerly owned by Petrus Environmental Services, Inc. Many of these systems were in close proximity to existing Authority water infrastructure and were able to be interconnected. The Land’s End, Contentment Island and Lakeside water systems at Smith Mountain Lake are now served by the Contentment Island wells. Customers who had been served by the individual water systems serving in Waverly, Deer Creek, Twin Cove and Long Island were connected to the Westlake Water System, and work is under way to combine The Retreats, Cedar Ridge and Lake Forest water systems with 6,600 LF of interconnections. Other improvements included adding continuous chlorination at the Fox Chase and Highland Lake water systems. Improvements also included installing an AMI system in Franklin County and replacing all water meters with Sensus iPerl meters equipped with wireless transmitters. Staff continue to work with Franklin County’s consultant on the layout of utilities for the new industrial park in the Wirtz Plateau area. Once bid, Franklin County’s contractors will install all the water and sewer mains in the industrial park. The Authority will manage the construction of a new sewage lift station to transmit flow to the Wirtz Wastewater Treatment Plant. Future phases, timed with the build out of the industrial park, will include construction of an additional sewage lift station, a forcemain to the Town of Rocky Mount, and possibly a new water storage tank for increased firefighting capabilities. Phase 1 of the Rutrough Road Water and Sewer Extension Project was bid in November 2016. The project, a cooperative effort between the Authority, Roanoke County and the Roanoke Valley Resource and Broadband Authorities, extends water, sewer, and fiber along Rutrough Road from

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the City of Roanoke’s corporate limits through southeast Roanoke County to Explore Park. Ultimately, the project will bring water, sewer and fiber optic services to Explore Park, wastewater service to the closed Rutrough Road landfill and allow the Authority to connect an existing well system in the Delaney Court system to the Authority’s water distribution system. The Authority, Roanoke County Public Schools and the Virginia Department of Labor developed a comprehensive three-year Registered High School Apprenticeship Program for students beginning their junior year in high school and continuing one year beyond graduation. The five students who applied and were accepted into this competitive program are paid by the Authority for all the on-the-job training. Roanoke County Public Schools (RCPS) is piloting this program and developed the in-class instruction that will be offered in each students’ home school during their junior and senior years. Each class will count as credit toward the student’s high school diploma, while earning an industry-based certification. The Authority will supplement this classroom instruction with additional job-related courses and paid on-the-job training with an employee mentor. Each student will work an average of 16 hours per week during their junior and senior years and will become a Full-Time Apprentice the year after graduation. In total, over 4,000 hours of paid on-the-job training will be offered, half as a Water Treatment Operator and half as a Wastewater Treatment Operator. At the end of the three-year program, students will be prepared to take the Commonwealth’s exam to earn a Class IV Operator license, allowing them to become a licensed professional in a high-growth and high-demand field. Water Division and Distribution The Authority continued to focus on the replacement of 1950’s era 12-inch cast iron pipe within high traffic areas including water lines on Orange Avenue, N.E. between 11th and 13th Streets, pipe in the intersection of Hershberger Road and Peters Creek Road and at the intersection of Melrose Avenue and Country Club Drive and Melrose Avenue and Peters Creek Road. A significant interconnection in the distribution system was also completed as the Buck Mountain Road Zone Connections project involving roughly 1,000 feet of 8 inch and 6 inch main was completed by the end of November. After more than 20-years of service, the Spring Hollow raw water intake had accumulated a significant amount of silt and river rock at its base. Scuba divers, contracted by D.H. Griffin (general contractor) removed approximately 350 cubic yards of rock and silt from the river bottom, intake channel, wet well and pump channels, and repaired the “air burst” system. Although river water pumping did not take place during the construction period, the water level at Spring Hollow was returned to full pond by mid-April 2017. Virginia Shoreline Contractors completed assembly and installation of a new 30’ X 40’ aluminum floating fishing pier at Carvins Cove. Public response was uniformly positive with patrons commenting favorably on the extended length of the gangway, the additional space on the pier proper and the quality

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of construction. This project replaced a shorter wooden pier whose pylons broke during freezing conditions in February 2015. The Green Ridge Water Storage tank construction work was completed, the structure was painted and the tank was put into service. Roanoke County added the Splash Valley logo on one side of the tank while Visit Virginia’s Blue Ridge added their logo to the other side of the tank. The 250,000 gallon tank increases water pressure and fire flow in the greater North County area. A Request for Proposals was issued for Engineering Design Services on the Carvins Cove Filter Upgrade project. This multi-year project will rehabilitate the existing ten filters at the Carvins Cove Water Treatment Plant and upgrade the filter backwash with an “air-scour” system. The Muse Spring Water Treatment Facility plans were submitted to the Virginia Department of Health (VDH) for their review in preparation of the construction of the new water treatment facility. Water from the spring and one of the Garden City wells will be treated at this facility in the future. As part of the Carroll Avenue Tank project, construction on the Carroll Avenue Pump Station began in June. The majority of construction work will be completed in-house by WVWA forces. Martin Services has been selected for masonry and cast-in place concrete work. Pumps are on order, and staff is procuring other major equipment. The Authority’s Water Division continued to focus on unaccounted for non-revenue water. Using the new meter technology, the Roanoke area water system was divided into seventy-two District Meter Areas (DMA’s) and analyzed for metered water use and water loss. Areas that indicated a high level of unaccounted for non-revenue water were prioritized by the Water Operations Division for investigation. Additional progress is being made in quantifying non-revenue water from flushing and other maintenance operations. Water Pollution Control Plant and Collection System The WPC Plant treated 13.72 billion gallons of flow for the year ending June 30, 2017, down 16% from the previous fiscal year. While the year as a whole was dry, several significant rain events led to record setting treatment days. In January, the Roanoke Valley experienced an unexpected flood of the Roanoke River with the Walnut Street gage recording 10.57 feet at the flood’s crest. The river flow at the crest exceeded 10,000 cubic feet per second or greater than 66 billion gallons per day. The official peak flow for the plant was set on January 23rd at 103.4 mgd; however, in a 21-hour period spanning both January 23rd and 24th, both influent and effluent pumps where operating at full capacity. Staff estimates flow through the plant at 140 mgd. As a comparison, average daily flows in January at the Regional Water Pollution Control (WPC) Plant were 43.4 mgd. This wet weather event topped the previous peak flow day of the month on September 30 with the WPC Plant processing 96.6 million gallons of flow on that day. The rain event of January 23 was complicated by AEP experiencing a fuse blow in their distribution system in the vicinity of the plant, knocking out one leg of the plant’s 3-phase power supply. In addition to getting backup power active, staff were required to shut down and restart most of the systems including both headworks and effluent pumping. AEP power was restored after 45 minutes, which is about the same time it took staff to restart the plant’s systems.

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Because of this and other power issues at the WPC Plant, staff evaluated alternatives to increase power reliability and met with officials from AEP to discuss ongoing maintenance concerns and evaluate a short distribution extension to the WPC Plant to increase redundancy. The peak flow records were able to be set because of work completed as part of the Peak Flow Enhancement Project, a project that came in under budget with a net deduction of $160,108 for a negative 1% change order rate. The addition of the new chlorine contact basin and four Archimedes effluent screwpumps offered the ability to get more treated flow out of the plant during these peak flow events. The project also involved reconfiguring the Biological Aerated Filter (BAF) to treat wastewater from the equalization storage basins, extending the ability to store flow during peak events. The treated flow is combined with flow treated through the conventional process in the new chlorine contact chamber. The BAF uses a clay media that allows microscopic organisms to grow on it, increasing treatment capacity compared to conventional activated sludge systems. The media is suspended in the sewage by dissolved air. Over time, the clay media breaks down and is washed out of the filters, so staff replaced it with a stone media that has better durability. Bids were received by Engineering Services for Contracts 1A & B and Contract 2 of the 2016 Collections System Improvements. Contracts 3 and 4 were put out to bid in early 2017. Contact 2 of the 2016 Collection System Improvements involved installation of a new sanitary sewer that allowed the last remaining portion of the old Tinker Creek Interceptor to be taken off-line. This work eliminated the significant inflow and infiltration this segment of failing sewer pipe had been introducing into the Tinker Creek sewer system and is expected to make a notable reduction in sanitary sewer overflow frequency and volume in the project area. In addition to these large projects, a cooperative effort between the Authority Sewer CIP Crews and EC Pace Contractors completed work on the Spring Road Sewer Replacement. This project significantly reduces overflows in the Grandin Road and Brambleton Avenue potions of the collection system. Initially budgeted at $700,000, final project costs are estimated at just under $600,000. The Sewer CIP Crews also completed the Gilmer Avenue Sewer Replacement Project, which included replacement of 500 feet of 8-inch sewer and replacement of four manholes. Field Operations Sewer CIP Crews also completed relocation of a sewer main under the new track and platform to be constructed in support of Amtrak service to Roanoke. The existing main serves a portion of the Hotel Roanoke, the Higher Education Center and the old N&W Building that has been converted to apartments. A very complex project, crews

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installed new sewer main to get a portion of the existing main out of the footprint of the passenger platform and replaced the remaining main in place by pulling a new pipe through the existing one. To make the connection to the sewer main in the intersection of Norfolk and Jefferson, staff had to work around two AEP duct banks, three communication banks of various providers and the Trout Run stormwater tunnel. To prepare for this project, Engineering Services spent two years obtaining the necessary approvals from the railroad through a series of planning meetings with their staff to convince them that the project could be completed. During the Fiscal Year, the SSE/R section of the WPC Division focused on manhole rehabilitation of brick manholes in low lying areas that might be sources of inflow and infiltration (I&I), working with a local contractor to install a cement lining system on 55 manholes susceptible to I&I. The SSE/R section, working with the Authorityâ&#x20AC;&#x2122;s root control contractors, treated 458 pipe segments totaling just over 113,000 feet of pipe or approximately 21.4 miles. Root control chemicals are used in sewer mains that are hard to access for cleaning to reduce possible property owner backups. The SSE/R section, working with a contractor, also cleaned the Tinker Creek Siphon. This facility carries flow from the Tinker Creek Interceptor across the Roanoke River to the WPC Plant. As the City of Roanoke worked to replace the Franklin Road bridge, staff relocated utilities under the original bridge. The complexity and depth of the sewer bores required the use of specialized drilling. Once the sewer work was completed, Aaron J. Conner, General Contractor worked on the relocation of 785 feet of 12-inch ductile iron water main. Administration and Internal Services The preference by customers for digital forms of payment (bank draft, online banking, and payments through the website and telephone systems) continues to increase. For fiscal year 2017, 55% of payments were received digitally.

Mailed check payments accounted for 29% of total payments with manually-processed payments (drop box and lobby) accounting for 16%. Total average monthly payments for fiscal year 2017 were 59,686. A downward trend in service disconnections due to nonpayment continued. This positive trend is likely due to improvements in job availability and increases in income, but the drop also corresponds with increased use of automated phone call reminders to customers prior to service termination. Staff typically mails 4,900 delinquent notices per month to customers behind on their bills. Customers are then mailed the next bill with the

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delinquent amount listed if it has not been paid. A few days prior to service termination, customers receive an automated call reminding them to make payment and providing the option to make payment over the phone. Calls have increased from 1,400 per month in fiscal year 14 to just under 3,000 per month in fiscal year 18. Staff is working on adding text and email notifications to the automated system. HomeServe launched its service line protection program marketing campaign for Authority customers the last week of March 2017 for exterior water line, exterior sewer line and interior plumbing and drainage coverage. The Authority receives 15% of all payment received from the purchase of these policies. The Authority is establishing a utility assistance fund with the commissions generated by the sale of these service line protection policies. While this will be the initial funding source for the program, eventually other sources such as customer donations and grants can be added to expand the funds available. The United Way of Roanoke Valley will screen customers needing assistance and offer pledges towards clients’ water and sewer bills as well as financial coaching to assist with their overall household budgeting. Inserts in the Authority’s delinquent notices, developed in partnership with the United Way, will offer budgeting tips and steps to improve one’s financial literacy. The goal of the program is to provide short term assistance and long term financial stability. After extensive testing and employee training, Human Resources successfully rolled out electronic timekeeping to all employees in May. Replacing paper timesheets, employees use the electronic MUNIS system to record all hours worked as well as to schedule time off. The Department of Environmental Quality granted permission to proceed with interest rate reductions on three loans issued under the Commonwealth’s Water Quality Revolving Loan Program. Two of the loans are related to WPC Plant upgrades and have a current interest rate of 3% that will be reduced to 2.3%. The third loan funded the Garst Mill Interceptor project also has an interest rate of 3%. It will be reduced to 2.5%. Total annual savings expected is approximately $108,000. Staff also researched options regarding cash management and treasury services and proceeded to diversify assets and invest funds with American National Bank & Trust Company. Besides diversifying holdings, American offered the Authority a higher rate of return through a cash management account than the Authority is currently earning with other deposits. Relevant Financial Policies Accounting System & Budget Control The Authority’s accounting records are maintained on an accrual basis under which revenues are recognized when earned and expenses are recognized when incurred. Accounting functions are separated to the extent possible for a small sized staff. The County of Roanoke, under the Operating Agreement between the City of Roanoke and County of Roanoke provides fleet and fuel management services to the Authority. Under the same agreement, the City of Roanoke provides information services support to the Authority. Under the Water and Waste Authorities Act, the Authority is not required to adopt a legal budget, but its bylaws and bond covenants states the Authority’s Board of Directors must adopt an annual

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budget before the first day of each fiscal year. The budget is prepared by the finance and administration divisions and serves as a framework for the Authority’s financial planning for the year. The Executive Directors have authorization from the Board to move funds within the line item budget without additional Board approval. A report of revenues and expenses is presented to the Board each month at the public meeting. The annual budget process includes use of rate modeling to prepare a five year plan which is used to assure that short and long term financial objectives are being met. A five year Operational and Maintenance forecast and a five year Capital Improvement Plan are prepared annually in the budget process. The Authority’s finances are organized into two funds, Water and Water Pollution Control. The Water fund fully supports debt incurred for water facilities and the water capital improvement plan, as well as fully funding the water operations division and 50% of the operation of field operation, engineering services, finance and administration, and utility internal services. The WPC Fund supports debt incurred for wastewater facilities, the wastewater and water pollution control plant capital improvement plans, the operations of the water pollution control division, and 50% of the operations of field operations, engineering services, finance and administration, and utility internal services. The Authority has in place a fiscal policy as a component of its financial strategic plan that will preserve and improve the sound financial condition of the Authority. The policy outlines the targeted levels and timeframe to fund several reserve funds including contingency reserve and emergency operating reserve funds. These funds will accumulate to reach an appropriate level over a 10 to 15 year period. During the year ended June 30, 2017 the scheduled annual funding to each reserve was accomplished. Risk Management The Authority relies on several techniques to minimize risk: safety training for employees, proper maintenance of equipment and facilities, continued observation for potential hazards, and prompt response upon discovery of a problem. Not only do these actions reduce potential risks to the Water Authority, they are also sound business practices that improve customer service and overall organizational performance. Worker’s compensation, property, vehicle, equipment and liability insurance services are carried by Virginia Municipal League. Note 8 of the Notes to Financial Statements provide additional information on risk management. Cash Management Cash and investments are maintained by the Authority. An investment policy acts to guide the investment of Authority funds in accordance with the terms of the Virginia Water and Waste Authorities Act. The policy’s primary objectives are safety of principal, liquidity of funds and yield on investment. Note 2 of the Notes to Financial Statements will provide the reader with additional information. Debt Administration Total long-term debt obligations outstanding for the Authority as of June 30, 2017 were $154,757,086. Of this amount, $70,895,357 is for the Water fund and $83,861,729 for the WPC fund. A debt policy is in place which sets forth comprehensive guidelines for the financing of capital expenditures. Objectives of the policy are to assure the credit rating of the Authority stays

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strong and that the Authority conforms to the applicable state and federal laws and existing indenture covenants. Annual review of specific debt ratios is required. Note 4 of the Notes to Financial Statements will provide additional information to the reader. Asset Management The Authority is committed to a best practices approach to managing its infrastructure capital assets that provides a means to protect, maintain, or improve the asset value of our water distribution system and wastewater collection systems with planned maintenance and repair based on predicted deterioration of the systems. Major parts of the asset management program are the five - year capital plan, the geographical information system (GIS), the financial rate model, the work order system and the SCADA system. Acknowledgements The Government Finance Officers Association of the United States and Canada (GFOA) awarded for a twelfth straight year the Certificate of Achievement for Excellence in Financial Reporting to the Western Virginia Water Authority for its comprehensive annual financial report (CAFR) for the fiscal year ended June 30, 2016. In order to be awarded a Certificate of Achievement, the Authority had to publish an easily readable and efficiently organized CAFR that satisfies 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 Programâ&#x20AC;&#x2122;s requirements and we are submitting it to the GFOA to determine its eligibility for another certificate. We would like to express our appreciation to the members of the finance department who have worked with dedication to prepare this report. We also wish to thank the Board of Directors of the Authority for their commitment to financial excellence and their support.

Gary Robertson Executive Director

Michael T. McEvoy Executive Director

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-14-

Equipment Maintenance

Safety & Workers' Compensation

Payroll

Investment Debt

Main Line Construction

Benefits, Retirements and Payroll Support

Finance

Capital Improvement

Water Treatment Plant Facilities

Botetourt & Franklin Co. Water

Botetourt & Franklin Co. Wastewater

Location Services

Planning & Mapping

Design Engineering

Director Engineering

Bio-Solids Management

Building Maintenance and Improvements

Pump & Storage Operations

Meter Operations

Water Distribution

Director Water Operations

Inspection

Executive Director Wastewater Services

Water Production

Sanitary Sewer Evaluation & Rehabilitation SSER

Plant/Industrial Maintenance

WPC - Operations

WPC - Pretreatment

Director Water Pollution Control (WPC)

Risk/Fleet Management

Main Line Maintenance

Human Resources Personnel

Accounting

Director Field Operations

Director Human Resources

Assistant Director Finance

Executive Director Water Operations

Board of Directors 8 Members

Cash & Collections

Utility Billing

Customer Service

Information Systems

Director Customer Service & Information Systems

Grant writing and website design

Out reach and educational programs

Public relations and media contact

Public Relations Manager

Government Finance Officers Association

Certificate of Achievement for Excellence in Financial Reporting Presented to

Western Virginia Water Authority

For its Comprehensive Annual Financial Report for the Fiscal Year Ended

June 30, 2016

Executive Director/CEO

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ROBINSON, FARMER, COX ASSOCIATES CERTIFIED PUBLIC ACCOUNTANTS

A PROFESSIONAL LIMITED LIABILITY COMPANY

Independent Auditors’ Report To the Board of Directors Western Virginia Water Authority Roanoke, Virginia Report on the Financial Statements We have audited the accompanying financial statements of the business-type activities of theWestern Virginia Water Authority as of and for the year ended June 30, 2017 and the related notes to the financial statements, which collectively comprise the Western Virginia Water Authority’s basic financial statements as listed in the table of contents. Management’s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Auditors’ Responsibility Our responsibility is to express an 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; the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States; and the Specifications for Audits of Authorities, Boards, and Commissions, issued by the Auditor of Public Accounts of the Commonwealth of Virginia. 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 auditors’ judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the business-type activities of the Western Virginia Water Authority as of June 30, 2017, and the respective changes in financial position and cash flows thereof for the year then ended in conformity with accounting principles generally accepted in the United States of America.

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Other Matters Required Supplementary Information Accounting principles generally accepted in the United States of America require that the management’s discussion and analysis and schedules related to pension and OPEB funding on pages 18-25 and 76-81, respectively, be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board, who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management’s responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. Other Information Our audit was conducted for the purpose of forming an opinion on the financial statements that collectively comprise the Western Virginia Water Authority’s basic financial statements. The introductory section, supporting schedules, and statistical section are presented for purposes of additional analysis and are not a required part of the basic financial statements. The schedule of expenditures of federal awards is presented for purposes of additional analysis as required by Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards, and is also not a required part of the basic financial statements. The supporting schedules and the schedule of expenditures of federal awards are the responsibility of management and were derived from and relate directly to the underlying accounting and other records used to prepare the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the supporting schedules and the schedule of expenditures of federal awards are 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 Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated November 10, 2017, on our consideration of the Western Virginia Water Authority’s internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the Western Virginia Water Authority’s internal control over financial reporting and compliance.

Blacksburg, Virginia November 10, 2017

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Western Virginia Water Authority Management’s Discussion and Analysis For the Year Ended June 30, 2017 As management of the Western Virginia Water Authority, (the “Authority”), we offer readers of our financial statements this narrative overview and analysis of the financial activities of the Authority for the fiscal year ended June 30, 2017. 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 2 through 13. Financial Highlights 



 

The assets and deferred outflows of resources of the Authority exceeded its liabilities and deferred inflows of resources at the close of the fiscal year by $308,692,663 for the Water fund and $230,429,122 for the WPC fund. Of this amount $25,749,666 for the Water fund and $28,737,406 for the WPC fund are unrestricted net position and may be used to meet the Authority’s ongoing obligations to customers and creditors. Operating revenues for the Water fund increased $1,097,629 over 2016 levels due to an increase in customer charges, Carvins Cove Natural Reserve fees and miscellaneous fees and charges. Operating revenues for the WPC fund remained relatively flat with a decrease of $12,534 over 2016 due primarily to a decrease in flow offset by an increase in other fees. Operating expenses for the Water fund increased $652,918 from 2016 due to increases in operating expenses related to Franklin County systems. Expenses increased $927,786 for the WPC fund from 2016 due to increases in operating expenses, field operation and internal services. Total long-term debt for the Authority decreased $8,454,557 in 2017 due to continued retirement of outstanding debt. Water fund debt decreased $2,784,571 while the WPC fund debt decreased for the year $5,669,986.

Overview of the Financial Statements: This discussion and analysis is intended to serve as an introduction to the Authority’s basic financial statements. Since the Authority is engaged only in business – type activities, its basic financial statements are comprised of two components: 1) enterprise fund financial statements and 2) notes to the financial statements. This report also contains other supplementary information in addition to the basic financial statements. Enterprise fund financial statements. The enterprise fund financial statements are designed to provide readers with a broad overview of the Authority’s finances, in a manner similar to a private sector business. The statement of net position presents information on the Authority’s 1) assets and deferred outflows of resources and 2) liabilities and deferred inflows of resources with the difference between the two reported as net position. Over time, increases or decreases in net position may serve as a useful indicator of whether the financial position of the Authority is improving or deteriorating. The statement of revenues, expenses and changes in net position presents information showing how the Authority’s net position changed during the most recent fiscal year. All changes in net position are reported as soon as the underlying event giving rise to the change occurs, regardless of the timing of cash flows. Thus, revenues and expenses are reported in this statement for some items that will only result in cash flows in future fiscal periods (e.g. earned but unused vacation leave). The basic enterprise fund financial statements can be found on pages 26 through 28 of this report. Notes to financial statements. The notes provide additional information that is essential to a full understanding of the data provided in the financial statements. The notes to financial statements can be found on pages 29 through 75.

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Overview of the Financial Statements (Continued) Other information. In addition to the basic financial statements and accompanying notes, this report also presents certain required supplementary information concerning the Authority’s progress in funding its obligation to provide pension and OPEB benefits to its employees. Financial Analysis As noted earlier, net position may serve over time as a useful indicator of an Authority’s financial position. In the case of the Authority, assets and deferred outflows of resources exceeded liabilities and deferred inflows of resources by $539,121,785 and $523,903,603, at June 30, 2017 and 2016, respectively. In the Water fund, assets and deferred outflows of resources exceeded liabilities and deferred inflows of resources by $308,629,663 and $299,959,001, at June 30, 2017 and 2016, respectively. For the WPC fund, assets amd deferred outflows of resources exceeded liabilities and deferred inflows of resourcesby $230,429,122 and $223,944,602, at June 30, 2017 and 2016, respectively. By far the largest portion of the Water and WPC fund’s net position reflects its investment in capital assets, less any related debt used to acquire those assets that is still outstanding. For the Water fund, 91.7% is invested in capital assets net of related debt. For the WPC fund, the percentage is 87.5%. The Authority uses these capital assets to provide services to its customers; consequently, these assets are not available for future spending. Although the Authority’s investment in its capital assets is reported net of related debt, it should be noted that the resources needed to repay this debt must be provided from other sources, since the capital assets themselves cannot be used to liquidate these liabilities. Table A presents the Condensed Statement of Net Position for the years ended June 30, 2017 and 2016 by fund. At June 30, 2017, and 2016, unrestricted net position was $25,749,666 and $24,852,838, respectively, for the Water Fund. Of total net position for the Water fund, unrestricted net position represented 8.3% for both fiscal years 2017 and 2016, respectively. At June 30, 2017 and 2016, unrestricted net position was $28,737,406 and $26,549,498, respectively, for the WPC Fund. Of total net position for the WPC fund, unrestricted net position represented 12.5% and 11.9% for fiscal year 2017 and 2016, respectively. Table A Condensed Statement of Net Position Years ended June 30, 2017 and 2016 Water Fund 2017 Assets: Current and other assets Capital assets, net Total assets

Total liabilities

Total 2017

2016

34,976,084 $ 34,126,105 $ 35,569,224 $ 34,501,346 $ 70,545,308 $ 68,627,451 349,053,519 344,279,506 280,975,878 282,002,001 630,029,397 626,281,507

$ 384,029,603 $ 378,405,611 $ 316,545,102 $ 316,503,347 $ 700,574,705 $ 694,908,958

Deferred outflows of resources: $ Liabilities: Long-term debt outstanding Other liabilities

Water Pollution Control Fund 2017 2016

2016

1,895,959 $

1,671,528 $

1,479,005 $

993,272 $

3,374,964 $

2,664,800

67,048,405 $ 9,800,930

70,276,859 $ 9,324,521

79,715,283 $ 7,294,260

85,728,553 $ 146,763,688 $ 156,005,412 7,156,805 17,095,190 16,481,326 92,885,358 $ 163,858,878 $ 172,486,738

76,849,335 $

79,601,380 $

87,009,543 $

Deferred inflows of resources:

383,564 $

516,758 $

585,442 $

Net Position: Net investment in capital assets Unrestricted

$ 282,942,997 $ 275,106,163 $ 201,691,716 $ 197,395,104 $ 484,634,713 $ 472,501,267 25,749,666 24,852,838 28,737,406 26,549,498 54,487,072 51,402,336

Total net position

666,659 $

969,006 $

1,183,417

$ 308,692,663 $ 299,959,001 $ 230,429,122 $ 223,944,602 $ 539,121,785 $ 523,903,603

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Financial Analysis (Continued) The total long-term debt outstanding to net capital assets are 19.2% for the Water fund and 28.4% for the WPC fund at June 30, 2017. The percentage decreased slightly from 2016 for the Water fund and the WPC fund. This ratio shows the existing debt leverage of capital assets and indicates that the Authority is not heavily leveraged relative to the size of its net capital assets. The total long-term outstanding liabilities to net capital assets were 20.4% for the Water fund and 30.4% for the WPC fund at June 30, 2016. The current ratio for the Water fund for the years ended June 30, 2017 and 2016 was 2.76 and 2.86, respectively. The current ratio for the WPC fund for the years ended June 30, 2017 and 2016 was 3.13 and 3.00, respectively. The combined funds have a current ratio for the years ended June 30, 2017 and 2016 as 2.93 and 2.92, respectively. The current ratio compares current assets to current liabilities. This ratio is a liquidity ratio and shows the ability of the company to pay its current liabilities with its current assets. Table B presents the Condensed Statement of Revenues, Expenses and Changes in Net Position for the years ended June 30, 2017 and 2016 by each fund. Table B Condensed Statement of Revenues, Expenses and Changes in Net Position Years ended June 30, 2017 and 2016 2017 Operating Revenues: Customer charges Connection fees Bulk sales Fire services Other revenues Total operating revenues

Water Fund 2016

Water Pollution Control Fund 2017 2016

Total 2017

2016

28,650,637 $ 208,811 134,933 1,383,328 1,314,567 31,692,276 $

28,039,511 $ 199,344 145,539 1,390,143 820,110 30,594,647 $

28,122,335 $ 122,380 1,836,774 1,333,025 31,414,514 $

28,190,896 $ 73,625 2,550,203 612,324 31,427,048 $

56,772,972 $ 331,191 1,971,707 1,383,328 2,647,592 63,106,790 $

56,230,407 272,969 2,695,742 1,390,143 1,432,434 62,021,695

8,619,689 $ 3,540,557 3,165,238 7,168,056 22,493,540 $

10,314,023 $ 3,476,670 3,339,351 7,774,513 24,904,557 $

10,748,837 $ 3,210,755 3,164,105 6,853,074 23,976,771 $

19,625,235 $ 7,036,817 6,680,496 14,708,467 48,051,015 $

19,368,526 6,751,312 6,329,343 14,021,130 46,470,311

Operating Expenses: Operating expenses Field operations Internal Services Depreciation expense Total operating expenses

9,311,212 $ 3,560,147 3,341,145 6,933,954 23,146,458 $

Operating income

8,545,818 $

8,101,107 $

6,509,957 $

7,450,277 $

15,055,775 $

15,551,384

72,331 $ 633,115 (173,635) 739,736 (141,648) (1,929,990)

25,459 $ 617,475 1,114,048 602,128 (122,976) (2,202,770)

115,549 $ 100,326 5,004 (141,648) (2,186,334)

62,754 $ 97,471 32,566 (122,976) (2,437,830)

187,880 $ 733,441 (168,631) 739,736 (283,296) (4,116,324)

88,213 714,946 1,146,614 602,128 (245,952) (4,640,600)

(800,091) $

33,364 $

(2,107,103) $

(2,368,015) $

(2,907,194) $

(2,334,651)

7,745,727 $

8,134,471 $

4,402,854 $

5,082,262 $

12,148,581 $

13,216,733

8,733,662 $

Nonoperating Revenues (Expenses): Interest earned Rental income Gain (loss) on disposal of assets Nonoperating contributions Rental expense Interest expense Total nonoperating revenues (expenses) Income (loss) before contributions Capital contributions & special items Changes in net position Total net position, beginning of year, as restated Total net position, end of year

987,935

299,959,001

10,425,679

2,081,666

3,776,313

18,560,150 $

6,484,520 $

8,858,575 $

281,398,851

223,944,602

215,086,027

3,069,601 15,218,182 $ 523,903,603

14,201,992 27,418,725 496,484,878

$ 308,692,663 $ 299,959,001 $ 230,429,122 $ 223,944,602 $ 539,121,785 $ 523,903,603

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Review of Operations Operating revenues for the Water fund increased $1,097,629 from the year ended June 30, 2016 to year ended June 30, 2017. Customer charges increased 2.2% due to a rate increase in January 2017. Bulk sales decreased $10,606 from 2016 revenues due to decreased quantities sold. Income from connection fees increased $9,467 as a result of an increase in new connections to the system. Fire service revenues decreased $6,815 over last year while other revenues increased from last year by $494,457. Operating revenues for the WPC fund decreased $12,534 from the year ended June 30, 2016 to year ended June 30, 2017. Customer charges decreased slightly .24%. Revenue from bulk sales decreased $713,429 from 2016 attributable to lower flow. Income for other revenues increased from 2016 levels by $720,701. The operating margins for the Water and WPC funds were 51% and 50%, 55% and 54%, respectively, for the years ended June 30, 2017 and 2016. The operating margin indicates the financial margin by comparing operating expenses (less depreciation) with operating revenues. A healthy operating margin indicates that the organization has adequate funds to cover interest and capital requirements. Median operating margins typically range from 30% to 40% for water and sewer utilities. Capital Asset and Debt Administration Capital Assets. The Authorityâ&#x20AC;&#x2122;s investment in capital assets (net of accumulated depreciation) totaled $630,029,397 and $626,281,507, at June 30, 2017 and 2016. Tables C and D present the Net Capital Assets by fund for the years ended June 30, 2017 and 2016. The Water fundsâ&#x20AC;&#x2122; net capital assets increased $4,774,013 or 1.4% from June 30, 2016 to June 30, 2017. Capital assets increased $11,670,043 during the year while depreciation expense totaled $6,933,954. Capital projects closed for the year were primarily transmission and distribution mains. Construction in progress balances increased $1,694,937 from June 30, 2016 to June 30, 2017 partially as a result of the Smith Mountain Lake Water Treatment Plant project. Net capital assets for the WPC fund decreased $1,026,123 from June 30, 2016 to June 30, 2017. Construction in progress decreased $17,514,496 as projects closed. Net capital assets increased $6,745,831 while depreciation expense totaled $7,774,513. Capital projects closed and assets placed in service increased $21,143,679 primarily reflecting improvements to the Regional Water Pollution Control Facility. Additional information regarding the Authority's capital assets is located in Note 3 of the Notes to Financial Statements.

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Table C Capital Assets - Water Fund Net of Accumulated Depreciation Years Ended June 30, 2017 and 2016 Fiscal Year 2017

2016

73,084,005 $ 54,317,934 181,682,075 17,735,141 80,406,063 12,656,208 (105,320,400)

72,958,549 52,175,321 178,874,427 15,145,057 79,136,717 11,620,271 (98,424,370)

314,561,026 $

311,485,972

Construction in progress Land

15,172,113 $ 19,320,380

13,477,176 19,316,358

Net capital assets

349,053,519 $

344,279,506

Water supply Treatment Transmission and distribution lines Pumping and storage Services General equipment and transportation Less accumulated depreciation Net depreciable assets

Table D Capital Assets - Water Pollution Control Fund Net of Accumulated Depreciation Years Ended June 30, 2017 and 2016 Fiscal Year 2017 Collection facilities General Plant Treatment Pumping and metering Services General equipment and transportation Other Plant Power generation equipment Less accumulated depreciation Net depreciable assets

242,966,248 $ 62,472 135,565,333 5,470,780 28,039,689 12,412,695 233,711 385,272 (152,413,846)

238,992,784 62,472 116,774,838 5,470,779 27,485,119 11,481,543 223,400 385,272 (144,641,892)

272,722,353 $

256,234,315

5,427,780 2,825,745

22,942,276 2,825,410

280,975,878 $

282,002,001

Construction in progress Land Net capital assets

2016

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Capital Asset and Debt Administration: (Continued) Major capital asset events during the fiscal year ended June 30, 2017 included the following:     

Construction of the Smith Mountain Lake Water Treatment Plant continued in 2017 with expenditures totaling $2,783,245. Various improvements to Storage Tanks was constructed with expenditures in 2017 of $792,663. Rutrough Road Improvements for Phase 1 totaled $1,213,138, $426,771 for the Water Fund and $786,367 for the WPC fund. Continued upgrades to the Turbo Blowers at the Wastewater Treatment Plant totaling $321,446 in 2017. Purchases of capital equipment and vehicles totaled $656,718 for the Water fund and $434,060 for the WPC fund.

Major capital asset events during the fiscal year ended June 30, 2016 included the following:      

Construction of the Smith Mountain Lake Water Treatment Plant continued in 2016 with expenditures totaling $4,209,769. The Burnt Chimney Water Storage Tank was constructed with expenditures in 2016 of $539,695. Expenditures of $2,334,482 were incurred on continued improvements to the Wastewater Treatment Plant. A Turbo Blower was added at the Wastewater Treatment Plant totaling $602,325 in 2016. The Memorial Avenue Sewer Project incurred expenditures of $321,730 in 2016. Purchases of capital equipment and vehicles totaled $843,525 for the Water fund and $792,502 for the WPC fund.

Debt Administration. Table E presents the long-term debt outstanding of the Authority at June 30, 2017 and 2016. Note 4 of the Notes to Financial Statements provides additional information about the activity during the fiscal year and balances at June 30, 2017. During the fiscal year ended June 30, 2017, the Water Fund issued debt totaling $2,105,143 (including premiums) and retired debt of $5,333,597. During the fiscal year ending June 30, 2017 the WPC Fund issued debt totaling $3,422,711 and retired debt of $9,435,981, which includes the advance refunding of $2,155,000 in sewer locality compensation payments. During the fiscal year ended June 30, 2016, the Water Fund issued debt totaling $12,474,014 (including premiums) and retired debt of $15,903,754, which includes the advance refunding of $8,240,000 in water revenue bonds. During the fiscal year ending June 30, 2016 the WPC Fund issued debt totaling $17,337,106 and retired debt of $15,189,650, which includes the advance refunding of $5,490,000 in sewer revenue bonds.

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Capital Asset and Debt Administration: (Continued) Table E Long-Term Debt Outstanding Years Ended June 30, 2017 and 2016 Fiscal Year 2017

2016

Water Fund Revenue bonds Locality compensation payments Premiums on issuances Long-term debt

59,747,309 1,953,900 5,347,196

61,838,906 2,300,800 6,137,153

67,048,405

70,276,859

69,081,607 8,650,000 1,978,676

74,204,133 9,600,000 1,924,420

79,710,283

85,728,553

Water Pollution Control Fund Revenue bonds Locality compensation payments Premiums on issuances Long-term debt

Fiscal year 2017 marked the completion of draws related to the Peak Flow Enhancement project with draws totaling $906,852. The Authority continued drawing funds related to the Smith Mountain Lake Water Treatment Plant in 2017 with draws in the amount of $2,101,011. During the fiscal year 2016, Bond draws for the Peak Flow Enhancement project continued in 2016, with draws totaling $2,421,979. The Authority began drawing funds related to the Smith Mountain Lake Water Treatment Plant in 2016 with draws in the amount of $1,907,869. The Authority has a debt policy which sets forth comprehensive guidelines for the financing of capital expenditures. The policy details a number of ratios to be monitored throughout the year and in the five year budget plan to ensure that the debt level and creditworthiness of the Authority remain sound. The Authority’s debt service coverage for the year ended June 30, 2017 was 2.42 times for the Water fund. The Water fund’s debt service coverage for the year ended June 30, 2016 was 2.18 times. The debt service coverage for the WPC fund was 1.63 times for the year ended June 30, 2017. The debt service coverage for the WPC fund was 1.34 times for the year ended June 30, 2016. The Authority’s bond issues require a minimum coverage of 1.15 times for its water and wastewater revenue bonds. Locality compensation debt of the Water and WPC funds require only 1.0 times. The Authority has met its debt service coverage for the fiscal year. Net take down is a ratio to measure the share of revenues remaining after payment of operating expenses. The net take down for the Water fund for the year ended June 30, 2017 is 52% and 47% for the WPC fund. The ratio for the combined funds is 49%. The net take down for the Water fund for the year ended June 30, 2016 was 54% and 47% for the WPC fund. The ratio for the combined funds was 51% for fiscal year 2016.

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Capital Asset and Debt Administration: (Continued) Total outstanding longâ&#x20AC;&#x201C;term debt per customer is a measurement that indicates the existing debt burden attributable to each customer. The total outstanding long-term debt at year ended June 30, 2017 per customer is $1,108 for the water fund and $1,430 for the WPC fund. The total outstanding long-term debt at year ended June 30, 2016 per customer is $1,165 for the water fund and $1,543 for the WPC fund. This information is presented in Table 11. Requests for Information This financial report is designed to provide a general overview of the Authorityâ&#x20AC;&#x2122;s finances for the reader. Questions concerning information provided in this report or requests for additional financial information should be addressed to the Western Virginia Water Authority, Finance Department, 601 South Jefferson St., Suite 210, Roanoke, VA 24011.

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Basic Financial Statements

WESTERN VIRGINIA WATER AUTHORITY

Exhibit 1

Statement of Net Position At June 30, 2017 Water Pollution Control Fund

Water Fund ASSETS Current Assets: Cash and cash equivalents Accounts receivable (net of allowance for uncollectibles) Inventory of materials and supplies, at cost Prepaid items Other receivables Total current assets

Noncurrent Assets: Restricted Assets: Cash and cash equivalents Total restricted assets Capital Assets: Land Construction work in progress Buildings and system Accumulated depreciation Sub-total depreciable assets Total capital assets, net Total noncurrent assets

29,981,740 3,370,088 520,419 514,736 168,336 34,555,319

$ $

420,765 420,765

Total assets DEFERRED OUTFLOWS OF RESOURCES Deferred charge on refunding Items related to measurement of the net pension liability: City of Roanoke pension plan VRS pension plan Contributions subsequent to measurement date City of Roanoke pension plan VRS pension plan Total deferred outflows of resources LIABILITIES Current liabilities: Accounts payable and accrued expenses Customers' deposits Accrued interest payable Compensated absences-current portion Revenue bonds payable-current portion Locality compensation payments payable-current portion Total current liabilities

DEFERRED INFLOWS OF RESOURCES Items related to measurement of net pension liability: City of Roanoke pension plan VRS pension plan Total deferred inflows of resources

Total net position

$ $

420,765 420,765

$ $ $

2,825,745 5,427,780 425,136,199 (152,413,846) 272,722,353 280,975,878 280,975,878

$ $ $

22,146,125 20,599,893 845,017,625 (257,734,246) 587,283,379 630,029,397 630,450,162

384,029,603

316,545,102

700,574,705

937,883

431,121

1,369,004

273,032 267,180

302,208 287,731

575,240 554,911

161,869 255,995 1,895,959

181,124 276,821 1,479,005

342,993 532,816 3,374,964

2,979,438 2,315,871 658,669 675,533 5,706,556 355,700 12,691,767

400,577 59,387,949 1,598,200 2,537,790 180,175 52,877 64,157,568

2,557,542 20,653 569,619 729,712 6,500,584 976,788 11,354,898

747,963 123,611,870 9,612,190 5,359,429 375,007 105,754 139,812,213

76,849,335

87,009,543

163,858,878

286,926 96,638 383,564

479,057 106,385 585,442

765,983 203,023 969,006

5,536,980 2,336,524 1,228,288 1,405,245 12,207,140 1,332,488 24,046,665

347,386 64,223,921 8,013,990 2,821,639 194,832 52,877 75,654,645

282,942,997 25,749,666

201,691,716 28,737,406

484,634,713 54,487,072

308,692,663

230,429,122

539,121,785

The accompanying notes to financial statements are an integral part of this statement.

-26-

NET POSITION Net investment in capital assets Unrestricted

$ $

$ $ $

Total liabilities

59,186,973 7,109,791 2,433,594 637,993 756,192 70,124,543

Noncurrent liabilities: Compensated absences-net of current portion Revenue bonds payable-net of current portion Locality compensation payments payable-net of current portion Net pension liability-City of Roanoke Net pension liability-VRS Net OPEB obligation Total noncurrent liabilities

29,205,233 3,739,703 1,913,175 123,257 587,856 35,569,224

19,320,380 15,172,113 419,881,426 (105,320,400) 314,561,026 349,053,519 349,474,284

Total

WESTERN VIRGINIA WATER AUTHORITY

Exhibit 2

Statement of Revenues, Expenses and Changes in Net Position Year Ended June 30, 2017 Water Pollution Control Fund

Water Fund Operating revenues: Customer charges Connection fees Bulk sales Fire service Other revenues Total operating revenues Operating expenses: Operating expenses Field operations Internal services Depreciation and amortization Total operating expenses Operating income (loss) Nonoperating income (expenses): Interest earned Rental income Gain (loss) on disposal of assets Nonoperating contribution Rental expenses Interest expense Total nonoperating income (expenses) Income before contributions

28,650,637 208,811 134,933 1,383,328 1,314,567

28,122,335 122,380 1,836,774 1,333,025

56,772,972 331,191 1,971,707 1,383,328 2,647,592

31,692,276

31,414,514

63,106,790

9,311,212 3,560,147 3,341,145 6,933,954

10,314,023 3,476,670 3,339,351 7,774,513

19,625,235 7,036,817 6,680,496 14,708,467

23,146,458

24,904,557

48,051,015

8,545,818

6,509,957

15,055,775

72,331 $ 633,115 (173,635) 739,736 (141,648) (1,929,990)

115,549 $ 100,326 5,004 (141,648) (2,186,334)

187,880 733,441 (168,631) 739,736 (283,296) (4,116,324)

(800,091) $

(2,107,103) $

(2,907,194)

7,745,727

987,935

Change in net position Net position, beginning of year

Net position, end of year

Capital contributions Total capital contributions

Total

4,402,854

12,148,581

2,081,666

3,069,601

2,081,666

3,069,601

8,733,662 299,959,001

6,484,520 223,944,602

15,218,182 523,903,603

308,692,663

230,429,122

539,121,785

The accompanying notes to financial statements are an integral part of this statement.

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WESTERN VIRGINIA WATER AUTHORITY

Exhibit 3

Statement of Cash Flows Year Ended June 30, 2017 Water Pollution Control Fund

Water Fund Cash flows from operating activities: Receipts from customers and users Payments to suppliers Payments to employees

Total

31,600,943 $ (6,624,544) (9,362,141)

30,668,710 $ (7,492,904) (9,888,079)

Net cash provided by (used for) operating activities

15,614,258

13,287,727

28,901,985

Cash flows from noncapital financing activities: Subsidy from local governments

739,736

Net cash provided by (used for) noncapital financing activities

739,736

(12,183,680) $ 17,560 (4,196,740) (346,900) 806,715 2,105,143 (2,701,933)

(6,654,979) $ 5,004 (6,029,378) (3,100,000) 1,861,216 3,422,711 (2,704,564)

(18,838,659) 22,564 (10,226,118) (3,446,900) 2,667,931 5,527,854 (5,406,497)

(16,499,835) $

(13,199,990) $

(29,699,825)

633,115 $ (141,648) 72,331

100,326 $ (141,648) 115,549

733,441 (283,296) 187,880

Cash flows from capital and related financing activities: Additions to utility plant Proceeds from the sale of assets Principal payments on bonds Principal payments on locality compensation payments Contributions in aid of construction Proceeds from indebtedness Interest payments Net cash provided by (used for) capital and related financing activities Cash flows from investing activities: Rental income Rental expenses Interest income

62,269,653 (14,117,448) (19,250,220)

Net cash provided by (used for) investing activities

563,798

74,227

638,025

Increase (decrease) in cash and cash equivalents

417,957

161,964

579,921

Cash and cash equivalents at beginning of year (including $74,491 and $828,010, respectively reported in restricted accounts)

29,984,548

Cash and cash equivalents at end of year (including $420,765 and $0, respectively reported in restricted accounts) Reconciliation of operating income to net cash provided by (used for) operating activities: Operating income Adjustments to reconcile operating income to net cash provided by (used for) operating activities: Depreciation Changes in operating assets, liabilities, and deferred inflows and outflows of resources: (Increase) decrease in receivables (Increase) decrease in inventories (Increase) decrease in prepaid items Increase (decrease) in net pension liability (Increase) decrease in items related to measurement (Increase) decrease in contributions supbsequent to measurement date Increase (decrease) in payables and accrued expenses Increase (decrease) in customer deposits Increase (decrease) in compensated absences Increase (decrease) in OPEB obligation Increase (decrease) in pension deferred inflows Net cash provided by (used for) operating activities Noncash investing, capital and financing activities: Contributions of capital assets Capital asset additions included in accounts payable at end of year Additional information: Capitalized interest included in interest expense above

59,027,817

30,402,505

29,205,233

59,607,738

8,545,818

6,509,957

15,055,775

6,933,954

7,774,513

(123,518) 75,362 (383,866) 423,390 (345,116) 29,543 539,207 32,185 8,793 11,700 (133,194)

14,708,467

(722,001) (196,280) 12,367 324,322 (379,410) 31,152 19,165 (23,803) 7,262 11,700 (81,217)

(845,519) (120,918) (371,499) 747,712 (724,526) 60,695 558,372 8,382 16,055 23,400 (214,411)

15,614,258

13,287,727

28,901,985

181,220 1,476,215

220,450 981,939

401,670 2,458,154

84,095

The accompanying notes to financial statements are an integral part of this statement.

-28-

29,043,269

84,095

WESTERN VIRGINIA WATER AUTHORITY Notes to Financial Statements At June 30, 2017 Note 1—Summary of Significant Accounting Policies: Western Virginia Water Authority was formed in early 2004 by the Board of Supervisors of Roanoke County, Virginia and the Council of the City of Roanoke, Virginia pursuant to the Virginia Water and Waste Water Authorities Act (Chapter 51, Title 15.2 of the 1950 Code of Virginia, as amended) (“Act”). On November 5, 2009 Franklin County joined as a member and on July 1, 2015 Botetourt County joined as a member of the Authority when the involved parties reorganized under amended and restated Articles of Incorporation. The purposes for which the Authority was formed are to exercise all powers granted to the Authority to acquire, finance, construct, operate, manage and maintain a water, wastewater, sewage disposal and storm water control system and related facilities pursuant to the Act. The Authority shall have all of the rights, powers, and duties of an authority under the Act. The Authority services the County of Roanoke, the City of Roanoke, the County of Franklin and to the extent permitted by the Act and by the terms of the Articles of Incorporation and the Western Virginia Water Authority Operating Agreement, such other public or private entities as the Authority may determine upon the terms and conditions established pursuant to such contracts. The Authority began operations on July 1, 2004. The financial statements of Western Virginia Water Authority have been prepared in conformity with the specifications promulgated by the accounting principles generally accepted in the United States as specified by the Governmental Accounting Standards Board and the Auditor of Public Accounts (APA) of the Commonwealth of Virginia. The following is a summary of the more significant policies. A. Financial Reporting Entity The Authority’s governing body is comprised of three members appointed by Roanoke County, three members appointed by the City of Roanoke, one member appointed by Franklin County and one member appointed by Botetourt County. Therefore, none of the participants appoints a voting majority of board members. The Authority is formed for a term of fifty years. No participating government has access to its resources or surpluses, nor is any participant liable for the Authority’s debts or deficits with the exception of the participants’ continuing obligations under their water and sewer general obligation bonds. The Authority also has the ability to finance its capital projects through user charges or the sale of revenue bonds. The Governmental Accounting Standards Board (GASB) has determined that, under certain circumstances, related organizations should be considered component units of a primary entity and, as such, reported as part of the primary entity. In so doing, GASB established criteria for determining whether a related entity should be reported as a component unit and, under different circumstances, how component units must be presented. In defining the Authority as a primary reporting entity, related organizations were evaluated for possible inclusion, using the criteria established by the GASB. The criteria would require the reporting entity to include entities that hold resources entirely or almost entirely for the direct benefit of the Authority where the Authority has the ability to access a majority of those resources and those resources are significant to the Authority. Based on these criteria, the Authority does not have any component units, nor is the Authority considered a component unit of any of the participating jurisdictions. Therefore, these financial statements are for the primary entity only.

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WESTERN VIRGINIA WATER AUTHORITY Notes to Financial Statements At June 30, 2017 (Continued) Note 1—Summary of Significant Accounting Policies: (Continued) A. Financial Reporting Entity (Continued) Based on the above representations and in accordance with Governmental Accounting Standards Board (GASB) Statement Number 14, Western Virginia Water Authority has been determined to be a joint venture of the City of Roanoke and the Counties of Roanoke, Franklin and Botetourt. B. Basis of Presentation The financial statements have been prepared in accordance with GASB Statement 34, Basic Financial Statements and Management’s Discussion and Analysis for State and Local Governments. The Authority follows the business-type activities requirements of GASB Statement 34, which provides that the following sections be included in the annual financial report: 1. Management’s discussion and analysis 2. Basic financial statements including a statement of net position, statement of revenues, expenses and changes in net position, and a statement of cash flows 3. Notes to financial statements 4. Required supplementary information including schedules related to pension and other postemployment benefits funding C. Basis of Accounting For financial reporting purposes, Western Virginia Water Authority is considered a special-purpose government, engaged only in business-type activities. Accordingly, the Authority’s financial statements have been prepared using the economic resources measurement focus and the accrual basis of accounting. Under the accrual basis, revenues are recognized when earned, and expenses are recorded when an obligation has been incurred. All significant intra-agency transactions have been eliminated. Proprietary Funds Proprietary Funds account for operations that are financed in a manner similar to those found in private business enterprises. The measurement focus is upon determination of net income, financial position, and changes in financial position. Proprietary Funds consist of Enterprise Funds. Enterprise Funds Enterprise Funds account for the financing of services to the general public where all or most of the operating expenses involved are recorded in the form of charges to users of such services. The Authority prepares its financial reports utilizing two enterprise funds. The Water Fund is used to account for water services and the Water Pollution Control (WPC) Fund is used to account for wastewater treatment services.

-30-

WESTERN VIRGINIA WATER AUTHORITY Notes to Financial Statements At June 30, 2017 (Continued) Note 1—Summary of Significant Accounting Policies: (Continued) D. Proprietary Fund Revenue and Expense Classifications The Authority distinguishes operating revenues and expenses from nonoperating items. Operating revenues and expenses generally result from providing services in connection with the Authority’s principal ongoing operations. The principal operating revenues of the Authority are charges to customers for services. Nonoperating revenues include activities that have the characteristics of nonexchange transactions, including gifts, and other revenue sources that are defined as nonoperating revenues by GASB Statement 9 – Reporting Cash Flows of Proprietary and Nonexpendable Trust Funds and Governmental Entities That Use Proprietary Fund Accounting, and GASB Statement 34 – Basic Financial Statements—and Management’s Discussion and Analysis—for State and Local Governments, such as government appropriations, rental income, and interest and other investment income. Nonoperating expenses include interest on debt related to the purchase of capital assets, losses on the disposal of capital assets, and rental expenses. All other expenses are classified as operating expenses. E. Deferred Outflows/Inflows of Resources In addition to assets, the statement of financial position will sometimes report a separate section for deferred outflows of resources. This separate financial statement element, deferred outflows of resources, represents a consumption of net position that applies to a future period(s) and so will not be recognized as an outflow of resources (expense) until then. The Authority has two items that qualify for reporting in this category. One item is the deferred charge on refunding which results from the difference in the carrying value of refunded debt and its reacquisition price. The other item is comprised of certain items related to the measurement of the net pension liability. These include differences between expected and actual experience, changes in assumptions, the net difference between projected and actual earnings on pension plan investments, changes in proportion and differences between employer contributions and proportionate share of contributions. It is also comprised of contributions to the pension plans made during the current year and subsequent to the net pension asset/liability measurement date, which will be recognized as an adjustment to the net pension asset/liability next fiscal year. For more detailed information on these items, reference the pension note. In addition to liabilities, the statement of financial position will sometimes report a separate section for deferred inflows of resources. This separate financial statement element, deferred inflows of resources, represents an acquisition of net position that applies to a future period(s) and so will not be recognized as an inflow of resources (revenue) until that time. The Authority has one type of item that qualifies for reporting in this category. Certain items related to the measurement of the net pension asset/liability are reported as deferred inflows of resources. These include differences between expected and actual experience and changes in proportion and differences between employer contributions and proportionate share of contributions. For more detailed information on these items, reference the pension note.

-31-

WESTERN VIRGINIA WATER AUTHORITY Notes to Financial Statements At June 30, 2017 (Continued) Note 1—Summary of Significant Accounting Policies: (Continued) F. Net Position Net Position is the difference between (a) assets and deferred outflows of resources and (b) liabilities and deferred inflows of resources. Net investment in capital assets represents capital assets, less accumulated depreciations, less any outstanding debt related to the acquisition, construction or improvement of those assets. Deferred outflows of resources and deferred inflows of resources that are attributed to the acquisition, construction, or improvement of those assets or related debt are also included in this component of net position. G. Net Position Flow Assumption Sometimes the Authority will fund outlays for a particular purpose from both restricted and unrestricted resources. In order to calculate the amounts to report as restricted—net position and unrestricted—net position in the financial statements, a flow assumption must be made about the order in which the resources are considered to be applied. It is the Authority’s policy to consider restricted—net position to have been depleted before unrestricted—net position is applied. H. Restricted Assets Certain proceeds of the Authority’s revenue bonds and funds held in escrow are classified as restricted assets on the statement of net position because they are maintained in separate bank accounts, and their use is limited by applicable bond covenants or escrow agreements. The bond proceeds account receives proceeds from Authority debt issuances and hold the proceeds until project costs are incurred. These assets are held by a trustee financial institution in separate accounts and consist of cash and cash equivalents. At year end, restricted assets consisted of escrow funds held on behalf of a third party. I. Budgets and Budgetary Accounting A budget is prepared for information, fiscal planning purposes, and to provide the basis for setting user rates. None of the participating entities are required to approve the budget. The budget is adopted as a planning document and is not a legal control on expenses. J. Cash and Cash Equivalents The Authority's cash and cash equivalents consist of demand deposits, certificates of deposit, overnight repurchase agreements, and short-term U.S. Governmental obligations with an original maturity of three months or less from the date of acquisition. K. Investments Money market investments, participating interest-earning investment contracts (repurchase agreements) that have a remaining maturity at the time of purchase of one year or less, nonparticipating interestearning investment contracts (nonnegotiable certificates of deposit (CDs) and external investment pools are measured at amortized cost. All other investments are reported at fair value.

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WESTERN VIRGINIA WATER AUTHORITY Notes to Financial Statements At June 30, 2017 (Continued) Note 1â&#x20AC;&#x201D;Summary of Significant Accounting Policies: (Continued) L. Inventory Inventories of material and supplies are recorded at cost, using the first-in, first-out method of valuation. M. Prepaid Items Certain payments to vendors represent costs applicable to future accounting periods and are recorded as prepaid items in the financial statements. The cost of prepaid items is recorded as an expense when consumed rather than when purchased. N. Allowance for Uncollectible Accounts Accounts receivable are stated at book value net of the allowance for uncollectible accounts. The allowance for uncollectible accounts amounted to $281,434 and $281,434 at June 30, 2017 for water and water pollution control, respectively. O. Capital Assets Capital assets, which include property, plant, equipment, and infrastructure assets (e.g., pipes, hydrants, pumps, and similar items), are reported in the financial statements. Capital assets are defined by the Authority as assets with an initial, individual cost of more than $5,000 (amount not rounded) and an estimated useful life in excess of one year. Such assets are recorded at historical cost or estimated historical cost if purchased or constructed. Donated capital assets are recorded at acquisition value at the date of donation. The capital assets donated to the Authority by the organizing localities were valued by a consulting engineer. The costs of normal maintenance and repairs that do not add to the value of the asset or materially extend its useful life are not capitalized. Major outlays for capital assets and improvements are capitalized as projects are constructed. Interest incurred during the construction phase of capital assets of business-type activities is included as part of the capitalized value of the assets constructed. Interest in the amount of $2,701,933 and $2,704,564 was paid during June 30, 2017 for the water fund and water pollution control fund, respectively. Of those amounts, $84,095 and $0 was capitalized during the fiscal year ending June 30, 2017 in the water fund and water pollution control fund, respectively. Property, plant, and equipment are depreciated using the straight line method over the following estimated useful lives: Assets

Years

Structures, lines and accessories Vehicles and equipment

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10 to 105 5 to 15

WESTERN VIRGINIA WATER AUTHORITY Notes to Financial Statements At June 30, 2017 (Continued) Note 1—Summary of Significant Accounting Policies: (Continued) P. Interest on Indebtedness Interest expense applicable to that portion of indebtedness, the proceeds of which are used to construct new facilities, is capitalized during the period of construction as part of the cost of such facilities. Other interest costs of the Authority are treated as nonoperating expenses. Q. Compensated Absences The liability for compensated absences reported in the financial statements consists of unpaid accumulated leave balances. The liability is based on the leave accumulated at June 30. Limited leave may be accumulated until retirement or termination. Accumulated leave is paid at the employee’s current wage upon retirement or termination. R. Pensions For purposes of measuring the net pension asset/liability, deferred outflows of resources and deferred inflows of resources related to pensions, and pension expense, information about the fiduciary net position of the Authority’s Retirement Plans and the additions to/deductions from the Authority’s Retirement Plans’ net fiduciary position have been determined on the same basis as they were reported by the Virginia Retirement System (VRS) and the City of Roanoke Pension Plan. For this purpose, benefit payments (including refunds of employee contributions) are recognized when due and payable in accordance with the benefit terms. Investments are reported at fair value. S. Long-Term Obligations The Authority assumed existing revenue bond obligations of both Roanoke County and the City of Roanoke upon the formation of the Authority. The obligations of the County and the City which could not be assumed by the Authority are reported as locality compensation payments. These amounts are paid to the locality in accordance with the locality’s existing debt service requirements. Bond premiums and discounts are deferred and amortized over the life of the bonds. Bonds payable are reported net of the applicable bond premium or discount. Bond issuance costs, whether or not withheld from the actual debt proceeds received, are reported as debt service expenditures. T. Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of financial statements and the reported amounts of revenues and expenses during the reporting period. Accordingly, actual results could differ from these amounts.

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WESTERN VIRGINIA WATER AUTHORITY Notes to Financial Statements At June 30, 2017 (Continued) Note 2—Cash and Cash Equivalents: Deposits Deposits with banks are covered by the Federal Deposit Insurance Corporation (FDIC) and collateralized in accordance with the Virginia Security for Public Deposits Act (the “Act”), Section 2.2-4400 et. Seq. of the Code of Virginia. Under the Act, banks and savings institutions holding public deposits in excess of the amount insured by the FDIC must pledge collateral to the Commonwealth of Virginia Treasury Board. Financial Institutions may choose between two collateralization methodologies and depending upon that choice, will pledge collateral that ranges in the amounts from 50% to 130% of excess deposits. Accordingly, all deposits are considered fully collateralized. Investments Statutes authorize the Authority to invest in obligations of the United States or agencies thereof, obligations of the Commonwealth of Virginia or political subdivisions thereof, obligations of the International Bank for Reconstruction and Development (World Bank), the Asian Development Bank, the African Development Bank, “prime quality” commercial paper and certain corporate notes, banker’s acceptances, repurchase agreements and the State Treasurer’s Local Government Investment Pool (LGIP). A summary of the Authority's deposits and investments at June 30, 2017 is as follows:

Water

Water Pollution Control

Total

Petty cash VML/VACO Virginia Investment Pool Local Government Investment Pool Bank Deposits

2,950 $ 1,007,614 1,070,958 28,320,983

2,950 $ 1,007,614 1,070,958 27,123,711

5,900 2,015,228 2,141,916 55,444,694

Totals

30,402,505 $

29,205,233 $

59,607,738

Credit Risk The Authority’s investment policy provides that securities purchased for the Authority shall be held by the Authority Treasurer or by the Treasurer’s custodian. If held by a custodian, the securities must be in the Authority’s name or in the custodian’s nominee name and identifiable on the custodian’s books as belonging to the Authority. Further, if held by a custodian, the custodian must be a third party, not a counterparty (buyer or seller) to the transaction. At June 30, 2017 all of the Authority’s investments were held in accordance with this policy.

-35-

WESTERN VIRGINIA WATER AUTHORITY Notes to Financial Statements At June 30, 2017 (Continued) Note 2—Cash and Cash Equivalents: (Continued) Credit Risk (Continued) The following investment types and quality levels are approved for use by the Treasurer in the investment of its public funds: 1. U.S. Treasury Bills, Notes, Bonds, and other direct obligations of the United States Government. 2. Obligations of Agencies of the Federal Government including but not limited to the Federal Farm Credit Bank, Federal Home Loan Bank, Federal National Mortgage Association, Government National Mortgage Association, Federal Home Loan Mortgage Corporation, and Student Loan Marketing Association. 3. Obligations of the Commonwealth of Virginia and of its local governments and public bodies, including the Local Government Investment Pool, provided such obligations have a debt rating of at least “AA” or equivalent by Moody’s and/or Standard & Poor’s. 4. Repurchase Agreements executed through Federal Reserve Member Banks or Primary Dealers in U. S. Government securities, and collateralized by Treasury or Agency obligations the market value of which is at least 102% of the purchase price of the repo. 5. Certificates of deposit or other deposits of national banks located within the Commonwealth and state-chartered banks under Commonwealth supervision provided such deposits are insured or collateralized as provided by the Virginia Security for Public Deposits Act. 6. U. S. dollar denominated Bankers’ Acceptances issued by a domestic bank or a foreign bank with an agency domiciled in the U. S., and rated by Thomson Bankwatch at least B/C (issuing bank) and I (country of origin). Not more than 40% of the total funds available for investment may be invested in Bankers’ acceptances. 7. U. S. dollar denominated Commercial Paper issued by an entity incorporated in the U. S. and rated by at least two of the following: Moody’s Investors Service, Inc., within its NCO/Moody’s rating of prime 1, by Standard & Poor’s Inc., within its rating of A-1, by Fitch Investor Services, Inc., within its rating of F-1, by Duff and Phelps, Inc., within its rating of D-1, or by their corporate successors. Not more that 35% of the total funds available for investment may be invested in commercial paper, and not more that 5% in the obligations of any one issuer. 8. U. S. dollar denominated high quality corporate notes and bonds with a duration of no more than five years and a rating of at least A by two rating agencies, one of which must be either Moody’s Investor Services, Inc., or Standard and Poor’s, Inc. 9. Money Market Mutual Funds which trade on a constant net asset value and which invest solely in securities otherwise eligible for investment under these guidelines. 10. Asset-backed securities with a duration of no more than 5 years and a rating of no less than AAA by two rating agencies, one of which must be either Moody’s Investor Services, Inc., or Standard and Poor’s, Inc.

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WESTERN VIRGINIA WATER AUTHORITY Notes to Financial Statements At June 30, 2017 (Continued) Note 2—Cash and Cash Equivalents: (Continued) The Authority’s rated debt investments as of June 30, 2017 were rated by Standard & Poor’s and the ratings are presented below using the Standard & Poor’s rating scale. Authority's Rated Debt Investments' Values Fair Quality Ratings AAAm Aam VML/VACO Virginia Investment Pool Local Government Investment Pool Total

$ $

$ 2,141,916 2,141,916 $

2,015,228 2,015,228

Concentration of Credit Risk The Authority’s investment policy limits the investment in bankers’ acceptances to 40% of total funds available for investment. Not more than 35% of the Authority’s total investments may be in commercial paper and not more than 5% of commercial paper investments in the obligations of any one issuing corporation. Interest Rate Risk All Authority investments must be in securities maturing within five years to reduce the volatility associated with interest rate risk. Investments subject to interest rate risk are presented below along with their corresponding maturities. Investment Maturities (in years) Investment Type Local Government Investment Pool

Fair Value

1 Year

2,141,916 $

2,141,916

External Investment Pools The value of the positions in the external investment pools (Local Government Investment Pool and State Non-Arbitrage Pool) is the same as the value of the pool shares. As LGIP is not SEC registered, regulatory oversight of the pool rests with the Virginia State Treasury. LGIP and SNAP are amortized cost basis portfolios under the provisions of GASB Statement No. 79. There are no withdrawal limitations or restrictions imposed on participants. Redemption Restrictions The Authority has the option to have access to withdrawal funds twice a month, with a five day period notice. Additionally, fund are available to meet unexpected needs such as fluctuations in revenue sources, one-time outlays (disasters, immediate capital needs, state budget cuts, and etc.). Fair Value Measurements Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The Authority has measured fair value of the above VML/VACO Investment Pool investment at the net asset value (NAV).

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WESTERN VIRGINIA WATER AUTHORITY Notes to Financial Statements At June 30, 2017 (Continued) Note 3â&#x20AC;&#x201D;Capital Assets: Capital asset activity for the year ended June 30, 2017 was as follows:

Water Fund: Capital assets, not being depreciated: Land Construction in progress

Beginning Balance

Increases

Ending Balance

Decreases

19,316,358 $ 13,477,176

4,022 $ 7,376,319

- $ (5,681,382)

19,320,380 15,172,113

32,793,534 $

7,380,341 $

(5,681,382) $

34,492,493

402,260,037 $ 7,650,305

9,543,484 $ 656,719

(212,406) $ (16,713)

411,591,115 8,290,311

409,910,342 $

10,200,203 $

(229,119) $

419,881,426

$ $

(93,175,923) $ (5,248,447) (98,424,370) $

(6,249,208) $ (684,746) (6,933,954) $

21,211 $ 16,713 37,924 $

311,485,972 $

3,266,249 $

(191,195) $

314,561,026

344,279,506 $

10,646,590 $

(5,872,577) $

349,053,519

2,825,410 $ 22,942,276

335 $ 3,629,183

- $ (21,143,679)

2,825,745 5,427,780

25,767,686 $

3,629,518 $

(21,143,679) $

8,253,525

393,314,843 $ 7,561,364

23,828,491 $ 434,060

- $ (2,559)

417,143,334 7,992,865

400,876,207 $

24,262,551 $

(2,559) $

425,136,199

$ $

(139,592,235) $ (5,049,657) (144,641,892) $

(7,071,662) $ (702,851) (7,774,513) $

- $ 2,559 2,559 $

(146,663,897) (5,749,949) (152,413,846)

256,234,315 $

16,488,038 $

- $

272,722,353

Total Water Pollution Control Fund

282,002,001 $

20,117,556 $

(21,143,679) $

280,975,878

Total Authority Capital Assets

626,281,507 $

30,764,146 $

(27,016,256) $

630,029,397

Total capital assets, not being depreciated Capital assets, being depreciated: Structures, lines and accessories Machinery and equipment Total capital assets, being depreciated Accumulated depreciation: Structures, lines and accessories Machinery and equipment Total accumulated depreciation Total capital assets, being depreciated, net Total Water Fund Water Pollution Control Fund: Capital assets, not being depreciated: Land Construction in progress Total capital assets, not being depreciated Capital assets, being depreciated: Structures, lines and accessories Machinery and equipment Total capital assets, being depreciated Accumulated depreciation: Structures, lines and accessories Machinery and equipment Total accumulated depreciation Total capital assets, being depreciated, net

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(99,403,920) (5,916,480) (105,320,400)

WESTERN VIRGINIA WATER AUTHORITY Notes to Financial Statements At June 30, 2017 (Continued) Note 3â&#x20AC;&#x201D;Capital Assets: (Continued) Construction Commitments:

The Authority has active construction projects as of June 30, 2017 detailed below: Water Fund Project Description Smith Mountain Lake Treament Plant-Design Beaverdam Spillway Improvements Muse Spring Water Treatment-Professional Engineering Caroll Avenue Pump Station Water Main Replacement Design Contract DMA Meters and Large Meter Purchases Oakland Blvd Waterline Extension Carvins Cove Filter Upgrade Plantation Road Streetscape Improvements 2nd Floor Office Modifications

Contract Amount 8,087,360 $ 423,405 670,800 47,000 231,150 102,000 47,990 426,000 163,068 99,998

Spentto-Date 7,948,754 $ 371,271 33,376 27,000 209,473 35,037 16,311 192,645 -

164,751 1,200,800 294,253 47,000 100,000 415,030 41,584 270,853 38,616 418,900

65,938 1,143,257 232,243 19,872 26,078 164,914 212,780 16,716 398,478

13,290,558 $

11,114,143 $

Remaining Commitment 138,606 52,134 637,424 20,000 21,677 66,963 31,679 233,355 163,068 99,998

Water Pollution Control Fund Project Description Lick Fun Interceptor Rehabilitation Sanitary Sewer Design Contract (Contract 2) Electrical Substation Enhancements Harvest Lane Sewer Project Wirtz 220 Sewer Installation Sanitary Sewer Design Contract (Contract 1) Plantation Road Streetscape Improvements Franklin Road Relocation Project - Sewer Manhole Scour in Roanoke River Sanitary Sewer Design Contract Total

98,813 57,543 62,010 27,128 73,922 250,116 41,584 58,073 21,900 20,422 2,176,415

The above projects are to be funded from the proceeds of revenue bonds and funds generated from operations.

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WESTERN VIRGINIA WATER AUTHORITY Notes to Financial Statements At June 30, 2017 (Continued) Note 4â&#x20AC;&#x201D;Long-Term Obligations: Business-type Activities Indebtedness: The following is a summary of long-term obligation transactions of the Authority for the year ended June 30, 2017: Beginning Balance Water Fund: Bonds: Revenue bonds Locality compensation payments Unamortized bond premium Total bonds Compensated absences Net pension liability - City of Roanoke Net pension liability - VRS Net OPEB obligation Total Water Fund

Total business-type activities

2,105,143 $

2,300,800

6,137,153 70,276,859 $ 1,067,317

Retirement/ Reductions

(4,196,740) $ (346,900)

Ending Balance

59,747,309 $ 1,953,900 5,347,196 67,048,405 $ 1,076,110

Due Within One Year

4,940,133 355,700

2,105,143 $ 677,427

(789,957) (5,333,597) $ (668,634)

754,536 823,641 101,750

(444,173) (710,614) (90,050)

73,679,928 $

4,462,497 $

(7,247,068) $

70,895,357 $

6,737,789

74,204,133 $

906,852 $

(6,029,378) $

69,081,607 $

6,314,328

2,227,427 67,148 41,177

Water Pollution Control Fund: Bonds: Revenue bonds $ Locality compensation payments Unamortized bond premium Total bonds $ Compensated absences Net pension liability - City of Roanoke Net pension liability - VRS Net OPEB obligation Total Water Pollution Control Fund

61,838,906 $

Issuances/ Additions

9,600,000 1,924,420 85,728,553 $ 1,069,836 2,620,131 72,018 41,177

2,155,000

(3,100,000)

360,859 3,422,711 $ 728,996

(306,603) (9,435,981) $ (721,734)

838,916 890,648 101,750

(637,408) (767,834) (90,050)

2,537,790 180,175 52,877

8,655,000 1,978,676 79,715,283 $ 1,077,098 2,821,639 194,832 52,877

766,423 6,062,256 675,533 -

945,000 218,044 7,477,372 729,712 -

89,531,715 $

5,983,021 $

(11,653,007) $

83,861,729 $

8,207,084

163,211,643 $

10,445,518 $

(18,900,075) $

154,757,086 $

14,944,873

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WESTERN VIRGINIA WATER AUTHORITY Notes to Financial Statements At June 30, 2017 (Continued) Note 4â&#x20AC;&#x201D;Long-Term Obligations: (Continued) Annual requirements to amortize long-term obligations and the related interest are as follows: Revenue Bonds Year Ending June 30 2018 2019 2020 2021 2022 2023-2027 2028-2032 2033-2037 2038-2041 Total

Water Pollution Control Fund Principal Interest

Water Fund Principal Interest $

4,940,133 $ 4,748,920 4,933,639 5,127,104 5,330,261 28,965,961 5,392,845 195,576 112,870 59,747,309 $

2,515,052 $ 2,320,271 2,102,034 1,877,197 1,641,777 4,408,718 316,007 7,008 15,188,064 $

6,314,328 6,010,560 5,464,695 5,230,836 5,368,669 27,603,633 10,474,007 2,614,879 69,081,607

1,782,283 1,599,046 1,441,360 1,297,053 1,155,589 3,472,277 751,781 75,418 11,574,807

Locality Compensation Payments

2018 2019 2020 2021 2022 2023-2027 2028-2032 2033-2035 Total

Water Pollution Control Fund Principal Interest

Water Fund Principal Interest

Year Ending June 30 $

355,700 373,400 388,200 415,400 421,200 1,953,900

79,266 65,952 49,594 31,445 10,530 236,787

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945,000 950,000 975,000 990,000 1,015,000 2,475,000 770,000 535,000 8,655,000

236,951 218,844 197,447 172,945 146,087 376,495 172,268 29,541 1,550,578

Type Locality Compensation Payments: City of Roanoke, VA - 2010A Refunding Total Locality Compensation Payments

Water Fund Interest Rates

Revenue Bonds: VRA Water Revolving Loan Series 2000B VRA Water Revolving Loan Series 2000A VRA Pool Bond Water Series 2008A VRA Water Revolving Loan Series 2008 BB&T Revenue Bond Series 2009 VRA Water Revolving Loan Series 2010 VRA Water Revolving Loan Series 2011 ARRA - VRA Water Revolving Loan Series 2009 ARRA - VRA Water Revolving Loan Series 2009 VRA Water Revolving Loan Series 2011 VRA Pool Bond Water Series 2011B VRA Water Revolving Loan Series 2012 VRA VPFP Refunding Bond Series 2013B Carter Bank and Trust Series 2013A VRA Pool Bond Water Series 2014B Refunding Carter Bank and Trust - Series 2014 2016A VRA Refunding of 2011B VRA 2011 Bond Series 2011A Add: Premium on issuance Total Revenue Bonds

Installment Amounts

Final Maturity Date

2.00-5.00%

$310,000-$421,200 (a+)

10/1/2021

3.00% 4.00% 2.959-4.915% 3.05% 3.91% 0.00% 2.64% 0.00% 0.00% 2.83% 4.67-5.13% 1.45% 3.435-4.826% 2.75% 2.00-5.25% 3.80% 4.80-5.13% 2.125-5.125%

$22,962 (sa) $6,629 (sa) $355,000-$795,000 (a+) $13,523(sa) $177,496 (sa) $13,397 (sa+) $18,746 (sa) $597 (sa+) $353 (sa+) $7,273 (sa) $830,000-$1,550,000 (a+) $26,811 (sa) $2,090,000-$3,510,000 (a+) $51,857 (sa+) $505,000-$765,000 (a+) $389,855 (sa) $1,150,000-$1,475,000 (a+) $20,000-$40,000 (a+)

9/1/2020 9/1/2020 10/1/2018 11/1/2028 5/15/2024 1/1/2041 3/1/2032 6/1/2040 6/1/2040 6/1/2031 10/1/2021 4/1/2033 10/1/2026 10/1/2029 10/1/2028 4/1/2033 10/1/2027 10/1/2031

Amount of Original Issue

Balance Enterprise Activities

3,263,800

$ $

1,953,900 1,953,900

$ $

355,700 355,700

674,269 178,340 10,690,000 389,557 4,000,000 803,823 564,401 35,919 21,242 216,850 17,035,000 907,965 35,855,000 1,556,000 6,355,000 10,000,000 7,870,000 510,000

151,508 42,903 975,000 253,319 2,155,638 643,058 457,205 27,440 16,235 166,962 5,285,000 762,497 28,925,000 1,296,665 6,285,000 4,008,881 7,870,000 425,000 5,347,194 65,094,505

41,689 11,658 475,000 19,468 273,353 26,794 25,589 949 950 9,891 970,000 42,720 2,335,000 103,734 583,338 20,000 766,423 5,706,556

Other Long-Term Obligations: Compensated absences Net pension liability-City of Roanoke Net pension liability-VRS Net OPEB obligation Total Other Long-Term Obligations

Total Long-Term Obligations Payable from the Water Fund (a+)-annual principal installments shown, does not include semi-annual interest installments (sa)-semi-annual installments, includes interest as applicable (sa+)-semi-annual principal installments shown, does not include semi-annual interest installments (m)-monthly installments, includes interest as applicable

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Amount Due Within One Year

1,076,110 2,537,790 180,175 52,877 3,846,952

675,533 675,533

70,895,357

6,737,789

WESTERN VIRGINIA WATER AUTHORITY Notes to Financial Statements At June 30, 2017 (Continued) Note 4â&#x20AC;&#x201D;Long-Term Obligations: (Continued) Details of the Authority's outstanding long-term indebtedness at June 30, 2017 are as follows: (Continued) Water Pollution Control Fund Interest Type Rates Locality Compensation Payments: City of Roanoke, VA - 2012B Refunding 1.15-2.96% County of Franklin, VA - 2016B Refunding 4.702-5.125% VRA Bond Series 2016B 2.125-5.125% Add: Premium on issuance Total Locality Compensation Payments Revenue Bonds: VRA Wastewater Revolving Loan Series 1996 VRA Clean Water Revolving Loan Series 2000 VRA Wastewater Revolving Loan Series 2003 VRA Wastewater Revolving Loan Series 2003 VRA Wastewater Revolving Loan Series 2007 VRA Pool Bond Sewer Series 2008B VRA Clean Water Revolving Loan Series 2011 VRA Pool Bond Sewer Series 2011B VRA Wastewater Revolving Loan Series 2011 VRA Wastewater Revolving Loan Series 2011 VRA Wastewater Revolving Loan Series 2012 VRA Pool Bond Sewer Series 2014B Refunding VRA Refunding Bond Series 2016A VRA Bond Series 2012 VRA Bond Series 2004 VRA Bond Series 2013 VRA Bond Series 1997 Add: Premium on issuance Total Revenue Bonds

3.75% 3.50% 2.30% 2.30% 2.50% 2.13-4.92% 2.35% 4.82-5.13% 2.35% 2.35% 1.45% 1.18-5.13% 4.80-5.13% 2.40% 3.10% 1.45% 3.75%

Installment Amounts

Final Maturity Date

$845,000-$945,000 (a+) $80,000-$95,000 (a+) $5,000-$185,000 (a+)

10/1/2023 10/1/2019 10/1/2034

Amount of Original Issue 7,105,000 2,645,000 2,155,000

Balance Enterprise Activities $

$486,279 (sa) $189,600 (sa) $306,492 (sa) $1,051,566 (sa) $343,375 (sa) $105,000-240,000 (a) $48,166 (sa) $545,000-$1,035,000 (a+) $149,659 (sa) $191,135 (sa) $363,739 (sa) $20,000-$235,000 (a+) $770,000-$990,000 (a+) $86,700 (sa) $102,801 (sa) $34,543 (sa) $103,047 (sa)

12/1/2018 3/1/2020 10/1/2026 10/1/2026 8/1/2028 10/1/2018 3/1/2032 10/1/2021 9/1/2033 9/1/2032 4/1/2035 10/1/2028 10/1/2027 3/1/2033 9/1/2026 4/1/2035 6/1/2019

$ 13,100,000 5,357,725 9,000,000 31,665,134 9,993,612 3,215,000 1,500,000 11,285,000 4,660,693 5,952,344 12,318,074 1,930,000 5,270,000 2,700,000 4,032,975 1,169,808 3,000,000

Other Long-Term Obligations: Compensated absences Net pension liability-City of Roanoke Net pension liability-VRS Net OPEB obligation Total Other Long-Term Obligations

Amount Due Within One Year

6,260,000 270,000 2,125,000 335,778 8,990,778

1,404,994 1,071,049 5,040,258 17,293,016 6,600,783 295,000 1,208,944 3,490,000 4,055,182 4,884,431 11,146,926 1,910,000 5,270,000 2,300,287 1,680,702 1,036,465 393,570 1,642,898 70,724,505

855,000 85,000 5,000 31,788 976,788

928,494 344,702 480,479 1,648,515 499,885 145,000 68,322 640,000 205,220 269,058 563,298 120,019 154,707 53,499 193,130 186,256 6,500,584

1,077,098 2,821,639 194,832 52,877 4,146,446

729,712 729,712

Total Long-Term Obligations Payable from the Water Pollution Control Fund

83,861,729

8,207,084

Grand Total

154,757,086

$ 14,944,873

(a)-annual principal installments shown, includes semi-annual interest as applicable (a+)-annual principal installments shown, does not include semi-annual interest installments (sa)-semi-annual installments, includes interest as applicable (m)-monthly installments, includes interest as applicable

The loans from the Virginia Resources Authority (VRA) are governed by covenants with which the Authority has been in compliance through June 30, 2017.

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WESTERN VIRGINIA WATER AUTHORITY Notes to Financial Statements At June 30, 2017 (Continued) Note 4—Long-Term Obligations: (Continued) The Authority (through Franklin County) issued $2,155,000 in locality compensation obligations (revenue bonds) to refund $2,145,000 of same in a current refunding. As a result, the Authority reduced future debt service by $255,424, which represents a present value savings of $208,164 based on a discount rate of 2.284%. Operating Lease On January 17, 2008, the Authority entered into an agreement with the County of Roanoke, Virginia for the County’s Fleet Maintenance Department to perform repairs and maintenance on Authority vehicles. The term of the agreement was for 30 years however, the Authority could terminate the agreement after ten years without penalty. The Authority and the County agreed to share the costs of the facility based on the estimated number of vehicles provided by each entity which at that time was 30% for the Authority. For fiscal year ended June 30, 2017, the Authority paid the County $124,301. The Authority’s annual lease payments for the use of the facility is equal to 30% of the debt service and are listed below for the remainder of the initial ten year period: Year Ending June 30 2018

Amount $

125,284

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WESTERN VIRGINIA WATER AUTHORITY Notes to Financial Statements At June 30, 2017 (Continued) Note 5â&#x20AC;&#x201D;Capital Contributions: The Authority received capital contributions from the following sources during the year: Year Ended June 30, 2017: Water Fund

Water Pollution Control Fund

Total

Availability fees Developer contributions Contributions from other governments Other capital contributions

771,828 $ 181,220 34,887

825,500 $ 220,450 1,027,511 8,205

1,597,328 401,670 1,027,511 43,092

Total Capital Contributions

987,935 $

2,081,666 $

3,069,601

The remainder of this page is left blank intentionally.

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WESTERN VIRGINIA WATER AUTHORITY Notes to Financial Statements At June 30, 2017 (Continued) Note 6—Pension Plans: Virginia Retirement System Plan Plan Description All full-time, salaried permanent employees of the Authority (that are not covered under the Roanoke City Pension Plan) are automatically covered by VRS Retirement Plan upon employment. This is an agent multiple-employer plan administered by the Virginia Retirement System (the System) along with plans for other employer groups in the Commonwealth of Virginia. However, one entity’s financial information is not included in the primary government report participate in the VRS plan through the Authority and the participating entity report’s its proportionate information on the basis of a cost-sharing plan. Members earn one month of service credit for each month they are employed and for which they and their employer pay contributions to VRS. Members are eligible to purchase prior service, based on specific criteria as defined in the Code of Virginia, as amended. Eligible prior service that may be purchased includes prior public service, active military service, certain periods of leave, and previously refunded service. The System administers three different benefit structures for covered employees – Plan 1, Plan 2, and, Hybrid. Each of these benefit structures has different eligibility criteria. The specific information for each plan and the eligibility for covered groups within each plan are set out in the table below:

RETIREMENT PLAN PROVISIONS PLAN 1

PLAN 2

HYBRID RETIREMENT PLAN

About Plan 1 Plan 1 is a defined benefit plan. The retirement benefit is based on a member’s age, creditable service and average final compensation at retirement using a formula. Employees are eligible for Plan 1 if their membership date is before July 1, 2010, and they were vested as of January 1, 2013.

About Plan 2 Plan 2 is a defined benefit plan. The retirement benefit is based on a member’s age, creditable service and average final compensation at retirement using a formula. Employees are eligible for Plan 2 if their membership date is on or after July 1, 2010, or their membership date is before July 1, 2010, and they were not vested as of January 1, 2013.

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

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• The defined benefit is based on a member’s age, creditable service and average final compensation at retirement using a formula. • The benefit from the defined contribution component of the plan depends on the member and employer contributions made to the plan and the investment performance of those contributions.

WESTERN VIRGINIA WATER AUTHORITY Notes to Financial Statements At June 30, 2017 (Continued) Note 6—Pension Plans: (Continued) Virginia Retirement System Plan (Continued) Plan Description (Continued)

RETIREMENT PLAN PROVISIONS (CONTINUED) PLAN 1

PLAN 2

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

Eligible Members Employees are in Plan 1 if their membership date is before July 1, 2010, and they were vested as of January 1, 2013. Hybrid Opt-In Election VRS non-hazardous duty covered Plan 1 members were allowed to make an irrevocable decision to opt into the Hybrid Retirement Plan during a special election window held January 1 through April 30, 2014. The Hybrid Retirement Plan’s effective date for eligible Plan 1 members who opted in was July 1, 2014. If eligible deferred members returned to work during the election window, they were also eligible to opt into the Hybrid Retirement Plan.

Eligible Members Employees are in Plan 2 if their membership date is on or after July 1, 2010, or their membership date is before July 1, 2010, and they were not vested as of January 1, 2013. Hybrid Opt-In Election Eligible Plan 2 members were allowed to make an irrevocable decision to opt into the Hybrid Retirement Plan during a special election window held January 1 through April 30, 2014. The Hybrid Retirement Plan’s effective date for eligible Plan 2 members who opted in was July 1, 2014. If eligible deferred members returned to work during the election window, they were also eligible to opt into the Hybrid Retirement Plan.

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Eligible Members Employees are in the Hybrid Retirement Plan if their membership date is on or after January 1, 2014. This includes: • Political subdivision employees* • Members in Plan 1 or Plan 2 who elected to opt into the plan during the election window held January 1-April 30, 2014; the plan’s effective date for opt-in members was July 1, 2014. *Non-Eligible Members Some employees are not eligible to participate in the Hybrid Retirement Plan. They include: • Political subdivision employees who are covered by enhanced benefits for hazardous duty employees.

RETIREMENT PLAN PROVISIONS (CONTINUED) PLAN 1

PLAN 2

HYBRID RETIREMENT PLAN

Hybrid Opt-In Election (Cont.) Members who were eligible for an optional retirement plan (ORP) and had prior service under Plan 1 were not eligible to elect the Hybrid Retirement Plan and remain as Plan 1 or ORP.

Hybrid Opt-In Election (Cont.) Members who were eligible for an optional retirement plan (ORP) and have prior service under Plan 2 were not eligible to elect the Hybrid Retirement Plan and remain as Plan 2 or ORP.

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

Retirement Contributions Employees contribute 5% of their compensation each month to their member contribution account through a pre-tax salary reduction. Some political subdivisions elected to phase in the required 5% member contribution but all employees are paying the full 5% as of July 1, 2016. Member contributions are tax-deferred until they are withdrawn as part of a retirement benefit or as a refund. The employer makes a separate actuarially determined contribution to VRS for all covered employees. VRS invests both member and employer contributions to provide funding for the future benefit payment.

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

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RETIREMENT PLAN PROVISIONS (CONTINUED) PLAN 1

PLAN 2

Creditable Service Creditable Service Creditable service includes active Same as Plan 1. service. Members earn creditable service for each month they are employed in a covered position. It also may include credit for prior service the member has purchased or additional creditable service the member was granted. A member’s total creditable service is one of the factors used to determine their eligibility for retirement and to calculate their retirement benefit. It also may count toward eligibility for the health insurance credit in retirement, if the employer offers the health insurance credit.

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

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RETIREMENT PLAN PROVISIONS (CONTINUED) PLAN 1 Vesting Vesting is the minimum length of service a member needs to qualify for a future retirement benefit. Members become vested when they have at least five years (60 months) of creditable service. Vesting means members are eligible to qualify for retirement if they meet the age and service requirements for their plan. Members also must be vested to receive a full refund of their member contribution account balance if they leave employment and request a refund.

PLAN 2 Vesting Same as Plan 1.

HYBRID RETIREMENT PLAN Vesting Defined Benefit Component: Defined benefit vesting is the minimum length of service a member needs to qualify for a future retirement benefit. Members are vested under the defined benefit component of the Hybrid Retirement Plan when they reach five years (60 months) of creditable service. Plan 1 or Plan 2 members with at least five years (60 months) of creditable service who opted into the Hybrid Retirement Plan remain vested in the defined benefit component. Defined Contributions Component: Defined contribution vesting refers to the minimum length of service a member needs to be eligible to withdraw the employer contributions from the defined contribution component of the plan.

Members are always 100% vested in the contributions that they make.

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RETIREMENT PLAN PROVISIONS (CONTINUED) PLAN 1

PLAN 2

HYBRID RETIREMENT PLAN Vesting (Cont.) Defined Contributions Component: (Cont.) Upon retirement or leaving covered employment, a member is eligible to withdraw a percentage of employer contributions to the defined contribution component of the plan, based on service. • After two years, a member is 50% vested and may withdraw 50% of employer contributions. • After three years, a member is 75% vested and may withdraw 75% of employer contributions. • After four or more years, a member is 100% vested and may withdraw 100% of employer contributions. Distribution is not required by law until age 70½.

Calculating the Benefit The Basic Benefit is calculated based on a formula using the member’s average final compensation, a retirement multiplier and total service credit at retirement. It is one of the benefit payout options available to a member at retirement.

Calculating the Benefit See definition under Plan 1.

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Calculating the Benefit Defined Benefit Component: See definition under Plan 1.

RETIREMENT PLAN PROVISIONS (CONTINUED) PLAN 1

PLAN 2

Calculating the Benefit (Cont.) Defined Contribution Component: The benefit is based on contributions made by the member and any matching contributions made by the employer, plus net investment earnings on those contributions.

Calculating the Benefit (Cont.) An early retirement reduction factor is applied to the Basic Benefit if the member retires with a reduced retirement benefit or selects a benefit payout option other than the Basic Benefit. Average Final Compensation A member’s average final compensation is the average of the 36 consecutive months of highest compensation as a covered employee.

HYBRID RETIREMENT PLAN

Average Final Compensation A member’s average final compensation is the average of their 60 consecutive months of highest compensation as a covered employee.

Average Final Compensation Same as Plan 2. It is used in the retirement formula for the defined benefit component of the plan.

Service Retirement Multiplier VRS: Same as Plan 1 for service earned, purchased or granted prior to January 1, 2013. For nonhazardous duty members the retirement multiplier is 1.65% for creditable service earned, purchased or granted on or after Sheriffs and regional jail January 1, 2013. superintendents: The retirement multiplier for sheriffs and Sheriffs and regional jail regional jail superintendents is superintendents: Same as Plan 1. 1.85%. Political subdivision hazardous Political subdivision hazardous duty employees: Same as Plan 1. duty employees: The retirement multiplier of eligible political subdivision hazardous duty employees other than sheriffs and regional jail superintendents is 1.70% or 1.85% as elected by the employer.

Service Retirement Multiplier Defined Benefit Component: VRS: The retirement multiplier for the defined benefit component is 1.00%.

Service Retirement Multiplier VRS: The retirement multiplier is a factor used in the formula to determine a final retirement benefit. The retirement multiplier for non-hazardous duty members is 1.70%.

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For members who opted into the Hybrid Retirement Plan from Plan 1 or Plan 2, the applicable multipliers for those plans will be used to calculate the retirement benefit for service credited in those plans. Sheriffs and regional jail superintendents: Not applicable. Political subdivision hazardous duty employees: Not applicable. Defined Contribution Component: Not applicable.

RETIREMENT PLAN PROVISIONS (CONTINUED) PLAN 1 Normal Retirement Age VRS: Age 65.

PLAN 2

HYBRID RETIREMENT PLAN

Normal Retirement Age Normal Retirement Age VRS: Normal Social Security Defined Benefit Component: VRS: Same as Plan 2. retirement age.

Political subdivisions hazardous Political subdivisions hazardous Political subdivisions hazardous duty employees: Age 60. duty employees: Same as Plan 1. duty employees: Not applicable. Defined Contribution Component: Members are eligible to receive distributions upon leaving employment, subject to restrictions. Earliest Unreduced Retirement Eligibility VRS: Age 65 with at least five years (60 months) of creditable service or at age 50 with at least 30 years of creditable service. Political subdivisions hazardous duty employees: Age 60 with at least five years of creditable service or age 50 with at least 25 years of creditable service.

Earliest Unreduced Retirement Eligibility VRS: Normal Social Security retirement age with at least five years (60 months) of creditable service or when their age and service equal 90. Political subdivisions hazardous duty employees: Same as Plan 1.

Earliest Unreduced Retirement Eligibility Defined Benefit Component: VRS: Normal Social Security retirement age and have at least five years (60 months) of creditable service or when their age and service equal 90. Political subdivisions hazardous duty employees: Not applicable. Defined Contribution Component: Members are eligible to receive distributions upon leaving employment, subject to restrictions.

Earliest Reduced Retirement Eligibility VRS: Age 55 with at least five years (60 months) of creditable service or age 50 with at least 10 years of creditable service.

Earliest Reduced Retirement Eligibility VRS: Age 60 with at least five years (60 months) of creditable service.

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Earliest Reduced Retirement Eligibility Defined Benefit Component: VRS: Members may retire with a reduced benefit as early as age 60 with at least five years (60 months) of creditable service.

RETIREMENT PLAN PROVISIONS (CONTINUED) PLAN 1

PLAN 2

HYBRID RETIREMENT PLAN

Earliest Reduced Retirement Eligibility (Cont.)

Political subdivisions hazardous duty employees: 50 with at least five years of creditable service.

Political subdivisions hazardous duty employees: Same as Plan 1.

Political subdivisions hazardous duty employees: Not applicable. Defined Contribution Component: Members are eligible to receive distributions upon leaving employment, subject to restrictions.

Cost-of-Living Adjustment (COLA) in Retirement The Cost-of-Living Adjustment (COLA) matches the first 3% increase in the Consumer Price Index for all Urban Consumers (CPI-U) and half of any additional increase (up to 4%) up to a maximum COLA of 5%.

Cost-of-Living Adjustment (COLA) in Retirement The Cost-of-Living Adjustment (COLA) matches the first 2% increase in the CPI-U and half of any additional increase (up to 2%), for a maximum COLA of 3%.

Cost-of-Living Adjustment (COLA) in Retirement Defined Benefit Component: Same as Plan 2. Defined Contribution Component: Not applicable. Eligibility: Same as Plan 1 and Plan 2.

Eligibility: Same as Plan 1. Eligibility: For members who retire with an unreduced benefit or with a reduced benefit with at least 20 years of creditable service, the COLA will go into effect on July 1 after one full calendar year from the retirement date. For members who retire with a reduced benefit and who have less than 20 years of creditable service, the COLA will go into effect on July 1 after one calendar year following the unreduced retirement eligibility date.

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RETIREMENT PLAN PROVISIONS (CONTINUED) PLAN 1

PLAN 2

Cost-of-Living Adjustment (COLA) Cost-of-Living Adjustment in Retirement (Cont.) (COLA) in Retirement (Cont.)

HYBRID RETIREMENT PLAN Cost-of-Living Adjustment (COLA) in Retirement (Cont.)

Exceptions to COLA Effective Exceptions to COLA Effective Exceptions to COLA Effective Dates: Dates: Dates: The COLA is effective July 1 Same as Plan 1. Same as Plan 1 and Plan 2. following one full calendar year (January 1 to December 31) under any of the following circumstances: • The member is within five years of qualifying for an unreduced retirement benefit as of January 1, 2013. • The member retires on disability. • The member retires directly from short-term or long-term disability under the Virginia Sickness and Disability Program (VSDP). • The member is involuntarily separated from employment for causes other than job performance or misconduct and is eligible to retire under the Workforce Transition Act or the Transitional Benefits Program. • The member dies in service and the member’s survivor or beneficiary is eligible for a monthly death-in-service benefit. The COLA will go into effect on July 1 following one full calendar year (January 1 to December 31) from the date the monthly benefit begins.

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RETIREMENT PLAN PROVISIONS (CONTINUED) PLAN 1

PLAN 2

HYBRID RETIREMENT PLAN

Disability Coverage Members who are eligible to be considered for disability retirement and retire on disability, the retirement multiplier is 1.7% on all service, regardless of when it was earned, purchased or granted.

Disability Coverage Members who are eligible to be considered for disability retirement and retire on disability, the retirement multiplier is 1.65% on all service, regardless of when it was earned, purchased or granted.

VSDP members are subject to a one-year waiting period before becoming eligible for non-workrelated disability benefits.

VSDP members are subject to a one-year waiting period before becoming eligible for non-work related disability benefits.

Disability Coverage Employees of political subdivisions (including Plan 1 and Plan 2 optins) participate in the Virginia Local Disability Program (VLDP) unless their local governing body provides an employer-paid comparable program for its members.

Purchase of Prior Service Purchase of Prior Service Members may be eligible to Same as Plan 1. purchase service from previous public employment, active duty military service, an eligible period of leave or VRS refunded service as creditable service in their plan. Prior creditable service counts toward vesting, eligibility for retirement and the health insurance credit. Only active members are eligible to purchase prior service. When buying service, members must purchase their most recent period of service first. Members also may be eligible to purchase periods of leave without pay.

Hybrid members (including Plan 1 and Plan 2 opt-ins) covered under VLDP are subject to a one-year waiting period before becoming eligible for non-work-related disability benefits. Purchase of Prior Service Defined Benefit Component: Same as Plan 1, with the following exceptions:  Hybrid Retirement Plan members are ineligible for ported service.  The cost for purchasing refunded service is the higher of 4% of creditable compensation or average final compensation.  Plan members have one year from their date of hire or return from leave to purchase all but refunded prior service at approximate normal cost. After that one-year period, the rate for most categories of service will change to actuarial cost. Defined Contribution Component: Not applicable.

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WESTERN VIRGINIA WATER AUTHORITY Notes to Financial Statements At June 30, 2017 (Continued) Note 6—Pension Plans: (Continued) Virginia Retirement System Plan (Continued) Pension Plan Data Information about the VRS Political Subdivision Retirement Plan is also available in the separately issued VRS 2016 Comprehensive Annual Financial Report (CAFR). A copy of the 2016 VRS CAFR may be downloaded from the VRS website at http://www.varetire.org/Pdf/Publications/2016-annual-report-pdf, or by writing to the System’s Chief Financial Officer at P.O. Box 2500, Richmond, VA 23218-2500. Contributions The contribution requirement for active employees is governed by §51.1-145 of the Code of Virginia, as amended, but may be impacted as a result of funding options provided to political subdivisions by the Virginia General Assembly. Employees are required to contribute 5.00% of their compensation toward their retirement. Prior to July 1, 2012, all or part of the 5.00% member contribution may have been assumed by the employer. Beginning July 1, 2012 new employees were required to pay the 5% member contribution. In addition, for existing employees, employers were required to begin making the employee pay the 5.00% member contribution. This could be phased in over a period of up to 5 years and the employer is required to provide a salary increase equal to the amount of the increase in the employee-paid member contribution. The Authority’s contractually required contribution rate for the year ended June 30, 2017 was 6.07% of covered employee compensation. This rate was based on an actuarially determined rate from an actuarial valuation as of June 30, 2015. This rate, when combined with employee contributions, was expected to finance the costs of benefits earned by employees during the year, with an additional amount to finance any unfunded accrued liability. Contributions to the pension plan from the Authority were $532,816 and $603,721 for the years ended June 30, 2017 and June 30, 2016, respectively. Net Pension Liability At June 30, 2017, the Authority reported a liability of $375,007 for its proportionate share of the net pension liability. The Authority’s net pension liability was measured as of June 30, 2016. The total pension liability used to calculate the net pension liability was determined by an actuarial valuation performed as of June 30, 2015, using updated actuarial assumptions, applied to all periods included in the measurement and rolled forward to the measurement date of June 30, 2016. In order to allocate the net pension liability to all employers included in the plan, the Authority is required to determine its proportionate share of the net pension liability. Creditable compensation as of June 30, 2016 and 2015 was used as a basis for allocation to determine the Authority’s proportionate share of the net pension liability. At June 30, 2016 and 2015, the Authority’s proportion was 98.726% and 100.000%, respectively.

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WESTERN VIRGINIA WATER AUTHORITY Notes to Financial Statements At June 30, 2017 (Continued) Note 6—Pension Plans: (Continued) Virginia Retirement System Plan (Continued) Actuarial Assumptions – General Employees The total pension liability for General Employees in the Authority’s Retirement Plan was based on an actuarial valuation as of June 30, 2015, using the Entry Age Normal actuarial cost method and the following assumptions, applied to all periods included in the measurement and rolled forward to the measurement date of June 30, 2016.

Inflation

2.5%

Salary increases, including inflation

3.5% – 5.35%

Investment rate of return

7.0%, net of pension plan investment expense, including inflation*

* Administrative expenses as a percent of the market value of assets for the last experience study were found to be approximately 0.06% of the market assets for all of the VRS plans. This would provide an assumed investment return rate for GASB purposes of slightly more than the assumed 7.0%. However, since the difference was minimal, and a more conservative 7.0% investment return assumption provided a projected plan net position that exceeded the projected benefit payments, the long-term expected rate of return on investments was assumed to be 7.0% to simplify preparation of pension liabilities. Mortality rates: 14% of deaths are assumed to be service related Largest 10 – Non-LEOS: Pre-Retirement: RP-2000 Employee Mortality Table Projected with Scale AA to 2020 with males set forward 4 years and females set back 2 years Post-Retirement: RP-2000 Combined Mortality Table Projected with Scale AA to 2020 with males set forward 1 year Post-Disablement: RP-2000 Disability Life Mortality Table Projected to 2020 with males set back 3 years and no provision for future mortality improvement All Others (Non 10 Largest) – Non-LEOS: Pre-Retirement: RP-2000 Employee Mortality Table Projected with Scale AA to 2020 with males set forward 4 years and females set back 2 years Post-Retirement: RP-2000 Combined Mortality Table Projected with Scale AA to 2020 with males set forward 1 year Post-Disablement: RP-2000 Disability Life Mortality Table Projected to 2020 with males set back 3 years and no provision for future mortality improvement

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WESTERN VIRGINIA WATER AUTHORITY Notes to Financial Statements At June 30, 2017 (Continued) Note 6—Pension Plans: (Continued) Virginia Retirement System Plan (Continued) Actuarial Assumptions – General Employees (Continued) The actuarial assumptions used in the June 30, 2015 valuation were based on the results of an actuarial experience study for the period from July 1, 2008 through June 30, 2012. Changes to the actuarial assumptions as a result of the experience study are as follows: Largest 10 – Non-LEOS: - Update mortality table - Decrease in rates of service retirement - Decrease in rates of disability retirement - Reduce rates of salary increase by 0.25% per year All Others (Non 10 Largest) – Non-LEOS: - Update mortality table - Decrease in rates of service retirement - Decrease in rates of disability retirement - Reduce rates of salary increase by 0.25% per year

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WESTERN VIRGINIA WATER AUTHORITY Notes to Financial Statements At June 30, 2017 (Continued) Note 6â&#x20AC;&#x201D;Pension Plans: (Continued) Virginia Retirement System Plan (Continued) Long-Term Expected Rate of Return The long-term expected rate of return on pension System investments was determined using a log-normal distribution analysis in which best-estimate ranges of expected future real rates of return (expected returns, net of pension System investment expense and inflation) are developed for each major asset class. These ranges are combined to produce the long-term expected rate of return by weighting the expected future real rates of return by the target asset allocation percentage and by adding expected inflation. The target asset allocation and best estimate of arithmetic real rates of return for each major asset class are summarized in the following table:

Asset Class (Strategy)

Target Allocation

U.S. Equity Developed Non U.S. Equity Emerging Market Equity Fixed Income Emerging Debt Rate Sensitive Credit Non Rate Sensitive Credit Convertibles Public Real Estate Private Real Estate Private Equity Cash

19.50% 16.50% 6.00% 15.00% 3.00% 4.50% 4.50% 3.00% 2.25% 12.75% 12.00% 1.00%

Total

Arithmetic Long-Term Expected Rate of Return 6.46% 6.28% 10.00% 0.09% 3.51% 3.51% 5.00% 4.81% 6.12% 7.10% 10.41% -1.50%

100.00% Inflation *Expected arithmetic nominal return

Weighted Average Long-Term Expected Rate of Return 1.26% 1.04% 0.60% 0.01% 0.11% 0.16% 0.23% 0.14% 0.14% 0.91% 1.25% -0.02% 5.83% 2.50% 8.33%

* Using stochastic projection results provides an expected range of real rates of return over various time horizons. Looking at one year results produces an expected real return of 8.33% but also has a high standard deviation, which means there is high volatility. Over larger time horizons the volatility declines significantly and provides a median return of 7.44%, including expected inflation of 2.50%.

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WESTERN VIRGINIA WATER AUTHORITY Notes to Financial Statements At June 30, 2017 (Continued) Note 6—Pension Plans: (Continued) Virginia Retirement System Plan (Continued) Discount Rate The discount rate used to measure the total pension liability was 7.00%. The projection of cash flows used to determine the discount rate assumed that System member contributions will be made per the VRS Statutes and the employer contributions will be made in accordance with the VRS funding policy at rates equal to the difference between actuarially determined contribution rates adopted by the VRS Board of Trustees and the member rate. Through the fiscal year ending June 30, 2018, the rate contributed by the employer for the Authority Retirement Plan will be subject to the portion of the VRS Board-certified rates that are funded by the Virginia General Assembly. From July 1, 2018 on, participating employers are assumed to contribute 100% of the actuarially determined contribution rates. Based on those assumptions, the pension plan’s fiduciary net position was projected to be available to make all projected future benefit payments of current active and inactive employees. Therefore the long-term expected rate of return was applied to all periods of projected benefit payments to determine the total pension liability. Sensitivity of the Authority’s Proportionate Share of the Net Pension Liability to Changes in the Discount Rate The following presents the Authority’s proportionate share of the net pension liability using the discount rate of 7.00%, as well as what the Authority’s proportionate share of the net pension liability would be if it were calculated using a discount rate that is one percentage point lower (6.00%) or one percentage point higher (8.00%) than the current rate: Rate (7.00%)

(6.00%) Authority's proportionate share of the Authority Retirement Plan Net Pension Liability (Asset)

$ 2,244,801

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375,007

(8.00%)

(1,152,978)

WESTERN VIRGINIA WATER AUTHORITY Notes to Financial Statements At June 30, 2017 (Continued) Note 6â&#x20AC;&#x201D;Pension Plans: (Continued) Virginia Retirement System Plan (Continued) Pension Expense and Deferred Outflows of Resources and Deferred Inflows of Resources Related to Pensions For the year ended June 30, 2017, the Authority recognized pension expense of $538,025. Since there was a change in proportionate share between measurement dates, a portion of the pension expense was related to deferred amounts from changes in proportion and from difference between employee contributions and the proportionate share of employer contributions. At June 30, 2017, the Authority reported deferred outflows of resources and deferred inflows of resources related to pensions from the following sources:

Deferred Outflows of Resources Differences between expected and actual experience

Change in proportionate shares

244,580 $ 466

Deferred Inflows of Resources 201,136 1,887

Net difference between projected and actual earnings on pension plan investments

309,865

Employer contributions subsequent to the measurement date

532,816

Total

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1,087,727 $

203,023

WESTERN VIRGINIA WATER AUTHORITY Notes to Financial Statements At June 30, 2017 (Continued) Note 6—Pension Plans: (Continued) Virginia Retirement System Plan (Continued) Pension Expense and Deferred Outflows of Resources and Deferred Inflows of Resources Related to Pensions (Continued) $532,816 reported as deferred outflows of resources related to pensions resulting from the Authority’s contributions subsequent to the measurement date will be recognized as a reduction of the Net Pension Liability in the fiscal year ended June 30, 2018. Other amounts reported as deferred outflows of resources and deferred inflows of resources related to pensions will be recognized in pension expense in future reporting periods as follows:

Year ended June 30 2018

44,351

2019 2020 2021

44,351 184,312 96,746

Thereafter

(17,872)

City of Roanoke Pension Plan Employees of the Authority who transferred their employment from the City of Roanoke are eligible to continue their participation in the City’s Pension Plan. General Information about the Pension Plan The City of Roanoke Pension Plan (the “Plan”) is a cost-sharing, multiple employer, defined benefit pension plan. At June 30, 2016, the participating entities were: City of Roanoke (City); City of Roanoke School Board; Roanoke Regional Airport Commission; Roanoke Valley Resource Authority; Roanoke Valley Detention Commission; and Western Virginia Water Authority. The Pension Plan was established by the City on July 1, 1946. Responsibility for the general administration and proper operation of the Plan is vested in the Board of Trustees. City Council appoints the nine-member Board. The Board consists of the Mayor, City Manager (or his designee), and the Director of Finance, all of whom serve as ex-officio members, two non-member citizen trustees, who must have experience in the investment of institutional funds or pension administration, one member trustee, who must be an employee of the City’s Police or Fire departments, one member trustee who is a City employee other than Police or Fire, one member trustee, who is employed by one of the Plan’s other participating employers, and one retired member trustee.

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WESTERN VIRGINIA WATER AUTHORITY Notes to Financial Statements At June 30, 2017 (Continued) Note 6—Pension Plans: (Continued) City of Roanoke Pension Plan (Continued) General Information about the Pension Plan (Continued) The Plan covers substantially all full-time employees of the City of Roanoke, Roanoke Regional Airport Commission and the Roanoke Valley Detention Commission. The Plan also covers certain employees of the Roanoke Valley Resource Authority, certain employees of the Western Virginia Water Authority, and certain non-professional City of Roanoke School Board employees, but is closed to new employee entrants of these employers. The City is the major contributor of employer contributions to the Plan. The Plan is established under authority of City Council and is governed by, and administered in accordance with, Chapter 22.3, Pensions and Retirement, of the Code of the City of Roanoke (as amended). City Council maintains the authority to establish or amend the provisions of this Chapter. As of July 1, 1984, the Plan changed its name from Employees’ Retirement System (ERS) of the City of Roanoke, Virginia to the City of Roanoke Pension Plan and incorporated a provision for an Employees’ Supplemental Retirement System (ESRS) which modified certain benefits as defined by ERS. All Plan related administrative and benefit provisions are established by City ordinance, as contained in Chapter 22.3 of the Code of the City of Roanoke. The Plan maintains a single trust from which ERS and ESRS benefits and all Plan expenses are paid. Coverage under the ESRS was mandatory for all employees hired or rehired on or after July 1, 1984. On November 28, 1994, June 1, 1998, November 2, 1998, and June 5, 2000, City Council authorized the Pension Plan to offer members of the ERS an opportunity to transfer to the ESRS. Both the ERS and the ESRS share a common trust fund from which all benefits are paid without distinction as to the source of funds and are administered by the Board of Trustees. The Pension Plan provides retirement benefits as well as death and disability benefits. Employees who are members of the ERS with 30 years of service or age 60 (normal retirement age) are entitled to an annual retirement benefit equal to 1/70 (1.429%) of their average final compensation (highest consecutive 12 months), excluding overtime, for each year of service. Employees may retire with 20 years of service and receive a reduced retirement benefit. For employees who are married at their retirement date, a joint and survivor annuity is payable monthly. If employees terminate before rendering ten years of service, they forfeit the right to receive any Pension Plan benefits. There is no mandatory retirement age. Employees who are members of the ESRS with 5 years or more of credited service and age 65 or over, general employees who have attained age 50 with age plus service equal to 80, and police officers and firefighters who have attained age 45 with age plus service equal to 70, are entitled to an annual retirement benefit, payable monthly for life in an amount equal to 2.1 percent of their final average compensation for each year of credited service up to a maximum of 63 percent. Final average compensation is the employee's average salary, excluding overtime, over the highest 36 consecutive months of credited service. Employees with 5 years of credited service may retire at age 55 and receive a reduced retirement benefit. Employees may elect to receive their retirement benefits in the form of a single life annuity or a joint and survivor annuity payable monthly from retirement. If employees under age 65 terminate before rendering five years of service, they forfeit the right to receive any Pension Plan benefits. There is no mandatory retirement age.

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WESTERN VIRGINIA WATER AUTHORITY Notes to Financial Statements At June 30, 2017 (Continued) Note 6—Pension Plans: (Continued) City of Roanoke Pension Plan (Continued) General Information about the Pension Plan (Continued) On May 15, 2000, City Council authorized the Board of Trustees to enter into an agreement with the Virginia Retirement System or another political subdivision of the Commonwealth of Virginia, having a defined benefit plan that is not supplemental to the Virginia Retirement System, allowing eligible members of ESRS the option of portability of creditable service between plans. Portability provides ESRS members the opportunity to transfer their vested pension benefits from one Virginia government employer to another. The Board of Trustees has entered into Reciprocal Asset Transfer and Pension Portability Agreements with the Virginia Retirement System and the Newport News Employee’s Retirement Fund. Effective July 1, 2000, City Council adopted provisions providing members of ESRS an opportunity to purchase eligible prior service credit in the Plan. This provision permits members who were formerly grant employees and members who have participated in the portability provisions of the plan to purchase certain eligible service credit. Effective July, 1, 2001, an additional monthly supplement equal to the greater of (a) $159; or, (b) 75% of the amount the City contributes toward the cost of a single, active employee’s health insurance shall be paid for eligible retirees until the month in which the retiree attains age 65. Any member of the Plan who is an employee of the City (not including employees of the City of Roanoke School Board); and, who retired after earning 20 or more years of creditable service but prior to attaining the age of 65 is eligible for this supplement. As part of Chapter 22.3 of City Code, The Plan provides cost of living supplements to members that retire before July 1, 2014 and those members that retire on or after July 1, 2014 and have at least 15 years of creditable service. Members must be retired for one full year to be eligible for a cost of living supplement. The amount of the cost of living supplement is determined annually as 2/3rds of the United States Average Consumer Price Index. The percentage increase for any one (1) year shall not exceed the lesser of four (4) percent or the pay raise awarded generally to active employees. Employees do not contribute to the Plan unless purchasing service. Approximately 90 days prior to the beginning of each of the City's fiscal years, the Plan files with the City Manager its certification of the appropriation necessary to pay the required contribution as certified by the actuary and such amount is included in the City's annual budget and adopted by City Council. As a governmental plan, the Plan is currently not subject to the provisions of the Employee Retirement Income Security Act (ERISA) of 1974, as amended. For the fiscal year ended on or before June 30, 2016, employer contributions to the Plan are based on a percentage of earnable compensation of the active members. This percentage is calculated annually by the Plan’s actuary using the entry age normal actuarial cost method. The annual contribution percentages include amortization of the unfunded actuarial liability. The Plan is noncontributory for employees. For the year ending June 30, 2017, the required contribution rate was 15.81%. Contributions to the plan for the fiscal year totaled $161,869 for the Water Fund and $181,124 for the Water Pollution Control Fund.

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WESTERN VIRGINIA WATER AUTHORITY Notes to Financial Statements At June 30, 2017 (Continued) Note 6—Pension Plans: (Continued) City of Roanoke Pension Plan (Continued) Pension Liabilities, Pension Expense and Deferred Outflows of Resources and Deferred Inflows of Resources Related to Pensions At June 30, 2017, the Authority reported a liability of $2,537,790 in the Water Fund and $2,821,639 in the Water Pollution Control Fund for its’ proportionate share of the net pension liability. The net pension liability was measured as of June 30, 2016 and the total pension liability used to calculate the net pension liability was determined by an actuarial valuation as of that date. The Authority’s proportion of the net pension liability was based on a projection of the Authority’s long-term share of contributions to the pension plan relative to projected contributions of all participates, as actuarially determined. At June 30, 2016, the Authority’s proportions of 1.4961% and 1.6634% for the Water and Water Pollution Control Funds, respectively, represent a decrease of 0.0932% and 0.0021%, respectively from its proportion measured as of June 30, 2015 for the funds. For the year ended June 30, 2017, the Authority recognized pension expense of $175,637 in the Water Fund and $191,813 in the Water Pollution Control Fund. At June 30, 2017, the Authority’s reported deferred outflows of resources and deferred inflows of resources related to this pension from the following sources: Water Fund Deferred

Net difference between projected and actual earnings on pension plan investments

Water Pollution Control Fund

Deferred

Outflows

Inflows

Outflows

Inflows

of Resources

260,979

Changes in assumptions

288,031

12,053

14,177

Differences between expected and actual experience

99,547

113,005

Changes in proportion and differences between contributions and proportionate share of contributions

187,379

366,052

Contributions subsequent to the measurement date Totals

161,869 $

434,901

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286,926

181,124 $

483,332

479,057

WESTERN VIRGINIA WATER AUTHORITY Notes to Financial Statements At June 30, 2017 (Continued) Note 6â&#x20AC;&#x201D;Pension Plans: (Continued) City of Roanoke Pension Plan (Continued) Pension Liabilities, Pension Expense and Deferred Outflows of Resources and Deferred Inflows of Resources Related to Pensions (Continued) $161,869 in the Water Fund and $181,124 in the Water Pollution Control Fund, respectively, reported as deferred outflows of resources related to the pension resulting from the Authorityâ&#x20AC;&#x2122;s contributions subsequent to the measurement date will be recognized as a reduction of the net pension liability in the year ending June 30, 2018. Other amounts reported as deferred inflows of resources will be recognized in pension expense as follows: Amounts to be recognized Year ending Water Water Polution 30-Jun Fund Control Fund

2018 2019 2020 2021 Total

$ (104,520) (104,520) 95,874 99,272 $ (13,894)

(180,591) (180,591) 73,959 110,374 (176,849)

Actuarial Assumptions The total pension liability in the June 30, 2016 actuarial valuation was determined using the following actuarial assumptions, applied to all periods included in the measurement: Interest rate: 7.75% per annum, compounded annually. This investment return is net of investment expenses. Salary increases: Representative values of the assumed salary increase are shown below. The rates include the following components: 2.75% for inflation, 0.5% for national productivity and 0.25% for merit or seniority increases. Annual Rate Age of Salary Increase 20 5.00% 25 4.50% 30 4.00% 35 3.50% 40 3.50% 45 3.25% 50 3.00% 55 2.75% 60 2.50% 64 2.50%

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WESTERN VIRGINIA WATER AUTHORITY Notes to Financial Statements At June 30, 2017 (Continued) Note 6â&#x20AC;&#x201D;Pension Plans: (Continued) City of Roanoke Pension Plan (Continued) Actuarial Assumptions (Continued) For purposes of amortizing the Unfunded Actuarial Liability as a level percent of payroll. A 3.00% annual rate of pay growth is used. Mortality rates: Mortality rates were based on the RP-2000 Combined Healthy Mortality Tables for Males and Females, as appropriate, with general mortality projection using Scale AA. Disabled mortality rates were based on PBGC Disabled Mortality Table 5A for males and Table 6A for females. Marital status: 70% of non-retired members are assumed to be married, with males three years older than females. Post-retirement cost of living supplement: For those participants that are eligible, 1.833% per annum (2/3 of the assumed 2.75% inflation rate). Trend for retiree supplement: The Getzen Trend Model was used to develop medical trend rates. Inputs to the model are consistent with the assumptions used in deriving assumed investment return rates (and the discount rate) used in the valuation. The health care trend rate of 5.9% is graded to 4.40% over a seventy year period.

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WESTERN VIRGINIA WATER AUTHORITY Notes to Financial Statements At June 30, 2017 (Continued) Note 6â&#x20AC;&#x201D;Pension Plans: (Continued) City of Roanoke Pension Plan (Continued) Actuarial Assumptions (Continued) Investment Rate of Return - The long-term expected rate of return on pension plan investments was determined using projected long-term rates of returns developed for each asset class. The expected long-term rate of return for each asset class as weighted by the Investment Policy target asset allocation was used, to derive the overall expected rate of return for the portfolio. The following table reflected the long-term expected rate of return based upon the defined target allocation for each asset class as defined in the Statement of Investment Policy: Weighted Arithmetic Average Long-Term Long-Term Target Expected Expected Asset Class (Strategy) Allocation Rate of Return Rate of Return

Equity Large Cap Mid Cap Small Cap Int. Developed Markets Emerging Markets Fixed Income Core Core Plus Long Duration Distressed Debt (high yield) Other Asset Classes Convertible Securities Real Estate Infrastructure Total

34.00% 7.00% 7.00% 18.00% 4.00%

8.49% 9.17% 9.24% 9.24% 11.50%

2.89% 0.64% 0.65% 1.66% 0.46%

3.00% 5.00% 8.00% 4.00%

4.35% 4.60% 5.18% 6.75%

0.13% 0.23% 0.41% 0.27%

4.00% 3.00% 3.00% 100.00%

7.79% 6.67% 7.97%

0.31% 0.20% 0.24% 8.09%

Elected form of payment: Active and terminated vested ERS participants were assumed to elect a Joint & 50% Survivor form of payment if married. All others were valued as a life annuity. Changes in assumptions: An annual cost of living assumption of 1.833% was added based on the City changing the plan to include a codified post-retirement cost of living supplement to certain individuals.

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WESTERN VIRGINIA WATER AUTHORITY Notes to Financial Statements At June 30, 2017 (Continued) Note 6—Pension Plans: (Continued) City of Roanoke Pension Plan (Continued) Actuarial Assumptions (Continued) Discount Rate: The discount rate used to measure the total pension liability was 7.75%. The projection of cash flows used to determine the discount rate assumed that contributions will be made at contractually required rates, as actuarially determined. Based on those assumptions, the pension plan’s fiduciary net position was projected to be available to make all projected future benefit payments of current active an inactive employees. Therefore, the long-term expected rate of return on pension plan investments was applied to all periods of projected benefit payments to determine the total pension liability. Sensitivity of the Authority’s proportionate share of the net pension liability to changes in the discount rate: The following presents the Authority’s proportionate share of the net pension liability calculated using the discount rate of 7.75%, as well as what the Authority’s proportionate share of the net pension liability would be if it were calculated using a discount rate that is 1 percentage point lower (6.75%) or 1 percentage point higher (8.75%) than the current rate:

Authority's proportionate share of the net pension liability

Water Fund Water Pollution Control Fund

1% Decrease (6.75%)

Discount Rate (7.75%)

1% Increase (8.75%)

$ 3,428,282 3,811,732

$ 2,537,790 2,821,639

$ 1,785,675 1,985,400

Other Information The Roanoke City Pension Plan issues a publicly available comprehensive annual financial report that includes financial statements and required supplementary information. A copy of the most recent report may be obtained by writing to the City of Roanoke Retirement Office, Attention: Retirement Administrator, P.O. Box 1220, Roanoke, Virginia, 24006.

The remainder of this page is left blank intentionally.

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WESTERN VIRGINIA WATER AUTHORITY Notes to Financial Statements At June 30, 2017 (Continued) Note 7—Other Postemployment Benefits: A. Plan Description The Authority administers a single-employer healthcare plan (“the Retiree Plan”). The plan provides for participation by eligible retirees of the Authority and their dependents in the health insurance programs available to Authority employees. The Retiree Health Plan will provide retiring employees the option to continue health insurance offered by the Authority. An eligible Authority retiree may receive this benefit until the retiree is eligible to receive Medicare. To be eligible for this benefit a retiree must meet the following criteria:    

The retiree must be a full time employee retiring on or after July 1, 2004. The employee must be eligible to retire with the Virginia Retirement System (VRS) or the current City of Roanoke retirement plan. Active employees must have at least 10 years of service with combined VRS or City of Roanoke and/or the Water Authority, with a minimum of five continuous years of service with the Water Authority and must be hired before July 1, 2010. Disabled employees are eligible after they meet retirement eligibilities

The benefits, employee contributions and the employer contributions are governed by the Board of Directors of the Western Virginia Water Authority and can be amended through Board action. The Retiree Health Plan does not issue a publicly available financial report. B. Funding Policy The Authority currently pays for post-employment health care benefits on a pay-as-you-go basis for nineteen (19) retirees. The Authority currently has 177 employees that are eligible for the program. In addition, retirees pay a percentage of the medical premium which ranged from 9.08% to 48.94%. As of July 1, 2016, the average rates were as follows: Total premium

Participants Employee only Employee and Spouse Employee and Child Employee and Family

605 1,119 1,119 1,633

The Authority is required to contribute the annual required contribution of the employer (ARC), an amount actuarially determined in accordance with the parameters of GASB Statement 45. The ARC represents a level of funding that, if paid on an ongoing basis, is projected to cover normal costs each year and amortize any unfunded actuarial liabilities (or funding excess) over a period not to exceed thirty years.

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WESTERN VIRGINIA WATER AUTHORITY Notes to Financial Statements At June 30, 2017 (Continued) Note 7—Other Postemployment Benefits: (Continued) C. Annual OPEB Cost and Net OPEB Obligation For 2017, the Authority’s contribution of $180,100 did not equal the annual required contribution. The obligation calculation is as follows:

Annual required contribution (ARC) Interest on net OPEB obligation Adjustment to ARC Annual OPEB cost (expense) Contributions made Increase in net OPEB obligation Net OPEB obligation-beginning of fiscal year

Net OPEB obligation-end of fiscal year

Water Fund 102,950 $ 1,650 (2,850) 101,750 90,050 11,700 41,177

Water Pollution Control Fund 102,950 $ 1,650 (2,850) 101,750 90,050 11,700 41,177

52,877 $

Total 205,900 3,300 (5,700) 203,500 180,100 23,400 82,354 105,754

The Authority’s annual OPEB cost, the percentage of annual OPEB cost contributed to the plan, and the net OPEB obligation for 2017 and for the two preceding years were as follows: Fiscal Year Ended 6/30/2017 6/30/2016 6/30/2015

Percentage of Annual OPEB Cost Contributed

Annual OPEB Cost $

203,500 201,000 164,600

89% 100% 143%

Net OPEB Obligation $

The remainder of this page is left blank intentionally.

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105,754 82,354 82,954

WESTERN VIRGINIA WATER AUTHORITY Notes to Financial Statements At June 30, 2017 (Continued) Note 7â&#x20AC;&#x201D;Other Postemployment Benefits: (Continued) D. Funded Status and Funding Progress The funded status of the Plan as of July 1, 2016 (the most recent actuarial valuation), was as follows:

Actuarial accrued liability (AAL) Actuarial value of plan assets Unfunded actuarial accrued liability (UAAL) Funded ratio (actuarial value of plan assets/AAL) Covered payroll (active plan members) UAAL as a percentage of covered payroll

2,172,300 2,172,300 0.00% 11,528,294 18.84%

Actuarial valuations of an 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 revision as actual results are compared with past expectations and new estimates are made about the future. The schedule of funding progress, presented as required supplementary information following the notes to the financial statements, presents multiyear trend information about whether the actuarial value of plan assets is increasing or decreasing over time relative to the actuarial accrued liabilities for benefits. E. Actuarial Methods and Assumptions Projections of benefits for financial reporting purposes are based on the substantive plan and include the types of benefits provided at the time of each valuation and the historical pattern of sharing of benefit costs between the employer and plan members to that point. The actuarial methods and assumptions used include techniques that are designed to reduce the effects of short-term volatility in actuarial accrued liabilities and the actuarial value of assets, consistent with the long-term perspective of the calculations. In the January 1, 2016 actuarial valuation, the projected unit credit actuarial cost method was used. Under this method, future benefits are projected and the present value of such benefits is allocated from date of hire to date of eligibility. The actuarial assumptions included: inflation at 2.50%, an investment rate of return at 4.00%, and a health care trend rate of 3.70% in 2016, 8.50% in 2017, graded to 4.40% over 77 years. The UAAL is being amortized on a closed basis as a level percentage over the remaining amortization period, which at July 1, 2016 was 23 years.

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WESTERN VIRGINIA WATER AUTHORITY Notes to Financial Statements At June 30, 2017 (Continued) Note 8—Risk Management: The Authority is exposed to various risks of loss related to torts; theft of, damage to and destruction of assets; errors and omissions; injuries to employees; and natural disasters. The Authority joined together with other local governments in the Commonwealth to form the Virginia Municipal League Self Insurance Risk Pool, a public entity risk pool currently operating as a common risk management and insurance program for member governments. The Authority pays an annual premium to the pool for its workers compensation, general liability, automobile liability, property, crime and public official’s insurance coverages. The Agreement for Formation of the pool provides that the pool will be self-sustaining through member premiums. Settled claims have not exceeded pool coverage in any of the past three fiscal years. Note 9—Contingencies: Authority officials estimate that no claims, not covered by insurance, would have a material effect on the Authority’s financial position. The Authority is operating under the terms of a Consent Special Order dated March 18, 2005 issued by the Virginia State Water Control Board requiring certain improvements to the Authority’s water pollution control plant. The Authority intends to comply with the provisions of this consent order through projects already started or future improvements. Note 10—Arbitrage Rebate Compliance: As of June 30, 2017 and for the year then ended, the Authority was not liable for any amounts due under current rules governing arbitrage earnings. Note 11—Litigation: As of June 30, 2017, there were no matters of litigation involving the Authority which would materially affect the Authority’s financial position should any court decision on pending matters not be favorable. Note 12—Joint Use Facility: The Authority entered into a cooperative agreement with the Bedford Regional Water Authority for the operation of the Smith Mountain Lake Water Facility. Under terms of the agreement, the participants jointly operate the facility and are responsible for their prorated share of operating cost based on usage. The Authority reports its’ undivided interest (the assets owned and liabilities for which it is responsible) related to this agreement in these financial statements. Note 13— Upcoming Pronouncements: Statement No. 75, Accounting and Financial Reporting for Postemployment Benefits Other Than Pension, improves accounting and financial reporting by state and local governments for postemployment benefits other than pensions (other postemployment benefits or OPEB). This Statement replaces the requirements of Statements No. 45, Accounting and Financial Reporting by Employers for Postemployment Benefits Other Than Pensions, as amended, and No. 57, OPEB Measurements by Agent Employers and Agent Multiple Employer Plans, for OPEB. Statement No. 74, Financial Reporting for Postemployment Benefit Plans Other

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WESTERN VIRGINIA WATER AUTHORITY Notes to Financial Statements At June 30, 2017 (Continued) Note 13— Upcoming Pronouncements: (Continued) Than Pension Plans, establishes new accounting and financial reporting requirements for OPEB plans. Statement is effective for fiscal years beginning after June 15, 2017.

This

Statement No. 81, Irrevocable Split-Interest Agreements, improves accounting and financial reporting for irrevocable split-interest agreements by providing recognition and measurement guidance for situations in which a government is a beneficiary of the agreement. The requirements of this Statement are effective for financial statements for periods beginning after December 15, 2016, and should be applied retroactively. Statement No. 83, Certain Asset Retirement Obligations, addresses accounting and financial reporting for certain asset retirement obligations (AROs). An ARO is a legally enforceable liability associated with the retirement of a tangible capital asset. A government that has legal obligations to perform future asset retirement activities related to its tangible capital assets should recognize a liability based on the guidance in this Statement. This Statement establishes criteria for determining the timing and pattern of recognition of a liability and a corresponding deferred outflow of resources for AROs. The requirements of this Statement are effective for reporting periods beginning after June 15, 2018. Statement No. 84, Fiduciary Activities, establishes criteria for identifying fiduciary activities of all state and local governments. The focus of the criteria generally is on (1) whether a government is controlling the assets of the fiduciary activity and (2) the beneficiaries with whom a fiduciary relationship exists. Separate criteria are included to identify fiduciary component units and postemployment benefit arrangements that are fiduciary activities. This Statement describes four fiduciary funds that should be reported, if applicable: (1) pension (and other employee benefit) trust funds, (2) investment trust funds, (3) private-purpose trust funds, and (4) custodial funds. This Statement also provides for recognition of a liability to the beneficiaries in a fiduciary fund when an event has occurred that compels the government to disburse fiduciary resources. The requirements of this Statement are effective for reporting periods beginning after December 15, 2018. Statement No. 86, Certain Debt Extinguishment Issues, improve consistency in accounting and financial reporting for in-substance defeasance of debt by providing guidance for transactions in which cash and other monetary assets acquired with only existing resources—resources other than the proceeds of refunding debt—are placed in an irrevocable trust for the sole purpose of extinguishing debt. This Statement also improves accounting and financial reporting for prepaid insurance on debt that is extinguished and notes to financial statements for debt that is defeased in substance. The requirements of this Statement are effective for reporting periods beginning after June 15, 2017. Statement No. 87, Leases, increases the usefulness of governments’ financial statements by requiring recognition of certain lease assets and liabilities for leases that previously were classified as operating leases and recognized as inflows of resources or outflows of resources based on the payment provisions of the contract. It establishes a single model for lease accounting based on the foundational principle that leases are financings of the right to use an underlying asset. Under this Statement, a lessee is required to recognize a lease liability and an intangible right-to-use lease asset, and a lessor is required to recognize a lease receivable and a deferred inflow of resources, thereby enhancing the relevance and consistency of information about governments’ leasing activities. The requirements of this Statement are effective for reporting periods beginning after December 15, 2019. Management is currently evaluating the impact these standards will have on the financial statements when adopted.

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Required Supplementary Information

Western Virginia Water Authority Schedule of Authority's Proportionate Share of the Net Pension Liability - VRS For the Years Ended June 30, 2015 through June 30, 2017

Date (1)

Proportion of the Net Pension Liability (Asset) (NPLA) (2)

Virginia Retirement System Plan 2016 2015 2014

98.7264% $ 100.0000% 100.0000%

Proportionate Share of the NPLA (3)

Covered Payroll (4)

375,007 $ 139,166 (399,624)

8,976,762 8,650,612 8,243,754

Proportionate Share of the NPLA as a Percentage of Covered Payroll (3)/(4) (5)

Pension Plan's Fiduciary Net Position as a Percentage of Total Pension Liability (Asset) (6)

4.18% 1.61% -4.85%

96.87% 98.74% 104.34%

Schedule is intended to show information for 10 years. Information prior to the 2014 valuation is not available. However, additional years will be included as they become available.

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Western Virginia Water Authority Schedule of Employer Contributions - VRS For the Years Ended June 30, 2008 through June 30, 2017

Contractually Required Contribution (1)

Date 2017 2016 2015 2014 2013 2012 2011 2010 2009 2008

Contributions in Relation to Contractually Required Contribution (2)

532,816 577,393 563,177 746,059 699,973 603,821 559,636 459,784 445,194 397,683

Contribution Deficiency (Excess) (3) $

Employer's Covered Payroll (4) $

9,644,034 8,976,762 8,650,612 8,243,754 7,734,509 7,004,889 6,492,302 6,114,149 5,920,132 5,239,564

Contributions as a % of Covered Payroll (5) 5.52% 6.43% 6.51% 9.05% 9.05% 8.62% 8.62% 7.52% 7.52% 7.59%

Current year contributions are from the Authority's records and prior year contributions are from the VRS actuarial valuation performed each year.

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Western Virginia Water Authority Notes to Required Supplementary Information - VRS Year Ended June 30, 2017

Changes of benefit terms – There have been no actuarially material changes to the System benefit provisions since the prior actuarial valuation. The 2014 valuation includes Hybrid Retirement Plan members for the first time. The hybrid plan applies to most new employees hired on or after January 1, 2014 and not covered by enhanced hazardous duty benefits. Because this is a fairly new benefit and the number of participants was relatively small, the impact on the liabilities as of the measurement date of June 30, 2016 is not material. Changes of assumptions – The following changes in actuarial assumptions were made effective June 30, 2013 based on the most recent experience study of the System for the four-year period ending June 30, 2012:

Largest 10 – Non-LEOS: - Update mortality table - Decrease in rates of service retirement - Decrease in rates of disability retirement - Reduce rates of salary increase by 0.25% per year All Others (Non 10 Largest) – Non-LEOS: - Update mortality table - Decrease in rates of service retirement - Decrease in rates of disability retirement - Reduce rates of salary increase by 0.25% per year

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-79-

68.70%

247%

1,027,284

2,537,790

1.4961%

68.70%

247%

1,142,185

2,821,639

1.6630%

73.81%

198%

1,125,759

2,227,427

1.5893%

73.81%

198%

1,324,235

2,620,131

1.8695%

2015 Water Pollution Water Fund Control Fund

77.23%

175%

1,093,299

1,914,560

1.6310%

77.23%

175%

1,260,812

2,207,905

1.8809%

2014 Water Pollution Water Fund Control Fund

*Schedule is intended to show information for 10 years. Information prior to the 2014 valuation is not available. However, additional years will be included as they become available.

The amounts presented for each year were determined as of 06/30.

Plan fiduciary net position as a percentage of the total pension liability

Authority's proportionate share of the net pension liability (asset) as a percentage of its covered payroll

Authority's covered employee payroll

Authority's proportionate share of the net pension liability (asset)

Authority's proportion of the net pension liability (asset)

Roanoke City Pension Plan:

2016 Water Pollution Water Fund Control Fund

Schedule of the Authority's Proportionate Share of the Net Pension Liability - Roanoke City Pension Plan Last 10 Fiscal Years*

Western Virginia Water Authority

-80-

Contribution as a percentage of covered payroll 15.81%

$ 2,169,469

Authority's covered employee payroll

(342,993)

Conribution deficiency (excess)

Contributions in relation to the contractually required contribution

342,993

Contractually required contribution

2017

Roanoke City Pension Plan:

(383,179)

383,179

2016

15.64%

$ 2,449,994

Schedule of Employer Contributions - Roanoke City Pension Plan Last 10 Fiscal Years*

Western Virginia Water Authority

(523,319)

523,319

22.23%

$ 2,354,112

2015

18.07%

2,505,800

(452,798)

452,798

2014

15.60%

2,682,526

(418,474)

418,474

2013

18.04%

2,854,263

(514,909)

514,909

2012

15.78%

2,955,044

(466,306)

466,306

2011

15.42%

3,070,318

(473,443)

473,443

2010

15.42%

3,386,180

(522,149)

522,149

2009

15.73%

3,539,650

(556,787)

556,787

2008

WESTERN VIRGINIA WATER AUTHORITY Schedule of OPEB Funding Progress Last Three Fiscal Years

Retiree Medical Plan:

Actuarial Valuation Date June 30, 2012 June 30, 2014 July 1, 2016

Actuarial Accrued Liability (AAL)

Actuarial Value of Assets $

Unfunded Actuarial Accrued Liability (UAAL)

1,991,600 $ 2,413,100 2,172,300

1,991,600 2,413,100 2,172,300

-81-

Funded Ratio 0.00% $ 0.00% 0.00%

Covered Payroll 9,110,100 11,043,314 11,528,294

UAAL as a Percent of Covered Payroll 21.86% 21.85% 18.84%

Other Supplementary Information

WESTERN VIRGINIA WATER AUTHORITY

Schedule 1

Schedule of Revenues, Expenses and Changes in Net Position - Budget and Actual - Water Fund Year Ended June 30, 2017

Final Budget Operating Revenues: Water sales Water connection charges Bulk sales Fire service Other fees Total operating revenues Operating Expenses: Water treatment administration Water treatment plants/systems: Carvin's Cove Spring Hollow Crystal Spring Falling Creek Smith Mountain Lake systems Westlake operations Botetourt operations Laboratory services Water purchases Contract operations Pump and storage operations Well operations Distribution operations Meter operations Reservoir operations Internal services Field operations Occupancy costs Depreciation and amortization Total operating expenses Income from operations Nonoperating Income (Expenses): Interest earned Tower site rental Office building lease income Non operating contribution Gain (loss) on disposal of assets Office building maintenance expense Interest expense Total nonoperating income (expenses)

Variance Favorable (Unfavorable)

Actual

29,665,951 225,000 150,000 1,368,750 974,314

28,650,637 $ 208,811 134,933 1,383,328 1,314,567

(1,015,314) (16,189) (15,067) 14,578 340,253

32,384,015

31,692,276 $

(691,739)

1,087,482

768,086 $

1,471,395 1,622,839 411,479 283,451 440,240 244,000 174,388 351,683 10,000 26,114 1,387,448 173,652 977,545 1,104,918 347,174 3,520,927 3,821,497 23,080 6,900,000

1,385,750 1,554,131 405,608 278,639 485,948 236,622 136,584 336,269 1,727 17,651 1,396,956 161,107 912,537 892,650 340,947 3,316,712 3,560,147 24,433 6,933,954

319,396 85,645 68,708 5,871 4,812 (45,708) 7,378 37,804 15,414 8,273 8,463 (9,508) 12,545 65,008 212,268 6,227 204,215 261,350 (1,353) (33,954)

24,379,312

23,146,458 $

1,232,854

8,004,703

8,545,818 $

541,115

40,000 $ 582,288 97,779 601,531 (134,191) (2,631,030)

72,331 $ 532,789 100,326 739,736 (173,635) (141,648) (1,929,990)

32,331 (49,499) 2,547 138,205 (173,635) (7,457) 701,040

(1,443,623) $

(800,091) $

643,532

1,184,647

Income (loss) before contributions

6,561,080

Capital contributions

1,477,208 $

Change in net position

8,038,288

-82-

7,745,727

987,935 $ 8,733,662 $

(489,273) 695,374

WESTERN VIRGINIA WATER AUTHORITY

Schedule 2

Schedule of Revenues, Expenses and Changes in Net Position - Budget and Actual - Water Pollution Control Fund Year Ended June 30, 2017

Final Budget Operating Revenues: Water pollution control charges Sewer connection charges Bulk sales Septic disposal fees Other fees

Actual

Variance Favorable (Unfavorable)

30,903,532 $ 85,000 1,735,000 510,000 693,689

28,122,335 $ 122,380 1,836,774 488,081 844,944

(2,781,197) 37,380 101,774 (21,919) 151,255

33,927,221 $

31,414,514 $

(2,512,707)

827,696 $ 4,179,242 2,059,500 1,964,564 74,952 1,507,298 220,000 175,000 558,012 3,520,927 23,080 3,984,215 134,796 384,601 7,775,000

489,867 $ 4,219,644 1,258,615 1,806,221 92,764 1,086,491 186,385 244,838 477,753 3,316,712 22,639 3,476,670 87,746 363,699 7,774,513

337,829 (40,402) 800,885 158,343 (17,812) 420,807 33,615 (69,838) 80,259 204,215 441 507,545 47,050 20,902 487

27,388,883 $

24,904,557 $

6,538,338 $

6,509,957 $

(28,381)

80,000 $ 97,779 (134,191) (2,272,148)

115,549 $ 100,326 5,004 (141,648) (2,186,334)

35,549 2,547 5,004 (7,457) 85,814

(2,228,560) $

(2,107,103) $

121,457

Income (loss) before contributions

4,309,778 $

4,402,854 $

93,076

Capital contributions

2,159,692 $

2,081,666 $

(78,026)

Change in net position

6,469,470 $

6,484,520 $

15,050

Total operating revenues Operating Expenses: Water pollution control: Administration Operations Biosolids handling Maintenance Contract operations Inflow and infiltration control Collection system metering Metering and lift stations Pretreatment Internal services Occupancy costs Field operations Westlake system Botetourt system Depreciation and amortization Total operating expenses Income from Operations Nonoperating Income (Expenses): Interest earned Office building lease income Gain/disposal on sale of assets Office building maintenance expense Interest expense Total nonoperating income (expenses)

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2,484,326

Statistical Section This part of Western Virginia Water Authority's 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 Authority's overall financial health. Contents Financial Trends − Tables 1-6 These schedules contain trend information to help the reader understand how the Authority's financial performance and well-being have changed over time as well as show how the revenue and expenses are split between the water and sewer departments Revenue Trends and Capacity − Tables 7-10 These schedules contain trend information to help the reader assess the Authority's most significant revenue sources, user rates, and the growth in water and sewer connections. Debt Service Trends and Capacity − Tables 11-12 These schedules present trend information to help the reader assess the Authority's current levels of outstanding debt and the capacity to acquire additional debt with appropriate revenue coverage. Demographic and Economic Information − Tables 13-14 These schedules offer demographic and economic indicators for Roanoke City and Roanoke County to help the reader understand the environment within which the Authority's financial activities take place. Operating Information − Tables 15-18 These schedules contain service and infrastructure data to help the reader understand how the information in the Authority's financial report relates to the services the Authority provides and the activities it performs. Sources: Unless otherwise noted, the information in these schedules is derived from the audited financial reports for the relevant year.

-84-

230,429,122

201,691,716 28,737,406

2017

308,692,663

282,942,997 25,749,666

2017

Net investment in capital assets Unrestricted

Total Western Virginia Water Authority

539,121,785

484,634,713 54,487,072

2017

Western Virginia Water Authority (Total all funds)

Total water pollution control fund net position

Net investment in capital assets Unrestricted

Water Pollution Control Fund

Total water fund net position

Net investment in capital assets Unrestricted

Water Fund

Net Position By Component Last Ten Fiscal Years

WESTERN VIRGINIA WATER AUTHORITY

472,501,267 51,402,336 523,903,603

2016

223,944,602

197,395,104 26,549,498

299,959,001

2016

275,106,163 24,852,838

2016

568,781,445

524,425,307 44,356,138

2015

278,618,927

253,826,266 24,792,661

2015

290,162,518

270,599,041 19,563,477

2015

562,076,273

517,974,747 44,101,526

2014

274,560,799

249,680,507 24,880,292

2014

287,515,474

268,294,240 19,221,234

2014

552,587,106

509,742,484 42,844,622

550,191,907

516,626,626 33,565,281

2012

265,382,931

244,620,766 20,762,165

2012

284,808,976

Fiscal Year

270,058,678

2013

2012 272,005,860 12,803,116

Fiscal Year

245,121,209 24,937,469

2013

282,528,428

Fiscal Year

264,621,275 17,907,153

2013

541,001,479

508,823,556 32,177,923

2011

259,387,561

237,434,519 21,953,042

2011

281,613,918

271,389,037 10,224,881

2011

533,052,106

505,903,642 27,148,464

2010

255,465,163

235,888,824 19,576,339

2010

277,586,943

270,014,818 7,572,125

2010

523,512,312

498,635,176 24,877,136

2009

250,686,903

234,003,903 16,683,000

2009

272,825,409

264,631,273 8,194,136

2009

516,695,188

492,065,643 24,629,545

2008

244,497,235

229,099,148 15,398,087

2008

272,197,953

262,966,495 9,231,458

2008

Table 1

WESTERN VIRGINIA WATER AUTHORITY

Table 2

Changes in Net Position Last Ten Fiscal Years Water Fund

Fiscal Year 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Operating Revenues $

21,847,931 $ 22,520,105 23,813,262 25,593,681 26,495,481 27,062,236 28,597,148 28,344,557 30,594,647 31,692,276

Operating Expenses 20,539,667 $ 21,045,730 21,162,348 21,474,008 23,802,637 23,710,753 24,725,547 24,106,927 22,493,540 23,146,458

Operating Income (Loss)

Total Nonoperating Revenues/ (Expenses)

1,308,264 $ 1,474,375 2,650,914 4,119,673 2,692,844 3,351,483 3,871,601 4,237,630 8,101,107 8,545,818

(2,604,988) $ (2,788,571) (2,324,390) (2,034,901) (2,231,520) (6,633,646) (1,479,084) (571,705) 33,364 (800,091)

Income/(Loss) before Capital Contributions (1,296,724) $ (1,314,196) 326,524 2,084,772 461,324 (3,282,163) 2,392,517 3,665,925 8,134,471 7,745,727

Capital Contributions 1,408,504 $ 1,941,652 4,435,010 1,942,203 2,733,734 1,001,615 2,594,529 1,412,193 10,425,679 987,935

Change in Net Position 111,780 627,456 4,761,534 4,026,975 3,195,058 (2,280,548) 4,987,046 5,078,118 18,560,150 8,733,662

Water Pollution Control Fund

Fiscal Year 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Operating Revenues $

22,786,707 $ 23,969,097 26,146,817 27,690,477 28,548,004 29,003,472 30,486,279 28,850,165 31,427,048 31,414,514

Operating Expenses

Operating Income (Loss)

20,543,227 $ 21,923,901 22,850,876 23,201,862 22,850,559 23,727,560 24,604,677 23,734,208 23,976,771 24,904,557

Total Nonoperating Revenues/ (Expenses)

2,243,480 $ 2,045,196 3,295,941 4,488,615 5,697,445 5,275,912 5,881,602 5,115,957 7,450,277 6,509,957

(2,379,045) $ (2,173,065) (2,180,740) (2,044,259) (2,234,852) (2,011,990) (4,565,530) (1,713,406) (2,368,015) (2,107,103)

Income/(Loss) before Capital Contributions (135,565) $ (127,869) 1,115,201 2,444,356 3,462,593 3,263,922 1,316,072 3,402,551 5,082,262 4,402,854

Capital Contributions 2,086,259 $ 6,317,537 3,663,059 1,478,042 2,532,777 1,411,825 3,186,049 3,674,333 3,776,313 2,081,666

Change in Net Position 1,950,694 6,189,668 4,778,260 3,922,398 5,995,370 4,675,747 4,502,121 7,076,884 8,858,575 6,484,520

Western Virginia Water Authority (Total all funds)

Fiscal Year 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Operating Revenues $

44,634,638 $ 46,489,202 49,960,079 53,284,158 55,043,485 56,065,708 59,083,427 57,194,722 62,021,695 63,106,790

Operating Expenses 41,082,894 $ 42,969,631 44,013,224 44,675,870 46,653,196 47,438,313 49,330,224 47,841,135 46,470,311 48,051,015

Operating Income (Loss)

Total Nonoperating Revenues/ (Expenses)

3,551,744 $ 3,519,571 5,946,855 8,608,288 8,390,289 8,627,395 9,753,203 9,353,587 15,551,384 15,055,775

(4,984,033) $ (4,961,636) (4,505,130) (4,079,160) (4,466,372) (8,645,636) (6,044,614) (2,285,111) (2,334,651) (2,907,194)

-85-

Income/(Loss) before Capital Contributions (1,432,289) $ (1,442,065) 1,441,725 4,529,128 3,923,917 (18,241) 3,708,589 7,068,476 13,216,733 12,148,581

Capital Contributions 3,494,763 $ 8,259,189 8,098,069 3,420,245 5,266,511 2,413,440 5,780,578 5,086,526 14,201,992 3,069,601

Change in Net Position 2,062,474 6,817,124 9,539,794 7,949,373 9,190,428 2,395,199 9,489,167 12,155,002 27,418,725 15,218,182

WESTERN VIRGINIA WATER AUTHORITY

Table 3

Operating Revenues By Source Last Ten Fiscal Years Water Fund Fiscal Year

Customer Charges

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

$ 19,375,949 $ 19,890,287 20,979,028 22,679,166 23,718,542 24,292,043 26,046,352 25,460,809 28,039,511 28,650,637

Connection Fees 236,743 $ 196,591 231,140 340,800 244,009 137,376 163,304 268,972 199,344 208,811

Bulk Sales 435,083 $ 370,470 421,274 388,756 415,012 424,648 547,897 413,312 145,539 134,933

Fire Service

Other Revenues

1,048,790 $ 1,120,028 1,204,743 1,256,060 1,257,747 1,255,954 1,282,672 1,293,822 1,390,143 1,383,328

751,366 $ 942,729 977,077 928,899 860,171 952,215 556,923 907,642 820,110 1,314,567

Total 21,847,931 22,520,105 23,813,262 25,593,681 26,495,481 27,062,236 28,597,148 28,344,557 30,594,647 31,692,276

Water Pollution Control Fund Fiscal Year

Customer Charges

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

$ 19,319,239 $ 20,546,188 22,268,988 24,245,313 25,252,650 25,604,607 27,374,347 25,864,309 28,190,896 28,122,335

Connection Fees 84,875 $ 66,860 100,000 56,750 73,495 56,375 88,070 73,050 73,625 122,380

Bulk Sales

Fire Service

2,437,565 $ 2,183,217 2,429,476 2,180,514 2,059,003 2,057,766 2,655,458 2,257,530 2,550,203 1,836,774

Other Revenues - $ -

945,028 $ 1,172,832 1,348,353 1,207,900 1,162,856 1,284,724 368,404 655,276 612,324 1,333,025

Total 22,786,707 23,969,097 26,146,817 27,690,477 28,548,004 29,003,472 30,486,279 28,850,165 31,427,048 31,414,514

Western Virginia Water Authority (Total all funds) Fiscal Year

Customer Charges

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

$ 38,695,188 $ 40,436,475 43,248,016 46,924,479 48,971,192 49,896,650 53,420,699 51,325,118 56,230,407 56,772,972

Connection Fees 321,618 $ 263,451 331,140 397,550 317,504 193,751 251,374 342,022 272,969 331,191

Bulk Sales 2,872,648 $ 2,553,687 2,850,750 2,569,270 2,474,015 2,482,414 3,203,355 2,670,842 2,695,742 1,971,707

-86-

Fire Service 1,048,790 $ 1,120,028 1,204,743 1,256,060 1,257,747 1,255,954 1,282,672 1,293,822 1,390,143 1,383,328

Other Revenues 1,696,394 $ 2,115,561 2,325,430 2,136,799 2,023,027 2,236,939 925,327 1,562,918 1,432,434 2,647,592

Total 44,634,638 46,489,202 49,960,079 53,284,158 55,043,485 56,065,708 59,083,427 57,194,722 62,021,695 63,106,790

-87-

2016 1,659 $ 3,788,986 21,556 1,008,631 459,828 1,677,561 4,277,866 4,068,471 20,926 7,168,056

1,826 $ 3,771,537 14,264 1,031,549 464,107 1,603,979 4,087,283 3,804,364 22,120 9,305,898

2015 1,823 $ 4,223,470 13,510 1,006,816 498,223 1,687,302 4,127,444 3,868,453 20,660 9,277,846

2014 13,614 $ 4,222,046 13,075 999,177 622,854 1,523,192 3,785,169 3,772,612 24,292 8,734,722

45,304 $ 4,189,001 12,495 995,066 695,203 1,417,095 3,594,510 3,597,429 24,862 9,231,672

Fiscal Year 2013 2012 73,369 $ 3,936,928 11,793 850,161 542,610 1,630,937 3,602,627 3,556,784 24,986 7,243,813

2011 94,369 $ 3,989,576 11,776 842,677 649,646 1,440,389 3,645,581 3,382,491 24,096 7,081,747

2010 495,637 $ 3,959,592 12,609 535,123 496,960 1,950,732 3,445,489 3,249,952 30,509 6,869,127

2009 571,177 3,911,010 14,694 458,692 387,496 2,048,024 2,970,048 3,348,680 25,811 6,804,035

2008

4,391,189 $ 4,276,047 1,947,470 149,539 1,217,458 3,550,305 1,134,758 436,005 20,926 6,853,074

2016 4,244,370 $ 4,172,866 1,817,113 115,032 1,097,311 3,322,875 1,293,613 348,152 22,120 7,300,756

2015 4,358,513 $ 4,124,422 1,931,336 99,507 1,544,215 3,610,335 1,263,527 332,568 20,660 7,319,594

2014 4,221,649 $ 3,871,990 1,884,127 115,437 2,178,595 3,298,953 1,200,428 257,820 24,292 6,674,269

3,926,939 $ 3,914,759 1,862,114 81,724 1,881,558 3,026,784 1,155,950 417,690 24,862 6,558,179

Fiscal Year 2013 2012

3,693,750 $ 3,989,367 1,917,953 113,676 1,685,592 2,766,775 1,057,237 424,257 24,986 7,528,269

2011

3,497,739 $ 4,293,532 1,766,895 95,976 1,389,831 2,846,285 1,149,071 367,610 24,096 7,419,841

2010

3,326,804 $ 4,144,553 1,798,198 86,093 1,141,693 2,675,760 1,223,315 371,675 30,509 7,125,301

2009

3,468,983 3,704,141 1,724,997 59,835 1,471,296 2,637,974 1,296,517 167,564 25,811 5,986,109

2008

2015

2014

Fiscal Year 2013 2012

2011

2010

2009

2008

Total Operating Expenses

$ 48,051,015 $ 46,470,311 $ 47,841,135 $ 49,330,224 $ 47,438,313 $ 46,653,196 $ 44,675,870 $ 44,013,224 $ 42,969,631 $ 41,082,894

Utility Administration $ 8,369,130 $ 8,459,660 $ 8,048,734 $ 8,226,966 $ 7,994,261 $ 7,524,368 $ 7,250,534 $ 6,880,230 $ 6,576,756 $ 6,817,663 Operations and Maintenance 9,928,223 9,540,632 9,218,910 9,361,116 9,029,852 8,978,456 9,056,497 9,100,891 9,024,268 8,397,879 Distribution 8,259,670 7,828,171 7,410,158 7,737,779 7,084,122 6,621,294 6,369,402 6,491,866 6,121,249 5,608,022 Water Purchases 1,727 1,659 1,826 1,823 13,614 45,304 73,369 94,369 495,637 571,177 Water Treatment 3,960,397 3,788,986 3,771,537 4,223,470 4,222,046 4,189,001 3,936,928 3,989,576 3,959,592 3,911,010 Biosolids Handling 1,258,615 1,217,458 1,097,311 1,544,215 2,178,595 1,881,558 1,685,592 1,389,831 1,141,693 1,471,296 Inflow & Infiltration Control 1,086,491 1,134,758 1,293,613 1,263,527 1,200,428 1,155,950 1,057,237 1,149,071 1,223,315 1,296,517 Metering & Lift Stations 431,223 436,005 348,152 332,568 257,820 417,690 424,257 367,610 371,675 167,564 Occupancy Cost 47,072 41,852 44,240 41,320 48,584 49,724 49,972 48,192 61,018 51,622 Depreciation and amortization 14,708,467 14,021,130 16,606,654 16,597,440 15,408,991 15,789,851 14,772,082 14,501,588 13,994,428 12,790,144

2017

2016

$ 24,904,557 $ 23,976,771 $ 23,734,208 $ 24,604,677 $ 23,727,560 $ 22,850,559 $ 23,201,862 $ 22,850,876 $ 21,923,901 $ 20,543,227

4,284,332 $ 4,219,644 1,806,221 180,510 1,258,615 3,840,369 1,086,491 431,223 22,639 7,774,513

2017

Western Virginia Water Authority (Total all funds)

Total Operating Expenses

1,727 $ 3,960,397 17,651 1,396,956 502,054 1,805,187 4,419,301 4,084,798 24,433 6,933,954

2017

Table 4

$ 23,146,458 $ 22,493,540 $ 24,106,927 $ 24,725,547 $ 23,710,753 $ 23,802,637 $ 21,474,008 $ 21,162,348 $ 21,045,730 $ 20,539,667

WPC Utility Administration $ WPC Operations WPC Maintenance Contract Operations Biosolids Handling WPC Distribution Inflow & Infiltration Control Metering & Lift Stations Occupancy Cost Depreciation and amortization

Water Pollution Control Fund

Total Operating Expenses

Water Purchases $ Water Treatment Contract Operations Pump & Storage Operations Reservoir & Well Operations Meter Operations Water Distribution Internal Services Occupancy Cost Depreciation and amortization

Water Fund

Operating Expenses Last Ten Fiscal Years

WESTERN VIRGINIA WATER AUTHORITY

Table 5

Nonoperating Revenues and Expenses Last Ten Fiscal Years

Water Fund

Fiscal Year 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Interest Earned $

371,645 $ 227,166 69,558 76,813 82,402 51,110 25,095 17,230 25,459 72,331

Rental Income

Gain (Loss) on Disposal of Assets

521,270 $ (189,471) $ 504,676 (199,293) 520,885 (192,738) 489,614 (193,647) 472,312 (96,364) 509,273 (4,653,555) 546,830 15,630 587,917 45,144 617,475 1,114,048 633,115 (173,635)

Insurance Recoveries - $ 35,069 15,927 30,493 23,209 46,675 92,660 30,887 -

Rental Expense (110,808) $ (138,548) (133,130) (138,346) (120,203) (121,334) (117,418) (125,829) (122,976) (141,648)

Interest Expense (3,197,624) $ (3,433,193) (3,229,688) (2,920,965) (3,214,585) (3,081,726) (2,657,611) (1,817,881) (2,202,770) (1,929,990)

Nonoperating Contributions - $ 215,552 624,796 621,137 621,709 615,911 615,730 690,827 602,128 739,736

Total Nonoperating Income/ (Expenses) (2,604,988) (2,788,571) (2,324,390) (2,034,901) (2,231,520) (6,633,646) (1,479,084) (571,705) 33,364 (800,091)

Water Pollution Control Fund

Fiscal Year 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Interest Earned $

520,999 $ 272,793 195,883 204,887 155,208 100,354 56,651 44,840 62,754 115,549

Rental Income 168,291 $ 171,711 173,552 127,618 93,878 92,675 93,322 97,195 97,471 100,326

Gain (Loss) on Disposal of Assets (567,797) $ 9,416 7,759 12,554 51,187 63,796 38,377 23,650 32,566 5,004

Insurance Recoveries 10,956 $ 58,133 4,969 1,194 4,620 29,963 1,493 241 -

Rental Expense (110,808) $ (138,548) (133,130) (138,346) (120,203) (121,334) (117,418) (125,829) (122,976) (141,648)

Interest Expense (2,400,686) $ (2,546,570) (2,429,773) (2,252,166) (2,419,542) (2,177,444) (1,883,627) (1,753,503) (2,437,830) (2,186,334)

Nonoperating Contributions - $ (2,754,328) -

Total Nonoperating Income/ (Expenses) (2,379,045) (2,173,065) (2,180,740) (2,044,259) (2,234,852) (2,011,990) (4,565,530) (1,713,406) (2,368,015) (2,107,103)

Western Virginia Water Authority (Total all funds)

Fiscal Year 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Interest Earned $

892,644 $ 499,959 265,441 281,700 237,610 151,464 81,746 62,070 88,213 187,880

Rental Income

Gain (Loss) on Disposal of Assets

689,561 $ (757,268) $ 676,387 (189,877) 694,437 (184,979) 617,232 (181,093) 566,190 (45,177) 601,948 (4,589,759) 640,152 54,007 685,112 68,794 714,946 1,146,614 733,441 (168,631)

Insurance Recoveries 10,956 $ 93,202 20,896 31,687 27,829 76,638 94,153 31,128 -

-88-

Rental Expense (221,616) $ (277,096) (266,260) (276,692) (240,406) (242,668) (234,836) (251,658) (245,952) (283,296)

Interest Expense (5,598,310) $ (5,979,763) (5,659,461) (5,173,131) (5,634,127) (5,259,170) (4,541,238) (3,571,384) (4,640,600) (4,116,324)

Nonoperating Contributions - $ 215,552 624,796 621,137 621,709 615,911 (2,138,598) 690,827 602,128 739,736

Total Nonoperating Income/ (Expenses) (4,984,033) (4,961,636) (4,505,130) (4,079,160) (4,466,372) (8,645,636) (6,044,614) (2,285,111) (2,334,651) (2,907,194)

WESTERN VIRGINIA WATER AUTHORITY

Table 6

Annual Capital Contributions by Source Last Ten Fiscal Years Water Fund Water Availability Fees

Fiscal Year 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

886,023 679,318 555,089 649,300 549,073 510,665 593,843 890,376 815,750 771,828

Developer Contributions $

522,481 859,834 2,249,356 786,520 1,156,080 440,450 1,197,186 316,900 3,322,487 181,220

Governments $

402,500 1,630,565 506,383 1,028,581 50,500 803,500 204,917 832,744 34,887

Total $

1,408,504 1,941,652 4,435,010 1,942,203 2,733,734 1,001,615 2,594,529 1,412,193 4,970,981 987,935

Water Pollution Control Fund Sewer Availability Fees

Fiscal Year 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

634,711 636,750 493,976 625,500 515,125 524,225 490,375 726,500 842,500 825,500

Developer Contributions $

749,828 765,409 2,435,990 490,942 1,159,360 148,665 759,510 347,910 1,574,298 220,450

Governments $

701,720 4,915,378 733,093 361,600 858,292 738,935 1,936,164 2,599,923 809,475 1,035,716

Total $

2,086,259 6,317,537 3,663,059 1,478,042 2,532,777 1,411,825 3,186,049 3,674,333 3,226,273 2,081,666

Western Virginia Water Authority (Total all funds)

Fiscal Year 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Availability Fees $

1,520,734 1,316,068 1,049,065 1,274,800 1,064,198 1,034,890 1,084,218 1,616,876 1,658,250 1,597,328

Developer Contributions $

1,272,309 1,625,243 4,685,346 1,277,462 2,315,440 589,115 1,956,696 664,810 4,896,785 401,670

-89-

Governments $

701,720 5,317,878 2,363,658 867,983 1,886,873 789,435 2,739,664 2,804,840 1,642,219 1,070,603

Total $

3,494,763 8,259,189 8,098,069 3,420,245 5,266,511 2,413,440 5,780,578 5,086,526 8,197,254 3,069,601

WESTERN VIRGINIA WATER AUTHORITY

Table 7

Water Produced, Consumed and Wastewater Treated Gallons In Thousands Last Ten Fiscal Years

Fiscal Year 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Gallons of Water Produced 7,763,848 7,869,326 7,963,322 7,487,117 6,875,326 6,950,902 7,091,431 6,875,959 7,075,336 7,331,069

Gallons of Water Consumed

Gallons of Water Unbilled

5,421,272 5,336,598 5,155,621 5,188,055 5,183,625 5,148,885 5,289,324 5,074,953 5,272,062 5,133,048

Average Percent Unbilled

2,342,576 2,532,728 2,807,701 2,299,062 1,691,701 1,802,017 1,802,107 1,801,006 1,803,274 2,198,021

(1) Regional flow (2) Data provided by Western Virginia Water Authority Billing & Customer Service.

-90-

30% 32% 35% 31% 25% 26% 25% 26% 25% 30%

Gallons of Wastewater Treated (1) 11,457,290 12,815,400 16,848,400 13,550,000 13,468,900 12,951,500 14,594,100 13,351,400 16,324,800 13,714,900

WESTERN VIRGINIA WATER AUTHORITY

Table 8

Number of Customers Last Ten Fiscal Years

Fiscal Year

Water

Sewer

Total

Residential Commercial Industrial Residential Commercial Industrial

Bulk

Water

Sewer

2008

51,735

4,253

46,951

4,085

56,038

51,077

2009

52,375

4,281

47,229

4,107

56,693

51,367

2010

53,164

4,468

47,326

4,095

57,669

51,456

2011

53,266

4,440

47,317

4,082

57,741

51,431

2012

53,642

4,465

47,438

4,094

58,140

51,562

2013

53,910

4,536

47,644

4,139

58,469

51,804

2014

52,374

5,123

47,659

4,190

57,522

51,866

2015

52,560

5,157

47,872

4,086

57,744

51,973

2016

53,831

5,257

49,704

4,491

59,122

54,219

2017

56,551

5,578

51,292

4,572

62,163

55,889

(1) Data provided by Western Virginia Water Authority Billing & Customer Service.

-91-

-92-

$11.25 3.00 26.25

$30.00 5.00 30.00

$12.25 4.75 36.00

$14.25 3.75 33.00

$14.25 6.75 48.00

$14.25 3.75 33.00

County of Roanoke Residents Water Fixed Rate Water Variable Rate Average monthly residential bill

County of Franklin Residents (2) Water Fixed Rate Water Variable Rate Average monthly residential bill

County of Botetourt Residents (3) Water Fixed Rate Water Variable Rate Average monthly residential bill

Sewer Rates: City of Roanoke Residents Sewer Fixed Rate Sewer Variable Rate Average monthly residential bill

County of Roanoke Residents Sewer Fixed Rate Sewer Variable Rate Average monthly residential bill

County of Franklin Residents (2) Sewer Fixed Rate Sewer Variable Rate Average monthly residential bill

County of Botetourt Residents (3) Sewer Fixed Rate Sewer Variable Rate Average monthly residential bill

(1) (2) (3) (4) (5)

$14.00 3.75 32.75

$11.00 7.60 49.00

$13.75 3.75 32.50

$12.25 4.75 36.00

$30.00 5.00 30.00

$10.75 3.00 25.75

2016

na na na

$11.00 7.60 49.00

$13.00 3.75 31.75

na na na

$30.00 5.00 30.00

$10.25 3.00 25.25

2015

na na na

$11.00 7.60 49.00

$12.25 3.75 31.00

$12.75 3.75 31.50

na na na

$30.00 5.00 30.00

$9.50 3.00 24.50

2014

na na na

$11.00 7.60 49.00

$12.25 3.50 29.75

na na na

$30.00 5.00 30.00

$8.65 3.00 23.65

na na na

$11.00 7.60 49.00

$12.10 3.50 29.60

na na na

$32.00 8.00 32.00

$8.65 3.00 23.65

Fiscal Year 2013 2012

Rates effective January 1 of each year County of Franklin joined the Authority in fiscal year 2010, rates are not applicable for years before fiscal year 2010 County of Botetourt joined the Authority in fiscal year 2016, rates are not applicable for years before fiscal year 2016 Rates approved by the Western Virginia Water Authority Board of Directors. Data provided by Western Virginia Water Authority Billing & Customer Service.

Residential bill based on 5/8 inch meter using 5,000 gallons

$11.25 3.00 26.25

2017

Water Rates: City of Roanoke Residents Water Fixed Rate Water Variable Rate Average monthly residential bill

Schedule of User Rates (1) Last Ten Fiscal Years

WESTERN VIRGINIA WATER AUTHORITY

na na na

$11.00 7.60 49.00

$11.20 3.50 28.70

na na na

$32.00 8.00 32.00

$7.75 3.00 22.75

2011

na na na

$9.00 7.25 45.25

$9.25 3.50 26.75

na na na

$32.00 8.00 32.00

$6.25 3.00 21.25

2010

na na na

$9.00 3.20 25.00

$7.50 3.30 24.00

na na na

$6.00 2.90 20.50

$5.30 2.90 19.80

2009

na na na

$9.00 2.80 23.00

$6.00 3.05 21.25

na na na

$5.50 2.90 20.00

$4.50 2.75 18.25

2008

Table 9

WESTERN VIRGINIA WATER AUTHORITY

Table 10

Principal Customers Comparison of June 30, 2017 and 2008

Customer

Fiscal Year 2017 Water Consumption Sewer Flow in 000/gals % of System in 000/gals % of System

Norfolk Southern Corporation Coca Cola Carilion Roanoke Redevelopment and Housing Authority Dynax America Corporation Steel Dynamics Roanoke City of Roanoke Schools Snyder Hunt Corporation Hollins University ITT Exelis Total consumption (principal customers) Balance from other customers Total system annual consumption

Customer

235,580 119,420 104,745 87,525 55,209 53,130 41,032 37,952 31,472 29,559

4.6% 2.3% 2.0% 1.7% 1.1% 1.0% 0.8% 0.7% 0.6% 0.6%

277,485 77,166 86,797 55,209 33,280 40,955 37,952 -

6.6% 0.0% 1.8% 2.1% 1.3% 0.8% 1.0% 0.9% 0.0% 0.0%

795,624

15.5%

608,843

14.4%

4,337,424

84.5%

3,610,547

85.6%

5,133,048

100.0%

4,219,390

100.0%

Fiscal Year 2008 Water Consumption Sewer Flow in 000/gals % of System in 000/gals % of System

Carilion Hospitals Wometco Coca Cola Roanoke Redevelopment and Housing Authority Botetourt County Public Works Steel Dynamics Roanoke Norfolk Southern Corporation Town of Vinton Snyer Hunt Corporations ITT Hollins University Total consumption (principal customers) Balance from other customers Total system annual consumption

127,225 117,555 104,101 70,133 66,535 62,008 58,187 44,038 38,640 35,612

2.3% 2.2% 1.9% 1.3% 1.2% 1.1% 1.1% 0.8% 0.7% 0.7%

2.6% 0.6% 2.2% 0.0% 0.6% 1.3% 0.0% 0.9% 1.5% 0.6%

724,034

13.4%

488,184

10.4%

4,697,238

86.6%

4,196,824

89.6%

5,421,272

100.0%

4,685,008

100.0%

(1) Data provided by Western Virginia Water Authority Billing & Customer Service.

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123,840 26,425 104,101 27,671 62,008 44,038 72,092 28,009

WESTERN VIRGINIA WATER AUTHORITY

Table 11

Ratios of Outstanding Debt by Type Last Ten Fiscal Years

Water Fund Fiscal Year 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Revenue Bonds $

62,755,142 $ 66,781,357 64,195,468 61,645,717 79,352,270 76,461,851 74,404,938 70,843,099 67,976,059 65,094,505

Locality Compensation Payments 13,432,165 $ 11,568,091 9,799,150 8,284,866 6,560,446 4,914,900 3,184,900 2,863,500 2,300,800 1,953,900

Total 76,187,307 $ 78,349,448 73,994,618 69,930,583 85,912,716 81,376,751 77,589,838 73,706,599 70,276,859 67,048,405

Per Connection 1,345 1,350 1,271 1,200 1,472 1,391 1,322 1,250 1,165 1,108

Water Pollution Control Fund Fiscal Year 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Revenue Bonds $

62,222,026 $ 61,482,338 58,881,657 55,664,136 66,025,906 68,224,251 72,117,929 73,806,707 76,034,133 70,724,505

Locality Compensation Payments 13,440,000 $ 12,600,000 12,045,000 11,475,000 10,901,817 8,475,000 10,554,359 9,774,390 9,694,420 8,990,778

Western Virginia Water Authority (Total all funds) Locality Fiscal Revenue Compensation Year Bonds Payments 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

124,977,168 $ 128,263,695 123,077,125 117,309,853 145,378,176 144,686,102 146,522,867 144,649,806 144,010,192 135,819,010

26,872,165 $ 24,168,091 21,844,150 19,759,866 17,462,263 13,389,900 13,739,259 12,637,890 11,995,220 10,944,678

-94-

Total 75,662,026 $ 74,082,338 70,926,657 67,139,136 76,927,723 76,699,251 82,672,288 83,581,097 85,728,553 79,715,283

Total 151,849,333 $ 152,431,786 144,921,275 137,069,719 162,840,439 158,076,002 160,262,126 157,287,696 156,005,412 146,763,688

Per Connection 1,480 1,441 1,376 1,301 1,489 1,481 1,591 1,603 1,543 1,430

Per Connection 1,409 1,393 1,320 1,249 1,480 1,434 1,448 1,416 1,346 1,262

-95-

21,847,931 $ 22,520,105 23,813,262 25,593,681 26,495,481 27,062,236 28,597,148 28,344,557 30,594,647 31,692,276

Operating Revenues

22,786,707 $ 23,969,097 26,146,817 27,690,477 28,548,004 29,003,472 30,486,279 28,850,165 31,427,048 31,414,514

Operating Revenues 634,711 $ 636,750 493,976 625,500 515,125 524,225 490,375 726,500 842,500 825,500

Availability Fees

886,023 $ 679,318 555,089 649,300 549,073 510,665 593,843 890,376 815,750 771,828

Availability Fees

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Fiscal Year

44,634,638 $ 46,489,202 49,960,079 53,284,158 55,043,485 56,065,708 59,083,427 57,194,722 62,021,695 63,106,790

Operating Revenues 1,520,734 $ 1,316,068 1,049,065 1,274,800 1,064,198 1,034,890 1,084,218 1,616,876 1,658,250 1,597,328

Availability Fees 892,644 $ 499,959 265,441 281,700 237,610 151,464 81,746 62,070 88,213 187,880

Interest Earnings

520,999 $ 272,793 195,883 204,887 155,208 100,354 56,651 44,840 62,754 115,549

Interest Earnings

371,645 $ 227,166 69,558 76,813 82,402 51,110 25,095 17,230 25,459 72,331

Interest Earnings

Western Virginia Water Authority (Total all funds)

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Fiscal Year

Water Pollution Control Fund

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Fiscal Year

Water Fund

Schedule of Debt Service & Coverage Last Ten Fiscal Years

WESTERN VIRGINIA WATER AUTHORITY

700,517 $ 985,141 1,340,129 1,270,056 1,215,728 1,294,497 1,404,042 1,475,861 2,463,688 1,478,181

Nonoperating Revenues

179,247 $ 229,844 178,521 128,812 98,498 122,638 133,192 121,086 130,037 105,330

Nonoperating Revenues

521,270 $ 755,297 1,161,608 1,141,244 1,117,230 1,171,859 1,270,850 1,354,775 2,333,651 1,372,851

Nonoperating Revenues

47,748,533 $ 49,290,370 52,614,714 56,110,714 57,561,021 58,546,559 61,653,433 60,349,529 66,231,846 66,370,179

Gross Revenues

24,121,664 $ 25,108,484 27,015,197 28,649,676 29,316,835 29,750,689 31,166,497 29,742,591 32,462,339 32,460,893

Gross Revenues

23,626,869 $ 24,181,886 25,599,517 27,461,038 28,244,186 28,795,870 30,486,936 30,606,938 33,769,507 33,909,286

Gross Revenues

28,292,750 $ 28,975,203 29,511,636 29,903,788 30,863,345 32,029,322 32,732,784 31,234,481 32,449,181 33,342,548

Expenses (excluding depreciation)

14,557,118 $ 14,798,600 15,431,035 15,673,593 16,292,380 17,053,291 17,285,083 16,433,452 17,123,697 17,130,044

Operating Expenses (excluding depreciation)

13,735,632 $ 14,176,603 14,080,601 14,230,195 14,570,965 14,976,031 15,447,701 14,801,029 15,325,484 16,212,504

Operating Expenses (excluding depreciation)

221,616 $ 277,096 266,260 276,692 240,406 242,668 234,836 251,658 245,952 283,296

Nonoperating Expenses

110,808 $ 138,548 133,130 138,346 120,203 121,334 117,418 125,829 122,976 141,648

Nonoperating Expenses

110,808 $ 138,548 133,130 138,346 120,203 121,334 117,418 125,829 122,976 141,648

Nonoperating Expenses

19,234,167 $ 20,038,071 22,836,818 25,930,234 26,457,270 26,274,569 28,685,813 28,863,390 33,536,713 32,744,335

Net Available Revenues

9,453,738 $ 10,171,336 11,451,032 12,837,737 12,904,252 12,576,064 13,763,996 13,183,310 15,215,666 15,189,201

Net Available Revenues

9,780,429 $ 9,866,735 11,385,786 13,092,497 13,553,018 13,698,505 14,921,817 15,680,080 18,321,047 17,555,134

Net Available Revenues

10,733,420 12,915,165 14,277,472 13,939,338 14,721,527 16,953,102 16,338,319 15,429,462 19,790,542 16,563,655

Debt Service Requirements

5,600,613 6,085,626 6,333,934 6,345,274 6,601,266 8,484,702 7,466,653 7,965,573 11,391,519 9,318,081

Debt Service Requirements

5,132,807 6,829,539 7,943,538 7,594,064 8,120,261 8,468,400 8,871,666 7,463,889 8,399,023 7,245,574

Debt Service Requirements

1.79 1.55 1.60 1.86 1.80 1.55 1.76 1.87 1.69 1.98

Coverage Ratio

1.69 1.67 1.81 2.02 1.95 1.48 1.84 1.66 1.34 1.63

Coverage Ratio

1.91 1.44 1.43 1.72 1.67 1.62 1.68 2.10 2.18 2.42

Coverage Ratio

Table 12

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(1) (2) (3) (4) (5)

93,734 94,482 97,032 97,061 97,206 98,641 98,913 99,320 99,681 99,644

38,370 37,929 38,713 36,948 39,100 38,453 39,385 39,385 39,385 40,947

Estimate from City of Roanoke Estimate from County of Roanoke Estimate from County of Franklin Estimate from County of Botetourt Source: Bureau of Labor Statistics

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Fiscal Year

Table 13

90,420 90,867 91,011 92,376 92,687 93,256 92,703 93,569 93,775 93,924

41,019 39,315 39,315 40,688 42,288 42,288 45,577 48,047 48,047 48,047

54,447 55,284 55,732 56,225 56,419 56,616 56,616 56,793 56,373 56,205

29,334 30,619 30,606 30,254 30,244 32,193 33,314 33,356 34,586 37,035

33,177 33,374 33,148 33,209 33,399 33,293 33,423 33,521 33,486 33,176

40,775 41,610 40,667 40,796 43,721 45,320 45,320 46,664 45,055 46,811

3.9% 7.7% 7.4% 6.9% 6.5% 6.4% 5.7% 5.6% 4.1% 4.5%

2.8% 4.6% 6.3% 5.7% 5.6% 5.5% 5.2% 4.5% 3.5% 3.6%

4.7% 8.4% 7.5% 6.4% 6.2% 4.9% 5.2% 5.2% 4.2% 4.1%

2.9% 5.0% 6.4% 5.8% 5.6% 5.2% 5.1% 4.6% 3.7% 3.6%

5.6% 9.5% 9.4% 9.1% 8.2% 7.5% 6.1% 5.3% 4.9% 4.4%

County of County of County of County of County of County of City of City County of Roanoke County of Franklin County of Botetourt City of Roanoke Roanoke Franklin Botetourt National Roanoke Per Capita Roanoke Per Capita Franklin Per Capita Botetourt Per Capita Unemployment Unemployment Unemployment Unemployment Unemployment Population (1) Income (1) Population (2) Income (2) Population (3) Income (3) Population (4) Income (4) Rate (1) Rate (2) Rate (3) Rate (4) Rate (5)

Demographic Statistics Last Ten Fiscal Years

WESTERN VIRGINIA WATER AUTHORITY

Table 14

Principal Area Employers Comparison of June 30, 2017 and 2008 Fiscal Year 2017 Employer Roanoke County Schools Wells Fargo Operations Center (Wachovia division) County of Roanoke Kroger Friendship Manor Richfield Recovery & Care Center Allstate Insurance Company Wal-mart ITT Exelis-Harris Corporation Integrity Windows & Doors

Employees (1,2)

Rank

2000+ 1,500+ 500-999 500-999 500-999 500-999 500-999 250-499 250-499 250-499

1 2 3 4 5 6 7 8 9 10

Fiscal Year 2008 Employer Roanoke County Schools Wachovia Corporation Allstate Insurance Company County of Roanoke Kroger Mid-Atlantic Hanover Direct Verizon Virginia Bright Personnel and Business ITT Industries RPS Teleservice

Employees

Rank

1,000+ 1,000+ 1,000+ 1,000+ 500-999 500-999 500-999 250-499 250-499 250-499

1 2 3 4 5 6 7 8 9 10

(1) Per current Virginia Employment Guidelines, actual number of employees for each employer are no longer available for publication. (2) Data provided by City of Roanoke, County of Roanoke, Franklin and Botetourt.

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-98-

6 31 19 28

Field Operations Field Operations Field Operations Field Operations Field Operations

287

3 9 21 3 21

4 28 19 14 7

6 31 19 28

7 10 11 2 2 12 2 26 2

2016

274

3 9 15 3 21

5 28 19 14 6

6 31 19 24

8 11 13 2 2 5 2 26 2

2015

272

4 12 15 3 22

5 31 20 14 2

6 31 18 22

4 14 14 1 2 4 3 22 3

2014

(1) Data provided by Western Virginia Water Authority Payroll & Human Resources.

287

3 10 15 3 21

Administration General Administration Finance, Payroll & Human Resources Billing & Customer Service Information Technology Engineering

Total Employees

4 28 23 14 7

Water Pollution Control Operation WPC Administration WPC Operations WPC Maintenance WPC Inflow & Infiltration Control Water Pollution Pretreatment

Administration Water Sewer Maintenance Sewer Construction

7 10 11 2 2 12 3 26 2

Water Operations Water Administration Carvins Cove Spring Hollow Crystal Springs Falling Creek Pump & Storage Well Operation Meter & Distribution Operations Watershed Maintenance/Security

2017

Number of Employees by Identifiable Activity Last Ten Fiscal Years

WESTERN VIRGINIA WATER AUTHORITY

268

4 12 15 3 22

5 31 20 14 2

6 31 14 22

4 14 14 1 2 4 3 22 3

2013

268

4 12 15 3 22

5 31 20 14 2

6 31 14 22

4 14 14 1 2 4 3 22 3

264

4 10 15 3 22

3 33 20 14 2

8 32 13 17

4 12 15 1 2 5 3 22 4

Fiscal Year 2012 2011

263

4 12 13 2 22

3 33 20 14 2

8 31 14 17

4 9 14 1 5 5 1 25 4

2010

262

4 11 16 2 20

3 33 20 14 2

8 32 13 17

4 13 13 1 2 4 1 25 4

2009

259

4 9 14 1 20

3 34 19 15 2

12 29 13 16

4 17 8 1 2 4 1 27 4

2008

Table 15

-9955,750 6 55 38 30 974

2017

60,530 12 58 20 116 76 1,202

2017

55,572 5 55 45 30 973

2016

60,315 4 56 19 116 75 1,174

2016

52,147 3 55 36 25 891

2015

58,951 4 56 19 123 88 1,123

2015

(1) Data provided by Western Virginia Water Authority Engineering Services.

Number of service connections Number of treatment plants WPC plant permit (MGD) Average annual daily flow (MGD) Number of lift stations Miles of sewer mains

Wastewater System

Number of service connections Number of treatment plants Treatment capacity (MGD) Average production (MGD) Number of storage tanks Number of pump stations Miles of water mains

Water System

Operating Statistics Last Ten Fiscal Years

WESTERN VIRGINIA WATER AUTHORITY

51,959 2 55 36 25 873

2014

58,708 4 56 19 123 88 1,107

2014

51,774 2 55 36 25 873

2013

58,488 4 56 19 123 87 1,098

2013

51,681 2 55 37 25 874

Fiscal Year 2012

58,382 4 56 19 123 86 1,093

Fiscal Year 2012

51,607 2 55 37 24 873

2011

58,295 4 56 21 121 85 1,087

2011

51,560 2 55 46 22 873

2010

58,219 4 56 22 113 85 1,082

2010

51,395 2 55 34 26 886

2009

58,054 4 56 22 96 85 1,057

2009

51,133 1 55 31 30 870

2008

56,628 4 56 24 93 85 966

2008

Table 16

-100-

356 1426 165 76 87 106 220 243 1,364 215

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

56,628 58,054 58,219 58,295 58,382 58,488 58,708 58,951 60,315 60,530

Cumulative Connections 0.63% 2.52% 0.28% 0.13% 0.15% 0.18% 0.38% 0.41% 2.31% 0.36%

% Water Growth 360 262 165 47 74 93 185 188 3,425 178

Sewer Connections 51,133 51,395 51,560 51,607 51,681 51,774 51,959 52,147 55,572 55,750

Cumulative Connections

(1) Data provided by Western Virginia Water Authority Billing & Customer Service.

Water Connections

Fiscal Year

Schedule of New Connections Last Ten Fiscal Years

WESTERN VIRGINIA WATER AUTHORITY

0.71% 0.51% 0.32% 0.09% 0.14% 0.18% 0.36% 0.36% 6.57% 0.32%

% Sewer Growth

107,761 109,449 109,779 109,902 110,063 110,262 110,667 111,098 115,887 116,280

Total Services

Table 17

-1011,825,595 2,021,710 372,085 4,219,390

2017

2,537,563 2,135,409 460,076 5,133,048

2017

1,882,257 2,075,862 353,663 4,311,782

2016

2,251,472 2,565,490 455,100 5,272,062

2016

1,815,311 1,958,585 265,991 4,039,887

2015

2,461,620 2,255,711 357,622 5,074,953

2015

2,147,812 1,999,867 332,776 4,480,455

2014

2,694,799 2,131,720 462,860 5,289,379

2014

(1) Data provided by Western Virginia Water Authority Billing & Customer Service.

Type of Customer: Residential flow Commercial flow Industrial flow Total

Water Pollution Control Fund

Type of Customer: Residential consumption Commercial consumption Industrial consumption Total

Water Fund

Water Consumption and Wastewater Flow by Customer Group Gallons In Thousands Last Ten Fiscal Years

WESTERN VIRGINIA WATER AUTHORITY

2,769,791 1,980,964 432,870 5,183,625

2,255,115 1,865,559 172,945 4,293,619

2,284,818 1,846,436 110,032 4,241,286

Fiscal Year 2013 2012

2,736,616 2,001,987 410,281 5,148,884

Fiscal Year 2013 2012

2,328,346 1,860,807 95,793 4,284,946

2011

2,808,711 1,987,898 391,445 5,188,054

2011

2,347,872 1,899,324 77,284 4,324,480

2010

2,814,286 1,996,997 344,338 5,155,621

2010

2,441,164 1,989,087 105,848 4,536,099

2009

2,900,553 2,052,622 383,423 5,336,598

2009

2,529,674 2,053,367 101,967 4,685,008

2008

2,834,882 2,121,067 465,323 5,421,272

2008

Table 18

ROBINSON, FARMER, COX ASSOCIATES CERTIFIED PUBLIC ACCOUNTANTS

A PROFESSIONAL LIMITED LIABILITY COMPANY

Independent Auditors’ Report on Internal Control over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards To the Board of Directors Western Virginia Water Authority Roanoke, Virginia We have audited, in accordance with the auditing standards generally accepted in the United States of America; the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States; and the Specifications for Audits of Authorities, Boards, and Commissions, issued by the Auditor of Public Accounts of the Commonwealth of Virginia, the financial statements of the business-type activities of Western Virginia Water Authority, as of and for the year ended June 30, 2017, and the related notes to the financial statements, which collectively comprise Western Virginia Water Authority’s basic financial statements, and have issued our report thereon dated November 10, 2017. Internal Control over Financial Reporting In planning and performing our audit of the financial statements, we considered Western Virginia Water Authority’s internal control over financial reporting (internal control) to determine the audit procedures that are appropriate in the circumstances for the purpose of expressing our opinion on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of Western Virginia Water Authority’s internal control. Accordingly, we do not express an opinion on the effectiveness of Western Virginia Water Authority’s internal control. 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 a 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. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance. Our consideration of internal control was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control that might be material weaknesses or, significant deficiencies. Given these limitations, during our audit we did not identify any deficiencies in internal control that we consider to be material weaknesses. However, material weaknesses may exist that have not been identified. Compliance and Other Matters As part of obtaining reasonable assurance about whether Western Virginia Water Authority’s financial statements are free from material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements, 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. The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards.

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Purpose of this Report The purpose of this report is solely to describe the scope of our testing of internal control and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the entityâ&#x20AC;&#x2122;s internal control or on compliance. This report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the entityâ&#x20AC;&#x2122;s internal control and compliance. Accordingly, this communication is not suitable for any other purpose.

Blacksburg, Virginia November 10, 2017

-103-

ROBINSON, FARMER, COX ASSOCIATES CERTIFIED PUBLIC ACCOUNTANTS

A PROFESSIONAL LIMITED LIABILITY COMPANY

Independent Auditors’ Report on Compliance for Each Major Program and on Internal Control over Compliance Required by the Uniform Guidance To the Board of Directors Western Virginia Water Authority Roanoke, Virginia Report on Compliance for Each Major Federal Program We have audited Western Virginia Water Authority’s compliance with the types of compliance requirements described in the OMB Compliance Supplement that could have a direct and material effect on each of Western Virginia Water Authority’s major federal programs for the year ended June 30, 2017. Western Virginia Water Authority’s major federal programs are identified in the summary of auditors’ results section of the accompanying schedule of findings and questioned costs. Management’s Responsibility Management is responsible for compliance with federal statutes, regulations, and the terms and conditions of its federal awards applicable to its federal programs. Auditors’ Responsibility Our responsibility is to express an opinion on compliance for each of Western Virginia Water Authority’s major federal programs based on our audit of the types of compliance requirements referred to above. We conducted our audit of compliance in accordance with auditing standards generally accepted in the United States of America; the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States; and the audit requirements of Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance). Those standards and the Uniform Guidance require that we plan and perform the audit to obtain reasonable assurance about whether noncompliance with the types of compliance requirements referred to above that could have a direct and material effect on a major federal program occurred. An audit includes examining, on a test basis, evidence about Western Virginia Water Authority’s compliance with those requirements and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion on compliance for each major federal program. However, our audit does not provide a legal determination of Western Virginia Water Authority’s compliance. Opinion on Each Major Federal Program In our opinion, Western Virginia Water Authority, complied, in all material respects, with the types of compliance requirements referred to above that could have a direct and material effect on each of its major federal programs for the year ended June 30, 2017.

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Report on Internal Control over Compliance Management of Western Virginia Water Authority, is responsible for establishing and maintaining effective internal control over compliance with the types of compliance requirements referred to above. In planning and performing our audit of compliance, we considered Western Virginia Water Authorityâ&#x20AC;&#x2122;s internal control over compliance with the types of requirements that could have a direct and material effect on each major federal program to determine the auditing procedures that are appropriate in the circumstances for the purpose of expressing an opinion on compliance for each major federal program and to test and report on internal control over compliance in accordance with the Uniform Guidance, but not for the purpose of expressing an opinion on the effectiveness of internal control over compliance. Accordingly, we do not express an opinion on the effectiveness of Western Virginia Water Authorityâ&#x20AC;&#x2122;s internal control over compliance. A deficiency in internal control over compliance exists when the design or operation of a control over compliance does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, noncompliance with a type of compliance requirement of a federal program on a timely basis. A material weakness in internal control over compliance is a deficiency, or combination of deficiencies, in internal control over compliance, such that there is a reasonable possibility that material noncompliance with a type of compliance requirement of a federal program will not be prevented, or detected and corrected, on a timely basis. A significant deficiency in internal control over compliance is a deficiency, or a combination of deficiencies, in internal control over compliance with a type of compliance requirement of a federal program that is less severe than a material weakness in internal control over compliance, yet important enough to merit attention by those charged with governance. Our consideration of internal control over compliance 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 compliance that might be material weaknesses or significant deficiencies. We did not identify any deficiencies in internal control over compliance that we consider to be material weaknesses. However, material weaknesses may exist that have not been identified. The purpose of this report on internal control over compliance is solely to describe the scope of our testing of internal control over compliance and the results of that testing based on the requirements of the Uniform Guidance. Accordingly, this report is not suitable for any other purpose.

Blacksburg, Virginia November 10, 2017

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Western Virginia Water Authority Schedule of Expenditures of Federal Awards Year Ended June 30, 2017

Federal Grantor/State Pass-Through Grantor/Cluster/Program Title Environmental Protection Agency: Pass-Through Payments: Virginia Resource Authority: Capitalization Grants for Clean Water State Revolving Funds

Total Expenditures of Federal Awards

Federal CFDA Number

Pass-Through Entity Identifying Number

66.458

n/a

Federal Expenditures

827,306

Note 1 -- Basis of Presentation

The accompanying schedule of expenditures of federal awards (the Schedule) includes the federal grant activity of Western Virginia Water Authority under programs of the federal government for the year ended June 30, 2017. The information in this schedule is presented in accordance with the requirements of Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards, (Uniform Guidance). Because the Schedule presents only a selected portion of the operations of Western Virginia Water Authority, it is not intended to and does not present the financial position, changes in net position or cash flows of Western Virginia Water Authority. Note 2 -- Summary of Significant Accounting Policies (1) Expenditures reported on the Schedule are reported on the accrual basis of accounting. Such expenditures are recognized following the cost principles contained in the Uniform Guidance, wherein certain types of expenditures are not allowable or are limited as to reimbursement. (2) Pass-through entity identifying numbers are presented where available. (3) The Authority did not elect the 10 percent de minimis indirect cost rate because they only request direct costs for reimbursement. Note 3 -- Subrecipients The Authority did not have any subrecipients for the year ended June 30, 2017.

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Western Virginia Water Authority Schedule of Findings and Questioned Costs Year Ended June 30, 2017 Section I - Summary of Auditors' Results Financial Statements Type of auditors' report issued:

Unmodified

Internal control over financial reporting: Material weakness(es) identified?

Significant deficiency(ies) identified?

None reported

Noncompliance material to financial statements noted?

Federal Awards Internal control over major programs: Material weakness(es) identified?

Significant deficiency(ies) identified?

None reported

Type of auditors' report issued on compliance for major programs:

Unmodified

Any audit findings disclosed that are required to be reported in accordance with 2 CFR section 200.516(a)?

Identification of major programs: CFDA #

Name of Federal Program or Cluster

66.458

Capitalization Grants for Clean Water State Revolving Funds

Dollar threshold used to distinguish between Type A and Type B programs

$750,000

Auditee qualified as low-risk auditee?

Yes

Section II - Financial Statement Findings None Section III - Federal Award Findings and Questioned Costs None Section IV - Status of Prior Audit Findings None

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