POPULAR Annual Financial Report

—————————— For the Fiscal Year Ended June 30, 2020

Mount Pleasant Waterworks Mount Pleasant, South Carolina

Hurricane Dorian and Mount Pleasant Waterworks’ (MPW)

Response to Bahamas

On Saturday, September 7, 2019, only days after the eye of Hurricane Dorian passed within 20 miles of the Charleston area, Water Missions International reached out to MPW with a request to assist in their Bahamas Relief Effort. In no time at all, MPW assembled a team of water operation experts to leave for Nassau on Thursday, September 12, to assist with establishing water and wastewater services to the hard-hit areas of Marsh Harbour and Treasure Cay located on the Abaco Islands. The crew was chosen based on their unique skill-set and willingness to serve. The MPW team included: Rob Atkinson, John Grant, Graham MacDonald, and Quinn Tolbert. Establishing a reliable and safe drinking water source for the relief workers and residents was the primary mission along with evaluating Treasure Cay’s wastewater collection system. A reverse osmosis (RO) unit, supplied by Water Missions International, was initially set up beside the harbor and functioned as a desalination unit treating seawater. Production was low and the consumption of fuel high. Luckily, after speaking with residents, the team was informed of multiple abandoned groundwater wells on the island. The RO unit was moved to a new location and things began to come together with production increasing to 110 gallons per hour. The MPW crew also located and tested, as well as developed a guiding document of all the critical infrastructure points in Treasure Cay for the Bahamas Water & Sewer Corporation. “Our RO location literally became the local watering hole where most people in the town would finish their day to fill up water jugs and share touching stories with each other and listen to one another’s needs,” shared John Grant. “I think most people were able to relax for a moment when they were collecting water from us, while knowing that people from all over the world are here to support them is huge.”

The guys in the blue “Clean Water” t-shirts quickly became known as the primary go-to resource around the island. They were asked to fix, repair, and engineer everyday objects and transform them into functional engines and industry equipment. It became apparent that the skills of our industry are extremely valuable. “Often, we take for granted how important our jobs are and how much we truly know.”

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MOUNT PLEASANT

WATERWORKS

POPULAR ANNUAL FINANCIAL REPORT

For the Fiscal Years Ended June 30, 2020

Prepared By:

Financial Services | Mark L. Coffin, CGMA | Chief Financial Officer Mount Pleasant Waterworks | Mount Pleasant, South Carolina 29464

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VISION Mount Pleasant Waterworks strives to be a trusted leader in our community and the water

industry.

MISSION The MPW team provides water services of exceptional quality, value, and reliability, while

protecting public health, safety, and the environment.

VALUES The MPW team is passionately committed to:

· HONESTY: In all actions by employees and commissioners · FAIRNESS: To our customers, employees, and other stakeholders · QUALITY: Of our products, services, and processes · INNOVATION: By seeking positive change

Mount Pleasant, South Carolina

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Contents Title Page i Vision, Mission & Values and Service Area Map ii Table of Contents iii GFOA Awards for Outstanding Achievement iv About this Report v Profile and History of the Government vi-vii Elected Commissioners and Management Team viii Financial Activity & Performance

Production and Statistics 1 Net Position 2 Capital Assets 3 Capital Improvement Plan (CIP) 3 Debt Service Coverage 4 Bond Ratings 4 Long-Term Debt 4 Revenue & Expenses 5 Contributed Capital 6

Financial Awards 7 Contact Us 8

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Finance and Accounting Team

Mark L. Coffin, CGMA Chief Financial Officer Jeff Clark Accounting Supervisor Brian King Budget and Procurement Supervisor Kelly Hobart Business Data Analyst Quinteria Mazyck-Wilson Project Accountant Dianna Kirkpatrick Financial Specialist Angie Kuras Financial Specialist Mark King Inventory Technician Mark Levy Inventory Technician

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It is with great pleasure for the Commission to present the 2020 Popular Annual Financial Report (PAFR) for the fiscal year ended June 30, 2020. The financial information presented was derived from the Commission’s Comprehensive Annual Financial Report (CAFR).

The CAFR is prepared in conformance with generally accepted accounting principles (GAAP) and Governmental Accounting Standards Board (GASB) pronouncements applicable to an enterprise fund, and includes financial statements audited by Mauldin & Jenkins, LLC. The CAFR includes financial statements, notes, schedules, and statistical information. The PAFR is unaudited and not presented in conformity with GAAP and is presented in a less technical format for easier reading to increase the public awareness about the Commission’s financial conditions and its financial performance. The information in this report is an unaudited financial summary of the CAFR. For those interested in additional details, the CAFR, along with the PAFR, are available online at the Commission’s website at:

mountpleasantwaterworks.com Sincerely, Mark L. Coffin, CGMA Chief Financial Officer Mount Pleasant Waterworks

About This Report

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PROFILE OF THE GOVERNMENT

The Commission, empowered by South Carolina Code of Laws section 5-31-210, is governed by seven Commissioners: five elected by the public for staggered terms of six years, the Mayor, and the Chairman of the Water Supply Committee of Town Council. Only Town Council is empowered to approve the borrowing of money for system purposes; however, the sole power to impose and fix rates, dispose of surplus revenues, and otherwise control and direct the fiscal affairs of the system, is vested with the Commissioners.

The Commission was originally designated to provide water and wastewater services within the corporate limits of the Town of Mount Pleasant. In accordance with the Water Quality Management Plan required by PL 92-500, Section 208, the wastewater service area was expanded in 1985 to include all areas within Charleston County between the Wando River, the Intracoastal Waterway and the Town of Awendaw, including the Town of Mount Pleasant. With the merger of the Bulls Bay Rural Community Water District in March 1990, the water service area was extended from the Santee River to the Cooper River, an area 42 miles in length. Enlargement of the Commission’s service area demonstrated the need for progressive provision of adequate water and wastewater services to the East Cooper area of Charleston County.

The popular name of the Commission is Mount Pleasant Waterworks (MPW).

HISTORY & SYSTEM

The Town of Mount Pleasant began operating its water system in 1935, and designed the system to have 160,000 gallons per day capacity. The system initially included 179 water meters to serve the Town’s population. Now, MPW serves more than 41,033 water accounts, with an average daily usage of 9.4 million gallons a day (MGD). MPW purchases approximately 65% of its water from the Charleston Water System (CWS) and operates four reverse osmosis plants (RO), six deep wells, eight ground storage and one elevated storage facilities, with 589 miles of water mains.

The wastewater system began operations in 1942 by collecting wastewater for discharge into the Charleston Harbor. Construction started on the first primary treatment facility in 1969 and commenced operations in June 1970. This initial facility had a treatment capacity of 1.4 MGD but was expanded in 1976 to process as much as 3.7 MGD. In 1989, an outfall line was constructed to transport all of MPW’s treated wastewater 4,700 feet into the Charleston Harbor to ensure maximum dilution. In 1995, the Rifle Range Road Treatment Plant came online with an initial capacity of 3 MGD, later increased to 6 MGD. Currently, the total wastewater treatment capacity is 9.7 MGD, and an average of 8.1 MGD is treated. The system includes 524 miles of lines, and 165 wastewater pump stations. The Commission is in the process of expanding the Rifle Range Road Wastewater Treatment Plant capacity by 3.2 MGD for a total of 9.2 MGD.

Mount Pleasant Waterworks

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General Trends and Significant Events

As estimated by the United States Census Bureau, the Town’s population grew 2.6% during 2019 to approximately 91,684. The Commission’s customer base grew by 1.7% and 1.9% during fiscal year 2020. Total water gallons, including irrigation gallons sold, decreased by 1.6% as compared to the 9.8% increase during fiscal year 2019. Weather continues to be a factor for the Commission as Hurricane Dorian impacted the Commission service area. This was the sixth weather related event in the last five years. From the spring to the fall of 2019 the Commission experienced extreme water demands, primarily irrigation, due to climate factors such as the driest 6-months on record with May 2019 being the hottest May on record, and October 2019 being the second hottest October on record. These unprecedented water demands resulted in exceeding our peak for 12 days in a row during June 2019. By contrast, the period between mid-May through mid-June 2020 was the coldest period on record with rainfall during the spring at 25% above normal pushing water demand down by 20% from the previous year. In addition to effects of climate, the Commission was impacted by the COVID-19 pandemic. The Commission executed its Emergency Management Plan (EMP) which included holding 42 emergency meetings through June 2020, suspension of customer disconnects as directed by a State of South Carolina Order, authorized emergency leave for employees, approved teleworking options for 40 plus workers, created a COVID-19 Customer Care program to help affected customers with bill payment, suspended non-essential work functions and closed the lobby. The Commission established an employee awareness initiative to educate employees as to social distancing, mask wearing, hand washing, self-monitoring and remote meetings.

The Commission undertook an effort with the Medical University of South Carolina (MUSC) in the Back2Business program to help the Commission effectively manage the COVID19 and ensure continuation of service to the community. The effort included a site-assessment, a Return-to-Work Playbook, antibody testing, contact tracing and Back2Business Certification. The Commission and its employees stepped up to ensure continued customer service and utility operations. The Commission began working with the University of South Carolina (USC) to monitor bioaerosols at its wastewater treatment plant. At the onset of the coronavirus pandemic, the relationship quickly shifted to sampling for the virus. USC, in partnership with South Carolina Department of Health and Environmental Control (SCDHEC), hopes to develop a model that will be used to predict community health and serve as an additional tool for public health decision-makers when dealing with similar viral disease outbreaks. The Commission took fiscal action to include suspension of external offsite conferences and educational training, temporarily suspended several unfilled positions, approved no increase in rates or impact fees for the upcoming fiscal year (fiscal year 2021), and a reduction of operating and capital budget. Mount Pleasant Waterworks ranked as one of the Best Places to Work in South Carolina in the small-to-medium employer category for the fifth consecutive year.

Commissioners

Back Row: Mac Jenkinson, Linda Page, Town Council Member and Chair of the Town’s Water Supply Committee Jake Rambo, and Mayor Will Haynie

Front Row: Vice-Chairman Susan Mellichamp, Chairman Rick Crosby and Diane Lauritsen, Ph.D. Secretary-Treasurer

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ELECTED COMMISSIONERS

COMMISSIONERS YEAR FIRST ELECTED

TERM EXPIRES POSITION

Rick M. Crosby 1998 2025 Chairman

Diane Lauritsen, Ph.D. 2002 2021 Secretary-Treasurer

Susan I. Mellichamp 2004 2023 Vice-Chairman

H. Mac Jenkinson 2009 2021 Commissioner

Linda Page 2019 2025 Commissioner

Will Haynie 2017 2021 Mayor, Town of Mount Pleasant

Jake Rambo 2019 2023 Town Council Member Chair Town Water Supply Committee

MANAGEMENT TEAM

TEAM MEMBERS YEAR FIRST APPOINTED POSITION

H. Clay Duffie 1989 General Manager

David P. Niesse 2004 Engineering Manager

Brian P. Head 2006 Technical Services Manager

Nicole F. Bates 2006 Customer Services Manager

Christi A. Fowler 2009 Human Resources Manager

Mark L. Coffin 2013 Chief Financial Officer

Ross Wattay 2015 Field Services Manager

Franklin Allan Clum, Jr. 2016 Operations Manager

Natalie J. Lawrence 2019 Communications Manager

Financial Position and Performance

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Production and Statistics

Water sales are impacted by the duration and timing of rainfall, not just the total amount of rainfall. During the spring through the fall of 2019, the service area experienced one of the longest, driest and hottest periods on record. In contrast, May of 2020 was one of the coldest on record pushing water demand down by 1.6% for the year. Mount Pleasant Waterworks’ primary customers are residential therefore irrigation demand can vary year-over-year.

The population for Mount Pleasant increased by

2.6% during fiscal year 2020 and by an average of 3.4% over the last five years.

Water customer accounts increased by 1.6% during fiscal year 2020 and by an average of 2.5%

over the last five years.

Rates were increased by 7.1% for fiscal year 2020. A typical bill is based on 5,000 gallons of usage per month. The average residential usage for fiscal year 2020 was approximately 4,700 gallons.

FY2016 FY2017 FY2018 FY2019 FY2020

2.74

2.90

2.77

3.04 2.99

Water Gallons SoldBillions of Gallons

FY2016 FY2017 FY2018 FY2019 FY2020

2.33

2.43 2.37

2.51 2.48

Wastewater Gallons BilledBillions of Gallons

FY2016 FY2017 FY2018 FY2019 FY2020

$66.85

$70.00

$73.55

$78.55

$84.09

Typical Monthly Bill

FY2016 FY2017 FY2018 FY2019 FY2020

37,569

38,734

39,636

40,381

41,033

Water Customers

FY2015 FY2016 FY2017 FY2018 FY2019

81,317

84,170

86,668

89,338

91,684

Population

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Abbreviated Statement of Net Position Balance Sheet (in 1,000)

The Statements of Net Position may serve as a useful indicator of the Commission’s financial position. Net Position continues to improve as revenues exceed expenditures. The net position increased by $15.9 million or 5% during fiscal year 2020 as compared to the increase of $18.6 million or 6% during fiscal year 2019. One of the primary factors for the increase during fiscal year 2019 was the increased water demand driven by the climate beginning in the spring through the fall of 2019.

Net position is the difference between total assets and deferred outflows of resources less total liabilities and deferred inflows of resources.

The improving net position is the result of the Commission’s strong financial policies, practices and management strategies guided by the Commission’s Cost Recovery Policy.

2016 2017 2018 2019 2020

$269,470

$285,775

$302,005 $320,584

$336,506

Net Position Fiscal Year Ended June 30

(in 1,000)

Fiscal Year Ending June 30

Total Assets & Deferred Outflows

Total Liabilities & Deferred Inflows Total Net Position

2020 575,009$ 238,503$ 336,506$

2019 561,486$ 240,902$ 320,584$

2018 536,005$ 234,000$ 302,005$

2017 512,251$ 226,476$ 285,775$

2016 369,386$ 99,916$ 269,470$

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Capital Asset & Capital Improvement Plan

Total capital assets continue to increase as the Commission invests in the system infrastructure. The total for fiscal year 2020 includes $96 million of construction in process. Of this, $60 million is associated with the Rifle Range Road Wastewater Treatment Plant Expansion and Rehabilitation Project. This project will add 3.2 million gallons a day (MGD) capacity for a total of 9.2 MGD at the plant.

The Commission is planning to expend up to $132 million for capital improvement to the system infrastructure to include rehabilitation and renewal projects, and growth-related projects as the Commission’s service area continues to grow.

2021 2022 2023 2024 2025

$7.4 $7.8 $8.6 $9.9 $12.8

$8.0 $9.9 $12.1 $16.5 $10.8

$2.7 $2.3 $1.6

$10.4 $11.5

Capital Improvement Plan (CIP)(in millions)

Water Wastewater Admin

2016 2017 2018 2019 2020

$439,066 $472,061 $511,916 $568,725 $632,753

$(125,713) $(139,278) $(155,130) $(173,500) $(193,670)

Capital Assets(in 1,000)

Capital Assets Depreciation

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Debt Analysis Debt Service Coverage Earnings coverage of principal and interest payments is a primary industry indicator of financial strength and additional borrowing capacity. Bond ordinance requires a debt service coverage of 100% for net operating earnings and 120% for net earnings. Net earnings include impact fees. The Commission has established an internal policy of 200% for net operating earnings. The debt service coverage for the fiscal years as shown has exceeded both bond ordinance and the Commission’s Cost Recovery Policy requirement. Bond Ratings Strong credit ratings are important metrics of the quality of the bonds and will lower the cost of borrowing o include issuance costs and interest.

Long Term Debt (in millions) Total bonds and loans as of June 30, 2020 was $190 million as compared to $196 million for June 30, 2019. The issuance of debt was to finance the continued investment into water and wastewater infrastructure.

Aa1Moody's

AA+Standard & Poor's

2016 2017 2018 2019 2020

29 28 26 24 21

36 43 44 49 48

$10

$128 $125 $123 $121

REVENUE, SRF AND BANK LOANS

Bank Loans State Revolving Loans Revenue Bonds

2016 2017 2018 2019 2020

395%402%

357%

395%

337%

Debt Service Coverage (Net Earnings)

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Revenues & Expenses (in millions)

Net Position remains strong over the reported five years and for fiscal year 2020 was $15.9 million. Operating revenues consist of water and wastewater volumetric charges, basic facility charges and other direct fees and charges. During fiscal year 2020 water revenues increased 4%, wastewater revenues increased 6%, and miscellaneous fees &

charges increased 5% over fiscal year 2019. The Commission increased volumetric and basic facility charge rates by 7% for fiscal year 2020. The Commission utilized a rate model to establish rates ensuring financial viability. Financial viability provides for the proper funding of operations, asset management (CIP) and cash reserves.

The largest component of operating expenses is employee compensation and benefits. The increase over the reported five-year period is due to the addition of employees, ensuring a high quality of service and reliability. Increases in state retirements and health costs are also drivers for the increase in cost of personnel.

2016 2017 2018 2019 2020

$22.6

$16.3

$24.8

$18.6

$15.9

Change in Net Position

Operating Revenues 2016 2017 2018 2019 2020Water Sales 19.2$ 21.3$ 21.2$ 24.3$ 25.2$ Wastewater Sales 19.5$ 21.6$ 23.0$ 25.7$ 27.1$ Miscellenous Fees & Charges 2.5$ 2.4$ 2.4$ 2.5$ 2.6$

Total 41.3$ 45.3$ 46.5$ 52.4$ 55.0$

Operating Expenses 2016 2017 2018 2019 2020Personnel Expense 10.8$ 12.0$ 13.8$ 14.3$ 15.7$

Contractual Expense 6.6$ 6.8$ 7.3$ 7.6$ 7.9$

Other Expenses 3.5$ 4.0$ 4.0$ 4.0$ 3.4$ Total 20.9$ 22.8$ 25.1$ 25.9$ 27.0$

- 20 40 60 80

100 120 140 160

2016 2017 2018 2019 2020

116 122

125 134

150

Total Commission Employees

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Contributed Capital

There are two components to contributed capital: impact fees paid by developers and customers for capacity, and developer contributions of system infrastructure. Approximately 547 water and 519 wastewater impact fees were received during fiscal year 2020. Developer contributions including lines, hydrants, manholes, pump stations and other system assets which are conveyed to the Commission upon completion of the development project.

Best Places to Work in South Carolina Award

Mount Pleasant Waterworks ranked as one of the Best Places to Work in South Carolina in the small-to-medium employer category for the fifth consecutive year. In fact, this year, Mount Pleasant Waterworks was named one of the top fifteen employers in South Carolina. The Best Places to Work program, created by SC Biz News, the South Carolina Chamber of Commerce and Best Companies Group, was designed to identify, recognize, and honor employers in the state that benefit the state's economy, workforce, and businesses.

To qualify for this award, an extensive two-part survey process was conducted. The first part consists of evaluating our company's workplace policies, practices, philosophy, systems and demographics. The second part is a company-wide survey to measure employee satisfaction. The combined scores determine the top companies and the final rankings. Seventy-four companies from across the state were recognized, and Mount Pleasant Waterworks ranked 15th out of fifty companies in the small-to-medium employer category for 2020.

2016 2017 2018 2019 2020

$8.2 $6.2 $10.6

$6.9 $4.0

$8.2 $5.7

$14.9

$7.0 $7.4

(in millions)

Impact Fees Developer Contributions

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Popular Annual Financial Award Government Finance Officers Association of the United States and Canada (GFOA) has given an Award for Outstanding Achievement in Popular Annual Financial Reporting to Mount Pleasant Waterworks for its Popular Annual Financial Report for the fiscal year ended June 30, 2019. The Award for Outstanding Achievement in Popular Annual Financial Reporting is a prestigious national award recognizing conformance with the highest standards for preparation of state and local government popular reports. This was the second consecutive year for this award.

In order to receive an Award for Outstanding Achievement in Popular Annual Financial Reporting, a government unit must publish a Popular Annual Financial Report, whose contents conform to program standards of creativity, presentation, understandability, and reader appeal.

An Award for Outstanding Achievement in Popular Annual Financial Reporting is valid for a period of one year only. Mount Pleasant Waterworks has received a Popular Award for fiscal year 2019. Mount Pleasant Waterworks believes our current report continues to conform to the Popular Annual Financial Reporting requirements, and we are submitting it to GFOA to determine its eligibility for another award.

Comprehensive Annual Financial Reporting Mount Pleasant Waterworks’ Comprehensive Annual Financial Report (CAFR) for the year ended 2019 was awarded the Certificate of Achievement for Excellence in Financial Reporting by the Government Finance Officers Association of the United States and Canada (GFOA). The Certificate of Achievement is the highest form of recognition for excellence in state and local government financial reporting. This was the twenty-fourth consecutive year that the Commission has achieved this prestigious award.

In order to be awarded a Certificate of Achievement, a government unit must publish an easily readable and efficiently organized Comprehensive Annual Financial Report, whose contents conform to program standards. As such, the CAFR must satisfy both Generally Accepted Accounting

Principles (GAAP) and applicable legal requirements.

A Certificate of Achievement is valid for a period of one year only. Mount Pleasant Waterworks believes its current CAFR continues to conform to the Certificate of Achievement program requirements and is submitting the CAFR for the current year to the GFOA to determine its eligibility for another certificate.

Distinguished Budget Presentation Award The GFOA also presented the Commission with a Distinguished Budget Presentation Award for the annual budget beginning July 1, 2020. This was the tenth consecutive year that the Commission has achieved this prestigious award. In order to receive this award, a governmental unit must publish a budget document that meets program criteria as a policy document, as an operations guide, as a financial plan, and as a communications device

Financial Awards

Mount Pleasant Waterworks 1619 Rifle Range Road

Mount Pleasant, South Carolina 29464 (843) 884-9626

www.mountpleasantwaterworks.com