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Management's Discussion and Analysis <br />As management of the Tri-County Water Conservancy District, we offer readers of <br />the Tri-County Water Conservancy District's financial statements this narrative <br />overview and analysis of the financial activities of the Tri-County Water <br />Conservancy District for the fiscal years ended December 31, 2009 and 2008. <br />Financial Hiqhliqhts <br />• The assets of the Tri-County Water Conservancy District (also referred <br />to as the District) exceeded its liabilities at the close of the most <br />recent fiscal year by $37,727,274 (net assets). Of this amount, <br />$13,762,869 (unrestricted net assets) may be used to meet the <br />District's ongoing obligations to citizens and creditors. At the <br />close of the prior fiscal year the District's net assets and <br />unrestricted net assets were $37,312,317 and $15,213,591, <br />respectively. <br />• The District's total net assets increased by $414,957 in 2009 and <br />$2,119,127 in 2008, mainly the result of "capital contributions - tap <br />fees" and "capital contributions - other" for both years. <br />• The District implemented a new fee structure effective January, 2006 <br />as a result of the annual cost of service analysis. Residential tap <br />fees are $5,000 plus the cost of installation. <br />• District revenues and expenses remained relatively consistent from <br />2007 to 2009. In 2009 and 2008, water sales increased due to the <br />increase in number of taps sold and rate increases. Interest revenue <br />reflects the US Treasury Strips that were purchased in 1990's and are <br />yielding 9.3�. Each year the District budgets and constructs projects <br />identified by a capital improvement program which includes renewals <br />and replacements of aged or problem infrastructure, new or enlarged <br />pipelines, and tanks or pump stations necessitated by growth. This <br />annual renewal and replacement is in the same order of magnitude as <br />the annual depreciation on the system as generally recommended in the <br />industry. Depreciation for 2009 and 2008 was $1,045,355 and $990,545, <br />respeCtively. During 2008, the District hired HDR, Inc. to identify <br />current system deficiencies and to project those that may occur as a <br />result of population growth, system age, or increasingly strict water <br />quality regulations and form a 5 Year Capital Improvements Plan based <br />on the results. This plan has been implemented along with additional <br />capital improvements as determined by the District. <br />• In July 1968 a bond election for the construction of the domestic <br />water system was held and approved by a 5 to 1 ratio. The original <br />distribution system was constructed valley wide in 1970 by issuing a <br />$3.9 million in General Obligation (Zimited Tax) and Water Revenue <br />Conservancy Bonds. The balance on this issue is $200,000 and was paid <br />in full on April 1, 2010. <br />• In 2009 and 2008, capital contributions - tap fees and capital <br />contributions - other were down significantly due to decreased growth <br />in the District's service area and uncertainties concerning the <br />economy. Tap sales resulted in additional water sales. <br />2 <br />