GAS DEPARTMENT - Metropolitan Utilities District · GAS DEPARTMENT Number of customers ... (CNG)...

2008metropolitan utilities district

annualreport

focused

ContentsBoard of Directors 2

About Us 3

Message to Customers 4

Financials 18

Officers 44

The cover is a photo of the building of the Platte West Water Treatment Plant.

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STATISTICAL HIGHLIGHTSYears ended December 31, 2008, 2007 and 2003 (unaudited)

metropolitan utilities district

2008 2007 2003

WATER DEPARTMENTNumber of customers (December) 196,878 194,809 180,540

Sales (thousand gallons) 29,370,317 32,946,664 33,442,612

Operating revenues, net $ 61,604,385 $ 55,575,924 $ 50,501,958Operating expenses 62,520,824 55,137,008 45,352,880

Operating Income (loss) $ (916,439) $ 438,916 $ 5,149,078

Plant additions and replacements, net $ 43,770,290 $ 98,378,678 $ 35,786,415Plant in service $ 845,098,746 $ 519,086,673 $ 395,970,973Miles of mains 2,818 2,768 2,506Average daily pumpage (thousand gallons) 87,194 95,525 95,959

GAS DEPARTMENTNumber of customers (December) 209,487 207,553 194,465

Sales (MCF):Firm 29,375,000 26,613,000 26,954,000Interruptible 5,538,000 6,487,000 5,799,000

Total 34,913,000 33,100,000 32,753,000

Operating revenues, net $ 346,208,598 $ 311,120,362 $ 227,439,398Cost of gas sold 273,785,525 246,862,290 187,700,701Other operating expenses $ 57,191,410 $ 52,219,056 38,532,708

Operating income $ 15,231,663 $ 12,039,016 $ 1,205,989

Plant additions and replacements, net $ 32,407,002 $ 27,244,063 $ 15,258,784Plant in service $ 359,263,414 $ 336,216,941 $ 276,989,421Miles of mains 2,645 2,640 2,401Average daily sendout (MCF) 95,360 90,705 89,427Number of active employees water and gas

combined 846 826 811

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Mark E. DoyleChairmanSecond Vice-PresidentFirst National Bank of OmahaElected 1992; re-elected 1998, 2004 (16 years)

Jack FrostVice-ChairmanReal EstateElected 1986; re-elected 1992, 1998, 2004 (22 years)

Mary Kay BegleyEducator/HomemakerElected 1988; re-elected 1994, 2000, 2006 (20 years)

Tim CavanaughChief Deputy Douglas Co. Treasurer’s Office; retired Captain, Omaha Police DepartmentAppointed 1999; elected 2002, 2008 (9 years)

Thomas F. DowdSenior PartnerDowd, Howard & CorriganElected 1974; re-elected 1980, 1986, 1996, 2002, 2008 (30 years)

David J. FriendDirector, Public SafetyMetropolitan Community CollegeElected 2000; re-elected 2006(8 years)

Amy LindsayIndependent ConsultantElected 2008

Thomas A. WurtzPresident and Secretary(29 years)

John S. McCollisterPresident, McCollister & Co.Retired from the board in 2009 with 30 years of service.

2008-2009 Board of Directors

The Nebraska Legislature created the Metropolitan Utilities District in the early 1900s as a political subdivision of the State to provide water and natural gas to the metropolitan Omaha area. The District is governed by a board of seven directors, elected by our customer-owners. The board meets the first Wednesday of every month.

Our first water treatment plant was built near the Missouri River in 1889 by a private company. Omaha received water and gas service from private water and gas companies until the citizens of Omaha became dissatisfied with high costs, constant ownership changes and poor service, and voted to take control and ownership of their utilities. The Legislature created the Metropolitan Water District in 1913.

Five years later, state senators authorized the City of Omaha, which had acquired the gas system by condemnation, to assign the responsibility for operation of the gas system to the Metropolitan Water District. The name was changed to the Metropolitan Utilities District. Today, we are the only metropolitan utility district in the State of Nebraska. Our strength lies in being a public utility, customer-owned and governed by a locally-elected board of directors.

As the fifth largest public gas utility in the United States, we provide a product and service that is lower in cost than area investor-owned utilities. We serve natural gas to 209,487 customer-owners in Omaha, Bennington, Fort Calhoun, Springfield, Yutan, and 85 percent of Bellevue.

We also provide safe drinking water to 196,878 customer-owners in Omaha, Bellevue, Bennington, Carter Lake, LaVista, Ralston, Waterloo and the Papio-Missouri Natural Resources District (which supplies water to Fort Calhoun). In addition, we maintain 28,049 water hydrants throughout our service area for fire protection.

Besides providing natural gas and water to customers in the metro area, we also provide a cost-saving service to municipalities by collecting sewer use and trash fees.

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about us

ReliabilityEntrance to the Platte West Water Treatment Plant. The plant was dedicated October 15. (photo courtesy of HDR Inc.)

focusedon

2008 was a historic year as we celebrated the completion of the Platte West Water Treatment Plant, the largest development in Nebraska’s water industry since 1994. Dedication of the plant was held October 15.

The Platte West Plant adds 100 million gallons per day of capacity to our existing 234-million-gallon-per-day capacity at the Florence and Platte South Water Treatment Plants and our peakshaving wells.

Our three plants form a triangle of reliability that will meet the water demands of the metro area for the next 50 to 60 years. Our goal has always been to provide an economic growth engine for the metro area. The plant provides a stimulus for economic development in western Douglas and Sarpy counties.

More than 75 percent of the plant construction was done by local subcontractors, and at its peak, the three-year project employed up to 450 workers. Approximately 2,300 workers participated in the safety program during construction.

WATER DEPARTMENTSeveral years prior to the Platte West operation, we embarked on an intensive program to educate our customer-owners about water conservation. They responded.

The average residential customer’s water use dropped from 110,000 gallons per year in 2007 to 108,000 gallons per year in 2008, and we project that figure will drop to 105,000 gallons per year in 2009.

The Platte South Water Treatment Plant marked its 40th year of water production February 6. Regulatory agencies re-classified the plant as a groundwater facility under the direct influence of surface water so we completed a design for a contact basin at the plant to comply with the state and federal requirements. Construction is expected to be completed in 2010.

The Board approved a 5-percent water rate increase for 2009. The increase will generate an additional $2.9 million a year in revenue for increased operating and maintenance costs and to pay for the financing of the Platte West Project.

The 2009 budget also includes a $1 million added expense for electrical costs in water and gas operations due to an OPPD rate increase.

Reliability 5

16%

15%

10%

8% 5%

2% Maintenance Expense

Debt Service Expense

Depreciation and Reinvested Earnings

Infrastructure Replacement Expense

Electricity Expense

Chemical Expense

Payments to Cities

10%

9%

2% 1%

Gas Purchased Expense

Operating and Maintenance Expense

Depreciation and Reinvested Earnings

Payments to Cities

Infrastructure Replacement Expense

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Where does your gas dollar go?

44%

78%

Where does your water dollar go?

GAS DEPARTMENTThe District saw one of its best years for natural gas sales in more than a decade. We sold 34.9 billion cubic feet of gas in 2008 — the highest volume since 1996 and the second highest in the past 33 years.

We optimized our gas supply portfolio on the daily spot market, which resulted in a profit of $1.3 million. The funds went directly to our customer-owners through reduced gas costs.

The District secured long-term gas supplies at below-market prices through its participation in the Central Plains Energy Project, a natural gas supply acquisition agency formed by M.U.D., Hastings Utilities and Cedar Falls, IA.

Our customer-owners realized $2.9 million in savings from this gas purchase in 2008.

We replaced vaporizers and cavern deep well pumps at the 117th and Fort Propane Air Plant to increase its capacity. Our peakshaving facilities, including the 117th and Fort Liquefied Natural Gas Plant and the 63rd and Oak Propane Air Plant, save customer-owners $7 million a year in pipeline demand charges.

“Live Green, Think Blue” gained momentum with a renewed interest in compressed natural gas (CNG) vehicles. The District purchased five Honda Civic GX automobiles to complement its fleet of 66 CNG vehicles. With a four-cylinder engine and five-speed automatic transmission, the Civic GX achieves the equivalent of approximately 24 miles per gallon of gasoline in the city and 36 mpg on the highway.

CNG vehicles saved us $300,000 in fuel costs during the past 12 years. During the last decade, we saved $80,000 in fuel costs, avoided dumping more than 2 million pounds of carbon dioxide into the environment and displaced 2,050 barrels of foreign oil.

We are focused on growing the CNG vehicle industry in the metro area. We continue to work with the Nebraska Energy Office, City of Omaha, Metro Area Transit and local school districts to build a public fueling station in Omaha, which would cost approximately $500,000. We also are working to acquire a licensed CNG vehicle dealership for the community.

In 2009 we will partner with the Clean Vehicle Education Foundation, Lincoln Composites which is a CNG tank manufacturer, and Black Hills Energy to sponsor a public workshop with a panel of speakers who have experience in establishing CNG vehicle fleets and fueling infrastructure.

“Live Green, Think Blue”gained momentum with a renewed interestin compressed natural gas (CNG) vehicles.

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A crew installs a 16-inch 125-lb. steel gas main under an existing 24-inch 60-lb. steel gas main at 20th and Martha streets. From left: Don VanRiper, Stan Bobbett and Daryl Woods. Randy Homan is the crane operator. The two smaller pipes shown are conduits for traffic signals at the intersection.

The installation was part of the $3.1-million Frances Street Project, a four-mile-gas main which tied together our east and west high-pressure gas systems for greater reliability.

INFRASTRUCTURE IMPROVEMENTSIn July, the District completed the Frances Street Project, a four-mile-gas main which ties together our east and west high-pressure gas systems for greater reliability. It also provides a second feed to the 27th and Childs Town Border Station which serves 70,000 customers.

We installed the main from 55th and Cedar to 21st and Martha streets in about 14 months at a cost of $3.1 million. The project originally was designed to be installed in three phases over three years at a cost of $4.5 million.

The new main is important to infrastructure replacement east of 72nd Street. It allows the District to expand its high-pressure system, which is necessary for the economical replacement of the low-pressure cast iron system.

The District has 580 miles of cast iron gas mains and 1,280 miles of cast iron water mains that will need to be replaced during the next 30 to 40 years. Much of the work will be done in conjunction with the City of Omaha’s federally-mandated combined sewer overflow control project.

In 2008, the District replaced 10 miles of cast iron gas and water mains at a cost of $5.5 million.

To fund these upgrades, customers saw gas and water infrastructure replacement charges on their bills. The charge for residential customers is $2 per month for water and $3 per month for gas. The revenue will allow us to add construction crews along with equipment to replace the older mains.

In 2009, the City of Omaha plans an extensive street renovation in the Old Market of downtown Omaha. The District will take advantage of this opportunity to upgrade old cast iron gas and water mains, services and meters and minimize disruptions to customers.

Our engineers developed a plan to structurally line and rehabilitate 2,940 ft. of cast iron water mains for this project instead of digging up the street with a typical trench replacement. The $1.2 million project will be completed in the fall of 2009.

ADMINISTRATION AND SAFETYIn 2008 the District developed a database for the new Geographical Information System to improve gas and water main mapping and facilities. We will convert to the new system in 2009.

The District also completed the “blueprint phase” to convert from Genesys, the human resources and payroll application, to the Systems Applications and Products

From left: Burwell Beaman, Construction, and Craig Johnson, Engineering, review plans for the Frances Street cast iron gas main upgrade project at 20th and Martha streets.

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(SAP) Human Capital Management system. We expect to roll out the SAP system in 2009.

We continue to convert meter reader routes to drive routes with Encoder, Receiver, Transmitter (ERT) devices. ERTs ultimately will eliminate estimates of a customer’s water and gas use. Last year we eliminated 32 walking meter routes, and at the end of 2008, 42 percent of our meters were equipped with ERTs.

Gas and Water Operations received safety awards from the National Safety Council. Water Operations also received a safety award from the Nebraska Section of the American Water Works Association.

The Centers for Disease Control and the U.S. Department of Health and Human Services presented the District a water fluoridation quality award for “consistent and professional adjustment of the water fluoride content to the optimum level for oral health for 12 consecutive months.”

The maximum amount of fluoride allowed in drinking water by the U.S. Environmental Protection Agency is 4 parts per million (ppm). The District adds fluoride to bring the natural level of about 0.5 ppm to the optimum of 1.0 ppm.

M.U.D. customers voted for fluoridation in May 1968 and the District began adding fluoride to the water January 22, 1969.

COMMUNITY OUTREACHM.U.D., Black Hills Energy and Omaha Public Power District partnered with metro area cities, social service agencies and businesses to organize the Heartland Walk for Warmth, February 1. The event drew 700 walkers and raised $30,000 for three energy assistance programs. The second annual event will be held February 20, 2009.

In addition to the walk, customer-owners and employees donated an average of $19,200 a month to the District’s Heat Aid Fund. Established in 1983 to help older and disabled neighbors pay heating bills, the Fund provided more than $253,000 to 788 households in 2008.

Current and retired employees continued to break annual giving records to the United Way of the Midlands. In 2008, we donated $122,024 — an 8-percent increase over the previous year.

Finally, 2008 brought changes to the Board of Directors. John S. McCollister retired with 30 years of service to the District, and voters elected Amy Lindsay to succeed him.

Employees raised $2,900 for the Heat Aid Fund with a silent auction, from left: Patricia Welch, Remittance Processing; Kim Plummer and Cheryl Miller, Collections.

Thomas A. WurtzPresident

Mark E. DoyleChairman of the Board

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More than 200 elected officials, community and business leaders attended the dedication

of the Platte West Water Treatment Plant at 216th and Q streets October 15, 2008. The

$352-million facility provides a 100 million-gallon-a-day pumping capacity. Along with the

Florence and Platte South plants, the facility completes the District’s triangle of reliability

surrounding the metro Omaha area.

SECURE SUPPLYOmaha World-Herald editorialDecember 24, 2008 (reprinted with permission)

Omahans can thank their lucky stars — and leaders of the Metropolitan Utilities District — for a future of continued growth, economic development and clean water.

Little more than two months ago, M.U.D. opened its new Platte River West water filtration plant, a $352 million effort to expand and secure the availability of water in the entire metropolitan area for decades to come. The plant and its wells sunk into the Platte complement the utility’s Platte South and Missouri River plants.

The luck, and the foresight that ensured that luck, was evident earlier this month: The Nebraska Department of Natural

Resources issued a preliminary ruling that all of the water in the Platte and its tributaries has been claimed by municipalities, irrigators, industries and other water users.

That ruling means that a moratorium falls on the river until final plans and decisions are made, no more wells can be dug, no more acres irrigated, no additional water uses approved. The DNR and natural resources districts along the river must come up with management plans on how the water should be fairly divided and used to benefit the most people.

Tom Wurtz, president of M.U.D., said that if the proper permits for the new water plant hadn’t been obtained and plans finalized before the moratorium, the utility and, by extension, Omaha could have faced problems.

Municipal water users likely will rank high on the list when the DNR and NRDs consider additional water uses. Not only does a

safe, clean and readily available water supply benefit residents, but it also promotes economic development and growth.

In addition, municipal users are

economic

Growthonfocused

a small corner of the water-use picture in Nebraska. According to U.S. Geological Survey figures, some 93 percent of water used across the state goes to irrigation. Just 3.5 per cent is consumed by municipal utilities. The remaining small uses include mining, livestock and independent home and industrial water wells.

Nevertheless, the planning displayed by M.U.D.’s managers and board of directors, who began work on the Platte West plant in the mid-1990s, is remarkable.

Platte West is designed to supply the Omaha metropolitan area with sufficient water for its use and growth for 50 or 60 years, Wurtz said. When the next generation of M.U.D. executives and board members begins thinking about a new plant in 30 or 40 years, he said, they’ll probably have to look at the Missouri for water supply. The quality isn’t as good, he said, but the quantity is certainly there and will continue to be.

The utility has the authority — and now the water — to follow growth. Estimates indicate that Douglas County will be “built out,” that is, fully developed, by around 2040. Sarpy County, also within M.U.D.’s jurisdiction, will continue to grow.

M.U.D. also can sell water to municipalities outside the two-

county area. The utility supplies Fort Calhoun in Washington County, for instance. As development continues in the area’s small communities and as federal clean-water restrictions tighten, it seems likely that more will want to tie into the M.U.D. system.

The Omaha area is an attractive place for businesses and industries, in part because of its exceedingly reasonable water, gas and electric rates. Wurtz said that several large industries already have talked to the utility about building in the area.

The fates of rural and urban Nebraska are tied together, and water is one of the ropes. It’s good to know that as the concerns and debates over water continue, Omaha’s supply is secure.

M.U.D. decisions enable Omaha to have stable water supply for long-term.

From left: Senior Design Engineer-Major Projects Mike Koenig; Platte West Superintendent Kevin Tobin; Director of Water Quality Chris Fox and Vice-President of Water Operations Joel Christensen share a toast with water treated at the Platte West Plant, July 31.

Nebraska Lt. Governor Rick Sheehy was the keynote speaker at the Platte West Plant dedication October 15. From left: Sheehy and President Tom Wurtz.

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AT THE STARTING LINEOmaha World-Herald editorialSeptember 15, 2008 (reprinted with permission)

The thing looks just like a car — four wheels, hood, doors, the whole nine yards. But it’s more and better: It also looks like the future.

The Metropolitan Utilities District has latched onto a real winner. In August, the utility purchased its first car powered by compressed natural gas. This month, it added four more to the M.U.D. fleet.

Last year the District bought five Honda Civic GX automobiles to complement its fleet of 66 CNG vehicles. With use of CNG vehicles during the past 10 years, we saved $80,000 in fuel costs, avoided dumping more than 2 million pounds of carbon dioxide into the environment and displaced 2,050 barrels of foreign oil.

The utility already was operating 66 service vans converted to compressed natural gas several years ago.

The natural-gas-powered Honda Civic is a winner for many reasons: Natural gas is the cleanest fossil fuel, emitting 25 percent less CO2 than a similar gasoline-powered car while getting the same number of miles per equivalent gallon.

There’s more. Some 98 percent of natural gas is produced from domestic sources (70 percent of oil is imported), and it costs 6 cents a mile to operate. The rate for a petroleum-fueled car: 15 cents a mile.

Here’s the capper: M.U.D. officials said the cost of the amount of natural gas equivalent to a gallon of gasoline is $1.52.

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onfocused

Greenliving

Moving towards greater use of natural gas will require overcoming several challenges. Natural gas vehicles have been around for decades, but there’s an unfortunate stalemate in trying to move forward: There are few public refueling stations in the country. (The high cost of adding natural gas pumps thus far has been prohibitive.) Most people don’t want to buy a natural-gas-fueled car until they can refuel easily.

Hence the daunting Catch-22.

At the moment, there are no public refueling stations in either Nebraska or Iowa. M.U.D. and other agencies and companies with natural gas cars have their own pumps.

M.U.D., which is understandably eager to develop the local market, has plans to work with filling station owners and apply for grants to help subsidize both pump installations and the purchase of natural-gas-powered vehicles. It conceivably could own the first station opened to the public.

Another apparent problem may just be a short-term blip on the radar. The price of natural gas is rising, perhaps as much as 15 percent this winter, M.U.D. officials estimated. Because the high price of petroleum affects natural gas prices, electric utilities are using more natural gas to produce electricity and imports are down. Last year’s cold winter depleted stored supplies.

A recent study by Navigant Consulting concluded, however, that the supply of natural gas in North America is growing steadily, with no end in sight. A conservative estimate, the group said, is that enough gas exists for more than 88 years of production at current levels. Producers developing new sources argue that Americans could see a 120-year supply from the fields.

The supply has been consistently underestimated, Navigant said, because estimates didn’t sufficiently take into account gas production from unconventional sources. Those sources produce gas by new methods of extracting it from shale, for instance. In 1998, extraction from shale accounted for 28 percent of the total natural gas produced; by 2007, the share has increased to 46 percent.

Natural gas won’t wipe away the nation’s energy problems. Indeed, it is a fossil fuel and, as such, sooner or later will be used up. But as part of a multifaceted energy policy, it can serve as a solid bridge, a dependable and affordable alternative that can help the United States as it moves a more sustainable energy policy.

M.U.D.’s natural gas cars are only the beginning.

The District is focused on growing the compressed natural gas (CNG) vehicle industry in the metro Omaha area. We’re working to build a public fueling station and acquire a licensed CNG vehicle dealership in the community.In the future, customers will be able to fill their CNG vehicles at home using a “Phill” station installed on their property, such as in a garage. A Phill station currently costs approximately $4,000.

onfocused

Neighborshelping

Other walkers included, from left: Mike Spitznagle, John O’Donnell, Measurement; Tammy Watkins, Meter Reading; Laura Davis, Human Resources, and Bill Sullivan, Meter Reading.

More than 700 walkers participated in the First Annual Heartland Walk for Warmth February 1 at the Heartland of America Park. The one-mile event raised $30,000 for energy assistance programs, including the District’s Heat Aid Fund which helps older and disabled neighbors with their utility bills.

The walk was organized by M.U.D., Black Hills Energy, Omaha Public Power District, Omaha Mayor Mike Fahey’s office, American Red Cross Heartland Chapter, The Salvation Army, United Way of the Midlands, Cox Communications and NewsRadio 1110 KFAB.

Major sponsors included: Lozier, Northern Border Pipeline Co., Northern Natural Gas Co., Pinnacle Bank and Tenaska Marketing Ventures.

In addition to the walk, customer-owners and employees donated an average of $19,200 a month to the District’s Heat Aid Fund. Established in 1983 to help older and disabled neighbors pay heating bills, the Fund provided more than $253,000 to 788 households in 2008.

M.U.D. walkers, from left: Taylor and Cheryl Rippe, Accounting; Sydney and Lisa Herren, Accounting; Bonnie Savine, Human Resources.From left: Abbie Johnson, Information Technology,

Megan Murray, Customer Accounting; Janine and Joe Davitt, Safety and Security; Dan Crouchley, general counsel, and Tim Cavanaugh, director.

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Neighbors

ContentsManagement’s discussion and analysis 19

Financial Statements 24

Notes to Statements 32

the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinions.

In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the business-type activities and each major fund of the Metropolitan Utilities District as of December 31, 2008 and 2007 and the respective changes in financial position and cash flows for the years then ended, in conformity with U.S. generally accepted accounting principles.

In accordance with Government Auditing Standards, we have also issued our report dated March 5, 2009, on our consideration of the District’s internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and 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 the internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards and should be considered in assessing the results of our audits.

The management’s discussion and analysis on pages 19 through 23 and the schedules of funding progress are not a required part of the financial statements but are supplementary information required by U.S. generally accepted accounting principles. We have applied certain limited procedures, which consisted principally of inquiries of management regarding the methods of measurement and presentation of the supplementary information. However, we did not audit the information and express no opinion on it.

KPMG LLPOmaha, NebraskaMarch 5, 2009

FINANCIALSindependent auditors’ report


The Board of DirectorsMetropolitan Utilities District:

We have audited the accompanying financial statements of the business-type activities and each major fund of the Metropolitan Utilities District (the District) as of December 31, 2008 and 2007, which collectively comprise the District’s financial statements as listed in the table of contents. These financial statements are the responsibility of the District’s management. Our responsibility is to express opinions on these financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the District’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating

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MANAGEMENT’S DISCUSSION AND ANALYSISDecember 31, 2008 and 2007


This section presents management’s analysis and overview of the Metropolitan Utilities District’s (the District) financial condition and activities as of and for the years ended December 31, 2008 and 2007. This information should be read in conjunction with the financial statements and notes to the financial statements.

Overview of Financial Statements

Management’s discussion and analysis serves as an introduction to the financial statements and supplementary information. The financial statements report information about the District using accrual accounting.

The balance sheet presents information on the District’s assets and liabilities, with the difference between the two reported as net assets. Over time, increases or decreases in net assets may serve as a useful indicator of the District’s financial position.

The statement of revenues, expenses, and changes in net assets presents information on how the District’s net assets changed during the year. All changes in net assets are reported as soon as the underlying event giving rise to the change occurs, regardless of the timing of related cash flows. Thus, revenues and expenses are reported in this statement for some items that will result in cash flows in future periods.

The notes to the financial statements provide required disclosures and other information that are necessary to understand material data provided in the financial statements.

Financial Highlights

The District’s overall financial position and results of operations for the current and prior year are summarized below. This information is derived from the financial statements and records of the District:

GAS DEPARTMENT2008 2007

Sales, volume sold — DTH:

Firm gas sales 29,374,495 84% 26,612,659 80%

Interruptible gas sales 5,538,288 16 6,486,994 20

Total gas sales 34,912,783 100% 33,099,653 100%

Degree days 6,729 6,071

Customers (December 31):

Firm customers 209,457 207,517

Interruptible customers 30 36

209,487 207,553

Gas volumes sold in 2008 increased 1,813,130 DTH, or 5.5 percent, from 2007 due to cooler temperatures (degree days in 2008 were 10.8 percent above 2007). There was an increase in firm gas customers in 2008 of 1,934, or 0.9 percent.

Gas volumes sold in 2007 increased 3,887,695 DTH, or 13.3 percent, from 2006 due to cooler temperatures (degree days in 2007 were 13.1 percent above 2006) and more sales to interruptible customers. There was an increase in firm gas customers in 2007 of 2,559, or 1.2 percent.

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Revenues from gas sales, net, were up 11.3 percent in 2008 due to more volumes sold and the addition of the Infrastructure Replacement Charge. Revenues from gas sales, net, were up 11.6 percent in 2007 due to more volumes sold. The annual revenues for the average residential gas customer were $1,020.83 in 2008 compared to $844.22 in 2007 and $819.86 in 2006.

The District initiated an Infrastructure Replacement Charge effective January 2, 2008. Therefore, no prior year data is available to compare against. This charge is included in the 2008 annual revenue for the average residential customer stated above.

Total operating expenses in 2008 were up 10.8 percent from 2007. In 2008, the cost of natural gas was 10.9 percent higher than in 2007. In 2008, other operating expenses were 10.1 percent higher than in 2007 primarily due to increased labor and benefit costs. Total operating expenses in 2007 were up 11.2 percent from 2006. In 2007, the cost of natural gas was 8.7 percent higher than in 2006. In 2007, other operating expenses were 24.2 percent higher than in 2006 primarily due to the accrual of postemployment benefits other than pensions and to increased labor costs.

2008 2007 2006

Operating revenues:

Firm gas sales $ 283,226,498 82% $ 258,738,610 83% $ 233,032,804 83%Interruptible gas

sales 48,151,275 14 48,837,157 16 43,711,280 16

Infrastructurecharge 11,390,573 3 — — — —

Other 5,478,586 2 5,113,785 2 4,491,215 2less: bad debt

expenses (2,038,334) (1) (1,569,190) (1) (2,404,954) (1)

Total operating revenues, net 346,208,598 100% 311,120,362 100% 278,830,345 100%

Operating expenses:

Cost of natural gas 273,785,525 83% 246,862,290 83% 227,029,165 85%Other operating

expenses 57,191,410 17 52,219,056 17 40,892,850 15

Total operating expenses 330,976,935 100% 299,081,346 100% 267,922,015 100%

Nonoperating expenses,net (356,391) (129,496) (508,026)

Change in net assets 14,875,272 11,909,520 10,400,304

Net assets, beginningof year 186,950,994 175,041,474 164,641,170

Net assets, end of year $ 201,826,266 $ 186,950,994 $ 175,041,474

Gas volumes sold in 2007 increased 3,887,695 DTH, or 13.3 percent, from 2006 due to cooler temperatures (degree days in 2007 were 13.1 percent above 2006) and more sales to interruptible customers. There was an increase in firm gas customers in 2007 of 2,559, or 1.2 percent.

Gas Department Summary of Results of Operations

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Gas Department Summary of Financial Position2008 2007 2006

Plant in service, net $ 194,396,959 $ 173,299,319 $ 155,497,593

Noncurrent assets 3,814,575 4,541,234 8,599,404

Current assets 96,923,912 94,271,176 101,079,519

Total assets $ 295,135,446 $ 272,111,729 $ 265,176,516

Current liabilities $ 77,344,398 $ 74,947,550 $ 87,002,235

Noncurrent liabilities 15,964,782 10,213,185 3,132,807

Total liabilities $ 93,309,180 $ 85,160,735 $ 90,135,042

Net assets:Invested in capital assets, net

of related debt $ 194,396,959 $ 173,299,319 $ 155,497,593

Unrestricted 7,429,307 13,651,675 19,543,881

Total net assets 201,826,266 186,950,994 175,041,474Total liabilities and

net assets $ 295,135,446 $ 272,111,729 $ 265,176,516

Long-Term Debt Activity — Debt totaled $17,720,000 and $5,640,000 in the Gas Department at December 31, 2008 and 2007, respectively. Of this amount, $8,720,000 and $5,640,000 was owed to the Water Department at December 31, 2008 and 2007, respectively. The remaining $9,000,000 at December 31, 2008 related to borrowings on a line of credit.

Capital Asset Activity — In 2008, construction costs consists of approximately $1 million related to additional downtown data center storage, approximately $9 million related to services and meter equipment, approximately $2 million related to the design and replacement the 117th and Oak Propane Plant vaporizer, approximately $7 million related to the replacement or installation new gas mains, and the balance was related to the replacement and upgrade of general plant.

In 2007, construction costs consists of approximately $3 million related to the construction of the downtown data center, $8 million related to services and meter equipment, approximately $4 million related to upgrade the 63rd and Oak Propane Plant, approximately $8 million related to the replacement or installation new gas mains, and the balance was related to the replacement and upgrade of general plant.

21

2008 2007Water sales (million gallons) 29,571.3 32,570.7

In 2008, the volume of water sales decreased 2,999.4 million gallons, or 9.2 percent less than 2007 due to more precipitation in 2008. In 2007, the volume of water sales decreased 661.9 million gallons, or 2.0 percent less than 2006.

The number of customers increased 2,069 or 1.1 percent over 2007. The number of customers increased 2,916 or 1.5 percent over 2006.

Water Department Summary of Results of Operations

2008 2007Customers (December 31) 196,878 194,809

Operating revenues, net, increased 10.8 percent in 2008 due to higher water rates than in 2007 and establishment of an Infrastructure Replacement Charge. Operating revenues, net, decreased less than 1 percent in 2007 due to a write off of hydrant taxes in 2007, which did not occur in 2006. The annual revenues for the average residential water customer were $188.46 in 2008 compared to $180.30 in 2007 and to $188.29 in 2006.

The District initiated an Infrastructure Replacement Charge effective January 2, 2008. Therefore, no prior year data is available to compare against. This charge is included in the 2008 annual revenue for the average residential customer stated above.

2008 2007 2006

Operating revenues:

Water sales $ 52,232,256 85% $ 54,766,232 99% $ 53,122,628 95%

Infrastructure charge 5,954,710 10 — — — —

Other 3,702,341 6 2,990,542 5 2,653,865 5

less: bad debt expense (284,922) (1) (2,180,850) (4) (55,373) —Total operating

revenues, net 61,604,385 100% 55,575,924 100% 55,721,120 100%

Operating expenses: 62,520,824 55,137,008 46,170,265Nonoperating revenues

(expenses), net (138,678) 3,147,003 2,565,361

Change in net assets (1,055,117) 3,585,919 12,116,216

Net assets, beginningof year 268,841,861 265,255,942 253,139,726

Net assets, end of year $ 267,786,744 $ 268,841,861 $ 265,255,942

WATER DEPARTMENT



22

Long-Term Debt Activity — At December 31, 2008 and 2007, long-term obligations included a note payable of $444,351 and $496,342, respectively, at 3 percent interest per annum to Nebraska Department of Environmental Quality (NDEQ). During 2008 and 2007, the District paid $51,991 and $50,465, respectively, on the note payable to NDEQ.

In addition, during 2008 and 2007, respectively, the District made principal payments of $3,620,000 and $0 toward its outstanding water revenue bonds.

There were no additions to debt during 2008 and 2007.

Capital Asset Activity — Significant projects in 2008 and 2007 are as follows:

• In2008,constructioncostsofapproximately$29millionwererelatedtotheconstructionofthePlatte West Water Treatment Plant.

• In2007,constructioncostsofapproximately$82millionwererelatedtotheconstructionofthePlatte West Water Treatment Plant.

CONTACT INFORMATIONThis financial report is designed to provide a general overview of the District’s finances. Questions concerning any of the information provided in this report or requests for additional financial information should be addressed to the President of M.U.D. at 1723 Harney Street, Omaha, Nebraska 68102.

Water Department Summary of Financial Position2008 2007 2006

Plant in service, net $ 450,854,845 $ 425,096,572 $ 346,143,253

Current assets 47,236,738 83,285,373 166,057,379

Noncurrent assets 4,288,099 4,574,302 6,287,385

Total assets $ 502,379,682 $ 512,956,247 $ 518,488,017

Current liabilities $ 30,829,455 $ 42,634,416 $ 53,473,625

Long-term obligations 203,763,483 201,479,970 199,758,450

Total liabilities $ 234,592,938 $ 244,114,386 $ 253,232,075

Net assets:Invested in capital assets, net

of related debt $ 257,177,753 $ 260,061,830 $ 174,678,659

Restricted 1,657,364 231,941 745,368

Unrestricted 8,951,627 8,548,090 89,831,915

Total net assets 267,786,744 268,841,861 265,255,942Total liabilities and

net assets $ 502,379,682 $ 512,956,247 $ 518,488,017

23

BALANCE SHEETSDecember 31, 2008 and 2007


2008 Gas Department

Water Department Eliminations Total

Assets

Capital assets:

Utility plant in service $ 314,590,511 $ 558,352,105 $ — $ 872,942,616

Less accumulated depreciation 133,439,999 120,774,641 — 254,214,640

181,150,512 437,577,464 — 618,727,976

Construction in progress 13,246,447 13,277,381 — 26,523,828

Net capital assets 194,396,959 450,854,845 — 645,251,804

Noncurrent assets:Interdepartmental note receivable,

excluding current installments — — — —

Deferred charges 3,814,575 4,288,099 — 8,102,674

Total noncurrent assets 3,814,575 4,288,099 — 8,102,674

Current assets:

Cash and cash equivalents 4,010,503 246,470 — 4,256,973Cash and cash equivalents —

restricted — 1,206,940 — 1,206,940

Investments — 22,231,468 — 22,231,468

Investments — restricted — 693,822 — 693,822

Interdepartmental note receivable — 8,720,000 (8,720,000) —

Interest receivable — 61,974 (61,974) —Accounts receivable — customers

and others, less allowance for doubtful accounts

53,572,430 6,749,952 — 60,322,382

Interdepartmental receivable — 2,973,321 (2,973,321) —

Natural gas in storage 30,268,092 — — 30,268,092

Propane in storage 3,336,836 — — 3,336,836

Materials and supplies 2,205,286 1,843,869 — 4,049,155

Construction materials 3,296,175 882,932 — 4,179,107

Prepayments 234,590 1,625,990 — 1,860,580

Total current assets 96,923,912 47,236,738 (11,755,295) 132,405,355

Total assets $ 295,135,446 $ 502,379,682 $ (11,755,295) $ 785,759,833

See accompanying notes to basic financial statements.

24


2007 Gas Department


Assets

Capital assets:

Utility plant in service $ 291,703,131 $ 244,117,848 $ — $ 535,820,979

Less accumulated depreciation 130,063,063 117,023,518 — 247,086,581

161,640,068 127,094,330 — 288,734,398

Construction in progress 11,659,251 298,002,242 — 309,661,493

Net capital assets 173,299,319 425,096,572 — 598,395,891

Noncurrent assets:Interdepartmental note receivable,

excluding current installments — 820,000 (820,000) —

Deferred charges 4,541,234 3,754,302 — 8,295,536

Total noncurrent assets 4,541,234 4,574,302 (820,000) 8,295,536

Current assets:

Cash and cash equivalents 2,440,535 280,218 — 2,720,753Cash and cash equivalents —

restricted — 42,281 — 42,281

Investments — 33,156,689 — 33,156,689

Investments — restricted — 32,574,169 — 32,574,169

Interdepartmental note receivable — 4,820,000 (4,820,000) —

Interest receivable — 5,111 (5,111) —Accounts receivable — customers

and others, less allowance for doubtful accounts

59,916,145 7,888,789 — 67,804,934

Interdepartmental receivable — 575,981 (575,981) —

Natural gas in storage 23,502,541 — — 23,502,541

Propane in storage 3,443,780 — — 3,443,780

Materials and supplies 2,408,397 1,605,665 — 4,014,062

Construction materials 2,318,984 761,840 — 3,080,824

Prepayments 240,794 1,574,630 — 1,815,424

Total current assets 94,271,176 83,285,373 (5,401,092) 172,155,457

Total assets $ 272,111,729 $ 512,956,247 $ (6,221,092) $ 778,846,884

25

2008 Gas Department


Liabilities and Net Assets

Net assets:Invested in capital assets, net of related

debt $ 194,396,959 $ 257,177,753 $ — $ 451,574,712

Restricted:

Debt service — 1,486,184 — 1,486,184

Environmental — 171,180 — 171,180

Unrestricted 7,429,307 8,951,627 — 16,380,934

Total net assets 201,826,266 267,786,744 — 469,613,010

Noncurrent liabilities:Long-term debt, excluding current

installments — 191,844,368 — 191,844,368

Self-insured risks 238,237 182,059 — 420,296

Net pension obligation 1,911,162 1,563,678 — 3,474,840

Postretirement obligation 12,431,523 10,171,247 — 22,602,770

Other liabilities and deferred credits 1,383,860 2,131 — 1,385,991

Total noncurrent liabilities 15,964,782 203,763,483 — 219,728,265

Current liabilities:

Accounts payable 37,516,743 7,898,655 — 45,415,398

Customer deposits 14,681,026 5,348,445 — 20,029,471

Customer advances for construction 137,717 5,812,676 — 5,950,393

Interdepartmental payable 2,973,321 — (2,973,321) —

Sewer fee collection due municipalities — 3,531,372 — 3,531,372

Statutory payment due municipalities 1,110,810 267,582 — 1,378,392

Other accrued expenses 2,569,318 2,783,462 — 5,352,780

Line of credit 9,000,000 — — 9,000,000

Current installments of long-term debt — 3,258,562 — 3,258,562

Current interdepartmental loan 8,720,000 — (8,720,000) —

Accrued interest 61,974 695,372 (61,974) 695,372

Self-insured risks 573,489 1,233,329 — 1,806,818

Total current liabilities 77,344,398 30,829,455 (11,755,295) 96,418,558

Total liabilities 93,309,180 234,592,938 (11,755,295) 316,146,823

Total liabilities and net assets $ 295,135,446 $ 502,379,682 $ (11,755,295) $ 785,759,833

BALANCE SHEETSDecember 31, 2008 and 2007



26


27

2007 Gas Department


Liabilities and Net Assets

Net assets:Invested in capital assets, net of related

debt $ 173,299,319 $ 260,061,830 $ — $ 433,361,149

Restricted:

Debt service — 62,357 — 62,357

Environmental — 169,584 — 169,584

Unrestricted 13,651,675 8,548,090 — 22,199,765

Total net assets 186,950,994 268,841,861 — 455,792,855

Noncurrent liabilities:Long-term debt, excluding current

installments 820,000 195,202,882 (820,000) 195,202,882

Self-insured risks 354,761 937,534 — 1,292,295

Net pension obligation 375,508 319,877 — 695,385

Postretirement obligation 6,129,354 5,014,927 — 11,144,281

Other liabilities and deferred credits 2,533,562 4,750 — 2,538,312

Total noncurrent liabilities 10,213,185 201,479,970 (820,000) 210,873,155

Current liabilities:

Accounts payable 40,640,200 16,145,336 — 56,785,536

Customer deposits 24,633,918 8,826,591 — 33,460,509

Customer advances for construction 306,023 7,226,977 — 7,533,000

Interdepartmental payable 575,981 — (575,981) —

Sewer fee collection due municipalities — 2,985,123 — 2,985,123

Statutory payment due municipalities 1,238,085 265,981 — 1,504,066

Other accrued expenses 2,324,263 2,488,234 — 4,812,497

Line of credit — — — —

Current installments of long-term debt — 3,671,991 — 3,671,991

Current interdepartmental loan 4,820,000 — (4,820,000) —

Accrued interest 5,111 707,439 (5,111) 707,439

Self-insured risks 403,969 316,744 — 720,713

Total current liabilities 74,947,550 42,634,416 (5,401,092) 112,180,874

Total liabilities 85,160,735 244,114,386 (6,221,092) 323,054,029

Total liabilities and net assets $ 272,111,729 $ 512,956,247 $ (6,221,092) $ 778,846,884

2008 Gas Department


Operating revenues:

Charges for services $ 348,246,932 $ 61,889,307 $ — $ 410,136,239

less: bad debt expense 2,038,334 284,922 — 2,323,256

Charges for services, net 346,208,598 61,604,385 — 407,812,983

Operating expenses:

Cost of natural gas 273,785,525 — — 273,785,525

Operating and maintenance 44,474,651 56,151,243 — 100,625,894

Depreciation 7,391,538 5,582,304 — 12,973,842

Payment in-lieu-of-taxes 5,325,221 787,277 — 6,112,498

Total operating expenses 330,976,935 62,520,824 — 393,497,759

Operating income (loss) 15,231,663 (916,439) — 14,315,224

Non-operating revenues (expenses):

Investment income 62,413 1,609,152 (181,297) 1,490,268

Interest expense (418,804) (1,750,448) 181,297 (1,987,955)

Property taxes — 2,618 — 2,618

Total nonoperating revenues (expenses), net (356,391) (138,678) — (495,069)

Change in net assets 14,875,272 (1,055,117) — 13,820,155

Net assets, beginning of year 186,950,994 268,841,861 — 455,792,855

Net assets, end of year $ 201,826,266 $ 267,786,744 $ — $ 469,613,010

STATEMENTS OF REVENUE, EXPENSES AND CHANGES IN NET ASSETSDecember 31, 2008 and 2007



28


2007 Gas Department


Operating revenues:

Charges for services $ 312,689,552 $ 57,756,774 $ — $ 370,446,326

less: bad debt expense 1,569,190 2,180,850 — 3,750,040

Charges for services, net 311,120,362 55,575,924 — 366,696,286

Operating expenses:

Cost of natural gas 246,862,290 — — 246,862,290

Operating and maintenance 40,324,781 49,694,495 — 90,019,276

Depreciation 7,139,661 4,612,869 — 11,752,530

Payment in-lieu-of-taxes 4,754,614 829,644 — 5,584,258

Total operating expenses 299,081,346 55,137,008 — 354,218,354

Operating income (loss) 12,039,016 438,916 — 12,477,932

Non-operating revenues (expenses):

Investment income 380,079 5,152,491 (66,611) 5,465,959

Interest expense (509,575) (2,008,181) 66,611 (2,451,145)

Property taxes — 2,693 — 2,693

Total nonoperating revenues (expenses), net (129,496) 3,147,003 — 3,017,507

Change in net assets 11,909,520 3,585,919 — 15,495,439

Net assets, beginning of year 175,041,474 265,255,942 — 440,297,416

Net assets, end of year $ 186,950,994 $ 268,841,861 $ — $ 455,792,855

29

2008 Gas Department

Water Department Total

Cash flows from operating activities:Receipts from customers $ 354,442,249 $ 60,667,270 $ 415,109,519Payments to suppliers (301,247,457) (20,902,387) (322,149,844)Payments to employees (28,126,872) (23,111,700) (51,238,572)Payments in-lieu-of taxes (5,325,221) (787,277) (6,112,498)

Net cash flows provided by operating activities 19,742,699 15,865,906 35,608,605Cash flows from noncapital financing activities:

Interdepartmental loans and advances 5,477,340 (5,477,340) —Proceeds received from line of credit 9,000,000 — 9,000,000

Net cash flows provided by (used in) noncapital financing activities 14,477,340 (5,477,340) 9,000,000

Cash flows from capital and related financing activities:Plant additions (32,264,920) (51,794,234) (84,059,154)Payments on long-term debt — (3,671,991) (3,671,991)Customer advances (9,213) 10,363,515 10,354,302Proceeds received from property taxes — 2,618 2,618Interest paid (438,351) (8,415,468) (8,853,819)

Net cash flows used in capital and related financing activities (32,712,484) (53,515,560) (86,228,044)

Cash flows from investing activities:Purchase of investment securities (51,975,479) (394,584,266) (446,559,745)Sales of investment securities 51,975,479 437,332,971 489,308,450Interest received 62,413 1,509,200 1,571,613

Net cash flows provided by (used in) investing activities 62,413 44,257,905 44,320,318

Net increase (decrease) in cash and cash equivalents 1,569,968 1,130,911 2,700,879

Cash and cash equivalents, beginning of year 2,440,535 322,499 2,763,034Cash and cash equivalents, end of year $ 4,010,503 $ 1,453,410 $ 5,463,913Reconciliation of operating income (loss) to net cash flows

provided by operating activities:Operating income (loss) $ 15,231,663 $ (916,439) $ 14,315,224Adjustments to reconcile operating income (loss) to net

cash flows provided by operating activities:Depreciation:

Charged to operations 7,391,538 5,582,304 12,973,842Charged to other accounts 2,765,654 546,691 3,312,345

Cash flows impacted by changes in:Amounts due from customers and others 6,343,715 1,136,219 7,479,934Natural gas, propane, materials, supplies and

prepayments (6,449,292) (289,564) (6,738,856)

Deferred charges 1,102,167 (533,797) 568,370Accounts payable and other (3,450,518) 7,260,026 3,809,508Customer deposits (9,933,345) (3,478,146) (13,411,491)Deferred credits and self-insurance (1,096,706) 158,491 (938,215)Net pension obligation 1,535,654 1,243,801 2,779,455Postretirement obligation 6,302,169 5,156,320 11,458,489

Net cash flows provided by operating activities $ 19,742,699 $ 15,865,906 $ 35,608,605

STATEMENTS OF CASH FLOWDecember 31, 2008 and 2007



30


2007 Gas Department


Cash flows from operating activities:Receipts from customers $ 307,312,130 $ 60,665,755 $ 367,977,885Payments to suppliers (243,558,410) (31,734,710) (275,293,120)Payments to employees (25,859,861) (21,702,152) (47,562,013)Payments in-lieu-of taxes (4,754,614) (829,644) (5,584,258)

Net cash flows provided by operating activities 33,139,245 6,399,249 39,538,494Cash flows from noncapital financing activities:

Interdepartmental loans and advances 2,106,557 (2,106,557) —Proceeds received from line of credit — — —

Net cash flows provided by (used in) noncapital financing activities 2,106,557 (2,106,557) —

Cash flows from capital and related financing activities:Plant additions (27,613,017) (102,115,950) (129,728,967)Payments on long-term debt — (50,465) (50,465)Customer advances 590,258 11,241,972 11,832,230Proceeds received from property taxes — 2,693 2,693Interest paid (518,786) (8,599,317) (9,118,103)

Net cash flows used in capital and related financing activities (27,541,545) (99,521,067) (127,062,612)

Cash flows from investing activities:Purchase of investment securities (213,634,176) (244,960,842) (458,595,018)Sales of investment securities 205,133,398 334,729,761 539,863,159Interest received 380,079 5,537,227 5,917,306

Net cash flows provided by (used in) investing activities (8,120,699) 95,306,146 87,185,447

Net increase (decrease) in cash and cash equivalents (416,442) 77,771 (338,671)

Cash and cash equivalents, beginning of year 2,856,977 244,728 3,101,705Cash and cash equivalents, end of year $ 2,440,535 $ 322,499 $ 2,763,034Reconciliation of operating income (loss) to net cash flows

provided by operating activities:Operating income (loss) $ 12,039,016 $ 438,916 $ 12,477,932Adjustments to reconcile operating income (loss) to net

cash flows provided by operating activities:Depreciation:

Charged to operations 7,139,661 4,612,869 11,752,530Charged to other accounts 2,094,820 4,247,449 6,342,269

Cash flows impacted by changes in:Amounts due from customers and others (5,288,356) 1,855,084 (3,433,272)Natural gas, propane, materials, supplies and

prepayments 8,268,252 274,280 8,542,532

Deferred charges 4,058,170 893,083 4,951,253Accounts payable and other (5,782,106) (8,061,384) (13,843,490)Customer deposits 3,036,002 (3,105,731) (69,729)Deferred credits and self-insurance 1,068,924 (90,121) 978,803Net pension obligation 375,508 319,877 695,385Postretirement obligation 6,129,354 5,014,927 11,144,281

Net cash flows provided by operating activities $ 33,139,245 $ 6,399,249 $ 39,538,494

31

NOTES TO BASIC FINANCIAL STATEMENTSDecember 31, 2008 and 2007

(1) Summary of Significant Accounting Policies(a) Nature of Operations

Metropolitan Utilities District (the District), a political subdivision of the State of Nebraska, is a public utility providing water and gas service to a diversified base of residential, commercial and industrial customers. State statutes vest authority to establish rates in the board of directors and provide, among other things, that separate books of account be kept for each utility department and for the equitable allocation of joint expenses. The District is not liable for federal and state income taxes. The District pays ad valorem taxes on real property not used for public purposes and in-lieu-of taxes to various municipalities.

(b) Basis of PresentationThe District’s financial statements have been prepared using the economic resources measurement focus and the accrual basis of accounting. Under this method, revenues are recorded when earned and expenses are recorded at the time liabilities are incurred. In accordance with Governmental Accounting Standards Board (GASB) Statement No. 20, Accounting and Financial Reporting for Proprietary Funds and Other Governmental Entities That Use Proprietary Fund Accounting, the District has elected to follow all applicable GASB pronouncements, including all National Council on Governmental Accounting (NCGA) statements and interpretations currently in effect, as well as all Financial Accounting Standards Board (FASB) statements and interpretations, except those that conflict with or contradict GASB pronouncements. The District follows the Uniform System of Accounts as prescribed by the National Association of Regulatory Utility Commissioners.The District’s accounting policies also conform to FASB Statement No. 71, Accounting for the Effects of Certain Types of Regulation. Accordingly, certain transactions that result from the rate-making process are recorded that would not be recorded under U.S. generally accepted accounting principles for nonregulated utilities.

(c) Utility PlantUtility plant is stated at cost. Cost includes direct charges such as labor, material and related overhead. Allowance for borrowed funds used during construction represents interest capitalized on construction projects not paid for by contributions to the extent such projects are financed by debt. Interest was not capitalized on Gas Department projects in 2008 and 2007. Interest of $6,665,020 and $6,491,459 was capitalized on Water Department projects in 2008 and 2007, respectively. The original cost of depreciable units of plant retired, together with the net cost of removal, less salvage, are charged to accumulated depreciation. Expenditures for ordinary maintenance and repairs are charged to operations.Depreciation of utility plant is computed primarily on the straight line method over its estimated useful life. The weighted average composite depreciation rates, expressed as a percentage of the beginning of the year cost of depreciable plant in service, were:

2008 2007Water Department 2.5% 2.0%

Gas Department 3.3 3.2


Contributions in-aid-of construction are reported as contra-fixed assets in accordance with Uniform Systems of Accounts and as allowed by FASB Statement No. 71. Contributions in-aid-of construction are not considered in the District’s rate-making process and are therefore not reported as income.

(d) Net AssetsThe net assets of the District are broken down into three categories: (1) invested in capital assets, net of related debt, (2) restricted for debt service and environmental, and (3) unrestricted.

• Netassetsinvestedincapitalassets,netofrelateddebt,consistofcapitalassets,includingrestrictedcapitalassets,net of accumulated depreciation and reduced by the outstanding balance of debt that are attributable to the acquisition, construction, or improvement of those assets.

• Restrictedfordebtserviceandenvironmentalfundsrepresentnetassetswhoseuseisrestrictedthroughexternalconstraints imposed by debt covenants and constraints imposed by the Nebraska Department of Environmental Quality and the Nebraska Game and Parks Commission.

32

33

• Unrestrictednetassetsconsistofnetassetsthatdonotmeetthedefinitionofnetassetsinvestedincapitalassets,net of related debt or restricted for debt service and environmental.When both restricted and unrestricted resources are available for use, it is the District’s policy to use restricted first, and then unrestricted resources when they are needed.

(e) Deferred ChargesDeferred charges consist primarily of debt issuance costs, which are being amortized on the straight line method over the life of the bond.

(f ) Bond Premium and DiscountsBond premium and discounts are amortized over the life of the bond using the straight-line method.

(g) Cash, Cash Equivalents and InvestmentsU.S. government securities that have original maturities less than one year are carried at amortized cost, which approximates market.For purposes of the statements of cash flows, the District considers cash and all investments with original maturities of three months or less to be cash equivalents.

(h) Accounts ReceivableAccounts receivable are recorded at the invoiced amount and do not bear interest. Amounts collected on accounts receivable are included in net cash provided by operating activities in the statements of cash flows. The allowance for doubtful accounts is the District’s best estimate of the amount of probable credit losses in the District’s existing accounts receivable. The District determines the allowance based on an analysis of open accounts and historical write off experience.

(i) InventoriesInventories of natural gas, liquefied natural gas, and propane are carried at cost. Construction materials and materials and supplies are carried at the lower of cost (average cost method) or market.

(j) Compensated AbsencesThe District employees earn vacation days at specific rates during their employment. In the event of termination, an employee is reimbursed for accumulated vacation time up to a maximum allowed accumulation of no more than what they are eligible to earn in two years.

(k) RevenuesMeters are read and bills are rendered on a cycle basis as earned. Revenues earned after meters are read are estimated and accrued as unbilled revenues at the end of each accounting period. Accounts receivable includes unbilled revenues as follows:

2008 2007Gas Department $ 33,751,000 $ 36,120,000Water Department 642,390 375,060

(l) Operating Versus NonoperatingOperating revenues and expenses generally result from providing services in connection with the District’s ongoing operations. The principal operating revenues are charges to customers for services. Operating expenses include the cost of services, administrative expenses, and depreciation on capital assets. All revenues and expenses not meeting this definition are reported as nonoperating revenues and expenses.

(m) Property TaxesThe District no longer levies a property tax for public fire protection services effective during the 2006 tax year. The District collected $2,618 during 2008 for delinquent taxes from prior years. The District collected $2,693 during 2007 for delinquent taxes from prior years.



34

Investment Maturities (in years)

Investment Type: Carrying Value Fair Value Less than 1 Concentration

Water Department:

Federal Home Loan Mortgage Discount Notes $ 2,061,839 $ 2,043,128 $ 2,043,128 9%

Federal Home Loan Bank Discount Note 8,841,341 8,888,664 8,888,664 39

Freddie Mac Discount Notes 1,017,429 1,020,490 1,020,490 4

FNMA Discount Note 6,296,716 6,325,805 6,325,805 28

Certificate of Deposit 4,536,785 4,536,785 4,536,785 20

Money Market 171,180 171,180 171,180 —

$ 22,925,290 $ 22,986,052 $ 22,986,052 100%

(n) Interdepartmental TransactionsMost routine disbursement transactions of the District are initially recorded by the Gas Department. Substantially all amounts payable to vendors for services provided to the Water and Gas departments are included in the accompanying financial statements as assets and liabilities of the Gas Department. All transactions are accumulated in interdepartmental receivable and payable accounts. At December 31, 2008, the Water Department reflected a receivable from the Gas Department and the Gas Department reflected a payable to the Water Department of $2,973,321. At December 31, 2007, the Water Department reflected a receivable from the Gas Department and the Gas Department reflected a payable to the Water Department of $575,981. The receivable and payable have been eliminated in the total column.During 2003, the Water Department loaned the Gas Department $4,100,000 to fund operations. The note bears interest at 3 percent. At December 31, 2008, $820,000 remains outstanding and is included on the Gas Department’s books as a short-term obligation. Interest charged on the note was $37,652 and $66,611 for the years ended December 31, 2008 and 2007, respectively. The note is payable in annual installments of $820,000 and matures in 2009. The debt, interest income, and expense have been eliminated in the total columns.During 2008, the Water Department loaned the Gas Department $7,900,000 to fund operations, which is due in 2009 and is included in the current portion of the note receivable and payable. The note bears interest at 2.65 percent at December 31, 2008.

(o) Use of EstimatesThe preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management of the District to make estimates and assumptions related to the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the period. Significant assumptions include the lives of the utility plant, pension obligation, other postemployment benefit (OPEB) obligation, and valuation of accounts receivable. Actual results could differ from these estimates.

(2) Deposits and InvestmentsState Statute 14-2144 R.R.S. authorizes funds of the District to be invested in district bonds, municipal bonds, warrants and bonds of sanitary improvement districts, and any other investment that constitutes a legal investment for the school fund of the State.Deposits — At December 31, 2008 and 2007, all of the bank balances were covered by federal depository insurance or collateralized with securities held by the Federal Reserve Bank.Investments — At December 31, 2008, the District’s investments are categorized as follows:

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Investment Maturities (in years)

Investment Type: Carrying Value Fair Value Less than 1 Concentration

Water Department:Federal Home Loan Mortgage

Discount Notes $ 1,629,232 $ 1,627,970 $ 1,627,970 2%

Federal Home Loan Bank Discount Note 9,728,526 9,728,277 9,728,277 15

Freddie Mac Discount Notes 36,736,562 36,756,923 36,756,923 56

U.S. Treasury Note 2,011,710 2,014,369 2,014,369 3

FNMA Discount Note 12,448,198 12,453,792 12,453,792 19

Certificate of Deposit 3,007,046 3,007,046 3,007,046 5

Money Market 169,584 169,584 169,584 —

$ 65,730,858 $ 65,757,961 $ 65,757,961 100%

At December 31, 2007, the District’s investments are categorized as follows:

Interest Rate Risk — The District does not have a formal investment policy that limits investment maturities as a means of managing its exposure to fair value losses arising from increasing interest rates.Credit Risk — The District’s board authorizes the District to invest funds in accordance with the prudent man rule: Investments are made as a prudent person would be expected to act, with discretion and intelligence, to seek reasonable income, preserve capital, and, in general, avoid speculative investments. Such securities may include, but are not limited to, U.S. Treasury securities, U.S. government agency securities, and funding agreements with insurance companies, which are rated at least A+ by A.M. Best. Credit ratings for these investments that are rated are as follows:

2008 2007

Investment Type: Fair Value Quality Rating Fair Value Quality

RatingDebt Securities:

U.S. Agencies $ 18,278,087 AAA $ 62,581,331 AAA

$ 18,278,087 $ 62,581,331

Concentration of Credit Risk — The District places no limit on the amount that may be invested in any one issuer. Concentration percentages by investment type are included in the above tables.Custodial Credit Risk — The District’s investment policy does not limit the value of investments that may be held by an outside party.

2008: Gas Department


Utility plant in service $ 359,263,414 $ 845,098,746 $ 1,204,362,160

Construction in progress, nondepreciable 13,246,447 13,277,381 26,523,828372,509,861 858,376,127 1,230,885,988

Less:Accumulated depreciation (133,439,999) (120,774,641) (254,214,640)Contributions and grants in-aid-of-

construction (44,672,903) (286,746,641) (331,419,544)$ 194,396,959 $ 450,854,845 $ 645,251,804

2007:Utility plant in service $ 336,216,941 $ 519,086,673 $ 855,303,614Construction in progress, nondepreciable 11,659,251 298,002,242 309,661,493

347,876,192 817,088,915 1,164,965,107Less:

Accumulated depreciation (130,063,063) (117,023,518) (247,086,581)Contributions and grants in-aid-of-

construction (44,513,810) (274,968,825) (319,482,635)$ 173,299,319 $ 425,096,572 $ 598,395,891



The provision for depreciation expense is as follows:

2008:Gas Department:

BalanceBeginning

of Year Increases DecreasesBalance

End of YearUtility plant in service,

depreciable $ 336,216,941 $ 26,309,375 $ (3,262,902) $ 359,263,414

Construction in progress, nondepreciable 11,659,251 29,583,945 (27,996,749) 13,246,447

Accumulated depreciation (130,063,063) (10,157,192) 6,780,256 (133,439,999)Contributions and grants in-

aid-of-construction (44,513,810) (5,814,601) 5,655,508 (44,672,903)

$ 173,299,319 $ 39,921,527 $ (18,823,887) $ 194,396,959

(3) Utility PlantUtility plant at December 31, 2008 and 2007 is summarized as follows:

2008: Gas Department


Charged to depreciation $ 7,391,538 $ 5,582,304 $ 12,973,842

Charged to operating and maintenance 2,765,654 546,691 3,312,345$ 10,157,192 $ 6,128,995 $ 16,286,187

2007:Charged to depreciation $ 7,139,661 $ 4,612,869 $ 11,752,530Charged to operating and maintenance 2,094,820 453,915 2,548,735

$ 9,234,481 $ 5,066,784 $ 14,301,265

Capital asset activity for the years ended December 31, 2008 and 2007 is as follows:

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37

2008:Water Department:

BalanceBeginning


End of YearUtility plant in service,

depreciable $ 519,086,673 $ 328,043,674 $ (2,031,601) $ 845,098,746



aid-of-construction (274,968,825) (15,929,266) 4,151,450 (286,746,641)

$ 425,096,572 $ 352,181,632 $ (326,423,359) $ 450,854,8452007:

Gas Department:Utility plant in service,

depreciable $ 318,916,492 $ 20,268,763 $ (2,968,314) $ 336,216,941



aid-of-construction (44,024,217) (546,990) 57,397 (44,513,810)

$ 155,497,593 $ 37,181,417 $ (19,379,691) $ 173,299,3192007:

Water Department:Utility plant in service,

depreciable $ 505,882,151 $ 15,265,717 $ (2,061,195) $ 519,086,673



aid-of-construction (260,681,739) (14,933,238) 646,152 (274,968,825)

$ 346,143,253 $ 93,832,361 $ (14,879,042) $ 425,096,572

(4) Long-Term ObligationsLong-term debt in the Water Department includes a note payable to the Nebraska Department of Environmental Quality (NDEQ) and two water revenue bonds to finance the construction of the Platte West Water Treatment Plant. Activity in long-term obligations for the years ended December 31, 2008 and 2007 is as follows:

2008:Balance

Beginningof Year Increases Decreases

BalanceEnd of Year

DueWithin

One YearNDEQ Note Payable $ 496,342 $ — $ 51,991 $ 444,351 $ 53,562Series 2006A Revenue

Bond 100,000,000 — 2,620,000 97,380,000 2,705,000

Less Unamortized Discount (306,836) — (13,292) (293,544) —

Series 2006B Revenue Bond 96,000,000 — 1,000,000 95,000,000 500,000

Plus Unamortized Premium 2,685,367 — 113,244 2,572,123 —

Other Postemployment Benefits 11,144,281 13,874,310 2,415,821 22,602,770 —

Pension Obligation 695,385 5,979,459 3,200,004 3,474,840 —$ 210,714,539 $ 19,853,769 $ 9,387,768 $ 221,180,540 $ 3,258,562



Principal InterestAdministrative

Fee Total2009 $ 53,562 $ 12,932 $ 4,310 $ 70,8042010 55,181 11,313 3,771 70,2652011 56,849 9,645 3,215 69,7092012 58,567 7,927 2,642 69,1362013 60,337 6,157 2,052 68,546

2014-2016 159,855 7,305 2,435 169,595$ 444,351 $ 55,279 $ 18,425 $ 518,055

Water Revenue Bonds — On February 24, 2006, the District issued 2006A Series Bonds for a par value of $100,000,000, and on October 11, 2006, the District issued 2006B Series Bonds for a par value of $96,000,000. The 2006A issue consists of $87,360,000 of serial bonds with maturity dates between 2008 and 2029, with interest rates between 4.0 percent and 4.375 percent, and $12,640,000 of term bonds due 2031 with an interest rate of 4.375 percent. The 2006B issue consists of $77,775,000 of serial bonds with maturity dates of 2008 through 2030, with interest rates between 4.0 percent and 5.0 percent, and $18,225,000 of term bonds with interest rates of 5.0 percent due 2031 and 2032. The 2006A Bonds are subject to optional redemption prior to maturity on and after December 1, 2016. The 2006B Bonds are subject to optional redemption prior to maturity on and after June 1, 2017. Principal and interest payments are as follows:

Principal Interest Total2009 $ 3,205,000 $ 8,334,463 $ 11,539,4632010 4,795,000 8,176,263 12,971,2632011 6,465,000 7,952,963 14,417,9632012 6,235,000 7,700,863 13,935,8632013 5,845,000 7,461,462 13,306,462

2014-2018 31,755,000 33,668,113 65,423,1132019-2023 38,800,000 26,605,775 65,405,7752024-2028 48,160,000 17,427,931 65,587,9312029-2031 47,120,000 5,083,187 52,203,187

$ 192,380,000 $ 122,411,020 $ 314,791,020

2007:

BalanceBeginning


End of Year

DueWithin

One YearNDEQ Note Payable $ 546,807 $ — $ 50,465 $ 496,342 $ 51,991Series 2006A Revenue

Bond 100,000,000 — — 100,000,000 2,620,000

Less Unamortized Discount (320,092) — (13,256) (306,836) —

Series 2006B Revenue Bond 96,000,000 — — 96,000,000 1,000,000

Plus Unamortized Premium 2,798,300 — 112,933 2,685,367 —

Other Postemployment Benefits — 13,788,608 2,644,327 11,144,281 —

Pension Obligation(Asset) (1,353,940) 4,934,405 2,885,080 695,385 —

$ 197,671,075 $ 18,723,013 $ 5,679,549 $ 210,714,539 $ 3,671,991

Long-term debt in the Water Department consists of a 3 percent note payable to the Nebraska Department of Environmental Quality. The note is payable in semiannual installments of $33,247 plus an administrative fee through December 15, 2016. Note payable requirements to maturity are as follows:

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39

The indenture, under which the revenue bonds were issued, provides for the creation and maintenance of certain funds. These cash and investments are classified as restricted in the balance sheet. All revenues of the Water Department are pledged to secure the revenue bonds.Restrictive covenants required the District to set rates that enable it to maintain an annual debt service coverage ratio of 1.2. As of December 31, 2008, the District’s ratio was 1.13 and the District was not in compliance with this covenant. Failure to comply with this covenant constitutes an event of default if not corrected within 30 days, however, the District has taken corrective measures designed to ensure that it will meet the covenant in subsequent periods. As of December 31, 2007, the District was in compliance with its covenants.The District has pledged future water revenues to repay $196,000,000 million of the 2006A and 2006B Series Bonds issued in February and October 2006. Proceeds from the bonds provided financing for the Platte West Water Treatment Plant. The 2006A and 2006B Series Bonds are payable solely from water revenues and are payable through 2029 and 2031, respectively. Annual principal and interest payments on the bonds are expected to require less than 20 percent of water revenues. The total principal and interest remaining to be paid on the bonds as of December 31, 2008 is $314,791,020. Principal and interest paid and total water revenues for the year ended December 31, 2008 were $12,077,196 and $61,889,307, respectively.

(5) Line of CreditThe District’s Gas Department entered into an unsecured line of credit on October 31, 2006 for $30,000,000. The loan was renewed in 2007 and again in 2008. The current amendment to the Loan Agreement matures April 30, 2009. As of December 31, 2008, the interest rate is 1.93 percent and the unpaid balance is $9,000,000.

(6) Pension PlanEffective December 31, 2008, the District adopted the provisions of GASB Statement No. 50, Pension Disclosures, an amendment of GASB Statements No. 25 and 27. This statement establishes and modifies footnote disclosures for defined benefit plans.(a) Plan Description and Funding Policy

The District sponsors a single employer defined benefit pension plan (the Plan) for all full time employees of the Water and Gas Departments administered by a third party administrator. The Plan was established and may be amended by the District’s board of directors. The Plan provides retirement, disability (in the form of continued credited service), death, and termination benefits. An employee of the District is eligible for coverage at the time of employment. Vesting is achieved upon the completion of five years of service. The District does not issue a separate report that includes financial statements and required supplementary information for the Plan.

As of January 1, 2009, membership of the Plan consists of the following:Active Employees 831Long-Term Disability 27Terminated Vested 38Retirees and Beneficiaries Receiving Benefits 517

1,413

The Plan is not subject to either the minimum funding standards of the Employee Retirement Income Security Act of 1974 or the maximum funding limitations. Funding standards are actuarial determined using the Entry Age Normal Cost method. Actuarial reviews are produced on an annual basis, the most recent was as of January 1, 2009.The information presented in the notes to the financial statements and required supplementary information was determined as part of the actuarial valuation at the date indicated, valuation information is as follows:



Three-Year Trend Information

Year Ended December 31:Annual Pension

Cost (APC)Percentage of APC

ContributedNet Pension Asset

(Obligation)2008 $ 5,979,459 54% $ (3,474,840)2007 4,934,405 58 (695,385)2006 1,884,973 114 1,353,940

2008 2007Annual required contribution $ 5,965,250 $ 4,960,762Interest on net pension (asset) liability 50,415 (94,776)Adjustment to annual required contribution (36,206) 68,419

Annual pension cost 5,979,459 4,934,405Contributions made 3,200,004 2,885,080

Increase in net pension obligation (2,779,455) (2,049,325)Net pension asset (obligation), beginning of year (695,385) 1,353,940Net pension obligation, end of year $ (3,474,840) $ (695,385)

Valuation date January 1, 2009Actuarial cost method Entry age normal cost methodAmortization period 30 yearsRemaining amortization period 30Actuarial assumptions:

Investment rate of return 7.25%Projected salary increase 4 to 11%Annual postretirement benefit increase 3%Inflation rate 3.25%

(b) Annual Pension Cost and Net Pension Asset (Obligation)The District’s annual pension cost and net pension asset (obligation) to the Plan for 2008 and 2007 were as follows:

The annual pension costs, the percentage of annual pension cost contributed, and the net pension asset (obligation) are as follows:

(c) Basis of AccountingThe Plan’s financial statements are prepared using the accrual basis of accounting. Plan member and employer contributions are recognized in the period in which the contributions are due. Benefits are recognized when due and payable.

(d) Method Used to Value InvestmentsPlan assets are invested in readily marketable securities and are carried at fair value. Investments in securities traded on a national securities exchange are valued at the latest quoted market prices. For investments where no readily available market value exists, management, in consolation with their investment advisors, values those investments in good faith based upon audited financial statements or other information provided by the underlying investment advisor.

(e) ContributionsAnnual contributions to the Plan for employee members are composed of employee contributions equal to 3.76 percent of base salary.

40

41

(f ) Funding Status and Funding Progress

Actuarial Valuation Date

Actuarial Value of Assets

(in thousands)(a)

Actuarial Accrued Liability (AAL)

Entry Age(in thousands)

(b)

Unfunded AAL (UAAL)(in thousands)

(b-a)

Funded Ratio (a/b)

Covered Payroll

(in thousands) (c)

UAAL as a Percentage of

Covered Payroll ([b-a]/c)

December 31, 2008 $ 235,349 $ 277,524 $ 42,175 85% $ 46,428 91%

December 31, 2007 245,760 262,627 16,867 94 43,105 39

December 31, 2006 234,707 241,172 6,465 97 40,945 16

The schedules of funding progress, presented as required supplementary information (RSI) following the notes to the financial statements, present multi-year-trend information about whether the actuarial value of plan assets are increasing or decreasing over time relative to the actuarial accrued liability for benefits.

(7) Postemployment Benefits(a) Plan Description

The District provides certain postemployment health care and life insurance benefits to eligible retirees and their spouses in accordance with provisions established by the District’s board of directors. The plan is a single employer defined benefit health care plan administered by the District. The plan does not issue separate financial statements.

(b) Funding PolicyThe contribution requirements of plan members and the District are established and can be amended by the District’s board of directors. Contributions are made to the plan based on a pay as you go basis. For the years ended December 31, 2008 and 2007, the District’s payments were $1,547,772 and $1,667,352, respectively, for Water retirees and $1,891,721 and $2,037,874, respectively, for Gas retirees. These amounts include $2,415,821 paid by the District (approximately 70 percent of total) in 2008 and $2,644,327 (approximately 71 percent of total) in 2007. The District’s retirees paid $1,023,672 (approximately 30 percent of total) in 2008 and $1,060,899 (approximately 29 percent of total) in 2007 of contributions from retirees receiving benefits. Retirees contributed $133.25 per month for retiree only coverage effective April 1, 2008 and the same amount to cover their spouses.

(c) Annual OPEB Cost and Net OPEB ObligationThe District’s annual OPEB cost (expense) is calculated based on the annual required contribution of the employer (ARC), an amount actuarially determined in accordance with the parameters of GASB Statement No. 45. The ARC represents a level of funding that, if paid on an ongoing basis, is projected to cover normal cost each year and amortize any unfunded actuarial liabilities (or funding excess) over a period not to exceed 30 years. The District’s annual OPEB cost, the percentage of annual OPEB cost contributed to the plan, and the net OPEB obligation for 2008 and 2007 are as follows:

Fiscal Year Ended:Annual

OPEB CostAnnual OPEB

Contributed Net OPEBDecember 31, 2008 $ 13,874,310 17% $ 22,602,770December 31, 2007 13,788,608 19 11,144,281

2008 2007Annual required contribution $ 13,788,608 $ 13,788,608Interest on net OPEB obligation 501,493 —Adjustment to annual required contribution (415,791) —

Annual OPEB cost 13,874,310 13,788,608Contributions made 2,415,821 2,644,327

Increase in OPEB obligation 11,458,489 11,144,281Net OPEB obligation beginning of year 11,144,281 —Net OPEB obligation end of year $ 22,602,770 $ 11,144,281

The following table shows the components of the District’s annual OPEB cost for 2008 and 2007, the amount actually contributed to the plan, and changes in the District’s net OPEB obligation:



Funding Status and Funding ProgressThe funded status of the plan as of January 1, 2007 is as follows:

Actuarial accrued liability (AAL) $ 160,493,551Actual value of plan assets —

Unfunded actuarial accrued liability (UAAL) 160,493,551Funded ratio —%Covered payroll 46,428,438UAAL as a percentage of covered payroll 346%

(d) Actuarial Methods and AssumptionsActuarial valuations on an ongoing plan involve estimates of the value reported amounts and assumptions about the probability of occurrence of events far into the future. Examples include assumptions about future employment, mortality, and the health care 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 multi-year trend information about whether the actuarial value of plan assets is increasing or decreasing over time relative to the actuarial accrued liabilities for benefits.Projections of benefits for financial reporting purposes are based on the substantive plan (the plan as understood by the employer and the plan members) and include benefits provided at the time of each valuation and the historical pattern of sharing benefit costs between the employer and plan member to that point. The actuarial methods 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, 2007, actuarial valuation, the unit credit actuarial cost method was used. The actuarial assumptions included a 4.5 percent projected investment rate of return and an annual health care cost trend of 9.25 percent initially, reduced by decrements to an ultimate rate of 5 percent after nine years. Both rates include a 3.25 percent inflation assumption. The projected salary increase is 4 percent to 11 percent. The unfunded actuarial accrued liability is being amortized over 30 years as a level percent of payroll.

(8) Self Insured RisksLiabilities are recorded to cover self insured risks for physical damage to property, liability, and workers’ compensation. The accrual balance is based on a combination of loss experience and estimates by the District’s in house legal department.Changes in the District’s self insured risk balances during 2008 and 2007 are as follows:

Gas Department Water Department2008 2007 2008 2007

Beginning balance $ 758,730 $ 943,671 $ 1,254,278 $ 1,349,149Expenses 482,799 277,043 1,162,629 393,787Payments (429,803) (461,984) (1,001,519) (488,658)Ending balance $ 811,726 $ 758,730 $ 1,415,388 $ 1,254,278

(9) Amounts Due from Customers and Others and Allowance for Doubtful AccountsThe allowance for doubtful accounts provides for the potential write off of uncollectible account balances. It is the District’s policy to only write off receivables that are over two years old. During 2008, the Gas Department and Water Department wrote off receivables totaling approximately $2,400,000 and $400,000, respectively. During 2007, the Gas Department and Water Department wrote off receivables totaling approximately $1,700,000 and $300,000, respectively. The allowance consists of the following:

2008 2007Water Department $ 717,872 $ 740,531

Gas Department 4,695,947 4,621,74842

43

(10) CommitmentsAt December 31, 2008, the District’s obligation under the uncompleted portion of contracts for plant facilities and equipment for the Water Department amounted to approximately $3,600,000, which will be financed through operations. For the Gas Department, such obligations at December 31, 2008 amounted to approximately $208,000, which will be financed through operations.The majority of gas supply contracts expired March 31, 2008 and October 31, 2008 and are renewed on an annual basis. There is one contract that represents 14 percent of the District’s annual gas requirements, which is subject to market price indices and expires October 31, 2010.The District entered into a 20-year gas purchase agreement with the Central Plains Energy Project (CPEP). CPEP is a public body created under Nebraska Interlocal Law for the purpose of securing long-term, economical, and reliable gas supplies. CPEP currently has three members: Metropolitan Utilities District, Cedar Falls Utilities, and Hastings Utilities. This 20-year gas purchase represents 15 percent of the District’s annual gas requirements, and the term of the gas purchase is from January 1, 2007 to October 31, 2026 and is priced at a discount to monthly market indices.

(11) ContingenciesThe District is subject to legal proceedings and claims that arise in the ordinary course of business. Management believes, based on the opinion of legal counsel, the amount of ultimate liability with respect to these actions is adequately covered by the District’s accrued liabilities for self insured risks.

(12) Deferred ChargesWater DepartmentIncluded in the Water Department’s deferred charges at December 31, 2008 and 2007 is $777,959 and $852,389, respectively, related to the unamortized costs of a 1994 study and design related to the Platte West Water Production Facility. Such costs have been deferred and are being amortized over a 25-year period. Also included in deferred charges are unamortized bond issue costs of $1,425,838 and $1,489,411 in 2008 and 2007, respectively.

Required Supplementary Information Schedules of Funding Progress (unaudited)

Schedule of Funding Progress — PensionDollar amounts in thousands

ActuarialValuation Date


(a)

Actuarial Accrued

Liability (AAL) Entry Age

(b)

UnfundedAAL (UAAL)

(b-a)

Funded Ratio (a/b)

Covered Payroll

(c)

UAAL as a Percentage of Covered

Payroll ([b-a]/c)

12/31/08 $ 235,349 $ 277,524* $ 42,175 85% $ 46,428 91%12/31/07 245,760 262,627* 16,867 94 43,105 3912/31/06 234,707 241,172 6,465 97 40,945 1612/31/05 224,761 212,358 (12,403) 106 38,707 (32)12/31/04 216,655 203,356 (13,299) 107 38,257 (35)12/31/03 208,282 194,491 (13,791) 107 36,757 (38)

* 2007’s and 2008’s actuarial valuations include benefit changes that went into effect in 2006.

Schedule of Funding Progress — OPEB (unaudited)

Actuarial Valuation Date


(a)

Actuarial Liability (AL)

(b)

UnfundedAL (UAL)

(b-a)

Funded Ratio (a/b)

Covered Payroll

(c)

UAL as a Percentage of Covered

Payroll ([b-a]/c)

1/1/08 $ — $ 160,494 $ 160,494 —% $ 46,428 346%1/1/09**

** Actuarial review is completed every other year.

Mark W. Weiss, 2004Senior Vice-President, CIO

Daniel G. Crouchley, 1983Senior Vice-PresidentGeneral Counsel

Thomas A. Wurtz, 1980President and Secretary

Ronald E. Bucher, 1992Senior Vice-President Administration and Treasurer

Scott L. Keep, 1980Senior Vice-President Operations

From left: Weiss, Crouchley, Wurtz, Bucher, Keep

John Hemschemeyer, 1991Human Resources

Joel G. Christensen, 1975Water Operations

Ronald K. Reisner, 1981Engineering and Construction

James J. Knight, 1990Gas Operations

Lisa R. Hale, 1989Customer Services

From left: Hemschemeyer, Christensen, Reisner, Knight, Hale

Rhonda S. Chantry, 1983Rates and Regulatory Affairs

Kenneth M. McNary, 1983Internal Auditing

Roger A. Burmeister, 1974Accounting

Douglas R. Clark, 2002Governmental Affairs and Marketing

James B. Goodwin, 1995Purchasing

From left: Chantry, McNary, Burmeister, Clark, Goodwin

2008 Officers

44

focused

1723 Harney StOmaha NE 68102mudomaha.com402.504.7169

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