This discussion and analysis is provided as an overall review of significant OCSD operational activities for the fiscal year ended June 30, 2004.  Information presented in conjunction with financial statements should provide a better understanding of the year’s accomplishments.

Overview
OCSD was established by Oldham County Fiscal Court Ordinance No. 96-830-26 in December 1996 as empowered by KRS 67.083 et. seq. and KRS 220.140 as a countywide sewer district to construct, acquire, operate and maintain sewers.  The purpose of OCSD is to provide more comprehensive solutions for wastewater service in Oldham County.  It is intended that OCSD facilitate sanitary sewer service where needed or requested within a planned and regional context to benefit the customer, community and environment.  OCSD mission and goals are as follows. 

• Develop wastewater management program to provide public sewer service.
• Acquire privately owned package sewage treatment plants. 
• Construct regional wastewater treatment facilities to improve water quality. 
• Establish and maintain fair and equitable charges for sewer service.

Future wastewater collection, conveyance and treatment facility projects will be reviewed by OCSD for conformance to regionalization objectives.  Efforts to complete regional systems are underway in areas where OCSD owns the wastewater facilities.

 System Acquisitions
OCSD borrowed $4,000,000 from the Kentucky Association of Counties Leasing Trust program to purchase privately owned sewage treatment plants and make much needed repairs to the facilities. A total of $3,000,700 has been spent to acquire private sewer utility companies with approximately 4,800 customers.  Twelve sewage treatment plants have been acquired by OCSD in the last four years.  OCSD has spent over $800,000 on repairs and maintenance of the wastewater systems.  The following table provides a summary of the private sewer utility acquisition program.

Capital Improvements
In 2002 OCSD completed a five year, $3.7 million capital construction program in the Buckner area.  This program provided sewers to serve the John Black Community Center and Oldham County Business Park, eliminated 5 sewage treatment plants and constructed the first phase of a regional wastewater treatment facility.  A $3.0 million grant was used to fund a substantial portion of the project cost.

OCSD initiated a $1,960,000 project in 2003 to provide sewers in Buckner and Kamer Place subdivision.  Another $500,000 project was initiated in 2003 to construct a pump station and force main necessary to eliminate the Heather Hill sewage treatment plant.  Other capital improvements in the Buckner area within the next five years is an $112,200 project to eliminate the Mockingbird Valley sewage treatment plant and $6,402,500 project to expand the Buckner wastewater treatment plant to a capacity of 1 million gallons per day.

For the Goshen area construction of a regional wastewater treatment facility near the Ohio River has the highest priority.  A regional wastewater treatment facility in this area allows elimination of all smaller treatment plants.  In June 2003 the OCSD Board approved the Ohio River sub-regional wastewater treatment facility and Trails End plant elimination project estimated to cost $3,000,000.  An additional $1.5 million in capital improvements are planned for the Goshen area within the next five years.  The following table summarizes financial aspects of OCSD wastewater facility construction since 1997.

 Capital Expenditures

Operations
OCSD currently operates and maintains approximately 70 miles of sewer, 40 pumping stations and 13 wastewater treatment plants.  Total treatment plant capacity is approximately 1.8 million gallons per day.  Eight OCSD wastewater treatment plants have a design capacity of 100,000 gallons per day or more which represents about 86% of total plant capacity.  The three largest plants are Trails End, Ash Avenue and Orchard Grass having design capacities of 300,000 gallons per day with Trails End at 314,000 gpd.  Other OCSD treatment plants are Covered Bridge and Willow Creek (140,000 gpd), Buckner (135,000 gpd), Cardinal Harbour (110,000 gpd), Lakewood Valley (100,000 gpd), Heather Hill (70,000 gpd), Lockwood Estates and Country Village (60,000 gpd), Mockingbird Valley (40,000 gpd) and Green Valley (30,000 gpd).

Assets and Liabilities
As can be seen in the Audit Report, OCSD assets in cash and cash equivalents, accounts receivable, and other assets increased from $6,917,403 in 2003 to $7,868,604 in 2004.  OCSD total liabilities through June 30, 2004 are $4,478,516, an increase of $363,792 from the prior year.  The Audit Report indicates that most of OCSD liabilities consist of long term debt of $3,810,000 which is the balance of the loan with the Kentucky Association of Counties.

Revenues & Expenses
The financial integrity of OCSD changed dramatically during the past fiscal year.  In August 2003 the Kentucky State Supreme Court ruled in favor of OCSD with regard to regulation by the Public Service Commission.  As a result of this legal action, OCSD was able to establish a fair and equal sewer rate for the entire service area and secure adequate revenue to meet operating expenses. The OCSD budget for the fiscal year beginning July 1, 2004 and ending June 30, 2005 is $1,708,093.  For the previous fiscal year the annual OCSD budget was $1,259,349. OCSD budget and customer growth since 1997 are depicted below.

The Future

Over the next few years OCSD revenue is expected to increase to approximately $2.0 million.  This revenue increase is mainly due to customer growth from new housing connections and impact of private sewer utility acquisitions.  By January 2005 OCSD revenue should slightly exceed total annual expenses.  Reducing annual operation expense over the next several years is possible with elimination of the number of treatment plants being operated.  An OCSD revenue and expense projection is shown below.