Attachment A - Metro 2024 Annual Comp Financial Report_Final 3-30-2025.pdf

METRO WATER RECOVERY

STATE OF COLORADO

METROGRO Farm gets ready for Spring.

ANNUAL COMPREHENSIVE FINANCIAL REPORT

For the Years Ended December 31, 2024 and 2023

STATE OF COLORADO

ANNUAL COMPREHENSIVE FINANCIAL REPORT

FOR THE YEARS ENDED

DECEMBER 31, 2024 AND 2023

PREPARED BY:

ADMINISTRATIVE SERVICES DEPARTMENT

Metro’s service area map

Metro Water Recovery

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Table of Contents

Page

Table of Contents .............................................................................................................................. i

I. INTRODUCTORY SECTION

Letter of Transmittal

GFOA Certificate of Achievement

Metro Officials

Organization Chart

II. FINANCIAL SECTION

Independent Auditors’ Report

Management’s Discussion and Analysis (Unaudited)

Basic Financial Statements

Statements of Net Position

Statements of Revenue, Expenses, and Changes in Net Position

Statements of Cash Flows

Statements of Fiduciary Net Position

Statements of Changes in Fiduciary Net Position

Notes to Basic Financial Statements

Required Supplementary Information

Schedule of Changes in Net Pension Liability and Related Ratios

Schedule of Employer Contributions

Schedule of Changes in Total OPEB Liability and Related Ratios

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Table of Contents Continued

Page

Supplementary Information

Combining Statement of Net Position – Fiduciary Funds December 31, 2024 and December 31, 2023

Combining Statement of Changes in Net Position – Fiduciary Funds December 31, 2024 and December 31, 2023

Schedules

Schedule of Revenue and Expenses – Budget and Actual – Year ended December 31, 2024

Schedule of Operating Expenses – Budget and Actual – Year ended December 31, 2024

III. STATISTICAL SECTION

Statistical Section Index

Net Position by Component (Last Ten Fiscal Years)

Changes in Net Position (Last Ten Fiscal Years)

Annual Revenues by Source (Last Ten Fiscal Years)

Annual Expenses by Type (Last Ten Fiscal Years)

Non-operating Revenues and Expenses (Last Ten Fiscal Years)

Wastewater Treated (Last Ten Fiscal Years)

Annual Sewer Connections (Last Ten Fiscal Years)

Number of Sewer Customers by Type (Last Ten Fiscal Years)

Ten Largest Customers (Current Year and Nine Years Ago)

Pledged Revenue Coverage (Last Ten Fiscal Years)

Ratios of Outstanding Debt (Last Ten Fiscal Years)

Demographic and Economic Statistics (Last Ten Calendar Years)

Ten Largest Employers (Current Year and Nine Years Ago)

Number of Employees by Activity (Last Ten Fiscal Years)

Operating Indicators by Function/Program (Last Ten Fiscal Years)

I. INTRODUCTORY SECTION

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William J. (Mickey) Conway, Chief Executive Officer

March 28, 2025

To the Board of Directors and Citizens of Metro Water Recovery:

The Annual Comprehensive Financial Report (Annual Report) of Metro Water Recovery (Metro) for the fiscal years ended December 31, 2024 and 2023 is hereby submitted. Responsibility for both the accuracy of the data and the completeness and fairness of the presentation, including all disclosures, rests with Metro management. To the best of our knowledge and belief, the enclosed data are accurate in all material respects and are reported in a manner designed to present fairly the financial position and results of operations of Metro’s two reporting funds--the Enterprise Fund and the Fiduciary Fund. All disclosures necessary to allow the reader to gain an understanding of Metro’s financial activities have been included. For a detailed analysis of Metro’s financial information, please refer to the Management’s Discussion and Analysis in the Financial Section, which provides an overview and analysis of the financial activities for the years ended December 31, 2024 and 2023 beginning on page 15.

Metro has included, in the accompanying financial statements, all funds controlled by Metro’s Board of Directors in conformance with the Governmental Accounting Standards Board standards. Control is determined on the basis of budget adoption, appropriating authority, and managerial direction by Metro’s Board. The reporting entity and fund types are described in detail in Note 1 to the financial statements. Metro itself is an Enterprise Fund for accounting purposes, although its budget and account records are segregated into several different activity funds per mandates in bond covenant requirements. The Fiduciary Fund, which reports the Defined Benefit Retirement Plan and a variety of Defined Contribution Retirement Plans, is included in the Annual Comprehensive Financial Report as members of the Defined Benefit Plan Retirement Board and the Defined Contribution Plan Retirement Board are appointed by Metro’s Board.

Metro, a political entity authorized by the State of Colorado, was organized on May 15, 1961 for the purpose of constructing and operating a wastewater transmission and disposal system in the greater Denver metropolitan area. Metro’s 50 municipal and special district members (Member Municipalities and Special Connectors) collect wastewater and deliver it to Metro’s interceptor lines. Metro also receives flow from 15 Indirect Connectors through Member Municipalities and Special Connectors. Metro treats an average of 137 million gallons per day (mgd) of wastewater for the Member Municipalities and Special Connectors at its Robert W. Hite Treatment Facility (RWHTF) and the Northern Treatment Plant (NTP). Most of Metro’s biosolids are land applied as a soil amendment on more than 300 permitted sites, including Metro’s 52,000 acre METROGRO Farm.

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Metro’s service area totals approximately 817 square miles, located in all or part of six counties:

Adams, Arapahoe, Denver, Douglas, Jefferson, and Weld. In 2024, the six-county area had an estimated total population of 3.2 million of which Metro estimates it serves an approximate population of 2.2 million.

ECONOMIC CONDITION AND OUTLOOK

Metro is located in the largest metropolitan area in the State of Colorado. Metropolitan Denver (Metro Denver) is composed of Adams, Arapahoe, Boulder, Broomfield, Denver, Douglas, and Jefferson counties. The economic region has experienced significant population and economic growth in the past ten plus years. Economic indicators as of December 2024 expects Metro Denver to continue with positive growth. Colorado and the Metro Denver area continue to see growth in the labor market and expect the unemployment rate to remain moderately low around 4% in the near term. Colorado consumer habits continue to shift to services and tend to be a bit more reactive to economic conditions compared to the national average. Inflation has been one major disruption to the economy in 2022 and 2023. Prices have stabilized in the second half of 2024 and Colorado CPI is expected to remain stable in near term.

Metro experienced the impacts from the inflationary economic cycle in 2023. Metro saw large increases in prices for materials and fuels, chemicals, and utilities and significant escalation of capital project costs. Local unemployment rates remain low, which has led to labor shortages accompanied by higher-than-average turnover rates. In the operating budget for 2024, salaries savings from vacant positions are somewhat helping to offset higher prices in other categories.

Metro’s 2024 expenses in total were less than the 2024 Revised Budget due to the stabilization of prices in the second half of 2024, as well as a variety of continued optimization strategies for operations.

Sewer Connection Charge revenue remained stable in 2024. Growth in Metro Denver construction continued at the same pace in 2024 as it did in 2023, though state-wide housing starts are down in relation to prior years. This is primarily due to the higher interest rates.

Economists forecast that housing starts will be on the rise year over year starting in 2026. Metro will continue to budget relatively conservatively for these revenues.

Metro continues to track a variety of economic conditions which may affect future operations and budget projections. Metro continues to experience a mildly higher-than-average turnover of employment and wages and benefits are increasing at a rate higher than has been experienced in quite some time. Metro is also watching prices of chemicals, utilities, and maintenance contracts as supply chain and inflationary pressures continue through the region.

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MAJOR INITIATIVES

Strategic Planning Metro’s Board of Directors adopted the updated Strategic Plan in the spring of 2023 to enhance its value to the organization and provide strategic guidance for the future. This update is focused on organizational values and strategic pillars that will guide Metro’s work in the next several years.

Led by employees from start to finish, the updated strategic plan now has a grand total of four values, which are:

• Excellence: Continuously improving ourselves and our organization.

• Inclusion: Fostering an environment where all are welcome, valued, and respected.

• Collaboration: Sharing expertise, building partnerships, and innovating together to achieve our mission.

• Integrity: Doing the right thing for the environment, our organization, and our people.

The Strategic Plan was also streamlined to include key components rather than tactics. The plan outlines three pillars—Our People, Our Work, and Our Communities—with two focus areas within each pillar.

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Metro identified key results that could be achieved within each of its pillars and focus areas. Each year, Metro will select projects that align with focus areas and have the highest potential to positively impact and move the organization toward achieving its desired results. For 2025, several key projects have been identified to help achieve desired results, including the following:

• Conduct an inclusion audit of Metro Water Recovery’s current activities and develop a roadmap for future activities

• Asset Management Implementation

• NTP Process Modeling and Advanced Automation

• Energy and Greenhouse Gas Management Program

• Implement a Framework for the Organization of Employee-Driven Sustainability Practices

• External Engagement Framework Implementation

• Regional Water Reuse Feasibility Study

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Enterprise Asset Management:

Metro selected a new Enterprise Asset Management (EAM) software program during 2023, NEXGEN Asset Management. The new software will help facilitate routine processes for asset management, work order management, and materials management. Many departments at Metro use EAM software daily, including Maintenance, Purchasing, Resource Recovery and Reuse, Transmissions, and the Warehouse. Metro’s current system has been used since 1993. The current system does not adequately meet Metro’s business requirements and is not positioned to accommodate future needs without significant upgrades and reconfiguration. Metro’s transition to the new software is anticipated to take 18 months, with a scheduled go-live mid-year 2025.

Enterprise Resource Planning Software:

Metro began a process in 2024 to select and implement software to replace the current financial application system. Metro’s current system has been used since 1993. The current system does not adequately meet Metro’s business requirements and is not positioned to accommodate future needs without significant upgrades and reconfiguration. Newer software packages include best practices and modern technology and interfaces allowing for more flexibility and scalability of business processes. Replacing the current system provides an opportunity for Metro to:

• Analyze and improve process efficiency

• Increase access to data and reports to all users

• Increase productivity through integrated electronic forms and workflows to automate processes and eliminate unnecessary paper shuffling

• Reduce the number of systems used for financial processes

• Improve system security and accessibility

Metro’s transition to the new software is anticipated to take 12 months, with a scheduled go-live mid-year 2026.

FINANCIAL INFORMATION

Internal Control Metro management is responsible for establishing and maintaining internal controls to ensure Metro assets are protected from loss, theft, or misuse, and to ensure adequate accounting data are compiled to allow for the preparation of financial statements in conformity with accounting principles generally accepted in the United States. The internal controls are designed to provide reasonable, but not absolute, assurance these objectives are met. The concept of reasonable assurance recognizes (1) the cost of a control should not exceed the benefits likely to be derived and (2) the evaluation of costs and benefits requires estimates and judgments by management.

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Budgeting Controls Metro maintains strict budgetary controls to ensure compliance with legal provisions embodied in the various bond covenants and in the annual budget approved by Metro’s Board. Activities of the Operations and Maintenance Fund, as defined in bond covenants, are appropriated in the annual budget. Capital projects are appropriated individually from the Fixed Asset Replacement Fund, Acquisition and Construction Fund, or the General Fund, depending on the nature of the project. The level of budgetary control (the level at which expenditures cannot legally exceed the appropriated amount) is the fund total with a specific allocation for capital outlay for the Operations and Maintenance Fund. The individual project appropriation is the legal level of control for expenses incurred by the Fixed Asset Replacement Fund, Acquisition and Construction Fund, and the General Fund. All activities of Metro, other than the Fiduciary Fund activities, are reported in the Enterprise Fund in the enclosed financial statements in accordance with accounting principles generally accepted in the United States. Supplementary schedules display the budgetary comparison for 2024 as well as reconciliation between the budgetary format and that required by these generally accepted accounting principles. Management’s Discussion and Analysis in the Financial Section provides an overview and analysis of the financial activities of Metro for the years ended December 31, 2024 and 2023.

CAPITAL FINANCING POLICY

Prior to 1991, Metro typically issued bonds to finance its capital needs. In 1991, in an effort to reduce or defer long-term debt, Metro began progressively cash-financing capital projects. From 2002 until late 2009, all capital projects were financed with revenue from operations, primarily from Annual Charges for Service, Sewer Connection Charge fees, and existing reserves. When the Board made the change to cash financing, the Board acknowledged that during future periods when capital needs were high, Metro would use bond financing when appropriate. Metro issued 2009A&B Bonds in the amount of $250 million and in 2012 issued $380 million in bonds. The 2009 and 2012 bond issues provided Metro with an additional funding source for financing its NTP Program and South Secondary Improvements Project, which helped mitigate the need for higher annual rate increases to its Member Municipalities and Special Connectors.

Metro completed a tax-exempt bond issue in October 2020 to fund the construction of the Second Creek Interceptor project which is expected to be completed in 2024. Metro issued $146 million tax-exempt bonds at an all-in true interest cost of 2.34 percent with a repayment period of 25 years.

Metro is currently planning to expend over $1.3 billion through 2035 to rebuild aging facilities, pay for needed improvements due to increased regulations, and build additional infrastructure to address growth throughout its service area. At this time, Metro anticipates cash financing most of these improvements with a potential bond issue in 2026.

INDEPENDENT AUDIT

The Bylaws of Metro Water Recovery require an annual audit of the books of account, financial records, and transactions to be conducted by independent certified public accountants selected by the Board. The opinion of Metro’s independent auditor, Moss Adams LLP, on the financial statements is included in this report.

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AWARDS

Government Finance Officers Association of the United States and Canada (GFOA) awarded a Certificate of Achievement for Excellence in Financial Reporting to Metro Water Recovery for its annual comprehensive financial report for the fiscal year ended December 31, 2023. This was the 36th consecutive year (1987-2023) that the government has achieved this prestigious award.

In order to be awarded a Certificate of Achievement, a government must publish an easily readable and efficiently organized Annual Comprehensive Financial Report. This report must satisfy both generally accepted accounting principles and applicable legal requirements.

A Certificate of Achievement is valid for a period of one year only. We believe that our current annual comprehensive financial report continues to meet the Certificate of Achievement Program's requirements and we are submitting it to GFOA to determine its eligibility for another certificate. In order to be awarded a Certificate of Achievement, a government unit must publish an easily readable and efficiently organized Annual Comprehensive Financial Report whose contents conform to program standards.

ACKNOWLEDGMENTS

The preparation of the Annual Comprehensive Financial Report on a timely basis was made possible by the dedicated service of the Accounting Division. Each member of the Division extends their sincere appreciation for the contributions made in the preparation of this report.

In closing, without the leadership and support of the Board of Directors, preparation of this report would not have been possible.

Respectfully submitted, Annual Comprehensive Financial Report 8 | P a g e

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METRO OFFICIALS

BOARD OF DIRECTORS

Officers of the Board

Sarah Niyork : Chair

Marena Lertch : Chair Pro Tem

Janet Kieler : Treasurer

Delbert Smith : Secretary

Members of the Board

Curt Aldstadt Mike Barrett Cody Berg Clint Blackhurst Travis Bogan Nadine Caldwell John Chavez David Councilman Deborah Crisp G. Clark Davenport James DeHerrera Joe Drew

Mary Gearhart Joan Iler Andrew Johnston Craig Kocian Laura Kroeger Bob LeGare Martin Majors Geroge Mazzotti, Jr Jamie Miller Charlie Miller Cat Olukotun

Josh Redman Thomas Roode Robert Roth Greg Sekera Peter Spanberger Mary Beth Susman Dennis Towndrow Scott Twombly Don Wick Jennifer Williams Ronald Younger

Staff Officials

William J. Conway Chief Executive Officer Emily E. Jackson Chief Legal Officer Liam M. Cavanaugh Deputy CEO and Chief Operating Officer Dawn M. Ambrosio Chief Strategy Officer Colleen M. Dempsey Chief Human Resources Officer Molly M. Kostelecky Chief Financial Officer Sherman Papke Chief Technical Officer Tanja Rauch-Willians Chief Innovation Officer Martin J. Alvis Director of Operations Kimberly N. Cowan Director of NTP Operations and Maintenance Shawn M. Fredrickson Director of Information Technology Daniel Freedman Director of Technology and Innovation Perry J. Holland Director of Comprehensive Planning Andrew J. Nelson Director of Engineering Jennifer T. Robinett Director of Environmental Services Patrick J. Stanley Director of Resource Recovery and Reuse Orren E. West Director of Maintenance

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Maintenance 71 Northern Treatment Plant 30 Operations 41 Resource Recovery and Reuse 68 Administrative Services 30 Comprehensive Planning 5 Engineering 48 Environmental Services 72 Human Resources 14 Information Technology 29 Office of the CEO 9 Legal 3 Strategy and Communication 15 Technology and Innovation 19

Total 454

Employees by Department at 12/31/2024

II. FINANCIAL SECTION

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Report of Independent Auditors

The Board of Directors Metro Water Recovery

Report on the Audit of the Financial Statements

Opinions

We have audited the statements of net position of the enterprise fund and fiduciary net position of the pension trust fund as of December 31, 2024 and 2023, and the related statements of revenue, expenses and changes in net position, and cash flows of the enterprise fund, and changes in fiduciary net position of the pension trust fund of Metro Water Recovery (Metro) as of and for the years ended December 31, 2024 and 2023, and the related notes to the financial statements, which collectively comprise Metro’s basic financial statements as listed in the table of contents.

In our opinion, the accompanying financial statements referred to above present fairly, in all material respects, the respective financial position of Metro’s enterprise fund and pension trust fund as of December 31, 2024 and 2023, and the respective changes in financial position and, where applicable, cash flows thereof for the years then ended in accordance with accounting principles generally accepted in the United States of America.

Basis for Opinions

We conducted our audits in accordance with auditing standards generally accepted in the United States of America (GAAS) and the standards applicable to financial audits contained in Government Auditing Standards (Government Auditing Standards), issued by the Comptroller General of the United States. Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Statements section of our report. We are required to be independent of Metro and to meet our other ethical responsibilities, in accordance with the relevant ethical requirements relating to our audit. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions.

Responsibilities of Management for the Financial Statements

Management is responsible for the preparation and fair presentation of the financial statements in accordance with accounting principles generally accepted in the United States of America, and for the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the financial statements, management is required to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about Metro’s ability to continue as a going concern for twelve months beyond the financial statement date, including any currently known information that may raise substantial doubt shortly thereafter.

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Auditor’s Responsibilities for the Audit of the Financial Statements

Our objective is to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinions. Reasonable assurance is a high level of assurance but is not absolute assurance and therefore is not a guarantee that an audit conducted in accordance with GAAS and Government Auditing Standards will always detect a material misstatement when it exists. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

Misstatements are considered material if there is a substantial likelihood that, individually or in the aggregate, they would influence the judgment made by a reasonable user based on the financial statements.

In performing an audit in accordance with GAAS and Government Auditing Standards, we

• Exercise professional judgment and maintain professional skepticism throughout the audit.

• Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, and design and perform audit procedures responsive to those risks. Such procedures include examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.

• Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of Metro’s internal control. Accordingly, no such opinion is expressed.

• Evaluate the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluate the overall presentation of the financial statements.

• Conclude whether, in our judgment, there are conditions or events, considered in the aggregate, that raise substantial doubt about Metro’s ability to continue as a going concern for a reasonable period of time.

We are required to communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit, significant audit findings, and certain internal control–related matters that we identified during the audit.

Required Supplementary Information

Accounting principles generally accepted in the United States of America require that the Management’s Discussion and Analysis, Schedules of Changes in Net Pension Liability and Related Ratios, Schedule of Employer Contributions, and Schedule of Changes in Total OPEB Liability and Related Ratios, as listed in the table of contents, be presented to supplement the basic financial statements. Such information is the responsibility of management and, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board, who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context.

We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management's responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance.

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Supplementary Information

Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise Metro's basic financial statements. The Combining Statement of Net Position – Fiduciary Funds and Combining Statement of Changes in Net Position – Fiduciary Funds are presented for purposes of additional analysis and are not a required part of the basic financial statements. Such information is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the basic financial statements. The information has been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the supplementary information is fairly stated, in all material respects, in relation to the basic financial statements as a whole.

Other Information

Management is responsible for the other information included in the annual report. The other information comprises the Schedules of Revenue and Expenses – Budget and Actual, Schedules of Operating Expenses – Budget and Actual, Introductory section, and Statistical section, but does not include the basic financial statements and our auditor’s report thereon. Our opinions on the basic financial statements do not cover the other information, and we do not express an opinion or any form of assurance thereon.

In connection with our audit of the basic financial statements, our responsibility is to read the other information and consider whether a material inconsistency exists between the other information and the basic financial statements, or the other information otherwise appears to be materially misstated. If, based on the work performed, we conclude that an uncorrected material misstatement of the other information exists, we are required to describe it in our report.

Other Reporting Required by Government Auditing Standards

In accordance with Government Auditing Standards, we have also issued our report dated March 28, 2025, on our consideration of Metro'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 solely 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 effectiveness of Metro's internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering Metro's internal control over financial reporting and compliance.

Denver, Colorado March 28, 2025

Management’s Discussion and Analysis

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As management of Metro Water Recovery (Metro), we offer readers of Metro’s financial statements this narrative overview and analysis of the financial activities of Metro for the years ended December 31, 2024 and 2023. This discussion and analysis is presented for Metro’s primary operations.

Financial Highlights

• Metro’s net position of $1,139 million at December 31, 2024 increased during 2024 by $34 million or approximately 3.1%.

• Annual charge revenue increased $10 million, or 7.0%, totaling $155 million in 2024 due to the increase in annual charge rate of 7.0%.

• Total operating expenses increased $4.7 million in 2024 due primarily to stabilization of costs and a reduction of inflation during 2024.

Overview of the Financial Statements

This discussion and analysis is intended to serve as an introduction to Metro’s basic financial statements. Metro’s financial statements are comprised of four components: 1) management’s discussion and analysis, 2) the financial statements, 3) notes to the financial statements that explain in more detail some of the information in the financial statements, and 4) Required Supplementary Information and Other Schedules.

Required Financial Statements

The financial statements of Metro report information using accounting methods similar to those used by private sector companies. These statements provide both long-term and short-term information about Metro’s overall financial status.

The statements of net position present information on all of Metro’s assets, deferred outflows of resources, liabilities, and deferred inflows of resources, with the difference between the categories reported as net position.

These statements provide information about the nature and the amounts of investments in resources and the obligations to Metro’s creditors. They provide one way to measure the financial health of Metro by providing the basis for evaluating the capital structure of Metro and assessing the liquidity and financial flexibility of Metro. One will also need to consider other nonfinancial factors, such as changes in economic conditions, population, and industrial/commercial customer growth, and new or changed government legislation.

Each year’s revenue and expenses are accounted for in the statements of revenue, expenses, and changes in net position. These statements measure operations over the year and can be used to determine whether Metro has recovered all of its costs through its user fees and other charges.

The statement of cash flows report cash receipts, cash payments, and net changes in cash resulting from operating, investing, capital financing, and noncapital financing activities. This statement provide answers to such questions as, where did cash come from, what was cash used for, and what was the change in the cash balance during the reporting period.

Two financial statements are presented for the fiduciary fund. The statements of fiduciary net position present assets held in trust for pension benefits at a given point in time, net of accrued liabilities of the pension trust fund. The statements of changes in fiduciary net position indicate the additions and deductions to the pension trust fund net position during the specified periods. The pension trust fund includes both the Defined Benefit Retirement Plan and the Defined Contribution Plan for Metro.

Management’s Discussion and Analysis

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Financial Analysis of Metro’s Operations

As previously noted, net position may serve over time as a useful indicator of an entity’s financial position. In the case of Metro Water Recovery, assets plus deferred outflows of resources, exceeded liabilities plus deferred inflows of resources by $1,139 million at December 31, 2024 and $1,105 million at December 31, 2023.

Unrestricted non-capital assets totaled approximately $326 million and $355 million at year-end 2024 and 2023, respectively. These balances primarily represent unrestricted cash, cash equivalents, investments, and accounts receivable from connectors. Restricted assets totaled $40 million and $69 million at year-end 2024 and 2023, respectively. These restricted assets represent cash, cash equivalents, and investments restricted by bond covenants required to be used for debt-funded capital projects and future debt service payments. Capital assets totaled $1,427 million and $1,363 million at year-end 2024 and 2023, respectively. These assets include investments in wastewater plant, including pipelines and buildings, machinery, equipment, vehicles and right-to-use assets.

Current liabilities totaled approximately $77 million and $69 million at year-end 2024 and 2023, respectively. The balances include accounts payables, accrued payroll and related benefits to employees, accrued interest payable on outstanding bonded debt, and the current portion of long-term debt. Noncurrent liabilities totaled approximately $578 million and $616 million at year-end 2024 and 2023, respectively. The balances represent the noncurrent principal amounts of outstanding bond issues, the noncurrent portion of compensated absences, the net pension liability and other postemployment healthcare benefits liability.

As can be seen in the following Table A-l, net investment in capital assets is the largest portion of Metro’s net position (75.2%) in 2024 and (70.2%) in 2023, and reflect its investment in capital assets (e.g., sewers, buildings, machinery, and equipment) less related debt. Net investment in capital assets totaled $857 million and $775 million at year-end 2024 and 2023, respectively. The net increase as of December 31, 2024, of $82 million over 2023 is primarily due to a $65 million net increase in capital assets combined with a decrease in outstanding capital-related borrowings. Metro uses these assets to provide wholesale wastewater transmission and treatment for approximately 715 square miles of the Denver metropolitan area and serves approximately 2.2 million people. As Metro uses these capital assets in its operations, they are not available for future spending. Although Metro’s investment in its capital assets is reported net of related debt, it should be noted that the resources to repay this debt must be provided from other sources, since the capital assets themselves are not intended to be used to liquidate these liabilities.

Restricted net position is restricted for current debt service payments, debt service reserve, and includes unspent debt proceeds as required by debt covenants and represent the excess of assets restricted for debt service payments over the accrued interest liability. These totaled approximately $35 million and $62 million at year-end 2024 and 2023, respectively. Board of Directors designated amount includes funds specifically designated by Board actions for a specific purpose. These totaled approximately $62 million and $56 million at year-end 2024 and 2023, respectively. Unrestricted net position comprises the remainder of the balance. This net position may be used for any purpose. Unrestricted net position totaled approximately $185 million and $211 million at year-end 2024 and 2023, respectively.

Management’s Discussion and Analysis

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Table A-1 Condensed Summary of Net Position

(In thousands) December 31, 2024 2023 as restated 2022 as restated Unrestricted assets $ 325,711 $ 354,634 $ 321,272 Restricted assets 40,468 68,584 91,876 Capital assets, net 1,427,449 1,362,513 1,344,422

Total assets 1,793,628 1,785,731 1,757,570 Deferred outflows of resources 6,695 10,999 15,953 Current liabilities 76,809 68,866 71,426 Noncurrent liabilities 578,216 616,157 654,168

Total liabilities 655,025 685,023 725,594 Deferred inflows of resources 6,308 6,987 5,600

Net investment in capital assets 856,559 775,237 752,324 Restricted - bonds 35,842 62,461 60,847 Designated - board of directors 61,912 56,066 53,375 Unrestricted, as restated 184,677 210,956 175,783

Total net position $ 1,138,990 $ 1,104,720 $ 1,042,329

The primary variances between 2024, 2023, and 2022 in Summary of Net Position are related to capital assets, restricted assets, and noncurrent liabilities. Net capital assets increased by $64 million and $18 million during 2024 and 2023, respectively, due primarily to additions in construction in progress and completion of projects. Restricted assets decreased by $28 million during 2024 and $23 million during 2023 due primarily to the spend down of bond proceeds from 2020. Noncurrent liabilities decreased by $38 million in 2024 and $39 million during 2023 due primarily to the principal payments on outstanding bonds. For further information, please see the capital assets and debt administration discussion on pages 19 – 20.

As can be seen in the following Table A-2, net position increased $34 million to $1,139 million in 2024 and $62 million to $1,105 million, as restated, in 2023. The increase in net position in 2024 was primarily due to receiving $57 million in sewer connection fees reduced by loss before sewer connection fees of $23 million. The increase in net position in 2023 was primarily due to receiving $103 million in sewer connection fees reduced by loss before sewer connection fees of $40 million.

During 2024, Metro implemented GASB Statement No. 101, Compensated Absences, to enhance information in the financial statement by updating the recognition and measurement guidance for compensated absences. Metro adopted the provisions of GASB 101 effective January 1, 2023, resulting in restatement of financial results for the year ended December 31, 2023. For further information, please see the notes to the financial statements.

Management’s Discussion and Analysis

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Table A-2 Summary of Revenue, Expenses, and Changes in Net Position (In thousands) for the year ended December 31, 2024 2023 as restated 2022 as restated Annual charges to connectors $ 155,211 $ 145,057 $ 138,150 Land application revenue 125 177 95 Other operating revenue 7,923 4,213 2,773

Total operating revenue 163,259 149,447 141,018

Investment revenue (expense) 14,353 16,816 (8,648) Intergovernmental revenue 1,795 1,804 1,795 Other revenue 5,661 3,712 1,859

Total revenue 185,068 171,779 136,024

Operations and maintenance expenses 57,267 53,886 50,500 Technical management and support 26,581 27,341 25,210 Administrative and general 39,112 33,360 28,666 Depreciation and amortization 65,686 69,307 62,932

Total operating expenses 188,646 183,894 167,308

Interest expense 17,229 17,740 18,448 Studies expense 2,713 9,902 1,823

Total nonoperating expenses 19,942 27,642 20,271

Total expenses 208,588 211,536 187,579 (Loss) before capital contributions (23,520) (39,757) (51,555)

Capital contributon - sewer connection fees 57,790 103,411 81,668

Increase in net position 34,270 63,654 30,113

Net position, beginning of year, as previously reported 1,041,066 1,042,329 1,012,216

Change in accounting principle — (1,263) —

Net position, beginning of year, as restated 1,104,720 1,041,066 1,012,216 Ending net position $ 1,138,990 $ 1,104,720 $ 1,042,329

Management’s Discussion and Analysis

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While the summary of net position (Table A-1) shows the change in financial position, the summary of revenue, expenses, and changes in net position (Table A-2) provides answers as to the nature and source of these changes.

As can be seen in Table A-2, total revenue for 2024 including sewer connection fees decreased by approximately $32 million or 11.7%, and total expenses decreased by approximately $3 million or 1.9% from 2023. The major factors that drove these results and other changes during 2024 include:

• Operating revenue increased by $13.8 million in 2024 primarily due to the increase in Annual Charges revenue, which had an overall rate increase of 7.0% from 2023.

• Sewer connection fees decreased approximately $46 million, or 44.1%, totaling $58 million in 2024. During 2023, Metro received the full buy-in payments for existing connections from a Connector in the amount of $46,597,324. This payment amounted to almost half of the sewer connection revenue in 2023.

• The $3 million decrease in total expenses included a small increase in operating expenses of $4 million netted against a decrease of $7 million in nonoperating expenses. Operating costs in 2024 appear to have stabilized in relation to the significant increases in costs due to inflationary factors in 2022 and 2023.

In Table A-2, total revenue for 2023 including sewer connection fees increased by approximately $56 million or 25.8%, and total expenses increased by approximately $21 million or 11.3% from 2022. The major factors that drove these results and other changes during 2023 include:

• Operating revenue increased by $8.4 million in 2023 primarily due to the increase in Annual Charges revenue, which had an overall rate increase of 5.0% from 2022.

• Sewer connection fees increased approximately $22 million, or 26.6%, totaling $103 million in 2023 due primarily to the final buy-in payment from a Connector.

• Investment revenue increased by $25 million in 2023, primarily due to unrealized gains on investments resulting from the significant increase in bond values.

• The $21 million increase in total expenses included an increase of $15 million in operating costs, primarily due to significant increases in costs due to inflationary factors in 2022 and 2023, and an additional increase of $6 million in other nonoperating expenses.

Capital Assets and Debt Administration

Capital Assets

As of December 31, 2024 and 2023, Metro’s investment in capital assets amounted to $1.428 billion and $1.362 billion, respectively (net of accumulated depreciation), as shown in the following Table A-3. The $66 million increase in net capital assets in 2024 was primarily due to approximately $137 million in additions to construction in progress for various ongoing wastewater and improvement and rehabilitation projects offset by completed projects placed in service of $196 million and by $65 million of depreciation expense.

The following projects incurred such costs for 2024: Electrical Transmission Service Substation - $32 million, Peracetic Acid Disinfection System - $13 million, Lift Station - $12 million, and North Secondary Upgrades – $10 million. The remaining additions of $19 million to construction in progress was a result of other additions to numerous smaller projects.

The $18 million increase in net capital assets in 2023 was primarily due to approximately $93 million in additions to construction in progress for various ongoing wastewater and improvement and rehabilitation projects offset by completed projects placed in service and offset by $69 million of depreciation expense.

Management’s Discussion and Analysis

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The following projects incurred such costs for 2023: Sand Creek and Second Creek Basins - $29 million, Interceptor Rehabilitation – $9 million, Lift Station - $12 million, and Sludge Processing Building – $11 million. The remaining increase of $32 million to construction in progress was a result of other additions to numerous smaller projects.

Construction in progress decreased by $70 million in 2024. The $137 million in additions to construction in progress in 2024 discussed above, was offset by $196 million in completed projects, such as the Second Creek Interceptor and the NTP Primary Clarifier Cover Replacement, which were transferred to plant and equipment. Construction in progress decreased by $24 million in 2023. The $93 million in additions to construction in progress in 2023 discussed above, was offset by $108 million in completed projects, such as the Solids Processing Building Improvements and progress completion of Interceptor Rehabilitation, which were transferred to plant and equipment.

The increase in capital assets in 2024 and 2023 was offset by capital asset disposals of $1 million and $36 million, respectively.

Table A-3

Capital Assets

(In thousands)

2024 2023 2022 as restated

Land, land improvements and water rights $ 52,271 $ 46,952 $ 46,879 Plant in service 1,226,184 1,041,214 1,000,706 Vehicles and equipment 750,155 742,564 709,008 Construction in progress 164,303 234,243 258,194 Right-to-use equipment 371 371 342 Right-to-use subscriptions 7,661 6,053 5,389

2,200,945 2,071,397 2,020,518

Less accumulated depreciation (773,496) (708,884) (676,096)

Net capital assets $ 1,427,449 $ 1,362,513 $ 1,344,422

In fiscal year 2023, Metro implemented GASB Statement No. 96, Subscription-Based Information Technology Arrangements (SBITAs). This statement requires recognition of certain subscription assets and liabilities for SBITAs that were previously classified as operating expenses. The statement was implemented effective January 1, 2022, resulting in a restatement of the financial results for the year ended December 31, 2022.

Debt Administration

At December 31, 2024 and 2023, Metro’s long-term debt consisted of approximately $549 million and $580 million in bonds payable, respectively. Metro’s underlying bond ratings are as follows:

Moody’s Investors Services Standard & Poor’s Aa1 AAA

Additional information on Metro’s capital assets and long-term debt can be found in notes 4, 5, and 6 to the financial statements.

Management’s Discussion and Analysis

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Fiduciary Fund

As of December 31, 2024 and 2023, the net position of the pension trust fund totaled $169 million and $151 million, respectively. The increase in fiduciary net position in 2024 was primarily due to net appreciation in the fair value of investments of $11 million and contributions netted against benefit payments. In 2024 and 2023, contributions to the pension trust fund amounted to $17 million and $15 million, respectively. The increase in contributions in 2024 was primarily due to the increase in required employer contributions.

Next Year’s Budgets and Rates

Metro approved a $143 million 2025 Operation and Maintenance Budget, an increase of $23 million from 2024.

The increase is primarily from budgeted wage increases and significant increases in employee benefit costs, as well as significant increases in materials and fuels, an increase in the amount and cost of treatment chemicals, an increase in outside services, an increase in insurance expenses, and a significant increase in utility costs. Metro also approved Annual Charges for Service totaling $171 million, a 10.0% increase from 2024. Annual Charges for Services are the annual user fees that Metro Connectors pay for the treatment of their wastewater and are allocated to individual connectors based on the relative amount and strength of their wastewater. Annual rates are set each year to cover the annual requirements of operating expenses, debt service, capital project expenditures, and fund balances.

Metro’s Capital Projects Budget for 2025 totals $121 million, a decrease of $11 million from the 2024 Capital Projects Budget of $132 million. These projects include rehabilitation, growth, and improvement projects in Metro’s system.

Requests for Information

This financial report is designed to provide a general overview of Metro Water Recovery’s finances for all those with an interest in Metro’s finances and to demonstrate Metro’s accountability for the money it receives. Questions concerning any of the information provided in this report or requests for additional financial information should be addressed to the attention of Molly Kostelecky, Chief Financial Officer, Metro Water Recovery, 6450 York Street, Denver, CO 80229 or www.metrowaterrecovery.com.

http://www.metrowaterrecovery.com/

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For the Years Ended December 31, 2024 and 2023

Basic Financial Statements

Statements of Net Position 2024 2023, as restated

Current assets:

Cash and cash equivalents $ 88,189,106 $ 139,556,041 Investments — 11,265,753 Accounts receivable 16,791,792 24,097,327 Due from other governments 1,346,542 448,848 Accrued interest receivable 1,400,033 1,342,420 Materials and supplies inventories, net of loss reserve of…