Leases Leases

12 Months Ended

Dec. 31, 2019

Leases

The adoption of the new lease guidance did not have a material impact on Registrant's results of operations or liquidity but resulted in the recognition of operating lease liabilities and operating lease right-of-use assets on its balance sheets. Right-of-use ("ROU") assets represent the right to use an underlying asset for the lease term, and lease liabilities represent the obligation to make lease payments arising from the lease. ROU assets and liabilities are recognized at the lease commencement date based on the estimated present value of lease payments over the lease term. As of December 31, 2019, Registrant has right-of-use assets of $13.2 million, short-term operating lease liabilities of $1.8 million and long-term operating lease liabilities of $11.7 million.

Significant assumptions and judgments made as part of the adoption of this new lease standard include determining (i) whether a contract contains a lease, (ii) whether a contract involves an identified asset, and (iii) which party to the contract

directs the use of the asset. The discount rates used to calculate the present value of lease payments were determined based on hypothetical borrowing rates available to Registrant over terms similar to the lease terms.

Registrant’s leases consist of real estate and equipment leases, which are mostly GSWC's. Most of Registrant's leases require fixed lease payments. Some real estate leases have escalation payments, which depend on an index. Variable lease costs were not material. Lease terms used to measure the lease liability include options to extend the lease if the option is reasonably certain to be exercised. Lease and non-lease components were combined to measure lease liabilities.

GSWC's long-term debt includes $28 million of 9.56% private placement notes, which require GSWC to maintain a total indebtedness to capitalization ratio of less than 0.6667 -to-1. The indebtedness, as defined in the note agreement, includes any lease liabilities required to be recorded under GAAP. As of December 31, 2019, GSWC had a total indebtedness (including GSWC's lease liabilities) to capitalization ratio of 0.4445 -to-1. None of the other covenants or restrictions contained in Registrant's long-term debt agreements were affected by the adoption of the new lease standard.

Registrant's supplemental lease information for the year ended December 31, 2019 is as follows (in thousands, except for weighted average data):



	For The Year Ended December 31, 2019

Operating lease costs	$	3,166
Short-term lease costs	159

Weighted average remaining lease term (in years)	7.24
Weighted-average discount rate	3.5		%

Non-cash transactions
Lease liabilities arising from obtaining right-of-use assets	$	18,034

During 2019 and 2018 and 2017, Registrant’s consolidated rent expense was approximately $2.8 million, $2.5 million and $2.4 million, respectively. Registrant’s future minimum payments under long-term non-cancelable operating leases are as follows (in thousands):



	December 31, 2019		December 31, 2018
2020	$	2,709	$	2,530
2021	2,533		1,497
2022	2,217		1,007
2023	1,779		546
2024	1,499		293
Thereafter	5,246		311
Total lease payments	15,983		$	6,184
Less: imputed interest	2,395
Total lease obligations	13,588
Less: current obligations	1,849
Long-term lease obligations	$	11,739

The increase in future minimum lease payments from December 31, 2018 to December 31, 2019 was largely due to new office leases entered into during 2019. The consolidated operations of AWR and the operations of GSWC in regard to the future minimum payments under long-term cancelable operating leases are not materially different.