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CAFR FY2018 KODIAK ISLAND BOROUGH Comprehensive Annual Financial Report Year Ended June 30, 2018 KODIAK ISLAND BOROUGH Comprehensive Annual Financial Report Year Ended June 30, 2018 Official Issuing Report Dora Cross Finance Director KODIAK ISLAND BOROUGH TABLE OF CONTENTS June 30, 2018 Page INTRODUCTORY SECTION: Letter of Transmittal 1-4 GFOA Certificate of Achievement 5 Organizational Chart 6 Elected Officials (Photographs) 7 Borough Officials 8 Map of Kodiak Island Borough 9 FINANCIAL SECTION: Independent Auditor’s Report 10-13 Management’s Discussion and Analysis 14-27 Basic Financial Statements: Government-wide Financial Statements: Statement of Net Position 28 Statement of Activities 29 Fund Financial Statements: Balance Sheet – Governmental Funds 30 Reconciliation of Net Position Between the Government-Wide and the Fund Financial Statements 31 Statement of Revenues, Expenditures, and Changes in Fund Balances (Deficits) – Governmental Funds 32 Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balances (Deficits) of Governmental Funds to the Statement of Activities 33 Statement of Net Position – Proprietary Funds – Business-Type Activities – Enterprise Funds 34 Statement of Revenues, Expenses, and Changes in Net Position – Proprietary Funds – Business-Type Activities – Enterprise Funds 35 Statement of Cash Flows – Proprietary Funds – Business-Type Activities – Enterprise Funds 36-37 Notes to Basic Financial Statements 38-83 Required Supplementary Information: Budgetary Comparison Schedule – General Fund 84-85 Budgetary Comparison Schedule – Special Revenue Fund – Education Support 86 Budgetary Comparison Schedule – Special Revenue Fund – Facilities 87 Notes to Required Supplementary Information – Budgetary Comparison Schedules 88 Schedule of Borough’s Proportionate Share of the Net Pension Liability – Public Employees’ Retirement System 89 Schedule of Borough’s Proportionate Share of the Net OPEB Liability – Public Employees’ Retirement System 90 Schedule of Borough’s Contributions (Pensions) – Public Employees’ Retirement System 91 Schedule of Borough’s Contributions (OPEB) – Public Employees’ Retirement System 92 KODIAK ISLAND BOROUGH TABLE OF CONTENTS, CONTINUED Page Additional Supplementary Information: Budgetary Comparison Schedule – Debt Service Fund – Education 93 Nonmajor Governmental Funds: Combining Balance Sheet 94 Combining Statement of Revenues, Expenditures, and Changes in Fund Balances 95 Nonmajor Special Revenue Funds: Combining Balance Sheet 96-97 Combining Statement of Revenues, Expenditures and Changes in Fund Balances (Deficit) 98-99 Schedule of Revenues, Expenditures, and Changes in Fund Balance (Deficit) – Budget and Actual: Fire and Road Service Areas: Fire: Fire Protection Area No. 1 100 Womens Bay Fire Department 101 Kodiak Airport Fire District 102 Road: Monashka Bay Road Service Area 103 Service Area No. 1 104 Womens Bay Road Service Area 105 Bay View Road Service Area 106 Service Area No. 2 107 L.E.P.C. 108 Land Sales 109 Buildings and Grounds 110 Woodland Acres Street Light Service Area 111 Trinity Islands Street Light Service Area 112 Tourism Development 113 Mission Lake Tide Gate 114 Nonmajor Capital Project Funds: Combining Balance Sheet 115 Combining Statement of Revenues, Expenditures and Changes in Fund Balances (Deficit) 116 Enterprise Funds: Schedule of Revenues, Expenses, and Changes in Net Position – Budget and Actual: Municipal Solid Waste Collection and Disposal 117 Hospital Facilities 118 Long Term Care Center 119 Kodiak Fisheries Research Center 120 911 Services Fund 121 (continued) KODIAK ISLAND BOROUGH TABLE OF CONTENTS, CONTINUED Supplementary Bond Schedules: Summary of Bonded Debt Service Requirements to Maturity 122 General Obligation Bond, 2011 Series One – Retirement Schedule 123 General Obligation Bond, 2012 Series A – Retirement Schedule 124 General Obligation Bond, 2012 Series B – Retirement Schedule 125 General Obligation Bond, 2013 Series One – Retirement Schedule 126 General Obligation Bond, 2014 Series One – Retirement Schedule 127 General Obligation Bond, 2015 Series Three – Retirement Schedule 128 General Obligation Bond, 2015 Series Three – Retirement Schedule 129 General Obligation Bond, 2016 Series One – Retirement Schedule 130 General Obligation Bond, 2016 Series One – Retirement Schedule 131 General Obligation Bond, 2016 Series Three – Retirement Schedule 132 STATISTICAL SECTION: Statistical Section Index Net Position by Component – Last Ten Fiscal Years 133 Changes in Net Position – Last Ten Fiscal Years 134 Fund Balances of Governmental Funds – Last Eight Fiscal Years 135 Changes in Fund Balances of Governmental Funds – Last Ten Fiscal Years 136 General Revenues by Source – Last Ten Fiscal Years 137 Assessed and Estimated Actual Value of Taxable Property – Last Ten Fiscal Years 138 Direct and Overlapping Property Tax Rates and Contributions to the School District – Last Ten Fiscal Years 139 Property Tax Levies and Collections – Last Ten Fiscal Years 140 Principal Property Tax Payers – Current Year and Ten Years Ago 141 Ratios of Net Bonded Debt– Last Ten Fiscal Years 142 Computation of Direct and Overlapping Debt 143 Legal Debt Margin Information – Last Ten Fiscal Years 144 Ratio of Annual Debt Service Expenditures for General Bonded Debt to Total General Governmental Expenditures and Transfers – Last Ten Fiscal Years 145 Ratios of Outstanding Debt by Type – Last Ten Fiscal Years 146 Demographic and Economic Statistics – Last Ten Fiscal Years 147 Average Monthly Employment & Earnings – Last Ten Fiscal Years 148 Miscellaneous Statistical Data – Last Ten Fiscal Years 149 Property Value, Construction and Bank Deposits – Last Ten Fiscal Years 150 Full-Time Equivalent Borough Employees by Function/Program – Last Ten Fiscal Years 151 Operating Indicators by Function – Last Ten Fiscal Years 152 Capital Asset Statistics by Function/Program – Last Ten Fiscal Years 153 INTRODUCTORY SECTION 1 Kodiak Island Borough Finance Department 710 Mill Bay Road  Kodiak, Alaska 99615 December 20, 2018 Members of the Assembly Kodiak Island Borough, Alaska State of Alaska statutes and local charter provisions require that all general-purpose local governments publish a complete set of financial statements presented in conformity with generally accepted accounting principles in the United States of America (GAAP) and audited in accordance with auditing standards generally accepted in the United States of America by a firm of licensed certified public accountants. Pursuant to that requirement, we hereby issue the comprehensive annual financial report of the Kodiak Island Borough (Borough) for the fiscal year ended June 30, 2018. This report consists of management’s representations concerning the finances of the Borough. Consequently, management assumes full responsibility for the completeness and reliability of all information presented in this report. To provide a reasonable basis for making these representations, management of the Borough has established a comprehensive internal control framework that is designed both to protect the government’s assets from loss, theft, or misuse and to compile sufficient reliable information for the preparation of the Borough’s financial statements in conformity with GAAP. Because the cost of internal controls should not outweigh their benefits, the Borough’s comprehensive framework of internal controls has been designed to provide reasonable rather than absolute assurance that the financial statements will be free from material misstatement. As management, we assert that, to the best of our knowledge and belief, this financial report is complete and reliable in all material respects. The Borough’s financial statements have been audited by Altman, Rogers & Co., a firm of licensed certified public accountants. The goal of the independent audit was to form an opinion on whether the financial statements of the Borough, for the fiscal year ended June 30, 2018, are presented fairly, in all material respects, in accordance with generally accepted accounting principles in the United States of America. The independent audit involved 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; and evaluating the overall financial statement presentation. The independent auditor issued an unmodified (“clean”) opinion on the Borough’s financial statements for the fiscal year ended June 30, 2018. The independent auditor’s report is presented as the first component of the financial section of this report. The independent audit of the financial statements of the Borough was part of broader, State and federally mandated “Single Audits” designed to meet the special needs of State and federal grantor agencies. The standards governing Single Audit engagements require the independent auditor to report not only on the fair presentation of the financial statements, but also on the audited government’s internal controls and compliance with legal requirements, with special emphasis on internal controls and legal requirements involving the administration of State and federal awards. These reports are available in the Borough’s separately issued Single Audit Report. 2 GAAP require that management provide a narrative introduction, overview, and analysis to accompany the basic financial statements in the form of Management’s Discussion and Analysis (MD&A). This letter of transmittal is designed to complement the MD&A and should be read in conjunction with it. The Borough’s MD&A can be found immediately following the report of the independent auditors. Profile of the Government The Kodiak Island Borough lies at the western border of the Gulf of Alaska, approximately 40 miles south of the Kenai Peninsula. Kodiak Island is the largest island in Alaska and the second largest in the United States. About two-thirds of the Borough lies in the Kodiak archipelago with the remaining third on the Alaska Peninsula, across the Shelikof Strait from Kodiak Island. The Shelikof Strait is only 20 miles wide in places. The Borough encompasses 7,130 square miles, making it slightly smaller than the State of Massachusetts and serves a population of 13,287. The Borough was incorporated September 30, 1963, as a Second Class Borough by Chapter 146 Sessions, Laws of Alaska 1961, as amended. The powers granted to the Borough include area- wide powers and non area-wide powers. Area-wide powers are health, education, planning and zoning, emergency services planning, and assessment and collection of taxes for both the Borough and cities within the Borough. Non area-wide powers include parks and recreation, economic development, solid waste disposal, animal control, fire protection, street lighting and road maintenance and construction. A Manager form of government governs the Borough. The Mayor is elected at large while the Borough Assembly appoints the Manager. The Assembly is composed of seven members who are elected at-large. The Borough provides a full range of services including fire protection, the construction and maintenance of roads and other infrastructure, community and economic development, health, culture and recreation and solid waste collection and disposal. The Borough also is financially accountable for a legally separate school district which is reported separately within the Borough’s financial statements. Additional information on this legally separate entity can be found in the basic financial statements. Budgetary Accounting and Internal Controls The annual budget serves as the foundation for the Borough’s financial planning and control. All departments of the Borough are required to submit requests for appropriation to the Borough Manager. The Borough Manager uses these requests as the starting point for developing a proposed budget. The Borough Manager then presents this proposed budget to the Assembly for review by April 30th. The assembly is required to hold public hearings on the proposed budget and to adopt a final budget by no later than June 10th. The appropriated budget is prepared by fund and department. The Assembly makes appropriation transfers between funds and/or departments only after the adoption of an ordinance. Borough staff may execute transfers between line items within a department. Amendments to the budget can occur anytime during the fiscal year through the Borough Assembly or administrative action. Expenditures may not legally exceed appropriations at the following levels: Capital Project Funds – project level, all other funds – department level. All funds, except Capital Project Funds, are budgeted on an annual basis encompassing a fiscal year. Budgets of Capital Project Funds generally encompass the period from start-up to project completion, which is generally greater than one year. Budget-to-actual comparisons are provided in this report for each individual governmental and proprietary fund for which an appropriated annual budget has been adopted. 3 Factors Affecting Financial Condition The information presented in the financial statements is perhaps best understood when it is considered from the broader perspective of the specific environment within which the Borough operates. State economy. The State of Alaska has experienced budget shortfalls in the most recent periods and these factors are impacting the communities within the state due to decreased state grant funding and decreased revenue sharing. Local economy. The economic condition of the Kodiak Island Borough remains guarded. The main industries of the Borough are commercial fishing, and tourism. While the commercial fishing industry in Kodiak has been stable with severance taxes on seafood ranging from $1,289,695 in FY2009 to $1,660,842 in FY2018, there have been new federal and state environmental and quota restrictions that may reduce future revenues. Tourism continues to be strong in Kodiak. Transient accommodations tax (bed tax) revenues have increased from $86,338 in FY2009 to $109,297 in FY2018, an increase of 26.59%, and cruise ship tax revenues have increased from $24,778 in 2009 to $37,625 in FY2018. To accommodate this demand, construction of fishing lodges, bed and breakfast accommodations and recreational facilities has increased along with an increase in charter boat and guide operations. The Kodiak Island Borough is also home to the aerospace industry, which began with construction of the Kodiak Launch Complex in 1998. Owned by the Alaska Aerospace Development Corporation (AADC), a public corporation of the State of Alaska, the Kodiak Launch complex is the first complete launch facility built in the United States since the 1960’s and the first not owned by the Federal Government. The state-of-the-art facility includes a launch control center, payload processing facility, spacecraft assembly building and launch pad. It is designed to handle small to medium sized rockets used to launch low earth orbit satellites, as well as military, scientific and research missions. The seafood industry is by far the largest industry in the Kodiak Island Borough. This industry includes commercial fishing, fisheries research, management and enforcement, seafood processing, and maintenance and support services. Kodiak is home to the largest port in the State, housing over 500 commercial vessels and consistently ranks among the top ten ports in the United States in terms of amount and value of product delivered Kodiak is home to the largest U.S. Coast Guard base in the country, employing nearly 1,350 people and providing vital services to the marine industries that are an integral part of Kodiak’s make-up as well as making a significant contribution to the Kodiak community. Employment varies throughout the year with July, August, and September being the peak months due to the increased activity in the fisheries and related businesses, and then declines in November and December when fishing quotas are reached. At June 30, 2018, the unemployment rate for the Kodiak Island Borough was 5.1%. 4 Long-term financial planning. The Borough adopts a strategic plan. In this plan, the Borough decides what its goals and objectives are for the next 3-5 years. To view the complete Strategic plan, you can visit our web site at www.kodiakak.us. The basis of the strategic plan is:  Essential governmental services are to be provided at a level equal to or better than the level previously provided. Plan for revenues and expenses to create a government that is more efficient, less costly and more accountable to ensure a financially sustainable borough for future generations.  All services are to be constantly examined to ensure that they are provided in an efficient and effective manner and that unnecessary program costs are eliminated.  Each department’s progress in achieving their objectives is reviewed and monitored throughout the budget year. Awards and Acknowledgements The Government Finance Officers Association of the United States and Canada (GFOA) awarded a Certificate of Achievement for Excellence in Financial Reporting to the Borough for its comprehensive annual financial report (CAFR) for the fiscal year ended June 30, 2017. This was the twenty-eighth consecutive year that the Borough has received this prestigious award. In order to be awarded a Certificate of Achievement, a government must publish an easily readable and efficiently organized comprehensive annual 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 CAFR continues to meet the Certificate of Achievement Program’s requirements and we are submitting it to the GFOA to determine its eligibility for another certificate. The preparation of this report would not have been possible without the efficient and dedicated services of the entire staff of the administration and finance department. We would like to express our appreciation to all members of the department who assisted and contributed to the preparation of this report. Credit must be given to the mayor and the assembly for their unfailing support for maintaining the highest standards of professionalism in the management of the Borough’s finances. Respectfully submitted, Michael Powers Dora Cross Borough Manager Director of Finance Electorate Manager Borough Attorney Engineering/ Facilities Director BVFD Manager Finance/MIS Director Borough Mayor Borough Assembly Community Development Director Maintenance Specialist KFRC Maintenance Engineer Solid Waste Manager Baler Supervisor Treatment Plant Operator Lead Senior Baler Operator Baler Operator (4) Assessing Director Planner (2) Code Enforcement Officer Admin Support Asst. Lead Appraiser Appraiser Technician (2) Admin Support Asst. Fiscal Analyst Fiscal Technician (2) Fiscal Analyst Admin Support Asst. IT Administrator IT Analyst IT Analyst Fiscal Asst. Clerks Office Director Admin Support Specialist (2) Kodiak Island Borough Fiscal Year 2018 Projects Manager Projects Inspector Maintenance Administrator Projects Assistant Management Analyst (3) Landfill Attendant Treatment Plant Operator Treatment Plant Operator Trainee Admin Support Asst. (3) IT Technician MAYOR AND ASSEMBLY MEMBERS 7 Kyle Crow, Julie Kavanaugh, At Large, 2018 At Large, 2020 Dan Rohrer, Mayor, 2019 Andrew Schroeder, Scott Smiley, At Large, 2020 At Large, 2019 Dennis Symmons, Matt VanDaele, At Large, 2018 At Large, 2019 Rebecca Skinner, Deputy Presiding Officer (DPO), At Large, 2020 8 KODIAK ISLAND BOROUGH KODIAK, ALASKA BOROUGH OFFICIALS YEAR ENDED JUNE 30, 2018 MAYOR Dan Rohrer ‘19 ASSEMBLY Rebecca Skinner ’20 Kyle Crow ‘18 Julie Kavanaugh ’20 Andrew Schroeder ‘20 Scott Smiley ’19 Dennis Symmons ‘18 Matt VanDaele, ‘19 MANAGEMENT Michael Powers .................................................................................................. Borough Manager Dora Cross ............................................................................................... Finance Director/Treasurer Nova Javier, MMC ...................................................................................................... Borough Clerk Sara Fraser ................................................................................... Community Development Director Bill Roberts ............................................................................................................Borough Assessor Howard Rue ....................................................................................................................... Fire Chief Vacant ......................................................................................... Engineering and Facilities Director Paul Van Dyke .............................................................................................................. IT Supervisor Levesque Law Group, LLC ...................................................... Borough Attorney (Contracted Firm) 9 FINANCIAL SECTION 10 3000 C Street N. Suite 201 Anchorage, Alaska 99503 Phone 907-274-2992 Fax 907-274-2993 Offices in Juneau and Soldotna A Professional Corporation Independent Auditor’s Report The Honorable Mayor and Members of the Assembly Kodiak Island Borough Kodiak, Alaska Report on the Financial Statements We have audited the accompanying financial statements of the governmental activities, the business-type activities, the discretely presented component unit, each major fund, and the aggregate remaining fund information of the Kodiak Island Borough, as of and for the year ended June 30, 2018, and the related notes to the financial statements, which collectively comprise the Borough’s basic financial statements as listed in the table of contents. Management’s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes 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. Auditor’s Responsibility Our responsibility is to express opinions on these financial statements based on our audit. We conducted our audit 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 from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements 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 the entity’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. The Honorable Mayor and Members of the Assembly Kodiak Island Borough 11 We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions. Opinions In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, the business-type activities, the discretely presented component unit, each major fund, and the aggregate remaining fund information of the Kodiak Island Borough, as of June 30, 2018, and the respective changes in financial position and, where applicable, cash flows thereof for the year then ended in accordance with accounting principles generally accepted in the United States of America. Change in Accounting Principle As discussed in Note 15 to the financial statements, in 2018 the Kodiak Island Borough adopted new accounting guidance, GASB Statement No. 75, Accounting and Financial Reporting for Postemployment Benefits Other Than Pensions. This statement replaces the requirements of Statements No. 45, Accounting and Financial Reporting by Employers for Postemployment Benefits Other Than Pensions, as amended, and No. 57, OPEB Measurements by Agent Employers and Agent Multiple-Employer Plans, for OPEB Statement No. 74, Financial Reporting for Postemployment Benefit Plans Other Than Pension Plans. Our opinion is not modified with respect to this matter. Other Matters Required Supplementary Information Accounting principles generally accepted in the United States of America require that the Management’s Discussion and Analysis, Budgetary Comparison Schedules and notes to RSI, and Schedules of Borough’s Proportionate Share the of Net Pension and OPEB Liabilities and Contributions for the Public Employees’ Retirement System on pages 14-27, 84-88, and 89-92, respectively, be presented to supplement the basic financial statements. Such information, 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. The Honorable Mayor and Members of the Assembly Kodiak Island Borough 12 Other Information Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the Kodiak Island Borough’s basic financial statements. The information listed in the table of contents as “Additional Supplementary Information”, which includes Budgetary Comparison Schedule – Debt Service Fund – Education; Nonmajor Governmental Funds: Combining Balance Sheet and Combining Statement of Revenues, Expenditures, and Changes in Fund Balances; Nonmajor Special Revenue Funds: Combining Balance Sheet, Combining Statement of Revenues, Expenditures and Changes in Fund Balances (Deficit), and Schedules of Revenues, Expenditures, and Changes in Fund Balance (Deficit) – Budget and Actual; Nonmajor Capital Project Funds: Combining Balance Sheet and Combining Statement of Revenues, Expenses and Changes in Fund Balances (Deficit); Enterprise Funds: Schedule of Revenues, Expenditures, and Changes in Net Position – Budget and Actual, is presented for purposes of additional analysis and is not a required part of the basic financial statements. The Additional Supplementary Information listed on the previous page 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. Such 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 Additional Supplementary Information listed on the previous page is fairly stated, in all material respects, in relation to the basic financial statements as a whole. The Introductory Section, the Supplementary Bond Schedules, and the Statistical Section, as identified in the table of contents, have not been subjected to the auditing procedures applied in the audit of the basic financial statements and, accordingly, we do not express an opinion or provide any assurance on them. We also have previously audited, in accordance with auditing standards generally accepted in the United States of America, the Kodiak Island Borough’s basic financial statements for the year ended June 30, 2017, which are not presented with the accompanying financial statements and we expressed unmodified opinions on the respective financial statements of the governmental activities, the business-type activities, the discretely presented component unit, each major fund, and the aggregate remaining fund information. That audit was conducted for the purpose of forming opinions on the financial stateemtns that collectively comprise Kodiak Island Borough’s basic financial statements as a whole. The individual fund financial statements and schedules for the year ended June 30, 2017, 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 June 30, 2017, basic financial statements. The information has been subjected to the auditing procedures applied in the audit of those 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 financial statements or to the financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the 2017 individual fund financial statements and schedules are fairly stated in all material respects in relation to the basic financial statements from which they have been derived. The Honorable Mayor and Members of the Assembly Kodiak Island Borough 13 Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated December 20, 2018, on our consideration of the Kodiak Island Borough'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 Kodiak Island Borough’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 Kodiak Island Borough’s internal control over financial reporting and compliance. Anchorage, Alaska December 20, 2018 MANAGEMENT’S DISCUSSION AND ANALYSIS KODIAK ISLAND BOROUGH Management’s Discussion and Analysis June 30, 2018 14 As management of the Kodiak Island Borough, we offer readers of these financial statements this narrative overview and analysis of the financial activities of the Kodiak Island Borough for the fiscal year ended June 30, 2018. We encourage readers to consider the information presented here in conjunction with additional information that we have furnished in our letter of transmittal, which can be found on pages 1 - 4 of this report. FINANCIAL HIGHLIGHTS  The assets and deferred outflows of resources of the Kodiak Island Borough exceeded its liabilities and deferred inflows of resources at the close of the most recent fiscal year by $181,338,761 (net position). Of this amount, $56,260,313 (unrestricted net position) may be used to meet the Borough’s ongoing obligations to citizens and creditors.  The Borough’s total net position increased by $2,505,584 (1.40%) including the cumulative effect of a change in accounting principle. The governmental net position increased by $2,524,225 (1.95%) and the business-type net position decreased by $18,641 (0.04%).  Total equity in the central treasury increased by $2,988,505 (4.04%). The governmental central treasury increased by $1,615,652 (2.65%) and the business-type central treasury increased by $1,372,853 (10.56%).  The Borough’s total noncurrent liabilities decreased by $7,732,339 (6.42%). Compensated leave, a new line item, is $233,140, notes/bonds payable decreased by $7,456,063 (6.91%), net pension and OPEB liabilities decreased by $830,416 (11.17%), and landfill closure costs increased by $331,000 (6.36%).  At the end of the current fiscal year, the Borough’s governmental funds reported combined fund balances of $52,350,699. This was a decrease of $1,296,369 (2.42%), compared to the net change in the prior year of a decrease of $2,328,562. Approximately 5.44% of the current year total amount, $2,848,289, is available for spending at the government’s discretion (unassigned fund balance).  At the end of the current fiscal year, unassigned fund balance for the General Fund was $3,151,069. This amounts to 52.53% of total General Fund expenditures.  The Borough adopted the provisions of GASB Statement No. 75, Accounting and Financial Reporting for Postemployment Benefits Other than Pensions, during FY2018. Among other accounting and reporting criteria, the Borough is required to recognize its proportional share of the net other postemployment benefit plans (OPEB) liability. As a result of the implementation of this statement, the change in accounting principle adjustment, as originally presented, is a decrease of $1,310,015; a decrease of $1,045,654 for Governmental activities and a decrease of $264,361 for Business-Type activities. See Note 15 for additional details. OVERVIEW OF THE FINANCIAL STATEMENTS The management discussion and analysis serves as an introduction to the Borough’s basic financial statements, which contain the following: 1) government-wide financial statements, 2) fund financial statements, and 3) notes to the financial statements. This report also contains 4) required supplementary information and 5) other supplementary information in addition to the basic financial statements. KODIAK ISLAND BOROUGH Management’s Discussion and Analysis, Continued 15 1) Government-wide Financial Statements (pages 28-29) The government-wide financial statements are designed to provide readers with a broad overview of the Borough’s finances in a manner similar to a private-sector business. These statements combine and consolidate short-term, spendable resources with capital assets and long-term obligations. The government- wide financial statements are divided into the following three categories:  Governmental activities – These are functions of the Borough that are financed primarily by taxes, intergovernmental revenues, and charges for services. The Borough’s governmental activities include general government, public safety, community and economic development, emergency preparedness, non-profit contributions for health and social services and education, culture and recreation, service district maintenance, primary and secondary education, and debt service.  Business-type activities – These are functions of the Borough in which customer user fees and charges are used to help cover all or most of the cost of services they provide. The Borough’s business-type activities include solid waste collections and disposal (landfill) facility, E911 emergency system, and long-term property leases for various Borough owned buildings including a hospital, long-term care center and a fisheries research center.  Component unit – The Borough also includes the Kodiak Island Borough School District in its report as it is financially accountable for this “component unit”. Financial information for the school district is reported separately from the financial information presented for the primary government itself. The Statement of Net Position is designed to be a bottom line for the Borough and its governmental activities and component unit. This statement combines and consolidates governmental funds’ current financial resources (short-term spendable resources) with capital assets, including infrastructure and long-term obligations. Net positions are the difference between the Borough’s assets and deferred outflows of resources and its liabilities and deferred inflows of resources. Increases or decreases in net position may serve as a useful indicator of whether the financial position of the Borough is improving. The Statement of Activities reflects the expenses of a given function, which are offset by program revenues. All changes in net position are reported as soon as the underlying event given 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 fiscal periods. Program revenues are defined as charges for services, operating grants and contributions, and capital grants and contributions directly associated with a given function. Both of the government-wide financial statements distinguish functions of the Borough that are principally supported by taxes and intergovernmental revenues (governmental activities) from other functions that are intended to recover all or a significant portion of their costs through user fees and charges (business-type activities). The government-wide financial statements include not only the Borough itself (known as the primary government), but also the legally separate school district for which the Borough is financially accountable. Financial information for this component unit is reported separately from the financial information presented for the primary government itself. KODIAK ISLAND BOROUGH Management’s Discussion and Analysis, Continued 16 2) Fund Financial Statements (pages 30-37) A fund is a grouping of related accounts that is used to maintain control over resources that have been segregated for specific activities or objectives. The Borough, like other state and local governments, uses fund accounting to ensure and demonstrate fiscal accountability. All the funds of the Borough can be divided into two categories: a) governmental funds and b) proprietary funds. Number of Funds Fund Type Major Non-Major Total Funds Governmental Funds: General Fund 1 - 1 Debt Service Fund 1 - 1 Special Revenue 2 15 17 Capital Projects - 7 7 Total Governmental Funds 4 23 26 Proprietary Funds: Enterprise Fund 5 Total of All Funds 31 a) Governmental Funds (pages 84-88 and 93-116) – Governmental funds are used to account for essentially the same functions reported as governmental activities in the government-wide financial statements. However, unlike the government-wide statements, governmental fund financial statements focus on the short-term view of the Borough’s operations. Because the focus of governmental funds is narrower than that of the government-wide financial statements, it is useful to compare the information presented for the governmental funds with similar information presented for governmental activities in the government-wide financial statements. Both the governmental fund balance sheet and the governmental fund statement of revenues, expenditures and changes in fund balances provide a reconciliation to facilitate this comparison between governmental funds and governmental activities. The Borough adopts an annual appropriated budget for its General Fund, Special Revenue Funds and Debt Service Fund. Budgetary comparison statements have been provided for the funds to demonstrate compliance with the budget. b) Proprietary Funds (pages 34-37 and 117-121) – The only Proprietary Fund type that the Borough uses is enterprise funds. Proprietary fund statements provide the same type of information as the government- wide financial statements, only in more detail. Enterprise funds are used to account for activities for which a fee is charged to external users for goods and services. The Borough adopts an annual appropriated budget for its proprietary funds. Budgetary comparison statements have been provided for the funds to demonstrate compliance with the budget. 3) Notes to the Basic Financial Statements (pages 38-83) The notes provide additional information that is essential to a full understanding of the data provided in the government-wide and fund financial statements. 4) Required Supplementary Information (pages 84-92) The required supplementary information (RSI) includes required budgetary supplementary information and the schedules of the proportionate share of the net pension and OPEB liabilities and pension/OPEB contributions. KODIAK ISLAND BOROUGH Management’s Discussion and Analysis, Continued 17 5) Other Supplementary Information (page 93-121) The basic financial statements are followed by additional supplementary information on individual fund activity. GOVERNMENT-WIDE FINANCIAL ANALYSIS Statement of Net Position (page 28) As noted earlier, net position may serve over time as a useful indicator of a government’s financial position. In the case of the Borough, assets and deferred outflows of resources exceeded liabilities and deferred inflows of resources by $181,338,761 at June 30, 2018, compared to $178,833,177 at June 30, 2017. The largest portion of the Kodiak Island Borough’s net position ($125,078,448 or 68.97%) reflects its investment in capital assets (e.g. land, buildings, equipment and infrastructure) net of any related debt used to acquire those assets. The Borough uses these capital assets to provide services to citizens; consequently, these capital assets are not available for future spending. Although the Borough’s investment in capital assets is reported net of related debt, it should be noted that the resources needed to repay this debt must be provided from other sources, since the capital assets themselves cannot be used to liquidate these liabilities. Total net position has increased over the past 10 years indicating an improving financial position as illustrated by the graph below. The Borough has maintained a stable financial position and the $56,260,313 of unrestricted net position may be used to meet the Borough’s ongoing obligations to citizens and creditors. 0 50,000,000 100,000,000 150,000,000 200,000,000 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Total Net Position of Government and Business-Type Activities Business Type Activities Governmental Activites KODIAK ISLAND BOROUGH Management’s Discussion and Analysis, Continued 18 Governmental Business-type Total Activities Activities Activities 2018 2017 2018 2017 2018 2017 Current and other assets $ 64,518 63,648 18,092 17,027 82,610 80,675 Capital assets 163,318 163,160 68,965 71,113 232,283 234,273 Total assets 227,836 226,808 87,057 88,140 314,893 314,948 Deferred outflows of resources 661 1,295 176 336 837 1,631 Total assets and deferred outflows of resources $ 228,497 228,103 87,233 88,476 315,730 316,579 Long-term liabilities $ 78,023 83,734 34,777 36,797 112,800 120,531 Other liabilities 17,892 15,151 2,563 1,981 20,455 17,132 Total liabilities 95,915 98,885 37,340 38,778 20,455 137,663 Deferred inflows of resources 907 67 229 16 1,136 83 Total liabilities and deferred inflows of resources $ 96,822 98,952 37,569 38,794 21,591 137,746 Net position: Net investment in capital assets $ 85,570 80,857 39,509 40,098 125,079 120,955 Unrestricted 46,105 48,294 10,155 9,584 56,260 57,878 Total net position $131,675 129,151 49,664 49,682 181,339 178,833 Net Position of Governmental and Buisness-type Activities (in thousands) For Years Ended June 30, 2018 and 2017 Changes in Net Position During the current fiscal year, the Borough’s total net position increased by $2,505,584 (1.4%). This compares to an increase of $886,949 for the year ended June 30, 2017. Of the $2,505,584 increase, the governmental net position increased by $2,524,225 (1.95%) and the business-type net position decreased by $18,641 (0.04%). Revenues increased overall by $1,094,295 (3.09%). The largest increase is Operating grants and contributions at $1,403,902 (33.0%) and the largest revenue decrease is Capital grants at $788,795 (89.1%). Expenses decreased overall by $1,872,864 (5.41%) The largest increase is Service District Maintenance at $112,459 (23.6%) and the largest decrease is Primary and secondary education at $1,467,635 (10.36%). KODIAK ISLAND BOROUGH Management’s Discussion and Analysis, Continued 19 Statement of Activities (page 29) The following table shows the changes in net position for fiscal years 2018 and 2017 for both governmental and business type activities. 2018 2017 2018 2017 2018 2017 Revenues: Program revenues: Charges for services $ 979 3,001 7,118 5,733 8,097 8,734 Operating grants and contributions 5,614 4,227 45 28 5,659 4,255 Capital grants 97 885 — — 97 885 General revenues: Property taxes 16,045 15,714 — — 16,045 15,714 Grants and entitlements not restricted to specific programs 3,415 3,631 — — 3,415 3,631 Land sales 28 326 — — 28 326 Excise taxes 310 — — — 310 — Severance taxes 1,929 1,415 — — 1,929 1,415 Other 306 23 312 116 618 139 Loss on advanced refunding of debt — — — (55) — (55) Investment earnings 282 272 70 178 352 450 Total revenues 29,005 29,494 7,545 6,000 36,550 35,494 Expenses: General government 6,995 7,156 — — 6,995 7,156 Public safety 954 1,028 — — 954 1,028 Community and economic development 1,152 1,136 — — 1,152 1,136 Emergency preparedness 43 36 — — 43 36 Health and social services 208 234 — — 208 234 Education, culture and recreation 5 18 — — 5 18 Parks and recreation 77 30 — — 77 30 Service district maintenance 588 475 — — 588 475 Primary and secondary education 12,695 14,163 — — 12,695 14,163 Interest on long-term debt 2,673 3,061 — — 2,673 3,061 Municipal solid waste collection and disposal — — 3,246 3,297 3,246 3,297 Hospital facilities — — 1,412 1,285 1,412 1,285 Long Term Care Center — — 1,008 1,128 1,008 Kodiak Fisheries Research Center — — 1,422 1,532 1,422 1,532 911 services — — 256 28 256 28 Total expenses 25,390 27,337 7,344 7,270 32,734 33,479 Change in net position before transfers 3,615 2,157 201 (1,270) 3,816 887 Transfers (45) (1,134) 45 1,134 — — Change in net position 3,570 1,023 246 (136) 3,816 887 Net position, beginning of year, as previously stated 129,151 128,128 49,682 49,818 178,833 177,946 Cummulative effect of a change in accounting principle (1,046) — (264) — (1,310) — Net position, beginning of year, as restated 128,105 128,128 49,418 49,818 177,523 177,946 Net position, end of year $ 131,675 129,151 49,664 49,682 181,339 178,833 Governmental activities Business-type activities Total activities Changes in Net Position (in thousands) KODIAK ISLAND BOROUGH Management’s Discussion and Analysis, Continued 20 Governmental Activities – increased the Borough’s net position by $2,524,225. The largest source of revenue from governmental activities is property taxes, which amounted to $16,045,148, a 2.1% increase from 2017. Operating grants and contributions was the largest increasing revenue by $1,387,172 (32.82%) and Capital grants was the largest decreasing revenue by $788,795 (89.1%). Excise taxes, a new revenue for 2018, was $310,482. Overall, total revenues decreased by $488,849 (1.66%) from 2017. The largest expense from governmental activities is from Primary and Secondary Education, which amounted to $12,695,233, a 10.36% decrease from 2017. General government was the second largest decreasing expense at $463,557 (6.48%). Service district maintenance and parks and recreation are the two largest increases in expenses at $112,459 (22.66%) and $47,014 (155.82%), respectively. Overall, total expenses decreased by $1,946,574 (7.12%) from 2017. Charges for services 3% Operating grants and contributions 19% Property taxes 56% Grants and entitlements not restricted to specific programs 12% Excise taxes 1% Severance taxes 7%Investment earnings 1% Other 1% FY2018 Governmental Activities - Revenue Sources General government 26% Public safety 5% Community and economic development 5% Health and social services 1% Service district maintenance 2% Primary and secondary education 50% Interest on long-term debt 11% FY2018 Governmental Activities - Functional Expenses KODIAK ISLAND BOROUGH Management’s Discussion and Analysis, Continued 21 Business Activities - decreased the Kodiak Island Borough’s net position by $18,641. The largest source, and increase, in revenue from business-type activities is charges for services, which amounted to $7,117,737, a 24.15% increase from 2017. The largest decrease in revenues is interest earnings at $107,980 (60.71%). Overall, total revenues increased by $1,544,635 (25.75%) from 2017. The largest expense from business-type activities is from Municipal Solid Waste Collection and Disposal, which totaled $3,245,526, a 1.56% decrease from 2017. The largest increase in expenses was 911 services at $227,208 (799.77%) and the largest decrease in expenses is the long-term care center at $120,027 (10.64%). Overall, total expenses increased by $73,710 (1.01%) from 2017. Personnel services 22% Contracted services 6% Maintenance and repair 2% Depreciation 39% General Administration 21% Recycling services 4% Closure/post closure 6% FY2018 Business-Type Activities - Expenses Charges for Services 94% Operating grants and contributions 1% Interest Earnings 1% Other 4% FY2018 Business-Type Activities - Revenue Sources KODIAK ISLAND BOROUGH Management’s Discussion and Analysis, Continued 22 FINANCIAL ANALYSIS OF THE GOVERNMENT’S FUNDS As noted earlier, the Borough uses fund accounting to ensure and demonstrate compliance with finance related legal requirements. These funds are accounted for using the modified accrual basis of accounting. Governmental Funds – The focus of the Borough’s governmental funds is to provide information on near-term inflows, outflows, and balances of spendable resources. Such information is useful in assessing the Borough’s financing requirements. Unassigned fund balance may serve as a useful measure of a government’s net resources available for spending at the end of the fiscal year. As of the end of the current fiscal year, the Borough’s governmental funds reported combined ending fund balances of $52,350,699, a decrease of $1,296,369 (2.42%) in comparison to the beginning of the year. $37,889 of this total amount constitutes nonspendable fund balances, $43,876,363 is committed fund balances, $5,588,158 is assigned fund balances and $2,848,289 is unassigned fund balances. The General Fund is the main operating fund of the Borough. At the end of the current fiscal year, nonspendable fund balance of the General Fund was $37,885, with an unassigned fund balance of $3,151,069 for a total fund balance of $3,188,954. As a measure of the General Fund’s liquidity, it may be useful to compare fund balance to total expenditures. Unassigned fund balance represents 52.53% of total General Fund expenditures. Major Fund Highlights  General Fund – Fund balance increased by $871,830 (37.63%) during the current fiscal year. A non-recurring revenue of $492,936 is from the Debt Service fund and a new excise tax revenue of $310,482 contributed to the overall increase to the fund balance.  Education Support (Special Revenue Fund) – Fund balance deficit increased by $58,574 (86.09%) during the current fiscal year. The key factor leading to this change was less property and motor vehicle tax revenues.  Facilities Fund (Special Revenue Fund) – Fund balance increased by $73,220 (0.19%) during the current fiscal year. The largest use of allowed earning use in this fund was a transfer of $65,105 to the Debt Service Fund to help cover required debt service payments.  Education Debt Service Fund – Fund balance decreased by $27,792 (11.83%), largely due to a $492,936 repayment to the General Fund. $3,188,954 $(126,614) $39,371,219 $207,204 $9,709,936 (20,000,000) 0 20,000,000 40,000,000 60,000,000 General Education Facilities Debt Service Non-Major Funds GOVERNMENTAL FUNDS - FUND BALANCE KODIAK ISLAND BOROUGH Management’s Discussion and Analysis, Continued 23 Other Governmental Funds (Non-Major Funds) Highlights  Other Governmental funds – Aggregate fund balance decreased by $2,155,053 (18.16%) during the current fiscal year; special revenue funds decreased $623,373 and capital projects funds decreased $1,531,680.  Fire Protection Area No. 1 (Special Revenue Fund) – Fund balance decreased by $926,462 primarily due to the purchase of capital assets.  Land Sales (Special Revenue Fund) – Fund balance decreased $94,210. The Borough did not sell property or timber this year. Although this fund’s regular annual revenue streams are not enough to fund regular annual expenses, the infrequent sales of land and timber resources provide a fund balance for these non-revenue years.  Building and Grounds (Special Revenue Fund) – Fund balance increased $310,534. The key factors leading to this was an increase in building lease income and a reduction in transfers out.  Kodiak High School Renovation (Capital Project Fund) – Fund balance decreased by $615,212 due the project nearing completion.  Renewal and Replacement Projects (Capital Project Fund) – Fund balance increased by $1,444,643 primarily due to a mill rate increase to the fund. Fund balance will continue to increase due to future planned projects.  Other Capital Projects (Capital Project Fund) – Fund balance increased by $479,137 primarily due to timing of revenues and project expenses.  School Renewal and Replacement Facilities Bond Projects (Capital Projects Fund) – Fund balance decreased by $2,850,791. The key factor leading to this decrease is the completion of projects. Fire Protection Area No 1 9% Womens Bay Fire Dept. 27% Kodiak Airport Fire District 2% Monashka Bay Road Service 8% Service Area No 1 32% Womens Bay Road Service 5% Bay View Road Service 2% Woodland Acres Street Light 1% Trinity Island Street Light 1% Tourism Development 10% Mission Lake Tide Gate 3% GOVERNMENTAL FUNDS (NON-MAJOR FUNDS SPECIAL REVENUE) - FUND BALANCES KODIAK ISLAND BOROUGH Management’s Discussion and Analysis, Continued 24 Proprietary Funds – The Borough’s proprietary funds provide the same type of information found in the government-wide financial statements, but in more detail. As of the end of the current fiscal year, the Borough’s proprietary funds reported combined net position of $4,966,803, a $18,641 (0.04%) decrease in comparison to the beginning of the year. However, equity in central treasury and restricted cash and equivalents increased by $1,372,774 (9.61%) in comparison to the beginning of the year. Major Fund Highlights  Municipal Solid Waste Collection and Disposal (Enterprise fund) – Net position increased by $637,189 (4.27%) due to an increase in charges for services and a decrease in interest expenses.  Hospital Facilities (Enterprise Fund) – Net position decreased by $4,028 (0.03%).  Long-Term Care Center (Enterprise Fund) – Net position increased by $88,196 due to timing differences in revenues and bond payments.  Kodiak Fisheries Research Center (Enterprise Fund) – Net position decreased by $475,637 (3.89%) due to decreasing lease revenues and operating expenses exceeding revenues. Other Nonmajor Fund Highlights  911 Services (Enterprise Fund) – Since the revenues to this fund are passed through to the City of Kodiak, the net position at year end is $0. However, it should be noted that the City increased the per line fee from $0.75 per land line to $2.00 for land lines and cellular phones. Therefore, the revenue from this fund increased by $227,208 (799.77%). 0 500,000 1,000,000 1,500,000 2,000,000 2,500,000 3,000,000 3,500,000 4,000,000 Municipal Solid Waste Hospital Facilities Long-Term Care Center Kodiak Fisheries Research Center 911 Service 2018 Operating Revenues versus Operating Expenses Operating Revenues Operating Expenses KODIAK ISLAND BOROUGH Management’s Discussion and Analysis, Continued 25 GENERAL FUND BUDGETARY HIGHLIGHTS (pages 84-85) The Borough’s budget is prepared, according to Alaska law, using a basis of accounting that is consistent with accounting principles generally accepted in the United States of America. The most significant budget areas are in the General Fund. Within the General Fund revenues, the largest difference between budgeted and actual revenues was PERS on-behalf receiving $12,681 less and Federal PILT (Payment in Lieu of Taxes) receiving $290,466 more than budgeted. Overall, actual revenues were $719,771 (12.09%) more than budgeted. Within the General fund expenditures, the largest difference between budgeted and actual expenses was the general administration department expending $146,525 less and the engineering department expending $134,130 more than budgeted. Overall, actual expenditures were $444,295 (6.89%) less than budgeted. 0 500,000 1,000,000 1,500,000 2,000,000 Property Taxes Severance Taxes Excise Tax State Sources Federal Sources Other FY18 Budget to Actual Comparison of Revenues Budgeted Actual 0 500,000 1,000,000 1,500,000 2,000,000 2,500,000 3,000,000 3,500,000 4,000,000 4,500,000 5,000,000 General Government Public Safety Community & Economic Development Emergency Preparedness Non-Profit - Social Services, Education & Recreation Parks and Recreation FY18 Budget to Actual Comparison of Expenditures Budgeted Actual KODIAK ISLAND BOROUGH Management’s Discussion and Analysis, Continued 26 CAPITAL ASSETS AND DEBT ADMINISTRATION Capital Assets (Note 8 on page 53-58) – The Borough’s investment in capital assets includes land, buildings and improvements, improvements other than buildings, machinery and equipment, and construction work-in-progress. As of June 30, 2018, the total net book value was $232,283,824. The $1,988,832 net decrease was mostly due to decrease in construction work-in-progress. The following table displays the capital assets (net of accumulated depreciation) at June 30, 2018 with a comparison to 2017. 2018 2017 2018 2017 2018 2017 Artwork $ — — 16,091 16,091 16,091 16,091 Land 23,495,458 23,852,758 1,661,499 1,661,499 25,156,957 25,514,257 Construction work-in-progress 86,335,806 86,867,058 28,897,659 28,448,177 115,233,465 115,315,235 Buildings and improvements 38,853,891 39,605,633 34,414,872 36,599,907 73,268,763 76,205,540 Improvements other than buildings 12,428,055 11,294,569 2,798,575 3,088,939 15,226,630 14,383,508 Equipment 1,711,415 970,611 377,958 456,891 2,089,373 1,427,502 Infrastructure 493,498 569,421 — — 493,498 569,421 Unclassified plant in service — — 799,047 841,102 799,047 841,102 $ 163,318,123 163,160,050 68,965,701 71,112,606 232,283,824 234,272,656 Governmental activities Business-type activities activities Total Long-Term Debt (Note 10, pages 60-64) – At the end of the current fiscal year, the Borough had total bonded debt outstanding of $70,210,000. This entire amount is backed by the full faith and credit of the Borough. The remainder of the Borough’s debt represents loans and notes payable, compensated absences, landfill closure and post-closure costs, and revenue bonds payable. The following table displays the long-term debt at June 30, 2018, with a comparison to 2017. Governmental Business-type activities activities 2018 2017 2018 2017 2018 2017 General obligation bonds, including premium $ 77,748,492 82,302,899 — — 77,748,492 82,302,899 Compensated absences 219,481 242,398 — — 219,481 242,398 Landfill post closure care costs — — 5,535,000 5,204,000 5,535,000 5,204,000 Notes payable — — 18,129,817 19,139,725 18,129,817 19,139,725 Revenue Bonds Payable — — 11,327,067 11,874,871 11,327,067 11,874,871 $ 77,967,973 82,545,297 23,664,817 24,343,725 112,959,857 118,763,893 Total Activities The Borough’s total debt decreased by $5,804,036 (4.89%) during the current fiscal year. This decrease can be attributed to regularly scheduled bond payments. During 2017, the Borough refunded one of the general obligation bonds which will result in interest expense savings over the life of the bond. There is no general obligation debt limit imposed on the Borough by the State Constitution, state statutes, or the Borough’s charter or code. KODIAK ISLAND BOROUGH Management’s Discussion and Analysis, Continued 27 ECONOMIC FACTORS AND NEXT YEAR’S BUDGETS AND RATES Economic Factors:  Kodiak continues to be one of the nation’s largest producers of seafood. The Borough has the largest and most diversified fishing port in Alaska and is consistently ranked in the top three largest fishing ports in the U.S. in terms of value landed.  Tourism continues to increase with a steady number of cruise ships stopping in Kodiak and bed tax revenues from visitors increasing.  Unemployment varies throughout the year due to the seasonal nature of the fishing industry; however, the Borough’s 2017 unemployment rate was 5.1% compared to 7.2% Alaska-wide.  The United States Coast Guard continues to maintain their largest base on Kodiak Island. Their area of responsibility covers the Gulf of Alaska, Bristol Bay, the Bering Sea and Alaska’s Pacific coast. o March 2018, the USCG (United States Coast Guard) announced the upgrade of five of its Kodiak based multipurpose airplanes over the next two years. o April 2018, the USCG announced the addition of two new Kodiak based cutters for search and rescue, fisheries enforcement and security. o June 2018, the USCG announced the addition of 100 service members to the Kodiak Coast Guard Base over the next six years. Next Year’s Budgets and Rates:  No change to the Area-wide mill rate.  Property tax revenues are projected to increase in future years as the Borough’s assessed valuation continues to increase.  Fish revenues from the State and from local sources are projected to decrease due to quota and catch limit restrictions.  No increase to the State of Alaska’s ceiling of 22% for political subdivision contributions to PERS (Public Employees Retirement System).  General Obligation bond payments are projected to remain steady now that the remodel/construction of the High School is nearing completion.  Landfill user fees are expected in increase due to the landfill expansion and the new leachate treatment plant. All of these factors were considered in preparing the Borough’s budget for fiscal year 2019. REQUESTS FOR INFORMATION This financial report is designed to provide a general overview of the Borough’s finances for all those with an interest. Questions concerning any of the information provided in this report or requests for additional information should be addressed to the Kodiak Island Borough, Director of Finance, 710 Mill Bay, Kodiak, Alaska 99615. BASIC FINANCIAL STATEMENTS Component Primary government unit Total reporting entity Governmental Business-type School activities activities Total District 2018 2017 Equity in central treasury $ 62,663,220 14,369,530 77,032,750 — 77,032,750 74,044,245 Due from primary government — — — 9,397,741 9,397,741 7,785,248 Receivables: State of Alaska 128,089 — 128,089 3,144,654 3,272,743 2,274,331 Federal government 231,570 — 231,570 — 231,570 280,005 Property taxes, net of allowance of $15,789 427,086 — 427,086 — 427,086 316,132 Severance taxes 288,482 — 288,482 — 288,482 376,432 Excise taxes 122,130 — 122,130 — 122,130 Interest 300,209 — 300,209 — 300,209 192,190 Land sales contracts receivable 187,845 — 187,845 — 187,845 384,792 Accounts and other receivables, net 132,017 540,492 672,509 — 672,509 915,797 Current portion of notes receivable — 118,194 118,194 — 118,194 114,135 Inventories — 380,038 380,038 467,094 847,132 1,182,462 Prepaid items 37,889 — 37,889 — 37,889 451,561 Restricted cash and equivalents — 1,285,575 1,285,575 — 1,285,575 1,285,654 Notes receivable — 1,397,207 1,397,207 — 1,397,207 1,515,401 Capital assets: Non-depreciable 109,831,264 30,575,249 140,406,513 — 140,406,513 140,845,583 Depreciable, net 53,486,859 38,390,452 91,877,311 882,429 92,759,740 94,303,839 Total assets 227,836,660 87,056,737 314,893,397 13,891,918 328,785,315 326,267,807 Deferred outflows of resources - Pension and OPEB deferrals 660,787 176,079 836,866 3,281,554 4,118,420 8,740,961 Total assets and deferred outflows of resources $228,497,447 87,232,816 315,730,263 17,173,472 332,903,735 335,008,768 Liabilities: Accounts payable $1,862,275 414,591 2,276,866 1,038,646 3,315,512 2,470,526 Accrued compensation and related liabilities 366,972 — 366,972 2,991,196 3,358,168 3,774,675 Other accrued liabilities 1,105,617 132,421 1,238,038 691,681 1,929,719 1,615,822 Customer deposits 2,450 60,468 62,918 — 62,918 77,418 Unearned revenues 33,161 202,325 235,486 279,173 514,659 348,007 Due to component unit 9,397,741 — 9,397,741 — 9,397,741 7,785,248 Internal balances (71,072) 71,072 — — — — Noncurrent liabilities: Due within one year: Accrued leave 86,041 23,990 110,031 — 110,031 242,398 Notes payable 5,109,407 1,659,087 6,768,494 21,555 6,790,049 5,215,853 Due in more than one year: Accrued leave 133,440 89,700 223,140 — 223,140 — Notes payable 72,639,085 27,797,797 100,436,882 798,016 101,234,898 108,669,803 Net pension and OPEB liabilities 5,250,303 1,353,775 6,604,078 29,524,048 36,128,126 40,895,548 Landfill closure costs — 5,535,000 5,535,000 — 5,535,000 5,204,000 Total liabilities 95,915,420 37,340,226 133,255,646 35,344,315 168,599,961 176,299,298 Deferred inflows of resources - Pension and OPEB deferrals 907,069 228,787 1,135,856 4,402,324 5,538,180 717,563 Net position: Net investment in capital assets 85,569,631 39,508,817 125,078,448 789,539 125,867,987 121,798,226 Unrestricted 46,105,327 10,154,986 56,260,313 (23,362,706) 32,897,607 36,193,681 Total net position 131,674,958 49,663,803 181,338,761 (22,573,167) 158,765,594 157,991,907 Total liabilities, deferred inflows of resources and net position $ 228,497,447 87,232,816 315,730,263 17,173,472 332,903,735 335,008,768 See accompanying notes to financial statements. (With summarized financial information for June 30, 2017) June 30, 2018 Statement of Net Position KODIAK ISLAND BOROUGH of Resources and Net Position Liabilities, Deferred Inflows Outflows of Resources Assets and Deferred 28 Program revenues Net (expense) revenue and changes in net position Operating Primary government Component unit Charges for grants and Capital Governmental Business-type School Total reporting entity Functions/Programs Expenses services contributions grants activities activities Total District 2018 2017 Primary government: Governmental activities: General government $6,995,624 873,043 141,863 96,698 (5,884,020) — (5,884,020) — (5,884,020) (3,429,466) Public safety 953,898 15,366 182,075 — (756,457) — (756,457) — (756,457) (1,004,569) Community and economic development 1,152,197 — 67,232 — (1,084,965) — (1,084,965) — (1,084,965) (1,086,888) Emergency preparedness 43,038 — — — (43,038) — (43,038) — (43,038) (22,105) Health and social services 207,500 — — — (207,500) — (207,500) — (207,500) (233,999) Education, culture and recreation 4,665 — — — (4,665) — (4,665) — (4,665) (17,562) Parks and recreation 77,186 — — — (77,186) — (77,186) — (77,186) 3,217 Service district maintenance 587,707 90,450 — — (497,257) — (497,257) — (497,257) (364,102) Primary and secondary education 12,695,233 — 237,895 — (12,457,338) — (12,457,338) — (12,457,338) (13,848,567) Interest on long-term debt 2,673,238 — 4,985,040 — 2,311,802 — 2,311,802 — 2,311,802 780,243 Total governmental activities 25,390,286 978,859 5,614,105 96,698 (18,700,624) — (18,700,624) — (18,700,624) (19,223,798) Business-type activities: Municipal solid waste collection and disposal 3,245,526 3,813,343 35,503 — — 603,320 603,320 — 603,320 (170,370) Hospital facilities 1,412,150 1,384,272 — — — (27,878) (27,878) — (27,878) (624,657) Long Term Care Center 1,008,032 1,093,475 — — — 85,443 85,443 — 85,443 (62,720) Kodiak Fisheries Research Center 1,422,337 826,647 9,006 — — (586,684) (586,684) — (586,684) (677,456) 911 service 255,617 — — — — (255,617) (255,617) — (255,617) (28,409) Total business-type activities 7,343,662 7,117,737 44,509 — — (181,416) (181,416) — (181,416) (1,563,612) Total primary government 32,733,948 8,096,596 5,658,614 96,698 (18,700,624) (181,416) (18,882,040) — (18,882,040) (20,787,410) Component unit: School District $48,861,120 190,716 8,830,324 7,388 (39,832,692) (39,832,692) (51,073,100) General revenues: Property taxes 16,045,148 — 16,045,148 — 16,045,148 15,714,593 Grants and entitlements not restricted to specific programs 3,414,671 — 3,414,671 33,245,974 36,660,645 36,020,458 Land sales 27,955 — 27,955 — 27,955 325,793 Tobacco excise taxes 310,482 — 310,482 — 310,482 — Severance taxes 1,929,409 — 1,929,409 — 1,929,409 1,414,557 Support from primary government — — — 9,377,500 9,377,500 10,277,500 Investment earnings 281,855 69,871 351,726 — 351,726 449,542 Other 305,983 312,265 618,248 154,651 772,899 253,114 Transfers (45,000) 45,000 — — — — Total general revenues and transfers 22,270,503 427,136 22,697,639 42,778,125 65,475,764 64,455,557 Change in net position 3,569,879 245,720 3,815,599 2,945,433 6,761,032 (7,404,953) Net position, at beginning of year, as previously stated 129,150,733 49,682,444 178,833,177 (20,841,270) 157,991,907 165,396,860 Cumulative effect of a change in accounting principle (1,045,654) (264,361) (1,310,015) (4,677,330) (5,987,345) — Net position, at beginning of year, as restated 128,105,079 49,418,083 177,523,162 (25,518,600) 152,004,562 165,396,860 Net position, at end of year $131,674,958 49,663,803 181,338,761 (22,573,167) 158,765,594 157,991,907 See accompanying notes to financial statements. KODIAK ISLAND BOROUGH Statement of Activities Year ended June 30, 2018 (With summarized financial information for the year ended June 30, 2017) 29 Education Other Education Debt Service Governmental Assets General Support Facilities Fund Funds 2018 2017 Assets: Equity in central treasury $ 2,458,718 8,982,385 39,371,219 97,764 11,753,134 62,663,220 61,047,568 Receivables: State of Alaska 17,321 49,643 — 49,849 11,276 128,089 482,993 Federal government — — — — 231,570 231,570 280,005 Property taxes, net of allowance of $15,789 54,388 239,099 — 62,741 70,858 427,086 316,132 Severance taxes 288,482 — — — — 288,482 376,432 Excise taxes 122,130 — — — — 122,130 — Interest 300,209 — — — — 300,209 192,190 Land sales contracts — — — — 17,970 17,970 24,135 Accounts and other receivables, net 30,370 — — — 101,647 132,017 116,487 Prepaid items 37,885 — — — 4 37,889 451,561 Due from other funds 780,305 — — — — 780,305 995,538 Land sales contracts, due after one year — — — — 169,875 169,875 360,657 Total assets $ 4,089,808 9,271,127 39,371,219 210,354 12,356,334 65,298,842 64,643,698 Liabilities: Accounts payable 145,416 — — 3,150 1,713,709 1,862,275 1,156,393 Accrued compensation and related liabilities 366,972 — — — — 366,972 270,833 Customer deposits — — — — 2,450 2,450 27,450 Due to component unit — 9,397,741 — — — 9,397,741 7,785,248 Due to other funds — — — — 709,233 709,233 995,538 Unearned revenues — — — — 33,161 33,161 30,930 Total liabilities 512,388 9,397,741 — 3,150 2,458,553 12,371,832 10,266,392 Deferred inflows of resources: Unavailable revenues 388,466 — — — 187,845 576,311 730,238 Total liabilities and deferred inflows of resources 900,854 9,397,741 — 3,150 2,646,398 12,948,143 10,996,630 Fund balances (deficit): Nonspendable 37,885 — — — 4 37,889 451,561 Committed — — 39,371,219 207,204 4,297,940 43,876,363 44,035,100 Assigned — — — — 5,588,158 5,588,158 7,066,350 Unassigned 3,151,069 (126,614) — — (176,166) 2,848,289 2,094,057 Total fund balances (deficit) 3,188,954 (126,614) 39,371,219 207,204 9,709,936 52,350,699 53,647,068 Total liabilities, deferred inflows of resources and fund balances $ 4,089,808 9,271,127 39,371,219 210,354 12,356,334 65,298,842 64,643,698 See accompanying notes to financial statements. Liabilities, Deferred Inflows of Resources, and Fund Balances (Deficit) KODIAK ISLAND BOROUGH Totals Governmental Funds Special Revenue Funds (With summarized financial information for June 30, 2017) June 30, 2018 Balance Sheet 30 Amount reported as fund balances on the governmental funds balance sheet $ 52,350,699 Amounts reported for governmental activities in the statement of net position are different because: Capital assets used in governmental activities are not financial resources and, therefore, are not reported in the funds.163,318,123 Long-term receivables, delinquent property taxes and loans are not available to pay for current-period expenditures and, therefore, are unavailable in the funds: Property taxes $388,466 Notes receivable - land sales 187,845 576,311 Long-term liabilities, including bonds payable, are not due and payable in the current period and therefore are not reported in the funds: General obligation bonds payable (70,210,000) Bond premium (7,538,492) Accrued interest expense (1,105,617) Compensated absences (219,481) (79,073,590) Changes in deferred inflows and outflows of resources are the results of timing differences in the acturial reports: Pension and OPEB related assets in the current fiscal year are presented as deferred outflows of resources 660,787 Pension and OPEB related liabilities in the current fiscal year are presented as deferred inflows of resources (907,069) Proportionate share of the collective net pension and OPEB liabilities (5,250,303) Net position of governmental activities $ 131,674,958 See accompanying notes to financial statements. KODIAK ISLAND BOROUGH Reconciliation of Net Position Between the June 30, 2018 Government-Wide Financial Statements and the Fund Financial Statements 31 Education Other Education Debt Service Governmental General Support Facilities Fund Funds 2018 2017 Revenues: Property taxes and assessments $1,071,739 9,081,031 — 2,711,114 3,138,244 16,002,128 15,700,272 Transient accomodations tax — — — — 113,486 113,486 108,050 Severance taxes 1,815,923 — — — — 1,815,923 1,306,507 Intergovernmental: State sources 1,688,433 237,895 — 4,985,040 64,105 6,975,473 6,134,338 Federal sources 1,813,439 — — — 253,674 2,067,113 2,628,537 Charges for services 2,064 — — — 876,635 878,699 791,786 Licenses, permits and fees 62,350 — — — 37,310 99,660 2,208,870 Tobacco excise tax 310,482 — — — — 310,482 — Investment income (loss)10,830 — 203,430 (1,746) 69,341 281,855 271,691 Rental — — — — 14,400 14,400 14,160 Other 4,650 — — — 285,693 290,343 9,146 Total revenues 6,779,910 9,318,926 203,430 7,694,408 4,852,888 28,849,562 29,173,357 Expenditures: Current: General government 4,399,266 — — 16,059 1,300,621 5,715,946 5,281,999 Public safety 114,015 — — — 684,499 798,514 699,118 Community and economic development 1,080,628 — — — 96,570 1,177,198 1,096,928 Emergency preparedness 43,038 — — — — 43,038 35,861 Health and social services 207,500 — — — — 207,500 233,999 Education, culture and recreation 4,665 — — — — 4,665 17,562 Parks and recreation 77,186 — — — — 77,186 30,172 Service district maintenance — — — — 587,707 587,707 475,248 Primary and secondary education 72,000 9,377,500 — — — 9,449,500 10,373,548 Capital outlay: Schools — — — — 2,958,053 2,958,053 3,936,147 General — — — — 2,029,456 2,029,456 1,086,817 Debt service: Principal — — — 3,870,000 — 3,870,000 3,530,000 Payment to refunding escrow — — — — — — 5,934,301 Interest — — — 3,408,310 — 3,408,310 3,568,559 Debt issuance costs — — — — — — 64,313 Total expenditures 5,998,298 9,377,500 — 7,294,369 7,656,906 30,327,073 36,364,572 Excess (deficiency) of revenues over expenditures 781,612 (58,574) 203,430 400,039 (2,804,018) (1,477,511) (7,191,215) Other financing sources (uses): Bond issuance — — — — — — 4,905,000 Premium on bonds issued — — — — — — 806,205 Land sale proceeds — — — — 224,902 224,902 145,820 Proceeds from sale of capital assets 1,240 — — — — 1,240 140,000 Transfers in 492,936 — — 65,105 631,063 1,189,104 1,758,036 Transfers out (403,958) — (130,210) (492,936) (207,000) (1,234,104) (2,892,408) Net other financing sources (uses)90,218 — (130,210) (427,831) 648,965 181,142 4,862,653 Change in fund balances 871,830 (58,574) 73,220 (27,792) (2,155,053) (1,296,369) (2,328,562) Fund balances (deficit), at beginning of year 2,317,124 (68,040) 39,297,999 234,996 11,864,989 53,647,068 55,975,630 Fund balances (deficit), at end of year $ 3,188,954 (126,614) 39,371,219 207,204 9,709,936 52,350,699 53,647,068 See accompanying notes to financial statements. Totals Special Revenue Funds KODIAK ISLAND BOROUGH Statement of Revenues, Expenditures and Changes in Fund Balances (Deficit) Governmental Funds Year ended June 30, 2018 (With summarized financial information for the year ended June 30, 2017) 32 Change in fund balances – total governmental funds $ (1,296,369) Amounts reported for governmental activities in the statement of activities are different because: Governmental funds report capital outlays as expenditures. However, in the Statement of Activities the cost of those assets is allocated over their estimated useful lives and reported as depreciation expense: Capital outlay $4,410,701 Depreciation expense (3,827,499) 583,202 Governmental funds only report the revenue from the sale of assets to the extent proceeds are received from the sale. In the Statement of Activities, a gain or loss is reported for each sale or disposal. The net effect of transactions involving capital assets is to decrease net position. Cost of assets disposed (506,172) Accumulated depreciation of assets disposed 81,043 (425,129) Certain revenues in the statement of activities do not provide current financial resources and are reported as unearned or unavailable revenues in the funds: Property tax 388,466 Land sale proceeds 187,845 576,311 Certain revenues that were earned in a prior year provide current financial resources: Accrued property tax (345,446) Land sale contracts (384,792) (730,238) The issuance of long-term debt provides current financial resources to governmental funds, while the repayment of the principal of long-term debt consumes the current financial resources of governmental funds. Neither transaction, however, has any effect on net position. Also, governmental funds do not report the accrual of interest expense on debt when it is not payable from currently available resources: Interest expenditures applied to accrued interest 50,665 Principal repayments 3,870,000 Bond premium amortization 684,407 4,605,072 Some expenses reported in the Statement of Activities do not require the use of current financial resources and; therefore, are not reported as expenditures in governmental funds: Change in compensated absences 22,917 Change in the proportionate share of the unfunded net pension and OPEB liabilities 1,877,467 Changes in deferred inflows and outflows of resources are the result of timing difference in the actuarial report and adjustments to reflect employer and non-employer contributions based on the measurement date of the net pension and OPEB liabilities.(1,643,354) Change in net position of governmental activities $ 3,569,879 See accompanying notes to financial statements. of Governmental Funds to the Statement of Activities Reconciliation of the Statement of Revenues, Expenditures and Changes in Fund Balances (Deficit) KODIAK ISLAND BOROUGH Year ended June 30, 2018 33 Municipal Kodiak Other Solid Waste Fisheries Nonmajor Collection and Hospital Long Term Research Enterprise Totals Disposal Facilities Care Center Center Fund 2018 2017 Current assets: Equity in central treasury $7,255,175 2,520,689 2,366,056 2,100,505 127,105 14,369,530 12,996,677 Restricted cash and equivalents 302,500 — 983,075 — — 1,285,575 1,285,654 Customer receivables 403,266 — — 100,192 37,034 540,492 421,349 Current portion of note receivable — — — 118,194 — 118,194 114,135 Total current assets 7,960,941 2,520,689 3,349,131 2,318,891 164,139 16,313,791 14,817,815 Inventories 380,038 — — — — 380,038 693,747 Capital assets: Non-depreciable 30,230,879 30,284 — 314,086 — 30,575,249 30,125,767 Depreciable, net 2,215,143 13,556,884 14,486,876 8,131,549 — 38,390,452 40,986,839 Total capital assets 32,446,022 13,587,168 14,486,876 8,445,635 — 68,965,701 71,112,606 Note receivable — — — 1,397,207 — 1,397,207 1,515,401 Total noncurrent assets 32,826,060 13,587,168 14,486,876 9,842,842 — 70,742,946 73,321,754 Pension and OPEB deferrals 119,258 — — 56,821 — 176,079 336,338 Total assets and deferred outflows of resources $40,906,259 16,107,857 17,836,007 12,218,554 164,139 87,232,816 88,475,907 Current liabilities: Accounts payable $195,376 22,877 — 32,199 164,139 414,591 272,669 Customer deposits 60,468 — — — — 60,468 49,968 Current portion of accrued compensation and related liabilities 18,932 — — 5,058 — 23,990 99,766 Unearned revenue — 115,356 86,969 — — 202,325 155,277 Interest payable 94,333 — 38,088 — — 132,421 459,540 Current portion of notes and bonds payable 1,101,283 — 557,804 — — 1,659,087 943,438 Due to other funds 56,085 969 — 14,018 — 71,072 — Total current liabilities 1,526,477 139,202 682,861 51,275 164,139 2,563,954 1,980,658 Noncurrent liabilities: Accrued compensation and related liabilities 77,188 — — 12,512 — 89,700 — Notes payable 17,028,534 — 10,769,263 — — 27,797,797 30,071,158 Accrual for landfill closure and postclosure costs 5,535,000 — — — — 5,535,000 5,204,000 Net pension and OPEB liabilities 988,128 — — 365,647 — 1,353,775 1,521,353 Total noncurrent liabilities 23,628,850 — 10,769,263 378,159 — 34,776,272 36,796,511 Total liabilities 25,155,327 139,202 11,452,124 429,434 164,139 37,340,226 38,777,169 Deferred inflows of resources - Pension and OPEB deferrals 182,772 — — 46,015 — 228,787 16,294 Net position: Net investment in capital assets 14,316,205 13,587,168 3,159,809 8,445,635 — 39,508,817 40,098,010 Restricted for capital projects — — — — — — — Unrestricted 1,251,955 2,381,487 3,224,074 3,297,470 — 10,154,986 9,584,434 Total net position 15,568,160 15,968,655 6,383,883 11,743,105 — 49,663,803 49,682,444 Total liabilities, deferred inflows of resources and net position $ 40,906,259 16,107,857 17,836,007 12,218,554 164,139 87,232,816 88,475,907 See accompanying notes to financial statements. KODIAK ISLAND BOROUGH Deferred outflows of resources - of Resources and Net Position Proprietary Funds - Business - Type Activities - Enterprise Funds Statement of Net Position (With summarized financial information for June 30, 2017) June 30, 2018 Outflows of Resources Assets and Deferred Liabilities, Deferred Inflows 34 KODIAK ISLAND BOROUGH Statement of Revenues, Expenses, and Changes in Net Position Year ended June 30, 2018 (With summarized financial information for the year ended June 30, 2017) Municipal Kodiak Other Solid Waste Fisheries Nonmajor Collection and Hospital Long Term Research Enterprise Totals Disposal Facilities Care Center Center Fund 2018 2017 Operating revenues: Charges for services: Solid waste disposal $3,813,343 — — — — 3,813,343 3,105,560 Lease income — 1,384,272 1,093,475 826,647 — 3,304,394 2,627,571 Other 1,434 — — — 255,617 257,051 56,422 Total operating revenues 3,814,777 1,384,272 1,093,475 826,647 255,617 7,374,788 5,789,553 Operating expenses: Personnel services 1,117,408 34,000 — 294,919 1,500 1,447,827 1,749,781 Contracted services 299,815 — — — — 299,815 303,846 Maintenance and repairs 101,429 — — 56,037 — 157,466 163,927 Depreciation 293,749 1,085,223 518,933 698,482 — 2,596,387 2,637,170 General and administration 450,051 22,818 16,040 363,593 — 852,502 897,305 Miscellaneous — 270,109 — 9,306 133 279,548 7,582 Telephone services — — — — 253,984 253,984 26,856 Recycling services 259,824 — — — — 259,824 252,960 Closure and postclosure costs 367,702 — — — — 367,702 154,010 Contributions 36,383 — — — — 36,383 35,880 Total operating expenses 2,926,361 1,412,150 534,973 1,422,337 255,617 6,551,438 6,229,317 Operating income (loss) 888,416 (27,878) 558,502 (595,690) — 823,350 (439,764) Nonoperating revenues (expense): Intergovernmental: State of Alaska on-behalf payment 35,503 — — 9,006 — 44,509 27,799 Contribution to Providence Hospital — — — — — — (108,000) Investment income 32,435 23,850 2,753 10,833 — 69,871 177,851 Debt issuance costs — — — — — — (11,500) Loss on advanced refunding of debt — — — — — — (54,590) Interest revenue — — — 55,214 55,214 59,134 Interest expense (319,165) — (473,059) — — (792,224) (921,135) Total nonoperating income (expense) (251,227) 23,850 (470,306) 75,053 — (622,630) (830,441) Income (loss) before transfers 637,189 (4,028) 88,196 (520,637) — 200,720 (1,270,205) Transfers in — — — 45,000 — 45,000 9,197,194 Transfers out — — — — — — (8,062,822) Total transfers — — — 45,000 — 45,000 1,134,372 Change in net position 637,189 (4,028) 88,196 (475,637) — 245,720 (135,833) Net position, at beginning of year, as previously stated 15,143,324 15,972,683 6,295,687 12,270,750 — 49,682,444 49,818,277 Cumulative effect of a change in accounting principle (212,353) — — (52,008) — (264,361) — Net position, at beginning of year, as restated 14,930,971 15,972,683 6,295,687 12,218,742 — 49,418,083 49,818,277 Net position, at end of year $15,568,160 15,968,655 6,383,883 11,743,105 — 49,663,803 49,682,444 See accompanying notes to financial statements. Proprietary Funds - Business - Type Activities - Enterprise Funds 35 Municipal Kodiak Other Solid Waste Fisheries Nonmajor Collection and Hospital Long Term Research Enterprise Totals Disposal Facilities Care Center Center Fund 2018 2017 Cash flows provided (used) by operating activities: Cash received from customers $3,714,421 1,439,628 1,085,167 964,931 223,181 7,427,328 6,173,385 Payments to suppliers (1,170,927) 3,944 (16,040) (420,736) (116,834) (1,720,593) (1,676,446) Payments to employees (1,157,311) (34,000) — (300,279) (1,500) (1,493,090) (1,482,586) Net cash provided (used) by operating activities 1,386,183 1,409,572 1,069,127 243,916 104,847 4,213,645 3,014,353 Cash flows provided (used) by noncapital financing activities: State sources - grants 35,503 — — 9,006 — 44,509 27,799 Contribution to Providence Hospital — — — — — — (108,000) Net change in interfund receivable/payable 56,085 969 — 14,018 — 71,072 133,098 Transfers in — — — 45,000 — 45,000 9,197,194 Transfers out — — — — — — (8,062,822) Net cash provided (used) by noncapital financing activities 91,588 969 — 68,024 — 160,581 1,187,269 Cash flows provided (used) by capital and related financing activities: Acquisition and construction of capital assets (131,454) (3,942) — (314,086) — (449,482) (676,420) Interest paid on notes payable and interfund borrowings (684,372) — (434,971) — — (1,119,343) (756,731) Principal payments on notes payable and interfund borrowings (1,091,284) — (547,804) — — (1,639,088) (3,339,483) Refunding costs — — — — — — (11,500) Proceeds from issuance of notes payable 81,376 — — — — 81,376 1,137,658 Net cash provided (used) by capital and related financing activities (1,825,734) (3,942) (982,775) (314,086) — (3,126,537) (3,646,476) Cash flows provided (used) by investing activities: Interest and dividends received 32,435 23,850 2,753 66,047 — 125,085 236,985 Net change in cash and cash equivalents (315,528) 1,430,449 89,105 63,901 104,847 1,372,774 792,131 Cash and equivalents, at beginning of year 7,873,203 1,090,240 3,260,026 2,036,604 22,258 14,282,331 13,490,200 Cash and equivalents, at end of year $ 7,557,675 2,520,689 3,349,131 2,100,505 127,105 15,655,105 14,282,331 Reconciliation of cash and cash equivalents to the Statement of Net Position: Equity in central treasury $ 7,255,175 2,520,689 2,366,056 2,100,505 127,105 14,369,530 12,996,677 Restricted cash and equivalents 302,500 — 983,075 — — 1,285,575 1,285,654 $7,557,675 2,520,689 3,349,131 2,100,505 127,105 15,655,105 14,282,331 (continued) Proprietary Funds - Business - Type Activities - Enterprise Funds (With summarized financial information for the year ended June 30, 2017) Year ended June 30, 2018 Statement of Cash Flows KODIAK ISLAND BOROUGH 36 KODIAK ISLAND BOROUGH Statement of Cash Flows Municipal Kodiak Other Solid Waste Fisheries Nonmajor Collection and Hospital Long Term Research Enterprise Totals Disposal Facilities Care Center Center Fund 2018 2017 Reconciliation of operating income (loss) to net cash provided by operating activities: Operating income (loss)$888,416 (27,878) 558,502 (595,690) — 823,350 (439,764) Adjustments to reconcile operating income (loss) to net cash provided by operating activities: Depreciation 293,749 1,085,223 518,933 698,482 — 2,596,387 2,637,170 Pension expense (47,544) — — (11,643) — (59,187) 287,603 Accrual for landfill closure and postclosure costs 331,000 — — — — 331,000 109,964 Changes in assets and liabilities that provided (used) cash: (Increase) decrease in assets: Customer receivables (110,856) — — 24,149 (32,436) (119,143) 108,273 Accounts receivable - State of Alaska — — — — — — 2,567 Inventories 36,702 277,007 — — — 313,709 — Notes receivable — — — 114,135 114,135 110,215 Increase (decrease) in liabilities: Accounts payable (23,425) 19,864 — 8,200 137,283 141,922 55,956 Customer deposits 10,500 — — — — 10,500 7,500 Accrued compensation 7,641 — — 6,283 — 13,924 (20,408) Other accrued liabilities — — — — — — 155,277 Unearned revenues — 55,356 (8,308) — — 47,048 — Net cash provided (used) by operating activities $1,386,183 1,409,572 1,069,127 243,916 104,847 4,213,645 3,014,353 See accompanying notes to financial statements. Proprietary Funds - Business - Type Activities - Enterprise Funds, (Continued) Year ended June 30, 2018 (With summarized financial information for the year ended June 30, 2017) 37 KODIAK ISLAND BOROUGH Notes to Basic Financial Statements Year Ended June 30, 2018 38 (1) Summary of Significant Accounting Policies (a) Reporting Entity The Kodiak Island Borough (the Borough), Alaska, was organized to perform the municipal duties allowed by Alaska Statutes and as directed by its residents. As required by accounting principles generally accepted in the United States of America, these financial statements present the government and its component unit, an entity for which the government is considered to be financially accountable. The discretely presented component unit is reported in a separate column in basic financial statements to emphasize it is legally separate from the government. The Borough reviewed its relationship with other organizations and determined that the following organization is a component unit. Discretely Presented Component Unit The Kodiak Island Borough School District (KIBSD) is a legally separate governmental entity, which is responsible for public education within the Borough. Members of the School Board are elected by the voters; however, the Borough imposes its will over KIBSD because the Borough Assembly has the authority to approve and/or alter the total budget of KIBSD. The Borough also must levy the necessary taxes, and issue bonds for KIBSD. KIBSD has a June 30 fiscal year end, therefore, the financial information presented in these financial statemetns is as of and for the fiscal year ended June 30, 2018. Complete financial statements for the component unit may be obtained at the entity’s administrative offices for the Kodiak Island Borough School District. Kodiak Island Borough School District 722 Mill Bay Road Kodiak, Alaska 99615 (b) Government-Wide and Fund Financial Statements The government wide financial statements (i.e., the statement of net position and the statement of activities) report information on all of the activities of the primary government and its component unit. For the most part, the effect of inter-fund activity has been removed from these statements. Governmental activities, which normally are supported by taxes and intergovernmental revenues, are reported separately from business type activities, which rely to a significant extent on fees and charges for support. Likewise, the primary government is reported separately from the legally separate component unit for which the primary government is financially accountable. KODIAK ISLAND BOROUGH Notes to Basic Financial Statements, Continued 39 The statement of activities demonstrates the degree to which the direct expenses of a given function or segment are offset by program revenues. Direct expenses are those that are clearly identifiable with a specific function or segment. Program revenues include 1) charges to customers or applicants who purchase, use, or directly benefit from goods, services, or privileges provided by a given function or segment and 2) grants and contributions that are restricted to meeting the operational or capital requirements of a particular function or segment. Taxes and other items not properly included among program revenues are reported instead as general revenues. Separate financial statements are provided for governmental funds and proprietary funds. Major individual governmental funds and major individual enterprise funds, if applicable, are reported as separate columns in the fund financial statements. Deferred inflows of resources are the acquisition of fund balance / net position by the Borough that are applicable to a future reporting period. Deferred outflows of resources are the consumption of fund balance / net position that are applicable to a future reporting period. (c) Measurement Focus, Basis of Accounting, and Financial Statement Presentation The government-wide financial statements are reported using the economic resources measurement focus and the accrual basis of accounting, as are the proprietary fund financial statements. Revenues are recorded when earned and expenses are recorded when a liability is incurred, regardless of the timing of related cash flows. Property taxes are recognized as revenues in the year for which they are levied. Grants and similar items are recognized as revenue as soon as all eligibility requirements have been met. Governmental fund financial statements are reported using the current financial resources measurement focus and the modified accrual basis of accounting. Revenues are recognized as soon as they are both measurable and available. Revenues are considered to be available when they are collectible within the current period or soon enough thereafter to pay liabilities of the current period. For this purpose, the government considers revenues to be available if they are collected within 60 days of the end of the current fiscal period except for grant revenues which are recognized when the related expenditure is incurred irrespective of when the cash is received. Expenditures generally are recorded when a liability is incurred, as under accrual accounting. However, debt service expenditures, as well as expenditures related to compensated absences and claims and judgments, are recorded only when payment is due. Property taxes and interest associated with the current fiscal period are all considered to be susceptible to accrual and have been recognized as revenues of the current fiscal period. All other revenue items are considered to be measurable and available only when cash is received by the government. KODIAK ISLAND BOROUGH Notes to Basic Financial Statements, Continued 40 The government reports the following major governmental funds: The General Fund is the government’s primary operating fund. It accounts for all financial resources of the general government, except those required to be accounted for in another fund. The Education Support Special Revenue Fund accounts for property taxes and assessments dedicated to Borough support activity. The Facilities Special Revenue Fund accounts for the proceeds from the sale of Shuyak Island. The single most important goal is to preserve the principal of the fund. Interest earnings, after inflation proofing, can be used for debt service, building insurance and capital projects. The Education Debt Service Fund was established to finance and account for the payment of interest and principal on all general obligation debts, serial and term, other than that payable exclusively from special assessments and revenue debt issued for and serviced by a government enterprise fund. The government reports the following major proprietary funds: The Municipal Solid Waste Collection and Disposal Fund accounts for the collection and disposal of solid waste and recycling services for the Kodiak Island Borough and debt service payments on related debt. The Hospital Facilities Fund accounts for rents on the Borough owned hospital; hospital related state revenue sharing; and other hospital related revenue. In turn, it purchases hospital equipment when needed. The Long Term Care Center Fund was created in fiscal year 2017 to account for the rents on the Borough owned Long Term Care Center and debt service payments on related debt. These activities were accounted for in the Hospital Facilities Fund until completion of the Long Term Care Center and debt service payments on related debt. The Kodiak Fisheries Research Center Fund accounts for rents and expenses on the Borough owned Kodiak Fisheries Research Center. Multiple tenants pay lease funds to participate in this multi-agency research facility committed to the preservation of the North Pacific marine ecosystem and resources. As a general rule the effect of inter-fund activity has been eliminated from the government wide financial statements. Exceptions to this general rule are charges between various functions of the government. Elimination of these charges would distort the direct costs and program revenues reported for the various functions concerned. Amounts reported as program revenues include (1) charges to customers or applicants for goods, services, or privileges provided, (2) operating grants and contributions, and (3) capital grants and contributions. Internally dedicated resources are reported as general revenues rather than as program revenues. Likewise, general revenues include all taxes. KODIAK ISLAND BOROUGH Notes to Basic Financial Statements, Continued 41 Proprietary funds distinguish operating revenues and expenses from nonoperating items. Operating revenues and expenses generally result from providing services and producing and delivering goods in connection with a proprietary fund’s principal ongoing operations. The principal operating revenues of the enterprise funds are charges to customers for sales and services and lease revenues. Operating expenses for enterprise funds include the cost of sales and services, administrative expenses, and depreciation on capital assets. All revenues and expenses not meeting this definition are reported as nonoperating revenues and expenses. (d) Assets, Deferred Outflows of Resources, Liabilities, Deferred Inflows of Resources, and Fund Balance/Net Position Cash and Investments Cash and temporary investments of Borough funds are pooled in a central treasury. Each fund’s portion of this pool is displayed on the Balance Sheet and Statement of Net Position as “Equity in Central Treasury”. The Borough participates in the Alaska Municipal League Investment Pool (AMLIP). AMLIP is not SEC registered and is unrated. Alaska Statute 37.23 establishes regulatory oversight of the pool. The law sets forth numerous requirements regarding authorized investments and reporting. The pool is incorporated in the State of Alaska as a nonprofit corporation and reports to its Board of Directors. Alaska Statute 37.23.050 requires the retention of an investment manager. The AMLIP manager is required to produce monthly disclosure statements to the pool. The pool has also retained an investment advisor to monitor the performance of the investment manager and to ensure compliance with investment policies. All participation in the pool is voluntary. The pool must maintain a dollar weighted average maturity of 90 days or less, and only purchase instruments having remaining maturities of 397 days or less. On a monthly basis, the investments in the pool are reviewed for fair value by an independent pricing service. All highly liquid investments, excluding restricted assets, with original maturities of ninety days or less are considered to be cash equivalents. For purposes of the Statements of Cash Flows, equity in central treasury held by enterprise funds are treated as cash equivalents. Investments for the government, as well as the component unit, are reported at fair value, as determined by quoted market prices. The reported value of the pool is the same as the fair value of the pool shares. KODIAK ISLAND BOROUGH Notes to Basic Financial Statements, Continued 42 Fair Value of Financial Instruments Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The following financial instruments are recorded at fair value or at amounts that approximate fair value: (1) cash and cash equivalents, (2) receivables, net, (3) certain other current assets, (4) accounts payable, and (5) other current liabilities. The carrying amounts reported in the Balance Sheet and Statement of Net Position for the above financial instruments closely approximates their fair value due to the short-term nature of these assets and liabilities, except for the Borough’s investments. The carrying amount of the Borough’s investments are determined based on quoted market prices. The carrying amount of notes receivable and notes payable approximates fair value for those financial instruments with interest at variable rates, as those rates approximate current market rates for notes with similar maturities and credit quality. Receivables and Payables Activity between funds that are representative of lending /borrowing arrangements outstanding at the end of the fiscal year are referred to as either “due to/from other funds” (i.e., the current portion of inter-fund loans) or “advances to/from other funds” (i.e., the noncurrent portion of inter-fund loans). Any residual balances outstanding between the governmental activities and business type activities are reported in the government wide financial statements as “internal balances.” Advances between funds, as reported in the fund financial statements, are offset by a fund balance reserve account in applicable governmental funds to indicate that they are not available for appropriation and are not expendable available financial resources. Inventories and Prepaid Items/Expenses Enterprise Fund inventories consist of cover rock that will be used to close cells at the Municipal Solid Waste Landfill. Inventories are stated at cost (first-in, first-out) and are recorded as expenses when used (consumption method). Payments made to vendors for services that are applicable to future accounting periods are recorded as prepaid items. The prepaid assets do not reflect current available resources and, thus, an equivalent portion of fund balance is classified as nonspendable in the fund financial statements. Prepaid items and expenses are based on the consumption method. KODIAK ISLAND BOROUGH Notes to Basic Financial Statements, Continued 43 Capital Assets Capital assets, which include property, plant, equipment, and infrastructure assets (e.g., roads, street lights, and similar items including those acquired prior to fiscal years ended after June 30, 1980), are reported in the applicable governmental or business type activities columns in the government-wide financial statements. Capital assets are defined by the Borough as assets with an initial, individual cost of more than $5,000 (amount not rounded) and an estimated useful life in excess of two years. Such assets are recorded at historical cost or estimated historical cost if purchased or constructed. Donated capital assets are recorded at acquisition value at the date of donation. The costs of normal maintenance and repairs that do not add to the value of the asset or materially extend assets lives are not capitalized. Major outlays for capital assets and improvements are capitalized as projects are constructed. Interest incurred during the construction phase of capital assets of business type activities is included as part of the capitalized value of the assets constructed. There was no interest capitalized during the year. Property, plant, and equipment of the primary government is depreciated using the straight line method over the following estimated useful lives: Buildings and improvements 10-40 years Improvements other than buildings 10-15 years Equipment 5-10 years Infrastructure 40 years Compensated Absences It is the Borough’s policy to permit employees to accumulate earned but unused annual leave benefits. All annual leave pay is accrued when incurred in the government wide and proprietary fund financial statements. A liability for these amounts is reported in governmental funds only if they have matured, for example, as a result of employee resignations and retirements. Long-term Obligations In the government wide financial statements, long-term debt and other long-term obligations are reported as liabilities in the applicable governmental activities, business type activities, or proprietary fund Statement of Net Position. Bond premiums and discounts are deferred and amortized over the life of the bonds using the effective interest method. Bonds payable are reported net of the applicable bond premium or discount. Bond issuance costs are expensed in the year incurred. In the fund financial statements, governmental fund types recognize bond premiums and discounts, as well as bond issuance costs, during the current period. The face amount of debt issued is reported as other financing sources. Premiums received on debt issuances are reported as other financing sources while discounts on debt issuances are reported as other financing uses. Issuance costs, whether or not withheld from the actual debt proceeds received, are reported as debt service expenditures. Interest on long-term obligations is recorded as an expenditure when due. KODIAK ISLAND BOROUGH Notes to Basic Financial Statements, Continued 44 Pension and Other Postemployment Benefits (OPEB) For purposes of measuring the net pension and OPEB liabilities, deferred outflows of resources and deferred inflows of resources related to pension and OPEB plans, and pension and OPEB expense, information about the fiduciary net position of the Public Employees’ Retirement System (PERS) and additions to/from PERS’s fiduciary net position have been determined on the same basis as they are reported by PERS. For this purpose, benefit payments (including refunds of employee contributions) are recognized when due and payable in accordance with the benefit terms, investments are reported at fair value. Net Position Government-wide net position is divided into three components:  Net investment in capital assets – consists of the historical cost of capital assets less accumulated depreciation and less any debt that remains outstanding that was used to finance those assets plus deferred outflows of resources less deferred inflows of resources related to those assets.  Restricted net position – consists of assets that are restricted by the Borough’s creditors (for example, through debt covenants), by the state enabling legislation (through restrictions on shared revenues), by grantors (both federal and state), and by other contributors.  Unrestricted – all other net position is reported in this category. Fund Balance In the Fund Financial Statements, fund balance includes five classifications as follows: Nonspendable Fund Balance – amounts that are legally or contractually required to be maintained intact (such as the corpus of an endowment fund) or amounts that are not in a spendable form (such as inventory, prepaid expenses, supplies, and long-term receivables). Such constraint is binding until the legal or contractual requirement is repealed or the amounts become spendable. Restricted Fund Balance – amounts constrained to specific purposes by their providers (such as grantors and higher levels of government), through constitutional provisions, or by enabling legislation. Such constraint is binding unless modified or rescinded by external body, laws, or regulation. Committed Fund Balance – amounts that can be used only for the specific purposes determined by a formal action of the Borough Assembly, the Borough’s highest level of decision-making authority. Commitments may be changed or lifted by the Assembly taking the same formal action that imposed the constraint originally. The formal action that is required to be taken to establish, modify or rescind a fund balance commitment is for the Assembly to pass a resolution. KODIAK ISLAND BOROUGH Notes to Basic Financial Statements, Continued 45 Assigned Fund Balance – amounts that are constrained by the Borough for specific purposes. In governmental funds other than the General Fund, assigned fund balance represents the amount that is not restricted or committed, but constrained for a specific purpose. Assignment of fund balance is made by the Borough Assembly or its designee, the Finance Director. Such constraint is binding unless modified or eliminated by the Borough Assembly or Finance Director. Assignment of fund balance is made during the budget process and reviewed at the end of the fiscal year. Assigned fund balance represents amounts constrained for capital project funds and was assigned by the Finance Director. Unassigned Fund Balance – amounts not contained in the other classifications and available for any purpose. Positive unassigned amounts will be reported only in the General Fund. If another governmental fund, other than the General Fund, has a fund balance deficit, then it will be reported as a negative amount in the unassigned classification in that fund. The order of spending, regarding the restricted and unrestricted fund balance when an expenditure is incurred for which both restricted and unrestricted fund balance is available should first reduce restricted fund balance and then unrestricted fund balance. The order of spending regarding unrestricted fund balance is that committed amounts should be reduced first, followed by the assigned amounts, and then the unassigned amounts when expenditures are incurred for purposes for which amounts in any of those unrestricted fund balance classifications could be used. Compliance with the provisions of the Fund Balance Classification Policy are reviewed as part of the annual budget adoption process. The Finance Director reports to the Assembly as close to the end of the year as possible the anticipated year-end fund balance or deficit. The Assembly takes appropriate action to commit or assign, or otherwise allocate prior year fund balances as a part of the budget planning process. The Borough’s Special Revenue Funds are used to account for Borough support, fire and road service areas, federal and state grant programs, street lighting Boroughs, and operations and maintenance programs that are restricted or committed. (e) Revenues, Expenditures, and Expenses Property Taxes Property taxes are based on the assessed value of taxable property as of January 1. Pursuant to Alaska Statute 29.45.240, the Borough establishes the mill rate on or before June 15th. Tax bills are then mailed on or before July 1st. Taxes are due when billed and generally become delinquent on or after October 16th. The Borough code also provides for split payments. If a taxpayer avails himself of this provision, one-half must be paid on or before August 15th and the remainder becomes due on or before November 15th (in lieu of October 15th). Borough property tax revenues are recognized in the fiscal year in which they are levied. KODIAK ISLAND BOROUGH Notes to Basic Financial Statements, Continued 46 All taxes are delinquent on November 16th, and a tax foreclosure process may commence as outlined in Alaska Statutes Title 29. Briefly, this entails the petition for Judgment of Foreclosure signed by the Borough Court Judge and the publication of all delinquent taxes in the local newspaper for four consecutive weeks. Real property tax liens are enforced by one general foreclosure proceeding against the delinquent properties. Prior to FY2012 all area wide property taxes were deposited into the General Fund and then transferred to the other area wide funds. As of FY2012 the Borough has set a separate mill rate for each area wide function that was funded by property taxes. For FY2018 the Borough set a mill rate of 0.62 mills for the General Fund, 6.8 mills for the Education Support Special Revenue Fund, 2.03 mills for the Debt Service Fund and 1.30 mills for the Renewal and Replacement Projects Capital Project Fund for a total area wide mill rate of 10.75. This was the same mill rate as FY2017. Severance Taxes Severance taxes are based on the amount and value of natural resources severed from the environment. Types of resources taxed include seafood, gravel and mineral resources, and timber. Severance tax returns are sent to appropriate companies (as determined by the Borough Assessor) and are returned to the Borough Finance Department. The returns are filed quarterly, and are due by the end of the month following the quarter’s end. Borough severance tax revenues are recognized in the fiscal year in which they become measurable and available. Intergovernmental Revenue State shared revenues, safe communities, State education related entitlement programs and State levied taxes, the proceeds of which are distributed to local governments, are recorded in the fiscal year to which they relate, including accrual at year end if final payments due are measurable and received within approximately two months after year end. State of Alaska and Federal government cost reimbursable grants and contracts are recorded to the extent of allowable expenditures in the period in which the expenditures were incurred. When both restricted and unrestricted resources are available for use for governmental activities, it is the Borough’s policy to use restricted resources first, then unrestricted resources as they are needed. KODIAK ISLAND BOROUGH Notes to Basic Financial Statements, Continued 47 Operating and Nonoperating Revenue and Expenses Proprietary funds distinguish operating revenues and expenses from nonoperating items. Operating revenues and expenses generally result from providing services and producing and delivering goods in connection with a proprietary fund’s principal ongoing operations. The principal operating revenues of the Municipal Solid Waste Collection and Disposal Fund and 911 Service Fund are charges to customers for services. The principal operating revenues of the Hospital Facilities Fund, Long Term Care Center Fund, and the Kodiak Fisheries Research Center Fund are rents from customers. Operating expenses for proprietary funds include costs of services, administrative expenses, and depreciation on capital assets. All revenues and expenses not meeting this definition are reported as nonoperating revenues and expenses. Revenue from Investments and Property Amounts earned on investment of available cash balances and the rental of building facilities are recorded in the period to which they relate, including accrual at year end of the balance due, and unrealized gains and losses on investments held at fiscal year end. Land Sales Proceeds and Other Local Revenues Amounts received pursuant to land sale contracts are recorded on the modified accrual basis in the fund financial statements and the accrual basis in the government-wide financial statements. Other local revenues are recorded on a basis consistent with their nature in relation to measurement and availability standards. (f) Cash Flows All highly liquid investments, excluding restricted assets, with original maturities of three months or less are considered cash equivalents for purposes of the statement of cash flows. (g) Use of Estimates Preparation of financial statements in accordance with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the amounts reported in these financial statements. Actual results may differ from the estimates. Significant estimates include the allowance for doubtful accounts, the useful lives of assets and related accumulated depreciation, accrued landfill closure and post-closure care costs, and the net pension and OPEB liabilities and related deferred outflows and inflows of resources. KODIAK ISLAND BOROUGH Notes to Basic Financial Statements, Continued 48 (2) Stewardship, Compliance, and Accountability (a) Excess of Expenditures over Appropriations The following fund expenditures or operating expenses exceeded their budget: Fund Excess General Fund - Public safety $ 4,015 Education Debt Service 12,459 Special Revenue Funds: Fire Protection Area No. 1 466,109 Tourism Development 9,570 Enterprise Funds: Long Term Care Center 77,639 911 Service Fund 15,617 (b) Deficit Fund Equity The individual fund deficits at June 30, 2018, are as follows: Education Support Special Revenue Fund $ 126,614 Kodiak High School Renovation Capital Project Fund $ 176,166 The deficit in these funds will be funded by transfers in from the General Fund in FY2019. (3) Cash and Investments A portion of the Borough’s investments are in the Alaska Municipal League Investment Pool (AMLIP). The investment in AMLIP represents the Borough’s share of ownership in the pool rather than ownership of specific securities. The fair values of the investments in the pool approximates amortized cost and is equal to the value of pool shares. To obtain a copy of AMLIP’s financial statements contact Key Trust of Alaska at 101 West Benson Blvd., Room 302, Anchorage, Alaska 99503. KODIAK ISLAND BOROUGH Notes to Basic Financial Statements, Continued 49 As of June 30, 2018, the Borough had the following investments: Investment Maturities (in years) Fair Less Investment Type Value than 1 1 to 5 6 + U.S. Agency Securities: Federal Home Loan Bank $ 16,803,730 9,907,760 5,927,840 968,130 Federal Home Loan Mortgage Corporation 14,213,634 6,466,200 7,747,434 - Federal Farm Credit Bank Federal Agrigulture 16,631,290 - 16,631,290 - Mortgage Corporation 1,963,640 - 1,963,640 - Federal National Mortgage Association 7,896,320 - 7,896,320 - Municipal Obligations 4,415,053 3,222,956 61,737 1,130,360 Alaska Municipal League Investment Pool 8,336,400 8,336,400 - - Certificates of Deposit 719,311 719,311 - - $ 70,979,378 28,652,627 40,228,261 2,098,490 In addition to the investments listed above, Kodiak Island Borough also had cash equivalents of $7,338,947, which includes restricted cash of $1,285,575. The Borough categorizes its fair value measurements within the fair value hierarchy established by generally accepted accounting principles. The hierarchy is based on the valuation inputs used to measure the fair value of the asset. Level 1 inputs are quoted prices in active markets for identical assets; Level 2 inputs are significant other observable inputs; Level 3 inputs are significant unobservable inputs. The Borough has the following recurring fair value measurements as of June 30, 2018: Total Level 1 Level 2 Level 3 Investments by fair value level: Debt securities: U.S. Agency Securities $ 57,508,614 57,508,614 - - Municipal Obligations 4,415,053 - 4,415,053 - Total debt securities 61,923,667 57,508,614 4,415,053 - Other investments: Alaska Municipal League Investment Pool 8,336,400 - 8,336,400 - Certificates of Deposit 719,311 - 719,311 - Total other investments 9,055,711 - 9,055,711 - Total investments $ 70,979,378 57,508,614 13,470,764 - KODIAK ISLAND BOROUGH Notes to Basic Financial Statements, Continued 50 Interest Rate Risk The Borough’s investment policy does not limit investment maturities as a means of managing its exposure to fair value losses arising from increasing interest rates. Credit Risk Statutes authorize the Borough to invest in obligations of the United States, the State of Alaska and its political subdivisions, savings accounts, certificates of deposit, banker’s acceptances, repurchase agreements, and such other legal security instruments. The Borough does not have a formal investment policy that restricts investments based on credit risk. At June 30, 2018, the Borough’s investments in municipal obligations and U.S. Government agencies or instruments implicitly guaranteed by the U.S. Government were rated as follows: S&P AA+ 90% AA 10% 100% At June 30, 2018, the Borough’s investment in the Alaska Municipal League Investment Pool and Certificates of Deposit were unrated. Concentration of Credit Risk The Borough places no limit on the amount the Borough may invest in any one issuer. At June 30, 2018, the Borough had 81% percent of its investments in U.S. Government agency securities. Custodial Credit Risk – Deposits The Borough maintains a cash pool that is available for use by all funds. Each fund’s portion of this pool is reported on the Balance Sheet and Statements of Net Position as “Equity in Central Treasury” or amounts “due to/from other funds.” The Borough bank accounts are insured by the Federal Depository Insurance Corporation (FDIC) to a maximum of $250,000. U.S. Treasury obligations, which are held by Bank of New York in a Tri-party collateral agreement with Wells Fargo, the pledging financial institution’s agent, in the Borough’s name, collateralize a portion of the remaining bank balance. At year end, $2,253,687 was uninsured. Custodial Credit Risk – Investments For an investment, this is a risk that, in the event of the failure of the counterparty, the Borough will not be able to recover the value of its investments or collateral securities that are in the possession of an outside party. The Borough manages its custodial credit risk in investments by requiring collateralization agreements. The Borough had no debt securities exposed to custodial credit risk at June 30, 2018. KODIAK ISLAND BOROUGH Notes to Basic Financial Statements, Continued 51 (4) Annual Appropriation to the School District An annual appropriation is made to the School District. In addition to the annual appropriation, the Borough provides the School District general liability and property insurance, the annual independent audit, and grounds maintenance services. (5) Receivables Education Education Other Total General Support Special Debt Governmental Governmental Fund Revenue Fund Service Fund Funds Funds Receivables: Grants $ 17,321 49,643 49,849 242,846 359,659 Taxes 480,789 239,099 62,741 70,858 853,487 Interest 300,209 — — — 300,209 Customers and other 30,370 — — 101,647 132,017 Notes receivable — — — 187,845 187,845 Gross receivables 828,689 288,742 112,590 603,196 1,833,217 Less: allowance for uncollectibles (15,789) — — — (15,789) Net total receivables $ 812,900 288,742 112,590 603,196 1,817,428 Municipal Kodiak Other Solid Waste Fisheries Nonmajor Total Total Collection Research Enterprise Enterprise Primary and Disposal Center Fund Funds Government Receivables: Grants $ — — — — 359,659 Taxes — — — — 853,487 Interest — — — — 300,209 Customers and other 403,266 100,192 37,034 540,492 672,509 Notes receivable — 1,515,401 — 1,515,401 1,703,246 Gross receivables 403,266 1,615,593 37,034 2,055,893 3,889,110 Less: allowance for uncollectibles — — — — (15,789) Net total receivables $ 403,266 1,615,593 37,034 2,055,893 3,873,321 Enterprise Funds Governmental Funds KODIAK ISLAND BOROUGH Notes to Basic Financial Statements, Continued 52 (6) Note Receivable - General Services Administration (GSA) on-behalf of National Oceanic and Atmospheric Administration (NOAA) In April 2016 a lease was executed between the Kodiak Island Borough and GSA which included a debt repayment portion designed to recoup costs incurred by the Borough to finance construction of the facility. Monthly payments to the Borough are $14,112 including interest of 3.5%, continuing through March 2029. As of June 30, 2018, the principal balance due is $1,397,207 and the principal amount due within one year is $118,194. This note receivable is recorded in the Kodiak Fisheries Research Center Enterprise Fund. (7) Deferred Inflows of Resources and Unearned Revenues Governmental funds report deferred inflows of resources in connection with receivables for revenues that are not considered to be available to liquidate liabilities of the current period. Governmental funds also report unearned revenues in connection with resources that have been received, but not yet earned. At June 30, 2018, the various components of deferred inflows of resources and unearned revenue reported in the governmental funds were as follows: Unavailable Unearned Total Unavailable taxes receivable $ 388,466 - 388,466 Unavailable land sales receivable 187,845 - 187,845 Grant advances prior to expending all proceeds - 33,161 33,161 Total unavailable/unearned revenue for governmental funds $ 576,311 33,161 609,472 The remainder of this page left blank intentionally. KODIAK ISLAND BOROUGH Notes to Basic Financial Statements, Continued 53 (8) Capital Assets As noted in Footnote (14), the Borough leases the Kodiak Island Hospital and Long Term Care Center to Sisters of Providence. The value of the leased assets and associated depreciation are reflected in the Hospital Facilities Fund and Long Term Care Center Fund following. Capital asset activity for the year ended June 30, 2018 was as follows: Beginning Ending Balance Increase Decrease Balance Governmental activities: Capital assets, not being depreciated Land $ 23,852,758 - (357,300) 23,495,458 Construction work-in-progress 86,867,058 3,485,209 (4,016,461) 86,335,806 Total 110,719,816 3,485,209 (4,373,761) 109,831,264 Capital assets, being depreciated: Buildings and improvements 114,225,313 1,597,564 - 115,822,877 Improvements other than buildings 22,128,118 2,351,068 - 24,479,186 Equipment 3,289,459 925,492 (81,043) 4,133,908 Infrastructure 5,762,722 - - 5,762,722 Total 145,405,612 4,874,124 (81,043) 150,198,693 Less accumulated depreciation for: Buildings and improvements 74,619,680 2,349,306 - 76,968,986 Improvements other than buildings 10,833,549 1,217,582 - 12,051,131 Equipment 2,318,848 184,688 (81,043) 2,422,493 Infrastructure 5,193,301 75,923 - 5,269,224 Total 92,965,378 3,827,499 (81,043) 96,711,834 Total capital assets being depreciated, net 52,440,234 1,046,625 - 53,486,859 Total governmental activities, net $ 163,160,050 4,531,834 (4,373,761) 163,318,123 KODIAK ISLAND BOROUGH Notes to Basic Financial Statements, Continued 54 Beginning Ending Balance Increase Decrease Balance Business-type activities: Municipal Solid Waste Collection and Disposal Fund capital assets, not being depreciated Land $ 1,651,248 - - 1,651,248 Construction work-in-progress 28,448,177 131,454 - 28,579,631 Total 30,099,425 131,454 - 30,230,879 Capital assets, being depreciated: Unclassified utility plant in service 2,178,733 - - 2,178,733 Improvements other than buildings 3,169,671 - - 3,169,671 Machinery and equipment 2,058,259 - (12,638) 2,045,621 Total 7,406,663 - (12,638) 7,394,025 Less accumulated depreciation for: Unclassified utility plant in service 1,337,631 42,055 - 1,379,686 Improvements other than buildings 1,921,551 176,011 - 2,097,562 Machinery and equipment 1,638,589 75,683 (12,638) 1,701,634 Total 4,897,771 293,749 (12,638) 5,178,882 Total capital assets being depreciated, net 2,508,892 (293,749) - 2,215,143 Total Municipal Solid Waste Collection and Disposal Fund, net $ 32,608,317 (162,295) - 32,446,022 KODIAK ISLAND BOROUGH Notes to Basic Financial Statements, Continued 55 Beginning Ending Balance Increase Decrease Balance Hospital Facilities Fund: Capital assets, not being depreciated Artwork $ 16,091 - - 16,091 Land 10,251 - - 10,251 Construction in progress - 3,942 - 3,942 Total 26,342 - - 30,284 Capital assets, being depreciated: Buildings 33,100,284 - - 33,100,284 Improvements other than buildings 401,046 - - 401,046 Machinery and equipment 3,627,068 - - 3,627,068 Total 37,128,398 - - 37,128,398 Less accumulated depreciation for: Buildings 18,644,112 1,071,422 - 19,715,534 Improvements other than buildings 250,325 12,560 - 262,885 Machinery and equipment 3,591,854 1,241 - 3,593,095 Total 22,486,291 1,085,223 - 23,571,514 Total capital assets being depreciated, net 14,642,107 (1,085,223) - 13,556,884 Total Hospital Facilities Fund, net $ 14,668,449 (1,081,281) - 13,587,168 KODIAK ISLAND BOROUGH Notes to Basic Financial Statements, Continued 56 Beginning Ending Balance Increase Decrease Balance Long Term Care Center Fund: Capital assets, being depreciated: Buildings $ 15,567,986 - - 15,567,986 Less accumulated depreciation for: Buildings 562,177 518,933 - 1,081,110 Total capital assets being depreciated, net 15,005,809 (518,933) - 14,486,876 Total Long Term Care Fund, net $ 15,005,809 (518,933) - 14,486,876 Kodiak Fisheries Research Center Fund: Capital assets, not being depreciated Construction in progress $ - 314,086 - 314,086 Capital assets, being depreciated: Buildings 17,840,410 - - 17,840,410 Improvements other than buildings 2,385,500 - - 2,385,500 Machinery and equipment 1,187,678 - - 1,187,678 Total 21,413,588 - - 21,413,588 Less accumulated depreciation for: Buildings 10,702,484 594,680 - 11,297,164 Improvements other than buildings 695,402 101,793 - 797,195 Machinery and equipment 1,185,671 2,009 - 1,187,680 Total 12,583,557 698,482 - 13,282,039 Total capital assets being depreciated, net 8,830,031 (698,482) - 8,131,549 Total Kodiak Fisheries Research Center Fund, net $ 8,830,031 (384,396) - 8,445,635 KODIAK ISLAND BOROUGH Notes to Basic Financial Statements, Continued 57 Beginning Ending Balance Increase Decrease Balance Total business-type activities: Capital assets, not being depreciated Artwork $ 16,091 - - 16,091 Land 1,661,499 - - 1,661,499 Construction work-in-progress 28,448,177 449,482 - 28,897,659 Total 30,125,767 449,482 - 30,575,249 Capital assets, being depreciated: Unclassified utility plant in service 2,178,733 - - 2,178,733 Buildings 66,508,680 - - 66,508,680 Improvements other than buildings 5,956,217 - - 5,956,217 Machinery and equipment 6,873,005 - (12,638) 6,860,367 Total 81,516,635 - (12,638) 81,503,997 Less accumulated depreciation for: Unclassified utility plant in service 1,337,631 42,055 - 1,379,686 Buildings 29,908,773 2,185,035 - 32,093,808 Improvements other than buildings 2,867,278 290,364 - 3,157,642 Machinery and equipment 6,416,114 78,933 (12,638) 6,482,409 Total 40,529,796 2,596,387 (12,638) 43,113,545 Total capital assets being depreciated, net 40,986,839 (2,596,387) - 38,390,452 Total business-type activities, net $ 71,112,606 (2,146,905) - 68,965,701 KODIAK ISLAND BOROUGH Notes to Basic Financial Statements, Continued 58 Depreciation expense was charged to the departments and functions of the primary government as follows: Governmental activities: General government $ 593,901 Public safety 161,181 Primary and secondary education 3,072,417 Total – governmental activities $ 3,827,499 Business-type activities: Municipal solid waste collection and disposal $ 293,749 Hospital facilities 1,085,223 Long Term Care Center 518,933 Kodiak fisheries research center 698,482 Total – business-type activities 2,596,387 Total primary government $ 6,423,886 (9) Interfund Receivables, Payables and Transfers (a) Interfund Receivables and Payables Interfund balances at June 30, 2018 consisted of the following: Due to / from other funds: Receivable Fund Payable Fund Amount Major governmental funds: General Fund Other Governmental Funds $ 709,233 General Fund Municipal Solid Waste Collection and Disposal Enterprise Fund 56,085 General Fund Hospital Facilities Enterprise Fund 969 General Fund Kodiak Fisheries Research Center Enterprise Fund 14,018 Total primary government $ 780,305 All interfund balances were short term loans to cover negative cash balances at year end. The outstanding short term balances between funds result from the time lag between the dates that (1) inter- fund goods and services are provided or reimbursable expenditures or expenses occur, (2) transactions are recorded in the accounting system, and (3) payments between funds are made. KODIAK ISLAND BOROUGH Notes to Basic Financial Statements, Continued 59 (b) Transfers Interfund transfers have been made in accordance with budget ordinances. Funds are transferred from one fund to support expenditures of other funds in accordance with the authority established for the individual fund. Transfers between funds during the year ended June 30, 2018 were as follows: Transfers In Governmental Funds Kodiak Education and Fisheries Health Other Research Center General Debt Service Governmental Enterprise Fund Fund Funds Fund Total Transfers Out Major Governmental Funds: General Fund $ - - 403,958 - 403,958 Facilities Special Revenue Fund - 65,105 65,105 - 130,210 Education Debt Service Fund 492,936 - - - 492,936 Other Governmental Funds - - 162,000 45,000 207,000 Total transfers $ 492,936 65,105 631,063 45,000 1,234,104 A summary of significant transfers are as follows:  The General Fund transferred $403,958 to Other Capital Projects Fund to fund the re- construction of the Chiniak Emergency Center.  The Building and Grounds Special Revenue Fund transferred $137,000 to Other Capital Projects Fund to fund the re-construction of the Chiniak Emergency Center.  The Women’s Bay Road Service Area Special Revenue Fund transferred $25,000 to the Other Capital Projects Fund for capital improvements.  The Education Debt Service Fund transferred $492,936 to the General Fund to repay costs incurred by the General Fund in previous years as a result of the State of Alaska reducing School Bond Reimbursements.  The Facilities Special Revenue Fund transferred $65,105 to the Education Debt Service Fund for debt service on Borough bonds.  The Facilities Special Revenue Fund transferred $55,105 to the Renewal and Replacement Special Revenue Fund for future projects.  The Facilities Special Revenue Fund transferred $10,000 to the Building and Grounds Special Revenue Fund for property insurance costs.  The Tourism Development Special Revenue Fund transferred $45,000 to the Kodiak Fisheries Research Center Enterprise Fund for tourism development activities. KODIAK ISLAND BOROUGH Notes to Basic Financial Statements, Continued 60 (10) Long Term Debt (a) General Obligation Bonds and other Debt The Borough issues general obligation bonds and other debt to provide funds for the acquisition and construction of major capital facilities. General obligation bonds are direct obligations and pledge the full faith and credit of the Borough. General obligation bonds and other debt currently outstanding are as follows: Balance Balance Due Within July 1, 2017 Additions Reductions June 30, 2018 One Year General obligation bonds: $8,000,000 2011 Series One High School Renovation bonds, due in semi-annual installments of $330,000 to $595,000 plus interest at 3.12% to 5.20% through March 2031 6,210,000 - 330,000 5,880,000 340,000 $5,230,000 2012 Series A Capital Improvements bonds due in semi-annual installments of $460,000 to $630,000 plus interest at 2.0% to 5.0% through September 2024 4,305,000 - 460,000 3,845,000 480,000 $6,385,000 2012 Series B Capital Improvements bonds due in semi-annual installments of $565,000 to $770,000 plus interest at 2.0% to 5.0% through September 2024 5,260,000 - 565,000 4,695,000 585,000 $21,595,000 2013 Series One High School Renovation bonds, due in semi-annual installments of $820,000 to $1,630,000 plus interest of 3.8% to 5.0% through February 2033 18,680,000 - 820,000 17,860,000 855,000 $22,660,000 2014 Series One High School Renovation bonds, due in semi-annual installments of $840,000 to $1,690,000 plus interest of 2.0% to 5.0% through March 2034 20,325,000 - 840,000 19,485,000 880,000 KODIAK ISLAND BOROUGH Notes to Basic Financial Statements, Continued 61 Balance Balance Due Within July 1, 2017 Additions Reductions June 30, 2018 One Year General obligation bonds, continued: $6,210,000 2015 Series Three High School Renovation bonds, due in semi-annual installments of $200,000 to $480,000 plus interest of 2.0% to 5.25% through October 2035 6,015,000 - 200,000 5,815,000 205,000 $1,780,000 2015 Series Three Renewal and Replacement bonds, due in semi-annual installments of $150,000 to $220,000 plus interest of 2.0% to 5.0% through October 2025 Renewal and Replacement bonds, 1,635,000 - 150,000 1,485,000 155,000 $1,870,000 2016 Series One High School Renovation bonds, due in semi-annual installments of $65,000 to $130,000 plus interest of 2.0% to 5.0% through August 2035 1,840,000 - 65,000 1,775,000 65,000 $5,140,000 2016 Series One Renewal and Replacement bonds, due in semi-annual installments of $440,000 to $660,000 plus interest of 5.0% through August 2025 4,905,000 - 440,000 4,465,000 465,000 $4,905,000 2016 Series Three High School Improvement Bonds, due in annual installments of $345,000 to $605,000 plus interest of 4.0% to 5.0% through December 2027 4,905,000 - - 4,905,000 395,000 $ 74,080,000 - 3,870,000 70,210,000 4,425,000 KODIAK ISLAND BOROUGH Notes to Basic Financial Statements, Continued 62 The annual requirements to amortize all general obligation bonded debt outstanding as of June 30, 2018, are as follows: Principal Interest Total Year ending June 30: 2019 $ 4,425,000 3,245,932 7,670,932 2020 4,605,000 3,063,032 7,668,032 2021 4,800,000 2,873,382 7,673,382 2022 5,020,000 2,653,882 7,673,882 2023 5,250,000 2,418,719 7,668,719 2024-2028 23,830,000 8,397,909 32,227,909 2029-2033 18,850,000 3,461,490 22,311,490 2034-2036 3,430,000 213,093 3,643,093 $ 70,210,000 26,327,439 96,537,439 At June 30, 2018, there was $207,204 available in the Education Debt Service Fund to service general obligation bonds. There are a number of limitations and restrictions contained in the various bond indentures. The Borough is in compliance with all significant limitations and restrictions. (The remainder of this page left blank intentionally.) KODIAK ISLAND BOROUGH Notes to Basic Financial Statements, Continued 63 (b) Notes and Bonds Payable As of June 30, 2018, the Borough had the following notes and bonds payable outstanding in the Municipal Solid Waste Collection and Disposal Enterprise Fund: Note payable (ACWF #505031) to Alaska Department of Environmental Conservation (ADEC), to be paid within 20 years. From June 2, 1999, until April 28, 2005, interest accrued at 2.5%. From April 29, 2005, to June 30, 2018, interest accrued at 1.5%. The first loan payment was made on April 1, 2012, with principal payments of $100,000 due on April 1 in each successive year. $ 1,300,000 Note payable (ACWF #505041) to Alaska Department of Environmental Conservation (ADEC), to be paid within 20 years. Interest accrues at 1.5% over the life of the loan. The first loan payment was made on April 1, 2018, with principal payments of $637,846 due on April 1 in each successive year. $ 12,119,067 Note payable (ACWF #505061) to Alaska Department of Environmental Conservation (ADEC), to be paid within 20 years. Interest started being accrued at 1.5% in November 2015 and will be accrued over the life of the loan. The first loan payment was made on March 1, 2016, with principal payments of $131,227 being due on March 1 in each successive year. $ 2,230,852 On September 15, 2011, the Borough issued a $3,275,000 revenue bond, with a premium of $384,379. The bond was marketed by the Alaska Municipal Bond Bank. Interest accrues at rates between 3.0 and 5.0% with principal payments ranging from $215,000 to $295,000 due on September 1 and March 1 of each year. The bond will mature on September 1, 2026. $ 2,479,898 As of June 30, 2018, the Borough had the following bond payable outstanding in the Long Term Care Center Enterprise Fund: On June 19, 2013, the Borough issued a $17,110,000 revenue bond, with a premium of $1,707,320. The bond was marketed by the Alaska Municipal Bond Bank. Interest accrues at rates between 3.0 and 5.0% with payments due on June 1 and December 1 of each year. The bond will mature on June 1, 2033. The unspent bond proceeds were defeased in fiscal year 2017, see Footnote 18. $ 11,327,067 KODIAK ISLAND BOROUGH Notes to Basic Financial Statements, Continued 64 (c) Changes in Long-term Liabilities Long-term liability activity for the year ended June 30, 2018, was as follows: Balance Balance June 30,June 30,Due within 2017 Additions Reductions 2018 one year Governmental activities: Bonds payable: General obligation bonds $74,080,000 — 3,870,000 70,210,000 4,425,000 Bond premium 8,222,899 — 684,407 7,538,492 684,407 82,302,899 — 4,554,407 77,748,492 5,109,407 Compensated absences 242,398 354,565 377,482 219,481 86,041 Total $ 82,545,297 354,565 4,931,889 77,967,973 5,195,448 Business-type activities: Municipal Solid Waste Collection and Disposal: Landfill closure and post-closure costs $5,204,000 331,000 — 5,535,000 — Notes and bonds payable 19,139,725 81,376 1,091,284 18,129,817 1,101,283 Total $ 24,343,725 412,376 1,091,284 23,664,817 1,101,283 Long Term Care Center: Bonds payable $11,874,871 — 547,804 11,327,067 557,804 Business-type activities: Landfill closure and post- closure costs $5,204,000 331,000 — 5,535,000 — Notes/bonds payable 31,014,596 81,376 1,639,088 29,456,884 1,659,087 Total $ 36,218,596 412,376 1,639,088 34,991,884 1,659,087 For governmental activities, compensated absences are generally liquidated by the General Fund. KODIAK ISLAND BOROUGH Notes to Basic Financial Statements, Continued 65 (11) Fund Balances Detailed information related to amounts classified as nonspendable, committed and assigned fund balances in governmental funds at June 30, 2018 are as follows: Facilities Education Special Debt Other General Revenue Service Governmental Fund Fund Fund Funds Total Nonspendable: Prepaid Items $ 37,885 - - 4 37,889 Committed: Facility Upgrades - 39,371,219 - - 39,371,219 Debt Service - - 207,204 - 207,204 Fire and Road Service Areas - - - 1,811,733 1,811,733 Land Sales - - - 1,366,459 1,366,459 Buildings and Grounds - - - 784,298 784,298 Street Lighting Districts - - - 59,853 59,853 Tourism Development - - - 215,431 215,431 Mission Lake Tide Gate - - - 60,166 60,166 Total Committed $ - 39,371,219 207,204 4,297,940 43,876,363 Assigned: Capital Projects and Upgrades $ - - - 5,588,158 5,588,158 (12) Solid Waste Landfill Closure and Post Closure Care Costs State and federal laws and regulations require that the Kodiak Island Borough place a final cover on its landfill when closed and perform certain maintenance for a number of years after closure. In addition to operating expenses related to current activities of the landfill, an expense provision and related liability are recognized based on the future closure and post closure care costs that will be incurred based on the date the landfill no longer accepts waste. The recognition of these landfill closure and post closure care costs is based on the amount of the landfill used during the year. The estimated liability of landfill closure and post closure care costs is $5,535,000 as of June 30, 2018, which is based on 37.5% usage (filled) of the landfill. The Borough recorded closure/post-closure expenses of $367,702 resulting from actual cost outlays of $36,702 to close existing cells and estimated future costs of $331,000 for closure and post-closure costs. The estimated total current cost of the landfill closure and post closure care of $5,535,0000 is based on the amount that would be paid if the landfill were closed as of June 30, 2018. However, the actual cost of closure and post closure care may be higher due to inflation, changes in technology, or changes in landfill laws and regulations. KODIAK ISLAND BOROUGH Notes to Basic Financial Statements, Continued 66 The Borough is required by state and federal laws and regulations to make annual contributions to finance closure and post closure care. The Kodiak Island Borough complies with these requirements by annually recording the liability based on the estimates provided by the Kodiak Island Borough’s Engineering/Facilities Director. It is anticipated that future inflation costs and additional costs that might arise from changes in post closure requirements, due to changes in technology or more rigorous environmental regulations, for example, will be financed primarily by charges to future landfill users and secondarily by taxpayers. In the fiscal year ended June 30, 1999, the Borough began initial planning for lateral expansion of the landfill (Phase 3). In May of 2012 bidding on the project was begun and work is ongoing and expected to continue through 2019. The lateral expansion has an estimated forty year capacity. Capital costs to complete is estimated at $3,100,000. (13) Insurance and Risk Retention The Kodiak Island Borough is exposed to numerous risks of loss associated with the operations of a government. These potential losses include, but are not limited to, employee relations and injuries, contracts, theft, loss or damage of property and general liability. The Borough manages its risks from these potential losses by participating in the Alaska Municipal League Joint Insurance Association, as well as purchasing commercial insurance coverage. This insurance has provided the Borough with adequate coverage in the past. There were no significant changes in insurance coverage obtained and there were no claims or settlements that exceeded insurance coverage in any of the past three fiscal years. The Borough is a member in good standing of the Alaska Municipal League Joint Insurance Association (JIA), a governmental insurance pool established by the Alaska Municipal League. Claims are covered on an occurrence basis. JIA provides risk management services, appraisal services and there is also a separate pool for policy liability. The responsibilities of both JIA and the participants are as follows: (a) Responsibilities of JIA JIA shall perform the following instructions in discharging its responsibilities:  Provide insurance coverage as necessary for property, including building and contents, automobile, mobile equipment and data processing equipment, casualty, including general liability, public officials’ and employees’ liability, auto liability and employee benefit liability; workers’ compensation, including employers’ liability; commercial blanket bond; and time element.  Assist each participant’s assigned risk manager with the implementation of that function.  Provide loss prevention and safety and consulting services to participants as required.  Provide claims adjusting and subrogation services for claims covered by the association’s joint insurance arrangement. KODIAK ISLAND BOROUGH Notes to Basic Financial Statements, Continued 67 (b) Responsibilities of the Participants The Participants shall have the following responsibilities:  The Borough Assembly or appointing official of each participant shall appoint a representative as provided in Article 5, Section 2 of the bylaws and at least one alternate representative to attend member meetings.  Each participant shall appoint an employee of the participant to be responsible for the risk management function within that entity and to serve as a liaison between the participant and JIA with respect to risk management.  Each participant shall maintain an active safety officer and/or committee, and shall comply with all recommendations of JIA concerning the development and implementation of a loss control policy to prevent unsafe practices.  Each participant shall maintain its own set of records as a loss log, in all categories of loss to insure accuracy of JIA’s loss reporting system. (14) Rental Revenues (a) Hospital Facilities Enterprise Fund The Kodiak Island Borough Assembly leases the Kodiak Island Hospital premise and equipment to Sisters of Providence d.b.a. Providence Kodiak Island Medical Center who assumed responsibility for the hospital’s operations as of April 21, 1997. The lease agreement was renegotiated in 2017 and is effective through fiscal year 2027. The lease is cancelable by either party with a one year notice. The hospital capital assets, the lease income, and all other costs relating to the agreement are accounted for by the Borough in the Hospital Facilities Enterprise Fund. The agreement with Providence established a 20 year renewal and replacement schedule, provided for a 3% administrative fee to be paid to the Borough, as well as $100,000 annual payment to replenish the Borough’s Hospital Enterprise Fund Net Position. If renewal and replacement costs are 25% greater than the budgeted costs, the lease payment may be amended to incorporate these cost overruns. If projects greater than $50,000 are necessary to meet federal or state facility audits, the lease payment may be amended to incorporate these cost overruns. (b) Long Term Care Center Enterpise Fund The Kodiak Island Borough Assembly leases the Kodiak Island Long Term Care Center to Sisters of Providence, d.b.a. Providence Kodiak Island Medical Center who assumed responsibility for the Long Term Care Center’s operations as of February 1, 2015. The lease agreement is effective for a term of twenty years from that date. The lease is cancelable by either party with a one year notice. The Center’s capital assets, the lease income, and all other costs relating to the agreement are accounted for by the Borough in the Long Term Care Center Fund. KODIAK ISLAND BOROUGH Notes to Basic Financial Statements, Continued 68 The agreement with Providence specifies that Providence will pay monthly lease payments to the Borough in an amount no less than required to fully fund all debt service requirements plus an amount sufficient to cover the Borough’s expenses in maintaining insurance for fire and other risks (including earthquakes). The monthly lease payment will be adjusted on January 1, each year and is based on the Borough’s required debt service payments and costs to insure the facility. The current lease payment through December 31, 2018, is $86,968. (c) Kodiak Fisheries Research Center The Kodiak Fisheries Research Center (KFRC) leases its premise to the Alaska Department of Fish and Game (ADF&G), the General Services Administration (GSA) on behalf of both the National Oceanic and Atmospheric Administration (NOAA) and the Natural Resources Commision (NRC), the University of Alaska Fairbanks (UAF), and Kodiak Regional Aquaculture Association (KRAA). The lease with ADF&G is from October 1, 1998 through September 30, 2018, with an option to extend for up to two additional five year periods. Annual rent escalates each year and is currently $59,428. The lease with NOAA was amended in April 2016 and expires in March 2036. Annual rent is $868,777 which is comprised of $185,867 base rent plus operational and maintenance expenses of $513,561 and debt repayment of $169,349. The debt repayment element was negotiated in the new lease to recover a portion of the original debt incurred by the Borough for construction of the facility. The original bond issue was fully paid by the Borough; however, the new lease is designed to recoup costs already incurred and this portion of the lease is recorded as a long- term receivable in the amount of $1,515,401 as of June 30, 2018. The lease with NRC commenced on March 1, 2018, and extends through February 28, 2038, with rents escalating every three years. The current annual rate of $24,433 is effective through February 28, 2021. The lease with UAF was originally from October 1, 1998 through September 30, 2018, cancelable with 30 days’ notice, with an option to extend for up to two additional five year periods. The State of Alaska cancelled the lease for laboratory space effective September 1, 2012, but has continued leasing the dorm space. The State has not given notice to cancel this section of the lease. In 2018 UAF paid $39,870 to lease dorm space at the research facility. The lease with Kodiak Regional Aquaculture Association was amended to include more space. The new lease term is from March 2017 through March 2020. Annual rent is $18,925. KODIAK ISLAND BOROUGH Notes to Basic Financial Statements, Continued 69 (15) Change in Accounting Principal As discussed in Note 16 to the financial statements, the Kodiak Island Borough participates in the Alaska Public Employees’ Retirement System (PERS). In 2018, the Kodiak Island Borough adopted the provisions of GASB Statement No. 75 Accounting and Financial Reporting for Postemployment Benefits Other Than Pensions, which, among other accounting and reporting criteria, requires the Kodiak Island Borough to recognize its proportional share of the net other postemployment benefit plans (OPEB) liability (and related deferred inflow/outflow accounts), as of the beginning of the Kodiak Island Borough’s fiscal year. As a result of the implementation of this statement, the Kodiak Island Borough has recorded an opening balance adjustment to increase liabilities and to decrease opening net position as follows: Governmental Business-Type Activities Activities Total Opening net position, as originally presented $ 129,150,733 49,682,444 $ 178,833,177 Change in accounting principal adjustment (1,045,654) (264,361) (1,310,015) Opening net position, as restated $ 128,105,079 49,418,083 $ 177,523,162 (16) Employee Retirement System Plans The Kodiak Island Borough (the Borough) follows Governmental Accounting Standards Board (GASB) Codification P20, Accounting for Pensions by State and Local Governmental Employees and GASB Codification P50, Accounting and Financial Reporting by Employers for Post-employment Benefits Other than Pensions. GASB Codification P20 and GASB Codification P50 establish uniform standards for the measurement, recognition and display of pension and other post-employment benefits other than pensions (healthcare) expenditures/expense and related liabilities, assets, note disclosure and applicable required supplementary information in the financial reports of state and local governmental employers. All full-time employees and certain permanent part-time employees of the Borough participate in the State of Alaska Public Employees’ Retirement System (PERS). In addition to the pension plan, PERS also administers other post-employment benefit (OPEB) plans. The system is governed by the Alaska Retirement Management Board. The benefit and contribution provisions are established by State law and may be amended only by the State legislature. The Administrator of the Plan is the Commissioner of Administration or the Commissioner’s designee. Summary of Significant Accounting Policies. The financial statements for PERS are prepared using the accrual basis of accounting. Plan member contributions are recognized in the period in which the contributions are due. The Borough’s contributions are recognized when due and a formal commitment to provide the contributions has been made. Benefits and refunds are recognized when due and payable in accordance with the terms of the plan. All plan investments are reported at fair value. KODIAK ISLAND BOROUGH Notes to Basic Financial Statements, Continued 70 PERS acts as the common investment and administrative agencies for the following multiple-employer plans: Plan Name Type of Plan Defined Benefit Pension Plan (DB) Cost-sharing, Defined Benefit Pension Defined Contribution Pension Plan (DC) Defined Contribution Pension Defined Benefit Other Postemployment Benefits (OPEB) Healthcare Reimbursement Arrangement Plan Defined Benefit OPEB Defined Contribution Other Postemployment Benefits (DC) Occupational Death and Disability Plan Cost-sharing, Defined Contribution OPEB Alaska Retiree Healthcare Trust Plan Cost-sharing, Defined Contribution OPEB Retiree Medical Plan Cost-sharing, Defined Contribution OPEB Other Postemployment Benefit Plans (OPEB) Occupational Death and Disability Plan (ODD) The Occupational Death and Disability Plan provides death benefits for beneficiaries of plan participants and long-term disability benefits to all active members within the System. Membership in the plan consisted of the following at June 30, 2017 (latest available report): Membership PERS Active plan members 19,442 Participating employers 155 Alaska Retiree Healthcare Trust Plan (ARHCT) Beginning July 1, 2007, the Alaska Retiree Healthcare Trust Plan (ARHCT), a Healthcare Trust Fund of the State, was established. The ARHCT is self-funded and provides major medical coverage to retirees of the System. The System retains the risk of loss of allowable claims for eligible members. The ARHCT began paying member healthcare claims on March 1, 2008. Prior to that, healthcare claims were paid for by the Retiree Health Fund (RHF). Membership in the plan consisted of the following at June 30, 2017 (latest report available): Membership PERS Inactive plan members or beneficiaries currently receiving benefits 34,310 Inactive plan members entitled to but not yet receiving benefits 5,799 Active plan members 14,956 Total plan membership 55,065 KODIAK ISLAND BOROUGH Notes to Basic Financial Statements, Continued 71 Retiree Medical Plan (RMP) The retiree medical plan provides major medical coverage to retirees of the DC plan. The plan is self- insured. Members are not eligible to use this plan until they have at least 10 years of service and are Medicare age eligible. Membership in the plan consists of the following at June 30, 2017 (latest available report): Membership PERS Inactive plan members or beneficiaries currently receiving benefits 5 Inactive plan members entitled to but not yet receiving benefits 831 Inactive plan members not entitled to benefits 10,466 Active plan members 19,442 Total plan membership 30,744 Healthcare Reimbursement Arrangement Plan The Healthcare Reimbursement Arrangement Plan was established to allow medical expenses to be reimbursed from individual savings accounts established for eligible participants. Membership in the plan consists of the following at June 30, 2017 (latest available report): Membership PERS Inactive plan members or beneficiaries currently receiving benefits 7 Inactive plan members entitled to but not yet receiving benefits 829 Inactive plan members not entitled to benefits 10,466 Active plan members 19,442 Total plan membership 30,744 Investments The Board is the investment oversight authority of the system’s investments. As the fiduciary, the Board has the statutory to invest the assets under the Prudent Investor Rule. Fiduciary responsibility for the Board’s invested assets is pursuant to AS 37.10.210.390. Treasury provides staff for the Board. Treasury has created a pooled environment by which it manages investments of the Board. Additionally, Treasury manages a mix of Pooled Investment Funds and Collective Investment Funds for the DC Participant-directed Pension plans under the Board’s fiduciary responsibility. Rate of Return The money-weighted rate of return expresses investment performance, net of investment expense, adjusted for the changing amounts actually invested. The annual weighted rate of return, net of investment expense for the year ended June 30, 2017 (latest available report) for the DB Plan is 12.99%, for the ARHCT is 12.69%, for the Occupational Death and Disability Plan is 11.97%, and for the Retiree Medical Plan is 11.93%. KODIAK ISLAND BOROUGH Notes to Basic Financial Statements, Continued 72 For additional information on securities lending, interest rates, credit risks, foreign exchange, derivatives, fair value, and counterparty credit risks, see the separately issued report on the Invested Assets of the State of Alaska Retirement and Benefits Plans at: http://treasury.dor.alaska.gov/armb/Reports-and-Policies/Annual-Audited-Financial-Schedules.aspx. Alaska Public Employee Retirement System (PERS) – Defined Benefit Plan (DB) Plan Description. The Borough participates in the Alaska Public Employees’ Retirement System (PERS), a cost sharing multiple employer defined benefit pension plan. PERS provides retirement benefits, disability and death benefits, and post-employment healthcare to plan members and beneficiaries. The Plan was established and is administered by the State of Alaska, Department of Administration. The Public Employee’s Retirement System issues a publicly available financial report that includes financial statements and required supplementary information for PERS. This report may be obtained from the system at Pouch C, Juneau, Alaska 99811 or online at http://doa.alaska.gov/drb/pers. Pension Benefits. All tier employee benefits vest with five years of credited service. There are three tiers of employees based on entry date. Tier I employees enrolled prior to July 1, 1986 with five or more years of credited service are entitled to annual pension benefits beginning at normal retirement age 55 or early retirement age 50. For tier II and III employees enrolled after June 30, 1986, but before July 1, 2006, the normal and early retirement ages are 60 and 55, respectively. All tier employees with 30 or more years of credited service may retire at any age and receive a normal benefit. The PERS defined benefit is closed to new hires enrolled on or after July 1, 2006. New hires after this date participate in the PERS defined contribution plan (DC) described later in these notes. Currently there are 155 employers participating in PERS, including the State of Alaska and 154 political subdivisions and public organizations. The DB Plan’s membership consisted of the following at June 30, 2017 (latest available report): Inactive plan members or beneficiaries currently receiving benefits 34,310 Inactive plan members entitled to but not receiving benefits 5,799 Active plan members 14,956 Total DB plan membership 55,065 Retirement benefits are calculated by multiplying the average monthly compensation (AMC) times credited PERS service times the percentage multiplier. The AMC is determined by averaging the salaries earned during the five highest (three highest for Police/Fire members or members hired prior to July 1, 1996) consecutive payroll years. Members must earn at least 115 days of credit in the last year worked to include it in the AMC calculation. The PERS pays a minimum benefit of $25 per month for each year of service when the calculated benefit is less. The percentage multipliers for police/fire personnel are 2% for the first ten years of service and 2.5% for all service over 10 years. The percentage multipliers for all other participants are 2% for the first ten years, 2.25% for the next ten years, and 2.5% for all remaining service earned on or after July 1, 1986. All service before that date is calculated at 2%. KODIAK ISLAND BOROUGH Notes to Basic Financial Statements, Continued 73 Post-employment healthcare benefits are provided without cost to all members first enrolled before July 1, 1986. Members first enrolled after June 30, 1986, but before July 1, 2006 and who have not reached age 60 may elect to pay for major medical benefits. Post Retirement Pension Adjustments. Post retirement pension adjustments (PRPAs) are granted annually to eligible benefit recipients when the consumer price index (CPI) increases during the preceding calendar year. PRPAs are calculated by multiplying the recipient’s base benefit, including past PRPAs, times: (a) 75% of the CPI increase in the preceding calendar year or 9%, whichever is less, if the recipient is at least 65 or on PERS disability; or (b) 50% of the CPI increase in the preceding calendar year or 6%, whichever is less, if the recipient is at least 60, or has been receiving benefits for at least five years. Ad hoc PRPAs, up to a maximum of 4%, may be granted to eligible recipients who first entered the PERS before July 1, 1986, if the CPI increases and the financial condition of the fund will permit an increase. In a year where an ad hoc PRPA is granted, eligible recipients will receive the higher of the two calculations. Funding Policy. In April 2008 the Alaska Legislature passed legislation which statutorily capped the employer contribution, established a state funded “on-behalf” contribution, and required that employer contributions be calculated against all PERS eligible wages, including wages paid to participants of the PERS Tier IV defined contribution plan (DC) described later in these footnotes. The state legislature capped the rate at 22%, with the State contributing an on-behalf payment for the difference between the actuarial contribution and the cap. Salary Floor. During the 25th legislation session, Senate Bill 125 passed, which established a June 30, 2008 salary floor under AS 39.35.255(a)(2). The salary floor is the total base salaries paid by an employer to active employees of the system as of the fiscal year ending June 30, 2008. The statute requires the Division of Retirement and Benefits (Division) to collect employer contributions at a minimum based on FY 2008 base salaries. Termination Costs. If the Borough decides to terminate coverage for a department, group, or other classification of members, even if that termination results from the decision to divest of a particular Borough function, all affected employees in that department, group or other classification of members become immediately vested in the plan. The Borough must pay to have a termination study completed. The purpose of the study is to calculate the Borough’s one-time termination costs. The costs represent the amount necessary to fully fund the costs of plan members who become vested through this process and for other changes in actuarial assumptions, such as, earlier than expected retirement, that arise from the act of termination of coverage. The Borough must pay a lump sum within 60 days of termination or arrange a payment plan that is acceptable to the PERS Administrator. For fiscal year 2018 the past service rate is 15.28%. Employee Contribution Rate. The Borough’s active PERS members are required to contribute 6.75% (5.25% pension costs and 1.50% OPEB) of their annual covered salary. KODIAK ISLAND BOROUGH Notes to Basic Financial Statements, Continued 74 Employer and Other Contribution Rates. There are several contribution rates associated with the pension and healthcare contributions and related liabilities. These amounts are calculated on an annual basis. Employer Effective Rate: This is the actual employer pay-in rate. Under current legislation, this rate is statutorily capped at 22% (17.12% pension costs and 4.88% OPEB) of eligible wages, subject to the salary floor, and other termination costs as described above. This 22% rate is calculated on all PERS participating wages, including those wages attributable to employees in the defined benefit plan. ARM Board Adopted Rate: This is the rate formally adopted by the Alaska Retirement Management Board. This rate is actuarially determined and used to calculate annual Plan funding requirements, without regard to the statutory rate cap or the GASB accounting rate. This rate is 25.01% (19.46% pension and 5.55% OPEB). Prior to July 1, 2015, there were no constraints or restrictions on the actuarial cost method or other assumptions used in the ARM Board valuation. Effective July 1, 2015, the Legislature requires the ARM Board to adopt employer contribution rates for past service liabilities using a level percent of pay method over a closed 25 year term which ends in 2039. This will result in lower ARM Board Rates in future years. On-behalf Contribution Rate: This is the rate paid in by the State as an on-behalf payment as mandated under current statute. Under state law, subject to annual appropriation, the state will contribute an on- behalf payment into the plan in an amount equal to the difference between the ARM Board Rate and the Employer Effective Rate. As a result, the On-behalf Contribution Rate for 2018 is 3.01% (75.54% pension and 24.46% OPEB). On-behalf contribution amounts have been recognized in these financial statements as both revenue and expenditures. GASB Rate: This is the rate used to determine the long-term pension and healthcare liability for plan accounting purposes. Certain actuarial methods and assumptions for this rate calculation are mandated by the Governmental Accounting Standards Board (GASB). Medicare Part D subsidies are not reflected in this rate. The rate uses an 8% pension discount rate. Employer contributions for the year ended June 30, 2018, were: Pensions (DB) Other Post-Employment Benefits (DB) Total $ 483,892 137,930 621,822 Public Employees Retirement Plans For the year ended June 30, 2018 the State of Alaska contributed $89,317 (75.54% pension cost) and $28,921 (24.46% OPEB cost) on-behalf of the Borough, which has been recorded in the fund financial statement under the modified-accrual basis of accounting. In the government-wide financial statements the on-behalf contribution has been adjusted as of the measurement date June 30, 2017 to a total of $222,708, to represent the pension/OPEB expense attributable to the State under the full accrual basis of accounting. KODIAK ISLAND BOROUGH Notes to Basic Financial Statements, Continued 75 Pension and OPEB Liabilities, Pension and OPEB Expense, and Deferred Outflows of Resources and Deferred Inflows of Resources Related to Pensions and OPEB: At June 30, 2018, the Borough reported liabilities that reflected a reduction for State pension and OPEB support provided to the Borough. The amount recognized by the Borough as its proportionate share of net pension and OPEB liabilities, the related State support, and the total portion of the net pension and OPEB liabilities (assets) that was associated with the Borough were as follows: Defined Benefit: Pension Borough’s proportionate share of the net pension liability $ 5,687,130 State’s proportionate share of the net pension liability 2,118,453 Total $ 7,805,583 OPEB Borough’s proportionate share of the ARHCT OPEB liability $ 929,853 State’s proportionate share of the ARHCT OPEB liability 347,255 Total $ 1,277,108 Defined Contribution: Borough’s proportionate share of the ODD OPEB liability (asset) $ (20,405) Borough’s proportionate share of the RMP OPEB liability 7,500 Total $ (12,905) Total Borough’s share of net pension and OPEB liabilities $ 6,604,078 $5,250,303 of the net pension and OPEB liabilities is reported in governmental activities and $1,353,775 is reported in business-type activities. The net pension and OPEB liabilities were measured as of June 30, 2017, and the total pension and OPEB liabilities used to calculate the net pension and OPEB liabilities were determined by an actuarial valuation as of that date. The Borough’s proportion of the net pension and OPEB liabilities were based on the present value of contributions for FY2019 through FY2039, as determined by projections based on the June 30, 2017 valuation. At June 30, 2018, the Borough’s proportion of the pension liability was 0.1100%, which is a decrease of 0.0230% from June 30, 2017. At June 30, 2018, the Borough’s proportion of the ARCHT, ODD and RMP OPEB liabilities were 0.1101%, 0.1438%, and 0.1438%, respectively, which represent a decrease of 0.0231%, and an increase of 0.0153%, and 0.0153%, respectively, from June 30, 2017. KODIAK ISLAND BOROUGH Notes to Basic Financial Statements, Continued 76 Based on the measurement date of June 30, 2017, the Borough recognized pension and OPEB expense of $429,332 and $144,389, respectively, for the year ended June 30, 2018. At June 30, 2018, the Borough reported deferred outflows of resources and deferred inflows of resources related to pensions and OPEB from the following sources: Pension Deferred Outflows Deferred Inflows Defined Benefit: of Resources of Resources Differences between expected and actual experience $ - (102,249) Changes of assumptions - - Net difference between projected and actual earnings on pension plan investments 152,549 - Changes in proportion and differences between Borough contributions and proportionate share of contributions 38,747 (549,458) Borough contributions subsequent to the measurement date 483,892 - Total $ 675,188 (651,707) OPEB ARHCT Deferred Outflows Deferred Inflows of Resources of Resources Differences between expected and actual experience $ - (50,144) Changes of assumptions - - Net difference between projected and actual earnings on OPEB plan investments - (291,191) Changes in proportion and differences between Borough contributions and proportionate share of contributions - (135,207) Borough contributions subsequent to the measurement date 137,930 - Total $ 137,930 (476,542) KODIAK ISLAND BOROUGH Notes to Basic Financial Statements, Continued 77 OPEB ODD Deferred Outflows Deferred Inflows Defined Contribution: of Resources of Resources Differences between expected and actual experience $ - (602) Changes of assumptions - - Net difference between projected and actual - earnings on OPEB plan investments - (1,275) Changes in proportion and differences between Borough contributions and proportionate share of contributions - (2,026) Borough contributions subsequent to the measurement date 3,283 - Total $ 3,283 (3,903) OPEB RMP Deferred Outflows Deferred Inflows of Resources of Resources Differences between expected and actual experience $ - (59) Changes of assumptions - - Net difference between projected and actual earnings on OPEB plan investments - (3,645) Changes in proportion and differences between Borough contributions and proportionate share of contributions 1,255 - Borough contributions subsequent to the measurement date 19,210 - Total $ 20,465 (3,704) $483,892 and $160,423 is reported as deferred outflows of resources related to pension and OPEB resulting from Borough contributions subsequent to the measurement date will be recognized as a reduction of the net pension and OPEB liabilities in the year ended June 30, 2019, respectively. Other amounts reported as deferred outflows of resources and deferred inflows of resources related to pension and OPEB will be recognized in pension and OPEB expense as follows: Year Ended June 30, Pension OPEB ARHCT OPEB ODD OPEB RMP 2018 $ (602,319) (175,772) (643) (764) 2019 158,850 (155,176) (643) (764) 2020 71,310 (72,797) (643) (764) 2021 (88,252) (72,797) (643) (764) 2022 - - (324) 148 Thereafter - - (1,007) 459 Total $ 460,411 (476,542) (3,903) (2,449) KODIAK ISLAND BOROUGH Notes to Basic Financial Statements, Continued 78 For the year ended June 30, 2018, the Borough recognized ($190,209) and ($75,210) of pension and OPEB amortization of the net deferred outflows and inflows of resources, respectively. Actuarial Assumptions: The total pension and OPEB liabilities in the June 30, 2017 (latest available) actuarial valuation was determined by an actuarial valuation as of June 30, 2016, which was rolled forward to June 30, 2017. These assumptions were the result of an experience study performed as of June 30, 2013. Investment return / discount rate 8% per year (geometric), compounded annually, net of expenses Salary scale Inflation – 3.12% per year Productivity – 0.50% per year Payroll growth 3.62% per year (inflation + productivity) Total inflation Total inflation as measured by the Consumer Price Index for urban and clerical workers from Anchorage is assumed to increase 3.12% annually. Mortality (Pre-termination) Based upon 2010-2013 actual mortality experience, 60% of male rates and 65% of female rates of post termination mortality rates. Deaths are assumed to be occupational 70% of the time for peace officers, and firefighters, 50% of the time for others. Mortality (Post-termination) 96% of all rates of the RP-2000 combined mortality table, 2000 base year projected to 2018. Total turnover Based upon the 2010-2013 actual withdrawal experience. Disability Incidence rates based on 2010-2013 actual experience. Post-disability mortality in accordance with the RP- 2000 Disabled Retiree Mortality Table. Disabilities are assumed to be occupational 70% of the time for peace officers / firefighters, 50% of the time for others. Retirement Retirement rates based upon the 2010-2013 actual experience. Deferred vested members are assumed to retire at their earliest unreduced retirement date for others. For peace officers/firefighters, Tier 1 deferred vested members are assumed to retire at age 55 and Tiers 2 and 3 deferred vested members are assumed to retire at age 60. KODIAK ISLAND BOROUGH Notes to Basic Financial Statements, Continued 79 Marriage and age difference Wives are assumed to be three years younger than husbands. For others, 75% of male members and 70% of female members are assumed to be married. For peace officers/firefighters, 85% of male members and 60% female members are assumed to be married. Healthcare cost trend rates Pre-65 medical: 8.8% grading down to 4.4% Post-65 Medical: 5.8% grading down to 4.0% Prescription drugs: 5.4% grading down to 4.0% The long-term expected rate of return on pension and OPEB plan investments was determined using the building-block method in which best-estimate ranges of expected future real rates of return (expected returns, net of pension plan investment expense and inflation) are developed for each major asset class. These ranges are combined to produce the long-term expected rate of return by weighting the expected future real rates of return by the target asset allocation percentage and adding expected inflation. The best estimates of arithmetic real rates of return for each major asset class are summarized below: Long-Term Expected Asset Class Real Rate of Return Domestic Equity 8.83% Global Ex- U.S. Equity 7.79% Intermediate Treasuries 1.29% Opportunistic 4.76% Real Assets 4.94% Absolute Return 4.76% Private Equity 12.02% Cash Equivalents 0.63% Discount Rate: The discount rate used to measure the total pension and OPEB liabilities is 8.00%. The projection of the cash flows used to determine the discount rate assumed that Employer and State contributions will continue to follow the current funding policy, which meets State statutes. Based on those assumptions, the pension and OPEB plans fiduciary net pension and OPEB were projected to be available to make all projected future benefit payments of current plan members. Therefore, the long- term expected rate of return on pension and OPEB plan investments were applied to all periods of projected benefit payments to determine the total pension and OPEB liabilities. KODIAK ISLAND BOROUGH Notes to Basic Financial Statements, Continued 80 Sensitivity of the Net Pension and OPEB Liabilities to Changes in the Discount Rate: The following presents the net pension liability of the plan calculated using the discount rate of 8%, as well as what the Plans’ net pension liability would be if it were calculated using a discount rate that is 1-percentage- point lower (7%) or 1-percentage-point higher (9%) than the current rate: 1% Decrease Current Rate 1% Increase (7%) (8%) (9%) Net pension liability $ 7,470,569 5,687,130 4,181,083 Net OPEB ARHCT liability $ 1,989,983 929,853 38,138 Net OPEB ODD liability $ (18,420) (20,405) (22,027) Net OPEB RMP liability $ 35,134 7,500 (14,079) Sensitivity of the Borough’s proportionate share of the net OPEB liability to changes in the healthcare cost trend rates. The following present the Borough’s proportionate share of the net OPEB liability, as well as what the Borough’s proportionate share of the net OPEB liability would be if it were calculated using healthcare cost trend rates that are 1-percentage-point lower or 1-percentage-point higher than the current healthcare cost trend rates: 1% Decrease Current Rate 1% Increase Net OPEB ARHCT liability $ (103,146) 929,853 2,171,766 Net OPEB ODD liability N/A (20,405) N/A Net OPEB RMP liability (18,564) 7,500 42,421 Alaska Public Employee Retirement System (PERS) – Defined Contribution Plan (DC) Plan Description and Funding Requirements. Public Employers in the State of Alaska have a defined contribution retirement plan (PERS Tier IV) for new hires first enrolled on or after July 1, 2006. This Plan is administered by the State of Alaska, Department of Administration in conjunction with the defined benefit plan noted above. The Administrator of the Plan is the Commissioner of Administration or the Commissioner’s designee. Plan members make mandatory contributions of 8% of gross eligible compensation. This amount goes directly to the individual’s account. State statutes require the employer to contribute 5% of employees’ eligible compensation. Additionally, employers are required to contribute to OPEB (DB): 1.03% for the retiree medical plan (DB), 0.16% for occupational and death and disability benefits (DB) and 3% of employers’ average annual employee compensation to the health reimbursement arrangement (HRA DC). The effective employer contribution is 22%. Currently there are 155 employers participating in the defined contribution plan, including the State of Alaska. At June 30, 2017 (latest available report), membership in the DC plan consisted of 1,735 peace officers and firefighters and 19,532 of other members. Plan members are 100% vested with their contributions. KODIAK ISLAND BOROUGH Notes to Basic Financial Statements, Continued 81 Members become vested in employers’ contributions as follows: 2 years of service – 25% 3 years of service – 50% 4 years of service – 75% 5 years of service – 100% The Borough contributed $169,685 for the year ended June 30, 2018. Deferred Compensation Plan The Kodiak Island Borough has two deferred compensation plans created and amended in accordance with Internal Revenue Code Section 457. The plans are available to all regular Borough employees. The deferred compensation is not available to employees until termination, retirement, death, or unforeseeable emergency. All amounts deferred under these plans are held in trusts that were established for the exclusive benefit of plan participants. Amounts contributed to the plans by participants during the year ended June 30, 2018, were $95,756. The first plan is managed by the International City Managers Association Retirement Corporation. $47,856 was contributed to this plan during the year ended June 30, 2018. The Borough believes that the plan does not meet the criteria for inclusion as a fiduciary fund. The second plan is managed by the MassMutual Financial Group. $47,900 was contributed to this plan during the year ended June 30, 2018. The Borough believes that the plan does not meet the criteria for inclusion as a fiduciary fund. (17) Contingencies (a) General The Borough, in the normal course of its activities, is involved in various claims and pending litigation. After consultation with legal counsel, management estimates that these matters will be resolved without material adverse effect on the Borough’s future financial position or results of operations. (b) Grants Amounts received or receivable from grantor agencies are subject to audit and adjustment by the grantor agencies. Any disallowed claims, including amounts already collected, would become a liability of the General or other applicable funds. In management’s opinion, disallowances, if any, will not be material. KODIAK ISLAND BOROUGH Notes to Basic Financial Statements, Continued 82 (18) Advance Refunding of Debt In November 2016, the Borough issued $4,905,000 of 2016 Series Three general obligation bonds with an average interest rate of 4.82% to advance refund $5,620,000 of outstanding 2008 Series A bonds with an average interest rate of 4.73%. As a result, the 2008 Series A bonds are considered to be defeased and the liability for those bonds has been removed from the financial statements. As of June 30, 2018, the amount of defeased debt still outstanding was $4,870,000. In November 2016, the Borough’s Long Term Care Center Enterprise Fund advance refunded $4,455,000 of the 2013 Series Two revenue bonds with an average interest rate of 4.43%, using $4,529,157 in available resources and $363,612 released from the Debt Service Reserve Fund for the 2013 Series Two revenue bonds. As a result, a portion of the 2013 Series Two bonds are considered to be defeased and the liability for those bonds has been removed from the financial statements As of June 30, 2018, the amount of defeased debt still outstanding was $4,105,000. (19) Subsequent Events The Borough received notice on June 18, 2018, from the State of Alaska, Department of Administration, Division of Retirement and Benefits that Forfeitures from the defined contribution plan for the Public Employees’ Retirement System (PERS) can be offset against future contributions effective July 1, 2018. The Borough has $57,419 in PERS forfeitures to be used towards future contributions. In October 2018 the Borough settled a lawsuit with Watterson Construction related to the high school construction project. $525,000 has been accrued as accounts payable and expenditures as of June 30, 2018. Management have evaluated all other subsequent events through December 20, 2018, the date which the financial statements were available for issue. (20) Long Term Care Center Fund During fiscal year 2017, Borough management separated the activities of the Long Term Care Center (LTCC) Enterprise Fund from the Hospital Facilities Enterprise Fund upon completion of the Long Term Care Center. The Hospital Facilities Enterprise Fund recorded a transfer out to the Long Term Care Center Enterprise Fund in the amount of $8,062,822 as a result of the separation. The Hospital Enterprise Fund also recorded a gain on the separation of $1,721,113, which is the net difference between capital assets and associated debt that was transferred to the Long Term Care Center Enterpirse Fund. Conversely, the LTCC Enterprise Fund recognized a loss of $1,721,113. (21) Construction Commitments The Borough has outstanding commitments for construction at year end of $2,706,790. KODIAK ISLAND BOROUGH Notes to Basic Financial Statements, Continued 83 (22) Subsequent Accounting Pronouncements The Governmental Accounting Standards Board has passed several new accounting standards with upcoming implementation dates covering several topics as follows:  GASB 83 – Certain Retirement Obligations. Effective for fiscal years beginning after June 15, 2018.  GASB 84 – Fiduciary Activities. Effective for fiscal years beginning after December 15, 2018.  GASB 87 – Leases. Effective for fiscal years beginning after December 15, 2019.  GASB 88 – Certain Disclosures Related to Debt, Including Direct Borrowings and Direct Placements. Effective for fiscal years beginning after June 15, 2018. Statements 83 and 84 are not expected to have any significant impact on the financial statements of the Borough. GASB Statement No. 87, the objective of this Statement is to better meet the information needs of financial statement users by improving accounting and financial reporting for leases by governments. This Statement increases the usefulness of governments' financial statements by requiring recognition of certain lease assets and liabilities for leases that previously were classified as operating leases and recognize as inflows of resources or outflows of resources based on the payment provisions of the contract. It establishes a single model for lease accounting based on the foundational principle that leases are financings of the right to use an underlying asset. Under this Statement, a lessee is required to recognize a lease liability and an intangible right- to-use lease asset, and a lessor is required to recognize a lease receivable and a deferred inflow of resources, thereby enhancing the relevance and consistency of information about governments' leasing activities. GASB Statement No. 88, the objective of this Statement is to improve the information that is disclosed in notes to government financial statements related to debt, including direct borrowings and direct payments. It also clarifies which liabilities governments should include when disclosing information related to debt. This Statement defines debt and requires enhanced footnote disclosures. REQUIRED SUPPLEMENTARY INFORMATION Budgetary Comparison Schedule General Fund Year ended June 30, 2018 (With financial information for the year ended June 30, 2017) Variance with Final Budget – Budget Positive 2017 Original Final Actual (Negative)Actual Revenues: Property taxes and assessments: Real $744,135 744,135 737,826 (6,309)159,796 Personal 84,631 84,631 84,827 196 21,508 Boat — — — — (64) Aircraft 26,500 26,500 30,000 3,500 26,500 Penalty and interest 148,500 148,500 219,086 70,586 213,373 Total property taxes and assessments 1,003,766 1,003,766 1,071,739 67,973 421,113 Severance taxes: Fish 1,395,000 1,395,000 1,660,842 265,842 1,182,924 Mining 20,000 20,000 53,618 33,618 73,495 Logging 20,000 20,000 101,463 81,463 50,088 Total severance taxes 1,435,000 1,435,000 1,815,923 380,923 1,306,507 Intergovernmental: State sources: State revenue sharing 390,200 465,942 465,942 — 461,512 Fisheries business tax 1,150,000 1,103,101 1,103,101 — 1,270,403 Fisheries resource landing tax 35,500 14,868 14,868 — 60,422 Telephone and electric tax 15,500 15,500 17,321 1,821 16,481 On-behalf PERS payment 99,382 99,382 86,701 (12,681)107,145 Marijuana license 2,500 2,500 500 (2,000)— Total state sources 1,693,082 1,701,293 1,688,433 (12,860) 1,915,963 Federal sources: Payments in lieu of taxes 1,331,000 1,331,000 1,621,466 290,466 1,592,112 Fish and Wildlife revenue sharing 112,500 191,973 191,973 — 230,082 Total federal sources 1,443,500 1,522,973 1,813,439 290,466 1,822,194 Total intergovernmental revenue 3,136,582 3,224,266 3,501,872 277,606 3,738,157 Charges for services - Sale of copies and maps 1,500 1,500 2,064 564 904 Licenses, permits and fees: Building and trailer permits 40,000 40,000 42,466 2,466 57,928 Subdivision and zoning fees 12,250 12,250 11,280 (970)16,785 Other permits 9,500 9,500 8,604 (896)8,833 Total licenses, permits and fees 61,750 61,750 62,350 600 83,546 Tobacco excise tax 200,000 200,000 310,482 110,482 — Investment income 13,000 13,000 10,830 (2,170) 11,059 Other 10,375 10,375 4,650 (5,725) 2,811 Total revenues 5,861,973 5,949,657 6,779,910 830,253 5,564,097 (continued) 2018 KODIAK ISLAND BOROUGH 84 Budgetary Comparison Schedule General Fund, continued Year ended June 30, 2018 (With financial information for the year ended June 30, 2017) Variance with Final Budget – Budget Positive 2017 Original Final Actual (Negative)Actual Expenditures: General government: General administration $253,700 341,384 194,859 146,525 177,983 Borough assembly 157,593 157,593 147,431 10,162 149,570 Borough manager 640,931 640,931 596,369 44,562 516,460 Borough clerk 564,427 564,427 536,455 27,972 519,422 Borough attorney 140,500 140,500 104,848 35,652 107,487 Finance department 880,938 880,938 758,166 122,772 719,954 Management information systems 898,269 898,269 806,485 91,784 810,500 Assessing department 739,669 739,669 789,476 (49,807)743,480 Engineering/facilities department 331,047 331,047 465,177 (134,130)319,031 Total general government 4,607,074 4,694,758 4,399,266 295,492 4,063,887 Public safety - animal control 110,000 110,000 114,015 (4,015) 109,415 Community and economic development: Community development department 894,786 894,786 880,241 14,545 860,160 Building official 169,130 169,130 166,451 2,679 96,979 Economic development 32,100 32,100 33,936 (1,836)30,268 Total community and economic development 1,096,016 1,096,016 1,080,628 15,388 987,407 Emergency preparedness 118,349 118,349 43,038 75,311 35,861 Health and social services 207,500 207,500 207,500 — 233,999 Education, culture, and recreation 4,500 4,500 4,665 (165)17,562 Parks and recreation 139,470 139,470 77,186 62,284 30,172 Kodiak College and city libraries 72,000 72,000 72,000 — 96,000 Total expenditures 6,354,909 6,442,593 5,998,298 444,295 5,574,303 Excess (deficiency) of revenues over expenditures (492,936) (492,936)781,612 1,274,548 (10,206) Other financing sources (uses): Proceeds from sale of assets — — 1,240 1,240 — Transfers in 492,936 492,936 492,936 — — Transfers out — (403,958) (403,958) — (958,451) Net other financing sources (uses)492,936 88,978 90,218 1,240 (958,451) Change in fund balance $— (403,958)871,830 1,275,788 (968,657) Fund balance, at beginning of year 2,317,124 3,285,781 Fund balance, at end of the year $ 3,188,954 2,317,124 See accompanying notes to required supplementary information. 2018 KODIAK ISLAND BOROUGH 85 KODIAK ISLAND BOROUGH Budgetary Comparison Schedule Special Revenue Fund – Education Support Year ended June 30, 2018 (With financial information for the year ended June 30, 2017) Variance with Final Budget – Budget Positive 2017 Original Final Actual (Negative)Actual Revenues: Property taxes and assessments: Real $8,221,174 8,221,174 8,152,772 (68,402) 8,892,817 Personal 903,326 903,326 928,259 24,933 1,095,560 Intergovernmental - state sources - Motor vehicle tax 253,000 253,000 237,895 (15,105) 235,177 Total revenues 9,377,500 9,377,500 9,318,926 (58,574) 10,223,554 Expenditures: Primary and secondary education 9,377,500 9,377,500 9,377,500 — 10,277,548 Excess (deficiency) of revenues over expenditures $— — (58,574) (58,574) (53,994) Fund balance (deficit), at beginning of year (68,040) (14,046) Fund balance (deficit), at end of year $ (126,614) (68,040) See accompanying notes to required supplementary information. 2018 86 KODIAK ISLAND BOROUGH Budgetary Comparison Schedule Special Revenue Fund – Facilities Year ended June 30, 2018 (With financial information for the year ended June 30, 2017) Variance with Final Budget – Budget Positive 2017 Original Final Actual (Negative) Actual Revenues - Investment income $170,000 170,000 203,430 33,430 191,391 Expenditures 39,790 39,790 — 39,790 — Excess of revenues over expenditures 130,210 130,210 203,430 73,220 191,391 Other financing sources (uses) - Transfers out (130,210) (130,210) (130,210) — (438,313) Change in fund balance $— — 73,220 73,220 (246,922) Fund balance, at beginning of year 39,297,999 39,544,921 Fund balance, at end of year $ 39,371,219 39,297,999 See accompanying notes to required supplementary information. 2018 87 KODIAK ISLAND BOROUGH Notes to Required Supplementary Information – Budgetary Comparison Schedules June 30, 2018 88 The Borough follows these procedures in establishing the budgetary data reflected in the fund financial statements:  The Borough Manager must submit to the Borough Assembly by April 30 a proposed operating budget for the fiscal year commencing the following July 1. The operating budget includes proposed expenditures and the means of financing them.  Public hearings are conducted by the Borough Assembly to obtain citizen comments.  By June 10, the budget is legally enacted through passage of an ordinance by Borough Assembly action. If the Borough Assembly fails to pass an ordinance, the budget submitted by the Borough Manager becomes the adopted budget.  Amendments to the budget can occur anytime during the fiscal year through the Borough Assembly or administrative action. Generally, the following actions are required at the level of the particular change: – All new appropriations are authorized by an appropriation ordinance that amends the annual budget ordinance. – A resolution of the Borough Assembly is required to move (appropriate) amounts between departments and projects. – The administration is authorized and directed by the Borough Assembly to effect the necessary line item changes within the limits established by Items (1) and (2) above by project or department to properly monitor, account, and report receipts and expenditures.  Expenditures may not legally exceed appropriations at the following levels: Capital Projects Funds – project level, all other funds – department level.  All funds, except Capital Projects Funds, are budgeted on an annual basis encompassing a fiscal year. Budgets of Capital Projects Funds generally encompass the period from start-up to project completion, which is generally greater than one year.  Appropriations lapse at year end to the extent that they have not been expended for all funds, except Capital Projects Funds, which lapse at project completion.  Budgets adopted by the Borough Assembly are in accordance with accounting principles generally accepted in the United States of America.  The Borough published a separate 2018 budget document. That document may be obtained from the Kodiak Island Borough, Finance Director, 710 Mill Bay Road, Kodiak, Alaska 99615. Borough's Proportionate Plan Fiduciary Borough's Borough's State of Alaska Share of the Net Position as Proportion Proportionate Proportionate Net Pension a Percentage of the Net Share of the Share of the Total Borough's Liability as a of the Total Pension Net Pension Net Pension Net Pension Covered Percentage of Pension Liability Liability Liability Liability Payroll Payroll Liability 0.0813%$3,790,363 $3,187,850 $6,978,213 $2,929,492 129%62.37% 0.1143%$5,545,660 $1,488,931 $7,034,591 $3,204,521 173%63.96% 0.1330%$7,434,494 $939,394 $8,373,888 $3,129,406 238%59.55% 0.1100%$5,687,130 $2,118,453 $7,805,583 $3,055,486 186%63.37% Notes to Schedule: 1. 2. Measurement is one year prior to fiscal year end for all years presented. 3. In fiscal year 2017 the Borough implemented GASB 82, which required a retroactive change in covered payroll. 4. 2015 2016 2017 Information presented for 2018 is based upon Plan measurement date June 30, 2017. This schedule is intended to present 10 years of information. Additional years' information will be included as it becomes available. 2018 KODIAK ISLAND BOROUGH Public Employees' Retirement System (PERS) Schedule of the Borough's Proportionate Share of the Net Pension Liability June 30, 2018 Year 89 Borough's Plan Fiduciary Borough's Borough's State of Alaska Proportionate Net Position as Proportion Proportionate Proportionate Share of the a Percentage of the Net Share of the Share of the Total Net OPEB of the Total OPEB Net OPEB Net OPEB Net OPEB Borough's Liability as a OPEB Liability Liability Liability Liability Covered Percentage of Liability (Asset) (Asset) (Asset) (Asset) Payroll Payroll (Asset) Alaska Retiree Healthcare Trust Plan (ARHCT): 0.1101% $ 929,853 $ 347,255 $ 1,277,108 $ 3,055,486 30.43% 89.68% Occupational Death and Disability (ODD): 0.1438% $ (20,405) $ - $ (20,405) $ 1,496,624 -1.36% 212.97% Retiree Medical Plan (RMP): 0.1438% $ 7,500 $ - $ 7,500 $ 1,496,624 0.50% 93.98% Notes to Schedule: 1. 2. Measurement is one year prior to fiscal year end for all years presented. 3. 4. This schedule is intended to present 10 years of information. Additional years' information will be included as it becomes available. Information presented for 2018 is based upon Plan measurement date June 30, 2017. In fiscal year 2017 the Borough implemented GASB 82, which required a retroactive change in covered payroll. KODIAK ISLAND BOROUGH Schedule of the Borough's Proportionate Share of the Net OPEB Liability Public Employees' Retirement System (PERS) June 30, 2018 Year 2018 2018 2018 90 Contributions Relative to the Contributions Contractually Contractually Contribution Borough's as a Percentage Required Required Deficiency Covered of Covered Contribution Contribution (Excess) Payroll Payroll $370,432 $(370,432) $- $3,204,521 11.56% $377,365 $(377,365) $- $3,129,406 12.06% $406,215 $(406,215) $- $3,055,486 13.29% $483,892 $(483,892) $- $3,597,759 13.45% Notes to schedule 1. Valuation date: 2. Methods and assumptions used to determine contribution rates: 3. Actuarial cost method: Entry Age Normal - level percentage of payroll. 4. Amortization method: Level dollar, closed. 5. Amortization period: 25 years, as a level of percentage of payroll. 6. Equivalent single amortization period: 17 years. 7. Asset valuation method: 8. Inflation: 9. Salary increases: 10. Investment rate of return: 11. Retirement age: 12. Mortality: 13. In fiscal year 2017 the Borough implemented GASB 82, which required a retroactive change in covered payroll. 14. This schedule is intended to present 10 years of information. Additional years' information will be included as it becomes available. 15. In fiscal year 2018 the Borough included pension DBUL into the contractually required contribution. This will be a prospective change. contributions are reported. 3.12% per annum. KODIAK ISLAND BOROUGH Public Employees' Retirement System (PERS) Schedule of the Borough's Contributions (Pensions) June 30, 2018 Actuarially determined contribution rates are calculated as of June 30th, two years prior to the fiscal year in which Year 2015 2016 2017 June 30, 2017, which was rolled forward to June 30, 2018. 2018 Ranges from 9.66% to 4.92% based on service for Peace Officer/Firefighter. Ranges from 8.55% to 4.34% based on age and service for All Others. The actuarial asset value was reinitialized to equal fair value of assets as of June 30, 2014. Beginning in FY2015, the assets value method recognizes 20% of the gain or loss each year, for a period of 5 years, all assets are valued at fair value. 8%, net of pension plan investment expenses. This is based on an average inflation rate of 3.12% and a real rate of return of 4.88%. An age-related assumption is used for participants not yet receiving payments. Pre-termination mortality rates were based upon the 2010-2013 actual mortality experience, 60% of male and 65% of female post-termination rates. Deaths are assumed to be occupational 70% of the time for Peace Officers / Firefighters, 50% of the time for Others, 96% of all rates of the RP - 2000 Table Base Year projected to 2018 with projected scale BB. 91 Contributions Relative to the Contributions Contractually Contractually Contribution Borough's as a Percentage Required Required Deficiency Covered of Covered Contribution Contribution (Excess) Payroll Payroll Alaska Retiree Healthcare Trust Plan (ARHCT): $ 137,930 $ (137,930) $ - $ 3,597,759 3.83% Occupational Death and Disability (ODD): $ 3,283 $ (3,283) $ - $ 1,865,541 0.18% Retiree Medical Plan (RMP): $ 19,210 $ (19,210) $ - $ 1,865,541 1.03% Notes to schedule 1. Valuation date: 2. Methods and assumptions used to determine contribution rates: 3. Actuarial cost method: Entry Age Normal - level percentage of payroll. 4. Amortization method: Level dollar, closed. 5. Amortization period: 25 years, as a level of percentage of payroll. 6. Equivalent single amortization period: 17 years. 7. Asset valuation method: 8. Inflation: 9. Salary increases: 10. Investment rate of return: 11. Retirement age: 12. Mortality: 13. In fiscal year 2017 the Borough implemented GASB 82, which required a retroactive change in covered payroll. 14. This schedule is intended to present 10 years of information. Additional years' information will be included as it becomes available. KODIAK ISLAND BOROUGH Schedule of the Borough's Contributions (OPEB) Public Employees' Retirement System (PERS) June 30, 2018 Year Pre-termination mortality rates were based upon the 2010-2013 actual mortality experience, 60% of male and 65% of female post-termination rates. Deaths are assumed to be occupational 70% of the time for Peace Officers / Firefighters, 50% of the time for Others, 96% of all rates of the RP - 2000 Table Base Year projected to 2018 with projected scale BB. 2018 June 30, 2017, which was rolled forward to June 30, 2018. Actuarially determined contribution rates are calculated as of June 30th, two years prior to the fiscal year in which contributions are reported. The actuarial asset value was reinitialized to equal fair value of assets as of June 30, 2014. Beginning in FY2015, the assets value method recognizes 20% of the gain or loss each year, for a period of 5 years, all assets are valued at fair value. 3.12% per annum. Ranges from 9.66% to 4.92% based on service for Peace Officer/Firefighter. Ranges from 8.55% to 8%, net of OPEB plan investment expenses. This is based on an average inflation rate of 3.12% and a real rate of return of 4.88%. An age-related assumption is used for participants not yet receiving payments. 2018 2018 92 ADDITIONAL SUPPLEMENTARY INFORMATION KODIAK ISLAND BOROUGH Budgetary Comparison Schedule Debt Service Fund - Education Year ended June 30, 2018 (With summarized financial information for the year ended June 30, 2017) Variance with Final Budget – Positive 2017 Original Final Actual (Negative)Actual Revenues: Property taxes and assessments $2,724,701 2,724,701 2,711,114 (13,587) 2,503,607 Intergovernmental: State sources 4,985,040 4,985,040 4,985,040 — 3,840,763 Investment income (loss)— — (1,746) (1,746) (608) Total revenues 7,709,741 7,709,741 7,694,408 (15,333) 6,343,762 Expenditures: General government 3,600 3,600 16,059 (12,459) 11 Debt service: Principal 3,870,000 3,870,000 3,870,000 — 3,530,000 Interest 3,408,310 3,408,310 3,408,310 — 3,568,559 Debt issuance — — — — 64,313 Total expenditures 7,281,910 7,281,910 7,294,369 (12,459) 7,162,883 Excess (deficiency) of revenues over expenditures 427,831 427,831 400,039 (27,792) (819,121) Other financing sources (uses): Bond issuance — — — — 4,905,000 Premium on bonds issued — — — — 806,205 Payment to refunding escrow — — — — (5,934,301) Transfers in 65,105 65,105 65,105 — 1,059,380 Transfers out (492,936) (492,936) (492,936) — — Net other financing sources (uses) (427,831) (427,831) (427,831) — 836,284 Change in fund balance $— — (27,792) (27,792) 17,163 Fund balance, at beginning of year 234,996 217,833 Fund balance, at end of year $ 207,204 234,996 2018 Budget 93 NONMAJOR GOVERNMENTAL FUNDS Special Revenue See Special Revenue section of this report. Capital Projects See Capital Projects section of this report. NONMAJOR SPECIAL REVENUE FUNDS The Fire Protection Area No. 1 Fund accounts for the activities related to fire suppression and fire prevention services to the citizens of the service area. The Womens Bay Fire Department Fund accounts for the activities related to fire suppression and fire prevention services to the citizens of the service area. The Kodiak Airport Fire District Fund accounts for the activities related to fire suppression and fire prevention services to the citizens of the service area. The Monashka Bay Road Service Area Fund accounts for the activities related to road services within the service area. The Service Area No. 1 Fund accounts for the activities related to maintenance service to roads within the district, including snow removal, ditching and grading. The Womens Bay Road Service Area Fund accounts for the activities related to maintenance service to roads within the service area, including snow and ice removal, ditching and culvert work. The Bay View Road Service Area Fund accounts for the activities related to road services within the service area. The Service Area No. 2 Fund accounts for the activities related to water and sewer services in the service area. This fund is in the design stage at present. The Local Emergency Planning Committee (L.E.P.C.) Fund accounts for State of Alaska grants provided for regional emergency preparation, response, and mitigation planning. The Land Sales Fund accounts for the disposal of Borough-owned lands. The proceeds of land disposals are generally used for the management of Borough lands. The Buildings and Grounds Fund accounts for the operations and maintenance of certain buildings and grounds owned by the Borough which are jointly shared with the City of Kodiak, the Kodiak Island Borough School District, and certain nonprofit community organizations. The Woodland Acres Street Light Service Area Fund accounts for activities related to the provision of street lighting within the service area. The Trinity Islands Street Light Service Area Fund accounts for activities related to the provision of street lighting within the service area. The Tourism Development Fund accounts for the collection of the Borough Transient Accommodation Tax (Bed Tax) and cruise ship tax revenue. The Mission Lake Tide Gate Fund accounts for activities related to maintaining the tide gate for the residents of the service area. KODIAK ISLAND BOROUGH Combining Balance Sheet Nonmajor Governmental Funds June 30, 2018 (With summarized financial information at June 30, 2017) Special Capital Revenue Project Assets Funds Funds 2018 2017 Equity in central treasury $ 4,243,187 7,509,947 11,753,134 8,403,655 Receivables: State of Alaska 10,663 613 11,276 9,431 Federal government 154,762 76,808 231,570 49,923 Property taxes 35,144 35,714 70,858 31,450 Land sales contracts, due within one year 17,970 — 17,970 24,135 Other 47,460 54,187 101,647 79,484 Prepaid items 4 — 4 419,212 Land sale contracts, due after one year 169,875 — 169,875 360,657 Total assets $ 4,679,065 7,677,269 12,356,334 9,377,947 Liabilities: Accounts payable $138,611 1,575,098 1,713,709 259,539 Customer deposits 2,450 — 2,450 27,450 Due to other funds 49,984 659,249 709,233 802,600 Unearned revenues 2,231 30,930 33,161 30,930 Total liabilities 193,276 2,265,277 2,458,553 1,120,519 Deferred inflows of resources - Unavailable revenues 187,845 — 187,845 384,792 Total liabilities and deferred inflows of resources 381,121 2,265,277 2,646,398 1,505,311 Fund balances: Nonspendable 4 — 4 419,212 Committed 4,297,940 — 4,297,940 4,502,105 Assigned — 5,588,158 5,588,158 3,073,997 Unassigned — (176,166) (176,166) (122,678) Total fund balances 4,297,944 5,411,992 9,709,936 7,872,636 Total $ 4,679,065 7,677,269 12,356,334 9,377,947 Totals Resources and Fund Balances (Deficits) Liabilities, Deferred Inflows of 94 KODIAK ISLAND BOROUGH Combining Statement of Revenues, Expenditures, and Changes in Fund Balances Nonmajor Governmental Funds Year ended June 30, 2018 (With summarized financial information for year ended June 30, 2017) Special Capital Revenue Project Funds Funds 2018 2017 Revenues: Property taxes and assessments $1,402,168 1,736,076 3,138,244 2,787,175 Transient accommodations tax 113,486 — 113,486 108,050 Intergovernmental: State sources 61,235 2,870 64,105 92,435 Federal sources 159,846 93,828 253,674 806,343 Charges for services 876,635 — 876,635 790,882 Licenses, permits and fees 37,310 — 37,310 2,125,324 Investment income 29,734 39,607 69,341 43,017 Rental 14,400 — 14,400 14,160 Other 1,332 284,361 285,693 6,335 Total revenues 2,696,146 2,156,742 4,852,888 6,773,721 Expenditures: Current: General government 775,621 525,000 1,300,621 1,218,101 Public safety 684,499 — 684,499 589,703 Community and economic development 96,570 — 96,570 109,521 Service district maintenance 587,707 — 587,707 475,248 Capital outlay: Schools — 2,958,053 2,958,053 227,474 General 1,203,024 826,432 2,029,456 1,086,817 Total expenditures 3,347,421 4,309,485 7,656,906 3,706,864 Excess (deficiency) of revenues over expenditures (651,275) (2,152,743) (2,804,018) 3,066,857 Other financing sources (uses): Land sales proceeds 224,902 — 224,902 145,820 Proceeds from sale of capital assets — — — 140,000 Bond issuance — — — — Premium on bonds issued — — — — Transfers in 10,000 621,063 631,063 698,656 Transfers out (207,000) — (207,000) (1,495,644) Net other financing sources (uses) 27,902 621,063 648,965 (511,168) Change in fund balances (623,373) (1,531,680) (2,155,053) 2,555,689 Fund balances, at beginning of year 4,921,317 6,943,672 11,864,989 5,316,947 Fund balances, at end of year $ 4,297,944 5,411,992 9,709,936 7,872,636 Totals 95 Fire Fire Womens Kodiak Monashka Womens Protection Bay Fire Airport Fire Bay Road Service Bay Road Bay View Road Service Area Area No. 1 Department District Service Area Area No. 1 Service Area Service Area No. 2 L.E.P.C. Equity in central treasury $ 79,301 569,632 37,504 172,509 734,259 125,301 32,391 5,923 — Receivables: State of Alaska — — — — — — — — 10,663 Federal government 154,762 — — — — — — — — Property taxes 12,370 3,188 2,075 381 10,328 6,377 410 — — Land sales contracts, due within one year — — — — — — — — — Other 766 — — — — — — — — Prepaid items — — — — — — — — — Land sale contracts, due after one year — — — — — — — — — Total $ 247,199 572,820 39,579 172,890 744,587 131,678 32,801 5,923 10,663 Liabilities: Accounts payable $32,106 3,726 — — 49,925 17,749 — — 1,538 Customer deposits — 1,450 — — — — — — — Due to other funds 27,041 135 — — 1,381 — — — 9,125 Unearned revenues 2,231 — — — — — — — — Total liabilities 61,378 5,311 — — 51,306 17,749 — — 10,663 Deferred inflows of resources: Unavailable revenues — — — — — — — — — Total liabilities and deferred inflows of resources 61,378 5,311 — — 51,306 17,749 — — 10,663 Fund balances: Nonspendable — — — — — — — — — Committed 185,821 567,509 39,579 172,890 693,281 113,929 32,801 5,923 — Total fund balances 185,821 567,509 39,579 172,890 693,281 113,929 32,801 5,923 — Total $ 247,199 572,820 39,579 172,890 744,587 131,678 32,801 5,923 10,663 (continued) Liabilities, Deferred Inflows of Resources, and Fund Balances State Grant Program Assets Fire and Road Service Areas Road KODIAK ISLAND BOROUGH Combining Balance Sheet Nonmajor Special Revenue Funds (With summarized financial information at June 30, 2017) June 30, 2018 96 Woodland Buildings Acres Street Trinity Islands and Light Service Street Light Tourism Mission Lake Totals Assets Land Sales Grounds Area Service Area Development Tide Gate 2018 2017 Equity in central treasury $ 1,363,400 813,107 31,597 28,780 189,301 60,182 4,243,187 4,653,300 Receivables: State of Alaska — — — — — — 10,663 8,368 Federal government — — — — — — 154,762 — Property taxes — — 15 — — — 35,144 31,450 Land sales contracts, due within one year 17,970 — — — — — 17,970 24,135 Other 15,530 846 — — 30,318 — 47,460 56,117 Prepaid items — 4 — — — — 4 419,212 Land sale contracts, due after one year 169,875 — — — — — 169,875 360,657 Total $ 1,566,775 813,957 31,612 28,780 219,619 60,182 4,679,065 5,553,239 Liabilities: Accounts payable $4,433 24,407 388 151 4,188 — 138,611 211,312 Customer deposits 1,000 — — — — — 2,450 27,450 Due to other funds 7,038 5,248 — — — 16 49,984 8,368 Unearned revenues — — — — — — 2,231 — Total liabilities 12,471 29,655 388 151 4,188 16 193,276 247,130 Deferred inflows of resources: Unavailable revenues 187,845 — — — — — 187,845 384,792 Total liabilities and deferred inflows of resources 200,316 29,655 388 151 4,188 16 381,121 631,922 Fund balances: Nonspendable — 4 — — — — 4 419,212 Committed 1,366,459 784,298 31,224 28,629 215,431 60,166 4,297,940 4,502,105 Total fund balances 1,366,459 784,302 31,224 28,629 215,431 60,166 4,297,944 4,921,317 Total $ 1,566,775 813,957 31,612 28,780 219,619 60,182 4,679,065 5,553,239 Liabilities, Deferred Inflows of Resources, and Fund Balances June 30, 2018 (With summarized financial information at June 30, 2017) Street Lighting Districts KODIAK ISLAND BOROUGH Nonmajor Special Revenue Funds Combining Balance Sheet, (continued) 97 State Grant Fire Program Fire Womens Kodiak Monashka Womens Protection Bay Fire Airport Fire Bay Road Service Bay Road Bay View Road Service Area No. 1 Department District Service Area Area No. 1 Service Area Service Area Area No. 2 L.E.P.C. Revenues: Property taxes and assessments $ 597,762 101,828 16,701 61,814 400,031 196,222 13,879 — — Transient accommodations tax — — — — — — — — — Intergovernmental - State sources 3,522 — — — — — — — 15,500 Federal sources 159,846 — — — — — — — — Charges for services — 15,366 — — — — — — — Licenses, permits and fees — — — — — 27,600 — — — Investment income 843 2,913 192 807 10,862 551 147 30 — Rental — 14,400 — — — — — — — Other 1,030 100 — — — — — — — Total revenues 763,003 134,607 16,893 62,621 410,893 224,373 14,026 30 15,500 Expenditures: Current: General government — — — — — — — — — Public safety 565,491 88,142 15,366 — — — — — 15,500 Community and economic development — — — — — — — — — Service district maintenance — — — 23,259 364,570 194,662 4,575 — — Capital outlay - general 1,123,974 79,050 — — — — — — — Total expenditures 1,689,465 167,192 15,366 23,259 364,570 194,662 4,575 — 15,500 Excess (deficiency) of revenues over expenditures (926,462) (32,585) 1,527 39,362 46,323 29,711 9,451 30 — Other financing sources (uses): Land sale proceeds — — — — — — — — — Proceeds from sale of capital assets — — — — — — — — — Transfers in — — — — — — — — — Transfers out — — — — — (25,000) — — — Net other financing sources (uses) — — — — — (25,000) — — — Change in fund balances (926,462) (32,585) 1,527 39,362 46,323 4,711 9,451 30 — Fund balances, at beginning of year 1,112,283 600,094 38,052 133,528 646,958 109,218 23,350 5,893 — Fund balances, at end of year $185,821 567,509 39,579 172,890 693,281 113,929 32,801 5,923 — (continued) Fire and Road Service Areas Road Combining Statement of Revenues, Expenditures, and Changes in Fund Balances Year ended June 30, 2018 (With summarized financial information for the year ended June 30, 2017) KODIAK ISLAND BOROUGH Nonmajor Special Revenue Funds 98 Woodland Acres Trinity Islands Buildings and Street Light Street Light Tourism Mission Lake Totals Land Sales Grounds Service Area Service Area Development Tide Gate 2018 2017 Revenues: Property taxes and assessments $ — — 5,241 2,498 — 6,192 1,402,168 1,384,642 Transient accommodations tax — — — — 113,486 — 113,486 108,050 Intergovernmental - — State sources 2,467 2,121 — — 37,625 — 61,235 55,788 Federal sources — — — — — — 159,846 7,497 Charges for services 12,879 848,390 — — — — 876,635 790,882 Licenses, permits and fees 9,710 — — — — — 37,310 2,125,324 Investment income 7,173 4,635 160 147 976 298 29,734 25,941 Rental — — — — — — 14,400 14,160 Other 80 122 — — — — 1,332 6,335 Total revenues 32,309 855,268 5,401 2,645 152,087 6,490 2,696,146 4,518,619 Expenditures: Current: General government 351,421 417,734 4,671 1,795 — — 775,621 1,100,518 Public safety — — — — — — 684,499 589,703 Community and economic development — — — — 96,570 — 96,570 109,521 Service district maintenance — — — — — 641 587,707 475,248 Capital outlay - general — — — — — — 1,203,024 — Total expenditures 351,421 417,734 4,671 1,795 96,570 641 3,347,421 2,274,990 Excess (deficiency) of revenues over expenditures (319,112) 437,534 730 850 55,517 5,849 (651,275) 2,243,629 Other financing sources (uses): Land sales proceeds 224,902 — — — — — 224,902 145,820 Proceeds from sale of capital assets — — — — — — — 140,000 Transfers in — 10,000 — — — — 10,000 75,831 Transfers out — (137,000) — — (45,000) — (207,000) (1,165,742) Net other financing sources (uses) 224,902 (127,000) — — (45,000) — 27,902 (804,091) Change in fund balances (94,210) 310,534 730 850 10,517 5,849 (623,373) 1,439,538 Fund balances, at beginning of year 1,460,669 473,768 30,494 27,779 204,914 54,317 4,921,317 3,481,779 Fund balances, at end of year $1,366,459 784,302 31,224 28,629 215,431 60,166 4,297,944 4,921,317 KODIAK ISLAND BOROUGH Nonmajor Special Revenue Funds Street Lighting Districts Combining Statement of Revenues, Expenditures, Year ended June 30, 2018 and Changes in Fund Balances, (continued) (With summarized financial information for the year ended June 30, 2017) 99 KODIAK ISLAND BOROUGH Nonmajor Special Revenue Funds Fire and Road Service Areas – Fire Protection Area No. 1 Schedule of Revenues, Expenditures, and Changes in Fund Balance Budget and Actual Year ended June 30, 2018 (With financial information for the year ended June 30, 2017) Variance with Final Budget Final Positive 2017 Budget Actual (Negative)Actual Revenues: Property taxes and assessments $ 602,013 597,762 (4,251) 588,587 Intergovernmental: State sources - PERS on behalf payment — 3,522 3,522 4,620 Federal sources 154,752 159,846 5,094 7,497 Investment income — 843 843 4,393 Other 1,500 1,030 (470) 4,425 Total revenues 758,265 763,003 4,738 609,522 Expenditures: Public safety: Personnel 116,000 117,880 (1,880) 112,159 Volunteers 40,000 28,260 11,740 29,130 Fringe benefits 87,336 84,469 2,867 79,197 Professional services — 10,502 (10,502) 24,658 Support goods and services 301,500 324,380 (22,880) 240,131 Total public safety 544,836 565,491 (20,655) 485,275 Capital outlay - general 678,520 1,123,974 (445,454) 8,159 Total expenditures 1,223,356 1,689,465 (466,109) 493,434 Excess (deficiency) of revenues over expenditures (465,091) (926,462) (461,371) 116,088 Other financing sources: Proceeds from sale of capital assets — — — 140,000 Transfers in — — — 57,493 Net other financing sources — — — 197,493 Change in fund balance $(465,091) (926,462) (461,371) 313,581 Fund balance, at beginning of year 1,112,283 798,702 Fund balance, at end of year $ 185,821 1,112,283 2018 100 Variance with Final Budget Final Positive 2017 Budget Actual (Negative)Actual Revenues: Property taxes and assessments $ 102,939 101,828 (1,111) 101,077 Charges for services 17,211 15,366 (1,845) 14,716 Investment income 1,000 2,913 1,913 2,853 Rental 12,000 14,400 2,400 14,160 Other 80 100 20 350 Total revenues 133,230 134,607 1,377 133,156 Expenditures: Public safety: Personnel services 7,000 1,674 5,326 1,040 Fringe benefits 3,000 801 2,199 724 Professional services — 5,746 (5,746) 4,489 Support goods and services 113,930 79,921 34,009 61,523 Total public safety 123,930 88,142 35,788 67,776 Capital outlay - general 134,300 79,050 55,250 — Total expenditures 258,230 167,192 91,038 67,776 Excess (deficiency) of revenues over expenditures $(125,000) (32,585) 92,415 65,380 Fund balance, at beginning of year 600,094 534,714 Fund balance, at end of year $ 567,509 600,094 2018 KODIAK ISLAND BOROUGH Nonmajor Special Revenue Funds Fire and Road Service Areas – Womens Bay Fire Department Schedule of Revenues, Expenditures, and Changes in Fund Balance Budget and Actual Year ended June 30, 2018 (With financial information for the year ended June 30, 2017) 101 KODIAK ISLAND BOROUGH Nonmajor Special Revenue Funds Fire and Road Service Areas – Kodiak Airport Fire District Schedule of Revenues, Expenditures, and Changes in Fund Balance Budget and Actual Year ended June 30, 2018 (With financial information for the year ended June 30, 2017) 2018 Variance with Final Budget Final Positive 2017 Budget Actual (Negative)Actual Revenues: Property taxes and assessments $ 16,741 16,701 (40) 15,366 Investment income 500 192 (308) 211 Total revenues 17,241 16,893 (348) 15,577 Expenditures: Public safety: Support goods and services 17,241 15,366 1,875 14,737 Excess of revenues over expenditures $— 1,527 1,527 840 Fund balance, at beginning of year 38,052 37,212 Fund balance, at end of year $ 39,579 38,052 102 KODIAK ISLAND BOROUGH Nonmajor Special Revenue Funds Fire and Road Service Areas – Monashka Bay Road Service Area Schedule of Revenues, Expenditures, and Changes in Fund Balance Budget and Actual Year ended June 30, 2018 (With financial information for the year ended June 30, 2017) 2018 Variance with Final Budget Final Positive 2017 Budget Actual (Negative)Actual Revenues: Property taxes and assessments $ 62,673 61,814 (859) 62,162 Investment income — 807 807 650 Total revenues 62,673 62,621 (52) 62,812 Expenditures: Service district maintenance: Personnel services 500 60 440 315 Fringe benefits — 17 (17) 204 Support goods and services 5,023 80 4,943 81 Snow removal/sanding 28,150 10,254 17,896 11,126 Road grading/ditching 13,000 10,285 2,715 1,414 Repairs and maintenance 16,000 2,563 13,437 6,929 Total expenditures 62,673 23,259 39,414 20,069 Excess of revenues over expenditures $— 39,362 39,362 42,743 Fund balance, at beginning of year 133,528 90,785 Fund balance, at end of year $ 172,890 133,528 103 KODIAK ISLAND BOROUGH Nonmajor Special Revenue Funds Fire and Road Service Areas – Service Area No. 1 Schedule of Revenues, Expenditures, and Changes in Fund Balance Budget and Actual Year ended June 30, 2018 2018 Variance with Final Budget Final Positive 2017 Budget Actual (Negative)Actual Revenues: Property taxes and assessments $ 401,792 400,031 (1,761) 394,545 Investment income — 10,862 10,862 3,218 Total revenues 401,792 410,893 9,101 397,763 Expenditures: Service district maintenance: Personnel services 8,800 5,865 2,935 6,038 Fringe benefits 2,900 1,291 1,609 1,415 Support goods and services 2,600 13,429 (10,829) 685 Snow removal/sanding 200,000 80,237 119,763 62,934 Road grading/ditching 60,000 47,140 12,860 32,493 Repairs and maintenance 194,700 216,608 (21,908) 56,312 Total expenditures 469,000 364,570 104,430 159,877 Excess (deficiency) of revenues over expenditures $(67,208) 46,323 113,531 237,886 Fund balance, at beginning of year 646,958 409,072 Fund balance, at end of year $ 693,281 646,958 (With financial information for the year ended June 30, 2017) 104 KODIAK ISLAND BOROUGH Nonmajor Special Revenue Funds Fire and Road Service Areas – Womens Bay Road Service Area Schedule of Revenues, Expenditures, and Changes in Fund Balance Budget and Actual Year ended June 30, 2018 (With financial information for the year ended June 30, 2017) 2018 Variance with Final Budget Final Positive 2017 Budget Actual (Negative)Actual Revenues: Property taxes and assessments $198,466 196,222 (2,244) 194,901 Licenses, permits and fees 27,000 27,600 600 27,600 Investment income — 551 551 811 Total revenues 225,466 224,373 (1,093) 223,312 Expenditures: Service district maintenance: Personnel services 500 274 226 81 Fringe benefits — 177 (177) 24 Support goods and services 34,966 273 34,693 287 Snow removal/sanding 60,000 31,919 28,081 73,174 Road grading/ditching 40,000 72,102 (32,102) 51,915 Repairs and maintenance 90,000 89,917 83 164,007 Total expenditures 225,466 194,662 30,804 289,488 Excess (deficiency) of revenues over expenditures — 29,711 29,711 (66,176) Other financing sources: Transfers out - Other Capital Projects Capital Project Fund (25,000) (25,000) — — Change in fund balance $ (25,000) 4,711 29,711 (66,176) Fund balance, at beginning of year 109,218 175,394 Fund balance, at end of year $ 113,929 109,218 105 KODIAK ISLAND BOROUGH Nonmajor Special Revenue Funds Fire and Road Service Areas – Bay View Road Service Area Schedule of Revenues, Expenditures, and Changes in Fund Budget and Actual Year ended June 30, 2018 (With financial information for the year ended June 30, 2017) 2018 Variance with Final Budget Final Positive 2017 Budget Actual (Negative)Actual Revenues: Property taxes and assessments $13,879 13,879 — 14,256 Investment income — 147 147 110 Total revenues 13,879 14,026 147 14,366 Expenditures: Service district maintenance: Personnel services — 48 (48) 246 Fringe benefits — 14 (14) 151 Professional services 5,879 — 5,879 — Support goods and services — — — 20 Snow removal/sanding 5,400 1,901 3,499 3,891 Road grading/ditching 1,100 1,891 (791) 497 Repairs and maintenance 1,500 721 779 541 Total expenditures 13,879 4,575 9,304 5,346 Excess of revenues over expenditures $— 9,451 9,451 9,020 Fund balance, at beginning of year 23,350 14,330 Fund balance, at end of year $ 32,801 23,350 106 KODIAK ISLAND BOROUGH Nonmajor Special Revenue Funds Fire and Road Service Areas – Service Area No. 2 Schedule of Revenues, Expenditures, and Changes in Fund Balance Budget and Actual Year ended June 30, 2018 (With financial information for the year ended June 30, 2017) 2018 Variance with Final Budget Final Positive 2017 Budget Actual (Negative)Actual Revenues: Investment income $100 30 (70) 29 Expenditures: Service district maintenance: Support services 100 — 100 — Excess of revenues over expenditures $— 30 30 29 Fund balance, at beginning of year 5,893 5,864 Fund balance, at end of year $ 5,923 5,893 107 KODIAK ISLAND BOROUGH Nonmajor Special Revenue Funds L.E.P.C. Schedule of Revenues, Expenditures, and Changes in Fund (Deficit) Budget and Actual Year ended June 30, 2018 (With financial information for the year ended June 30, 2017) 2018 Variance with Final Budget Final Positive 2017 Budget Actual (Negative)Actual Revenues: Intergovernmental: State sources – grants $15,812 15,500 (312) 13,756 Expenditures: Public safety: Personnel services 7,811 6,374 1,437 7,299 Fringe benefits 4,916 4,474 442 4,795 Support goods and services 3,085 4,652 (1,567) 1,662 Total expenditures 15,812 15,500 312 13,756 Excess of revenues over expenditures — — — — Other financing sources: Transfers in - General Fund — — — 18,338 Change in fund balance $— — — 18,338 Fund (deficit), at beginning of year — (18,338) Fund, at end of year $ — — 108 KODIAK ISLAND BOROUGH Nonmajor Special Revenue Funds Land Sales Schedule of Revenues, Expenditures, and Changes in Fund Balance Budget and Actual Year ended June 30, 2018 (With financial information for the year ended June 30, 2017) 2018 Variance with Final Budget Final Positive 2017 Budget Actual (Negative)Actual Revenues: Intergovernmental: State sources - PERS on behalf payment $3,650 2,467 (1,183) 3,780 Charges for services 5,000 12,879 7,879 24,488 Licenses, permits and fees 6,750 9,710 2,960 2,097,724 Investment income 6,300 7,173 873 8,173 Other 500 80 (420) 1,441 Total revenues 22,200 32,309 10,109 2,135,606 Expenditures: General government: Personnel services 84,000 87,486 (3,486) 115,924 Fringe benefits 52,867 54,028 (1,161) 56,034 Professional services 215,000 176,656 38,344 319,111 Support goods and services 113,736 33,251 80,485 61,588 Total expenditures 465,603 351,421 114,182 552,657 Excess (deficiency) of revenues over expenditures (443,403) (319,112) 124,291 1,582,949 Other financing sources (uses): Land sale proceeds 200,000 224,902 24,902 145,820 Transfers out: Hospital Facilities Enterprise Fund — — — (650,000) Net other financing sources (uses) 200,000 224,902 24,902 (504,180) Change in fund balance $(243,403) (94,210) 149,193 1,078,769 Fund balance, at beginning of year 1,460,669 381,900 Fund balance, at end of year $ 1,366,459 1,460,669 109 KODIAK ISLAND BOROUGH Nonmajor Special Revenue Funds Buildings and Grounds Schedule of Revenues, Expenditures, and Changes in Fund Balance Budget and Actual Year ended June 30, 2018 (With financial information for the year ended June 30, 2017) 2018 Variance with Final Budget Final Positive 2017 Budget Actual (Negative)Actual Revenues: Intergovernmental: State sources - PERS on behalf payment $6,126 2,121 (4,005) 2,745 Charges for services 833,467 848,390 14,923 751,678 Investment income 3,050 4,635 1,585 3,632 Other — 122 122 119 Total revenues 842,643 855,268 12,625 758,174 Expenditures: General government: School buildings 51,077 31,142 19,935 6,627 Borough building 733,486 359,036 374,450 523,951 Mental health center 43,080 24,371 18,709 6,608 Various borough buildings 15,000 3,185 11,815 4,065 Total expenditures 842,643 417,734 424,909 541,251 Excess of revenues over expenditures — 437,534 437,534 216,923 Other financing sources: Transfers in - Facilities Special Revenue Fund — 10,000 10,000 — Transfers out - Renewal and Replacement Projects Capital Project Fund (137,000) (137,000) — (336,370) Net other financing sources (uses)(137,000) (127,000) 10,000 (336,370) Change in fund balance $ (137,000) 310,534 447,534 (119,447) Fund balance, at beginning of year 473,768 593,215 Fund balance, at end of year $ 784,302 473,768 110 KODIAK ISLAND BOROUGH Nonmajor Special Revenue Funds Woodland Acres Street Light Service Area Schedule of Revenues, Expenditures, and Changes in Fund Balance Budget and Actual Year ended June 30, 2018 2018 Variance with Final Budget Final Positive 2017 Budget Actual (Negative)Actual Revenues: Property taxes and assessments $ 5,269 5,241 (28) 5,155 Investment income 200 160 (40) 153 Total revenues 5,469 5,401 (68) 5,308 Expenditures: General government: Support goods and services 5,469 4,671 798 4,817 Excess of revenues over expenditures $— 730 730 491 Fund balance, at beginning of year 30,494 30,003 Fund balance, at end of year $ 31,224 30,494 (With financial information for the year ended June 30, 2017) 111 KODIAK ISLAND BOROUGH Nonmajor Special Revenue Funds Trinity Islands Street Light Service Area Schedule of Revenues, Expenditures, and Changes in Fund Balance Budget and Actual Year ended June 30, 2018 (With financial information for the year ended June 30, 2017) 2018 Variance with Final Budget Final Positive 2017 Budget Actual (Negative)Actual Revenues: Property taxes and assessments $ 2,498 2,498 — 2,446 Investment income — 147 147 136 Total revenues 2,498 2,645 147 2,582 Expenditures: General government: Support goods and services 2,498 1,795 703 1,793 Excess of revenues over expenditures $— 850 850 789 Fund balance, at beginning of year 27,779 26,990 Fund balance, at end of year $ 28,629 27,779 112 KODIAK ISLAND BOROUGH Nonmajor Special Revenue Funds Tourism Development Schedule of Revenues, Expenditures, and Changes in Fund Balance Budget and Actual Year ended June 30, 2018 (With financial information for the year ended June 30, 2017) 2018 Variance with Final Budget Final Positive 2017 Budget Actual (Negative)Actual Revenues: Transient accommodations tax $ 94,000 113,486 19,486 108,050 Intergovernmental - State sources - Commerical passenger vessel tax 30,500 37,625 7,125 30,887 Investment income 950 976 26 948 Total revenues 125,450 152,087 26,637 139,885 Expenditures: Community and economic development: Contributions 87,000 96,501 (9,501) 109,521 Support goods and services — 69 (69) — Total expenditures 87,000 96,570 (9,570) 109,521 Excess of revenues over expenditures 38,450 55,517 17,067 30,364 Other financing sources (uses) - Transfers out - Kodiak Fisheries Research Center Enterprise Fund (45,000) (45,000) — (45,000) Change in fund balance $(6,550) 10,517 17,067 (14,636) Fund balance, at beginning of year 204,914 219,550 Fund balance, at end of year $ 215,431 204,914 113 KODIAK ISLAND BOROUGH Nonmajor Special Revenue Funds Mission Lake Tide Gate Schedule of Revenues, Expenditures, and Changes in Fund Balance Budget and Actual Year ended June 30, 2018 (With financial information for the year ended June 30, 2017) 2018 Variance with Final Budget Final Positive 2017 Budget Actual (Negative)Actual Revenues: Property taxes and assessments $ 6,198 6,192 (6) 6,147 Investment income — 298 298 259 Total revenues 6,198 6,490 292 6,406 Expenditures: Service district maintenance: Personnel services 150 383 (233) 255 Fringe benefits 98 251 (153) 205 Contracted services 5,850 — 5,850 — Support goods and services 100 7 93 8 Total expenditures 6,198 641 5,557 468 Excess of revenues over expenditures $— 5,849 5,849 5,938 Fund balance, at beginning of year 54,317 48,379 Fund balance, at end of year $ 60,166 54,317 114 NONMAJOR CAPITAL PROJECT FUNDS NONMAJOR CAPITAL PROJECT FUNDS The Borough Capital Projects Fund accounts for capital improvement projects related to various financing sources. The School Bond Capital Projects Fund accounts for educational related capital projects funded by general obligation bonds which will be paid for with property taxes and State of Alaska grants. The State Capital Grants Fund accounts for capital improvement projects relating to grants received from the State of Alaska. The Kodiak High School Renovation Fund accounts for the construction and major maintenance activites for the Borough’s educational facilities funded by bonds. The Renewal and Replacement Projects accounts for renewal and replacement projects. The Other Capital Projects Fund accounts for capital improvement projects related to various financing sources. The School Renewal and Replacement Facilities Bond Projects accounts for construction and maintenance for the borough’s educational facilities funded by bonds. KODIAK ISLAND BOROUGH Nonmajor Capital Project Funds Combining Balance Sheet June 30, 2018 School Renewal Borough School Bond State Kodiak High Renewal and Other and Replacement Capital Capital Capital School Replacement Capital Facilities Bond Assets Projects Projects Grants Renovation Projects Projects Projects 2018 2017 Equity in central treasury $112,711 666,634 424,091 359,266 1,245,489 2,607,150 2,094,606 7,509,947 3,750,355 Receivables: State of Alaska — — 613 — — — — 613 1,063 Federal government — — — — — 76,808 — 76,808 49,923 Property taxes — — — — 35,714 — — 35,714 — Accounts and other receivables, net — — 3,153 — 51,034 — — 54,187 23,367 Total $ 112,711 666,634 427,857 359,266 1,332,237 2,683,958 2,094,606 7,677,269 3,824,708 Liabilities and Fund Balances (Deficit) Liabilities: Accounts payable — — — 535,432 9,744 81,128 948,794 1,575,098 48,227 Due to other funds — 653,783 — — 528 688 4,250 659,249 794,232 Unearned revenues — — — — — 30,930 — 30,930 30,930 Total liabilities — 653,783 — 535,432 10,272 112,746 953,044 2,265,277 873,389 Fund balances (deficit): Assigned 112,711 12,851 427,857 — 1,321,965 2,571,212 1,141,562 5,588,158 3,073,997 Unassigned — — — (176,166) — — — (176,166) (122,678) Total fund balances (deficit) 112,711 12,851 427,857 (176,166) 1,321,965 2,571,212 1,141,562 5,411,992 2,951,319 Total $ 112,711 666,634 427,857 359,266 1,332,237 2,683,958 2,094,606 7,677,269 3,824,708 Totals (With summarized financial information at June 30, 2017) 115 KODIAK ISLAND BOROUGH Nonmajor Capital Project Funds Combining Statement of Revenues, Expenditures, and Changes in Fund Balances (Deficit) Year ended June 30, 2018 School Renewal Borough School Bond State Kodiak High Renewal and Other and Replacement Capital Capital Capital School Replacement Capital Facilities Bond Projects Projects Grants Renovation Projects Projects Projects 2018 2017 Revenues: Property taxes and assessments $— — — — 1,736,076 — — 1,736,076 1,402,533 Intergovernmental: State sources — — 2,870 — — — — 2,870 36,647 Federal sources — — — — — 93,828 — 93,828 798,846 Investment income (loss)(308) 8,511 3,415 1,976 — 10,939 15,074 39,607 17,076 Other — — — — 284,361 — — 284,361 — Total revenues (308) 8,511 6,285 1,976 2,020,437 104,767 15,074 2,156,742 2,255,102 Expenditures: General government — — — 525,000 — — — 525,000 117,583 Capital outlay: Schools — — — 92,188 — — 2,865,865 2,958,053 227,474 General — — 3,945 — 630,899 191,588 — 826,432 1,086,817 Total expenditures — — 3,945 617,188 630,899 191,588 2,865,865 4,309,485 1,431,874 Excess (deficiency) of revenues over expenditures (308) 8,511 2,340 (615,212) 1,389,538 (86,821) (2,850,791) (2,152,743) 823,228 Other financing sources (uses): Transfers in — — — — 55,105 565,958 — 621,063 622,825 Transfers out — — — — — — — — (329,902) Net other financing sources (uses)— — — — 55,105 565,958 — 621,063 292,923 Change in fund balances (308) 8,511 2,340 (615,212) 1,444,643 479,137 (2,850,791) (1,531,680) 1,116,151 Fund balances (deficit), at beginning of year 113,019 4,340 425,517 439,046 (122,678) 2,092,075 3,992,353 6,943,672 1,835,168 Fund balances (deficit), at end of year $112,711 12,851 427,857 (176,166) 1,321,965 2,571,212 1,141,562 5,411,992 2,951,319 Totals (With summarized financial information for the year ended June 30, 2017) 116 ENTERPRISE FUNDS ENTERPRISE FUNDS The Municipal Solid Waste Collection and Disposal Fund accounts for the collection and disposal of solid waste and recycling services for the Kodiak Island Borough. The Hospital Facilities Fund accounts for rents on the Borough-owned hospital. In turn, it purchases hospital equipment and makes debt service payments on hospital related debt. The Long Term Care Center Fund accounts for rents on the Borough-owned long term care center and other related revenue. In turn, it makes debt service payments on the long term care center related debt. The Kodiak Fisheries Research Center Fund accounts for rents and expenses on the Borough-owned Kodiak Fisheries Research Center. This facility, which contains salt- water lab facilities, and its tenants are committed to the preservation of the North Pacific marine ecosystem and resources. The 911 Service Fund accounts for funds collected from phone charges and pays for a 911 emergency system. KODIAK ISLAND BOROUGH Municipal Solid Waste Collection and Disposal Schedule of Revenues, Expenses, and Changes in Net Position Budget and Actual Year ended June 30, 2018 (With financial information for the year ended June 30, 2017) Variance with Final Budget Final Positive 2017 Budget Actual (Negative)Actual Operating revenues: Solid waste disposal $3,692,925 3,813,343 120,418 3,105,560 Other 5,000 1,434 (3,566) 11,390 Total operating revenues 3,697,925 3,814,777 116,852 3,116,950 Operating expenses: Personnel services 1,597,682 1,117,408 480,274 1,319,809 Contracted services 169,000 299,815 (130,815) 303,846 Maintenance and repairs 88,000 101,429 (13,429) 106,058 Depreciation 975,925 293,749 682,176 294,025 General and administration 467,781 450,051 17,730 463,071 Recycling services 250,000 259,824 (9,824) 252,960 Closure and postclosure costs 35,000 367,702 (332,702) 154,010 Contributions 40,000 36,383 3,617 35,880 Total operating expenses 3,623,388 2,926,361 697,027 2,929,659 Operating income (loss)74,537 888,416 813,879 187,291 Other income (expense): Intergovernmental: State of Alaska on-behalf payment 36,703 35,503 (1,200) 20,887 Investment income 36,500 32,435 (4,065) 30,576 Interest expense (197,740) (319,165) (121,425) (367,158) Total other income (expense)(124,537) (251,227) (126,690) (315,695) Change in net position $ (50,000) 637,189 687,189 (128,404) Net position, at beginning of year, as originally stated 15,143,324 15,271,728 Cumulative effect of a change in accounting principle (212,353) — Net position, at beginning of year, as restated 14,930,971 15,271,728 Net position, at end of year $ 15,568,160 15,143,324 Enterprise Funds 2018 117 KODIAK ISLAND BOROUGH Hospital Facilities Schedule of Revenues, Expenses, and Changes in Net Position Budget and Actual Year ended June 30, 2018 (With financial information for the year ended June 30, 2017) Variance with Final Budget Final Positive 2017 Budget Actual (Negative)Actual Operating revenues: Lease income $1,384,272 1,384,272 — 660,000 Operating expenses: Personnel services 34,000 34,000 — 42,436 General and administration 871,016 22,818 848,198 12,510 Miscellaneous — 270,109 (270,109) — Depreciation 1,162,618 1,085,223 77,395 1,121,711 Total operating expenses 2,067,634 1,412,150 655,484 1,176,657 Operating income (loss)(683,362) (27,878) 655,484 (516,657) Other income (expense): Investment income 129,000 23,850 (105,150) 136,828 Contribution to Providence Hospital — — — (108,000) Total other income (expense)129,000 23,850 (105,150) 28,828 Income (loss) before transfers and special item (554,362) (4,028) 550,334 (487,829) Transfers in — — — 1,089,372 Transfers out (726,000) — 726,000 (8,062,822) Total transfers (726,000) — 726,000 (6,973,450) Special item: Gain on transfer of Long Term Care Center operations (Note 20)— — — 1,721,113 Change in net position $(1,280,362) (4,028) 1,276,334 (5,740,166) Net position, at beginning of year 15,972,683 21,712,849 Net position, at end of year $ 15,968,655 15,972,683 Enterprise Funds 2018 118 Variance with Final Budget Final Positive 2017 Budget Actual (Negative)Actual Operating revenues: Lease income $1,143,322 1,093,475 (49,847) 1,119,929 Other — — — 16,623 Total operating revenue 1,143,322 1,093,475 (49,847) 1,136,552 Operating expenses: Insurance and bonding 18,700 16,040 2,660 43,536 Legal fees — — — 113 Miscellaneous 438,634 — 438,634 — Depreciation — 518,933 (518,933) 518,933 Total operating expenses 457,334 534,973 (77,639) 562,582 Operating income 685,988 558,502 (127,486) 573,970 Other income (expense): Investment income — 2,753 2,753 75 Interest expense (685,988) (473,059) 212,929 (553,977) Debt issuance costs — — — (11,500) Loss on advanced refunding of debt — — — (54,590) Total other income (expense)(685,988) (470,306) 215,682 (619,992) Income (loss) before transfers and special item — 88,196 88,196 (46,022) Transfers in — — — 8,062,822 Special item: Loss on transfer of Long Term Care Center operations (Note 20)— — — (1,721,113) Change in net position $— 88,196 88,196 6,295,687 Net position, at beginning of year 6,295,687 — Net position, at end of year $ 6,383,883 6,295,687 KODIAK ISLAND BOROUGH 2018 Year ended June 30, 2018 Budget and Actual Changes in Net Position Schedule of Revenues, Expenses, and Long Term Care Center Enterprise Funds (With financial information for the year ended June 30, 2017) 119 KODIAK ISLAND BOROUGH Kodiak Fisheries Research Center Schedule of Revenues, Expenses, and Changes in Net Position Budget and Actual Year ended June 30, 2018 (With financial information for the year ended June 30, 2017) Variance with Final Budget Final Positive 2017 Budget Actual (Negative)Actual Operating revenues: Lease income $ 903,815 826,647 (77,168) 847,642 Operating expenses: Personnel services 297,799 294,919 2,880 386,036 Maintenance and repairs 41,000 56,037 (15,037) 57,869 Depreciation 667,071 698,482 (31,411) 702,501 General and administration: Support goods and services 167,500 10,351 157,149 11,529 Cleaning and janitorial 64,000 61,444 2,556 55,750 Heating 101,500 87,610 13,890 84,106 Electrical 151,800 136,858 14,942 165,171 Plumbing 63,500 64,099 (599) 59,677 Air conditioning 2,000 981 1,019 42 Elevators 2,500 2,250 250 1,800 Miscellaneous 65,150 9,306 55,844 7,529 Total operating expenses 1,623,820 1,422,337 201,483 1,532,010 Operating income (loss) (720,005) (595,690) (124,315) (684,368) Other income: State of Alaska on-behalf payment 6,392 9,006 2,614 6,912 Investment income 38,000 10,833 (27,167) 10,372 Interest revenue 55,214 55,214 — 59,134 Total other income 99,606 75,053 (24,553) 76,418 Income (loss) before transfers (620,399) (520,637) 99,762 (607,950) Transfers in 45,000 45,000 — 45,000 Change in net position $(575,399) (475,637) 99,762 (562,950) Net position, at beginning of year, as originally stated 12,270,750 12,833,700 Cumulative effect of a change in accounting principle (52,008) — Net position, at beginning of year, as restated 12,218,742 12,833,700 Net position, at end of year $ 11,743,105 12,270,750 Enterprise Funds 2018 120 KODIAK ISLAND BOROUGH Enterprise Funds Schedule of Revenues, Expenses, and Changes in Net Position Budget and Actual Year ended June 30, 2018 (With financial information for the year ended June 30, 2017) Variance with Final Budget Final Positive 2017 Budget Actual (Negative)Actual Operating revenues: Customer charges $240,000 255,617 15,617 28,409 Operating expenses: Personnel services 1,500 1,500 — 1,500 Insurance & bonding 100 133 (33) 53 Telephone services 238,400 253,984 (15,584) 26,856 Total operating expenses 240,000 255,617 (15,617) 28,409 Operating income $— — — — Net position, at beginning of year — — Net position, at end of year $ — — 2018 911 Service Fund 121 SUPPLEMENTARY SCHEDULES Fiscal Year Principal Interest Total 2019 4,425,000$ 3,245,932 7,670,932 2020 4,605,000 3,063,032 7,668,032 2021 4,800,000 2,873,382 7,673,382 2022 5,020,000 2,653,882 7,673,882 2023 5,250,000 2,418,719 7,668,719 2024 5,505,000 2,163,708 7,668,708 2025 5,780,000 1,885,645 7,665,645 2026 4,585,000 1,651,321 6,236,321 2027 3,885,000 1,445,608 5,330,608 2028 4,075,000 1,251,627 5,326,627 2029 3,645,000 1,062,889 4,707,889 2030 3,830,000 881,178 4,711,178 2031 4,015,000 692,854 4,707,854 2032 3,590,000 501,672 4,091,672 2033 3,770,000 322,897 4,092,897 2034 2,240,000 155,057 2,395,057 2035 580,000 43,323 623,323 2036 610,000 14,713 624,713 70,210,000$ 26,327,439$ 96,537,439$ SUMMARY OF BONDED DEBT SERVICE REQUIREMENTS TO MATURITY KODIAK ISLAND BOROUGH June 30, 2018 Annual principal and interest requirements on General Obligation Bonds. 122 Fiscal year Interest rate Interest due September 01 Principal due April 01 Interest due March 01 Total 2019 3.45%140,700 340,000 140,700 621,400 2020 3.70%133,900 355,000 133,900 622,800 2021 3.93%126,800 370,000 126,800 623,600 2022 4.80%119,400 385,000 119,400 623,800 2023 4.80%110,256 405,000 110,256 625,512 2024 4.80%100,638 425,000 100,638 626,276 2025 5.20%90,544 445,000 90,544 626,088 2026 5.20%79,975 465,000 79,975 624,950 2027 5.20%68,931 485,000 68,931 622,862 2028 5.20%56,503 510,000 56,503 623,006 2029 5.20%43,434 535,000 43,434 621,868 2030 5.20%29,725 565,000 29,725 624,450 2031 5.20%15,247 595,000 15,247 625,494 1,116,053$ 5,880,000$ 1,116,053$ 8,112,106$ The 2011 Series One General Obligation School Bonds were issued to provide funds for school and related capital improvements in the Borough, specifically to provide a portion of the funds needed for the Kodiak High School Addition and Renovation. KODIAK ISLAND BOROUGH GENERAL OBLIGATION BONDS RETIREMENT SCHEDULE June 30, 2018 2011 Series One 123 Fiscal Year Interest Rate Interest Due September 1 Principal Due September 1 Interest due March 1 Total 2019 4.00%91,000 480,000 81,400 652,400 2020 5.00%81,400 495,000 69,025 645,425 2021 5.00%69,025 525,000 55,900 649,925 2022 4.00%55,900 545,000 45,000 645,900 2023 5.00%45,000 570,000 30,750 645,750 2024 5.00%30,750 600,000 15,750 646,500 2025 5.00%15,750 630,000 - 645,750 388,825$ 3,845,000$ 297,825$ 4,531,650$ The 2012 Series A General Obligation School Bonds were issued to refund (refinance) the 2004 Series A General Obligation bonds that were issued to provide funds for school and related capital improvements in the Borough, specifically to fund various school facility repairs. KODIAK ISLAND BOROUGH GENERAL OBLIGATION BONDS RETIREMENT SCHEDULE June 30, 2018 2012 Series A 124 Fiscal Year Interest Rate Interest Due September 1 Principal Due September 1 Interest due March 1 Total 2019 4.00%111,125 585,000 99,425 795,550 2020 5.00%99,425 610,000 84,175 793,600 2021 5.00%84,175 640,000 68,175 792,350 2022 4.00%68,175 665,000 54,875 788,050 2023 5.00%54,875 695,000 37,500 787,375 2024 5.00%37,500 730,000 19,250 786,750 2025 5.00%19,250 770,000 - 789,250 474,525$ 4,695,000$ 363,400$ 5,532,925$ KODIAK ISLAND BOROUGH GENERAL OBLIGATION BONDS RETIREMENT SCHEDULE June 30, 2018 The 2012 Series B General Obligation School Bonds were issued to refund (refinance) the 2004 Series B General Obligation bonds that were issued to provide funds for school and related capital improvements in the Borough, specifically to fund construction of the new pool facility. 2012 Series B 125 Fiscal Year Interest Rate Interest Due August 01 Principal Due February 01 Interest due February 01 Total 2019 5.00%417,670 855,000 417,670 1,690,340 2020 4.00%396,295 895,000 396,295 1,687,590 2021 4.00%378,395 935,000 378,395 1,691,790 2022 4.00%359,695 970,000 359,695 1,689,390 2023 4.00%340,295 1,010,000 340,295 1,690,590 2024 5.00%320,095 1,050,000 320,095 1,690,190 2025 5.00%293,845 1,100,000 293,845 1,687,690 2026 5.00%266,345 1,155,000 266,345 1,687,690 2027 5.00%237,470 1,215,000 237,470 1,689,940 2028 5.00%207,095 1,275,000 207,095 1,689,190 2029 5.00%175,220 1,340,000 175,220 1,690,440 2030 5.00%141,720 1,405,000 141,720 1,688,440 2031 5.00%106,595 1,475,000 106,595 1,688,190 2032 5.00%69,720 1,550,000 69,720 1,689,440 2033 3.80%30,970 1,630,000 30,970 1,691,940 3,741,425$ 17,860,000$ 3,741,425$ 25,342,850$ KODIAK ISLAND BOROUGH GENERAL OBLIGATION BONDS RETIREMENT SCHEDULE June 30, 2018 The 2013 Series One General Obligation School Bonds were issued to provide funds for school and related capital improvements in the Borough, specifically to provide a portion of the funds needed for the Kodiak High School Addition and Renovation. 2013 Series One 126 Fiscal Year Interest Rate Interest Due September 01 Principal Due March 01 Interest Due March 01 Total 2019 2.00%446,356 880,000 446,356 1,772,712 2020 2.00%437,556 900,000 437,556 1,775,112 2021 5.00%428,556 915,000 428,556 1,772,112 2022 5.00%405,681 965,000 405,681 1,776,362 2023 5.00%381,556 1,010,000 381,556 1,773,112 2024 5.00%356,306 1,060,000 356,306 1,772,612 2025 3.12%329,806 1,110,000 329,806 1,769,612 2026 5.00%312,463 1,150,000 312,463 1,774,926 2027 5.00%283,713 1,205,000 283,713 1,772,426 2028 5.00%253,588 1,265,000 253,588 1,772,176 2029 5.00%221,963 1,330,000 221,963 1,773,926 2030 5.00%188,713 1,395,000 188,713 1,772,426 2031 4.50%153,838 1,465,000 153,838 1,772,676 2032 5.00%120,875 1,535,000 120,875 1,776,750 2033 5.00%82,500 1,610,000 82,500 1,775,000 2034 5.00%42,250 1,690,000 42,500 1,774,750 4,445,720$ 19,485,000$ 4,445,970$ 28,376,690$ The 2014 Series One General Obligation School Bonds were issued to provide funds for school and related capital improvements in the Borough, specifically to provide a portion of the funds needed for the Kodiak High School Addition and Renovation. KODIAK ISLAND BOROUGH GENERAL OBLIGATION BONDS RETIREMENT SCHEDULE June 30, 2018 2014 Series One 127 Fiscal Year Interest Rate Interest Due October 01 Principal Due October 01 Interest Due April 01 Total 2019 4.00%145,206 205,000 141,106 491,312 2020 5.00%141,106 215,000 135,731 491,837 2021 5.00%135,731 225,000 130,106 490,837 2022 5.00%130,106 240,000 124,106 494,212 2023 5.00%124,106 250,000 117,856 491,962 2024 5.00%117,856 265,000 111,231 494,087 2025 5.00%111,231 275,000 104,356 490,587 2026 5.00%104,356 290,000 97,106 491,462 2027 5.00%97,106 305,000 89,481 491,587 2028 5.00%89,481 320,000 81,481 490,962 2029 5.00%81,481 335,000 73,106 489,587 2030 5.00%73,106 355,000 64,231 492,337 2031 4.00%64,231 370,000 56,831 491,062 2032 5.25%56,831 390,000 46,594 493,425 2033 5.25%46,594 410,000 35,831 492,425 2034 5.25%35,831 430,000 24,544 490,375 2035 5.25%24,544 455,000 12,600 492,144 2036 5.25%12,600 480,000 - 492,600 1,591,503$ 5,815,000$ 1,446,297$ 8,852,800$ KODIAK ISLAND BOROUGH GENERAL OBLIGATION BONDS RETIREMENT SCHEDULE June 30, 2018 The 2015 Series Three General Obligation School Bonds were issued to provide funds for school and related capital improvements in the Borough, specifically to provide a portion of the funds needed for the Kodiak High School Addition and Renovation. 2015 Series Three 128 Fiscal Year Interest Rate Interest Due October 01 Principal Due October 01 Interest Due April 01 Total 2019 4.00%36,350 155,000 33,250 224,600 2020 5.00%33,250 160,000 29,250 222,500 2021 5.00%29,250 170,000 25,000 224,250 2022 5.00%25,000 180,000 20,500 225,500 2023 5.00%20,500 190,000 15,750 226,250 2024 5.00%15,750 200,000 10,750 226,500 2025 5.00%10,750 210,000 5,500 226,250 2026 5.00%5,500 220,000 - 225,500 176,350$ 1,485,000$ 140,000$ 1,801,350$ The 2015 Series Three General Obligation School Bonds were issued to provide funds for school and related capital improvements in the Borough, specifically to provide for school facility renewal and replacement needs. KODIAK ISLAND BOROUGH GENERAL OBLIGATION BONDS RETIREMENT SCHEDULE June 30, 2018 2015 Series Three 129 Fiscal Year Interest Rate Interest Due August 01 Principal Due August 01 Interest Due February 01 Total 2019 5.00%33,584 65,000 31,959 130,543 2020 5.00%31,959 70,000 30,209 132,168 2021 5.00%30,209 75,000 28,334 133,543 2022 5.00%28,334 80,000 26,334 134,668 2023 5.00%26,334 80,000 24,334 130,668 2024 5.00%24,334 85,000 22,209 131,543 2025 5.00%22,209 90,000 19,959 132,168 2026 5.00%19,959 95,000 17,584 132,543 2027 2.00%17,584 100,000 16,584 134,168 2028 4.00%16,584 100,000 14,584 131,168 2029 4.00%14,584 105,000 12,484 132,068 2030 2.63%12,484 110,000 11,041 133,525 2031 3.00%11,041 110,000 9,391 130,432 2032 3.00%9,391 115,000 7,666 132,057 2033 3.00%7,666 120,000 5,866 133,532 2034 3.00%5,866 120,000 4,066 129,932 2035 3.13%4,066 125,000 2,113 131,179 2036 3.25%2,113 130,000 - 132,113 318,301$ 1,775,000$ 284,717$ 2,378,018$ The 2016 Series One General Obligation School Bonds were issued to provide funds for school and related capital improvements in the Borough, specifically to provide for the Kodiak High School Addition and Renovation. KODIAK ISLAND BOROUGH GENERAL OBLIGATION BONDS 2016 Series One RETIREMENT SCHEDULE June 30, 2018 130 Fiscal Year Interest Rate Interest Due August 01 Principal Due August 01 Interest Due February 01 Total 2019 5.00%111,625 465,000 100,000 676,625 2020 5.00%100,000 490,000 87,750 677,750 2021 5.00%87,750 515,000 74,875 677,625 2022 5.00%74,875 540,000 61,375 676,250 2023 5.00%61,375 570,000 47,125 678,500 2024 5.00%47,125 595,000 32,250 674,375 2025 5.00%32,250 630,000 16,500 678,750 2026 5.00%16,500 660,000 - 676,500 531,500$ 4,465,000$ 419,875$ 5,416,375$ The 2016 Series One General Obligation School Bonds were issued to provide funds for school and related capital improvements in the Borough, specifically to provide for school facility renewal and replacement needs. KODIAK ISLAND BOROUGH GENERAL OBLIGATION BONDS 2016 Series One RETIREMENT SCHEDULE June 30, 2018 131 Fiscal Year Interest Rate Interest Due December 01 Principal Due December 01 Interest Due June 01 Total 2019 4.00%114,175 395,000 106,275 615,450 2020 4.00%106,275 415,000 97,975 619,250 2021 4.00%97,975 430,000 89,375 617,350 2022 4.00%89,375 450,000 80,375 619,750 2023 5.00%80,375 470,000 68,625 619,000 2024 5.00%68,625 495,000 56,250 619,875 2025 5.00%56,250 520,000 43,250 619,500 2026 5.00%43,250 550,000 29,500 622,750 2027 5.00%29,500 575,000 15,125 619,625 2028 5.00%15,125 605,000 - 620,125 700,925$ 4,905,000$ 586,750$ 6,192,675$ The 2016 Series Three General Obligation School Bonds were issued to refund (refinance) the 2008 Series A General Obligation Bonds were issued to provide funds for school and related capital improvements in the Borough, specifically the new school pool facility. KODIAK ISLAND BOROUGH GENERAL OBLIGATION BONDS 2016 Series Three RETIREMENT SCHEDULE June 30, 2018 132 STATISTICAL SECTION STATISTICAL SECTION This part of the Kodiak Island Borough’s comprehensive annual financial report presents detailed information as a context for understanding what the information in the financial statements, note disclosures, and required supplementary information says about the government’s overall financial health. Contents Page Financial Trends These schedules contain trend information to help the reader understand how the government’s financial performance and well-being have changed over time. 133-137 Revenue Capacity These schedules contain information to help the reader assess the govern- ment’s most significant local revenue source, the property tax. 138-141 Debt Capacity These schedules present information to help the reader assess the afford- ability of the government’s current levels of outstanding debt and the gov- ernment’s ability to issue additional debt in the future. 142-146 Demographic and Economic Information These schedules offer demographic and economc indicators to help the reader understand the environment within which the government’s finan- cial activities take place. 147-153 Sources: Unless otherwise noted, the information in these schedules is derived from the comprehensive annual financial reports for the revelant year. 2009 2010 2011 2012 2013 Governmental activities: Net investment in capital assets $ 71,534,766 $ 77,447,045 $ 81,789,375 $ 85,285,497 $ 72,773,598 Unrestricted 48,140,406 48,992,902 47,094,977 48,265,320 47,149,835 Total governmental activities net assets $119,675,172 $126,439,947 $128,884,352 $133,550,817 $119,923,433 Business-type activities: Net investment in capital assets $ 38,135,340 $ 36,655,859 $ 35,170,143 $ 31,967,945 $ 21,628,143 Unrestricted (2,939,301) (598,367) 1,137,826 4,532,561 20,750,321 Total business-type activities net assets $35,196,039 $36,057,492 $36,307,969 $36,500,506 $42,378,464 Primary government: Net investment in capital assets $ 115,582,385 $ 118,445,234 $ 116,959,518 $ 117,253,442 $ 94,401,741 Unrestricted 46,053,601 46,496,610 48,232,803 52,797,881 67,900,156 Total primary government net assets $154,871,211 $162,497,439 $165,192,321 $170,051,323 $162,301,897 2014 2015 2016 2017 2018 Governmental activities: Net investment in capital assets $ 80,159,521 $ 82,616,865 $ 80,747,617 $ 80,857,151 $ 85,569,631 Unrestricted 46,754,461 43,472,334 47,678,271 48,293,582 46,105,327 Total governmental activities net assets $126,913,982 $126,089,199 $128,425,888 $129,150,733 $131,674,958 Business-type activities: Net investment in capital assets $ 36,383,229 $ 43,884,340 $ 37,381,997 $ 40,098,010 $ 39,508,817 Unrestricted 12,115,258 5,239,974 12,436,280 9,584,434 10,154,986 Total business-type activities net assets $48,498,487 $49,124,314 $49,818,277 $49,682,444 $49,663,803 Primary government: Net investment in capital assets $ 116,542,750 $ 126,501,205 $ 118,129,614 $ 120,955,161 $ 125,078,448 Unrestricted 58,869,719 48,712,308 60,114,551 57,878,016 56,260,313 Total primary government net assets $175,412,469 $175,213,513 $178,244,165 $178,833,177 $181,338,761 Source: Borough general ledger Fiscal Year Fiscal Year KODIAK ISLAND BOROUGH Net Position by Component Last Ten Fiscal Years (accrual basis of accounting) 133 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Expenses Governmental activities: General government $3,723,964 $4,479,415 $5,109,232 $4,281,383 $ 7,398,899 $ 6,990,640 $ 5,637,239 $ 7,850,988 $ 7,156,087 $ 6,995,624 Public safety 579,710 612,763 664,349 622,396 644,197 751,637 663,145 798,079 1,028,240 953,898 Community and economic development 908,501 1,034,686 1,211,189 1,195,237 1,070,991 964,377 886,613 1,167,367 1,136,303 1,152,197 Emergency preparedness 14,988 10,511 11,705 21,423 278,480 12,487 31,628 30,849 35,861 43,038 Health and social services 371,673 406,087 392,011 391,996 290,800 326,700 406,093 389,000 233,999 207,500 Education, culture, and recreation 248,571 192,182 85,690 64,289 84,273 218,013 335,854 2,996,004 17,562 4,665 Parks and recreation - - 13,625 5,825 21,100 37,795 161,596 87,456 30,172 77,186 Service district maintenance 398,219 543,897 593,388 705,665 479,264 631,572 534,376 626,289 475,248 587,707 Primary and secondary education 12,354,129 12,423,691 12,834,349 11,998,842 13,930,919 14,523,509 14,316,695 11,225,022 14,162,868 12,695,233 Interest on long-term debt 1,408,045 1,336,068 1,508,052 1,188,945 1,254,225 2,109,406 3,063,649 3,194,612 3,060,520 2,673,238 Total governmental activities expenses 20,007,800 21,039,300 22,423,590 20,476,001 25,453,148 26,566,136 26,036,888 28,365,666 27,336,860 25,390,286 Business-type activities: Municipal solid waste collection and disposal 3,852,158 4,283,148 2,192,132 2,345,752 2,342,006 2,080,864 2,468,058 4,764,871 3,296,817 3,245,526 Hospital facilities 1,095,535 1,035,020 1,027,615 1,016,882 1,091,035 1,740,525 1,763,636 2,058,690 1,284,657 1,412,150 Long Term Care Center - - - - - - - - 1,128,059 1,008,032 Kodiak Fisheries Research Center 1,960,404 1,927,580 1,847,427 1,746,952 1,775,062 1,681,111 1,486,620 1,555,116 1,532,010 1,422,337 911 services 43,043 42,474 53,041 2,615 87,596 39,817 33,961 30,417 28,409 255,617 Total business-type activities expenses 6,951,140 7,288,222 5,120,215 5,112,201 5,295,699 5,542,317 5,752,275 8,409,094 7,269,952 7,343,662 Total primary government expenses $26,958,940 $28,327,522 $27,543,805 $25,588,202 30,748,847 32,108,453 31,789,163 36,774,760 34,606,812 32,733,948 Program Revenues Governmental activities: Charges for services: General government $705,166 $703,431 $658,463 $673,050 $ 549,100 $ 577,350 $ 540,052 $ 682,664 $ 2,874,794 $ 873,043 Public safety 12,361 12,762 33,755 11,646 13,849 14,336 13,601 16,610 14,716 15,366 Community and economic development - - - - - - - - - - Health and sanitation - - - - - - - - - - Education, culture, and recreation - - - - - - - - - - Service district maintenance 25,000 25,000 27,600 1 94,076 110,313 114,516 66,151 111,146 90,450 Primary and secondary education - - - - - - - - - - Operating grants and contributions 2,543,254 2,306,394 2,295,661 2,479,263 2,917,662 4,077,510 4,305,691 4,813,838 4,226,913 5,614,105 Capital grants 2,331,253 6,518,798 3,241,219 574,439 2,212,524 6,651,737 3,002,933 3,216,270 885,493 96,698 Total governmental activities program revenues 5,617,034 9,566,385 6,256,698 3,738,399 5,787,211 11,431,246 7,976,793 8,795,533 8,113,062 6,689,662 Business-type activities: Charges for services: Municipal solid waste collection and disposal 3,603,995 4,350,369 2,397,979 2,301,757 2,504,035 2,265,967 2,611,854 2,859,436 3,105,560 3,813,343 Hospital facilities 3,575,835 1,867,990 720,000 720,000 720,000 1,150,000 1,759,789 1,959,827 660,000 1,384,272 Long Term Care Center - - - - - - - - 1,119,929 1,093,475 Kodiak Fisheries Research Center 1,598,260 1,610,775 2,018,747 1,636,728 1,603,503 1,851,322 2,267,032 3,353,718 847,642 826,647 911 services 52,654 42,474 53,041 - - - - - - - Operating grants and contributions - - - 75,819 85,634 - 32,649 428,578 27,799 44,509 Capital grants - - - 97,534 5,984,095 5,538,038 213,753 11,326 - - Total business-type activities program revenues 8,830,744 7,871,608 5,189,767 4,831,838 10,897,267 10,805,327 6,885,077 8,612,885 5,760,930 7,162,246 Total primary government program revenues $14,447,778 $17,437,993 $11,446,465 $8,570,237 $ 16,684,478 $ 22,236,573 $ 14,861,870 $ 17,408,418 $ 13,873,992 $ 13,851,908 Net(expense)/revenue: Governmental activities $(14,390,766) $(11,472,915) $(16,166,892) $(16,737,602) $ (19,665,937) $ (15,134,890) $ (18,060,095) $ (19,570,133) $ (19,223,798) $ (18,700,624) Business-type activities 1,879,604 583,386 69,552 (280,363) 5,601,568 5,263,010 1,132,802 203,791 (1,509,022) (181,416) Total primary government net expense $(12,511,162) $(10,889,529) $(16,097,340) $(17,017,965) $ (14,064,369) $ (9,871,880) $ (16,927,293) $ (19,366,342) $ (20,732,820) $ (18,882,040) General Revenues and Other Changes in Net Assets Governmental activities: Taxes: Property taxes $10,592,258 $11,051,740 $11,945,103 $13,327,552 $ 12,910,512 $ 13,741,190 $ 14,228,505 $ 14,414,032 $ 15,714,593 $ 16,045,148 Severance taxes 1,311,188 1,336,075 1,649,275 1,970,265 1,774,700 1,843,819 1,703,257 3,985,978 1,414,557 1,929,409 Tobacco excise taxes - - - - - - - - - 310,482 Unrestricted grants and contributions 4,214,617 4,089,966 3,642,009 4,199,766 4,458,203 4,142,583 3,990,192 27,683 3,631,012 3,414,671 Land sales 26,369 760 2,383 4,540 - 864,584 103,143 1,586,555 325,793 27,955 Investment earnings 2,082,615 1,219,201 713,414 1,788,903 528,676 1,106,717 574,227 604,274 271,691 281,855 Other 226,586 619,948 739,113 327,540 383,877 506,546 494,287 403,958 23,306 305,983 Transfers (765,490) (80,000) (80,000) (80,000) (80,000) (80,000) (152,357) (50,228) (1,134,372) (45,000) Extraordinary item 1,396,222 - - - - - - 675,246 - - Total governmental activities $19,084,365 $18,237,690 $18,611,297 $21,538,566 $ 19,975,968 $ 22,125,439 $ 20,941,254 $ 21,647,498 $ 20,246,580 $ 22,270,503 Business-type activities: Investment earnings 273,973 198,067 100,925 282,027 117,702 178,851 80,825 236,180 177,851 69,871 Other 50 - - 110,442 78,688 598,162 186,328 203,764 115,556 312,265 Transfers 765,490 80,000 80,000 80,000 80,000 80,000 152,357 50,228 1,134,372 45,000 Extraordinary item 432,688 - - - - - - - (54,590) - Total business-type activities 1,472,201 278,067 180,925 472,469 276,390 857,013 419,510 490,172 1,373,189 427,136 Total primary government $20,556,566 $18,515,757 $18,792,222 $22,011,035 $ 20,252,358 $ 22,982,452 $ 21,360,764 $ 22,137,670 $ 21,619,769 $ 22,697,639 Change in Net Position Governmental activities $4,693,599 $6,764,775 $2,444,405 $4,800,964 $ 310,031 $ 6,990,549 $ 2,881,159 $ 2,077,365 $ 1,022,782 $ 3,569,879 Business-type activities 3,351,805 861,453 250,477 192,106 5,877,958 6,120,023 1,552,312 693,963 (135,833) 245,720 Total primary government $8,045,404 $7,626,228 $2,694,882 $4,993,070 $6,187,989 $13,110,572 $4,433,471 $2,771,328 $886,949 $3,815,599 KODIAK ISLAND BOROUGH Changes in Net Position Last Ten Fiscal Years (accrual basis of accounting) 134 2010 2011 2012 2013 2014 General Fund: Nonspendable $6,801 $6,801 $166,020 $6,324 $1,459 Committed - - - - - Unassigned 1,952,757 1,952,757 3,126,037 3,340,662 3,502,489 Total General Fund $1,959,558 $1,959,558 $3,292,057 $3,346,986 $3,503,948 All other governmental funds Nonspendable $21,704 $21,704 $5,114,902 $4,636,976 $513,765 Committed 57,633,409 57,633,409 37,288,510 37,902,356 42,355,129 Assigned - - 11,464,575 29,981,503 28,875,499 Unassigned (1,179,132) (1,179,132) (1,989,279) (51,337) (2,929,481) Total all other governmental funds $56,475,981 $56,475,981 $51,878,708 $72,469,498 $68,814,912 2015 2016 2017 2018 General Fund: Nonspendable $14,566 $26,272 $32,349 $37,885 Committed - - - - Unassigned 3,181,342 3,259,509 2,284,775 3,151,069 Total General Fund $3,195,908 $3,285,781 $2,317,124 $3,188,954 All other governmental funds Nonspendable $287,564 $181,191 $419,212 $4 Committed 42,606,097 43,081,680 4,502,105 43,876,363 Assigned 7,610,272 11,312,217 3,073,997 5,588,158 Unassigned (2,516,222) (1,871,193) (122,678) (302,780) Total all other governmental funds $47,987,711 $52,703,895 $7,872,636 $49,161,745 The Kodiak Island Borough implemented GASB 54 in Fiscal Year 2011. That is why there is only nine years of data. KODIAK ISLAND BOROUGH Fund Balances of Governmental Funds Last Nine Fiscal Years (modified accrual basis of accounting) 135 Fiscal Year 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Revenues: Property taxes and assessments $ 10,477,347 10,993,175 11,909,806 13,052,598 12,936,796 13,656,771 14,091,503 14,310,687 15,700,272 16,002,128 Transient accommodations tax 88,338 86,003 96,384 87,400 96,640 75,142 104,074 95,466 108,050 113,486 Intergovernmental: State sources 5,966,808 10,610,231 7,029,684 5,313,092 7,929,017 12,938,158 10,332,739 8,870,802 6,134,338 6,975,473 Federal sources 3,122,316 2,338,468 2,149,205 1,940,376 1,659,372 1,933,672 2,093,987 3,090,533 2,628,537 2,067,113 Severance taxes 1,311,188 1,336,075 1,649,275 1,970,265 1,774,700 1,843,819 1,703,257 1,491,089 1,306,507 1,815,923 Tobacco excise taxes — — — — — — — — — 310,482 Licenses, permits, fees, and other local revenues 742,527 766,193 719,818 684,697 657,025 701,999 688,719 774,225 3,014,816 992,759 Other revenues 418,741 459,412 720,659 44,304 52,516 50,556 17,747 45,422 9,146 290,343 Investment earnings 2,088,915 1,225,938 706,677 1,857,413 536,903 1,115,466 583,677 648,987 271,691 281,855 Total revenues 24,216,180 27,815,495 24,981,508 24,950,145 25,642,969 32,315,583 29,615,703 29,327,211 29,173,357 28,849,562 Expenditures: General government 4,067,024 4,600,601 4,818,287 4,848,805 5,307,199 5,449,505 6,333,724 5,307,245 5,281,999 5,715,946 Public safety 460,826 502,491 537,623 447,479 469,280 576,720 524,169 572,839 699,118 2,001,538 Community and economic development 908,501 1,034,686 1,211,189 1,195,237 1,070,991 964,377 1,153,985 1,069,639 1,096,928 1,177,198 Emergency preparedness 12,488 8,011 11,705 18,923 18,342 9,987 29,128 30,849 35,861 43,038 Health and sanitation department 333,747 371,321 392,011 391,996 290,800 326,700 406,093 389,000 233,999 207,500 Education, culture, and recreation 248,571 192,182 85,690 64,289 84,273 95,625 24,856 23,949 17,562 4,665 Parks and recreation — — 13,625 5,825 21,100 37,795 161,596 87,456 30,172 77,186 Service district maintenance 398,219 543,897 593,388 705,665 479,264 631,572 534,376 626,289 475,248 587,707 Primary and secondary education 9,956,618 9,980,350 10,127,350 10,337,349 10,442,350 10,845,220 11,100,714 11,100,650 10,373,548 9,449,500 Capital outlay: Schools 14,857,064 7,359,932 1,881,069 5,255,037 5,486,672 34,872,235 21,984,655 13,240,920 3,936,147 2,958,053 General 1,277,106 4,319,438 4,839,652 562,007 2,041,674 1,521,996 2,907,018 3,430,975 1,086,817 826,432 Debt service: Principal 2,495,056 2,685,606 2,750,690 2,780,776 2,966,441 3,645,950 2,646,040 3,201,002 3,530,000 3,870,000 Interest 1,578,408 1,356,872 1,292,645 2,695,657 1,254,225 2,109,406 3,121,577 3,194,612 3,568,559 3,408,310 Other charges - bond issuance costs 68,635 — 40,689 100,149 20,809 89,835 — 124,372 64,313 — Total expenditures 36,662,263 32,955,387 28,595,613 29,409,194 29,953,420 61,176,923 50,927,931 42,399,797 30,430,271 30,327,073 Excess of revenues over (under) expenditures (12,446,083) (5,139,892) (3,614,105) (4,459,049) (4,310,451) (28,861,340) (21,312,228) (13,072,586) (1,256,914) (1,477,511) Other Financing Sources (Uses): Proceeds from sales of bonds — — 8,049,233 — 21,595,000 22,660,000 — 15,000,000 4,905,000 — Bond premium — — — — 3,424,819 2,427,432 — 2,141,115 806,205 — Refunding bonds issued 6,740,000 — — . 13,578,039 — — — — — — Payment to refunded bond escrow agent (6,865,467) — — ########### — — — — (5,934,301) 0 Proceeds from sale of assets — — — — 9,564 — — — 140,000 1,240 Land sale proceeds 30,561 138,867 15,021 10,735 6,787 356,284 329,344 110,428 145,820 224,902 Insurance proceeds — — — — — — — 403,958 — — Transfers in 6,144,301 3,211,195 3,782,289 957,652 6,212,885 992,365 642,691 1,404,497 1,758,036 1,189,104 Transfers out (6,909,791) (3,291,195) (3,862,289) (1,037,652) (6,292,885) (1,072,365) (795,048) (1,454,725) (2,892,408) (1,234,104) Total other financing sources(uses) (860,396) 58,867 7,984,254 1,328,774 24,956,170 25,363,716 176,987 17,605,273 (1,071,648) 181,142 Net change in fund balances $(13,306,479)(5,081,025)4,370,149 (3,130,275)20,645,719 (3,497,624)(21,135,241)4,532,687 (2,328,562)(1,296,369) Debt service as a percentage of noncapital expenditures % 20.56 % 19.41 % 18.53 % 27.22 % 17.62 % 22.51 % 21.71 % 23.80 % 26.84 28.08 KODIAK ISLAND BOROUGH Changes in Fund Balances of Governmental Funds Last Ten Fiscal Years (modified accrual basis of accounting) 136 KODIAK ISLAND BOROUGH General Revenues by Source(a) Last Ten Fiscal Years Licenses, Inter- Fiscal Permits Governmental Investment Operating Miscellaneous Year Taxes and Fees Revenue Income Transfers Revenue Total 2009 10,864,441 65,417 4,461,624 292,825 — 131,944 15,816,251 2010 11,219,182 71,319 4,123,507 178,567 — 38,352 15,630,927 2011 12,412,832 72,394 3,642,009 (21,628) — 537,235 16,642,842 2012 2,291,625 65,421 4,425,447 281,792 — 16,177 7,080,462 2013 2,035,971 66,476 4,787,308 39,078 29,335 30,733 6,988,901 2014 2,051,794 82,713 4,605,916 23,804 — 14,328 6,778,555 2015 1,938,286 86,916 5,163,300 (18,330) — 19,468 7,189,640 2016 1,712,846 66,151 4,132,063 54,211 — 37,473 6,002,744 2017 1,727,620 83,546 3,738,157 11,059 — 3,715 5,564,097 2018 3,198,144 62,350 3,501,872 10,830 — 6,714 6,779,910 (a) Includes General Fund only. Source: Borough general ledger. 137 KODIAK ISLAND BOROUGH Assessed and Estimated Actual Value of Taxable Property Last Ten Fiscal Years Ratio of Total Taxable Total Assessed to Real Property Personal Property Total Direct Total Year Ended Net Taxable Full Value Net Taxable Full Value Net Taxable Full Value Tax Full Value June 30,Assessed Value Determination Assessed Value Determination Assessed Value Determination Rate Determination 2009 765,152,958 817,641,308 105,320,027 233,623,664 835,525,537 1,051,264,972 10.50 79.48 2010 805,000,744 855,452,864 108,014,241 227,294,006 870,472,985 1,082,746,870 10.50 80.39 2011 875,787,940 931,330,970 113,091,185 250,671,059 913,014,985 1,182,002,029 10.50 77.24 2012 947,611,296 1,007,199,396 91,612,537 236,610,137 1,039,223,833 1,243,809,533 10.50 83.55 2013 984,146,580 1,049,746,680 108,821,700 137,074,800 1,092,968,280 1,186,821,480 10.75 92.09 1,029,239,311 1,100,702,180 102,237,300 286,425,000 1,131,476,611 1,387,127,180 10.75 81.57 1,068,647,102 1,137,024,180 113,251,900 361,886,700 1,181,899,002 1,498,910,880 10.75 78.85 1,084,317,572 1,161,805,872 118,559,600 348,158,100 1,202,877,172 1,509,963,972 10.75 79.66 2017 1,169,223,198 1,256,477,176 143,116,200 154,899,290 1,312,339,398 1,411,376,466 10.75 92.98 2018 1,205,698,799 1,290,502,977 137,125,100 149,553,000 1,342,823,899 1,440,055,977 10.75 93.25 Sources: Borough assessment and tax records Notes: Property in Kodiak Island Borough is reassessed once every three years. Property is assessed at actual value; therefore, the assessed values are equal to actual value, Tax rates are per $1,000 of assessed value. Fiscal 2014 2016 2015 $0 $200,000,000 $400,000,000 $600,000,000 $800,000,000 $1,000,000,000 $1,200,000,000 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Last Ten Years Assessed Values 138 KODIAK ISLAND BOROUGH Direct and Overlapping Property Tax Rates and Contributions to the School District Last Ten Fiscal Years Overlapping Rates Woodland²Trinity²Mission² Fiscal Acres Islands Lake Fire Areas² Year Borough Education Renewal City¹Street Street Tide Road Services Areas²Fire Ended Basic Support Debt and of Lighting Lighting Gate Monashka Service Bay View Womens Protection Womens June 30, Rate Fund Service Replacement Kodiak Area Area Area Bay District 1 Road Bay Area No. 1 Bay Airport 2009 10.50 — — — 2.00 0.25 0.50 1.00 2.50 1.50 1.00 2.00 1.50 1.25 1.25 2010 10.50 — — — 2.00 0.25 0.50 1.00 2.50 1.50 1.00 2.00 1.50 1.25 1.25 2011 10.50 — — — 2.00 0.25 0.50 1.00 2.50 1.50 1.00 2.50 1.50 1.25 1.25 2012 0.03 9.09 1.55 0.08 2.00 0.25 0.50 1.00 2.50 1.50 1.00 2.50 1.50 1.25 1.25 2013 0.03 9.03 1.61 0.08 2.00 0.25 0.50 1.00 2.50 0.50 1.75 2.50 1.50 1.25 1.25 2014 0.03 8.75 1.81 0.16 2.00 0.25 0.50 1.00 2.50 1.50 1.50 2.50 1.50 1.25 1.25 2015 0.06 9.16 0.99 0.54 2.00 0.25 0.50 1.00 2.50 1.50 1.50 2.50 1.50 1.25 1.25 2016 0.10 8.45 1.70 0.50 2.00 0.10 0.20 1.00 2.50 1.50 1.50 2.50 1.50 1.25 1.25 2017 0.15 7.62 1.91 1.07 2.00 0.10 0.20 1.00 2.50 1.50 1.50 2.50 1.50 1.25 1.25 2018 0.62 6.80 2.03 1.30 2.00 0.10 0.20 1.00 2.50 1.50 1.50 2.50 1.50 1.25 1.25 Note: With the excection of a mill rate to cover Debt Service, the maximum mill rate allowed by State code is 30 mills ¹Overlapping rates are those of local governments that apply to property owners within the City of Kodiak. ²Overlapping rates are those which apply to property owners located within special taxing districts in the borough. They do not apply to every property owner in the Borough. Direct Rate (per $1,000 of Assessed Value) 139 KODIAK ISLAND BOROUGH Property Tax Levies and Collections Last Ten Fiscal Years Collections in Subsequent Years Amount 2009 10,231,461 10,201,209 99.7 27,835 10,229,044 100.0 2010 10,879,276 10,487,467 96.4 388,128 10,875,595 100.0 2011 11,536,758 11,499,457 99.7 98,463 11,597,920 100.5 2012 (a) 13,255,665 13,038,077 98.4 280,015 13,318,092 100.5 2013 (a) 13,581,524 13,489,190 99.3 144,567 13,633,757 100.4 2014 (a) 14,424,260 14,250,305 98.8 162,832 14,413,137 99.9 2015 15,009,704 14,749,222 98.3 242,767 14,991,989 99.9 2016 15,261,029 15,032,113 98.5 203,419 15,235,532 99.8 2017 16,642,674 16,554,392 99.5 9,652 16,564,044 99.5 2018 $ 17,069,728 16,809,461 98.5 $ — $ 16,809,461 98.5 Source: Borough general ledger. (a) Due to personal property audits in subsequent years, tax collections exceeded original taxes levied. Total Collections to DateTaxes Levied for the Fiscal Year Percentage of LevyAmount of Levy Percentage June 30, Ended Fiscal Year Collected within the Fiscal Year of the Levy 140 KODIAK ISLAND BOROUGH Principal Property Tax Payers Current Year and Ten Years Ago Percentage Percentage Taxable of Total Borough Taxable of Total Borough Assessed Assessed Assessed Assessed Taxpayer Value Rank Value Value Rank Value Trident Seafoods Corp $ 75,767,400 1 5.6% $ 9,028,842 7 0.9% Matson Navigation (b) 45,755,600 2 3.4% — — — Ocean Beauty Seafoods 35,989,000 3 2.7% 16,237,441 1 1.6% North Pacific Seafoods (a) 20,673,200 4 1.5% — — — Int'l Seafoods of Alaska 15,921,700 5 1.2% 10,879,502 4 1.1% Mill Bay Plaza Assoc Ltd 12,588,800 6 0.9% 8,648,400 8 0.9% GCI Communication Corp. 10,558,000 7 0.8% 7,563,488 9 0.8% Wal-Mart/Sam's Club 9,737,600 8 0.7% 9,987,787 5 1.0% Island Fish Co LLC 6,733,400 9 0.5% — — — Brechan Enterprises, Inc 5,850,300 10 0.4% 9,569,530 6 1.0% Westward Seafoods — — — 11,852,090 2 1.2% Alaska Communications Systems — — — 11,645,093 3 1.2% Kodiak Fishmeal Company — — — — — — Koncor Forest Products — — — 6,797,500 10 0.7% Total $239,575,000 17.8% $102,209,673 10.4% — Source: Borough tax records. (a) North Pacific Seafoods and Alaska Pacific Seafoods were combined in 2006. (b) Matson Navigation purchased Horizon Lines in 2012. 2018 2009 141 Net Total Taxable Net Debt Per Fiscal Assessed Bonded Per Assessed Year Population Value Debt Capita Value 2009 13,860 (a) 570,472,985 32,534,424 2,347 5.70% 2010 13,592 (a) 913,014,985 29,838,432 2,195 3.27% 2011 13,870 (a) 988,879,125 35,124,211 2,532 3.55% 2012 14,041 (a) 1,039,223,833 33,510,913 2,387 3.22% 2013 13,824 (a) 1,085,968,280 55,236,114 3,996 5.09% 13,797 (a) 1,131,476,611 76,227,556 5,525 6.74% 13,819 (a) 1,181,899,002 73,131,566 5,292 6.19% 13,790 (b) 1,202,877,172 86,481,657 6,271 7.19% 2017 13,563 (b) 1,312,339,398 82,302,899 6,068 6.27% 2018 13,287 (b) 1,342,823,899 77,748,492 5,851 5.79% Sources: Information obtained from assessment records and Borough general ledger except as otherwise noted. (a) Information obtained from State of Alaska, Division of Community and Regional Affairs, Community Database, Certified Population for Revenue Sharing Program. (b) Information obtained from State of Alaska, Department of Labor, Economic Information. Note: Detail regarding the borough's outstanding debt can be found in the notes to the financial statements. KODIAK ISLAND BOROUGH Ratios of Net Bonded Debt Last Ten Fiscal Years 2014 2016 2015 142 KODIAK ISLAND BOROUGH Computation of Direct Debt Percentage Kodiak Island Net Debt Applicable to this Borough Outstanding Governmental Share of (a) Unit (b) Debt (c) Kodiak Island Borough: General obligation bonds $ 77,748,492 100% $ 77,748,492 City of Kodiak: General obligation bonds 6,350,000 100% 6,350,000 Total $84,098,492 $84,098,492 (a) Gross debt outstanding less applicable amounts in the Debt Service Funds. (b) Determined by ratio of assessed valuation of property subject to taxation in overlapping unit to valuation of property subject to taxation in reporting unit. (c) Per Alaska Statute 29.45.090 there is a limit of 30 mills for ad valorem taxes. Per Alaska Statute 29.45.100 the limitation on maximum mill rate does not apply to taxes levied to pay bonds. Sources: Borough general ledger and City of Kodiak records. June 30, 2018 143 2009 2010 2011 2012 2013 Taxable Assessed value $ 870,472,985 913,014,985 988,879,125 1,039,223,833 1,085,968,080 Plus exempt property 45,188,050 50,452,120 55,543,030 59,588,100 65,600,100 Total $915,661,035 963,467,105 1,044,422,155 1,098,811,933 1,151,568,180 2014 2015 2016 2017 2018 Taxable Assessed value 1,131,476,611 1,181,899,002 1,202,877,172 1,312,339,398 1,342,823,899 Plus exempt property 71,462,869 68,377,078 77,488,300 87,253,178 84,804,178 Total 1,202,939,480 1,250,276,080 1,280,365,472 1,399,592,576 1,427,628,077 The State of Alaska does not mandate a debt limit to its municipalities and political subdivisions. Debt capacity is ultimately determined by the voters and the marketplace. Source: Borough assessment records (certified tax rolls). KODIAK ISLAND BOROUGH Legal Debt Margin Information Last Ten Fiscal Years 144 KODIAK ISLAND BOROUGH Ratio of Annual Debt Service Expenditures for General Bonded Debt to Total General Governmental Expenditures and Transfers Last Ten Fiscal Years Total General Ratio of Fund debt service Fiscal Interest Total debt expenditures to general year Principal (a) and fees service and transfers expenditures 2009 2,495,056 1,571,295 4,066,351 15,922,441 25.5 2010 2,685,606 1,350,620 4,036,226 16,372,540 24.7 2011 2,750,690 1,287,822 4,038,512 17,065,960 23.7 2012 2,780,776 2,691,426 5,472,202 5,747,963 95.2 2013 2,966,441 1,244,233 4,210,674 6,933,972 60.7 3,645,950 2,107,198 5,753,148 6,621,593 86.9 2,646,040 3,120,449 5,766,489 7,497,680 76.9 3,201,002 3,194,612 6,395,614 6,576,153 97.3 2017 3,530,000 3,632,872 7,162,872 6,532,754 109.6 2018 3,870,000 3,408,310 7,278,310 6,088,516 119.5 (a) Serial maturities in the case of serial bonds; annual Debt Service Fund requirements in the case of term bonds. Sources: Borough general ledger and debt documents. 2014 2016 2015 145 KODIAK ISLAND BOROUGH Ratios of Outstanding Debt by Type General Total Percent of Obligation Notes Revenue Notes Primary Personal Per Bonds Payable Bonds Payable Government Income Capita 32,534,424 66,505 — 1,864,503 34,465,432 5.96% 2,487 29,838,432 60,899 — 1,989,995 31,889,326 5.52% 2,346 35,124,211 55,209 — 2,735,778 37,915,198 5.87% 2,734 33,510,913 49,433 — 7,603,249 41,163,595 6.13% 2,932 55,236,114 42,992 18,817,320 7,346,324 81,442,750 12.10% 5,891 76,227,556 37,042 18,703,498 10,206,895 105,174,991 13.98% 7,623 73,131,566 31,002 17,984,677 9,908,184 101,055,429 12.51% 7,313 86,481,657 — 17,245,855 18,445,504 122,173,016 15.12% 8,860 82,302,899 — 11,874,871 19,139,725 113,317,495 13.84% 8,355 77,748,492 — 11,327,067 18,129,817 107,205,376 * 8,068 Note: Detail regarding the Borough's outstanding debt can be found in the notes to the financial statements. * Information not available at report time. 2018 Governmental Activities Business-type Activities 2016 Last Ten Fiscal Years Fiscal Year 2010 2017 2014 2009 2013 2012 2011 2015 146 KODIAK ISLAND BOROUGH Demographic and Economic Statistics Last Ten Years Per Capita Percentage Calendar Personal Personal School Unemployment Year Population (a) Income (c) Income (c) Enrollment (b) Rate (c) 2009 13,860 577,818,419 41,690 2,598 7.1 2010 13,592 578,018,380 42,526 2,567 7.4 2011 13,870 646,461,681 46,609 2,543 7.4 2012 14,041 671,556,096 47,828 2,517 6.7 2013 13,824 673,348,788 48,709 2,513 6.2 13,797 752,337,000 54,529 2,468 5.7 13,819 807,817,000 58,457 2,446 4.9 13,790 808,036,000 58,843 2,437 5.0 2017 13,563 818,860,000 60,891 2,386 4.6 2018 13,287 * * 2,437 4.8 Sources: (a) State of Alaska, DCRA certified population. (b)Alaska Dept of Education, Average Daily Membership by Fiscal Year at www.eed.state.ak.us/stats (c)Bureau of Economic Analysis https://www.bea.gov * Information not available at report time. 2016 2014 2015 — 5,000 10,000 15,000 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Borough Population and Student Count Population (a)School Enrollment (b) 147 Fiscal Year 2009 Fiscal Year 2010 Fiscal Year 2011 Fiscal Year 2012 Average Average Average Average Average Average Average Average Monthly Monthly Monthly Monthly Monthly Monthly Monthly Monthly Employment Earnings Employment Earnings Employment Earnings Employment Earnings Total Industries 5,961 $ 3,100 5,961 $ 3,100 6,416 $ 3,362 6,461 $ 3,488 Private Ownership 4,485 2,956 4,485 2,956 4,898 3,263 4,898 3,412 Total Government 1,475 3,538 1,475 3,538 1,518 3,681 1,501 3,742 Private Goods-Producing 1,814 3,290 1,814 3,290 2,113 3,619 2,193 3,801 Private Service-Providing 2,671 2,730 2,671 2,730 2,785 2,993 2,760 3,101 Fiscal Year 2013 Fiscal Year 2014 Fiscal Year 2015 Fiscal Year 2016 Average Average Average Average Average Average Average Average Monthly Monthly Monthly Monthly Monthly Monthly Monthly Monthly Employment Earnings Employment Earnings Employment Earnings Employment Earnings Total Industries 6,411 $ 3,459 6,472 $ 3,575 6,524 $ 3,650 6,154 $ 3,292 Private Ownership 4,928 3,358 5,049 3,491 5,148 3,565 4,721 3,118 Total Government 1,483 3,795 1,423 3,875 1,377 3,966 1,433 3,867 Private Goods-Producing 2,138 3,704 2,219 3,831 2,268 3,832 2,012 2,766 Private Service-Providing 2,790 3,092 2,830 3,224 2,879 3,356 2,710 3,378 Fiscal Year 2017 Fiscal Year 2018 Average Average Average Average Monthly Monthly Monthly Monthly Employment Earnings Employment Earnings Total Industries 6,294 $ 3,540 6,037 $ 3,585 Private Ownership 4,867 3,407 4,578 3,433 Total Government 1,427 3,995 1,460 4,060 Private Goods-Producing 1,934 3,318 1,636 3,067 Private Service-Providing 2,933 3,466 2,942 3,637 KODIAK ISLAND BOROUGH Average Monthly Employment & Earnings Last Ten Fiscal Years 148 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Land area - square miles 7,130 7,130 7,130 7,130 7,130 7,130 7,130 7,130 7,130 7,130 Miles of improved street 25.6 25.6 25.6 25.6 26.1 26.1 26.1 26.1 26.1 26.1 Building permits: Permits issued 192 208 204 167 219 155 193 216 143 93 Value of buildings (thousands) 15,007 16,445 30,832 10,171 91,619 36,652 36,216 10,866 11,793 7,331 Fire Protection: Number of fire stations 2 2 2 2 2 2 2 2 2 2 Number of employees 1 1 1 1 1 1 1 1 1 1 Police Protection: none (provided by the City of Kodiak within the city limits and by the State of Alaska outside the city boundaries.) Recreation: Parks (number of acres) 223 223 224 224 224 224 224 224 224 224 Facilities: Number of playgrounds 15 15 16 16 16 16 16 16 16 16 Number of swimming pools 1 1 1 1 1 1 1 1 1 1 Public Education: Number of schools: Kodiak Area Elementary 4 4 4 4 4 4 4 4 4 4 Kodiak Area Middle School 1 1 1 1 1 1 1 1 1 1 Kodiak Area High School 1 1 1 1 1 1 1 1 1 1 Village Schools (a) 7 7 8 8 8 7 7 7 7 7 Number of support personnel (b) 217 217 215 215 193 181 187 200 206 206 Number of teachers (c) 203 218 201 201 207 162 166 170 177 210 Number of students (d) 2,598 2,567 2,543 2,543 2,513 2,468 2,446 2,437 2,386 2,437 Number of Municipal Employees 43 43 43 45 45 48 45 43 44.5 45 Sources: Borough Departments, Kodiak Island Borough School District and City of Kodiak (a) The majority of Village Schools are grades K-12.(c) School district personnel figures include staffing from the General Fund and Grants. (b) All non-teaching employees.(d) Alaska Dept of Education & Early Development, Average District Enrollment www.eed.state.ak.us/stats KODIAK ISLAND BOROUGH MISCELLANEOUS STATISTICAL DATA Last Ten Fiscal Years 149 KODIAK ISLAND BOROUGH Property Value, Construction, and Bank Deposits Last Ten Fiscal Years Construction Property Value* Commercial Residential Fiscal No. of No. of year permits Value permits Value Commercial Residential 2009 50 34,081,887 147 7,848,428 175,141,000 312,122,205 595,391,145 2010 52 4,756,124 156 11,689,178 192,000,000 327,248,533 661,630,592 2011 46 24,165,884 158 6,666,400 194,289,000 317,950,418 721,273,415 2012 48 5,693,295 119 4,477,641 227,392,000 345,529,161 738,505,519 2013 59 85,969,566 160 5,649,717 230,391,000 364,353,810 767,122,801 44 33,062,171 111 3,589,833 252,999,000 386,480,100 788,418,800 61 31,146,134 141 5,644,907 239,000,000 402,319,200 800,640,400 56 4,882,606 160 5,983,768 245,354,000 452,535,972 750,341,200 2017 13 4,599,616 130 7,193,534 243,973,000 384,902,202 820,796,597 2018 23 3,515,430 70 3,815,114 233,000,000 390,922,837 859,606,088 *Assessed value. Sources: Borough assessing records and City of Kodiak building department and FDIC. Deposits in local banks 2016 2014 2015 — 50,000,000 100,000,000 150,000,000 200,000,000 250,000,000 300,000,000 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Deposits in Kodiak Banks 150 2009 2010 2011 2012 2013 Function: General Government 31 29 29 30 30 Community and Economic Development 5 5 5 6 6 Municipal Solid Waste Collection and Disposal 7 7 7 7 7 Kodiak Fisheries Research Center 2 2 2 2 2 Total 45 43 43 45 45 2014 2015 2016 2017 2018 Function: General Government 33 30 29 28.5 29 Community and Economic Development 5 4 5 6 6 Municipal Solid Waste Collection and Disposal 8 9 7 8 8 Kodiak Fisheries Research Center 2 2 2 2 2 Total 48 45 43 44.5 45 Source: Borough Finance Department Full-time Equivalent Employees as of June 30: KODIAK ISLAND BOROUGH Full-Time Equivalent Borough Employees by Function/Program Last Ten Fiscal Years 151 KODIAK ISLAND BOROUGH Operating Indicators by Function Last Ten Fiscal Years 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Function General Government Elections Number of registered voters 9,599 9,649 9,619 9,479 9,585 9,209 9,100 9,585 9,453 9,357 Number voting in last election 2,477 2,477 2,311 2,139 1,250 1,566 1,968 1,800 2,303 1,692 Percent of registered voters 26% 26% 24% 23% 13% 17% 22% 19% 24% 18% Public Safety Number of fire stations 2 2 2 2 2 2 2 2 2 2 Number of employees 1 1 1 1 1 1 1 1 1 1 Community and economic development Zoning compliance permits issued 203 245 149 113 160 111 183 161 177 128 Junk cars removed 83 89 218 27 22 28 37 21 10 35 Primary and secondary education Number of students 2,598 2,567 2,543 2,517 2,513 2,468 2,446 2,437 2,386 2,437 Number of General Fund certified staff 225 224 217 211 207 186 177 183 196 206 Number of General Fund classified staff 135 135 162 166 193 161 166 173 187 210 Solid waste disposal Total solid waste disposal in tons 14,429 14,580 14,896 16,558 14,688 11,826 12,364 12,876 11,646 11,458 Baled waste in tons 10,212 10,527 10,846 10,153 11,535 10,005 8,900 10,454 9,875 10,396 Scrap metal in tons 205 282 260 147 251 172 205 221 190 128 Asbestos, cubic yards 324 218 230 116 399 390 362 219 179 142 Source: Borough Finance Department 152 Function program 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 GOVERNMENTAL ACTIVITIES Number of buildings (teacher housing, schools and office buildings)18 18 18 19 19 19 19 21 20 20 Vehicles 13 13 15 15 15 14 14 11 14 13 Streets (miles) 25.6 25.6 25.6 26.1 26.1 26.1 26.1 26.1 26.1 26.1 Land area - square miles 7,130 7,130 7,130 7,130 7,130 7,130 7,130 7,130 7,130 7,130 (provided by the City of Kodiak within the city limits and by the State of Alaska outside the city boundaries) 2 2 2 2 2 2 2 2 2 2 11 8 15 13 13 12 12 10 11 13 1 1 1 1 1 1 1 1 1 0 BUSINESS-TYPE ACTIVITES Number of Baler Facilities (Landfills) 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 - - - - - - - 1 1 1 223 223 224 224 224 224 224 224 224 224 1 1 1 1 1 1 1 1 1 1 15 15 16 16 16 16 16 16 16 16 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 Sources : Supplied by Kodiak Island Borough Department Heads Notes : No capital asset indicators are available for the library function A description of the Kodiak Island Borough's Capitalization and Depreciation policy is included in the Notes To The Basic Financial Statements Number of playgrounds Number of Emergency response vehicles Emergency Tsunami Shelters Municipal Solid Waste Community Health & Public Services Mental Health Facilities Long Term Care Center Kodiak Island Research Facilities (marine research) Dorm facility (6 apartments) KODIAK ISLAND BOROUGH Capital Asset Statistics by Function/Program Last Ten Fiscal Years Parks (number of acres) Facilities: Hospital Culture, Parks and Recreation Roads Police: none Fire and Emergency Services Number of fire stations Number of Swimming Pools 153