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FY2021 Popular Annual Financial ReportKodiak Island Borough Finance Department 710 Mill Bay Road Kodiak, AK 99615 Presorted Standard US Postage PAID Anchorage, AK Permit No. 69 Kodiak Island Borough jai Popular Annual Financial Report For Fiscal Year Ending June 30, 2021 Kodiak, Alaska Government, Geographic Location & Population The Kodiak Island Borough was incorporated in 1963 as a sec- ond class Borough and currently operates under a manager - form of government. The Manager is hired by the Assembly and oversees the day-to-day business of the Borough. The seven member Assembly, along with the Mayor, are elected by the people. The day-to-day business of the Borough is conducted within six departments: Manager, Clerk, Finance/ IT, Assessing, Community Development and Engineering/ Facilities. Kodiak Island lies at the western border of the Gulf of Alaska and is approximately 250 air miles southwest of Anchorage, Alaska. The island is accessible only by boat or plane and is the second largest island in the United States. In total, the Borough encompasses 6,560 square miles and currently serves an estimated population of 12,611. Services The Borough has a full range of services, including: general government, fire protection, first -response emergency medi- cal services, health care facilities, road and other infrastruc- ture construction and maintenance, community and econom- ic development and solid waste disposal. Additionally, the Borough supports tourism development, local parks, and cultural and recreational activities. The Borough is financially responsible for a legally separate school district which is reported separately within the Borough's financial state- ments. Additional information on this legally separate entity can be found in the Annual Comprehensive Financial Report. Economics Seafood processing is by far the largest industry, generating revenue in several categories. The Port of Kodiak has been consistently ranked among the top ten ports in the United States in terms of quantity and value of product delivered. In 2018, according to the National Ocean Economics Program, the Port of Kodiak ranked fourth largest in landed weight (390,500,000) and eighth largest in landed value ($104,400,000). Tourism was strong through FY2019 with stable transient ac- commodations tax revenues and cruise ship traffic. In FY2020, tourism and cruise ship traffic sharply declined due to the COVID-19 pandemic. There was some recovery seen in FY2021, albeit slow. Kodiak Island is home to the largest U.S. Coast Guard Base in the United States, employing over 1,350 people and providing vital services to the marine industries which are integral to the community. The Pacific Spaceport Complex -Alaska, a launch facility, is capable of handling small to medium sized rockets for launch- ing low earth orbiting satellites, as well as other military, sci- entific and research missions. Map of the Kodiak Island Borough JI )I Ouzlnkle Pon• Cons K.disk* , Lateen Karluk ) Bay CM1lniak• d old Harbo, _ f ®, Akhlok w , -r Obi J / KOOIAK ISLAND BOROUGH About The Popular Annual Financial Report The Popular Annual Financial Report (PAFR) is intended to brief the residents of the Kodiak Island Borough on the financial standing of their municipal government. The information in this report was drawn from the FY2021 Annual Comprehensive Financial Report. The annual comprehensive financial report conforms to the gener- ally accepted accounting principles (GAAP) and includes audited financial statements, as well as more detailed information than presented here. Although the financial numbers in this Popular Annual Report come from an audited source, they are presented in this report in a condensed and unaudited format. For copies of the reports, visit the Borough's office located at 710 Mill Bay Road, Kodiak, Alaska, the Borough's Facebook page or on our website at www.kodiakak.us. We hope you find the report to be informative. We welcome your comments, questions and suggestions. Dave Conrad, Interim Borough Manager Roxanne Murphy, Borough Manager Dora Cross, Finance Director Kodiak Island Borough Popular Annual Financial Report For Fiscal Year Ending June 30, 202: BOROUGH POPULATION AND STATISTICAL INFORMATION FY2019 FY2020 FY2021 Borough Population 13,136 13,001 12,611 Annual Unemployment Rate in the Borough 4.2% 4.4% 3.9% Percentage of owner -occupied housing in the Borough* 59% 55% 55% Median Gross Rent within the Borough* $1,294 $1,369 $1,458 Median household income within the Borough* $74,167 $78,281 $85,839 Percent of persons living in poverty within the Borough* 9.3% 8.2% 7.5% KIBSD Student Enrollment 2,395 2,315 2,297 KIBSD Employees (Teachers and support personnel) 382 377 386 Number of Schools in the Borough 13 13 13 Number of Borough Employees 41 38 37 * United States Census Bureau FINANCIAL STRUCTURE The Borough maintains 33 separate funds to account for governmental services. They are generally established based upon their legal basis and objectives. These funds are grouped into two separate categories: Governmental Funds and Proprietary Funds. This report focuses on the funds which interests most residents : General, Education Support and Municipal Solid Waste Collection & Disposal. GOVERNMENTAL FUNDS (Reports the basic service activities provided by the Borough) Governmental Fund Name Activity or Purpose of Fund Operating fund for the Borough. Departments within the fund are: the Assembly, Assessing, Clerks, Com- munity Development, Engineering & Facilities, Finance/IT (Information Technology) and the Manager. Operating funds for specific revenue sources. These include: education, facilities, tourism, emergency planning and neighborhood service districts such as road, fire and street lighting, as well as maintenance of Borough building and grounds. Operating fund for the payment of general long-term debt principal, interest and other related costs. Currently the fund services General Obligation Bonds for school related projects. GOVERNMENTAL FUNDS - FUND BALANCE 6/30/21 ■ General Fund ■ Special Revenue Funds ■ Debt Service Fund - Capital Funds $7,487,220 $45,928,823 � $641,401 $6,772,600 Kodiak Island Borough Popular Annual Financial Report For Fiscal Year Ending June 30, 2021 GOVERNMENTAL FUNDS (Reports the basic service activities provided by the Borough) Governmental Fund Highlights: • General Fund — Fund balance increased by $1,392,671 (22.85%). There were two main contributors to the overall increase in the fund. 1) The fund received $461,147 more in property tax revenue due to increased tax assessments, and 2) the fund expended $943,524 less primarily due to vacant positions. • Education Support (Special Revenue Fund) — This fund collects tax revenue which is then paid to the School District for education services within the Borough. There was a $1,079,180 decrease in expenditures for this fund in FY2021 compared to FY2020. • Facilities Fund (Special Revenue Fund) — Fund balance decreased by $688,744 (1.70%). Investment income, the sole revenue source for the fund, was $143,573 due to decreased treasury interest rates. The largest use of allowed earnings use in this fund was a transfer of $827,316 to the Education Debt Service Fund to help cover required debt service payments the State of Alaska's School Bond Debt Reimbursement Program did not reimburse the Borough for. Statement of Revenue, Expenditures and Changes in Fund Balance (Deficits) Total of All Governmental Funds FY2019 FY2020 Revenues General Education Fund Support Fund fonm JOLnW FY2021 FY2021 FY2021 Property Taxes $16,794,958 $16,978,718 $17,445,434 $4,293,682 $9,389,701 Severance Taxes 1,285,669 1,286,750 1,100,413 1,049,430 - Intergovernmental 10,276,215 6,765,785 9,436,868 8,931,861 - Services, Fees, Investments & 3,740,229 Other miscellaneous revenue 3,434,448 $2,254,193 811,171 - Total Revenues $32,097,071 $28,465,701 $30,236,908 $15,086,144 $9,389,701 Expenditures General Government $5,308,369 $5,197,783 $4,995,157 $4,363,970 $ - Public Safety 714,826 635,865 546,055 118,700 - Community & Economic Devel- 1,183,798 opment 885,179 907,656 832,436 - Emergency Preparedness 14,307 4,479 5,257 5,257 - Health & Social Services 182,900 157,500 5,257,005 5,257,005 - Parks, Culture & Recreation 77,568 53,008 39,957 39,957 - Service District Maintenance 569,610 786,366 647,976 - - Primary & Secondary Education 9,970,576 10,522,544 9,443,364 50,000 9,393,364 Capital Outlay 3,083,409 1,604,709 1,195,820 - - Debt Service 7,688,414 7,733,394 8,088,223 - - Total Expenditures $28,793,777 $27,580,837 $31,126,470 $10,667,325 $9,393,364 Other financing sources (uses) Increase (decrease) in fund bal- ance $591,4911 $1,616,718 1 $2,972,840 $(3,026,148)1$ $3,894,785 1 $2,501,5821 $2,082,978 $1,392,671 $(3,663) Fund Balance, beginning of 52,350,6991 56,245,484 1 58,747,066 6,094,5491 59,394 year, as restated Fund Balance, at end of year 556.245.484 I 58.747.066 I 560 830 044 7.487.220 I 31 4 ;odiak Island Borough Popular Annual Financial Report For Fiscal Year Ending June 30, 2021 PROPRIETARY FUNDS: (Reports the business -type activities provided by the Borough) Proprietary Fund Name Activity or Purpose of Fund Municipal Solid Waste Collection & Accounts for the collection and disposal of solid waste and for the operation of the leachate Disposal treatment plant. Hospital Facility Accounts for the Borough -owned hospital. Long -Term Care Center Accounts for the Borough -owned long-term care center. Kodiak Fisheries Research Center Accounts for the Borough -owned Kodiak Fisheries Research Center. Research Court Apartments Accounts for rent collected for the Borough -owned Research Court Apartments. 911 Services Accounts for fees collected from all phone lines for a 911 emergency system. This is a pass through to the City of Kodiak therefore there is no fund balance retained. PROPRIETARY FUNDS - NET POSITION 6/30/21 ■ Municipal Solid Waste ■ Hospital ■ Long Term Care Center KFRC ■ Research Court Apartments $19,109,542 $16,601,854 $6,674,089 $10,055,704 I. - $308,548 Proprietary (Enterprise) Funds Highlights: • Municipal Solid Waste Collection and Disposal — Net position increased by $449,221 (2.41%) due to decreased depreciation and pension and OPEB liabilities. • Hospital Facilities— Net position increased by $217,595 (1.33%) due to decreased repair and maintenance expenses. • Long -Term Care Center— Net position decreased by $110,437 (1.63%) due to increased repair and maintenance expenses. • Kodiak Fisheries Research Center (Enterprise Fund) — Net position decreased by $653,124 (6.10%) due to decreasing lease reve- nues and increasing repair and maintenance expenses. • Research Court Apartments (Enterprise Fund) - Net position decreased by $7,134 (2.26%) due to increased insurance expenses. Statement of Revenue, Expenses and Changes in Net Position (Deficits) Total Expenses $7,321,384 771,8141 $7,681,913 $3,741,080 Other Financial Sources (uses) $45,000 $45,000 $ $ Net Position, beginning of year, $49,663,803 I $51,126,380 I $52,853,615 $18,660,321 as restated Net Position, end of year 5 Total for All Borough Proprietary Funds Municipal Waste Collection & Disposal (Only) FY2019 FY2020 FY2021 FY2021 Revenues Total Operating Revenue $8,038,190 $7,961,329 $7,444,573 $4,125,597 Total Non -Operating Revenue 700,771 492,721 133,461 64,704 Total Revenues $8,738,961 $8,454,050 $7,578,034 $4,190,301 Expenses Total Operating Expenses $6,605,558 I $6,070,727 $7,047,151 $3,523,239 Total Non -Operating Expenses 715,8261 701,087.1 634,762 217,841 Total Expenses $7,321,384 771,8141 $7,681,913 $3,741,080 Other Financial Sources (uses) $45,000 $45,000 $ $ Net Position, beginning of year, $49,663,803 I $51,126,380 I $52,853,615 $18,660,321 as restated Net Position, end of year 5 ;odiak Island Borough Popular Annual Financial Report For Fiscal Year Ending June 30, 2021 ASSEMBLY MEETINGS Assembly meetings can be viewed live via internet streaming through the Borough's website. Video recordings of previous regular meetings and voice recordings of work sessions, along with meeting packet information is also available on the website: http://www.kodiakak.us. Meeting locations are contained in the meeting agendas: Borough Building Assembly Chambers (710 Mill Bay Rd) OR Bayside Fire Dept (4606 E. Rezanof Dr.) Public Comment Call In Numbers: Tall Free 855-482-9202 or locally 907-486-3231 SUMMARY OF DEBT SERVICE REQUIREMENTS Total Principal and Interest Payments Due Project Description $ 64,655,050 High school renovation and renewal project. $ 7,773,625 Renewal and replacement for various school buildings. $ 4,957,975 Acquisition and construction of school improvements including a new school pool. $ 3,943,775 Planning, design and construction for the new school pool and Kodiak High School Voc/Ed classroom. $ 3,233,825 Planning, design and construction for the Larsen Bay, Kodiak Middle and Kodiak High schools. $ 84,564,250 $8,000,000 $6,000,000 $4,000,000 52,000,000 $- Summary of Total Debt Service Requirements By Year 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 PROPERTY TAXES The Assembly sets the mill rates, or the number of mills each individual taxpayer will be assessed or charged per dollar value of property owned. A mill is one tenth of one percent of a dollar (.001). For FY2021, the Borough -wide mill rate was 10.75 which equates to 1.075 cents of tax to be paid for each dollar of assessed property value. In addition to the Borough -wide mill rate, mill rates are set for taxing properties within specific boundaries for specific activities. If the taxing area has a board or committee, they submit a budget and recommended rate to the Assembly. For those properties within the city limits, the City of Kodiak's City Council sets the mill rate. Mill Rate Allocation History FY21 1.55 6.45 2.75 (includes $2.3 million transfer to Debt Service) INNER 0.95 FY20 1.79 7.45 0.56 0.73 FY19 Ill1.67 7.05 1.1 ■ R & R Projects s Debt Service ■ Education Support ■ General Fund N R&R Projects—To fund renewal and replace- ment project need within the Borough. Debt Service—To fund payment of principal and interest on the Borough's long-term debt. E Education Support—To fund the Kodiak is- land Borough School District for the State required local minimum contribution and in- kind costs. General Fund—To fund the general opera- tions of the Kodiak Island Borough. Kodiak Island Borough Popular Annual Financial Report For Fiscal Year Ending June 30, 2029 GENERAL FUND REVENUES — A Closer Look Revenue Source Reason(s) for increase or Decrease Although excise taxes, service and fee revenues were relatively stable, investment earnings decreased $128,308 (84%), primarily due to negative market rates in response to the COVID-19 pandemic. Various state revenues were $107,035 and federal revenue were $5,301,519 higher than FY2020. This is mostly due to the CARES Act Federal Grant. Local Severance Tax Revenues decreased by $174,491(14%); this tax is very dependent on the fishing, timber and gravel economy in Kodiak. The fishing industry suffered due to a variety of factors, including supply chain delays and labor shortages due to the ongoing COVID-19 pandemic. General Fund Property Tax Revenues increased by $3,240,684. Although the Borough -wide mill rate has remained the same at 10.75 mills since FY2012, how the mill rate is distributed to the general fund chang- es annually. The General Fund's share of the mill rate increased from 0.56 mills in FY2020 to 2.75 mills in FY2021. This was to account for a $2.3million dollar transfer to the Debt Service Fund. Category Descriptions: Excise Taxes, Services, Fees. Investments & Other. Local revenues from penalties and in- terest, excise taxes, building permits, zoning permits, interest earnings and changes in market value on investments, map sales and reimbursed expenses. 0 Intergovernmental: Federal and State reve- nues such as Payment in Lieu of Tax (PILT), Community Revenue Sharing, Fisheries Busi- ness Tax Sharing, Fisheries Landing Tax, Na- tional Wildlife Refuge and PERS on Behalf Payments. 0 Severance Taxes: Local revenues from fish, gravel and timber. 0 Property Tgxes: Local revenues from residen- tial and commercial real and personal prop- erties and commercial aircraft. WHERE YOUR BOROUGH -WIDE PROPERTY TAX DOLLAR GOES (See category descriptions under Property Taxes) Education Support Debt Service General Fund 60 Cents 14 Cents 26 Cents (Transfer to Debt Service 13 Cents) _._ 1tIC7fl7 711Y0;UK �A /At 91IfY ttRl! L11laD916 PG Kodiak Island Borough Popular Annual Financial Report For Fiscal Year Ending June 30, 2021 CAPITAL PROJECTS Completed in FY2021: • Baler Fuel Tank Replacement • Providence Kodiak Island Medical Center Fuel Tank Replacement • Kodiak High School Electric Boiler • Kodiak Fisheries Research Center Electric Boiler. • Kodiak Fisheries Research Center Fire Alarm Upgrades • North Star Elementary Gym Siding Replacement As part of the Federal CARES Act, the Kodiak Island Borough received $5,792,501. Here are the major categories the money was spent on. Scheduled for Completion in FY2022 and Beyond: • Borough Building Boiler Remodel • Salonie Creek Culvert Replacement • Saltery Cove Trail System Access & Improvement • Kodiak Fisheries Research Center Exterior Improvements Fume Hood Exhaust Ozonator • Long Term Care Center Fuel Line Replacement • Providence Kodiak Island Medical Center Retaining Wall Fire Alarm Replacement & Upgrade • Schools Chiniak Water System North Star Elementary Siding Replacement North Star Elementary Window Replacement Peterson Elementary Roof Replacement KODIAK ISLAND BOROUGH CARES ACT EXPENDITURES Small Business Grants, Ci Utility Relief Credit K113,9% Amount Percentage Description $ 58,681 Borough: Administrative/other(1%): Legal fees, hand sanitizer, masks, cleaning and social distancing barriers and other miscellaneous COVID-19 related expenses. $ 276,169 Payroll (5%): Salary and associated costs Borough Staff at the Emergency Operations Center EOC). $ 143,094 Payroll (2%): Salary and associated costs for Borough employees related to COVID-19 activities such as staffing the reception area and sanitizing the building. $ 39,421 Telework(1%): Equipment to work remotely as needed, security software, setup for remote meeting accessibility, and enabling the relocation of Assembly Meetings to Bayside Fire Dept. $ 517,365 9% $2,670,000 46°% School District: Funded education needs for remote classes and other social distancing regirements. $ 753,279 6% City of Kodiak: Supplies for testing and shared EOC expenses. $1,424,694 32°% Small Business Grants: Financial assistance to fund local businesses due to COVID-19 related economic hardship. $ 427,163 7% Utility Relief Credit Program: Financial assistance to residents and businesses with solid waste utility accounts. $5,792,501 100%