Loading...
Fiscal Year 2008 Basic Financial Statements TOWN OF NANTUCKET, MASSACHUSETTS REPORT ON EXAMINATION OF BASIC FINANCIAL STATEMENTS FISCAL YEAR ENDED JUNE 30, 2008 TOWN OF NANTUCKET, MASSACHUSETTS REPORT ON EXAMINATION OF BASIC FINANCIAL STATEMENTS JUNE 30, 2008 TABLE OF CONTENTS Page Independent Auditors’ Report..........................................................................................................................................1 Management’s Discussion and Analysis.........................................................................................................................3 Basic Financial Statements ...........................................................................................................................................13 Statement of Net Assets............................................................................................................................................14 Statement of Activities ...............................................................................................................................................16 Governmental Funds – Balance Sheet......................................................................................................................18 Reconciliation of the Governmental Funds Balance Sheet Total Fund Balances to the Statement of Net Assets...19 Governmental Funds – Statement of Revenues, Expenditures and Changes in Fund Balances.............................20 Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balances of Governmental Funds to the Statement of Activities.....................................................................................................................21 Proprietary Funds – Statement of Net Assets ...........................................................................................................22 Proprietary Funds – Statement of Revenues, Expenses and Changes in Fund Net Assets.....................................24 Proprietary Funds – Statement of Cash Flows..........................................................................................................26 Fiduciary Funds – Statement of Fiduciary Net Assets...............................................................................................28 Fiduciary Funds – Statement of Changes in Fiduciary Net Assets ...........................................................................29 Notes to Basic Financial Statements.........................................................................................................................30 Required Supplementary Information............................................................................................................................59 Schedule of Revenues, Expenditures and Changes in Fund Balance – General Fund – Budget and Actual..........60 Schedule of Funding Progress...................................................................................................................................62 Schedule of Employer Contributions .........................................................................................................................63 Notes to Required Supplementary Information..........................................................................................................64 This page intentionally left blank. 1 Independent Auditors’ Report To the Honorable Board of Selectmen Town of Nantucket, Massachusetts We have audited the accompanying financial statements of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of the Town of Nantucket, Massachusetts, as of and for the year ended June 30, 2008, which collectively comprise the Town’s basic financial statements as listed in the table of contents. These financial statements are the responsibility of the Town of Nantucket's management. Our responsibility is to express opinions on these financial statements based on our audit. We did not audit the financial statements of the Nantucket Islands Land Bank discretely presented component unit. Those financial statements were audited by other auditors whose reports thereon have been furnished to us, and our opinion, insofar as it relates to the amounts included for the Nantucket Islands Land Bank discretely presented component unit, is based on the report of the other auditor. 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 of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinions. The Town does not have a system of internal control that allows us to form an opinion on the balance of cash, investments and interfund receivables and payables. These internal control deficiencies also do not allow us to form an opinion on the accuracy of the revenue, expenses and expenditure lines reported. In our opinion, based on our audit and the report of other auditors, except for the effects on the financial statements of the matters described in the previous paragraph, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of the Town of Nantucket, Massachusetts, as of June 30, 2008, and the respective changes in financial position and cash flows, where applicable, thereof for the fiscal year then ended in conformity with accounting principles generally accepted in the United States of America. In accordance with Government Auditing Standards, we have also issued our report dated March 20, 2009 on our consideration of the Town of Nantucket, Massachusetts’ internal control over financial reporting and our tests of its compliance with certain provisions of laws, regulations, contracts, grant agreements and other matters. The purpose of that report is 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 internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards and should be read in conjunction with this report in considering the results of our audit. 2 Management’s discussion and analysis, located on the following pages, and the schedule of revenues, expenditures and changes in fund balance – general fund – budgetary basis, schedule of funding progress, and schedule of employer contributions located after the notes to the basic financial statements, are not a required part of the basic financial statements but are supplementary information required by accounting principles generally accepted in the United States of America. We have applied certain limited procedures, which consisted principally of inquiries of management regarding the methods of measurement and presentation of the required supplementary information. However, we did not audit the information and express no opinion on it. March 20, 2009 Town of Nantucket, Massachusetts 3 Management’s Discussion and Analysis Management’s Discussion and Analysis Town of Nantucket, Massachusetts 4 Basic Financial Statements Management’s Discussion and Analysis As management of the Town of Nantucket, we offer readers of these financial statements this narrative overview and analysis of the financial activities for the fiscal year ended June 30, 2008. The Town complies with financial reporting requirements issued by the Governmental Accounting Standards Board (GASB), and Management’s Discussion and Analysis are part of these requirements. The GASB is the authoritative standards-setting body that provides guidance on the preparation of financial statements in conformity with Generally Accepted Accounting Principles (GAAP). External users of these financial statements, such as investors and rating agencies, rely on consistent reporting standards in order to compare the financial position of the Town of Nantucket with that of other governmental entities. Overview of the Financial Statements This discussion and analysis are intended to serve as an introduction to the Town of Nantucket’s basic financial statements. These basic financial statements comprise three components: 1) government-wide financial statements, 2) fund financial statements, and 3) notes to the financial statements. This report also contains other required supplementary information in addition to the basic financial statements. Government-wide financial statements. The government-wide financial statements are designed to provide readers with a broad overview of finances, in a manner similar to private-sector business. The statement of net assets presents information on all assets and liabilities, with the difference between the two reported as net assets. Over time, increases or decreases in net assets may serve as a useful indicator of whether the financial position is improving or deteriorating. The statement of activities presents information showing how the government’s net assets changed during the most recent fiscal year. All changes in net assets are reported as soon as the underlying event giving 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 only result in cash flows in future fiscal periods (e.g., uncollected taxes and earned but unused vacation leave). Both of the government-wide financial statements distinguish functions 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 governmental activities include general government, public safety, education, public works, community preservation, human services, culture and recreation, interest and state and county charges. The business-type activities include the activities of the sewer department, solid waste, airport, and the Siasconset and Wannacomet water departments. The government-wide financial statements include not only the Town of Nantucket itself (known as the primary government), but also the County of Nantucket (County) and the Nantucket Islands Land Bank (Land Bank), which are legally separate entities. The County is included because the elected Board of Selectmen serves also as County Commissioners. The Land Bank is included because a portion of the Town’s debt was incurred on behalf of the Land Bank, and the Town guarantees other debt incurred by the Land Bank. Financial information for these component units is reported separately within the governmental and proprietary fund statements respectively. Fund financial statements. 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. Fund accounting is used to ensure and Town of Nantucket, Massachusetts 5 Basic Financial Statements demonstrate compliance with finance-related legal requirements. All of the funds can be divided into three categories: governmental funds, proprietary funds, and fiduciary funds. Governmental funds. 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 financial statements, governmental fund statements focus on near-term inflows of spendable resources, as well as on balances of spendable resources available at the end of the fiscal year. Such information may be useful in evaluating a government’s near-term financing requirements. 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 governmental funds with similar information presented for governmental activities in the government-wide financial statements. By doing so, readers may better understand the long-term impact of the government’s near-term financing decisions. 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 Town of Nantucket adopts an annual appropriated budget for its general fund. A budgetary comparison schedule has been provided for the general fund as required supplementary information to demonstrate compliance with this budget. Proprietary funds. The Town maintains two types of proprietary funds. Enterprise funds are used to report the same functions presented as business-type activities in the government- wide financial statements. The Town uses enterprise funds to account for its sewer department, solid waste, airport, and the Siasconset and Wannacomet water departments’ activities and activities of the Nantucket Islands Land Bank component unit. Internal service funds are used by the Town to report the activity of self funded insurance programs, including health and workers’ compensation insurance. Governmental accounting principles allow self funded insurance programs to be reported in either the general fund or in an internal service fund. The insurance programs benefit both the governmental and business-type activities of the town; however, the governmental activities include more employees and retirees than the business-type activities. For that reason, the internal service funds are included within the category of governmental activities in the government-wide financial statements.” Fiduciary funds. Fiduciary funds are used to account for resources held for the benefit of parties outside the government. Fiduciary funds are not reflected in the government-wide financial statement because the resources of those funds are not available to support the Town’s own programs. The accounting used for fiduciary funds is much like that used for proprietary funds. Notes to the basic financial statements. The notes provide additional information that is essential to a full understanding of the data provided in the government-wide and fund financial statements. Financial Highlights as of the close of Fiscal 2008 • The total of assets exceeded liabilities (i.e., net assets) by $176 million for governmental activities, and $103 million for business type activities. • Governmental funds reported combined ending fund balances of $34 million. • Unreserved fund balance for the general fund totaled $7 million. • Total governmental funds debt totaled $77.2 million, and total enterprise fund debt totaled $83.5 million. Town of Nantucket, Massachusetts 6 Basic Financial Statements Government-wide Financial Analysis The following chart provides a summary of Governmental activities financial data for fiscal year 2008, with comparative fiscal 2007 information. Governmental Activities Balance at Balance at June 30, June 30, 2008 2007 Assets: Current assets……………………………………………$ 57,632,959 $ 46,460,116 Noncurrent assets (excluding capital)………………… 499,024 608,233 Capital assets, not being depreciated………………… 175,330,456 172,004,677 Capital assets, net of accumulated depreciation…… 27,777,272 26,493,294 Total assets………………………………………… 261,239,711 245,566,320 Liabilities: Current liabilities (excluding debt)…………………… 6,579,717 5,923,957 Noncurrent liabilities (excluding debt)………………… 1,221,905 1,495,480 Current debt……………………………………………… 11,976,816 10,228,096 Noncurrent debt………………………………………… 65,196,354 52,121,592 Total liabilities………………………………………84,974,792 69,769,125 Net Assets: Capital assets net of related debt……………………… 153,639,878 145,427,507 Restricted………………………………………………… 13,803,760 9,291,543 Unrestricted……………………………………………… 8,821,281 21,078,145 Total net assets……………………………………$ 176,264,919 $ 175,797,195 As noted earlier, net assets may serve over time as a useful indicator of a government’s financial position. For governmental activities, assets exceeded liabilities by $176 million at the close of fiscal year 2008. The largest portion of the Town’s net assets, $153 million, (87%), reflects investment in capital assets (e.g., land, buildings, machinery, and equipment), less any outstanding debt which was borrowed in order to build or acquire those assets. The Town uses these capital assets to provide services to citizens; consequently, these assets are not available for future spending. Although the 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. An additional portion of the net assets, $14 million (8%), represents resources that are subject to external restrictions on how they may be used. The remaining balance of unrestricted net assets, $9 million (5%), may be used to meet the government’s ongoing obligations to citizens and creditors. At the end of the current fiscal year, the Town reports positive balances in all three categories of net assets. Town of Nantucket, Massachusetts 7 Basic Financial Statements Governmental Activities June 30, June 30, 2008 2007 Program revenues: Charges for services……………………………………$ 7,408,010 $ 6,443,813 Operating grants and contributions…………………… 5,462,762 4,330,913 Capital grants and contributions……………………… 1,991,891 1,881,330 General revenues: Real estate and personal property taxes……………… 55,285,952 51,611,421 Tax liens………………………………………………… 295,646 253,933 Motor vehicle and other excise taxes………………… 2,367,735 2,222,084 Hotel/motel tax…………………………………………… 1,343,140 1,291,414 Penalties and interest on taxes……………………… 410,785 398,796 Community Preservation Fund surtax………………… 1,535,337 1,459,647 Payments in lieu of taxes……………………………… 3,645 - Nonrestricted grants and contributions……………… 469,868 413,538 Unrestricted investment income……………………… 634,539 355,288 Miscellaneous revenues………………………………… 579,775 593,982 Total revenues……………………………………… 77,789,085 71,256,159 Expenses: General government…………………………………… 6,832,016 7,176,690 Public safety……………………………………………… 10,691,407 10,073,622 Education………………………………………………… 27,607,296 25,691,799 Public works……………………………………………… 3,146,271 3,889,166 Community preservation……………………………… 2,105,908 1,939,092 Human services………………………………………… 7,473,662 7,537,766 Culture and recreation………………………………… 2,232,982 2,147,117 Interest…………………………………………………… 2,419,841 2,246,838 Total expenses……………………………………… 62,509,383 60,702,090 Transfers…………………………………………………… (14,811,978) (4,124,760) Change in net assets…………………………………… $ 467,724 $ 6,429,309 The primary governmental expenses totaled $62 million. Of that amount, $14.9 million was directly supported by program revenues consisting of charges for services, operating and capital grants and contributions. General revenues totaled $62.9 million, primarily coming from property taxes, motor vehicle excise, hotel/motel taxes, non- restricted state aid and other miscellaneous charges. The governmental activities net assets increased by approximately $468,000 in Fiscal 2008 after recording a capital transfer of over $15 million to the Sewer Enterprise Fund for debt that will be repaid by the general government which will be used to construct capital assets for the Sewer Enterprise Fund. The resources for that transfer (borrowing agreement) are not included in the revenues shown above, in accordance with accrual accounting. Disregarding that capital transfer, governmental activities net assets increased by $15 million on a GAAP accounting basis. The major increase was a total of $8.2 million in capital assets, net of related debt. Other large increases include a $3.3 million capital transfer from the Nantucket County Sheriff’s department, a $2.8 million increase in the Internal Service Fund, and a $1 million increase in the community preservation fund. Town of Nantucket, Massachusetts 8 Basic Financial Statements Governmental Activities Balance at Balance at Net June 30, June 30, Increase 2008 2007 (Decrease) Net Assets: Capital assets net of related debt………………………$ 153,639,878 $ 145,427,507 $ 8,212,371 Restricted………………………………………………… 13,803,760 9,291,543 4,512,217 Unrestricted……………………………………………… 8,821,281 21,078,145 (12,256,864) Total net assets……………………………………$ 176,264,919 $ 175,797,195 $ 467,724 The following chart provides a summary of Business-type activities financial data for fiscal year 2008, with comparative fiscal 2007 information. Business-Type Activities Balance at Balance at June 30, June 30, 2008 2007 Assets: Current assets……………………………………………$ 44,675,721 $ 31,864,833 Noncurrent assets (excluding capital)………………… 2,367,761 2,469,066 Capital assets, not being depreciated………………… 74,107,339 40,459,326 Capital assets, net of accumulated depreciation…… 76,145,691 73,524,319 Total assets………………………………………… 197,296,512 148,317,544 Liabilities: Current liabilities (excluding debt)…………………… 10,768,076 6,275,354 Noncurrent liabilities (excluding debt)………………… 327,726 248,590 Current debt……………………………………………… 12,710,329 7,765,653 Noncurrent debt………………………………………… 70,859,005 52,399,347 Total liabilities……………………………………… 94,665,136 66,688,944 Net Assets: Capital assets net of related debt……………………… 78,358,807 69,117,523 Unrestricted……………………………………………… 24,272,569 12,511,077 Total net assets…………………………………… 102,631,376 81,628,600 Program revenues: Charges for services…………………………………… 25,376,292 24,449,745 Operating grants and contributions…………………… 1,773,605 2,154,457 Capital grants and contributions……………………… 6,804,856 1,340,057 Total revenues……………………………………… 33,954,753 27,944,259 Expenses: Water……………………………………………………… 3,941,308 3,219,051 Sewer…………………………………………………… 4,416,855 3,954,894 Solid Waste……………………………………………… 8,988,076 8,983,570 Airport…………………………………………………… 13,717,716 12,171,263 Total expenses……………………………………… 31,063,955 28,328,778 Transfers…………………………………………………… 18,111,978 4,124,760 Change in net assets…………………………………… $ 21,002,776 $ 3,740,241 Town of Nantucket, Massachusetts 9 Basic Financial Statements There was a net increase of $21 million in net assets reported in connection with the Town’s business-type activities (enterprise funds). The changes by fund are listed in the following table: Business-Type Activities Balance at Balance at Net June 30, June 30, Increase 2008 2007 (Decrease) Net Assets: Siasconset Water……………………………………… $ 4,017,461 $ 3,858,279 $ 159,182 Wannacomet Water Company………………………… 14,063,649 13,067,642 996,007 Nantucket Memorial Airport…………………………… 30,242,477 23,852,347 6,390,130 Sewer Enterprise Fund………………………………… 44,380,438 29,326,631 15,053,807 Solid Waste Enterprise Fund…………………………… 9,927,351 11,523,701 $ (1,596,350) Total net assets……………………………………$ 102,631,376 $ 81,628,600 $21,002,776 The most significant factor in this change is a $15 million capital transfer from the general government to the Sewer Enterprise Fund. This represents approximately one-third of the long term debt incurred on behalf of the Sewer Enterprise Fund to expand and improve a waste water treatment facility. The general government is responsible for the repayment of that portion of the debt, as approved by voters at Annual Town meetings and by ballot election. The increase in net assets for Nantucket Memorial Airport consists primarily of $6 million in capital contributions from state and federal grants for construction projects, including a new airport terminal. The change in net assets for the Wannacomet Water and Solid Waste Enterprise Funds occurred as a result of the fiscal year net income and net loss, respectively, in each of the Funds. At the end of the current fiscal year, the Town reports $103 million in net assets for its combined business-type activities. Financial Analysis of the Government’s Funds As noted earlier, the Town uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements. Governmental funds. The focus of governmental funds is to provide information on near-term inflows, outflows, and balances of spendable resources. Such information is useful in assessing financing requirements. In particular, unreserved 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, governmental funds reported combined ending fund balances of $34.6 million, of which $10.6 million is general fund, and $24 million is nonmajor governmental funds. The general fund is the chief operating fund. At the end of fiscal 2008, unreserved fund balance of the general fund was $7.2 million, while total fund balance was $10.6 million. Town of Nantucket, Massachusetts 10 Basic Financial Statements As a measure of the general fund’s liquidity, it may be useful to compare both unreserved fund balance and total fund balance to total fund expenditures. Unreserved fund balance represents 11% of total general fund expenditures, while total fund balance represents 15% of that same amount. $364 thousand of the unreserved fund balance was designated at year end to support the 2009 budget. An additional $2.1 million was reserved for carry-over appropriations and encumbrances, and $931 thousand was reserved for future debt service. The unreserved, undesignated fund balance increased by $1 million. The Town also maintains a community preservation fund, classified within the non-major governmental funds which had a year end fund balance of $5.5 million. Of this amount, $3.3 million is designated for ongoing projects, by previous Annual Town Meeting votes. This fund is attributable to the Town’s acceptance of the Community Preservation Act, which allows the Town to impose a surcharge on property taxes and to receive matching state funds for specified uses related to the acquisition, creation, preservation and support of open space, historic resources, land for recreation use and community housing. In fiscal year 2008 the Town earned and accrued a year end receivable for state matching community preservation funds, of $1.1 million. General Fund Budgetary Highlights The General fund budget consists of those appropriations voted at Annual Town Meeting, carryover encumbrances and appropriations from the previous year, amounts charged by the Commonwealth and deducted from state revenues, and amounts required to be raised as a result of any deficits. The Town’s budget may be changed by action of Town Meeting or, in the last two months of the fiscal year, by vote of the Board of Selectmen and the Finance Committee, with statutory limitation as to amount. The original appropriation budget and the carryover encumbrances and appropriations totaled $73 million. Changes during the year consisted largely of allocations between and among departments. The net increase from changes to the appropriation budget totaled $127,214. Total actual revenue was lower than estimated revenue by $1.1 million, a negative variance of 2% of estimated revenue. At year end, outstanding purchase orders totaled approximately $500 thousand and carry-over appropriations totaled approximately $1.6 million. The total of these two items, $2.1 million, is reserved in fund balance at year end. The total of actual expenditures and these amounts reserved for future expenditures was lower than the final budget by approximately $3.4 million, a positive variance. The net of actual revenue and expense, compared to budgeted amounts, was a positive variance of $2.3 million. Of that amount, $931 thousand was reserved for 2009 debt service. The remainder, approximately $1.4 million, represents about 2% of the current year initial budget. The primary source of savings in expenditures resulted from health insurance coverage costs remaining stable. Capital Asset and Debt Administration In conjunction with the annual operating budget, the Town annually prepares a capital budget for the upcoming fiscal year and a Capital Improvement Plan (CIP) that is used as a guide for future capital expenditures. The Town’s investment in capital assets for its governmental and business-type activities as of June 30, 2008, totals $203 million in the governmental funds, and $150 million in the enterprise funds (net of accumulated depreciation). This investment in capital assets includes land, buildings, land improvements, equipment, vehicles and infrastructure. Current year fixed asset additions totaled $7.5 million for governmental activities, and $39.6 million for business- type activities. Town of Nantucket, Massachusetts 11 Basic Financial Statements Long-term Debt At the end of the current fiscal year, the Town of Nantucket had total bonded debt outstanding of $160.7 million. The entire amount is classified as general obligation debt and is backed by the full faith and credit of the Town. Of this amount, $14.2 million is in short term notes and the remaining $146.6 is outstanding long term debt. The governmental fund portion of the outstanding debt is $77.2 million. The enterprise funds’ portion of the outstanding debt is $83.6 million. This amount is fully supported by the revenue of the enterprise funds, and does not rely upon a general fund subsidy. Governmental Enterprise Funds Funds Total Short term………………………………$ 5,500,000 $ 8,712,725 $ 14,212,725 Current portion of long term………… 6,476,815 3,997,604 10,474,419 Noncurrent portion of long term……… 65,196,355 70,859,005 136,055,360 Total…………………………………$ 77,173,170 $ 83,569,334 $ 160,742,504 Please refer to the notes to the financial statements for further discussion of the major capital and debt activity. Economic Factors and Next Year’s Budgets and Rates The Town’s tax base continued to grow in fiscal 2008. Taxable property increased by $234 million (1.2%) in 2008. New growth provided additional tax revenue of $1.1 million in 2008 or 2.6% of the prior year’s levy base. The average residential assessed value was $1.9 million in 2008. The residential tax rate for 2008 was $2.67 per $1,000 of assessed value. The 2008 Annual and Special Town Meetings approved a fiscal year 2009 total budget of $108.9 million, including a total general fund budget of $72.7 million, and an increase to the stabilization fund of $500 thousand. The residential tax rate for 2009 is $2.76 per $1,000 of assessed value. Requests for Information This financial report is designed to provide a general overview of the Town of Nantucket’s finances for all those with an interest in the government’s finances. Questions concerning any of the information provided in this report or requests for additional financial information should be addressed to the Finance Director, 16 Broad Street, Nantucket, Massachusetts 02554. Town of Nantucket, Massachusetts 12 Basic Financial Statements This Page Left Intentionally Blank. Town of Nantucket, Massachusetts 13 Basic Financial Statements Basic Financial Statements Primary Government Governmental Business-type Activities Activities Total ASSETS CURRENT: Cash and cash equivalents…………………………………………………………$ 30,292,229 $ 22,595,839 $ 52,888,068 Restricted cash and cash equivalents……………………………………...……… - - - Investments…………………………………………………………………………… 2,695,431 - 2,695,431 Investments, restricted……………………………………………………………… - - - Receivables, net of allowance for uncollectibles: Real estate and personal property taxes……………………………………… 2,496,874 - 2,496,874 Tax and trash liens……………………………………………………………… 1,737,638 - 1,737,638 Motor vehicle and other excise taxes…………………………………………… 490,473 - 490,473 User fees………………………………………………………………………… 3,885 1,494,665 1,498,550 Departmental and other………………………………………………………… 731,423 7,978 739,401 Special assessments…………………………………………………………… 25,171 - 25,171 Intergovernmental………………………………………………………………… 18,034,963 19,306,600 37,341,563 Deferred loss on refunding…………..……………………………………………… 109,209 - 109,209 Inventory……………………………………………………………………………… - 764,626 764,626 Working capital deposit……………………………………………………………… 1,490,900 - 1,490,900 Other assets………………………………………………………………………… - - - Prepaid expenses…………………………………………………………………… 10,900 19,876 30,776 Internal balances……………………………………………………………………… (486,137) 486,137 - NONCURRENT: Restricted assets: Cash and cash equivalents……………….…………………………………… - - - Cash surrender value of life insurance………………………………………… - - - Receivables, net of allowance for uncollectibles: Intergovernmental………………………………………………………………… - 2,367,761 2,367,761 Deferred loss on refunding………………………………………………………… 499,024 - 499,024 Capital assets, not being depreciated……………………...……………………… 175,330,456 74,107,339 249,437,795 Capital assets, net of accumulated depreciation………………………………… 27,777,272 76,145,691 103,922,963 TOTAL ASSETS………………………………………………………………………… 261,239,711 197,296,512 458,536,223 LIABILITIES CURRENT: Warrants payable…………………………………………………………………… 949,441 9,077,289 10,026,730 Accrued liabilities…………………………………………………………………… - 9,315 9,315 Accrued payroll……………………………………………………………………… 2,566,922 124,638 2,691,560 Health claims payable……………………………………………………………… 710,419 - 710,419 Accrued interest……………………………………………………………………… 823,380 1,105,522 1,928,902 Payroll withholdings………………………………………………………………… 96,517 - 96,517 Security deposits……………………………………………………………………… - 309,097 309,097 Abandoned property………………………………………………………………… 22,094 - 22,094 Other liabilities………………………………………………………………………… 1,017,264 51,300 1,068,564 Compensated absences…………………………………………………………… 256,269 90,915 347,184 Workers' compensation……………………………………………………………… 94,336 - 94,336 Unamortized premium on bonds and notes payable…………………………… 43,075 - 43,075 Bonds and notes payable…………………………………………………………… 11,976,816 12,710,329 24,687,145 NONCURRENT: Compensated absences…………………………………………………………… 1,025,075 327,726 1,352,801 Unamortized premium on bonds and notes payable…………………………… 196,830 - 196,830 Bonds and notes payable…………………………………………………………… 65,196,354 70,859,005 136,055,359 TOTAL LIABILITIES…………………………………………………………………… 84,974,792 94,665,136 179,639,928 NET ASSETS Invested in capital assets, net of related debt………………………………………… 153,639,878 78,358,807 231,998,685 Restricted for: Debt service………………………………………………………...………………… - - - Permanent funds: Expendable……….……………………………………………………………… 206,985 - 206,985 Nonexpendable…………………………………………………………………… 308,153 - 308,153 Other purposes……………………………………………………………………… 13,288,622 - 13,288,622 Unrestricted……………………………………………………………………………… 8,821,281 24,272,569 33,093,850 TOTAL NET ASSETS……………………………………………………………………$ 176,264,919 $ 102,631,376 $ 278,896,295 See notes to basic financial statements. STATEMENT OF NET ASSETS JUNE 30, 2008 Town of Nantucket, Massachusetts 14 Basic Financial Statements County Land Bank Total $ 3,982,061 $ 12,219,219 $ 16,201,280 - 353,413 353,413 - - - - 1,271,969 1,271,969 - - - - - - - - - - - - - 108,863 108,863 - - - 34,289 - 34,289 - - - - 110,493 110,493 - - - 101,950 2,500 104,450 - 365,012 365,012 - - - - 2,027,328 2,027,328 - 493,831 493,831 - - - - - - 28,458 195,732,972 195,761,430 624,171 14,924,504 15,548,675 4,770,929 227,610,104 232,381,033 5,359 179,218 184,577 - 691,967 691,967 11,421 - 11,421 - - - - - - 391,888 - 391,888 - - - - - - 254,120 - 254,120 - - - - - - - - - - 2,986,919 2,986,919 - - - - - - - 27,667,226 27,667,226 662,788 31,525,330 32,188,118 652,629 180,005,831 180,658,460 - 2,380,741 2,380,741 - - - - - - - - - 3,455,512 13,698,202 17,153,714 $ 4,108,141 $ 196,084,774 $ 200,192,915 Component Units Town of Nantucket, Massachusetts 15 Basic Financial Statements STATEMENT OF ACTIVITIES FISCAL YEAR ENDED JUNE 30, 2008 Operating Capital Charges for Grants and Grants and Net (Expense) Functions/Programs Expenses Services Contributions Contributions Revenue Primary Government: Governmental Activities: General government………………………$ 6,832,016 $ 1,018,223 $ 512,146 $ - $ (5,301,647) Public safety……………………………… 10,691,407 2,028,994 995,169 - (7,667,244) Education………………………………… 27,607,296 688,028 3,470,447 - (23,448,821) Public works……………………………… 3,146,271 69,200 8,075 763,713 (2,305,283) Community preservation………………… 2,105,908 - - 1,228,178 (877,730) Human services…………………………… 7,473,662 3,284,823 25,752 - (4,163,087) Culture and recreation…………………… 2,232,982 318,742 451,173 - (1,463,067) Interest……………………………………… 2,419,841 - - - (2,419,841) Total Governmental Activities………… 62,509,383 7,408,010 5,462,762 1,991,891 (47,646,720) Business-Type Activities: Water………………………………………… 3,941,308 4,279,554 816,943 - 1,155,189 Sewer……………………………………… 4,416,855 3,871,716 422,968 - (122,171) Solid waste………………………………… 8,988,076 4,237,488 216,325 1,913 (4,532,350) Airport……………………………………… 13,717,716 12,987,534 317,369 6,802,943 6,390,130 Total Business-Type Activities………… 31,063,955 25,376,292 1,773,605 6,804,856 2,890,798 Total Primary Government…………… 93,573,338 32,784,302 7,236,367 8,796,747 (44,755,922) Component Units: County……………………………………… 1,722,840 1,637,356 417,965 - 332,481 Land Bank………………………………… 5,714,381 17,919,375 696,519 - 12,901,513 Total Component Units……………….. 7,437,221 19,556,731 1,114,484 - 13,233,994 Total………………………………………$ 101,010,559 $ 52,341,033 $ 8,350,851 $ 8,796,747 $(31,521,928) See notes to basic financial statements.(Continued) Program Revenues Town of Nantucket, Massachusetts 16 Basic Financial Statements Governmental Business-Type Activities Activities Total County Land Bank Total Changes in net assets: Net (expense) revenue from previous page…… $(47,646,720) $2,890,798 $(44,755,922) $332,481 $12,901,513 $13,233,994 General revenues: Real estate and personal property taxes, net of tax refunds payable…………………… 55,285,952 - 55,285,952 - - - Tax liens………………………………………… 295,646 - 295,646 - - - Motor vehicle and other excise taxes………… 2,367,735 - 2,367,735 6,765 - 6,765 Hotel/motel tax………………………………… 1,343,140 - 1,343,140 - - - Penalties and interest on taxes……………… 410,785 - 410,785 - - - Community Preservation Fund surcharges… 1,535,337 - 1,535,337 - - - Payments in lieu of taxes……………………… 3,645 - 3,645 - - - Grants and contributions not restricted to specific programs……………………………… 469,868 - 469,868 - - - Unrestricted investment income……………… 634,539 - 634,539 - - - Miscellaneous…………………………………… 579,775 - 579,775 105 - 105 Capital transfers…………………………………… (15,175,978) 15,175,978 - - - - Transfers to/from component unit………………… - 3,300,000 3,300,000 (3,300,000) - (3,300,000) Transfers, net……………………………………… 364,000 (364,000) - - - - Total general revenues and transfers…………… 48,114,444 18,111,978 66,226,422 (3,293,130) - (3,293,130) Change in net assets………………………… 467,724 21,002,776 21,470,500 (2,960,649) 12,901,513 9,940,864 Net Assets: Beginning of year, as restated………………… 175,797,195 81,628,600 257,425,795 7,068,790 183,183,261 190,252,051 End of year……………………………………… $ 176,264,919 $ 102,631,376 $ 278,896,295 $ 4,108,141 $ 196,084,774 $ 200,192,915 (Concluded) Primary Government Component Units STATEMENT OF ACTIVITIES (Continued) FISCAL YEAR ENDED JUNE 30, 2008 Town of Nantucket, Massachusetts 17 Basic Financial Statements Component Nonmajor Total Unit - Governmental Governmental Nantucket ASSETS General Funds Funds County Cash and cash equivalents…………………………………$- $ 24,977,043 $ 24,977,043 $ 3,982,061 Investments………………………………………………… - 2,534,699 2,534,699 - Receivables, net of uncollectibles: Real estate and personal property taxes……………… 2,432,506 64,368 2,496,874 - Tax liens ……………………….………………………… 1,719,206 18,432 1,737,638 - Motor vehicle and other excise taxes………………… 490,473 - 490,473 - User fees………………………………………………… 3,885 - 3,885 - Departmental and other………………………………… 406,591 228,442 635,033 - Special assessments…………………………………… - 25,171 25,171 - Intergovernmental……………………………………… 15,453,080 2,581,883 18,034,963 34,289 Due from other funds……………………………………… 958,600 619,852 1,578,452 - Other assets………………………………………………… - - - 101,950 Prepaid expenses…………………………………………… 10,900 - 10,900 - TOTAL ASSETS…………………………………………… $ 21,475,241 $ 31,049,890 $ 52,525,131 $ 4,118,300 LIABILITIES AND FUND BALANCES LIABILITIES: Warrants payable…………………………………………$ 532,001 $ 414,956 $ 946,957 $ 5,359 Accrued payroll…………………………………………… 2,535,505 31,417 2,566,922 11,421 Accrued interest on short-term debt…………………… 37,739 - 37,739 - Payroll withholdings……………………………………… 96,517 - 96,517 391,888 Abandoned property…………………………………… 22,094 - 22,094 - Other liabilities…………………………………………… 871,722 145,542 1,017,264 254,120 Deferred revenues……………………………………… 4,152,172 1,077,623 5,229,795 14,730 Due to other funds……………………………………… 2,615,418 - 2,615,418 - Notes payable…………………………………………… - 5,500,000 5,500,000 - TOTAL LIABILITIES………………………………………… 10,863,168 7,169,538 18,032,706 677,518 FUND BALANCES: Reserved for: Encumbrances and continuing appropriations…… 2,142,523 - 2,142,523 - Debt service………………………………………...… 931,390 - 931,390 - Perpetual permanent funds………………………… - 308,153 308,153 - Unreserved: Designated for subsequent year's expenditures… 364,200 - 364,200 - Undesignated, reported in: General fund……………………………………… 7,173,960 - 7,173,960 394,544 Special revenue funds…………………………… - 16,061,734 16,061,734 3,046,238 Capital projects funds…………………………… - 7,303,480 7,303,480 - Permanent funds………………………………… - 206,985 206,985 - TOTAL FUND BALANCES………………………………… 10,612,073 23,880,352 34,492,425 3,440,782 TOTAL LIABILITIES AND FUND BALANCES……………$ 21,475,241 $ 31,049,890 $ 52,525,131 $ 4,118,300 See notes to basic financial statements. JUNE 30, 2008 GOVERNMENTAL FUNDS BALANCE SHEET Town of Nantucket, Massachusetts 18 Basic Financial Statements RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET TOTAL FUND BALANCES TO THE STATEMENT OF NET ASSETS JUNE 30, 2008 Total governmental fund balances……………………………………………………………………… $ 34,492,425 Capital assets (net) used in governmental activities are not financial resources and, therefore, are not reported in the funds…………………………………………………… 203,107,728 Accounts receivable are not available to pay for current-period expenditures and, therefore, are deferred in the funds………………………………………… 5,229,795 Internal service funds are used by management to account for retirees' health insurance and workers' compensation activities. The assets and liabilities of the internal service funds are included in the governmental activities in the statement of net assets………………………………… 6,901,134 In the statement of activities, interest is accrued on outstanding long-term debt, whereas in governmental funds interest is not reported until due……………………………… (785,641) Long-term liabilities are not due and payable in the current period and, therefore, are not reported in the governmental funds Bonds payable…………………………………………………………………………………… (71,673,170) Unamortized premiums on bonds and notes………………………………………………… (239,905) Workers' compensation………………………………………………………………………… (94,336) Compensated absences………………………………………………………………………… (1,281,344) Net effect of reporting long-term liabilities……………………………………………… (73,288,755) In the statement of activities, deferred losses are reported for refundings of debt, which are amortized over the shorter of the remaining life of the refunding bonds or refunded bonds. In governmental funds, defeasances of debt are expensed when the refunding bonds are issued…………………………………… 608,233 Net assets of governmental activities…………………………………………………………………… $ 176,264,919 See notes to basic financial statements. Town of Nantucket, Massachusetts 19 Basic Financial Statements Component Nonmajor Total Unit - Governmental Governmental Nantucket General Funds Funds County REVENUES: Real estate and personal property taxes, net of tax refunds…………………………………………………………… $ 55,129,913 $ - $ 55,129,913 $ - Tax liens…………………………………………………………………………… 74,677 - 74,677 - Motor vehicle and other excise taxes………………………………………… 2,332,743 - 2,332,743 6,765 Hotel/motel tax…………………………………………………………………… 1,343,140 - 1,343,140 - Charges for services…………………………………………………………… 4,742,366 681,365 5,423,731 - Community Preservation surcharges………………………………………… - 1,535,337 1,535,337 - Penalties and interest on taxes………………………………………………… 409,101 1,684 410,785 - Payments in lieu of taxes……………………………………………………… 3,645 - 3,645 - Licenses and permits…………………………………………………………… 1,321,794 - 1,321,794 - Fines and forfeitures…………………………………………………………… 266,693 - 266,693 - Intergovernmental……………………………………………………………… 3,186,379 3,992,328 7,178,707 100,000 Departmental and other………………………………………………………… 163,521 187,156 350,677 1,782,089 Contributions……………………………………………………………………… - 1,300 1,300 - Investment income……………………………………………………………… 549,686 209,215 758,901 158,502 Miscellaneous…………………………………………………………………… 544,193 2,327,087 2,871,280 105 TOTAL REVENUES……………………………………………………… 70,067,851 8,935,472 79,003,323 2,047,461 EXPENDITURES: Current: County administration……………………………………………………… - - - 266,369 Registry of Deeds…………………………………………………………… - - - 312,741 Sheriff's department………………………………………………………… - - - 919,706 Special projects……………………………………………………………… - - - 61,754 General government………………………………………………………… 5,327,955 1,379,707 6,707,662 962 Public safety………………………………………………………………… 7,918,077 498,793 8,416,870 42,763 Education……………………………………………………………………… 21,041,055 2,919,937 23,960,992 - Public works…………………………………………………………………… 2,883,144 3,219,949 6,103,093 - Community preservation…………………………………………………… - 2,105,908 2,105,908 - Human services……………………………………………………………… 6,118,790 33,210 6,152,000 - Culture and recreation……………………………………………………… 2,097,818 551,235 2,649,053 - Pension benefits……………………………………………………………… 4,716,353 - 4,716,353 - Employee benefits…………………………………………………………… 8,587,434 - 8,587,434 - State and county charges……………………………………………………… 462,130 - 462,130 - Debt service: Principal……………………………………………………………………… 4,728,096 - 4,728,096 - Interest………………………………………………………………………… 2,343,057 - 2,343,057 - TOTAL EXPENDITURES………………………………………………… 66,223,909 10,708,739 76,932,648 1,604,295 EXCESS (DEFICIENCY) OF REVENUES OVER (UNDER) EXPENDITURES………………………………………………………………… 3,843,942 (1,773,267) 2,070,675 443,166 OTHER FINANCING SOURCES (USES): Proceeds from bonds and notes……………………………………………… 15,175,978 4,375,600 19,551,578 - Transfer to primary government………………………………………………… - - - (3,300,000) Transfer from component unit………………………………………………… - 3,300,000 3,300,000 - Transfers in……………………………………………………………………… 642,464 910,000 1,552,464 - Transfers out……………………………………………………………………… (3,846,000) (642,464) (4,488,464) - Capital transfer…………………………………………………………………… (15,175,978) - (15,175,978) - TOTAL OTHER FINANCING SOURCES (USES)…………………… (3,203,536) 7,943,136 4,739,600 (3,300,000) NET CHANGE IN FUND BALANCES…………………………………………… 640,406 6,169,869 6,810,275 (2,856,834) FUND BALANCES AT BEGINNING OF YEAR………………………………… 9,971,667 17,710,483 27,682,150 6,297,616 FUND BALANCES AT END OF YEAR……………………………………………$ 10,612,073 $ 23,880,352 $ 34,492,425 $ 3,440,782 See notes to basic financial statements. GOVERNMENTAL FUNDS STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES FISCAL YEAR ENDED JUNE 30, 2008 Town of Nantucket, Massachusetts 20 Basic Financial Statements RECONCILIATION OF THE STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES OF GOVERNMENTAL FUNDS TO THE STATEMENT OF ACTIVITIES FISCAL YEAR ENDED JUNE 30, 2008 Net change in fund balances - total governmental funds…………………………………………………… $ 6,810,275 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…………………………………………………………………………………………… 6,913,592 Depreciation expense………………………………………………………………………………… (2,303,835) Net effect of reporting capital assets………………………………………………………… 4,609,757 Revenues in the Statement of Activities that do not provide current financial resources are fully deferred in the Statement of Revenues, Expenditures and Changes in Fund Balances. Therefore, the recognition of revenue for various types of accounts receivable (i.e., real estate and personal property, motor vehicle excise, etc.) differ between the two statements. This amount represents the net change in deferred revenue…………………………………………………………………… 773,409 The issuance of long-term debt (e.g., bonds and leases) provides current financial resources to governmental funds, while the repayment of the principal of long- term debt consumes the financial resources of governmental funds. Neither transaction, however, has any effect on net assets. Also, governmental funds report the effect of premiums, discounts, and similar items when debt is first issued, whereas these amounts are deferred and amortized in the Statement of Activities. Proceeds from bonds and notes…………………………………………………………………… (19,551,578) Debt service principal payments…………………………………………………………………… 4,728,096 Net effect of reporting long-term debt………………………………………………………… (14,823,482) 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 the governmental funds. Net change in compensated absences accrual…………………………………………………… 288,125 Net change in accrued interest on long-term debt………………………………………………… (7,686) Net change in workers' compensation……………………………………………………………… 50,338 Amortization of deferred charge on refunding……………………………………………………… (114,104) Amortization of premiums on bonds and notes payable………………………………………… 45,006 Net effect of recording long-term liabilities and amortizing deferred losses……………… 261,679 Internal service funds are used by management to account for health insurance and workers' compensation activities. The net activity of internal service funds is reported with Governmental Activities…………… 2,836,086 Change in net assets of governmental activities……………………………………………………………… $ 467,724 See notes to basic financial statements. Town of Nantucket, Massachusetts 21 Basic Financial Statements Nantucket Siasconset Memorial Water Sewer Solid Waste Airport ASSETS CURRENT: Cash and cash equivalents………………………………$ (300) $ 1,962,589 $ - $ 10,238,314 Restricted cash and cash equivalents…………………… - - - - Investments………………………………………………… - - - - Investments, designated………………………………… - - - - Receivables, net of allowance for uncollectibles: Land Bank accounts…………………………………… - - - - Insurance reimbursements…………………………… - - 7,978 - User fees……………………………………………… 29,940 143,294 544,601 341,802 Intergovernmental……………………………………… - 17,185,373 - 2,121,227 Inventory…………………………………………………… - - - 649,111 Working capital deposit…………………………………… - - - - Prepaid expenses………………………………………… - - - 19,876 Land deposits…………………………………………….… - - - - Due from other funds……………………………………… 67,981 3,070,418 188,320 - Total current assets……………………………… 97,621 22,361,674 740,899 13,370,330 NONCURRENT: Receivables, net of allowance for uncollectibles: Intergovernmental……………………………………… - 2,367,761 - - Restricted cash and cash equivalents…………………… - - - - Cash surrender value of life insurance………………… - - - - Capital assets, not being depreciated…………………… 4,537,825 49,125,475 2,651,406 12,488,698 Capital assets, net of accumulated depreciation……… 2,409,496 27,651,838 8,357,588 19,280,738 Total noncurrent assets…………………………… 6,947,321 79,145,074 11,008,994 31,769,436 TOTAL ASSETS……………………………………………… 7,044,942 101,506,748 11,749,893 45,139,766 LIABILITIES CURRENT: Warrants payable………………………………………… 132,369 6,471,338 536,054 1,806,954 Accrued liabilities………………………………………… - - - - Accrued payroll…………………………………………… 3,412 14,755 1,496 85,058 Health claims payable…………………………………… - - - - Security deposits………………………………………… - - - 309,097 Accrued interest…………………………………………… 32,130 696,083 10,205 106,182 Other liabilities……………………………………………… - - - 51,300 Due to other funds………………………………………… 1,169,388 253,711 189,787 44,128 Compensated absences………………………………… 5,036 8,225 - 39,907 Notes payable……………………………………………… - - - 8,712,725 Bonds payable…………………………………………… 180,000 1,720,292 110,000 732,312 Total current liabilities……………………………… 1,522,335 9,164,404 847,542 11,887,663 NONCURRENT: Compensated absences………………………………… 20,146 32,901 - 159,626 Notes payable……………………………………………… - - - - Bonds payable…………………………………………… 1,485,000 47,929,005 975,000 2,850,000 Total noncurrent liabilities………………………… 1,505,146 47,961,906 975,000 3,009,626 TOTAL LIABILITIES………………………………………… 3,027,481 57,126,310 1,822,542 14,897,289 NET ASSETS Invested in capital assets, net of related debt……………… 5,282,321 30,077,387 9,923,994 19,880,316 Restricted……………………………………………………… - - - - Unrestricted: Undesignated……………………………………………… (1,264,860) 14,303,051 3,357 10,362,161 TOTAL NET ASSETS…………………………………………$ 4,017,461 $ 44,380,438 $ 9,927,351 $ 30,242,477 See notes to basic financial statements. Business-type Activities - Enterprise Funds PROPRIETARY FUNDS STATEMENT OF NET ASSETS JUNE 30, 2008 Town of Nantucket, Massachusetts 22 Basic Financial Statements Component Unit Governmental Wannacomet Total Activities - Water Business-Type Internal Service Nantucket Islands Company Activities Fund Land Bank $ 10,395,236 $ 22,595,839 $ 5,315,186 $ 12,219,219 - - - 353,413 - - 160,732 - - - - 1,271,969 - - - 108,863 - 7,978 96,390 - 435,028 1,494,665 - - - 19,306,600 - - 115,515 764,626 - 110,493 - - 1,490,900 - - 19,876 - - - - - 2,500 8,320 3,335,039 550,829 365,012 10,954,099 47,524,623 7,614,037 14,431,469 - 2,367,761 - - - - - 2,027,328 - - - 493,831 5,303,935 74,107,339 - 195,732,972 18,446,031 76,145,691 - 14,924,504 23,749,966 152,620,791 - 213,178,635 34,704,065 200,145,414 7,614,037 227,610,104 130,574 9,077,289 2,484 179,218 9,315 9,315 - 691,967 19,917 124,638 - - - - 710,419 - - 309,097 - - 260,922 1,105,522 - - - 51,300 - - 1,191,888 2,848,902 - - 37,747 90,915 - - - 8,712,725 - 2,986,919 1,255,000 3,997,604 - - 2,905,363 26,327,307 712,903 3,858,104 115,053 327,726 - - - - - 27,667,226 17,620,000 70,859,005 - - 17,735,053 71,186,731 - 27,667,226 20,640,416 97,514,038 712,903 31,525,330 13,194,789 78,358,807 - 180,005,831 - - - 2,380,741 868,860 24,272,569 6,901,134 13,698,202 $ 14,063,649 $ 102,631,376 $ 6,901,134 $ 196,084,774 Town of Nantucket, Massachusetts 23 Basic Financial Statements Siasconset Nantucket Water Memorial Company Sewer Solid Waste Airport OPERATING REVENUES: Lease and rental income………………………………… $ - $ - $ - $ - Fee revenue………………………………………………… - - - - Charges for services……………………………………… 592,654 3,870,841 4,237,488 12,719,037 Utility liens…………………………………………………… - - 212,603 - Intergovernmental………………………………………… - 421,621 - - Other………………………………………………………… - - - - Contributions……………………………………………… - - - - TOTAL OPERATING REVENUES …………………… 592,654 4,292,462 4,450,091 12,719,037 OPERATING EXPENSES: Cost of services and administration……………………… 305,581 1,695,766 8,576,603 11,234,778 Depreciation………………………………………………… 42,995 1,298,801 379,056 1,472,107 Other………………………………………………………… 5,231 - 2,580 - Employee benefits………………………………………… 10,082 21,133 - 654,955 TOTAL OPERATING EXPENSES…………………… 363,889 3,015,700 8,958,239 13,361,840 OPERATING INCOME (LOSS)……………………… 228,765 1,276,762 (4,508,148) (642,803) NONOPERATING REVENUES (EXPENSES): Investment income………………………………………… 800 2,222 5,635 585,866 Interest expense…………………………………………… (70,383) (1,401,155) (29,837) (355,876) Intergovernmental capital grants………………………… - - - 6,802,943 TOTAL NONOPERATING REVENUES (EXPENSES), NET…………………… (69,583) (1,398,933) (24,202) 7,032,933 INCOME (LOSS) BEFORE TRANSFERS AND CAPITAL CONTRIBUTIONS………………...……… 159,182 (122,171) (4,532,350) 6,390,130 CAPITAL CONTRIBUTIONS………………………………… - 15,175,978 - - TRANSFERS IN……………………………………………… - - 2,936,000 - CHANGE IN NET ASSETS……………………………… 159,182 15,053,807 (1,596,350) 6,390,130 NET ASSETS AT BEGINNING OF YEAR………………… 3,858,279 29,326,631 11,523,701 23,852,347 NET ASSETS AT END OF YEAR…………………………… $ 4,017,461 $ 44,380,438 $ 9,927,351 $ 30,242,477 See notes to basic financial statements. Business-type Activities - Enterprise Funds PROPRIETARY FUNDS STATEMENT OF REVENUES, EXPENSES AND CHANGES IN FUND NET ASSETS FISCAL YEAR ENDED JUNE 30, 2008 Town of Nantucket, Massachusetts 24 Basic Financial Statements Component Unit Governmental Wannacomet Total Activities - Water Business-Type Internal Service Nantucket Islands Company Activities Fund Land Bank $- $ - $ - $ 157,620 - - - 17,460,366 3,686,900 25,106,920 - - - 212,603 - - - 421,621 - - 401,019 401,019 - 90,239 - - 10,848,339 211,150 4,087,919 26,142,163 10,848,339 17,919,375 2,037,283 23,850,011 - 4,397,714 635,033 3,827,992 - - - 7,811 - - 99,474 785,644 8,046,171 - 2,771,790 28,471,458 8,046,171 4,397,714 1,316,129 (2,329,295) 2,802,168 13,521,661 415,124 1,009,647 33,918 696,519 (735,246) (2,592,497) - (1,316,667) - 6,802,943 - - (320,122) 5,220,093 33,918 (620,148) 996,007 2,890,798 2,836,086 12,901,513 - 15,175,978 - - - 2,936,000 - - 996,007 21,002,776 2,836,086 12,901,513 13,067,642 81,628,600 4,065,048 183,183,261 $ 14,063,649 $ 102,631,376 $ 6,901,134 $ 196,084,774 Town of Nantucket, Massachusetts 25 Basic Financial Statements Siasconset Nantucket Water Memorial Company Sewer Solid Waste Airport CASH FLOWS FROM OPERATING ACTIVITIES: Receipts from customers and users……………………………………………………………$ 661,838 $ 3,972,859 $ 4,419,681 $ 11,918,603 Employer and employee contributions to fund………………………………………………… - - - - Receipts from other governments……………………………………………………………… - 522,926 - - Receipts from other operating revenues……………………………………………………… - - - - Payments to vendors……………………………………………………………………………… (94,512) (1,063,486) (8,728,741) (7,530,279) Payments to employees………………………………………………………………………… (122,846) (632,760) (61,314) (3,688,872) Payments for interfund services used…………………………………………………………… (10,082) (21,133) - (654,955) NET CASH FROM OPERATING ACTIVITIES…………………………………………………… 434,398 2,778,406 (4,370,374) 44,497 CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES: Transfers in………………………………………………………………………………………… - - 2,936,000 - Transfers out……………………………………………………………………………………… - - - - Advances from other funds……………………………………………………………………… 1,134,855 10,437,764 13,842 - Advances to other funds………………………………………………………………………… (300) (13,235,297) - (373,623) NET CASH FROM NONCAPITAL FINANCING ACTIVITIES…………………………………… 1,134,555 (2,797,533) 2,949,842 (373,623) CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES: Proceeds from the issuance of bonds and notes……………………………………………… - 23,269,441 350,000 3,203,537 Capital grants……………………………………………………………………………………… - - - 6,802,943 Acquisition and construction of capital assets………………………………………………… (2,256,968) (23,037,754) (1,028,340) (6,414,443) Net change in land deposits……………………………………………………………………… - - - - Principal payments on bonds and notes……………………………………………………… (170,000) (748,972) (5,000) (435,000) Interest expense…………………………………………………………………………………… (73,500) (1,008,729) (20,444) (270,824) NET CASH FROM CAPITAL AND RELATED FINANCING ACTIVITIES……………………… (2,500,468) (1,526,014) (703,784) 2,886,213 CASH FLOWS FROM INVESTING ACTIVITIES: Proceeds from sales and maturities of investments…………………………………………… - - - - Purchase of investments………………………………………………………………………… - - - - Investment income………………………………………………………………………………… 800 2,222 5,635 585,866 NET CASH FROM INVESTING ACTIVITIES……………………………………………………… 800 2,222 5,635 585,866 NET CHANGE IN CASH AND CASH EQUIVALENTS…………………………………………… (930,715) (1,542,919) (2,118,681) 3,142,953 CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR………………………………… 930,415 3,505,508 2,118,681 7,095,361 CASH AND CASH EQUIVALENTS AT END OF YEAR…………………………………………$ (300) $ 1,962,589 $ - $ 10,238,314 RECONCILIATION OF OPERATING INCOME (LOSS) TO NET CASH FROM OPERATING ACTIVITIES: Operating income (loss)………………………………………………………………………… $ 228,765 $ 1,276,762 $ (4,508,148) $ (642,803) Adjustments to reconcile operating income (loss) to net cash from operating activities: Depreciation…………………………………………………………………………………… 42,995 1,298,801 379,056 1,472,107 Insurance reimbursements……………………..………………………………………… - - - - User fees…………………………………………………………………………………… 69,184 102,018 (22,432) 115,069 Accounts receivable………………………………………………………………….…… - - (7,978) - Intergovernmental………………………………………………………………………… - 101,305 - (915,503) Inventory…………………………………………………………………………………… - - - (378,426) Working capital deposit…………………………………………………………………… - - - - Prepaid expenses………………………………………………………………………… - - - (15,400) Warrants payable………………………………………………………………………… 87,362 (14,630) (183,810) 286,788 Accrued liabilities…………………………………………………………………………… - - - - Security deposits………………………………...………………………………………… - - - 77,253 Accrued payroll…………………………………………………………………………… 1,454 2,957 120 85,058 Health claims payable…………………………………………………………………… - - - - Other liabilities……………………………………………………………………………… - - - (6,100) Accrued compensated absences………………………………………………………… 4,638 11,193 (27,182) (33,546) Total adjustments……………………………………………………………………… 205,633 1,501,644 137,774 687,300 NET CASH FROM OPERATING ACTIVITIES……………………………………………………$ 434,398 $ 2,778,406 $ (4,370,374) $ 44,497 See notes to basic financial statements. Business-type Activities - Enterprise Funds PROPRIETARY FUNDS STATEMENT OF CASH FLOWS FISCAL YEAR ENDED JUNE 30, 2008 Town of Nantucket, Massachusetts 26 Basic Financial Statements Component Unit Governmental Wannacomet Total Activities - Water Business-Type Internal Service Nantucket Islands Company Activities Fund Land Bank $ 4,383,769 $ 25,356,750 $ - $ 17,488,144 - - 11,159,942 - - 522,926 - - - - - 459,009 (915,535) (18,332,553) (8,574,732) (2,417,265) (1,085,828) (5,591,620) - (1,649,425) (99,474) (785,644) - - 2,282,932 1,169,859 2,585,210 13,880,463 - 2,936,000 - - - - - - - 11,586,461 - - (18,189) (13,627,409) - - (18,189) 895,052 - - 1,100,000 27,922,978 - 15,343,181 - 6,802,943 - - (3,291,447) (36,028,952) - (17,608,938) - - - 125,000 (800,000) (2,158,972) - (10,769,067) (474,324) (1,847,821) - (1,316,667) (3,465,771) (5,309,824) - (14,226,491) - - - 1,577,324 - - (160,732) - 415,124 1,009,647 33,918 696,519 415,124 1,009,647 (126,814) 2,273,843 (785,904) (2,235,266) 2,458,396 1,927,815 11,181,140 24,831,105 2,856,790 10,291,404 $ 10,395,236 $ 22,595,839 $ 5,315,186 $ 12,219,219 $ 1,316,129 $ (2,329,295) $ 2,802,168 $ 13,521,661 635,033 3,827,992 - 693,918 - - 273,462 (69,390) 295,850 559,689 - - - (7,978) - 27,778 - (814,198) - - 1,061 (377,365) - 16,791 - - 10,300 - - (15,400) - (210,849) (147,173) 28,537 (538,861) - 9,315 9,315 - (99,446) - 77,253 - - 19,917 109,506 - - - - 38,141 - - (6,100) - - 152,800 107,903 - - 966,803 3,499,154 (216,958) 358,802 $ 2,282,932 $ 1,169,859 $ 2,585,210 $ 13,880,463 Town of Nantucket, Massachusetts 27 Basic Financial Statements FIDUCIARY FUNDS STATEMENT OF FIDUCIARY NET ASSETS JUNE 30, 2008 Private Purpose Agency Trust Funds Funds ASSETS Cash and cash equivalents……………………………………$ 699,974 $ 579,359 Investments…………………………………………………… 1,673,368 - TOTAL ASSETS…………………………………………………… 2,373,342 579,359 LIABILITIES Liabilities due depositors……………………………………… - 579,359 TOTAL LIABILITIES……………………………………………… - 579,359 NET ASSETS Held in trust for other purposes………………………………$ 2,373,342 $ - See notes to basic financial statements. Town of Nantucket, Massachusetts 28 Basic Financial Statements FIDUCIARY FUNDS STATEMENT OF CHANGES IN FIDUCIARY NET ASSETS FISCAL YEAR ENDED JUNE 30, 2008 Private Purpose Trust Funds ADDITIONS: Contributions: Private donations………………………………………………………………………………$ 22,501 Net investment income (loss): Interest………………………………………………………………………………………… 181,503 TOTAL ADDITIONS……………………………………………………………………… 204,004 DEDUCTIONS: General government………………………………………………………………………… 6,499 CHANGE IN NET ASSETS……………………………………………………………… 197,505 NET ASSETS AT BEGINNING OF YEAR…………………………………………………… 2,175,837 NET ASSETS AT END OF YEAR………………………………………………………………$ 2,373,342 See notes to basic financial statements. Town of Nantucket, Massachusetts 29 Basic Financial Statements Notes to Basic Financial Statements Fiscal Year Ended June 30, 2008 Town of Nantucket, Massachusetts 30 Basic Financial Statements NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Notes to Basic Financial Statements The accompanying basic financial statements of the Town of Nantucket, Massachusetts (the Town) have been prepared in accordance with accounting principles generally accepted in the United States of America (GAAP). The Governmental Accounting Standards Board (GASB) is the recognized standard-setting body for establishing governmental accounting and financial reporting principles. The significant accounting policies are described herein. A. Reporting Entity The Town is a municipal corporation that is governed by an elected five member Board of Selectmen. For financial reporting purposes, the Town has included all funds, organizations, agencies, boards, commissions and institutions. The Town has also considered all potential component units for which it is financially accountable as well as other organizations for which the nature and significance of their relationship with the Town are such that exclusion would cause the basic financial statements to be misleading or incomplete. As required by GAAP, these basic financial statements present the Town (the primary government) and its component units. Two entities have been included as component units in the reporting entity, because of the significance of their operational and/or financial relationships with the Town. Discretely Presented Component units – Discretely presented component units are entities that are legally separate from the Town, but for which the Town is financially accountable, or whose relationship with the Town is such that exclusion would cause the Town’s financial statements to be misleading or incomplete. These component units are reported in separate columns to emphasize that they are legally separate from the Town. In the Governmental Funds: (1) The County of Nantucket (County) has the same geographical boundaries as the Town of Nantucket, and the Town’s selectmen serve ex officio as the County Commissioners. The principal services provided by the County are the Registry of Deeds and the Sheriff’s Office. In the Enterprise Funds: (1) The Nantucket Islands Land Bank (Land Bank) was created by Chapter 669 of the Acts of 1983 of the Commonwealth of Massachusetts to acquire and manage open space and resource protection within Nantucket County. The Land Bank is administered by the Nantucket Islands Land Bank Commission comprised of five elected members. Availability of Financial Information for Component Units The Nantucket Islands Land Bank issued separate audited financial statements. A copy of the complete financial statements can be obtained by contacting them at 22 Broad Street, Nantucket, MA 02554. B. Government-Wide and Fund Financial Statements Government-Wide Financial Statements The government-wide financial statements (i.e., statement of net assets and the statement of changes in net assets) report information on all of the non-fiduciary activities of the primary government and its component units. Governmental activities, which are primarily supported by taxes and intergovernmental revenues, are reported separately from business-type activities, which are supported primarily by user fees and charges. Notes to Basic Financial Statements Fiscal Year Ended June 30, 2008 Town of Nantucket, Massachusetts 31 Basic Financial Statements Fund Financial Statements Separate financial statements are provided for governmental funds, proprietary funds, and fiduciary funds, even though fiduciary funds are excluded from the government-wide financial statements. Major individual governmental funds and major individual enterprise funds are reported as separate columns in the fund financial statements. Nonmajor funds are aggregated and displayed in a single column. Major Fund Criteria Major funds must be reported if the following criteria are met: • If the total assets, liabilities, revenues, or expenditures/expenses of an individual governmental or enterprise fund are at least 10 percent of the corresponding element (assets, liabilities, etc.) for all funds of that category or type (total governmental or total enterprise funds), and • If the total assets, liabilities, revenues, or expenditures/expenses of the individual governmental fund or enterprise fund are at least 5 percent of the corresponding element for all governmental and enterprise funds combined. Additionally, any other governmental or enterprise fund that management believes is particularly significant to the basic financial statements may be reported as a major fund. Internal service funds and fiduciary funds are reported by fund type. C. Measurement Focus, Basis of Accounting and Financial Statement Presentation Government-Wide Financial Statements The government-wide financial statements are reported using the economic resources measurement focus and the accrual basis of accounting. Under this method, revenues are recorded when earned and expenses are recorded when the liabilities are incurred. Real estate and personal property taxes are recognized as revenues in the fiscal year for which they are levied. Grants and similar items are recognized as revenue as soon as all eligibility requirements imposed by the provider have been met. The statement of activities demonstrates the degree to which the direct expenses of a particular 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 the following: • Charges to customers or applicants who purchase, use, or directly benefit from goods, services, or privileges provided by a given function or segment. • Grants and contributions that are restricted to meeting the operational requirements of a particular function or segment. • Grants and contributions that are restricted to meeting the capital requirements of a particular function or segment. Taxes and other items not identifiable as program revenues are reported as general revenues. Notes to Basic Financial Statements Fiscal Year Ended June 30, 2008 Town of Nantucket, Massachusetts 32 Basic Financial Statements For the most part, the effect of interfund activity has been removed from the government-wide financial statements. However, the effect of interfund services provided and used between functions is not eliminated as the elimination of these charges would distort the direct costs and program revenues reported for the functions affected. Fund Financial Statements Governmental fund financial statements are reported using the flow of current financial resources measurement focus and the modified accrual basis of accounting. Under the modified accrual basis of accounting, revenues are recognized when susceptible to accrual (i.e., measurable and available). Measurable means the amount of the transaction can be determined and available means collectible within the current period or soon enough thereafter to pay liabilities of the current period. Expenditures are recorded when the related fund liability is incurred, except for unmatured interest on general long-term debt which is recognized when due, and certain compensated absences, claims and judgments which are recognized when the obligations are expected to be liquidated with current expendable available resources. Real estate and personal property tax revenues are considered available if they are collected within 60 days after fiscal year-end. Investment income is susceptible to accrual. Other receipts and tax revenues become measurable and available when the cash is received and are recognized as revenue at that time. Entitlements and shared revenues are recorded at the time of receipt or earlier if the susceptible to accrual criteria is met. Expenditure driven grants recognize revenue when the qualifying expenditures are incurred and all other grant requirements are met. The following major governmental funds are reported: The general fund is the primary operating fund. It is used to account for all financial resources, except those that are required to be accounted for in another fund. The nonmajor governmental funds consist of other special revenue, capital projects and permanent funds that are aggregated and presented in the nonmajor governmental funds column on the governmental funds financial statements. The following describes the general use of these fund types: The special revenue fund is used to account for the proceeds of specific revenue sources (other than permanent funds or capital projects funds) that are restricted by law or administrative action to expenditures for specified purposes. The capital projects fund is used to account for financial resources to be used for the acquisition or construction of major capital facilities (other than those financed by enterprise and trust funds). The permanent fund is used to account for financial resources that are legally restricted to the extent that only earnings, not principal, may be used for purposes that support the governmental programs. Proprietary fund financial statements are reported using the flow of economic resources measurement focus and use the accrual basis of accounting. Under this method, revenues are recorded when earned and expenses are recorded when the liabilities are incurred. 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 the proprietary funds principal ongoing operations. All revenues and expenses not meeting this definition are reported as nonoperating revenues and expenses. Notes to Basic Financial Statements Fiscal Year Ended June 30, 2008 Town of Nantucket, Massachusetts 33 Basic Financial Statements The following major proprietary funds are reported: The Siasconset Water enterprise fund is used to account for the Town’s water distribution activities within its service area. The Sewer enterprise fund is used to account for the Town’s sewer activities. The Solid Waste enterprise fund is used to account for the Town’s landfill activities. The Nantucket Memorial Airport enterprise fund is used to account for the operations of the Town’s airport. The Wannacomet Water Company enterprise fund is used to account for the Town’s water distribution activities within its service area. The internal service fund is used to account for the financing of services provided by one department to other departments or governmental units. This fund is used to account for risk financing activities related to health insurance and workers’ compensation. The Nantucket Islands Land Bank enterprise fund is used to account for the activity of the Nantucket Islands Land Bank. Fiduciary fund financial statements are reported using the flow of economic resources measurement focus and use the accrual basis of accounting. Fiduciary funds are used to account for assets held in a trustee capacity for others that cannot be used to support the governmental programs. The following fiduciary fund types are reported: The private-purpose trust fund is used to account for trust arrangements, other than those properly reported in the pension trust fund or permanent fund, under which principal and investment income exclusively benefit individuals, private organizations, or other governments. The agency fund is used to account for assets held in a purely custodial capacity. Government-Wide and Fund Financial Statements For enterprise fund accounting, all applicable Financial Accounting Standards Board (FASB) pronouncements issued on or prior to November 30, 1989, are applied, unless those pronouncements conflict with or contradict GASB pronouncements. D. Cash and Investments Government-Wide and Fund Financial Statements Cash and cash equivalents are considered to be cash on hand, demand deposits and short-term investments with an original maturity of three months or less from the date of acquisition. Investments are carried at fair value. Notes to Basic Financial Statements Fiscal Year Ended June 30, 2008 Town of Nantucket, Massachusetts 34 Basic Financial Statements E. Accounts Receivable Government-Wide and Fund Financial Statements The recognition of revenue related to accounts receivable reported in the government-wide financial statements and the proprietary funds and fiduciary funds financial statements are reported under the accrual basis of accounting. The recognition of revenue related to accounts receivable reported in the governmental funds financial statements are reported under the modified accrual basis of accounting. Real Estate, Personal Property Taxes and Tax Liens Real estate and personal property taxes are levied and based on values assessed on January 1st of every year. Assessed values are established by the Board of Assessor’s for 100% of the estimated fair market value. Taxes are due on November 1st and May 1st and are subject to penalties and interest if they are not paid by the respective due date. Real estate and personal property taxes levied are recorded as receivables in the fiscal year of the levy. The Town has the legal authority to impose real estate tax liens on delinquent properties. Liens are recorded as receivables in the fiscal year they are imposed. Real estate receivables which have been secured via the tax lien process are considered 100% collectible. Accordingly, an allowance for uncollectibles is not reported. An allowance of uncollectibles for other real estate receivables is estimated based on historical trends and specific account analysis. Personal property taxes cannot be secured through the lien process. The allowance of uncollectibles is estimated based on historical trends and specific account analysis. Motor Vehicle and Other Excise Taxes Motor vehicle excise taxes are assessed annually for each vehicle registered and are recorded as receivables in the fiscal year of the levy. The Commonwealth is responsible for reporting the number of vehicles registered and the fair values of those vehicles. The tax calculation is the fair value of the vehicle multiplied by $25 per $1,000 of value. Boat excise taxes are assessed annually for each boat registered and are recorded as receivables in the fiscal year of the levy. The Commonwealth is responsible for reporting the number of boats registered and the fair value of those boats. The tax calculation is the fair value of the boat multiplied by $10 per $1,000 of value. The allowance for uncollectibles is estimated based on historical trends and specific account analysis. Departmental and Other Departmental and other receivables consist primarily of police and fire details and are recorded as receivables in the fiscal year accrued. The allowance of uncollectibles is estimated based on historical trends and specific account analysis. Special Assessments Special Assessments consist of betterments assessed to residents of Golf View Drive and in relation to the Town’s Septic Loan Betterment program. The allowance of uncollectibles is estimated based on historical trends and specific account analysis. Notes to Basic Financial Statements Fiscal Year Ended June 30, 2008 Town of Nantucket, Massachusetts 35 Basic Financial Statements Intergovernmental Various federal and state grants for operating and capital purposes are applied for and received annually. For non-expenditure driven grants, receivables are recorded as soon as all eligibility requirements imposed by the provider have been met. For expenditure driven grants, receivables are recorded when the qualifying expenditures are incurred and all other grant requirements are met. These receivables are considered 100% collectible and therefore do not report an allowance for uncollectibles. Water Fees Water Fees for Siasconset Water are levied monthly based on individual meter readings. Water Fees for Wannacomet Water Company are levied monthly based on individual meter readings and average bills. All water fees are subject to penalties and interest if they are not paid by the respective due date. Unbilled water fees at year-end are accrued and are recorded as revenue in the current period. Sewer Fees Sewer Fees are levied monthly based on individual meter readings and on average bills and are subject to penalties and interest if they are not paid by the respective due date. Unbilled user fees at year-end and are accrued and are recorded as revenue in the current period. The Town has the ability to issue Water and Sewer liens for delinquent fees which are included as a lien on the property owner’s tax bill. Water and Sewer charges and liens are recorded as receivables in the fiscal year of the levy. Allowances for uncollectible water and sewer fees are estimated based on historical trends and specific account analysis. Landfill Fees The outstanding receivable for Landfill Fees is comprised of annual commercial fees assessed to restaurants and inns and monthly tipping fees charged to private haulers. Airport Fees The outstanding receivable for Airport Fees is comprised primarily of fuel sales. F. Inventories Government-Wide and Fund Financial Statements Inventories of the Nantucket Memorial Airport and the Wannacomet Water Company are priced at the lower of cost or market, with cost being determined on the first-in, first-out method basis. Expendable supplies and small tools are not inventoried but rather expensed when purchased. All other inventories are recorded as expenditures at the time of purchase. Such inventories are not material in total to the government-wide and fund financial statements, and therefore are not reported. Notes to Basic Financial Statements Fiscal Year Ended June 30, 2008 Town of Nantucket, Massachusetts 36 Basic Financial Statements G. Restricted Assets Government-Wide and Fund Financial Statements Certain assets of the enterprise fund are classified as restricted because their use is restricted by contract covenants. H. Capital Assets Government-Wide and Proprietary Fund Financial Statements Capital assets, which include land, land improvements, buildings, machinery and equipment, and infrastructure (e.g., roads, water mains, sewer mains, and similar items), are reported in the applicable governmental or business-type activity column of the government-wide financial statements, and the proprietary fund financial statements. Capital assets are recorded at historical cost or at estimated historical cost when actual historical cost could not be determined. Donated capital assets are recorded at the estimated fair market value at the date of donation. Except for the capital assets of the governmental activities column in the government-wide financial statements, construction period interest is capitalized on constructed capital assets. All purchases and construction costs in excess of $10,000 are capitalized at the date of acquisition or construction, respectively, with expected useful lives of greater than one year. Capital assets (excluding land) are depreciated on a straight-line basis. The estimated useful lives of capital assets are as follows: Estimated Useful Life (in years) Vehicles………………………………………… 5 Office equipment……………………………… 5-10 Shop equipment………………………………… 10-15 Runway improvements………………………… 20 Water infrastructure…………………………… 40-70 Buildings and improvements………………… 33-50 Capital Asset Type The cost of normal maintenance and repairs that do not add to the value of the assets or materially extend asset lives are not capitalized and are treated as expenses when incurred. Improvements are capitalized. Governmental Fund Financial Statements Capital asset costs are recorded as expenditures in the acquiring fund in the fiscal year of the purchase. I. Interfund Receivables and Payables During the course of its operations, transactions occur between and within individual funds that may result in amounts owed between funds. Notes to Basic Financial Statements Fiscal Year Ended June 30, 2008 Town of Nantucket, Massachusetts 37 Basic Financial Statements Government-Wide Financial Statements Transactions of a buyer/seller nature between and within governmental funds and internal service funds are eliminated from the governmental activities in the statement of net assets. Any residual balances outstanding between the governmental activities and business-type activities are reported in the statement of net assets as “internal balances”. Fund Financial Statements Transactions of a buyer/seller nature between and within funds are not eliminated from the individual fund statements. Receivables and payables resulting from these transactions are classified as “Due from other funds” or “Due to other funds” on the balance sheet. J. Interfund Transfers During the course of its operations, resources are permanently reallocated between and within funds. These transactions are reported as transfers in and transfers out. Government-Wide Financial Statements Transfers between and within governmental funds and fiduciary funds are eliminated from the governmental activities in the statement of activities. Any residual balances outstanding between the governmental activities and business-type activities are reported in the statement of activities as “Transfers, net”. Fund Financial Statements Transfers between and within funds are not eliminated from the individual fund statements and are reported as transfers in and transfers out. K. Deferred Revenue Deferred revenue at the governmental fund financial statement level represents billed receivables that do not meet the available criterion in accordance with the current financial resources measurement focus and the modified accrual basis of accounting. Deferred revenue is recognized as revenue in the conversion to the government-wide (full accrual) financial statements L. Net Assets and Fund Equity Government-Wide Financial Statements (Net Assets) Net assets are reported as restricted when amounts are not available for appropriation or are legally restricted by outside parties for a specific future use. Net assets have been “restricted for” the following: “Permanent funds - expendable” represents amounts held in trust for which the expenditures are restricted by various trust agreements. “Permanent funds - nonexpendable” represents amounts held in trust for which only investment earnings may be expended. Notes to Basic Financial Statements Fiscal Year Ended June 30, 2008 Town of Nantucket, Massachusetts 38 Basic Financial Statements “Other purposes” represents restrictions placed on assets from outside parties. Fund Financial Statements (Fund Balances) Fund balances are reserved for amounts that are not available for appropriation or are legally restricted by outside parties for a specific future use. Designations of fund balance represent tentative management plans that are subject to change. Fund balances have been “reserved for” the following: “Encumbrances and continuing appropriations” represents amounts obligated under purchase orders, contracts and other commitments for expenditures that are being carried over to the ensuing fiscal year. “Debt service” represents amounts raised in the current fiscal year specifically for debt service payments and not spent at year end. The tax levy for debt service in the subsequent fiscal year will be reduced by those amounts. “Perpetual permanent funds” represents amounts held in trust for which only investment earnings may be expended. M. Long-term debt Government-Wide and Proprietary Fund Financial Statements Long-term debt is reported as liabilities in the government-wide and proprietary fund statement of net assets. Material 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. Governmental Fund Financial Statements The face amount of governmental funds long-term debt is reported as other financing sources. Bond premiums and discounts, as well as issuance costs, are recognized in the current period. Bond premiums are reported as other financing sources and bond discounts are reported as other financing uses. Issuance costs, whether or not withheld from the actual bond proceeds received, are reported as general government expenditures. N. Investment Income Excluding the permanent funds, investment income derived from major and nonmajor governmental funds is legally assigned to the general fund unless otherwise directed by Massachusetts General Law (MGL). O. Compensated Absences Employees are granted vacation and sick leave in varying amounts based on collective bargaining agreements, state laws and executive policies. Government-Wide and Proprietary Fund Financial Statements Vested or accumulated vacation and sick leave are reported as liabilities and expensed as incurred. Notes to Basic Financial Statements Fiscal Year Ended June 30, 2008 Town of Nantucket, Massachusetts 39 Basic Financial Statements Governmental Fund Financial Statements Vested or accumulated vacation and sick leave, which will be liquidated with expendable available financial resources, are reported as expenditures and fund liabilities. P. Post Retirement Benefits Government-Wide and Fund Financial Statements In addition to providing pension benefits, health insurance coverage is provided for retired employees and their survivors in accordance with MGL, Chapter 32, on a pay-as-you-go basis. The cost of providing health insurance is recognized by recording the employer’s 90% share of insurance premiums in the general fund in the fiscal year paid. For the fiscal year ended June 30, 2008, this expense/expenditure totaled approximately $1,514,000. There were approximately 144 participants eligible to receive benefits at June 30, 2008. Q. Individual Fund Deficits At June 30, 2008, there are several individual fund deficits within the special revenue funds and capital project funds, which are classified as non-major governmental funds in the fund financial statements. These deficits will be funded through available funds and grants during fiscal year 2009. R. Use of Estimates Government-Wide and Fund Financial Statements The preparation of basic financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure for contingent assets and liabilities at the date of the basic financial statements and the reported amounts of the revenues and expenditures/expenses during the fiscal year. Actual results could vary from estimates that were used. S. Total Column Government-Wide Financial Statements The total column presented on the government-wide financial statements represents consolidated financial information. Fund Financial Statements The total column on the fund financial statements is presented only to facilitate financial analysis. Data in this column is not the equivalent of consolidated financial information. NOTE 2 – CASH AND INVESTMENTS A cash and investment pool is maintained that is available for use by all funds. Each fund type's portion of this pool is displayed on the balance sheet as "Cash and cash equivalents". The deposits and investments of the trust funds are held separately from those of other funds. Statutes authorize the investment in obligations of the U.S. Treasury, agencies, and instrumentalities, certificates of deposit, repurchase agreements, money market accounts, bank deposits and the State Treasurer's Investment Notes to Basic Financial Statements Fiscal Year Ended June 30, 2008 Town of Nantucket, Massachusetts 40 Basic Financial Statements Pool (the Pool). The Treasurer may also invest trust funds in securities, other than mortgages or collateral loans, which are legal for the investment of funds of savings banks under the laws of the Commonwealth. The Pool meets the criteria of an external investment pool. The Pool is administered by the Massachusetts Municipal Depository Trust (MMDT), which was established by the Treasurer of the Commonwealth who serves as Trustee. The fair value of the position in the Pool is the same as the value of the Pool shares. Custodial Credit Risk – Deposits In the case of deposits, this is the risk that in the event of a bank failure, the Town of Nantucket’s deposits may not be returned to it. The Town, including the primary government and Nantucket County and Nantucket Islands Land Bank component units, does not have a deposit policy for custodial credit risk. Primary Government At fiscal year-end, the carrying amount of deposits of the primary government totaled $43,430,950 and the bank balance totaled $49,323,041. Of the bank balance, $600,000 was covered by the Federal Depositors Insurance Company (“FDIC”), $1,016,384 was covered by Federal Depository Insurance, $45,178,825 was collateralized and $2,527,832 was exposed to custodial credit risk because it was uninsured and uncollateralized. Component Unit-County At fiscal year-end, the carrying amount of deposits of Nantucket County totaled $3,982,061 and the bank balance totaled $4,155,883. Of the bank balance, $200,000 was covered by Federal Depository Insurance and the remainder of $3,955,883 was collateralized, therefore the County did not have funds that were exposed to custodial credit risk because of being uninsured or uncollateralized. Component Unit-Nantucket Islands Land Bank The Land Bank considers securities purchased within six months of their date of maturity to be cash equivalents. The Land Bank holds a substantial amount of cash in time certificates of deposit and Federal treasury obligations. Cash and equivalents are insured by the Federal Depositors Insurance Company (“FDIC”), Depositors Insurance Fund (“DIF”) and the full faith pledge of the Commonwealth of Massachusetts. From time to time, the Land Bank’s cash balances fluctuate and can exceed the Federally insured limit of $100,000. At fiscal year-end, the carrying amount of deposits of the Nantucket Islands Land Bank totaled $14,599,960. No amount was exposed to custodial credit risk because it was uninsured or uncollateralized. Restricted cash of the Land Bank as of June 30, 2008 consists of the following: Debt Service funds: Series 98E……………………………………………………$ 807,485 Series 2007A Debt Service…………………………………32,244 Series 2007A Reserve………………………………………1,148,203 Security Deposit Fund……………………………………… 650 Marble Reserve Fund…………………………………………353,413 Smooth Hummocks Management Escrow…………………38,746 Total Restricted Cash…………………………………………$ 2,380,741 Notes to Basic Financial Statements Fiscal Year Ended June 30, 2008 Town of Nantucket, Massachusetts 41 Basic Financial Statements The Land Bank has entered into an agreement with the Town of Nantucket, which requires the Land Bank to establish a working capital reserve fund. This fund, along with the pledge of the Town of Nantucket of its full faith and credit, secures the Series 98E bonds outstanding as of June 30, 2008. In addition, the Land Bank is prohibited from acquiring additional real estate at any time that an amount equal to one year’s debt service in the reserve fund is not on deposit. Investments As of June 30, 2008, the Town of Nantucket had the following investments: Primary Government Under 1-5 6-10 Fair Value 1 Year Years Years Investment Type Debt Securities: Federal Home Loan Bank………………………………… $ 556,987 $ - $ 153,235 $ 403,752 Federal Home Loan Mortgage Corporation....................713,875 - 411,438 302,437 Federal National Mortgage Association..........................644,853 202,626 442,227 - Federal Home Loan Mortgage Corporation Gold............10,960 - 10,960 - United States Treasury Note.......................................... 2,442,124 556,995 1,155,306 729,823 Repurchase Agreements……………………………………9,026,146 9,026,146 - - Total Debt Securities......................................................13,394,945 $ 9,785,767 $ 2,173,166 $ 1,436,012 Other Investments: MMDT…………………………………………………………1,710,305 Total Investments........................................................... $15,105,250 Maturity Component Unit-County The County did not have any investments as of June 30, 2008. Component Unit-Nantucket Islands Land Bank The Land Bank designated investments according to the level of risk assumed by the Land Bank. At June 30, 2008, the entire balance of investments, $1,271,969, represent investments that are insured, registered or held by the Land Bank’s agent in the Land Bank name. The entire balance of investments represents certificates of deposit stated at the fair market value that are unrated in terms of credit risk quality ratings All designated investments consist of certificates of deposit maturing in less than 1 year. Custodial Credit Risk – Investments For an investment, this is the risk that, in the event of a failure by the counterparty, the Town will not be able to recover the value of its investments or collateral security that are in the possession of an outside party. The Town, including the primary government and Nantucket County component unit, does not have an investment policy for custodial credit risk. The Land Bank currently follows investment policies largely defined by the Commonwealth of Massachusetts, as well as internal Land Bank investment policies. Notes to Basic Financial Statements Fiscal Year Ended June 30, 2008 Town of Nantucket, Massachusetts 42 Basic Financial Statements Primary Government The investments of $556,987 in Federal Home Loan Bank, $713,875 in Federal Home Loan Mortgage Corporation, $644,853 in Federal National Mortgage Association $10,960 in Federal Home Loan Mortgage Corporation Gold, and $2,442,124 in U.S. Treasury Notes are subject to custodial credit risk exposure because the related securities are uninsured, unregistered, and held by the counterparty. The repurchase agreement consists of an overnight sweep agreement. Component Unit-County The County did not have any investments as of June 30, 2008. Component Unit-Nantucket Islands Land Bank The entire balance of Land Bank investments represents certificates of deposit stated at the fair market value that are unrated in terms of credit risk quality ratings. Interest Rate Risk The Town, including the primary government and Nantucket County and Nantucket Islands Land Bank component units, does not have a formal investment policy that limits investment maturities as a means of managing its exposure to fair value losses arising from increasing interest rates. Credit Risk The Town, including the primary government and Nantucket County and Nantucket Islands Land Bank component units has not adopted a formal policy related to Credit Risk. Of the Town’s investments at June 30, 2008, $4,357,839 are rated AAA and $10,960 are unrated. Concentration of Credit Risk The Town, including the primary government and Nantucket County and Nantucket Islands Land Bank component units, places no limit on the amount the government may invest in any one issuer. Primary Government More than 5 percent of the primary government’s investments are in the following securities: Percentage of Issuer Federal Home Loan Mortgage Corporation..................... 5% United States Treasury Note............................................16% Repurchase Agreements……………………………………60% MMDT…………………………………………………………11% Total Investments Component Unit-County The County did not have any investments as of June 30, 2008. Notes to Basic Financial Statements Fiscal Year Ended June 30, 2008 Town of Nantucket, Massachusetts 43 Basic Financial Statements NOTE 3 – RECEIVABLES At June 30, 2008, receivables for the individual major, non-major governmental funds and internal service funds in the aggregate, including the applicable allowances for uncollectible accounts, are as follows: Allowance Gross for Net Amount Uncollectibles Amount Receivables: Real estate and personal property taxes…………… $ 2,789,788 $ (292,914) $ 2,496,874 Tax liens ……………………….………………………… 1,737,638 - 1,737,638 Excise taxes……………………………………………… 1,050,796 (560,323) 490,473 User fees………………………………………………… 3,885 - 3,885 Departmental and other………………………………… 1,052,220 (320,797) 731,423 Special assessments…………………………………… 25,171 - 25,171 Intergovernmental……………………………………… 18,034,963 - 18,034,963 Total…………………………………………………… $ 24,694,461 $ (1,174,034) $ 23,520,427 At June 30, 2008, receivables for the enterprise funds consist of the following: Allowance Gross for Net Amount Uncollectibles Amount Receivables: Water fees……………………………………………… $ 464,968 $ - $ 464,968 Sewer fees……………………………………………… 143,294 - 143,294 Solid waste fees………………………………………… 658,331 (113,730) 544,601 Airport fees……………………………………………… 416,802 (75,000) 341,802 Intergovernmental……………………………………… 21,674,361 - 21,674,361 Total………………………………………………………$ 23,357,756 $ (188,730) $ 23,169,026 Governmental funds report deferred revenue in connection with receivables for revenues that are not considered to be available to liquidate liabilities of the current period. At the end of the current fiscal year, the various components of deferred revenue reported in the governmental funds were as follows: Nonmajor General Governmental Fund Funds Total Receivable: Real estate and personal property taxes…………… $ 1,532,017 $ 64,368 $ 1,596,385 Tax liens………………….……………………………… 1,719,206 18,432 1,737,638 Motor vehicle and other excise taxes………………… 490,473 - 490,473 User fees………………………………………………… 3,885 - 3,885 Departmental and other………………………………… 406,591 228,442 635,033 Special assessments…………………………………… - 25,171 25,171 Intergovernmental……………………………………… - 741,210 741,210 Total………………………………………………………$ 4,152,172 $ 1,077,623 $ 5,229,795 Notes to Basic Financial Statements Fiscal Year Ended June 30, 2008 Town of Nantucket, Massachusetts 44 Basic Financial Statements NOTE 4 – CAPITAL ASSETS Capital asset activity for the primary government for the fiscal year ended June 30, 2008, was as follows: Beginning Ending Balance Increases Decreases Balance Governmental Activities: Capital assets not being depreciated: Land…………………………………………………………$ 171,176,126 $ - $ - $ 171,176,126 Construction in progress………………………………… 828,551 3,676,085 (350,306) 4,154,330 - Total capital assets not being depreciated………… 172,004,677 3,676,085 (350,306) 175,330,456 Capital assets being depreciated: Vehicles…………………………………………………… 7,633,192 1,297,033 (594,491) 8,335,734 Buildings…………………………………………………… 31,207,129 324,065 - 31,531,194 Machinery and equipment………………………………… 7,610,206 57,592 - 7,667,798 Infrastructure……………………………………………… 21,088,698 2,503,614 - 23,592,312 Total capital assets being depreciated…………… 67,539,225 4,182,304 (594,491) 71,127,038 Less accumulated depreciation for: Vehicles…………………………………………………… (4,650,790) (1,197,128) 485,903 (5,362,015) Buildings.…………………………………………………… (14,638,276) (699,587) - (15,337,863) Machinery and equipment………………………………… (6,671,725) (177,945) 21,178 (6,828,492) Infrastructure.……………………………………………… (15,085,140) (736,256) - (15,821,396) Total accumulated depreciation…………………… (41,045,931) (2,810,916) 507,081 (43,349,766) Total capital assets being depreciated, net………………… 26,493,294 1,371,388 (87,410) 27,777,272 Total governmental activities capital assets, net……………$ 198,497,971 $ 5,047,473 $ (437,716) $ 203,107,728 Notes to Basic Financial Statements Fiscal Year Ended June 30, 2008 Town of Nantucket, Massachusetts 45 Basic Financial Statements The capital asset totals for the individual business-type activities at June 30, 2008 were as follows: Beginning Ending Balance Increases Decreases Balance Business-type activities Capital assets not being depreciated: Land…………………………………………………………$ 17,142,428 $ - $ - $ 17,142,428 Construction in progress………………………………… 23,316,898 35,703,186 (2,055,173) 56,964,911 Total capital assets not being depreciated………… 40,459,326 35,703,186 (2,055,173) 74,107,339 Capital assets being depreciated: Land improvements……………………………………… 23,574,534 980,361 - 24,554,895 Plant………………………………………………………… 15,594,467 12,113 - 15,606,580 Infrastructure……………………………………………… 33,201,380 4,501,758 (20,000) 37,683,138 Buildings…………………………………………………… 19,660,436 364,456 - 20,024,892 Vehicles…………………………………………………… 4,350,438 43,888 (25,909) 4,368,417 Machinery and equipment………………………………… 17,561,565 530,979 - 18,092,544 Furniture, fixtures and computer equipment…………… 441,830 32,246 - 474,076 Total capital assets being depreciated…………… 114,384,650 6,465,801 (45,909) 120,804,542 Less accumulated depreciation……………………………… (40,860,331) (3,827,992) 29,472 (44,658,851) Total capital assets being depreciated, net………………… 73,524,319 2,637,809 (16,437) 76,145,691 Total business-type activities, capital assets…………………$ 113,983,645 $ 38,340,995 $ (2,071,610) $ 150,253,030 Capital asset activity for the Nantucket County and Nantucket Islands Land Bank component units for the fiscal year ended June 30, 2008 was as follows: Beginning Ending Balance Increases Decreases Balance Nantucket Islands Land Bank Component Unit Capital assets not being depreciated: Land…………………………………………………………$ 183,119,050 $ 12,613,922 $ - $ 195,732,972 Capital assets being depreciated: Buildings, improvements and equipment……………… 12,931,131 4,999,127 (9,180) 17,921,078 Less accumulated depreciation………………………… (2,307,725) (698,029) 9,180 (2,996,574) Total capital assets being depreciated, net………………… 10,623,406 4,301,098 - 14,924,504 Total Nantucket Islands Land Bank Component Unit, capital assets…………………………………………………$ 193,742,456 $ 16,915,020 $ - $ 210,657,476 Notes to Basic Financial Statements Fiscal Year Ended June 30, 2008 Town of Nantucket, Massachusetts 46 Basic Financial Statements Beginning Ending Balance Increases Decreases Balance Nantucket County Component Unit Capital assets not being depreciated: Land…………………………………………………………$ 28,458 $ - $ - $ 28,458 Capital assets being depreciated: Vehicles…………………………………………………… 232,067 45,116 - 277,183 Equipment………………………………………………… 1,390,589 24,845 - 1,415,434 Total capital assets being depreciated…………… 1,622,656 69,961 - 1,692,617 Less accumulated depreciation for: Vehicles…………………………………………………… (176,824) (25,529) - (202,353) Equipment………………………………………………… (703,116) (162,977) - (866,093) Total accumulated depreciation…………………… (879,940) (188,506) - (1,068,446) Total capital assets being depreciated, net………………… 742,716 (118,545) - 624,171 Total County Component Unit capital assets……………… $ 771,174 $ (118,545) $ - $ 652,629 Depreciation expense was charged to functions/programs as follows: Governmental Activities: General government………………………………………………………………$ 58,132 Public safety………………………………………………………………………… 971,214 Education…………………………………………………………………………… 624,733 Public works………………………………………………………………………… 992,943 Human services…………………………………………………………………… 1,579 Culture and recreation…………………………………………………………… 162,315 Total depreciation expense - governmental activities………………………………$ 2,810,916 Business-Type Activities: Water………………………………………………..……………………………… $ 678,028 Sewer……………………………………….………………………………………… 1,298,801 Solid waste……………………………………….………………………………… 379,056 Airport……………………………………….……………………………………… 1,472,107 Total depreciation expense - business-type activities………………………………$ 3,827,992 Nantucket County Component Unit: Registry of Deeds……………………………………………………………………$ 50,496 Sheriff's Department………………………………………………………………… 138,010 Total depreciation expense - component unit activities…………………………… $ 188,506 Nantucket Islands Land Bank Component Unit: Land Bank……………………………………………………………………………$ 698,029 Notes to Basic Financial Statements Fiscal Year Ended June 30, 2008 Town of Nantucket, Massachusetts 47 Basic Financial Statements NOTE 5 – INTERFUND RECEIVABLES, PAYABLES AND TRANSFERS Interfund receivables and payables at June 30, 2008 are summarized as follows: Nonmajor Siasconset Sewer Solid Waste Wannacomet General Governmental Water Enterprise Enterprise Water Internal Service Fund Funds Company Fund Fund Company Fund Total General Fund………………………$- $ 619,852 $ - $ 1,303,384 $ 188,320 $ 8,320 $ 495,542 $ 2,615,418 Siasconset Water Company……… - - - 1,152,163 - - 17,225 1,169,388 Sewer Enterprise Fund…………… 232,826 - - - - - 20,885 253,711 Solid Waste Enterprise Fund……… - - - 189,787 - - - 189,787 Nantucket Memorial Airport……… 33,118 - - - - - 11,010 44,128 Wannacomet Water company…… 692,656 - 67,981 425,084 - - 6,167 1,191,888 Total……………………………$ 958,600 $ 619,852 $ 67,981 $ 3,070,418 $ 188,320 $ 8,320 $ 550,829 $ 5,464,320 Due To: Due From: Interfund transfers for the fiscal year ended June 30, 2008, are summarized as follows: Nonmajor Sewer Solid Waste General Governmental Enterprise Enterprise Fund Funds Fund Fund Total General Fund………………………… $ - $ 310,000 $ - $ - $ 310,000 (1) General Fund………………………… - - - 2,936,000 2,936,000 (2) General Fund………………………… - 600,000 - - 600,000 (3) General Fund………………………… - - 15,175,978 - 15,175,978 (4) Nonmajor Governmental Funds……… 370,000 - - - 370,000 (5) Nonmajor Governmental Funds……… 41,000 - - - 41,000 (6) Nonmajor Governmental Funds……… 231,464 - - - 231,464 (7) Total……………………………………$ 642,464 $ 910,000 $ 15,175,978 $ 2,936,000 $ 19,664,442 (1) Transfer from General Fund Operating Budget to Community School Revolving Fund. (2) General Fund subsidy to Solid Waste Enterprise Fund. (3) Gerneral Fund appropriation to fund the Stabilization Fund. (4) Capital Transfer to fund capital asset construction of the Sewer Enterprise with debt to be repaid from the general government. (5) Ambulance Reserve Fund transfer to fund the ambulance budget in the General Fund. (6) Waterway Improvement Fund transfer for the Marine & Coastal Resources Department for an outboard motor and vehicle. (7) Ferry Embarcation Fee transfer to the Town's Operating Budget. Transfers In: Transfers Out: Notes to Basic Financial Statements Fiscal Year Ended June 30, 2008 Town of Nantucket, Massachusetts 48 Basic Financial Statements NOTE 6 – SHORT-TERM FINANCING Short-term debt may be authorized and issued to fund the following: • Current operating costs prior to the collection of revenues through issuance of revenue or tax anticipation notes (RANS or TANS). • Capital project costs and other approved expenditures incurred prior to obtaining permanent financing through issuance of bond anticipation notes (BANS) or grant anticipation notes (GANS). Short-term loans are general obligations and carry maturity dates that are limited by statute. Interest expenditures and expenses for short-term borrowings are accounted for in the general fund and enterprise funds, respectively. Details related to the short-term debt activity for the fiscal year ended June 30, 2008, are as follows: Balance at Balance at Rate June 30, Renewed/ Retired/ June 30, Type Purpose (%) Due Date 2007 Issued Redeemed 2008 Governmental Funds BAN Stormwater Drainage Improvements…………… 4.00 02/27/09 $ 5,500,000 $ 5,500,000 $ 5,500,000 $ 5,500,000 (a) Enterprise Fund BAN Airport Equipment - New Airfield Equipment…… 4.00 02/28/08 109,188 - 109,188 - BAN Airport Improvement and Protection…………… 4.00 02/28/08 400,000 - 400,000 - BAN Airport……………………………………………… 4.00 02/27/09 5,000,000 5,000,000 1,287,275 8,712,725 ( b) BAN Wastewater Treatment Facility………………… 4.00 02/28/08 9,000,000 - 9,000,000 - Total Enterprise Fund………………………………………………………… 14,509,188 5,000,000 10,796,463 8,712,725 Total……………………………………………………………………………$ 20,009,188 $ 10,500,000 $ 16,296,463 $ 14,212,725 (a) Subsequent to year end, the $5,500,000 was reissued as part of a new BAN, totaling $14,212,725, with interest rates from 2% to 2.25%, which matured on February 27, 2009. The Town upon maturity rolled $4,610,490 of the $5,500,000 into a BAN maturing on March 30, 2009 with an interest rate of 1%. The remaining $889,510 was rolled into a BAN with the $8,712,725 of short term debt for the Airport in the value of $9,602,235 that matures on February 26, 2010 at an interest rate of 1.75%. (b) The $8,712,725 of BANs outstanding on February 27, 2009 was reissued as part of a new BAN totaling $9,602,235 with an interest rate of 1.75% that matures on February 26, 2010. NOTE 7 – LONG-TERM DEBT Under the provisions of Chapter 44, Section 10, Municipal Law authorizes indebtedness up to a limit of 5% of the equalized valuation. Debt issued in accordance with this section of the law is designated as being "inside the debt limit". In addition, however, debt may be authorized in excess of that limit for specific purposes. Such debt, when issued, is designated as being "outside the debt limit". Notes to Basic Financial Statements Fiscal Year Ended June 30, 2008 Town of Nantucket, Massachusetts 49 Basic Financial Statements Details related to the outstanding indebtedness at June 30, 2008, and the debt service requirements are as follows: Bonds and Notes Payable Schedule – Governmental Funds Interest Outstanding Outstanding Rate at June 30, at June 30, Project (%)2007 Issued Redeemed 2008 Land……………………………………………………………4.75 - 6.00 $ 1,300,000 $ - $ 1,300,000 $ - Advanced Refunding of 91 Landfill…………………………4.75 - 6.00 3,849,631 - 686,899 3,162,732 Advanced Refunding of 91 Sewer………………………… 4.75 - 6.00 2,391,905 - 424,724 1,967,181 Advanced Refunding of 91 School 1………………………4.75 - 6.00 656,672 - 319,854 336,818 Advanced Refunding of 91 School 2………………………4.75 - 6.00 586,792 - 183,523 403,269 Land Acquisition………………………………………………4.00 - 4.90 210,000 - 20,000 190,000 MWPAT Title V Loan - 97-1148……………………………- 15,080 - 1,162 13,918 Recreational facility……………………………………………2.25 - 5.00 480,000 - 40,000 440,000 School remodeling……………………………………………2.25 - 5.00 1,985,000 - 120,000 1,865,000 School remodeling……………………………………………2.50 - 4.25 130,000 - 10,000 120,000 Land acquisition 1……………………………………………2.50 - 4.10 14,445,000 - 565,000 13,880,000 Road, sidewalk and bikepath……………………………… 2.50 - 3.00 330,000 - 110,000 220,000 Recreational facility……………………………………………2.50 - 4.00 130,000 - 10,000 120,000 Planning……………………………………………………… 2.50 - 3.00 80,000 - 30,000 50,000 Public wharf 1…………………………………………………2.50 - 4.00 90,000 - 15,000 75,000 Assessors map……………………………………………… 2.50 - 4.00 40,000 - 5,000 35,000 Fire departmental equipment……………………………… 2.50 - 3.00 25,000 - 10,000 15,000 Departmental equipment……………………………………2.50 - 3.00 570,000 - 190,000 380,000 Computer hardware………………………………………… 2.50 - 4.00 440,000 - 55,000 385,000 Remodeling……………………………………………………2.50 - 4.13 495,000 - 30,000 465,000 Road and drainage……………………………………………2.50 - 3.00 315,000 - 105,000 210,000 Recreational facility 2…………………………………………2.50 - 4.00 170,000 - 15,000 155,000 Bulkhead………………………………………………………2.50 - 4.00 95,000 - 15,000 80,000 Public wharf 2…………………………………………………2.50 - 4.00 60,000 - 10,000 50,000 School Remodeling……………………………………………3.75 - 5.00 665,000 - 35,000 630,000 Planning………………………………………………………3.75 - 4.00 400,000 - 100,000 300,000 Outdoor Recreational Facility………………………………3.75 - 5.00 535,000 - 40,000 495,000 Fire departmental equipment………………………………3.75 - 4.00 280,000 - 70,000 210,000 Bath House Construction……………………………………3.75 - 5.00 235,000 - 15,000 220,000 Public Works Equipment……………………………………3.75 - 4.00 95,000 - 25,000 70,000 Land Acquisition………………………………………………3.75 - 5.00 295,000 - 20,000 275,000 Advance Refunding of 97 Land Bonds……………………3.75 - 5.00 17,815,000 - 110,000 17,705,000 MWPAT CW-04-19……………………………………………2.00 959,608 - 41,934 917,674 Children's Beach Ramp………………………………………3.00-5.00 200,000 - - 200,000 Public Safety Communications………………………………3.00-5.00 3,000,000 - - 3,000,000 Bikepath………………………………………………………3.00-5.00 650,000 - - 650,000 Fairgrounds Road……………………………………………3.00-5.00 1,375,000 - - 1,375,000 Fire Engine……………………………………………………3.00-5.00 - 450,000 - 450,000 Washington Street Building…………………………………3.00-5.00 - 200,000 - 200,000 Sidewalk Design………………………………………………3.00-5.00 - 25,000 - 25,000 South Shore Road Bike Path……………………………… 3.00-5.00 - 425,600 - 425,600 Nobadeer Farm Road Bike Path……………………………3.00-5.00 - 100,000 - 100,000 Study of Proporsed Bulk Fuel Facility………………………3.00-5.00 - 250,000 - 250,000 NES Building Improvements…………………………………3.00-5.00 200,000 - - 200,000 NES Building Improvements (2)……………………………3.00-5.00 - 400,000 - 400,000 CPS Building Improvements…………………………………3.00-5.00 390,000 - - 390,000 CPS Building Improvements (2)……………………………3.00-5.00 - 350,000 - 350,000 NHS Building Improvements…………………………………3.00-5.00 865,000 - - 865,000 NHS Building Improvements (2)……………………………3.00-5.00 - 725,000 - 725,000 MWPAT CW-05-21……………………………………………3.00-5.00 - 15,175,978 - 15,175,978 New School Playing Fields………………………………… 3.00-5.00 - 1,200,000 - 1,200,000 School Bus Lanes and Parking Lot Improvements………3.00-5.00 - 250,000 - 250,000 Total Governmental Bonds Payable……………………… $ 56,849,688 $ 19,551,578 $ 4,728,096 $ 71,673,170 Notes to Basic Financial Statements Fiscal Year Ended June 30, 2008 Town of Nantucket, Massachusetts 50 Basic Financial Statements Debt service requirements for principal and interest for Governmental bonds payable in future fiscal years are as follows: Fiscal Year Principal Interest Total 2009………………$ 6,476,815 $ 2,566,158 $ 9,042,973 2010……………… 6,337,765 2,265,192 8,602,957 2011……………… 5,827,402 2,008,747 7,836,149 2012……………… 5,817,262 1,776,224 7,593,486 2013……………… 4,437,359 1,568,616 6,005,975 2014……………… 4,302,699 1,406,047 5,708,746 2015……………… 4,383,287 1,233,349 5,616,636 2016……………… 4,384,110 1,065,156 5,449,266 2017……………… 4,475,214 896,554 5,371,768 2018……………… 4,001,585 737,548 4,739,133 2019……………… 2,068,230 628,588 2,696,818 2020……………… 2,040,154 558,269 2,598,423 2021……………… 2,026,217 486,642 2,512,859 2022……………… 2,003,723 415,352 2,419,075 2023……………… 1,956,530 343,827 2,300,357 2024……………… 1,859,645 273,040 2,132,685 2025……………… 818,075 227,518 1,045,593 2026……………… 801,829 203,973 1,005,802 2027……………… 694,594 182,601 877,195 2028……………… 632,779 162,830 795,609 2029……………… 566,286 145,921 712,207 2030……………… 580,123 132,084 712,207 2031……………… 594,299 117,908 712,207 2032……………… 608,820 103,386 712,206 2033……………… 623,697 88,510 712,207 2034……………… 638,937 73,270 712,207 2035……………… 654,549 57,657 712,206 2036……………… 670,543 41,663 712,206 2037……………… 686,928 25,279 712,207 2038……………… 703,714 8,494 712,208 Total………………$ 71,673,170 $ 19,800,403 $ 91,473,573 Notes to Basic Financial Statements Fiscal Year Ended June 30, 2008 Town of Nantucket, Massachusetts 51 Basic Financial Statements Bonds and Notes Payable Schedule – Enterprise Funds Interest Outstanding Outstanding Rate at June 30, at June 30, Project (%) 2007 Issued Redeemed 2008 Sewer………………………………………………………… 4.00 - 5.00 $ 610,000 $ - $ 40,000 $ 570,000 MWPAT - 94-10………………………………………………Various 147,868 - 15,071 132,797 MWPAT CW-01-40……………………………………………2.00 - 5.50 1,656,114 - 78,124 1,577,990 Sewer………………………………………………………… 2.25 - 5.00 1,020,000 - 60,000 960,000 MWPAT Sewer 98-143………………………………………4.50 - 5.25 762,400 - 45,096 717,304 MWPAT Sewer 98-144………………………………………4.50 - 5.25 170,594 - 9,752 160,842 MWPAT Sewer 98-145………………………………………4.50 - 5.25 188,570 - 10,466 178,104 MWPAT CW-02-50-A…………………………………………Various 5,112,589 - 271,850 4,840,739 Sewer Department……………………………………………3.75 - 4.00 50,000 - 10,000 40,000 MWPAT CW-04-20……………………………………………2.00 3,994,925 - 157,555 3,837,370 MWPAT CW-02-50……………………………………………Various 4,015,365 - 138,551 3,876,814 MWPAT CW-05-21……………………………………………2.14 9,000,000 20,459,250 - 29,459,250 Stormwater Planning…………………………………………3.75 - 4.00 40,000 - 10,000 30,000 Cleaning Equipment…………………………………………3.00-5.00 165,000 - - 165,000 Sewer Construction………………………………………… 3.00-5.00 250,000 - - 250,000 Sewer………………………………………………………… 3.00-5.00 870,000 - - 870,000 Waste Water Treatment Facility……………………………3.00-5.00 - 398,013 - 398,013 Sewer………………………………………………………… 3.00-5.00 1,435,075 - - 1,435,075 Sewer Departmental Equipment……………………………3.00-5.00 - 150,000 - 150,000 Airport land acquisition…………………………………………4.00 - 4.25 380,000 - 95,000 285,000 Airport…………………………………………………………2.25 - 5.00 270,000 - 40,000 230,000 Airport departmental equipment……………………………2.50 - 3.00 90,000 - 30,000 60,000 Airport improvement…………………………………………2.50 - 4.00 1,360,000 - 195,000 1,165,000 Airport Improvement…………………………………………3.75 - 5.00 195,000 - 25,000 170,000 Airport Equipment……………………………………………3.75 - 4.00 200,000 - 50,000 150,000 Airport Equipment……………………………………………3.00 - 5.00 440,811 - - 440,811 Airport Equipment Refurbishment………………………… 3.00 - 5.00 676,500 - - 676,500 Airport Equipment (2)…………………………………………3.00 - 5.00 230,000 - - 230,000 Airport Equipment Refurbishment………………………… 3.00 - 5.00 175,000 - - 175,000 Water projects…………………………………………………4.00 - 5.00 805,000 - 60,000 745,000 Water meters…………………………………………………4.00 - 4.25 600,000 - 150,000 450,000 Current Refunding of Dec. 1991 Water……………………2.25 - 5.00 320,000 - 170,000 150,000 Water 1…………………………………………………………2.50 - 4.13 450,000 - 25,000 425,000 Water 2…………………………………………………………2.50 - 4.13 450,000 - 25,000 425,000 Land acquisition 2……………………………………………2.50 - 4.13 2,700,000 - 150,000 2,550,000 Water 1…………………………………………………………3.75 - 5.00 2,905,000 - 110,000 2,795,000 Water 2…………………………………………………………3.75 - 5.00 690,000 - 65,000 625,000 Water 3…………………………………………………………3.75 - 5.00 485,000 - 15,000 470,000 Garage & Maintenance Facility………………………………3.75 - 5.00 870,000 - 30,000 840,000 Rehab & Administration Building……………………………3.00-5.00 750,000 - - 750,000 Source Well & Pump…………………………………………3.00-5.00 1,300,000 - - 1,300,000 Water Storage Tank…………………………………………3.00-5.00 5,000,000 - - 5,000,000 Water Mains……………………………………………………3.00-5.00 1,250,000 - - 1,250,000 Water System Distribution Improvements…………………3.00-5.00 - 1,000,000 - 1,000,000 Water Mains (2)………………………………………………3.00-5.00 - 100,000 - 100,000 Water Meter……………………………………………………3.75 - 5.00 1,745,000 - 160,000 1,585,000 Water 4…………………………………………………………3.75 - 5.00 90,000 - 10,000 80,000 Solid waste facility……………………………………………2.50 - 4.13 90,000 - 5,000 85,000 Landfill cell……………………………………………………3.00-5.00 650,000 - - 650,000 Material recovery facility…………………………………… 3.00-5.00 - 350,000 - 350,000 Total Enterprise Bonds Payable……………………………$ 54,655,811 $ 22,457,263 $ 2,256,465 $ 74,856,609 Notes to Basic Financial Statements Fiscal Year Ended June 30, 2008 Town of Nantucket, Massachusetts 52 Basic Financial Statements Debt service requirements for principal and interest for enterprise fund bonds and notes payable in future fiscal years are as follows: Fiscal Year Principal Interest Total 2009………………$ 3,997,604 $ 2,561,835 $ 6,559,439 2010……………… 3,943,904 2,351,718 6,295,622 2011……………… 3,962,283 2,194,906 6,157,189 2012……………… 3,692,406 2,058,175 5,750,581 2013……………… 3,510,413 1,929,177 5,439,590 2014……………… 3,455,073 1,785,828 5,240,901 2015……………… 3,294,515 1,649,088 4,943,603 2016……………… 3,353,638 1,529,089 4,882,727 2017……………… 3,060,315 1,412,987 4,473,302 2018……………… 3,011,600 1,310,165 4,321,765 2019……………… 3,057,798 1,211,481 4,269,279 2020……………… 3,112,614 1,089,719 4,202,333 2021……………… 3,210,537 979,053 4,189,590 2022……………… 3,040,697 870,567 3,911,264 2023……………… 3,113,995 758,663 3,872,658 2024……………… 3,042,122 647,226 3,689,348 2025……………… 2,909,635 540,666 3,450,301 2026……………… 2,208,058 453,582 2,661,640 2027……………… 1,922,803 389,963 2,312,766 2028……………… 1,673,042 334,977 2,008,019 2029……………… 1,099,262 283,257 1,382,519 2030……………… 1,126,122 256,396 1,382,518 2031……………… 1,153,638 228,880 1,382,518 2032……………… 1,181,827 200,691 1,382,518 2033……………… 1,210,705 171,813 1,382,518 2034……………… 1,240,289 142,230 1,382,519 2035……………… 1,270,595 111,924 1,382,519 2036……………… 1,301,642 80,877 1,382,519 2037……………… 1,333,447 49,071 1,382,518 2038……………… 1,366,030 16,488 1,382,518 Total………………$ 74,856,609 $ 27,600,492 $ 102,457,101 Bonds and Notes Payable Schedule – Land Bank Component Unit Interest Outstanding Outstanding Rate at June 30, at June 30, Project (%)2007 Issued Redeemed 2008 Land Bank Bonds and Notes Payable……………………6.03 $ 16,536,588 $ - $ 10,219,198 $ 6,317,390 Land Bank Bonds and Notes Payable……………………4.00 - 5.50 9,543,443 15,343,181 549,869 24,336,755 Total Land Bank Component Unit Bonds Payable………$ 26,080,031 $ 15,343,181 $ 10,769,067 $ 30,654,145 Notes to Basic Financial Statements Fiscal Year Ended June 30, 2008 Town of Nantucket, Massachusetts 53 Basic Financial Statements Debt service requirements for principal and interest for enterprise fund bonds and notes payable in future fiscal years are as follows: Fiscal Year Principal Interest Total 2009………………$ 2,986,919 $ 1,360,493 $ 4,347,412 2010……………… 1,347,452 1,192,871 2,540,323 2011……………… 1,403,469 1,129,442 2,532,911 2012……………… 1,474,991 1,062,262 2,537,253 2013……………… 1,542,042 988,150 2,530,192 2014-2018……… 8,891,284 3,674,765 12,566,049 2019-2023……… 7,821,535 1,760,811 9,582,346 2024-2028……… 5,186,453 545,789 5,732,242 Total………………$ 30,654,145 $ 11,714,583 $ 42,368,728 The Town is scheduled to be subsidized by the Massachusetts Water Pollution Abatement Trust (MWPAT) on a periodic basis for principal in the amount of $2,469,067 and interest costs of $3,644,957. Thus, net MWPAT loan repayments, including interest, are scheduled to be $54,511,297. The principal subsidies are guaranteed and therefore a $2,469,067 intergovernmental receivable has been reported in the enterprise fund financial statements. Since the Town is legally obligated for the total amount of the debt, such amounts have been reported in the accompanying basic financial statements. The fiscal year 2008 principal and interest subsidies totaled approximately $97,000 and $425,000, respectively. The Land Bank’s notes payable are with various entities and bear interest at 6.063%. The notes payable balance is amortized over periods of one to sixteen years. Bonds payable is comprised of the 1998 Series E Refunding Bonds dated July 15, 1998, bear interest at rates ranging from 4.25% to 5.25% and mature serially from July 1, 2001 through July 1, 2019. The 2007 Series A Bonds dated December 4, 2007 bear interest at rates ranging from 4% to 5.5% and mature serially from December 1, 2008 through December 1, 2027. The bonds are secured by a second priority security interest in the Land Bank’s present and future transfer fees and unrestricted revenue. The bonds are additionally secured by a guarantee of the Town. The Town is subject to various debt limits by statute and may issue additional general obligation debt under the normal debt limit. Notes to Basic Financial Statements Fiscal Year Ended June 30, 2008 Town of Nantucket, Massachusetts 54 Basic Financial Statements At June 30, 2008, the Town had the following authorized and unissued debt: General Government Purpose Amount Bikepaths……………………………………………………$ 599,250 Fire Station Expansion……………………………………1,100,000 Wastewater……………………………...…………………451,976 Total General Government……………………………… $ 2,151,226 Enterprise Purpose Amount Siasconset Water………………………………………… $ 3,900,000 Sewer……………………………………………………… 40,918,487 Solid Waste…………………………………………………1,633,000 Nantucket Memorial Airport………………………………30,968,600 Wannacomet Water Company……………………………250,000 Total Enterprise……………….……………………………$ 77,670,087 Land Bank Component Unit Purpose Amount Land Bank …………………………………………………$ 1,271,969 Total…………………………………………………………$81,093,282 Changes in Long-term Liabilities During the fiscal year ended June 30, 2008, the following changes occurred in long-term liabilities: Balance at Balance at June 30, June 30, Current 2007 Additions Reductions 2008 Portion GOVERNMENTAL ACTIVITIES: Long-Term Bonds and Notes……………$ 56,849,688 $ 19,551,578 $ (4,728,096) $ 71,673,170 $ 6,476,815 Compensated Absences………………… 1,569,469 - (288,125) 1,281,344 256,269 Workers' Compensation………………… 144,674 312,975 (363,313) 94,336 94,336 Total Governmental Funds………………$ 58,563,831 $ 19,864,553 $ (5,379,534) $ 73,048,850 $ 6,827,420 BUSINESS-TYPE ACTIVITIES: Long-Term Bonds and Notes……………$ 54,655,811 $ 22,457,263 $ (2,256,465) $ 74,856,609 $ 3,997,604 Compensated Absences………………… 310,738 188,669 (89,750) 409,657 90,915 Total Business-type Funds……………… 54,966,549 22,645,932 (2,346,215) 75,266,266 4,088,519 LAND BANK COMPONENT UNIT: Long-Term Bonds and Notes……………$ 26,080,031 15,343,181 (10,769,067) 30,654,145 2,986,919 Total……………………………………… $ 139,610,411 $ 57,853,666 $ (18,494,816) $ 178,969,261 $ 13,902,858 The governmental activities long-term liabilities are generally liquidated by the general fund. Notes to Basic Financial Statements Fiscal Year Ended June 30, 2008 Town of Nantucket, Massachusetts 55 Basic Financial Statements NOTE 8 – RISK FINANCING The Town is exposed to various risks of loss related to torts; theft of, damage to and destruction of assets; errors and omissions; and natural disasters for which the Town carries commercial insurance. The amount of claim settlements has not exceeded insurance coverage in any of the previous three fiscal years. The Town is self-insured for its health insurance and workers’ compensation activities. These activities are accounted for in the internal service fund where revenues are recorded when earned and expenses are recorded when the liability is incurred. (a) Health Insurance The estimate of Incurred But Not Reported (IBNR) claims is based on a three month claims paid average. At June 30, 2008, the amount of the liability for health insurance claims totaled $710,419. This liability is the best estimate based on available information. Changes in the reported liability since July 1, 2006, are as follows: Current Year Balance at Claims and Balance at Beginning of Changes in Claims Fiscal Fiscal Year Estimate Payments Year-End Fiscal Year 2007………..$ 639,480 $ 10,706,881 $ (10,674,083) $ 672,278 Fiscal Year 2008……….. 672,278 8,198,903 (8,160,762) 710,419 (b) Workers’ Compensation Workers’ compensation claims are administered by a third party administrator and are funded on a pay- as-you-go basis from a trust fund for workers compensation. Annual appropriations are made to add to the trust fund. The estimated future workers’ compensation liability is based on history and injury type. At June 30, 2008, the amount of the liability for workers’ compensation claims totaled $94,336. This liability is the Town’s best estimate based on available information. Changes in the reported liability since July 1, 2006, are as follows: Current Year Balance at Claims and Balance at Beginning of Changes in Claims Fiscal Fiscal Year Estimate Payments Year-End Fiscal Year 2007………..$ 48,306 $ 281,898 $ (185,530) $ 144,674 Fiscal Year 2008……….. 144,674 312,975 (363,313) 94,336 Notes to Basic Financial Statements Fiscal Year Ended June 30, 2008 Town of Nantucket, Massachusetts 56 Basic Financial Statements NOTE 9 – PENSION PLAN Plan Description - The Town and the County contribute to the Barnstable County Retirement Association (the System), a cost-sharing multiple-employer defined benefit pension plan administered by the Barnstable County Retirement Board. Substantially all employees of both the Town and County are members of the System, except for public school teachers and certain administrators who are members of the Massachusetts Teachers Retirement System, to which the Town does not contribute. Pension benefits and administrative expenses paid by the Teachers Retirement Board are the legal responsibility of the Commonwealth. The amount of these on- behalf payments totaled approximately $1,370,000 for the fiscal year ended June 30, 2008, and, accordingly, are reported in the general fund as intergovernmental revenues and pension expenditures. The System provides retirement, disability and death benefits to plan members and beneficiaries. Chapter 32 of the MGL assigns authority to establish and amend benefit provisions of the plan. Cost-of-living adjustments granted between 1981 and 1997 and any increase in other benefits imposed by the Commonwealth’s state law during those years are borne by the Commonwealth and are deposited into the pension fund. Cost-of-living adjustments granted after 1997 must be approved by the Barnstable County Retirement Board and are borne by the System. The System issues a publicly available, unaudited, financial report in accordance with guidelines established by the Commonwealth of Massachusetts’ Public Employee Retirement Administration Commission (PERAC). That report may be obtained by contacting the System located at 99 Willow Street, Yarmouthport, Massachusetts, 02675. Funding Policy - Plan members are required to contribute to the System at rates ranging from 5% to 11% of annual covered compensation. The Town and County are required to pay into the System their share of the system-wide actuarial determined contribution that is apportioned among the employers based on active current payroll. Administrative expenses are funded through investment earnings. Chapter 32 of the MGL governs the contributions of plan members and the Town. The Town’s contributions to the System for the fiscal year ended June 30, 2006, 2007 and 2008 totaled $2,761,460, $3,058,753, and $3,346,353 respectively, which equaled its required contributions for each fiscal year. The County’s contribution to the System for the fiscal years ended June 30, 2006, 2007 and 2008 were $112,420, $128,612 and $138,012 respectively, which equaled its required contributions for each fiscal year. The schedule of funding progress, presented as required supplementary information, following the notes to the basic financial statements, presents multiyear trend information about whether the actuarial value of plan assets is increasing or decreasing over time relative to the actuarial accrued liability for benefits. Additionally, the schedule of employer contributions, presented as required supplementary information, following the notes to the basic financial statements, presents multiyear trend information for required and actual contributions relating to the cost-sharing plan as a whole, of the Town is one participating employer, as well as the Town’s proportionate share of the plan’s annual contributions. This information is designed to be helpful for understanding the scale of the information presented relative to the Town. NOTE 10 – COMMITMENTS   Construction Contracts:   The Town has a contract with Carlin Contracting for the Surfside Waste Water Treatment Facility upgrade and expansion. At year end, the open contract totaled approximately $12,740,000. The Town has a contract with Skanska USA Building, Inc. for construction of the new airport terminal. At year end, the open contract totaled approximately $11,022,000. Notes to Basic Financial Statements Fiscal Year Ended June 30, 2008 Town of Nantucket, Massachusetts 57 Basic Financial Statements The Town has various contracts with Earth Tech that include air terminal design and expansion, wastewater and drainage infrastructure evaluation and mapping, upgrades to and expansion of the Surfside Waste Water Treatment Facility. At year end, open contracts totaled approximately $8,400,000. The Town has contracts with C. C. Construction for sewer pipe and stormwater drainage construction. At year end, open contracts totaled approximately $450,000. The Town has contracts with Edwards & Kelcey, Inc. for airport engineering projects, and terminal design. At year end, open contracts totaled approximately $410,000. The Town has contracts with Haley & Ward, Inc. that include the work for Siasconset and Wannacomet Water companies. At year end, open contracts totaled approximately $340,000. Operating Contracts The Town has a long-term contract with Waste Options, Inc. to operate the municipal landfill. The Town is charged by tonnage, with annual increases based on changes in the Consumer Price Index. Some fixed costs, fixed asset investments, and reimbursable expenses (transportation, disposal of construction and demolition waste) are charged to the Town. In Fiscal Year 2008, the contract resulted in annual payments of approximately $8,500,000. The Town has entered into various contracts with Blue Cross Blue Shield for administration of the Town’s self- funded medical insurance program, and for supplementary insurance for employees or retirees who are covered by Medicare insurance. The contract resulted in annual payments of approximately $7,490,000 in Fiscal Year 2008, which includes reimbursement payments for direct medical care, hospitalization, and prescriptions. The administrative cost portion of the contract is based on a monthly fee per enrolled member. NOTE 11 – CONTINGENCIES The Town participates in a number of federal award programs. Although the grant programs have been audited in accordance with the provisions of the Single Audit Act Amendments of 1996 through June 30, 2008, these programs are still subject to financial and compliance audits. The amount, if any, of expenditures which may be disallowed by the granting agencies cannot be determined at this time, although it is expected such amounts, if any, to be immaterial. Various legal actions and claims are pending. Litigation is subject to many uncertainties, and the outcome of individual litigated matters is not always predictable. Although the amount of liability, if any, at June 30, 2008, cannot be ascertained, management believes any resulting liability should not materially affect the financial position at June 30, 2008. NOTE 12 – LAND BANK PRIOR YEAR ADJUSTMENT During the fiscal year ended on June 30, 2008 the Land Bank recognized accrued post retirement benefits as required by GASB Statement 45 – Accounting and Financial Reporting by Employers for Postemployment Benefits Other Than Pensions. Notes to Basic Financial Statements Fiscal Year Ended June 30, 2008 Town of Nantucket, Massachusetts 58 Basic Financial Statements As a result of implementing this pronouncement, the following restatements have been made to beginning net assets: Net Assets at June 30, 2007, as previously reported…………………………… $ 183,470,161 To recognize liabilities related to accrued post retirement benefits………………… (286,900) Net Assets at June 30, 2007, restated…………… $ 183,183,261 NOTE 13 – IMPLEMENTATION OF NEW GASB PRONOUNCEMENTS During fiscal year 2008, the Town has implemented the following GASB pronouncements: The GASB issued Statement #43, Financial Reporting for Postemployment Benefit Plans Other Than Pension Plans, which is required to be implemented in fiscal year 2009. Management elected to implement this standard early. This standard did not impact the basic financial statements. The GASB issued Statement #50, Pension Disclosures—an amendment of GASB Statements No. 25 and No. 27, which was implemented in fiscal year 2008. This GASB changed the disclosures related to pensions. The GASB issued Statement #52, Land and Other Real Estate Held as Investments by Endowments, which is required to be implemented in fiscal year 2009. The standards in this statement require all investments in land and real estate in permanent and similar funds to be reported at fair value Management elected to implement this standard early. This standard did not impact the basic financial statements. The GASB issued Statement #53, Accounting and Financial Reporting for Derivative Instruments, which is required to be implemented in fiscal year 2010. The standards in this statement require governments to measure most derivative instruments at fair value in their financial statements that are prepared using the economic resources measurement focus and the accrual basis of accounting. Management elected to implement this standard early. This standard did not impact the basic financial statements. Future Implementation of GASB Pronouncements The GASB issued Statement #45, Accounting and Financial Reporting by Employers for Postemployment Benefits Other Than Pensions, which is required to be implemented in Fiscal 2009. Management believes this pronouncement will require additional disclosure and impact the basic financial statements. Town of Nantucket, Massachusetts 59 Required Supplementary Information Required Supplementary Information Amounts Current Year Carried forward Initial Original Final From Prior Year Budget Budget Budget REVENUES: Real estate and personal property taxes, net of tax refunds……………………………………………$- $ 55,830,438 $ 55,830,438 $ 55,830,438 Tax liens………………………………………………………… - - - - Motor vehicle and other excise taxes………………………… - 2,320,000 2,320,000 2,320,000 Hotel/motel tax…………………………………………………… - 1,315,000 1,315,000 1,315,000 Charges for services…………………………………………… - 4,985,200 4,985,200 4,985,200 Penalties and interest on taxes………………………………… - 410,000 410,000 410,000 Payments in lieu of taxes……………………………………… - - - - Licenses and permits…………………………………………… - 1,650,000 1,650,000 1,650,000 Fines and forfeitures…………………………………………… - 412,000 412,000 412,000 Intergovernmental……………………………………………… - 1,765,354 1,765,354 1,765,354 Departmental and other………………………………………… - 221,000 221,000 221,000 Investment income……………………………………………… - 300,000 300,000 300,000 Miscellaneous…………………………………………………… - 895,000 895,000 895,000 TOTAL REVENUES………………………………………… - 70,103,992 70,103,992 70,103,992 EXPENDITURES: Current: General government………………………………………… 853,183 5,806,398 6,659,581 6,531,261 Public safety………………………………………………… 98,826 8,120,968 8,219,794 8,304,472 Education…………………………………………………… 281,116 21,173,921 21,455,037 21,197,321 Public works………………………………………………… 238,644 2,940,200 3,178,844 3,249,810 Human services……………………………………………… 148,413 6,064,512 6,212,925 6,375,707 Culture and recreation……………………………………… 49,731 2,219,800 2,269,531 2,175,971 Employee benefits…………………………………………… 19,180 10,037,000 10,056,180 9,714,564 State and county charges……………………………………… - 3,708,483 3,708,483 3,808,483 Debt service: Principal……………………………………………………… - 6,449,000 6,449,000 6,449,000 Interest………………………………………………………… - 2,643,000 2,643,000 2,643,000 TOTAL EXPENDITURES…………………………………… 1,689,093 69,163,282 70,852,375 70,449,589 EXCESS (DEFICIENCY) OF REVENUES OVER (UNDER) EXPENDITURES………………………………………………… (1,689,093) 940,710 (748,383) (345,597) OTHER FINANCING SOURCES (USES): Transfers in……………………………………………………… - 642,400 642,400 642,400 Transfers out…………………………………………………… - (3,316,000) (3,316,000) (3,846,000) TOTAL OTHER FINANCING SOURCES (USES)……… - (2,673,600) (2,673,600) (3,203,600) NET CHANGE IN FUND BALANCE……………………………… (1,689,093) (1,732,890) (3,421,983) (3,549,197) BUDGETARY FUND BALANCE, Beginning of year…………… 9,077,878 9,077,878 9,077,878 9,077,878 BUDGETARY FUND BALANCE, End of year……………………$ 7,388,785 $ 7,344,988 $ 5,655,895 $ 5,528,681 See notes to required supplementary information. Budgeted Amounts GENERAL FUND SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE - BUDGET AND ACTUAL FISCAL YEAR ENDED JUNE 30, 2008 Town of Nantucket, Massachusetts 60 Required Supplementary Information Actual Amounts Variance Budgetary Carried Forward To Final Amounts To Next Year Budget $ 55,368,768 $ - $ (461,670) 74,677 - 74,677 2,332,743 - 12,743 1,343,448 - 28,448 4,742,366 - (242,834) 409,101 - (899) 3,645 - 3,645 1,321,794 - (328,206) 266,693 - (145,307) 1,816,379 - 51,025 140,215 - (80,785) 549,686 - 249,686 664,193 - (230,807) 69,033,708 - (1,070,284) 5,312,105 1,201,397 17,759 7,869,360 327,117 107,995 21,041,055 98,401 57,865 2,873,069 319,588 57,153 6,094,152 189,900 91,655 2,114,417 5,750 55,804 8,711,895 370 1,002,299 3,808,483 - - 4,728,096 - 1,720,904 2,305,318 - 337,682 64,857,950 2,142,523 3,449,116 4,175,758 (2,142,523) 2,378,832 642,464 - 64 (3,846,000) - - (3,203,536) - 64 972,222 (2,142,523) 2,378,896 9,077,878 - - $ 10,050,100 $ (2,142,523) $ 2,378,896 Town of Nantucket, Massachusetts 61 Required Supplementary Information Actuarial UAAL as a Actuarial Accrued Unfunded Percentage Actuarial Value of Liability (AAL) AAL Funded Covered of Covered Valuation Assets Entry Age (UAAL) Ratio Payroll Payroll Date (A) (B) (B-A) (A/B) (C) ((B-A)/C) 1/1/1993 $ 97,194,645 $ 226,430,792 $ 129,236,147 42.9% $ 97,074,725 133.1% 1/1/1996 157,044,089 276,107,221 119,063,132 56.9% 108,456,079 109.8% 1/1/1998 235,247,660 404,215,695 168,968,035 58.2% 121,161,677 139.5% 1/1/2000 300,396,700 462,462,500 162,065,800 65.0% 152,293,100 106.4% 1/1/2002 362,911,896 553,531,966 190,620,070 65.6% 173,610,557 109.8% 1/1/2004 378,317,300 647,655,411 269,338,111 58.4% 190,614,004 141.3% 1/2/2006 465,637,984 765,747,723 300,109,739 60.8% 215,474,180 139.3% 1/1/2007 517,396,087 825,863,068 308,466,981 62.6% 226,391,633 136.3% The Town's share of the UAAL, as of January 1, 2007, is approximately 8.9%. See notes to required supplementary information. Barnstable County Contributory Retirement System Schedule of Funding Progress Town of Nantucket, Massachusetts 62 Required Supplementary Information (B/A) Plan Year Annual (A) (B) Town's Percentage Ended Required Actual Percentage Actual of System Wide December 31 Contributions Contributions Contributed Contributions Actual Contributions 2005 $ 27,846,430 $ 27,846,430 100% $ 2,629,487 9.44% 2006 31,044,132 31,044,132 100% 2,761,460 8.90% 2007 34,360,912 34,360,912 100% 3,058,753 8.90% The Town's Actual Contributions equaled 100% of its Required Contributions for each year presented. See notes to required supplementary information. Barnstable County Contributory Retirement System Schedule of Employer Contributions System Wide Town of Nantucket Town of Nantucket, Massachusetts 63 Required Supplementary Information Notes to Required Supplementary Information Fiscal Year Ended June 30, 2008 Town of Nantucket, Massachusetts 64 Required Supplementary Information NOTE A – BUDGETARY BASIS OF ACCOUNTING Notes to Required Supplementary Information 1. Budgetary Information Municipal Law requires the adoption of a balanced budget. The Town’s Finance Committee (Committee) presents an annual budget to the Annual Town Meeting for adoption. Increases or decreases to the originally adopted budget require approval at a Special Town Meeting. Transfers between and within departments subsequent to the approval of the annual budget typically require approval at a Special Town Meeting. The majority of appropriations are non-continuing which lapse at the end of each fiscal year. Others are continuing appropriations for which the governing body has authorized that an unspent balance from a prior fiscal year be carried forward and made available for spending in the current fiscal year. These carry forwards are included as part of the subsequent fiscal year’s original budget. Generally, expenditures may not exceed the legal level of spending (salaries, expenses and capital) authorized for an appropriation account. However, the payment of debt service is statutorily required, regardless of whether such amounts are appropriated. Additionally, expenditures for disasters, natural or otherwise, and final judgments may exceed the level of spending authorized by two-thirds majority vote of the Committee. An annual budget is adopted for the general fund in conformity with the guidelines described above. The Town’s original fiscal year 2008 budget includes $74,168,375in appropriations and other amounts to be raised and $1,689,093 in amounts carried forward from the previous fiscal year. During fiscal year 2008, the Town’s budget was increased by $127,214.which includes subsequent appropriations as well as the use of available funds to finance a legal settlement. The Town Accountant’s office has the responsibility to ensure that budgetary control is maintained. Budgetary control is exercised through the accounting system. 2. Budgetary - GAAP Reconciliation For budgetary financial reporting purposes, the Uniform Municipal Accounting System basis of accounting (established by the Commonwealth) is followed, which differs from the GAAP basis of accounting. A reconciliation of budgetary-basis to GAAP-basis results for the general fund for the fiscal year ended June 30, 2008, is presented below: Net change in fund balance - budgetary basis…………………$ 972,222 Basis of accounting differences: Recognition of revenue based on available criteria…………… (239,163) Accrued expenditures…………………………………………… (634,971) Accrued payroll…………………….……………………………… 542,318 Recognition of bond proceeds received from MWPAT……… 15,175,978 Capital transfer of bond proceeds to the Sewer Enterprise… (15,175,978) Recognition of revenue for on-behalf payments……………… 1,370,000 Recognition of expenditures for on-behalf payments………… (1,370,000) Net change in fund balance - GAAP basis………………………$ 640,406 Notes to Required Supplementary Information Fiscal Year Ended June 30, 2008 Town of Nantucket, Massachusetts 65 Required Supplementary Information NOTE B – PENSION PLAN The Town and the County contribute to the Barnstable County Retirement Association (“Retirement System”), a cost-sharing, multiple-employer defined benefit pension plan (“Plan”) administered by the Barnstable County Retirement Board. The Retirement System provides retirement, disability, and death benefits to members and beneficiaries. Chapter 32 of the MGL assigns authority to establish and amend benefit provisions of the Plan. Plan members are required to contribute to the Retirement System at rates ranging from 5% to 11% of annual covered compensation. The Town and County are required to pay into the Retirement System its share of the systemwide actuarially determined contribution which is apportioned among the employers based on active covered payroll. The schedule of funding progress, presented as required supplementary information, following the notes to the basic financial statements, presented multiyear trend information about whether the actuarial value of plan assets is increasing or decreasing over time relative to the actuarial accrued liability for benefits. Additionally, the schedule of employer contributions, presented as required supplementary information, following the notes to the basic financial statements, presents multiyear trend information for required and actual contributions relating to the cost-sharing plan as a whole, of which the Town is one participating employer, as well as the Town’s proportionate share of the plans annual contributions. This information is designed to be helpful for understanding the scale of the information presented relative to the Town. The following actuarial methods and assumptions were used in the Retirement System’s most recent actuarial valuation: Actuarial Methods and Assumptions: Valuation Date…………………………………………………January 1, 2007 Actuarial Cost Method……………………………………… Entry Age Normal Cost Method Amortization Method…………………………………………Increasing at 4.50% per year Incentive, 21 years from July 1, 2007 for 2002 and 2003 Early Retirement Incentives and remaining unfunded liability Asset Valuation Method………………………………………5-year smoothing of investment returns greater (less) than expected. Actuarial Assumptions: Investment rate of return……………………………………8.25% Projected salary increases…………………………………5.00% Cost of living adjustments………………………………… 3.0% for the first $12,000 of retirement income Plan Membership: Retired participants and beneficiaries receiving benefits…………………………………… 2,267 Terminated participants entitled to a return of their employee contributions……………… 670 Terminated participants with a vested right to a deferred or immediate benefit………… 117 Active participants……………………………………………………………………………… 5,314 Total……………………………………………………………………………………………… 8,368 Remaining Amortization Period………………………………1 year from July 1, 2007 for 1992 Early Retirement