HomeMy WebLinkAboutNantucket Airport FS report 14NANTUCKET MEMORIAL AIRPORT
An Enterprise Fund of the Town of
Nantucket, Massachusetts
Report on Examination of
Basic Financial Statements
Year Ended June 30, 2014
NANTUCKET MEMORIAL AIRPORT
AN ENTERPRISE FUND OF THE TOWN OF NANTUCKET, MASSACHUSETTS
TABLE OF CONTENTS
JUNE 30, 2014
Page(s)
INDEPENDENT AUDITORS' REPORT 1 - 2
MANAGEMENT’S DISCUSSION AND ANALYSIS 3 - 6
BASIC FINANCIAL STATEMENTS:
Statement of Net Position 7
Statement of Revenues, Expenses and Changes in Net Position 8
Statement of Cash Flows 9
Notes to Basic Financial Statements 10 - 21
REQUIRED SUPPLEMENTARY INFORMATION:
Schedules of Funding Progress –
Pension System and Other Postemployment Benefits 22
Schedule of Contribution Funding –
Pension System and Other Postemployment Benefits 22
INDEPENDENT AUDITORS’ REPORT
Nantucket Memorial Airport Commission
Nantucket Memorial Airport
Nantucket, Massachusetts
Report on the Financial Statements
We have audited the accompanying financial statements of the Nantucket Memorial Airport (the
“Airport”), an enterprise fund of the Town of Nantucket, Massachusetts, as of and for the year ended
June 30, 2014, and the related notes to the financial statements, which collectively comprise the
Airport’s basic financial statements as listed in the table of contents.
Management’s Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation of these financial statements in
accordance with accounting principles generally accepted in the United States of America; this includes
the design, implementation, and maintenance of internal control relevant to the preparation and fair
presentation of financial statements that are free from material misstatement, whether due to fraud or
error.
Auditors’ Responsibility
Our responsibility is to express opinions on these financial statements based on our audit. We
conducted our audit in accordance with auditing standards generally accepted in the United States of
America and the standards applicable to financial audits contained in Government Auditing Standards
issued by the Comptroller General of the United States. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial statements are free from
material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in
the financial statements. The procedures selected depend on the auditors’ judgment, including the
assessment of the risks of material misstatement of the financial statements, whether due to fraud or
error. In making those risk assessments the auditor considers internal control relevant to the entity’s
preparation and fair presentation of the financial statements in order to design audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness
of the entity’s internal control. Accordingly, we express no such opinion. An audit also includes
evaluating the appropriateness of accounting policies used and the reasonableness of significant
accounting estimates made by management, as well as evaluating the overall presentation of the
financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
our audit opinions.
Nantucket Memorial Airport
Page Two
Opinions
In our opinion, the financial statements referred to above present fairly, in all material respects, the
financial position of the Airport as of June 30, 2014, and the changes in financial position and, cash
flows thereof, for the year then ended in accordance with accounting principles generally accepted in the
United States of America.
Other Matters
Accounting principles generally accepted in the United States of America require that management’s
discussion and analysis, the funding and contribution progress for pension benefits and other
postemployment benefits information as listed in the table of contents, be presented to supplement the
basic financial statements. Such information, although not part of the basic financial statements, is
required by the GASB, who considers it to be an essential part of financial reporting for placing the
basic financial statements in an appropriate operational, economic or historical context.
We have applied certain limited procedures to the required supplementary information in accordance
with auditing standards generally accepted in the United States of America, which consisted of inquiries
of management about the methods of preparing the information and comparing the information for
consistency with management’s responses to our inquiries, the basic financial statements, and other
knowledge we obtained during our audit of the basic financial statements. We do not express an
opinion or provide any assurance on the information because the limited procedures do not provide us
with sufficient evidence to express an opinion or provide any assurance.
Other Reporting Required By Government Auditing Standards
In accordance with Government Auditing Standards, we have also issued a report dated December 22,
2014 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. That report was issued in conjunction with the audit of the Airport,
which is an enterprise fund of the Town of Nantucket, Massachusetts. 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 in considering the Town’s internal control over financial reporting and compliance.
Roselli, Clark & Associates
Certified Public Accountants
Woburn, Massachusetts
December 22, 2014
MANAGEMENT’S DISCUSSION AND ANALYSIS
Our discussion and analysis of the Nantucket Memorial Airport’s (the “Airport”) financial performance
provides an overview of the Airport’s financial activities for the fiscal year ended June 30, 2014. The
Airport is an enterprise fund of the Town of Nantucket, Massachusetts (the “Town”). We encourage
readers to consider the information presented here in conjunction with their review of the basic financial
statements, notes to the basic financial statements and required supplementary information.
FINANCIAL HIGHLIGHTS
The assets of the Airport exceeded its liabilities at the close of the most recent fiscal year by
$53,765,299 (total net position).
The Airport’s total net position at June 30, 2014 decreased $1,023,794, or 1.9%, from June 30,
2013. A one-time master plan expense of $704,116 that was charged to the Airport’s capital
project account as maintenance and non-cash depreciation charges of $2,391,192 contributed to
this decrease.
The Airport’s unrestricted net assets total at June 30, 2014 was $4,516,768, which is
approximately 30 % of its fiscal year 2014 operating expenses.
The Airport’s general obligation bonds increased to $12,134,000 at June 30, 2014 from
$9,235,000 at June 30, 2013 as fiscal year 2014 new issuances of $3,664,000 exceeded
scheduled principal repayments of $765,000. Proceeds from new issuances were used to
refinance $3,662,385 in bond anticipation notes that were previously outstanding.
OVERVIEW OF THE FINANCIAL STATEMENTS
This report consists of two parts: management’s discussion and analysis and the basic financial
statements. The financial statements also include notes that explain information in the financial
statements in more detail. The Airport is an enterprise fund of the Town. Accordingly, the financial
statements are presented using the economic resources measurement focus and the accrual basis of
accounting. Enterprise fund statements offer short-term and long-term financial information about the
activities and operations of the Airport. These statements are presented in a manner similar to a private
business.
The statement of net position presents information on all of the Airport’s assets and deferred outflows of
resources and its liabilities and deferred inflows of resources, with the difference between the two
reported as net position. Over time, increases or decreases in net position may serve as a useful
indicator of whether the financial condition of the Airport is improving or deteriorating.
The statement of revenues, expenses and changes in net position presents information showing how the
Airport’s net position changed during the most recent fiscal year. All changes in net position 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 receivables and earned but unused
vacation leave.)
The statement of cash flows presents information on the Airport’s cash receipts, cash payments and
changes in cash resulting from operations, investments and financing activities.
FINANCIAL ANALYSIS
The following represents the condensed comparative financial data for the Airport for each of the years
ended June 30, 2014 and 2013:
June 30,June 30,
2014 2013
Assets
Current assets 8,311,013$ 8,776,192$
Capital assets, net 62,625,138 63,436,995
Total assets 70,936,151 72,213,187
Liabilities
Current liabilities 3,367,232 6,585,362
Noncurrent liabilities 13,803,620 10,838,732
Total liabilities 17,170,852 17,424,094
Net Position
Invested in capital assets, net 49,248,531 49,266,997
Unrestricted 4,516,768 5,522,096
Net Position 53,765,299$ 54,789,093$
2014 2013
Revenues:
Charges for services 12,761,708$ 11,824,972$
Operating grants 91,000 -
Total revenues 12,852,708 11,824,972
Expenses:
Operating expenses 11,944,071 11,769,432
Maintenance 704,116 -
Depreciation expense 2,391,192 2,337,481
Provision for bad debts - 230,890
Total expenses 15,039,379 14,337,803
Nonoperating revenues, net (530,030) (382,030)
Transfers (out) in, net (24,498) 954,667
Capital contributions 1,717,405 993,688
Change in net position (1,023,794) (946,506)
Net position - beginning of year (a)54,789,093 55,735,599
Net position - end of year 53,765,299$ 54,789,093$
(a) As restated. See Note E.
Year Ended June 30,
Changes in Net Position
Net Position
As noted earlier, net position may serve over time as a useful indicator of the Airport’s financial
condition. In the case of the Airport, assets and deferred outflows of resources exceeded liabilities and
deferred inflows of resources by $53,765,299 at June 30, 2014.
The Airport’s net position is categorized as either unrestricted or invested in capital assets, net. The vast
majority of the Airport’s net position is classified as invested in capital assets, net. This includes the
historical cost or donated value of land, buildings, infrastructure, vehicles, machinery and equipment
less any related debt used to acquire those assets outstanding at year end. The Airport uses these assets
to serve its customers and consequently these assets are not available for future spending. Although the
Airport’s investment in its 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.
Unrestricted net position totaled $4,474,700 at June 30, 2014 and may be used by the Airport to meet its
future obligations, subject to statutory restrictions. Unrestricted net position decreased $1,005,328 in
fiscal year 2014 primarily as a result of the Airport’s loss from operations.
The Airport’s operations are subject to annual appropriations by Town Meeting. Statutory accounting
differs greatly from accounting generally accepted in the United States of America, or GAAP. On a
statutory basis, the Airport reported net operating income of $2,500,599. The primary contributors to
the difference between the Airport’s statutory operating income and its decrease in net position (i.e., net
loss) on a GAAP basis include:
Statutory net income was strong as activity remained robust due to the Town’s strong tourism industry.
The following is a comparison of the major transaction types for calendar year 2013 and 2012:
Calendar year
2013 2012
Number of enplanements 174,129 178,303
Number of tower operations 119,976 126,898
Gallons of fuel sold 1,194,978 1,164,958
Net income on a statutory basis 2,500,599 $
Adjustments to convert statutory records to GAAP:
Proceeds from bond issuances (3,664,000)
Repayment of bonds 765,000
Depreciation expense (2,391,179)
Capital additions 1,982,087
Asset impairment (402,756)
Revenue recognition 212,400
Other postemployment benefits (239,948)
Other items 214,003
Total adjustments to statutory net income (3,524,393)
Decrease in net position on a GAAP basis (1,023,794) $
CAPITAL ASSET AND DEBT ADMINISTRATION
The Airport’s capital assets, net of accumulated depreciation totaled $62,625,138 at June 30, 2014. This
was $811,857 below the June 30, 2013 balance as fiscal year 2014 depreciation expense exceeded
capital additions. The Airport completed an internal analysis of its capital assets and, as a result of this
analysis, (i) disposed of $794,019 in fully depreciated capital assets, (ii) recorded an asset impairment of
$402,756 related to certain construction in-process at June 30, 2013 that were abandoned by the Airport
in fiscal year 2014 and (iii) recorded an additional $834,262 in net carrying value of previously
uncapitalized construction in-process. The $834,262 adjustment was reported as a restatement to the
Airport’s net position at June 30, 2013. Note E to the financial statements presents a detailed analysis of
the Airport’s capital assets, net.
General obligations bonds payable, net of unamortized bond premiums, totaled $12,134,000 at June 30,
2014. In fiscal year 2014, the Airport received $3,664,000 in proceeds from the sale of general
obligation bonds and made scheduled principal repayments of $765,000 on its general obligation bonds.
In addition, the Airport retired $3,662,895 in bond anticipation notes in fiscal year 2014, net. Notes G
and H to the financial statements present detailed analyses of long-term and short-term debt.
REQUEST FOR INFORMATION
This financial report is designed to provide a general overview of the Airport’s finances for all those
with an interest in its finances. Questions concerning any of the information provided in this report or
requests for additional financial information should be addressed to the Nantucket Memorial Airport, 14
Airport Road, Nantucket, Massachusetts 02554 or to the Town of Nantucket’s Finance Department, 16
Broad Street, Nantucket, Massachusetts, 02554.
NANTUCKET MEMORIAL AIRPORT
AN ENTERPRISE FUND OF THE TOWN OF NANTUCKET, MASSACHUSETTS
STATEMENT OF NET POSITION
JUNE 30, 2014
Assets:
Current assets:
Cash and cash equivalents 6,733,061$
Trade receivables, net of allowance for doubtful accounts of $90,000 784,861
Intergovernmental receivables 422,272
Inventory 370,819
Total current assets 8,311,013
Noncurrent assets:
Nondepreciable capital assets 8,605,260
Capital assets, net of accumulated depreciation 54,019,878
Total noncurrent assets 62,625,138
Total Assets 70,936,151
Deferred outflows of resources -
Liabilities:
Current liabilities:
Warrants payable 784,004
Accrued payroll 86,714
Accrued interest 56,011
Security deposits 380,977
Notes payable 1,001,000
Bonds payable 834,000
Unamortized bond premium 28,431
Compensated absences 196,095
Total current liabilities 3,367,232
Noncurrent liabilities:
Bonds payable 11,300,000
Unamortized bond premium 213,176
Compensated absences 196,094
Other postemployment benefits 2,094,350
Total noncurrent liabilities 13,803,620
Total Liabilities 17,170,852
Deferred inflows of resources -
Net Position:
Invested in capital assets, net of related debt 49,248,531
Unrestricted net assets 4,516,768
Total Net Position 53,765,299$
See accompanying notes to basic financial statements.
NANTUCKET MEMORIAL AIRPORT
AN ENTERPRISE FUND OF THE TOWN OF NANTUCKET, MASSACHUSETTS
STATEMENT OF REVENUES, EXPENSES AND CHANGES IN NET POSITION
YEAR ENDED JUNE 30, 2014
Operating Revenues:
Charges for services and other miscellaneous revenues 12,761,708$
Operating grants 91,000
Total Operating Revenues 12,852,708
Operating Expenses:
Operating expenses 11,944,071
Maintenance 704,116
Depreciation expense 2,391,192
Total Operating Expenses 15,039,379
Operating Loss (2,186,671)
Nonoperating Revenues:
Investment income 22,789
Interest expense (552,819)
Total Nonoperating Revenues (530,030)
Income (Loss) Before Capital Contributions and Transfers (2,716,701)
Capital Contributions:
Capital grants 1,717,405
Transfers:
Transfers in 304,598
Transfers out (329,096)
Net Transfers (24,498)
Change in Net Position (1,023,794)
Net Position - Beginning of year (as restated - see Note E)54,789,093
Net Position - End of year 53,765,299$
See accompanying notes to basic financial statements.
NANTUCKET MEMORIAL AIRPORT
AN ENTERPRISE FUND OF THE TOWN OF NANTUCKET, MASSACHUSETTS
STATEMENT OF CASH FLOWS
YEAR ENDED JUNE 30, 2014
Cash Flows from Operating Activities:
Receipts from customers and users 13,021,757$
Payments to vendors (7,701,414)
Payments for salaries, wages and related employee benefits (4,270,173)
Net cash used for operating activities 1,050,170
Cash Flows from Noncapital Financing Activities:
Intergovernmental grants for operations 15,713
Interfund payments (23,122)
Transfers out, net (24,498)
Net cash provided by capital and related financing activities (31,907)
Cash Flows from Capital and Related Financing Activities:
Proceeds from the issuance of bonds and notes payable 3,664,000
Intergovernmental grants for construction 1,385,133
Acquisition and construction of capital assets (1,982,091)
Proceeds from bond anticipation notes 1,001,000
Repayments of bond anticipation notes (4,663,895)
Principal payments on bonds and notes payable (765,000)
Interest payments on bonds and notes payable (592,138)
Net cash used for capital and related financing activities (1,952,991)
Cash Flows from Investing Activities:
Investment income 22,789
Net cash provided by investing activities 22,789
Net Decrease in Cash and Cash Equivalents (911,939)
Cash and Cash Equivalents:
Beginning of year 7,645,000
End of year 6,733,061$
Reconciliation of Operating Income to Net Cash Provided By
Operating Activities:
Operating loss (2,186,671)$
Depreciation and amortization 2,391,193
Changes in assets and liabilities:
Accounts receivable 169,049
Inventory 74,010
Warrants payable and accrued expenses 249,579
Compensated absences and other postemployment benefits 329,111
Security deposits 23,899
Net cash used for operating activities 1,050,170$
See accompanying notes to basic financial statements.
NANTUCKET MEMORIAL AIRPORT
AN ENTERPRISE FUND OF THE TOWN OF NANTUCKET, MASSACHUSETTS
NOTES TO THE FINANCIAL STATEMENTS
AS OF AND FOR THE YEAR ENDED JUNE 30, 2014
NOTE A – REPORTING ENTITY
The Nantucket Memorial Airport (the “Airport”) is an enterprise fund of the Town of Nantucket,
Massachusetts (the “Town”). The Airport operated three runways and is the second busiest airport in
the Commonwealth of Massachusetts. The Airport’s operations are governed by the Nantucket
Memorial Airport Commission (the “Commission”), which is a five-person board appointed by the
Town’s Board of Selectmen.
NOTE B – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accounting policies of the Airport conform to accounting principles generally accepted in the
United States of America, or GAAP, as applicable to governmental units. The Airport’s financial
statements are not intended and do not present fairly the financial position of the Town.
Following are the significant accounting and reporting policies of the Airport:
Basis of Presentation – The Airport’s financial statements are reported using the economic resources
measurement focus and the accrual basis of accounting as specified by the Governmental Accounting
Standards Board’s (“GASB”) requirements for an enterprise fund. The Airport’s operations are
accounted for as an enterprise fund, which is a proprietary fund type. Proprietary funds distinguish
operating revenues and expenses from nonoperating revenues and expenses. Operating revenues and
expenses result from the day-to-day operation of the Airport. All other revenues and expenses are
reported as nonoperating revenues and expenses.
Use of Estimates – 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, disclosure for contingent assets and liabilities at the date of the basic financial statements,
and the reported amounts of the revenues and expenses during the fiscal year. Actual results could
vary from estimates that were used.
Revenue Recognition – Revenues from the Airport’s operations are recorded when earned, regardless
of the timing of related cash flows. Grants are recognized as revenue as soon as all eligibility
requirements imposed by the provider have been met.
Fair Value of Financial Instruments – The carrying amount of cash and cash equivalents, accounts
receivable and warrants payable approximates fair value due to the short-term nature of these items.
Taxes – The Airport is exempt from all federal and state income taxes and local property taxes.
Cash and Cash Equivalents – Cash and cash equivalents include cash on hand, demand deposits and
short-term investments with original maturities of three months or less. Investments are carried at fair
value.
Accounts Receivable – Accounts receivable are presented net of the allowance for doubtful accounts.
An allowance for uncollectible accounts is maintained for estimated losses resulting from the
Airport’s inability to collect payments from customers. This allowance is established using estimates
based on factors such as the composition of the accounts receivable aging, historical bad debts,
changes in payment patterns, changes to customer creditworthiness and current economic trends.
Inventory – Inventory is stated at the lower of cost or market, with cost being determined on the first-
in, first-out method. Inventory consists of aviation fuel at June 30, 2014.
Capital Assets – Capital assets are recorded at historical cost or estimated historical cost if purchased
or constructed. All purchases and construction costs in excess of $10,000 and with useful lives
exceeding one year are capitalized at the date of acquisition or construction. The costs of normal
repairs and maintenance that do not add to the value of the asset or materially extend assets lives are
not capitalized.
Capital assets (excluding land) are depreciated by the Airport on a straight-line-basis. The estimated
useful lives (in years) of capital assets by major asset class are as follows:
Infrastructure 40 to 70
Buildings 33 to 50
Vehicles 5
Machinery and equipment 10 to 15
Furniture, fixtures and computer equipment 5 to 10
Deferred Outflows/Inflows of Resources – In addition to assets, the statement of financial position
will sometimes report a separate section for deferred outflows of resources. This separate financial
statement element, deferred outflows of resources, represents a consumption of net position that
applies to a future period(s) and so will not be recognized as an outflow of resources
(expense/expenditure) until then.
In addition to liabilities, the statement of financial position will sometimes report a separate section
for deferred inflows of resources. This separate financial statement element, deferred inflows of
resources, represents an acquisition of net position that applies to a future period(s) and thus will not
be recognized as an inflow of resources (revenue) until that time.
Compensated Absences – Employees earn vacation and sick time as they provide services to the
Airport. Employees may accumulate (subject to certain limitations) unused sick time earned and,
upon retirement, termination or death, be compensated for unused portions of the time earned.
Unused vacation time may be carried for six months, then, it reverts to a use-it or lose-it policy. These
vested and accumulated benefits are reported as a liability in these financial statements.
NOTE C – CASH AND CASH EQUIVALENTS
As required by state law, the Airport’s cash is in the control of the Town’s treasurer. State laws and
regulations require the treasurer to invest funds only in pre-approved investment instruments, which
include, but are not necessarily limited to, bank deposits, money markets, certificates of deposit, U.S.
obligations, repurchase agreements, and the State Treasurer’s investment pool (“the Pool”). In
addition, the statutes impose various limitations on the amount and length of investments and
deposits. Repurchase agreements cannot be for a period of over ninety days, and the underlying
security must be a United States obligation.
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
At June 30, 2014, the Airport maintained $766,529 in investments that it classified as cash
equivalents in these financial statements. Short-term investments consisted of $653,030 in the
MMDT and $113,499 in repurchase agreements.
The Board of Selectmen has adopted policies related to risk for the Town, its enterprise funds, all
departments and the County of Nantucket (the “County”). These may be reviewed at the Town’s
website, under the Finance Department. Those policies that apply to the Airport are summarized
below:
Custodial Credit Risk: Deposits and Investments - In the case of deposits, this is the risk that in the
event of a bank failure, the government’s deposits may not be returned to it. The Town’s current
deposit requires that the Treasurer review each bank doing business with the Town on a quarterly
basis. The policy does not restrict the value of uninsured or uncollateralized investments held at any
time. As of June 30, 2014, all of the Airport’s deposits with carrying value of $5,966,532 and bank
value of $5,604,615 were either insured or collateralized.
In the case of investments, this is the risk that in the event of the invested party not being able to
provide required payments to investors, ceasing to exist, or filing of bankruptcy, the Town may not be
able to recover the full amount of its principal investment and/or investment earnings. The Town’s
current policy requires all securities not held directly by the Treasurer must be held by a third party
custodian approved by the Treasurer in the Town/County’s name and tax identification number.
Concentration of Credit Risk – The Town does not place a limit on the amount that may be invested
in any one issuer. All of the Airport’s investments were in the form of pooled investments with the
MMDT and repurchase agreements. Approximately 85% of the Airport’s investments were in the
MMDT and 15% in repurchase agreements.
Interest Rate Risk – The Town limits investment maturities as a means of managing its exposure to
fair value losses arising from increasing interest rates. The policy limits investments of operating
funds to one year or less and limits investment maturities of trust funds and other special funds to
periods no longer that seven years, maintaining an average maturity no greater than three years for the
investment portfolio.
Credit Risk – The Town restricts the investment of operating funds to U.S. Treasury or Agency
securities which carry “AAA” ratings. The Airport’s current investments are short-term and
classified as cash equivalents.
NOTE D – ACCOUNTS RECEIVABLE
Accounts receivable at June 30, 2014 consisted of the following:
NOTE E – CAPITAL ASSETS
Capital asset activity for the Airport for the fiscal year ended June 30, 2014 was as follows:
The Airport conducted an evaluation of its capital assets in fiscal year 2014. As a result of this
evaluation, the Airport (i) disposed of $794,019 in fully depreciated capital assets, (ii) recorded an asset
impairment of $402,756 related to certain construction in-process at June 30, 2013 that were abandoned
by the Airport in fiscal year 2014 and (iii) recorded an additional $834,262 in net carrying value of
previously uncapitalized construction in-process. The $834,262 adjustment was reported as a restatement
to the Airport’s net position at June 30, 2013.
Certain reclassifications have been made within the beginning balances in the individual asset categories
reported above and those reported in the Airport’s June 30, 2013 financial statements. Reclassifications
were made as a result of an internal analysis of Airport capital assets.
Gross
Amount
Allowance for
Uncollectible
Accounts
Net
Amount
Airport fees 874,890$ (90,000)$ 784,890$
Intergovernmental 422,272 - 422,272
1,297,162$ (90,000)$ 1,207,162$
Beginning Ending
Balance Increases Decreases Balance
Capital assets not being depreciated:
Land 2,736,587$ -$ -$ 2,736,587$
Construction in process (a)7,708,000 1,325,080 (3,164,407) 5,868,673
Total capital assets not being depreciated 10,444,587 1,325,080 (3,164,407) 8,605,260
Capital assets being depreciated:
Infrastructure 31,527,938 3,413,448 - 34,941,386
Buildings and improvements 45,745,494 - - 45,745,494
Vehicles 3,620,984 - (400,485) 3,220,499
Machinery and equipment 1,714,557 5,215 (393,534) 1,326,238
Total capital assets being depreciated 82,608,973 3,418,663 (794,019) 85,233,617
Less accumulated depreciation (29,616,565) (2,391,193) 794,019 (31,213,739)
Total capital assets being depreciated, net 52,992,408 1,027,470 - 54,019,878
Capital assets, net 63,436,995$ 2,352,550$ (3,164,407)$ 62,625,138$
(a) As restated; see below.
NOTE F – INTERFUND RECEIVABLES, PAYABLES AND TRANSFERS
Interfund transfers for the fiscal year ended June 30, 2014 were as follows:
NOTE G – TEMPORARY DEBT PLAN
The Town is authorized to borrow on behalf of the Airport on a temporary basis to fund the
following:
Current Operating Costs – Prior to the collection of revenues, expenditures may be financed through
the issuance of tax anticipation notes (“TANS”) or revenue anticipation notes (“RANS”).
Capital Projects and Other Approved Costs – Projects may be temporarily funded through the
issuance of bond anticipation notes (“BANS”) or grant anticipation notes (“GANS”). In certain
cases, prior to the issuance of these temporary notes, the governing body must take the necessary
legal steps to authorize the issuance of the general obligation bonds. Temporary notes may not
exceed the aggregate amount of bonds authorized or the grant award amount.
Details related to temporary debt activity for the fiscal year ended June 30, 2014 was as follows:
Temporary notes are general obligations of the Town and carry maturity dates not in excess of
one year and are interest bearing and will be paid through future issuance of general obligation
bonds. The BANS were issued primarily to finance costs related to the Airport’s general
administration building construction, runway improvements and an Airport Master Plan update.
Nantucket Town
Memorial General
Transfers Out Airport Fund Total
General fund 304,598$ -$ 304,598$ (1)
Nantucket Memorial Airport - 329,096 329,096 (2)
304,598$ 329,096$ 633,694$
(1) Transfer from Town general fund for Airport operations.
(2) Transfer of indirect costs by Airport to Town.
Transfers In
Balance Balance
Interest Maturity July 1, June 30,
Type Rate Date 2013 Additions Retirements Rollovers 2014
BAN 1.25% matured 4,663,895$ -$ (4,047,895)$ (616,000)$ -$
BAN 1.00% 6/5/15 - 385,000 - 616,000 1,001,000
4,663,895$ 385,000$ (4,047,895)$ -$ 1,001,000$
NOTE H – LONG-TERM OBLIGATIONS
The following reflects the activity in the Airport’s long-term liability accounts during the fiscal year
ended June 30, 2014:
Bond and Note Indebtedness – The Airport, through the Town, issues general obligation bonds and
notes to provide funds for the acquisition and construction of major capital facilities. State law
permits the Town, under the provisions of Chapter 44, Section 10, to authorize indebtedness up to a
limit of five percent of its equalized valuation. Debt issued in accordance with this section of the law
is designated as being “inside the debt limit.” In addition, the Town may authorize debt in excess of
that limit for specific purposes. Such debt, when issued, is designated as being “outside the debt
limit.”
General obligation bonds outstanding at June 30, 2014 were as follows:
Beginning Ending Due within
Description of Issue Balance Additions Deletions Balance one year
General obligation bonds and notes payable 9,235,000$ 3,664,000$ (765,000)$ 12,134,000$ 834,000$
Unamortized premiums 271,103 - (29,496) 241,607 28,431
Compensated absences 303,026 240,676 (151,513) 392,189 196,095
Other postemployment benefits 1,854,402 385,890 (145,942) 2,094,350 -
Total 11,663,531$ 4,290,566$ (1,091,951)$ 14,862,146$ 1,058,526$
Outstanding Outstanding
Interest at June 30, Maturities and at June 30,
Description Rate 2013 Additions Retirements 2014
General obligation bonds - December 2003 2.25 - 5.00% 35,000$ -$ (35,000)$ -$
General obligation bonds - October 2004 2.25 - 4.00% 190,000 - (190,000) -
General obligation bonds - November 2005 3.75 - 5.00% 60,000 - (20,000) 40,000
General obligation bonds - February 2008 3.00 - 5.00% 300,000 - (75,000) 225,000
General obligation bonds - February 2011 2.00 - 5.00% 4,720,000 - (150,000) 4,570,000
General obligation bonds - June 2012 2.00 - 5.00% 2,605,000 - (145,000) 2,460,000
General obligation bonds - June 2013 2.00 - 3.00% 1,325,000 - (150,000) 1,175,000
General obligation bonds - June 2014 2.00 - 3.35%- 3,664,000 - 3,664,000
9,235,000 3,664,000 (765,000) 12,134,000
Unamortized premiums on June 2012 bonds 271,103 - (29,496) 241,607
9,506,103$ 3,664,000$ (794,496)$ 12,375,607$
Future Debt Payoff – Payments on general long-term debt obligation bonds due in future years are as
follows:
At June 30, 2014, the Airport had $5,911,000 in authorized and unissued debt.
NOTE I – RETIREMENT SYSTEM
The Airport contributes to the Barnstable County Contributory Retirement System (the “Retirement
System”), a cost-sharing, multiple-employer defined benefit pension plan administered by the
Barnstable County Retirement Board. A stand-alone financial report for the year ended December
31, 2013, was issued and is available at the Barnstable County Retirement Office, 750 Attucks Lane,
Hyannis, Massachusetts 02601.
Substantially all Airport employees participate in the Retirement System. The members of the
Retirement System do not participate in the Social Security system. Benefits paid under the
Retirement System, referred to as “retirement allowances,” include both an annuity portion, funded
principally from amounts contributed by the participants, and a pension portion, funded by the
Airport.
Benefits – Massachusetts contributory retirement system benefits are uniform from system to system.
For employees with service dates beginning before April 2, 2012, the Retirement System provides for
retirement allowance benefits up to a maximum of 80% of a participant’s highest consecutive three-
year average annual rate of regular compensation. For those employees who began their service after
April 2, 2012, the Retirement System provides for retirement allowance benefits up to a maximum of
80% of a participant’s highest consecutive five-year average annual rate of regular compensation.
Benefit payments are based upon a participant’s age, length of creditable service, level of
compensation and group classification.
The retirement allowance consists of two parts – an annuity and a pension. Participants’ accumulated
total deductions and portions of the interest they generate constitute the annuity. The differential
between the total retirement benefit and annuity is the pension.
Year Ending
June 30,Principal Interest Total
2015 834,000$ 420,568$ 1,254,568$
2016 820,000 401,243 1,221,243
2017 800,000 379,498 1,179,498
2018 720,000 356,662 1,076,662
2019 705,000 335,612 1,040,612
2020 - 2024 2,915,000 1,349,163 4,264,163
2025 - 2029 2,455,000 851,118 3,306,118
2030 - 2034 2,325,000 401,633 2,726,633
2035 - 2036 560,000 40,850 600,850
Total 12,134,000$ 4,536,347$ 16,670,347$
From time to time, the Legislature may grant cost-of-living increases to benefits being paid to
retirees. These increases are expressed as a percentage of the retiree’s allowance subject to a
maximum dollar increase. Since 1982, cost-of-living increases granted to members of local
retirement systems have been the financial responsibility of the State. However, beginning in 1998,
the funding of future cost-of-living amounts became the responsibility of the participating units.
These units are responsible for the full cost-of-living amounts for all new retirees beginning that year,
and for any additional cost-of-living increases granted to individuals who retired before 1998. The
State shall continue to fund the cost-of-living amounts granted to retirees prior to 1998 for the
duration of their selected retirement option.
Participants who resign from service and who are not eligible to receive a retirement allowance or are
under the age of 55 are entitled to request a refund of their accumulated total contributions. In
addition, depending upon the number of years of creditable service, such employees are entitled to
receive 0%, 50% or 100% of the regular interest that has accrued upon those contributions. A vested
employee under the age of 55 who elects to leave his accumulation on deposit may apply for benefits
upon reaching that age. Survivor benefits are extended to eligible beneficiaries of participants whose
death occurs to or following retirement.
The Retirement System may be amended or terminated in whole or in part at any time by the
Massachusetts Legislature, provided that no such modification, amendment or termination shall be
made that would deprive a current member of superannuation pension rights or benefits provided
under applicable laws of Massachusetts, if such member has paid the stipulated contributions
specified in sections or provisions of such laws.
Normal Retirement – Generally, normal retirement occurs between ages 65 and 67. However,
participants may retire after twenty years of service or at any time after attaining age 55, if hired prior
to April 2, 2012 or at any time after attaining age 60 if hired on or after April 2, 2012. Participants
with hire dates subsequent to January 1, 1978 must have a minimum of ten years’ creditable service
in order to retire at age 55. Participants become vested after ten years of service. Benefits
commencing before age 65 are provided at a reduced rate. Members working in certain occupations
may retire with full benefits earlier than age 65.
Disability Retirement – The Retirement System provides for both an ordinary disability retirement,
where a participant is permanently incapacitated from a cause unrelated to employment, and an
accidental disability retirement, where the disability is the result of an injury or illness received or
aggravated in the performance of duty. The amount of benefits to be received in such cases is
dependent upon several factors, including the age at which the disability retirement occurs, the years
of service, average compensation and veteran status.
Funding Status and Progress – Barnstable County elected provisions of Chapter 32, Section 22D of
Massachusetts General Laws, which require that a funding schedule be established to fully fund the
accrued liability by June 30, 2040. Under provisions of this law, participating employers are assessed
their share of the total retirement cost based on the entry age, normal actuarial cost method.
Amortization of the unfunded actuarial liability is determined using the level dollar amortization
method over a 19-year period. Currently, Barnstable County’s funding schedule is calculated to fully
fund the accrued liability by June 30, 2038.
Contribution Requirements and Contributions Made – The Retirement System’s funding policies
have been established by Chapter 32 of the Massachusetts General Laws. The annuity portion of the
retirement allowance is funded by employees who contribute a percentage of their regular
compensation. Employees whose creditable service began prior to January 1, 1975, contribute 5% of
their base salary or wage; those whose service date is subsequent to January 1, 1975 and prior to
January 1, 1984, contribute 7%; those whose service date is subsequent to January 1, 1984, and prior
to July 1, 1996, contribute 8%, and those whose service date is subsequent to July 1, 1996, contribute
9%. Additionally, employees hired after January 1979 contribute an additional 2% on earnings in
excess of $30,000.
The total Airport contributions to the Retirement System for the years ended June 30, 2014, 2013 and
2012 were $456,485, $511,951 and $485,624, respectively. This equaled its required contribution for
each fiscal year. At June 30, 2014, the Airport did not have a net pension obligation.
NOTE J – OTHER POSTEMPLOYMENT BENEFITS
In addition to the pension benefits previously described, the Airport provides health and life insurance
benefits to current and future retirees, their dependents and beneficiaries (the “Plan”) in accordance
with Massachusetts General Law Chapter 32B. Specific benefit provisions and contribution rates are
established by collective bargaining agreements, state law, and Town ordinance. All benefits are
provided through the Town’s insurance program. The Plan does not issue a stand-alone financial
report since there are no assets legally segregated for the sole purpose of paying benefits under the
Plan. For purposes of the Plan, the Airport is a department within the Town, which had 463 active
employees and 307 retirees, beneficiaries and dependents for a total of 770.
Funding Policy – The contribution requirements of Plan members and the Airport are established
through collective bargaining agreements. Retirees contribute approximately 20% of the calculated
contribution primarily through pension benefit deductions. The remainder of the cost is funded by the
Airport. The Airport currently contributes enough money to the Plan to satisfy current obligations on
a pay-as-you-go basis. The costs of administering the Plan are paid by the Airport.
Annual OPEB Cost and Net OPEB Obligation – The Airport’s annual OPEB cost is calculated based
on the annual required contribution (“ARC”) of the employer, and actuarially determined amount that
is calculated in accordance with GASB Statement Number 45, Accounting and Financial Reporting
by Employers for Postemployment Benefits Other Than Pensions. The ARC represents a level of
funding that, if paid on an ongoing basis, is projected to cover normal cost each year and amortize
any unfunded liabilities over a period not to exceed thirty years.
The following table reflects the activity regarding the Airport’s OPEB obligation:
OPEB obligation at beginning of year $ 1,854,402
Annual required contribution 385,890
Contributions made (145,942)
OPEB obligation at end of year $ 2,094,350
Trend information regarding annual OPEB cost, the percentage of the annual OPEB cost contributed
and the net OPEB obligation is as follows:
Fiscal Year
Ending
Annual
OPEB Cost
(AOPEBC)
Percentage of
AOPEBC
Contributed
Net OPEB
Obligation
June 30, 2014 $ 385,890 38% $ 2,094,350
June 30, 2013 387,675 34% 1,854,402
June 30, 2012 412,455 40% 1,599,576
Funding Status and Funding Progress – The funded status of the Plan at June 30, 2014 for the Town,
for which the Airport is an enterprise fund, for the most recent actuarial valuation performed as of
June 30, 2012, was as follows:
Actuarial
Value of
Assets
(A)
Actuarial
Accrued
Liability (AAL)
Entry Age
Normal Cost
(B)
Unfunded
AAL
(UAAL)
(B – A)
Funded
Ratio
(A/B)
Covered
Payroll
(C)
UAAL as a
Percentage
of Covered
Payroll
((B-A)/C)
$ - $ 88,559,116 $ 88,559,116 0.0% N/A N/A
Actuarial valuations of an ongoing plan involve estimates of the value of reported amounts and
assumptions about the probability of occurrence of events into the future. Amounts determined
regarding the funded status of the Plan and the ARC of the employer are subject to continual revision
as estimates are compared to actual results and past expectations.
Methods and Assumptions – Projections of benefits for financial reporting purposes are based on the
substantive Plan and include the types of benefits provided at the time of each valuation and the
historical pattern of sharing of benefit costs between the employer and the Plan members to that point.
The actuarial methods and assumptions used include techniques that are designed to reduce short-
term volatility in actuarial accrued liabilities and the actuarial value of assets, consistent with the
long-term perspective of the calculations. The significant methods and assumptions as of the latest
valuation are as follows:
Valuation date June 30, 2012
Actuarial cost method Projected Unit Credit
Amortization method Amortization payments increasing at 4.0%
Amortization period 30 years open
Interest discount rate 4.5%
Healthcare/medical cost trend rate 8.0% decreasing by 0.5% for 6 years to an
ultimate level of 5.0% per year
NOTE K – COMMITMENTS AND CONTINGENCIES
At June 30, 2014, the Airport had open contracts totaling $6.2 million the majority of which pertained to various construction related projects at the facility.
The Airport is party to certain legal claims, which are subject to many uncertainties, and the outcome
of individual litigation matters is not always predictable with assurance. Although the amount of
liability, if any, at June 30, 2014, cannot be determined, management believes that any resulting
liability, if any, should not materially affect the basic financial statements of the Airport at June 30,
2014.
Amounts received or receivable from grantor agencies are subject to audit and adjustment by grantor
agencies, principally the federal and state governments. Any disallowed claims, including amounts
already collected, may constitute a liability of the applicable funds. The amount, if any, of
expenditures which may be disallowed by the grantor cannot be determined at this time, although the
Airport expects such amounts, if any, to be immaterial.
The Airport is subject to certain Federal arbitrage laws in accordance with long-term borrowing
agreements. Failure to comply with the rules could result in the payment of penalties. The amount of
penalties, if any, cannot be determined at this time, although the Airport expects such amounts, if any,
to be immaterial.
NOTE L – ECONOMIC DEPENDENCE
Although the Airport reported operating income of $2,500,599 on a statutory basis, when reported on
GAAP, the Airport’s operations continue to report operating losses. The operating losses for fiscal
years 2014 and 2013 were $1,065,862 and $2,440,104, respectively. The Airport is dependent in part
on intergovernmental grants from federal and state agencies as well as operating transfers from the
Town. In fiscal years 2014 and 2013, the Airport recorded $1,808,226 and $907,696 in
intergovernmental revenues, respectively. Net transfers out to the Town in fiscal year 2014 totaled
$24,498 while net transfers in from the Town totaled $954,667 in fiscal year 2013. Without the
ability to rely on these funds, the inconsistent results of activity from year to year could cause the
Airport to not generate sufficient funds from its operations to sustain operations.
NOTE M – SUBSEQUENT EVENTS
The Airport has evaluated subsequent events through December 22, 2014 which is the date the
financial statements were available to be issued.
NOTE N – IMPLEMENTATION OF GASB PRONOUNCEMENTS
Current Year Implementations
In March 2012, the GASB issued GASB Statement No. 65, Items Previously Reported as Assets and
Liabilities. This Statement establishes accounting and financial reporting standards that reclassify, as
deferred outflows of resources or deferred inflows of resources, certain items that were previously
reported as assets and liabilities and recognizes, as outflows of resources or inflows of resources,
certain items that were previously reported as assets and liabilities. This Statement also provides
other financial reporting guidance related to the impact of the financial statement elements deferred
outflows of resources and deferred inflows of resources, such as changes in the determination of the
major fund calculations and limiting the use of the term deferred in financial statement presentations.
The provisions of this Statement became effective in fiscal year 2014 and did not have a material
effect on the Airport.
In March 2012, the GASB issued GASB Statement No. 66, an amendment of GASB Statements No.
10 and No. 62. The objective of this Statement was to improve accounting and financial reporting for
a governmental financial reporting entity by resolving conflicting guidance that resulted from the
issuance of two pronouncements, Statements No. 54, Fund Balance Reporting and Governmental
Fund Type Definitions, and No. 62, Codification of Accounting and Financial Reporting Guidance
Contained in Pre-November 30, 1989 FASB and AICPA Pronouncements. The provisions of this
Statement became effective in fiscal year 2014 and did not have a material effect on the Airport.
Future Implementations
In June 2012, the GASB issued GASB Statement No. 67, Financial Reporting for Pension Plans.
This Statement replaced the requirements of Statement No. 25, Financial Reporting for Defined
Benefit Pension Plans and Note Disclosures for Defined Contribution Plans and Statement 50 as they
relate to pension plans that are administered through trusts or similar arrangements meeting certain
criteria. This Statement built upon the existing framework for financial reports of defined benefit
pension plans, which includes a statement of fiduciary net position (the amount held in a trust for
paying retirement benefits) and a statement of changes in fiduciary net position. Statement 67
enhances note disclosures and RSI for both defined benefit and defined contribution pension plans.
Statement 67 also requires the presentation of new information about annual money-weighted rates of
return in the notes to the financial statements and in 10-year RSI schedules. The provisions of this
Statement are effective beginning in fiscal year 2015. The Airport believes the adoption of this
statement will have a material impact on the financial statements.
In June 2012, the GASB issued GASB Statement No. 68, Accounting and Financial Reporting for
Pensions — an amendment of GASB Statement No. 27. Statement 68 replaced the requirements of
Statement No. 27, Accounting for Pensions by State and Local Governmental Employers and
Statement No. 50, Pension Disclosures, as they related to governments that provide pensions through
pension plans administered as trusts or similar arrangements that meet certain criteria. Statement 68
required governments providing defined benefit pensions to recognize their long-term obligation for
pension benefits as a liability for the first time, and to more comprehensively and comparably
measure the annual costs of pension benefits. The Statement also enhanced accountability and
transparency through revised and new note disclosures and required supplementary information. The
GASB issued GASB Statement No. 71, Pension Transition for Contributions Made Subsequent to the
Measurement Date—an amendment of GASB Statement No. 68, in November 2013 to amend certain
provisions regarding the application of transition provisions of Statement No. 68. The provisions of
these Statements are effective beginning in fiscal year 2015. The Airport believes the adoption of this
statement will have a material impact on the financial statements.
In April 2013, the GASB issued GASB Statement No. 70, Accounting and Financial Reporting for
Nonexchange Financial Guarantees. The objective of GASB 70 is to improve accounting and
financial reporting by governments that extend and receive nonexchange financial guarantees. The
provisions of this Statement are effective for financial reporting periods beginning after June 15, 2013
(fiscal year 2015). The Airport is currently evaluating whether adoption will have a material impact
on the financial statements.
* * * * * *
NANTUCKET MEMORIAL AIRPORT
AN ENTERPRISE FUND OF THE TOWN OF NANTUCKET, MASSACHUSETTS
REQUIRED SUPPLEMENTARY INFORMATION
YEAR ENDED JUNE 30, 2014
SCHEDULES OF FUNDING PROGRESS
(Dollars are in thousands)
Barnstable County Contributory Retirement System (All Participants)
UAAL as a
Actuarial Actuarial Unfunded Percentage
Actuarial Value of Accrued AAL Funded Covered of Covered
Valuation Assets Liability (AAL)(UAAL)Ratio Payroll Payroll
Date (a)(b)(b-a)(a/b)(c)(b-a/c)
1/1/2012 651,064$ 1,173,484$ 522,420$ 55.5%239,437$ 218.2%
1/1/2010 554,877 1,030,210 475,333 53.9%234,374 202.8%
1/1/2009 520,090 966,565 446,475 53.8%249,971 178.6%
Other Postemployment Benefits
UAAL as a
Actuarial Actuarial Unfunded Percentage
Actuarial Value of Accrued AAL Funded Covered of Covered
Valuation Assets Liability (AAL)(UAAL)Ratio Payroll Payroll
Date (a)(b)(b-a)(a/b)(c)(b-a/c)
6/30/2012 -$ 5,116$ 5,116$ 0.0%N/A N/A
6/30/2010 - 5,429 5,429 0.0%N/A N/A
6/30/2009 - 8,725 8,725 0.0%N/A N/A
SCHEDULES OF CONTRIBUTION FUNDING
Pension System
Barnstable County Contributory Retirement System (All)Airport
(B / A)
Plan Annual (A)(B)Percentage
Year Ended Required Actual Percentage Actual of System Wide
December 31,Contributions Contributions Contributed Contribution Actual Contributions
2013 49,504$ 49,504$ 100.0%456$ 0.9%
2012 46,702 46,702 100.0%512 1.1%
2011 43,048 43,048 100.0%486 1.1%
Other Postemployment Benefits
Annual (A)
Year Ended Required Actual Percentage
June 30,Contributions Contributions Contributed
2014 386$ 146$ 37.8%
2013 388 133 34.3%
2012 388 167 43.0%
See accompanying independent auditor's report.