Loading...
Nantucket Memorial AirportNANTUCKET MEMORIAL AIRPORT An Enterprise Fund of the Town of Nantucket, Massachusetts Report on Examination of Basic Financial Statements Year Ended June 30, 2017 NANTUCKET MEMORIAL AIRPORT AN ENTERPRISE FUND OF THE TOWN OF NANTUCKET, MASSACHUSETTS TABLE OF CONTENTS JUNE 30, 2017 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 – 26 REQUIRED SUPPLEMENTARY INFORMATION: Schedule of the Airport’s Proportionate Share of the Net Pension Liability 27 Schedule of the Airport’s Contribution to Pension Plan 27 Schedules of Funding Progress and Contribution Funding – Other Postemployment Benefits 28 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, 2017, 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. 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, 2017, 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. Nantucket Memorial Airport Page 1 of 28 Basic Annual Financial Statements Other Matters Required Supplementary Information Accounting principles generally accepted in the United States of America require that management’s discussion and analysis, the schedules of the Airport’s proportionate share of the net pension liability and its contributions to pension plans, and the funding progress and contribution funding for other postemployment benefits information 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 Governmental Accounting Standards Board, who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management’s responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. Other Reporting Required By Government Auditing Standards In accordance with Government Auditing Standards, we have also issued a report dated October 20, 2017 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 October 20, 2017 Nantucket Memorial Airport Page 2 of 28 Basic Annual Financial Statements 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, 2017. 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 nearly $51.9 million (total net position). • The Airport’s total net position at June 30, 2017 decreased nearly $0.7 million, or 1.3%, from June 30, 2016. The Airport reported a net loss from operations of approximately $1.9 million in 2017. This operating loss was offset by over $1.2 million in capital grant intergovernmental revenues. • The Airport’s cash flows from operations totaled nearly $2.3 million in 2017 and its overall cash and cash equivalents increased nearly $2.0 million to approximately $12.4 million at June 30, 2017. • The Airport established a stabilization fund in June 2017 to assist it in funding future employment-related obligations. The Airport made an initial contribution of $200,000 into this stabilization fund in June 2017. • The Airport’s general obligation bonds, net of unamortized premiums, decreased to approximately $10.1 million at June 30, 2017 from $10.8 million at June 30, 2016. The Airport received $203,000 from long-term general obligation bonds in 2017. 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.) Nantucket Memorial Airport Page 3 of 28 Basic Annual Financial Statements 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’s net position for the years ended June 30, 2017 and 2016: 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 approximately $51.9 million at June 30, 2017. The Airport’s net position is categorized as either unrestricted or net investment in capital assets. The vast majority of the Airport’s net position is classified as net investment in capital assets. This includes the historical cost or donated value of land, buildings, infrastructure, vehicles, machinery and equipment less any related debt used to acquire those assets outstanding at year end. The Airport uses these assets to serve its customers and consequently these assets are not available for future spending. Although the Airport’s investment in its capital assets is reported net of related debt, it should be noted that the resources needed to repay this debt must be provided from other sources, since the capital assets themselves cannot be used to liquidate these liabilities. June 30,June 30, 2017 2016 Assets Current assets 13,706,922$ 11,137,737$ Capital assets, net 64,623,050 66,091,460 Total assets 78,329,972 77,229,197 Deferred Outflows of Resources Pensions 966,516 468,624 Liabilities Current liabilities 8,050,478 6,446,192 Noncurrent liabilities 19,302,932 18,697,907 Total liabilities 27,353,410 25,144,099 Deferred Inflows of Resources Pensions 85,926 - Net Position Net investment in capital assets 48,366,264 51,032,458 Unrestricted 3,490,888 1,521,264 Net Position 51,857,152$ 52,553,722$ Net Position Nantucket Memorial Airport Page 4 of 28 Basic Annual Financial Statements Unrestricted net position totaled nearly $3.5 million at June 30, 2017, which is significantly greater than the prior year. This increase was due primarily to strong operating performance, excluding the effect of depreciation expense. Unrestricted net position may be used by the Airport to meet its future obligations, subject to statutory restrictions. The following represents the condensed comparative financial data for the Airport’s changes in net position for the years ended June 30, 2017 and 2016: The Airport’s revenues increased approximately $438,000 year-over-year, due primarily to increased volume of Airport transactions. Normal operating expenses, excluding depreciation expense, were relatively consistent year-over-year. Depreciation expense (a non-cash item) increased significantly in 2017 as a significant amount of construction in-process was placed in service in 2017. 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 $844,536. The primary contributors to the difference between the Airport’s statutory operating loss and its increase in net position (i.e., net income) on a GAAP basis include: 2017 2016 Operating revenues 13,105,004$ 12,667,077$ Expenses: Operating expenses 11,147,113 11,164,653 Employee benefits 271,591 287,658 Depreciation expense 3,294,782 2,491,379 Total expenses 14,713,486 13,943,690 Nonoperating revenues, net 911,912 2,252,424 Change in net position (696,570) 975,811 Net position - beginning of year 52,553,722 51,577,911 Net position - end of year 51,857,152$ 52,553,722$ Year Ended June 30, Changes in Net Position Nantucket Memorial Airport Page 5 of 28 Basic Annual Financial Statements CAPITAL ASSET AND DEBT ADMINISTRATION The Airport’s capital assets, net of accumulated depreciation totaled over $64.6 million at June 30, 2017. This was approximately $1.5 million lower than the June 30, 2016 balance as fiscal year 2017 depreciation expense exceeded capital additions. Note E to the financial statements presents a detailed analysis of the Airport’s capital assets. General obligations bonds payable, net of unamortized premiums, totaled approximately $10.1 million at June 30, 2017, which was approximately $0.7 million lower than the balance at June 30, 2016. Notes G and H to the financial statements present detailed analyses of long-term and short-term debt. REQUEST FOR INFORMATION This financial report is designed to provide a general overview of the Airport’s finances for all those with an interest in its finances. Questions concerning any of the information provided in this report or requests for additional financial information should be addressed to the Nantucket Memorial Airport, 14 Airport Road, Nantucket, Massachusetts 02554 or to the Town of Nantucket’s Finance Department, 16 Broad Street, Nantucket, Massachusetts, 02554. Net income on a statutory basis 844,536$ Adjustments to convert statutory records to GAAP: Repayment of bonds 839,000 Depreciation expense (3,294,782) Capital additions 1,826,372 Revenue recognition (39,497) Other postemployment benefits (289,613) Pension accounting (516,187) Other items (66,399) Total adjustments to statutory net income (1,541,106) Decrease in net position on a GAAP basis (696,570)$ Nantucket Memorial Airport Page 6 of 28 Basic Annual Financial Statements NANTUCKET MEMORIAL AIRPORT AN ENTERPRISE FUND OF THE TOWN OF NANTUCKET, MASSACHUSETTS STATEMENT OF NET POSITION JUNE 30, 2017 Assets: Current assets: Cash and cash equivalents 12,375,993$ Investments 200,122 Trade receivables 374,669 Intergovernmental receivables 395,172 Inventory 360,966 Total current assets 13,706,922 Noncurrent assets: Nondepreciable capital assets 5,936,512 Capital assets, net of accumulated depreciation 58,686,538 Total noncurrent assets 64,623,050 Total Assets 78,329,972 Deferred outflows of resources Pensions 966,516 Liabilities: Current liabilities: Warrants payable 132,067 Accrued payroll 142,172 Accrued interest 86,432 Security deposits 418,794 Notes payable 6,108,213 Bonds payable 841,320 Compensated absences 321,480 Total current liabilities 8,050,478 Noncurrent liabilities: Bonds payable 9,307,253 Compensated absences 321,480 Other postemployment benefits 2,968,066 Net pension liability 6,706,133 Total noncurrent liabilities 19,302,932 Total Liabilities 27,353,410 Deferred inflows of resources Pensions 85,926 Net Position: Net investment in capital assets 48,366,264 Unrestricted net assets 3,490,888 Total Net Position 51,857,152$ See accompanying notes to basic financial statements. Nantucket Memorial Airport Page 7 of 28 Basic Annual 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, 2017 Operating Revenues: Charges for services and related revenues 13,105,004$ Operating Expenses: Operating expenses 11,147,113 Maintenance 271,591 Depreciation expense 3,294,782 Total Operating Expenses 14,713,486 Operating Loss (1,608,482) Nonoperating Revenues: Intergovernmental grants 70,458 Interest income 50,138 Interest expense (418,564) Total Nonoperating Revenues (297,968) Loss Before Capital Contributions and Transfers (1,906,450) Capital Contributions: Capital grants 1,209,880 Change in Net Position (696,570) Net Position - Beginning of year 52,553,722 Net Position - End of year 51,857,152$ See accompanying notes to basic financial statements. Nantucket Memorial Airport Page 8 of 28 Basic Annual Financial Statements NANTUCKET MEMORIAL AIRPORT AN ENTERPRISE FUND OF THE TOWN OF NANTUCKET, MASSACHUSETTS STATEMENT OF CASH FLOWS YEAR ENDED JUNE 30, 2017 Cash Flows from Operating Activities: Receipts from customers and users 13,033,756$ Payments to vendors (6,299,211) Payments for salaries, wages and related employee benefits (4,456,134) Net cash provided by operating activities 2,278,411 Cash Flows from Noncapital Financing Activities: Intergovernmental grants for operations 70,458 Net cash provided by capital and related financing activities 70,458 Cash Flows from Capital and Related Financing Activities: Proceeds from the issuance of bonds and notes payable 203,000 Principal payments on bonds and notes payable (839,000) Intergovernmental grants for construction 814,708 Acquisition and construction of capital assets (1,826,372) Proceeds from bond anticipation notes 3,802,100 Repayment of bond anticipation notes (1,942,867) Interest payments on bonds and notes payable (458,378) Net cash used in capital and related financing activities (246,809) Cash Flows from Investing Activities: Purchase of investments (200,122) Investment income 50,138 Net cash provided by (used for) investing activities (149,984) Net Increase in Cash and Cash Equivalents 1,952,076 Cash and Cash Equivalents: Beginning of year 10,423,917 End of year 12,375,993$ Reconciliation of Operating Income to Net Cash Provided By Operating Activities: Operating loss (1,608,482)$ Depreciation and amortization 3,294,782 Changes in assets and liabilities: Accounts receivable (71,415) Inventory 49,600 Warrants payable and accrued expenses (243,200) Accrued long-term employee benefits 856,959 Security deposits 167 Net cash provided by operating activities 2,278,411$ See accompanying notes to basic financial statements. Nantucket Memorial Airport Page 9 of 28 Basic Annual 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, 2017 NOTE A – REPORTING ENTITY The Nantucket Memorial Airport (the “Airport”) is an enterprise fund of the Town of Nantucket, Massachusetts (the “Town”). The Airport operates 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. 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. Nantucket Memorial Airport Page 10 of 28 Basic Annual Financial Statements Fair Value of Investments – The Airport reports its investments at fair value. When actively quoted observable prices are not available, the Airport generally uses either implied pricing from similar investments or valuation models based on net present values of estimated future cash flows (adjusted as appropriate for liquidity, credit, market and/or other risk factors). The Airport categorizes its fair value measurements within the fair value hierarchy established by GAAP. This hierarchy is based on valuation inputs used to measure the fair value of the asset or liability. The three levels of the hierarchy are as follows: • Level 1 – Inputs are quoted prices in active markets for identical investments at the measurement date. • Level 2 – Inputs (other than quoted prices included in Level 1) are either directly or indirectly observable for the investment through correlation with market data at the measurement date and for the duration of the instrument’s anticipated life. • Level 3 – Inputs reflect the Town’s best estimate of what market participants would use in pricing the investment at the measurement date. The following table presents the Airport’s investments carried at fair value on a recurring basis in the statement of net position at June 30, 2017: The Airport’s investment in negotiable certificates of deposit were classified as Level 1. Short-term investments in the Massachusetts Municipal Depository Trust, or MMDT, are measured at amortized cost. Accounts Receivable – Accounts receivable are presented net of an allowance for uncollectible 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. The Airport did not report an allowance for uncollectible accounts at June 30, 2017. 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, 2017. 6/30/17 Level 1 Level 2 Level 3 Investments by fair value level Debt securities: Certificates of deposit 200,122$ 200,122$ -$ -$ Investments measured at amortized cost MMDT 663,089 Total investments 863,211$ Fair Value Measurements Using Nantucket Memorial Airport Page 11 of 28 Basic Annual Financial Statements 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 net 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 net 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 so will not be recognized as an inflow of resources (revenue) until that time. The Airport reports deferred outflows and inflows of resources relative to pensions at June 30, 2017, as more fully described in Note I. 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, CASH EQUIVALENTS AND SHORT-TERM INVESTMENTS 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 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. Nantucket Memorial Airport Page 12 of 28 Basic Annual Financial Statements 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 policies 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. 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 or negotiable FDIC-insured certificates of deposit. 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. NOTE D – ACCOUNTS RECEIVABLE Accounts receivable at June 30, 2017 consisted of the following: Gross Amount Allowance for Uncollectible Accounts Net Amount Airport fees 231,707$ -$ 231,707$ Passenger facility charges 142,962 - 142,962 Intergovernmental 395,172 - 395,172 769,841$ -$ 769,841$ Nantucket Memorial Airport Page 13 of 28 Basic Annual Financial Statements NOTE E – CAPITAL ASSETS Capital asset activity for the Airport for the fiscal year ended June 30, 2017 was as follows: NOTE F – INTERFUND RECEIVABLES, PAYABLES AND TRANSFERS There were no interfund balances at June 30, 2017. In addition, there were no interfund transfers made during the year ended June 30, 2017. NOTE G – TEMPORARY DEBT PLAN The Airport is authorized to borrow 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. Beginning Ending Balance Increases Decreases Balance Capital assets not being depreciated: Land 2,736,587$ -$ -$ 2,736,587$ Construction in process 6,469,048 1,115,178 (4,384,301) 3,199,925 Total capital assets not being depreciated 9,205,635 1,115,178 (4,384,301) 5,936,512 Capital assets being depreciated: Infrastructure 35,607,057 28,174 - 35,635,231 Buildings and improvements 50,508,882 4,703,601 (2,941,264) 52,271,219 Vehicles 4,037,222 58,090 (223,584) 3,871,728 Machinery and equipment 2,758,464 305,630 - 3,064,094 Total capital assets being depreciated 92,911,625 5,095,495 (3,164,848) 94,842,272 Less accumulated depreciation (36,025,800) (3,294,782) 3,164,848 (36,155,734) Total capital assets being depreciated, net 56,885,825 1,800,713 - 58,686,538 Capital assets, net 66,091,460$ 2,915,891$ (4,384,301)$ 64,623,050$ Nantucket Memorial Airport Page 14 of 28 Basic Annual Financial Statements Details related to temporary debt activity for the fiscal year ended June 30, 2017 was as follows: Temporary notes are general obligations of the Airport 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 for a variety of construction projects to the Airport’s runways, aprons, terminal and security systems. 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, 2017: 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.” Balance Balance Interest Maturity July 1, June 30, Type Rate Date 2016 Additions Retirements Rollovers 2017 BAN 1.75% matured 1,106,912$ -$ (1,106,912)$ -$ -$ BAN 1.50% matured 3,142,068 - (835,955) (2,306,113) - BAN 1.50% 11/30/17 - 1,960,764 - 614,326 2,575,090 BAN 2.00% 11/30/17 - 1,841,336 - 1,691,787 3,533,123 4,248,980$ 3,802,100$ (1,942,867)$ -$ 6,108,213$ Beginning Ending Due within Description of Issue Balance Additions Deletions Balance one year General obligation bonds payable 10,624,000$ 203,000$ (839,000)$ 9,988,000$ 818,000$ Unamortized premiums 186,022 - (25,449) 160,573 23,320 Net 10,810,022 203,000 (864,449) 10,148,573 841,320 Compensated absences 591,801 347,059 (295,900) 642,960 321,480 Other postemployment benefits 2,678,453 516,601 (226,988) 2,968,066 - Net pension liability 5,777,980 2,052,289 (1,124,136) 6,706,133 - Total 19,858,256$ 3,118,949$ (2,511,473)$ 20,465,732$ 1,162,800$ Nantucket Memorial Airport Page 15 of 28 Basic Annual Financial Statements General obligation bonds outstanding at June 30, 2017 were as follows: Future Debt Payoff – Payments on general long-term debt obligation bonds due in future years are as follows: At June 30, 2017, the Airport had approximately $12.1 million in authorized and unissued debt. Outstanding Outstanding Interest at June 30, Maturities and at June 30, Description Rate 2016 Additions Retirements 2017 General obligation bonds - February 2008 3.00 - 5.00% 75,000$ -$ (75,000)$ -$ General obligation bonds - February 2011 2.00 - 5.00% 4,260,000 - (160,000) 4,100,000 General obligation bonds - June 2012 2.00 - 5.00% 2,170,000 - (145,000) 2,025,000 General obligation bonds - June 2013 2.00 - 3.00% 890,000 - (135,000) 755,000 General obligation bonds - June 2014 2.00 - 3.35% 3,085,000 - (285,000) 2,800,000 General obligation bonds - October 2015 2.00 - 3.00% 144,000 - (39,000) 105,000 General obligation bonds - November 2016 2.00 - 5.00%- 203,000 - 203,000 10,624,000 203,000 (839,000) 9,988,000 Unamortized premiums on June 2012 bonds 186,022 - (25,449) 160,573 10,810,022$ 203,000$ (864,449)$ 10,148,573$ Year Ending June 30,Principal Interest Total 2018 818,000$ 367,169$ 1,185,169$ 2019 800,000 341,087 1,141,087 2020 680,000 316,338 996,338 2021 605,000 294,362 899,362 2022 610,000 270,938 880,938 2023 - 2027 2,620,000 1,035,850 3,655,850 2028 - 2032 2,485,000 584,638 3,069,638 2033 - 2036 1,370,000 146,413 1,516,413 Total 9,988,000$ 3,356,795$ 13,344,795$ Nantucket Memorial Airport Page 16 of 28 Basic Annual Financial Statements NOTE I – RETIREMENT SYSTEM Pension Plan Description – The Airport contributes to the Barnstable County Regional Retirement System (the “Retirement System”), a cost-sharing multiple-employer defined benefit pension plan. The Retirement System was established under Chapter 32 of Massachusetts General Laws. The Retirement System is administered by the Barnstable County Retirement Board (the “Retirement Board”). Stand-alone audited financial statements for the year ended December 31, 2016 were issued and are available at the Retirement Board’s offices located at 750 Attucks Lane, Hyannis, Massachusetts 02601. Membership in the Retirement System for all employers as of January 1, 2016 (the date of the latest actuarial valuation report) was as follows: Retirees and beneficiaries currently receiving benefits 2,937 Inactive members 622 Active members 4,699 8,258 Benefit Terms – Membership in the Retirement System is mandatory for all full-time employees and non-seasonal, part-time employees who, in general, regularly work more than twenty-five hours per week. Members of the Retirement System do not participate in the federal Social Security retirement system. Massachusetts contributory retirement system benefits are uniform for each municipal retirement system. The Retirement System provides for retirement allowance benefits up to a maximum of 80% of a participant’s highest three-year or five-year average annual rate of regular compensation, depending on the participant’s date of hire. Benefit payments are based upon a participant’s age, length of creditable service, level of compensation and job classification. The most common benefits paid by the Retirement System include normal retirement, disability retirement and survivor benefits. Normal retirement generally occurs at age 65. 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. Ordinary disability retirement is where a participant is permanently incapacitated from a cause unrelated to employment. Accidental disability retirement is 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. Survivor benefits are extended to eligible beneficiaries of participants whose death occurs prior to or following retirement. Nantucket Memorial Airport Page 17 of 28 Basic Annual Financial Statements Cost-of-living adjustments granted to members of Massachusetts retirement systems granted between 1981 and 1997 and any increases in other benefits imposed by the Commonwealth during those years have been the financial responsibility of the Commonwealth. Beginning in 1998, the funding of cost- of-living amounts became the responsibility of the participating units like the Retirement System. Contributions Requirements – The Retirement System and its member employers have elected provisions of Chapter 32, Section 22D (as amended) of Massachusetts General Laws, which require that a funding schedule be established to fully fund the pension plan 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. The Airport contributed $569,586 to the Retirement System in fiscal year 2017, which equaled the actuarially-determined contribution requirement for the fiscal year. The Airport’s contributions as a percentage of covered payroll was approximately 22% in fiscal year 2017. Net Pension Liability – At June 30, 2017, the Airport reported a liability of $6,706,133 for its proportionate share of the net pension liability. The net pension liability was measured as of January 1, 2016 and the total pension liability used to calculate the net pension liability was determined by an actuarial valuation as of that date. These figures were updated by the independent actuary to December 31, 2016. There were no material changes made in this update to the actuarial assumptions (see below) nor were there any material changes to the Retirement System’s benefit terms since the actuarial valuation. The Airport’s proportion of the net pension liability is based on a projection of the Airport’s long- term share of contributions to the Retirement System relative to the projected contributions of all employers. The Airport’s proportion was approximately 0.955% at December 31, 2016 versus 0.918% at December 31, 2015. Fiduciary Net Position – The elements of the Retirement System’s basic financial statements (that is, all information about the Retirement System’s assets, deferred outflows of resources, liabilities, deferred inflows of resources and fiduciary net position) can be found in the Retirement System’s full financial statements as of and for the year ended December 31, 2016, which can be obtained by contacting the Retirement Board. The Retirement System’s fiduciary net position was determined using the accrual basis of accounting. The Retirement System’s accounting records are maintained on a calendar-year basis in accordance with the standards and procedures established by the Commonwealth’s Public Employee Retirement Administration Commission, or PERAC. Contributions from employers and employees are recognized in the period in which they become due pursuant to formal commitments, statutory or contractual requirements. Benefit payments (including refunds of employee contributions) are recorded when incurred, regardless of the timing of payment. Investments are reported at fair value; fair value is determined as the price one would receive in an orderly transaction between market participants at a measurement date. Pension Expense – The Airport recognized $1,085,773 in pension expense in the statement of activities in fiscal year 2017. Nantucket Memorial Airport Page 18 of 28 Basic Annual Financial Statements Deferred Outflows of Resources and Deferred Inflows of Resources – At June 30, 2017, the Airport reported deferred outflows of resources and deferred inflows of resources related to pensions from the following sources: The net deferred outflows of resources are expected to be recognized in the Airport’s pension expense as follows: Actuarial Valuation – The measurement of the Retirement System’s total pension liability is developed by an independent actuary. The latest actuarial valuation was performed as of January 1, 2016. The significant actuarial assumptions used in the January 1, 2016 actuarial valuation included: Actuarial cost method: Entry age normal Amortization method: Appropriations increase at 5.28% per year Remaining amortization period: 20 years from July 1, 2016 for 2002 and 2003 Early Retirement Incentives, retiree sherrifs liability and remaining unfunded liability; and 6 years from July 1, 2016 for 2010 Early Retirement Inventive Investment rate of return: 7.625%, net of pension plan investment expenses, including inflation Cost of living adjustments: 3% on the first $16,000 of benefits as of July 1, 2015, $17,000 as of July 1, 2016 and $18,000 as of July 1, 2017 Deferred Outflows Deferred Inflows of Resources of Resources Differences between expected and actual experience -$ 85,926$ Changes of assumptions 397,812 - Net difference between projected and actual earnings on pension plan investments 381,197 - Changes in proportion and differences between Airport contributions and proportionate share of contributions 187,507 - Airport contributions subsequent to the measurement date - - Total 966,516$ 85,926$ Year ended June 30, 2018 226,111$ 2019 226,111 2020 223,804 2021 106,302 2022 98,262 880,590$ Nantucket Memorial Airport Page 19 of 28 Basic Annual Financial Statements Asset valuation method: A preliminary actuarial value is first determined by taking the actuarial value of assets at the beginning of the year and adding assumed investment earnings (at the assumed actuarial rate of return) and the net new money during the year (contributions less benefit payments and administrative expenses). Twenty percent of the difference between the market value of assets as reported in the Retirement System’s Annual Statement and the preliminary actuarial value of assets is added to the preliminary actuarial value. In order for the actuarial value to not differ too significantly from the market value of assets, the final actuarial value of assets must be within 20% of the market value of assets. Projected salary increases: Varied by length of service with ultimate ranges of 4.25%, 4.50% and 4.75% for groups 1, 2 and 4, respectively Rates of retirement: Varies based upon age for general, police and fire employees Rates of disability: For general employees, it was assumed that 45% of all disabilities are ordinary (55% are service connected); for police and fire employees, 10% of all disabilities are assumed to be ordinary (90% are service connected) Mortality rates: Pre-retirement rates reflect the RP-2000 Employee Mortality Table projected generationally with Scale BB2D for 2009 Healthy retiree rates reflect the RP-2000 Healthy Annuitant Mortality Table projected generationally with Scale BB2D from 2009 Disabled retiree rates reflect the RP-2000 Healthy Annuitant Table projected generationally with Scale BB2D from 2015 The Retirement System’s investment policy in regard to the allocation of its invested assets is established by the Commonwealth’s Pension Reserves Investment Management Board. Retirement System assets are managed on a total return basis with a long-term objective of achieving a fully- funded status for the benefits provided through the pension plan. The long-term expected rate of return on pension plan investments was determined using a building- block method in which best-estimate ranges of expected future real rates of return (expected returns, net of pension plan investment expense and inflation) are developed for each major asset class. These ranges are combined to produce the long-term expected rate of return by weighting the expected future real rates of return by the target asset allocation percentage and by adding expected inflation. Best estimates of arithmetic real rates of return for each major asset class included in the pension plan's target asset allocation as of January 1, 2016 are summarized in the following table: Nantucket Memorial Airport Page 20 of 28 Basic Annual Financial Statements Discount Rate – The discount rate used to measure the total pension liability in the January 1, 2016 actuarial valuation report was 7.625%, which represents a decrease from 7.75% in the previous actuarial valuation. The projection of cash flows used to determine the discount rate assumed plan member contributions will be made at the current contribution rate and that contributions will be made at rates equal to the actuarially determined contribution rate. Based on those assumptions, the Retirement System’s fiduciary net position was projected to be available to make all projected future benefit payments of current plan members. Therefore, the long-term expected rate of return on pension plan investments was applied to all periods of projected benefit payments to determine the total pension liability. Sensitivity Analysis – The following presents the Airport’s proportionate share of the net pension liability calculated using the discount rate of 7.625% as well as the Airport’s proportionate share of the net pension liability using a discount rate that is one percentage point lower (6.625%) or one percentage point higher (8.625%) than the current rate: Long-Term Target Expected Real Asset Class Allocation Rate of Return Domestic equities 18.00% 6.44% International equities: Developed markets 16.00% 7.40% Emerging markets 6.00% 9.42% Core fixed income 13.00% 2.02% High-yield fixed income 10.00% 4.43% Real estate 10.00% 5.00% Commodities 4.00% 4.43% Hedge fund, GTAA, Risk parity 13.00% 3.75% Private equity 10.00% 10.47% Current 1% Decrease Discount Rate 1% Increase (6.625%)(7.625%)(8.625%) Airport's proportionate share of the net pension liability 8,533,626$ 6,706,133$ 5,164,732$ Nantucket Memorial Airport Page 21 of 28 Basic Annual Financial Statements NOTE J – OTHER POSTEMPLOYMENT BENEFITS In addition to the pension benefits described in Note I, 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 at June 30, 2016 (the date of the latest actuarial valuation) had 542 active employees and 372 retirees, beneficiaries and dependents for a total of 914. 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. Funding Status and Funding Progress – The funded status of the Plan at June 30, 2017 for the Town, for which the Airport is an enterprise fund and is included, for the most recent actuarial valuation performed as of June 30, 2016, was as follows: 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: Actuarial value of assets (a)1,341,213$ Actuarial accrued liability (AAL) (b)105,351,555 Unfunded AAL (b-a)104,010,342 Funded ration (a/b)1.3% Covered payroll (c)N/A UAAL as a percentage of covered payroll (b-a)/c N/A Annual required contribution (ARC)426,167$ Interest on net OPEB obligation 107,138 Adjustment to ARC (16,704) Annual OPEB cost 516,601 Contributions made (226,988) Increase in net OPEB obligation 289,613 Net OPEB obligation at beginning of year 2,678,453 Net OPEB obligation at end of year 2,968,066$ Nantucket Memorial Airport Page 22 of 28 Basic Annual Financial Statements Trend information regarding annual OPEB cost, the percentage of the annual OPEB cost contributed and the net OPEB obligation is as follows: 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. The schedules of funding progress, presented as required supplementary information, or RSI, following the notes to the financial statements, present multi-year trend information about whether the actuarial values of plan assets are increasing or decreasing over time relative to the AAL for benefits. 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: Actuarial cost method: Individual entry age normal Amortization method: Amortized increasing at 4.0% per year over 30 years at transition Remaining amortization period: 21 years at June 30, 2016 Investment rate of return: 4.00% per annum Actuarial valuation of assets: Market value Healthcare trend rates: Increasing 5% per year General inflation assumption: 2.75% per annum Annual compensation increases: 3.00% per annum Mortality rates: Pre-, post- and disabled retirement rates reflect the RP-2000 Employee Mortality Table projected generationally with Scale BB and a base year 2009 Participation in Town OPEB Plan – The Airport participates in the Plan, which is administered by the Town. The Town established an OPEB trust fund to account for funds reserve to fund this future obligation. Full financial statements of the OPEB trust fund, including RSI, can be found in the Town’s financial statements for the year ended June 30, 2017. Annual Percentage of Fiscal Year OPEB Cost AOPEBC Net OPEB Ended (AOPEBC)Contributed Obligation June 30, 2017 516,601$ 44%2,968,066$ June 30, 2016 483,272 33%2,678,453 June 30, 2015 377,913 31%2,356,377 Nantucket Memorial Airport Page 23 of 28 Basic Annual Financial Statements NOTE K – COMMITMENTS AND CONTINGENCIES At June 30, 2017, the Airport had open contracts totaling approximately $3.9 million primarily for equipment, buildings and infrastructure projects. 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, 2017, 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, 2017. 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 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 2017 and 2016, the Airport recorded $1,280,338 and $2,599,824 in intergovernmental revenues, respectively. Without these funds, the Airport would not generate sufficient funds from its operations to sustain its operations. NOTE M – SUBSEQUENT EVENTS The Airport has evaluated subsequent events through October 20, 2017 which is the date the financial statements were available to be issued. NOTE N – IMPLEMENTATION OF GASB PRONOUNCEMENTS Current Year Implementations In June 2015, the GASB issued GASB Statement No. 74, Financial Reporting for Postemployment Benefit Plans Other than Pension Plans. GASB 74’s objective was to improve the usefulness of information about postemployment benefits other than pensions included in the general purpose external financial reports of state and local governmental OPEB plans for making decisions and assessing accountability. The provisions of this Statement became effective for the Airport in fiscal year 2017. The Airport does not maintain a separate OPEB trust fund nor does it administer an OPEB plan; rather these services are performed and accounted for by the Town. Nantucket Memorial Airport Page 24 of 28 Basic Annual Financial Statements NANTUCKET MEMORIAL AIRPORT AN ENTERPRISE FUND OF THE TOWN OF NANTUCKET, MASSACHUSETTS REQUIRED SUPPLEMENTARY INFORMATION - PENSION YEAR ENDED JUNE 30, 2017 2016 2015 2014 Airport's proportion of the net pension liability (asset)0.9545%0.9180%0.9160% Airport's proportionate share of the net pension liability (asset)6,706$ 5,778$ 5,172$ Airport's covered-employee payroll 2,644$ 2,424$ 2,404$ Airport's proportionate share of the net pension liability (asset) as a percentage of its covered-employee payroll 253.6%238.4%215.1% Plan fiduciary net position as a percentage of the total pension liability 60.43%58.10%60.43% 2017 2015 Actuarially determined contribution 570$ 543$ 477$ Contributions in relation to the actuarially determined contribution 570 543 477 Contribution deficiency (excess)-$ -$ -$ Airport's covered-employee payroll 2,644$ 2,424$ 2,404$ Contributions as a percentage of covered-employee payroll 21.56%22.40%19.84% The Airport is a member of the Barnstable Country Contributory Retirement System. Stand-alone, audited financial statements may be obtained by contacting the Barnstable County Retirement System at 750 Attucks Lane, Hyannis, MA 02601. This schedule is presented to illustrate the requirement to show information for ten years. However, until a full ten-year trend is compiled, information is presented for those years in which information is available. See accompanying independent auditors' report. SCHEDULE OF THE AIRPORT'S PROPORTIONATE SHARE OF THE NET PENSION LIABILITY (dollar amounts are in thousands) SCHEDULE OF THE AIRPORT'S CONTRIBUTIONS TO PENSION PLAN (dollar amounts are in thousands) Year Ended June 30, 2016 Year Ended December 31, Nantucket Memorial Airport Page 25 of 28 Basic Annual Financial Statements NANTUCKET MEMORIAL AIRPORT AN ENTERPRISE FUND OF THE TOWN OF NANTUCKET, MASSACHUSETTS REQUIRED SUPPLEMENTARY INFORMATION - OPEB YEAR ENDED JUNE 30, 2017 SCHEDULES OF FUNDING PROGRESS (dollar amounts are in thousands) UAAL as a Actuarial Actuarial Actuarial Unfunded Percentage Valuation Value of Accrued AAL Funded Covered of Covered Date Assets Liability (AAL)(UAAL)Ratio Payroll Payroll (a)(b)(b-a)(a/b)(c)(b-a/c) 6/30/2016 82$ 6,334$ 6,334$ 1.3%N/A N/A 6/30/2014 - 4,867 4,867 0.0%N/A N/A 6/30/2012 - 5,116 5,116 0.0%N/A N/A SCHEDULES OF CONTRIBUTION FUNDING (dollar amounts are in thousands) Other Postemployment Benefits Annual Year Ended OPEB Actual Percentage June 30,Cost Contributions Contributed 2017 517$ 227$ 43.9% 2016 483 161 33.3% 2015 378 116 30.7% See accompanying independent auditors' report. Nantucket Memorial Airport Page 26 of 28 Basic Annual Financial Statements In December 2015, the GASB issued GASB Statement No. 78, Pensions Provided through Certain Multiple-Employer Defined Benefit Pension Plans. The provisions of GASB 78 were applicable to certain government pension plans that (i) are not administered as a trust by a state or local governmental pension plan, (ii) are shared between governmental and nongovernmental employees, and (iii) have not predominant state of local governmental employer. The provisions of this Statement became effective for the Airport in fiscal year 2017. The adoption of GASB No. 78 did not have a material effect on the Airport. In January 2016, the GASB issued GASB Statement No. 80, Blending Requirements for Certain Component Units. The provisions of GASB 80 apply to component units that are organized as not-for-profit corporations in which the primary government is the sole corporate member. Such component units should be included in the reporting entity financial statements using the blending method. The provisions of this Statement became effective for the Airport in fiscal year 2017. The adoption of GASB No. 80 did not have a material effect on the Airport. In March 2016, the GASB issued GASB Statement No. 82, Pension Issues – an amendment of GASB Statements No. 67, No. 68, and No. 73. The objective of GASB 73 was to address issues raised with respect to previously issued statements related to pensions. The provisions of this Statement became effective for the Airport in fiscal year 2017. The adoption of GASB No. 82 did not have a material effect on the Airport. Future Implementations In June 2015, the GASB issued GASB Statement No. 75, Accounting and Financial Reporting for Postemployment Benefits Other Than Pension Plans. GASB 75 establishes new accounting and financial reporting requirements for governments whose employees are provided with OPEB, as well as for certain nonemployer governments that have a legal obligation to provide financial support for OPEB provided to the employees of other entities. The provisions of this Statement are effective for financial reporting periods beginning after June 15, 2017 (fiscal year 2018). The Airport expects adoption will have a material impact on the financial statements. In March 2016, the GASB issued GASB Statement No. 81, Irrevocable Split-Interest Agreements. The objective of the Statement is to improve accounting and financial reporting for irrevocable split-interest agreements by providing recognition and measurement guidance for situations in which a government is a beneficiary of the agreement. The provisions of this Statement are effective for financial reporting periods beginning after December 15, 2016 (fiscal year 2018) and should be applied retroactively. The Airport is currently evaluating whether adoption will have a material impact on the financial statements. In November 2016, the GASB issued GASB Statement No. 83, Certain Asset Retirement Obligations. The objective of the Statement is to address accounting and financial reporting for certain asset retirement obligations that have legally enforceable liability associated with the retirement of a tangible capital asset. The provisions of this Statement are effective for financial reporting periods beginning after June 15, 2018 (fiscal year 2019). The Airport is currently evaluating whether adoption will have a material impact on the financial statements. In January 2017, the GASB issued GASB Statement No. 84, Fiduciary Activities. The objective of the Statement is to improve guidance regarding the identification of fiduciary activities for accounting and financial reporting purposes and how these activities should be reported. The provisions of this Statement are effective for financial reporting periods beginning after December 15, 2018 (fiscal year 2020). The Airport is currently evaluating whether adoption will Nantucket Memorial Airport Page 27 of 28 Basic Annual Financial Statements have a material impact on the financial statements. In May 2017, the GASB issued GASB Statement No. 86, Certain Debt Extinguishment Issues. The objective of the Statement is to improve consistency in accounting and financial reporting for in-substance defeasance of debt. The provisions of this Statement are effective for financial reporting periods beginning after June 15, 2017 (fiscal year 2018). The Airport is currently evaluating whether adoption will have a material impact on the financial statements. In June 2017, the GASB issued GASB Statement No. 87, Leases. This Statement redefines the manner in which long-term leases are accounted and reported. The provisions of this Statement are effective for financial reporting periods beginning after December 15, 2019 (fiscal year 2021). The Airport is currently evaluating whether adoption will have a material impact on the financial statements. ** * * * * Nantucket Memorial Airport Page 28 of 28 Basic Annual Financial Statements