CITY OF SEWARD COMPREHENSIVE ANNUAL FINANCIAL REPORT

Transcription

1 COMPREHENSIVE ANNUAL FINANCIAL REPORT Fiscal Year Ended December 31, 2012

2 COMPREHENSIVE ANNUAL FINANCIAL REPORT of the CITY OF SEWARD, ALASKA For the Fiscal Year Ended December 31, 2012 David Seaward MAYOR Jim Hunt CITY MANAGER Prepared by the Finance Department Kristin M. Erchinger, CGFM, MPA FINANCE DIRECTOR

3 INTRODUCTORY SECTION

4 Comprehensive Annual Financial Report Table of Contents PART I - INTRODUCTORY SECTION Table of Contents Letter of Transmittal Certificate of Achievement for Excellence in Financial Reporting List of Principal Officials Seward Citizens Organizational Chart PART II - FINANCIAL SECTION Exhibit Page I-VI VII-XIII XIV XV XVI Independent Auditor's Report 1-4 Management s Discussion and Analysis 5-16 Basic Financial Statements Government-wide Financial Statements: Statement of Net Position A-1 18 Statement of Activities A-2 19 Fund Financial Statements: Governmental Funds: Balance Sheet B-1 20 Reconciliation of Governmental Funds Balance Sheet to Statement of Net Position B-2 21 Statement of Revenues, Expenditures and Change in Fund Balances B-3 22 Reconciliation of the Changes in Fund Balances of Governmental Funds to Statement of Activities B-4 23 Statement of Revenues, Expenditures and Change in Fund Balance - Budget and Actual - General Fund B-5 24 Proprietary Funds: Statement of Net Position C-1 25 Statement of Revenues, Expenses and Change in Net Position C-2 26 Statement of Cash Flows C Statement of Fiduciary Net Position D-1 29 Notes to Basic Financial Statements I

5 Comprehensive Annual Financial Report Table of Contents, continued PART II - FINANCIAL SECTION, continued Exhibit Page Supplementary Information Nonmajor Governmental Funds: Combining Balance Sheet E-1 60 Combining Statement of Revenues, Expenditures and Change in Fund Balances E-2 61 Nonmajor Enterprise Funds: Combining Statement of Net Position F-1 62 Combining Statement of Revenues, Expenses and Change in Net Position F-2 63 Combining Statement of Cash Flows F Internal Service Funds: Combining Statement of Net Position G-1 66 Combining Statement of Revenues, Expenses and Change in Net Position G-2 67 Combining Statement of Cash Flows G-3 68 General Fund: Balance Sheet H Schedule of Revenues, Expenditures and Change in Fund Balance Budget and Actual H Nonmajor Special Revenue Funds: Combining Balance Sheet I-1 81 Combining Statement of Revenues, Expenditures and Change in Fund Balances (Deficit) I-2 82 Nonmajor Capital Project Funds: Combining Balance Sheet J-1 84 Combining Statement of Revenues, Expenditures and Change in Fund Balances (Deficits) J-2 85 II

6 Comprehensive Annual Financial Report Table of Contents, continued PART II - FINANCIAL SECTION, continued Exhibit Page Supplementary Information, continued Enterprise Funds: Electric: Statement of Net Position K Statement of Revenues, Expenses and Change in Net Position K-2 90 Statement of Cash Flows K-3 91 Schedule of Operating Expenses K-4 92 Schedule of Composition of Net Position K-5 93 Schedule of Electric Capital Projects K-6 94 Water: Statement of Net Position K-7 95 Statement of Revenues, Expenses and Change in Net Position K-8 96 Statement of Cash Flows K-9 97 Schedule of Composition of Net Position K Wastewater: Statement of Net Position K Statement of Revenues, Expenses and Change in Net Position K Statement of Cash Flows K Schedule of Composition of Net Position K Harbor: Statement of Net Position K Statement of Revenues, Expenses and Change in Net Position K Statement of Cash Flows K Schedule of Composition of Net Position K Schedule of Harbor Capital Projects K Seward Marine Industrial Center: Statement of Net Position K Statement of Revenues, Expenses and Change in Net Position K Statement of Cash Flows K Schedule of Composition of Net Position K III

7 Comprehensive Annual Financial Report Table of Contents, continued PART II - FINANCIAL SECTION, continued Exhibit Page Supplementary Information, continued Enterprise Funds, continued: Parking: Statement of Net Position K Statement of Revenues, Expenses and Change in Net Position K Statement of Cash Flows K Schedule of Composition of Net Position K Providence Seward Medical & Care Center: Statement of Net Position K Statement of Revenues, Expenses and Change in Net Position K Statement of Cash Flows K Internal Service Funds: Motor Pool: Statement of Net Position L Statement of Revenues, Expenses and Change in Net Position L Statement of Cash Flows L Schedule of Composition of Net Position L Compensated Annual Leave: Statement of Net Position L Statement of Revenues, Expenses and Change in Net Position L Statement of Cash Flows L Teen Council Agency Fund - Statement of Changes in Assets and Liabilities M Capital Assets: Schedule of Governmental Capital Assets N Schedule of Changes in Governmental Capital Assets N Schedule of Governmental Capital Assets by Function and Activity N Schedule of Changes in Governmental Capital Assets by Function and Activity N Schedule of Expenditures of Federal Awards O Schedule of State Financial Assistance P Note to the Schedules of Expenditures of Federal Awards and State Financial Assistance 135 IV

8 Comprehensive Annual Financial Report Table of Contents, continued PART III STATISTICAL SECTION Page Table 1 Net Assets/Position by Component 138 Table 2 Changes in Net Assets/Net Position Table 3 Fund Balances of Governmental Funds 141 Table 4 Changes in Fund Balances of Governmental Funds 142 Table 5 General Fund Revenues by Source 143 Table 6 General Fund Tax Revenues by Source 144 Table 7 Property Tax Rates 145 Table 8 Property Tax Levies and Collections 146 Table 9 Assessed and Estimated Actual Value of Taxable Property 147 Table 10 Principal Property Taxpayers 148 Table 11 Principal Taxable Sales by Line of Business 149 Table 12 Ratios of Outstanding Debt by Type 150 Table 13 Ratio of Net General Obligation Bonded Debt to Assessed Value and Net General Obligation Bonded Debt per Capita 151 Table 14 Computation of Direct and Overlapping Bonded Debt 152 Table 15 Legal Debt Margin 153 Table 16 Ratio of Annual Debt Service Expenditures for General Obligation Debt to Total General Fund Expenditures 154 Table 17 Revenue Bond Coverage Electric Enterprise Fund 155 Table 18 Revenue Bond Coverage Harbor Enterprise Fund 156 Table 19 Demographic and Economic Statistics 157 Table 20 Principal Employers 158 Table 21 Full-Time Equivalent Employees by Fund 159 Table 22 Operating Indicators by Function 160 Table 23 Capital Asset Statistics By Function 161 Table 24 Property Value, Construction, and Bank Deposits 162 Table 25 Miscellaneous Statistics 163 V

9 Comprehensive Annual Financial Report Table of Contents, continued PART IV - SINGLE AUDIT SECTION Page Independent Auditor s Report on Internal Control Over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards Independent Auditor s Report on Compliance For Each Major Federal Program and Report on Internal Control Over Compliance as Required by OMB Circular A Independent Auditor s Report on Compliance For Each Major State Program and Report on Internal Control Over Compliance as Required by the State of Alaska Audit Guide and Compliance Supplement for State Single Audits Schedule of Findings and Questioned Costs Summary Schedule of Prior Audit Findings 173 Corrective Action Plan 174 VI

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18 LIST OF PRINCIPAL OFFICIALS COUNCIL MEMBERS Term Expires David Seaward Mayor 2013 Jean Bardarson Vice Mayor 2014 Robert Valdatta Council Member 2013 Marianna Keil Council Member 2014 Vanta Shafer Council Member 2013 Ristine Casagranda Council Member 2014 Christy Terry Council Member 2013 ADMINISTRATION James Hunt Kristin Erchinger John Foutz W.C. Casey Mack Funk Tom Clemons David Squires Karin Sturdy Patty Linville City Manager Finance Director Manager of Electric Utility Public Works Director Harbormaster Chief of Police Fire Chief Parks & Recreation Director Library Director CITY CLERK Johanna Kinney City Clerk ATTORNEY Cheryl Brooking City Attorney, Wohlforth, Brecht, Cartledge & Brooking The City of Seward is a home-rule city with a council-manager form of government. Legislative powers of the City of Seward are vested in a council consisting of a mayor and six council members. The mayor and each council member are elected from the city at large. The term of office is two years. The appointed officers of the city include the city manager, city clerk, and the city attorney. The city council generally meets on the second and fourth Mondays of each month in the City Council Chambers located in the City Hall Building at 410 Adams Street in Seward, Alaska. XV

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20 FINANCIAL SECTION

21 Independent Auditor's Report Honorable Mayor and City Council City of Seward, Alaska Report on the Financial Statements We have audited the accompanying financial statements of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of City of Seward, Alaska, as of and for the year ended December 31, 2012, and the related notes to the financial statements, which collectively comprise the City s basic financial statements as listed in the table of contents. Management s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor s Responsibility Our responsibility is to express opinions on these financial statements based on our audit. We did not audit the operating account of the Providence Seward Medical and Care Center (PSMCC) which represents 6%, 0%, and 100% respectively, of the assets, net position, and revenues of the PSMCC Enterprise Fund, and 1%, 0%, and 49% respectively, of the assets, net position, and revenues of the business-type activities. Those financial statement components were audited by other auditors whose report has been furnished to us, and our opinion, insofar as it relates to the amounts included for the operating account of the Providence Seward Medical and Care Center is based solely on the report of the other auditors. 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. The financial statements of the operating account of the PSMCC were not audited in accordance with Government Auditing Standards C Street, Suite 600 * Anchorage, Alaska * (907) * Fax (907) *

22 Honorable Mayor and City Council City of Seward, Alaska An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. 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, based on our audit and the report of other auditors, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of City of Seward, Alaska as of December 31, 2012, and the respective changes in financial position and, where applicable, cash flows thereof and the respective budgetary comparison for the General Fund for the year then ended in accordance with accounting principles generally accepted in the United States of America. Emphasis of Matter As discussed in Note 1 to the financial statements, in 2012, City of Seward adopted the provisions of Governmental Accounting Standards Board (GASB) Statement number 63, Financial Reporting of Deferred Outflows of Resources, Deferred Inflows of Resources, and Net Position; and the provisions of GASB Statement number 65, Items Previously Reported as Assets and Liabilities. These provisions have been retrospectively applied to all periods presented in these financial statements. Our opinion is not modified with respect to this matter. Other Matters Required Supplementary Information Accounting principles generally accepted in the United States of America require that the management s discussion and analysis on pages 5-16 be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management s responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. 2

23 Honorable Mayor and City Council City of Seward, Alaska Supplementary and Other Information Our audit for the year ended December 31, 2012 was conducted for the purpose of forming opinions on the financial statements that collectively comprise City of Seward s basic financial statements. The accompanying Schedule of Expenditures of Federal Awards, the Schedule of State Financial Assistance, the combining and individual fund financial statements and schedules, and the introductory and statistical sections are presented for purposes of additional analysis and are not a required part of the basic financial statements. The Schedule of Expenditures of Federal Awards and the Schedule of State Financial Assistance are required by OMB Circular A-133 and the State of Alaska Audit Guide and Compliance Supplement for State Single Audits, respectively. The accompanying Schedule of Expenditures of Federal Awards, the Schedule of State Financial Assistance, and the combining and individual fund financial statements and schedules are the responsibility of management and were derived from and relate directly to the underlying accounting and other records used to prepare the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements for the year ended December 31, 2012 and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the accompanying supplementary information is fairly stated, in all material respects, in relation to the basic financial statements as a whole for the year ended December 31, The introductory and statistical sections have not been subjected to the auditing procedures applied in the audit of the basic financial statements, and accordingly, we do not express an opinion or provide any assurance on them. We also have previously audited, in accordance with auditing standards generally accepted in the United States of America, the City of Seward s basic financial statements for the year ended December 31, 2011 which are not presented with the accompanying financial statements. In our report dated June 7, 2012, we expressed unqualified opinions on the respective financial statements of the governmental activities, business-type activities, each major fund, and the aggregate remaining fund information. That audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the City of Seward s financial statements as a whole. The individual fund financial statements and schedules related to the December 31, 2011 financial statements are presented for purposes of additional analysis and are not a required part of the basic financial statements. Such information is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the December 31, 2011 financial statements. The information has been subjected to the auditing procedures applied in the audit of those financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare those financial statements or to those financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the 2011 individual fund financial statements and schedules are fairly stated in all material respects in relation to the basic financial statements for the year ended December 31,

24 Honorable Mayor and City Council City of Seward, Alaska Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated June 12, 2013 on our consideration of City of Seward s internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is 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 City of Seward s internal control over financial reporting and compliance. Anchorage, Alaska June 12,

25 Management s Discussion and Analysis December 31, 2012 As management for the City of Seward, we hereby offer readers of the City s Comprehensive Annual Financial Report this narrative overview and analysis of the financial activities of the City of Seward for the fiscal year ended December 31, In addition to this discussion and analysis, readers are encouraged to read our letter of transmittal found on pages VII-XIII of this report, which provides additional summary information. FINANCIAL HIGHLIGHTS The assets of the City of Seward exceed liabilities by $152,091,921 at December 31, Of this amount, $127,302,346 represents net investment in capital assets, $5,176,194 is restricted for capital purposes and the remainder of $19,613,381 represents unrestricted net position. Unrestricted net position does not necessarily reflect a surplus of resources, as a portion of net position is designated for capital grants, capital replacement, or for other purposes as determined by the City Council. Excluding business-type activities, the assets of the primary government exceeded liabilities by $70,088,200. Of this amount, $8,669,442 in unrestricted net position is legally unreserved and available to meet the government s ongoing financial obligations, although the Council has earmarked a portion of these funds for specific purposes. The City s total net position increased by $1,366,573. Governmental activities increased by $4,450,710 and business-type activities decreased by ($3,084,177). The decrease in businesstype activity net position is substantially due to the City s healthcare facilities. The City s governmental funds reported combined ending fund balances of $8,316,435, representing a decrease of ($1,715,148) compared to the prior year. While $7,832,458 of the fund balance is legally available for spending, only $4,814,175 has not already been earmarked for specific purposes (unassigned fund balance). This reflects an increase in available unassigned fund balance of $1,316,454 resulting primarily from the transfer of the outstanding balance on the hospital PERS liability ($1,312,334) and debt service collateral loan ($1,973,360) from the General Fund to the Providence Seward Medical and Care Center Enterprise Fund. The total debt of governmental activities decreased by ($162,258) or (3.8%) due to capital lease payments for a fire truck and two loaders. The total debt of business-type activities decreased by ($2,886,434) or (6.5%) as a result of routine bond and loan payments, and due to the retirement in the prior year of bonds on the North SMIC dock, 2000 harbor bonds, and a DEC water loan. OVERVIEW OF THE FINANCIAL STATEMENTS This Management Discussion and Analysis serves to introduce readers to the City of Seward s basic financial statements, which includes the government-wide financial statements, the individual fund statements, and notes to the financial statements. In addition to the basic financial statements, this report also contains other required supplementary information. The basic financial statements include two types of statements reflecting different views of the City s financial activities: 1. Government-wide financial statements summarize the City s overall financial condition and contain both short-term and long-term information. This information is intended to present a broader view of the City as a whole in a manner similar to private-sector business. 2. Fund financial statements focus on specific areas of City operations and provide more detail than the government-wide statements. 5

26 Government-wide Financial Statements The government-wide financial statements are intended to provide a comprehensive look at all financial activities of the City and are presented on the accrual basis of accounting, in a manner similar to a business enterprise. The Statement of Net Position presents information on all of the City s assets less liabilities, resulting in net position. The purpose of this statement is to present the overall financial position of the City. Over time, increases or decreases in net position may demonstrate whether the City s financial position is improving or deteriorating. There are other non-financial factors, such as the condition of public facilities, the timely investment in roads and infrastructure, and the level of maintenance funding that should be considered in evaluating the City s overall financial condition. The Statement of Activities demonstrates how the City s net position changed as a result of the current year s activities. This statement is prepared on the accrual basis of accounting which is comparable to private-sector businesses. Revenues and expenses are reported when the underlying event giving rise to the change occurs, regardless of the timing of the related cash flows. Therefore, revenues and expenses are reported in this statement for some items that will result in cash flows in future fiscal periods. Both of the government-wide financial statements distinguish functions of the City of Seward that are principally supported by taxes and intergovernmental revenues (governmental activities) from other functions that are intended to recover all or a significant portion of their costs through user fees and charges (business-type activities). The governmental activities of the City of Seward include general government, public safety, public works, parks and recreation, library, and the Alaska Sealife Center. The business-type activities of the City include hospital and long-term care facility, harbor, marine industrial center, electric, water, wastewater, and parking. The government-wide financial statements can be found on pages of this report. Fund Financial Statements A fund is a grouping of related accounts used to maintain control over resources that have been segregated for specific activities or purposes. The City of Seward, like other state and local governments, uses fund accounting to ensure and demonstrate compliance with legal requirements. The funds of the City of Seward are divided into three categories: governmental funds, proprietary funds, and fiduciary funds, each of which is further described below. Governmental Funds Governmental Funds are used to account for essentially the same functions reported as governmental activities in the government-wide financial statements. However, unlike the government-wide financial statements which provide a broad overview and include short-term and long-term information, the governmental funds financial statements focus on near-term inflows and outflows of spendable resources, as well as on balances of spendable resources available at the end of the fiscal year. Such information is useful in evaluating a government s near-term financing requirements. However, because the focus of governmental funds is narrower than that of the government-wide financial statements, it is useful to compare the information presented for governmental funds, with similar information presented for governmental activities in the government-wide financial statements. Such a comparison enables the reader to better understand the long-term impact of a government s nearterm financing decisions. The Governmental Funds Balance Sheet and the Governmental Funds Statement of Revenues, Expenditures, and Changes in Fund Balances provide a reconciliation to facilitate the comparison between governmental funds and governmental activities. 6

27 The City of Seward maintains sixteen (16) individual governmental funds. As Major Funds, information for the General Fund and the Library/Museum Capital Project Fund are presented as distinct columns in the Governmental Funds Balance Sheet and in the Governmental Fund Statement of Revenues, Expenditures, and Changes in Fund Balances, with the other fourteen governmental funds aggregated and shown in the Non-major Funds column on these same two statements. Individual fund information for the non-major governmental funds is provided in the form of combining statements elsewhere in this report. The City of Seward adopts an annual budget for the General Fund. A budgetary comparison statement can be found on page 24 to demonstrate compliance with the annual budget, and a list of budgetary highlights can be found later in this document. The basic governmental fund financial statements can be found on pages of this report. Proprietary Funds The City of Seward maintains two types of proprietary funds; enterprise funds and internal service funds. Enterprise funds are used to report the same functions identified as business-type activities in the government-wide financial statements. The City uses enterprise funds to account for the hospital and long-term care facility (Providence Seward Medical and Care Center), harbor, Seward Marine Industrial Center, electric utility, water utility, wastewater utility, and parking operations. Information for each of these funds is presented in the individual fund statements found on pages of this report. Internal service funds are used to accumulate and allocate costs internally among the various functions of the City. The City of Seward utilizes two internal service funds to account for its motor pool equipment replacement program and compensated annual leave resources. The equipment replacement program benefits both the governmental and business-type functions. As a result, its activities have been allocated among both the governmental and business-type activities in the government-wide financial statements. Accrued leave that is earned in the governmental funds is accounted for in the Compensated Annual Leave Internal Service Fund. Individual fund data for the internal service funds can be found on pages of this report. Fiduciary Funds Fiduciary funds account for resources held by the City in a trustee capacity, for the benefit of parties outside of the government. Fiduciary funds are not reflected in the government-wide financial statements because the resources of those funds are not available to support programs of the City. The accounting used for fiduciary funds is similar to that of governmental funds. The City utilizes a single fiduciary fund, the Teen Council Agency Fund, and data for that fund can be found on page 127 of this report. Notes to the Basic Financial Statements The notes provide additional information essential to a complete understanding of the data provided in the government-wide and fund financial statements. The notes can be found on pages of this report. Other Information In addition to the basic financial statements and accompanying notes, this report presents certain required supplementary information on the public employee s retirement system on pages of this report. 7

28 GOVERNMENT-WIDE FINANCIAL ANALYSIS Statement of Net Position Over time, net position may serve as a useful indicator of a government s financial position. At December 31, 2012, the City s assets exceeded liabilities by $152,091,921. A significant portion of the City s net position (84%) reflects its investment in capital assets, less any outstanding debt used to acquire those assets. Capital assets are not liquid and are not available for future spending. Since the investment in capital assets is reported net of related debt, it should be noted that the resources needed to repay this debt must be provided from other sources, since the capital assets themselves cannot be used to liquidate these liabilities. The following table provides a summary of the City s net position: Table 1 Statement of Net Position As of December 31, 2012 and 2011 Governmental Business-Type Activities Activities Total * * * Current and other assets $ 11,019,886 12,510,182 23,912,830 24,641,268 34,932,716 37,151,450 Capital assets 65,301,763 59,182, ,676, ,394, ,978, ,577,151 Total assets and deferred outflows 76,321,649 71,692, ,589, ,036, ,910, ,728,601 Long-term liabilities outstanding 4,413,129 4,487,329 42,265,550 44,959,459 46,678,679 49,446,788 Other liabilities 1,820,320 1,567,688 7,320,029 7,383,436 9,140,349 8,951,124 Total liabilities 6,233,449 6,055,017 49,585,579 52,342,895 55,819,028 58,397,912 Net position: Net investment in capital assets, 61,392,678 56,122,348 65,909,668 68,656, ,302, ,778,991 Restricted 26,080 3,730,137 5,150,114 1,387,821 5,176,194 5,117,958 Unrestricted 8,669,442 5,784,965 10,943,939 15,648,775 19,613,381 21,433,740 Total net position $ 70,088,200 65,637,450 82,003,721 85,693, ,091, ,330,689 * As restated At the end of 2012, the City of Seward is able to report positive balances in all three categories of net position, for the government as a whole, as well as for its separate governmental and business-type activities. 8

29 Statement of Activities The City s total revenues and expenses for governmental and business-type activities are reflected in the following table. Table 2 Change in Net Position For the Years Ended December 31, 2012 and 2011 Governmental Business-Type Activities Activities Total * * * Revenues: Program revenues: Charges for services $ 1,649,326 1,602,805 35,910,422 32,731,576 37,559,748 34,334,381 Operating grants / contributions 1,037,711 1,128, , ,734 1,408,535 1,530,012 Capital grants / contributions 3,442,599 3,573,497 1,732,343 2,291,919 5,174,942 5,865,416 General revenues: Sales taxes 4,189,330 4,147, ,189,330 4,147,010 Property taxes 1,025, , ,025, ,737 Payments in lieu of tax 76,160 78, ,160 78,574 Other 1,750,767 1,772, ,441 1,614,564 2,303,208 3,387,391 Total revenues 13,171,119 13,302,728 38,566,030 37,039,793 51,737,189 50,342,521 Expenses: General government 1,981,876 2,031, ,981,876 2,031,590 Public safety 3,360,091 3,140, ,360,091 3,140,921 Public works 2,410,794 1,988, ,410,794 1,988,748 Parks and Rec / Library 1,766,647 1,862, ,766,647 1,862,005 Unallocated interest 206, , , ,993 Alaska Sealife Center 965,206 51, ,206 51,939 Electric - - 9,935,695 10,493,512 9,935,695 10,493,512 Water - - 1,246,997 1,230,833 1,246,997 1,230,833 Wastewater - - 1,013,492 1,044,654 1,013,492 1,044,654 Harbor - - 4,243,734 3,676,190 4,243,734 3,676,190 SMIC ,458 1,081,862 1,144,987 1,081,862 PSMCC ,856,797 20,416,615 21,856,797 20,416,615 Parking , , , ,407 Total expenses 10,691,392 9,249,196 39,679,224 38,149,073 50,370,616 47,398,269 Increase (decrease) in net assets before transfers 2,479,727 4,053,532 (1,113,194) (1,109,280) 1,366,573 2,944,252 Transfers 1,970,983 (1,290,998) (1,970,983) 1,290, Change in net position 4,450,710 2,762,534 (3,084,177) 181,718 1,366,573 2,944,252 Beginning net position 65,637,450 62,874,916 85,087,898* 85,511, ,725, ,386,437 Ending net position $ 70,088,200 65,637,450 82,003,721 85,693, ,091, ,330,689 *As restated 9

30 Amount Governmental Activities Governmental and business-type activities both increased the City of Seward s net position. Governmental activities increased net position by $4,450,710. The following items are of particular note: Overall revenues for governmental activities were down by ($131,609), or approximately (1%) compared with the prior year. Overall expenditures were up by $1,442,196 or 15.6%. The primary areas of increase included the Alaska Sealife Center (up $913,267 or 1,758%) related to infrastructure; public works (up $422,046 or 21.2%); and public safety (up $219,170 or 7.0%). Capital and operating grants brought in $3.4 million -- approximately $130,000 lower than the prior year -- with more than $3.1 million attributed to the construction of a new library/museum. Governmental funds experienced net transfers-in of $1,970,983 in 2012 versus net transfers-out of ($1,290,998) in Much of the difference in the current year is attributed to the transfer of outstanding hospital-related debt for the SGH PERS liability and a debt service collateral loan out of the General Fund to the newly established Providence Seward Medical and Care Center Enterprise Fund. The City does not generate sufficient tax revenues to cover depreciation on general government assets. To replace capital assets in the future, the City will need to rely on external financing sources such as grants, or incurring debt to finance construction. The following graph reflects the revenues and expenses associated with each of the general government s primary programs: 4,000,000 3,500,000 3,000,000 2,500,000 2,000,000 1,500,000 1,000, ,000 0 Gen'l Govt Public SafetyPublic Works Parks & Rec Library Sealife Center Debt interest Revenues Expenses Business-Type Activities Business-type activities decreased the net position of the City by ($3,084,177), including adjustments for Motor Pool Internal Service Fund activities. As is the case with governmental activities, a substantial portion (80%) of the $82.0 million in net position is invested in capital assets. The decrease in net position is comprised of the following: Net position decreased in the Water Enterprise Fund by ($181,957), in the Wastewater Enterprise Fund by ($136,478), in the Seward Marine Industrial Center Fund by ($263,025), and in the Providence Seward Medical and Care Center Enterprise Fund by ($3,488,958). Net position increased in the Electric Enterprise Fund by $503,363, in the Harbor Enterprise Fund by $438,723, and in the Parking Enterprise Fund by $33,740. Allocations of the Motor Pool Internal Service Fund to the business-type activities increased net position by $10,

31 The Electric Enterprise Fund experienced earnings from operations of $1,659,214, an increase of $1,456,611 from the prior year. Operating revenues were higher by $914,987 or 8.9% and operating costs were down by ($541,624) or (5.4%). The improved operating performance was due in large part to a 10% increase in all electric utility rates, aimed at reversing the negative trend in financial performance of the Utility. Power costs declined ($383,819) or (6.8%) owing to a reduction in fuel costs. The utility reduced contributions to the Motor Pool Internal Service Fund by $165,000, and scaled back purchase of operating supplies by $234,574, in an effort to restore cash necessary to address critical infrastructure needs. The Electric Enterprise Fund (excluding associated capital projects) experienced an increase in cash during the year of $1,256,943, from a prior cash balance of $639,624 to a balance of $1,896,567. Including related capital projects, the ending electric utility-related cash balance is $3,634,856 with $1,738,289 of those funds restricted by bond covenants and grant agreements. The restoration of cash in the enterprise fund is the result of targeted efforts to scale back spending and raise rates to address significant critical-risk and high-risk infrastructure needs of the Fund. It also results in no contribution to the depreciation reserve fund for the future replacement of capital assets, which is not consistent with the City s budget policy of setting aside 100% of annual depreciation costs for replacement of capital assets. To address these concerns, rate increases were approved as follows: 5% in 2011, 10% in 2012 and 5% in The net decrease in Seward Marine Industrial Center (SMIC) net position of ($263,025) results from an operating loss of ($513,721), which includes depreciation expense of $601,831. The cash balance in the SMIC fund is $144,503, and will be used to offset future cash infusion requirements from the General Fund. The net decrease in Water Enterprise Fund net position of ($181,957) is due to the following: The State of Alaska DEC required the City to reimburse $94,507 of grant funding the City was paid in a prior year, resulting from an audit which found that the DEC overpaid a number of cities for water-related grants. The City had not initially anticipated receiving the grant funds, so the refund of the monies was not a financial hardship to the Utility. The cost of utilities increased by $41,699 over the prior year, and transfers-out to other funds increased by $45,794. The water utility ends the year with $957,479 in cash (excluding water-related capital projects) representing a decline of ($893,264) from 2011, reflecting a loan payment in excess of $724,000 for the Third Avenue water main upgrade. The one-time payment was equivalent to what the City would have paid over the past four years, had loan payments not been delayed pending the outcome of a dispute over contaminated soils with the State of Alaska DOT. The net increase in Harbor Enterprise Fund net position of $438,723 is substantially due to net capital grant contributions of $624,735, and $343,265 in State of Alaska Commercial Passenger Vessel Tax proceeds. The enterprise fund experienced a loss from operations of ($82,499), and is not able to fund replacement of existing assets due to the need to spend cash on servicing debt ($704,553 in 2012). In 2010, the Harbor took an important step in identifying a specific revenue source (raw fish tax proceeds being contributed from the General Fund, and a newly created capital renewal and replacement fee) to contribute to the Major Maintenance and Repair Fund for replacement of existing infrastructure and assets. The purpose of this fund is to repair and replace existing infrastructure, and the balance in this account at year-end is $901,249, which will be completely depleted for the upcoming replacement of D-Float. The Harbor Enterprise Fund (excluding capital projects) ended the year with a cash balance of $2,149,227, with an additional $2,383,536 restricted by bond and capital project covenants. Including Capital Project Funds, the harbor ended the year with a net increase in unrestricted cash of $187,015 due to capital grant contributions and commercial passenger vessel tax receipts. The net decrease in net position of the Providence Seward Medical and Care Center Enterprise Fund of ($3,488,958) is due to a loss from operations of ($1,784,215) and interest payments on debt of ($1,348,255). Most of the loss comes from a reduction in cost reimbursements from the State of Alaska, which Providence Health and Services, as operator of the City s hospital and long-term care facility, has appealed with the State. The issue has recently been settled and the City expects to see a total of $6.1 million in settlement proceeds paid to the facility over the next 11

32 two years. The financial stability of PSMCC will depend in large part, on the census of the long-term care facility in the future, as census is the most important driver of patient service revenue of the facility. These revenues are also pledged to repay the $27 million in revenue bonds issued to construct the Seward Mountain Haven long-term care facility. Other non-major enterprise funds experienced the following: 1) increase in Parking Enterprise Fund net position of $33,740 and an increase in cash of $55,546 with parking revenues higher than the prior year by $25,338. The acquisition of automated pay stations drove personnel cost savings of approximately $17,000; and 2) a net decrease in Wastewater Enterprise Fund net position of ($136,478) and increase in cash of $25,735 to $605,982 (for the wastewater utility only, excluding related capital projects). FINANCIAL ANALYSIS OF THE GOVERNMENT S FUNDS Governmental Funds The City of Seward s governmental funds focus on near-term inflows, outflows, and balances of spendable resources. As such, you will not find long-term capital assets or long-term debt displayed on the governmental funds individual fund financial statements. This focus on near-term inflows and outflows assesses whether the City is generating sufficient revenues in the current year to pay for current-year obligations. However, it does not indicate whether there are sufficient funds available to cover long-term operations. The level of unassigned fund balance is an important indicator of the amount of net resources available for spending at the end of the year. At the end of the year, the City of Seward s governmental funds reported combined ending fund balances of $8,316,435. Of this amount: $457,897 is nonspendable (inventory, prepaid items); $26,080 is restricted by bond covenants requiring its use for construction of the library/museum; $2,126,418 has been committed by the City Council for working capital, hospital line of credit, and insurance reserves; $891,865 has been assigned by the administration for payment of grant-related projects; and $4,814,175 is unassigned, and legally available for spending. These new classifications of fund balance promulgated in GASB Statement No. 54, reflect efforts to create a hierarchy of fund balance to enable the reader of the financial statements to understand the extent to which fund balance reserves are available for spending. The hierarchy reports, in order, the least spendable to the most spendable fund balance; first are resources which are not available for spending (nonspendable), then resources which are restricted by legislation or external agencies (restricted), next resources which the City Council has committed to spend for a specific purpose by way of enabling legislation, and then resources which have been assigned for a specific use but don t meet the definition of restricted or committed, and finally, the unassigned fund balance which remains available for spending. Fund balances in the governmental funds decreased by ($1,715,148), representing a net increase in the General Fund of $1,376,945, a net decrease in the Library/Museum Capital Project of ($3,704,057), and a combined net increase in other governmental funds of $611,964. The overall net increase in fund balance is due to the following: General Fund General Fund revenues were $265,917 higher than expenditures, and after subtracting net transfers of $1,111,028, fund balance increased by $1,376,945. General Fund revenues came in $22,910 (0.22%) lower than in 2011, and expenditures came in $326,808 or 3.32% higher. 12

33 The General Fund s fund balance must be able to meet unforeseen needs and emergencies, as well as future spending needs. The City s fund balance policy is to maintain unassigned fund balance equal to between three and six months expenditures and routine transfers-out to other funds. The General Fund unassigned fund balance at the end of 2012 is $4,827,055, equal to approximately 4.6 months reserves, up from 3.2 months at the end of 2011 due, primarily, to the transfer of hospital PERS liability and debt service collateral loan from the General Fund to the Providence Seward Medical and Care Center Enterprise Fund. In the City s case, an adequate level of fund balance is between $3.1 million and $6.2 million (based on 2012 actuals), which results in the General Fund currently being in the mid-range of the desired level of unassigned fund balance. There is a marked improvement in this metric of financial stability over the past few years. Special Revenue Funds Special revenue fund projects experienced a net increase in fund balance of $115,495 to $138,101, with all but the Fish Ditch Restoration project maintaining a positive fund balance, and with the largest project being the Cruise Ship Transportation project with a fund balance of $112,832. Major Capital Project Funds The Library/Museum Fund experienced a net decrease in fund balance of ($3,704,057) as bond proceeds were spent on construction of the new library/museum building. Non-Major Capital Project Funds All other capital projects combined experienced a net increase in fund balance of $496,469 to $740,884. The Capital Acquisition Fund ($742,857) and Kawabe Park project ($8,524) have positive fund balances, while the Flood Mitigation Fund (-$10,019) and Fire Department Equipment Fund (-$478) have deficits which are pending reimbursement of capital grants from state and federal agencies. Proprietary Funds The City of Seward maintains two types of proprietary funds; enterprise funds and internal service funds. The City s seven enterprise funds (hospital, harbor, electric, water, wastewater, parking, and marine industrial center) report the same functions presented as business-type activities in the government-wide financial statements, but the individual fund statements are presented in more detail. Enterprise funds reported total net position of $82.0 million, with $65.9 million invested in capital assets net of related debt, leaving unrestricted net position of approximately $10.9 million, and restricted net position of $5.1 million. Of the unrestricted net position, $6.45 million is in restricted cash (bond reserve funds, bond proceeds, etc.) not available for appropriation, and current liabilities total $9.9 million. More specific factors influencing the net position of the enterprise funds are addressed above in the discussion of the City s business-type activities. The City maintains two internal service funds; the motor pool and the compensated annual leave fund. The Motor Pool Internal Service Fund accumulates cash for the replacement of the City s vehicles and heavy equipment fleet. Departments contribute to the motor pool to purchase vehicles and annually pay into the motor pool to forward-fund replacement of vehicles. This funding mechanism spreads the costs of the vehicles over the life of the vehicle in each program s annual budget, rather than to incur costs as one-time expenses in the year of the vehicle/equipment purchase. The balance of unrestricted cash in the motor pool at year-end is $1,089,780, reflecting an increase of $203,000. The Motor Pool maintains an outstanding loan due from the Providence Seward Medical and Care Center (PSMCC) Enterprise Fund in the amount of $960,362 related to the payoff of prior hospital PERS liabilities. This loan was carried on the books of the General Fund until 2012 when it was transferred to the books of the PSMCC Fund. The Compensated Annual Leave Fund accumulates cash reserves to pay annual leave cash-outs for governmental funds. The balance of cash in this fund at the end of 2012 is $454,

34 General Fund Budgetary Highlights There were a number of modifications to the budget during the year, as described below: Overall, projected revenues were upward adjusted $723,538 related primarily to State payments on behalf of the City for PERS ($472,217) and raw fish tax ($199,689), increased project management fees ($25,000), and various general government grants ($26,632). Expenditures were increased by $872,500, as follows: $472,217 related to the State payments on behalf of the City for public employee s retirement system costs; $16,500 to restore credit card fees absorbed by the City; $6,145 in added audit costs; $6,732 in grant-funded travel for historic preservation commission training; $6,830 in increased personnel costs in the City Clerk s department; $51,000 for salmon enhancement in Resurrection Bay; $55,001 for increases in utility and heating fuel costs; $20,000 in personnel costs to extend the retirement date for fire chief; $13,273 in grant-funded supplies for the fire department; additional costs related to snow removal, including $57,000 in overtime, $27,000 in operating supplies, $15,000 in fuel and $39,000 in operating supplies; $15,835 in grant-related library costs for a town hall meeting, archival packing material, a non-fiction grant, and an online library aide; $67,500 for building stabilization at the parks and recreation warehouse; and the remaining $3,467 miscellaneous grant-related costs for training. Transfers to other funds increased by a total of $585,239 due to the acquisition of new financial accounting software ($214,766), sharing of project management fees with the Capital Acquisition Fund ($25,000), raw fish tax to the Harbor ($144,689), a new sound system for the city council chambers ($50,000), a loan repayment to the electric fund ($110,784), and erosion control funds for the SMIC seawall ($40,000). Transfers from other funds increased by $1,312,335 for transfer of the remaining SGH PERS liability from the General Fund to the PSMCC Enterprise Fund; by $17,807 to close out the Hoben Park Capital Project Fund; and by $7,293 to close out the Pavilion Capital Project Fund. On a budgetary basis, General Fund revenues came in $148,345 or 1.4% higher than budget primarily due to an increase in the State jail contract of $101,923 and tax revenues exceeding budget by $72,500 or 1.3%. Investment earnings came in lower than budget by $32,310 due to the sustained low interest rate environment. General Fund expenditures were under budget by $552,315. Most of this variance was due to budgeting $336,686 for debt service payments on the new library/museum, which did not come due in Retirement costs came in under budget by $123,591 based on timing differences between the City and the State s fiscal year. The remaining budget variance of expenditures of $92,038 was entirely due to salary savings related to vacancy factor. General Fund Actual Highlights General Fund revenues exceeded expenditures by $265,917, and after transfers between funds were accounted for, there was a net increase in fund balance of $1,376,945, which was due to the transfer of liabilities for SGH PERS and debt service loan collateral from the General Fund to the PSMCC Enterprise Fund. CAPITAL ASSETS AND DEBT ADMINISTRATION Capital Assets As of December 31, 2012, the City had $127,302,346 invested in capital assets net of accumulated depreciation, representing an overall increase of $4,523,355 from the previous year. 14

35 Table 3 City of Seward Capital Assets (in thousands, net of depreciation) Governmental Business-Type Activities Activities Total * * * Land and improvements $ 5,432 5,432 17,484 17,484 22,916 22,916 Buildings 37,020 38,019 26,553 29,941 63,573 67,960 Improvements other than buildings 1,676 1,910 56,736 53,276 58,412 55,186 Machinery and equipment 4,340 5,107 6,149 6,874 10,489 11,981 Construction in progress 16,834 8, ,820 17,588 14,534 Total net capital assets $ 65,302 59, , , , ,577 * As restated Additional information regarding the City of Seward s capital assets can be found in Footnote 4 on pages Long-term Debt As of December 31, 2012, the City had total debt outstanding of $45,710,243. Of this amount, $4.19 million represents outstanding general obligation bonds backed by the full faith and credit of the City. General obligation bonds outstanding include the hospital and library/museum bonds. An additional $38.5 million represents: revenue bonds backed by operating revenues from the harbor enterprise fund ($6.45 million), electric enterprise fund ($6.4 million), and long-term care facility ($25.6 million). The remaining debt represents an outstanding capital equipment lease on fire/rescue vehicles, loaders, water and wastewater loans, and compensated absences. Table 4 City of Seward Outstanding Debt (in thousands) Governmental Business-Type Activities Activities Total * * * General obligation bonds $ 3,480 3, ,550 4,190 5,030 Revenue bonds ,475 39,930 38,475 39,930 Capital leases Loans - - 2,155 2,775 2,155 2,775 Compensated absences Total outstanding debt $ 4,164 4,326 41,546 44,432 45,710 48,758 * As restated Further detail regarding the City s long-term outstanding debt can be found on pages Economic Factors and Next Year s Budget and Rates The City is entering the second year of its Biennial Budget for the period January 1, 2012 through December 31, The budget has been adjusted mid-cycle to meet changing economic and operational conditions. In the past few years, economic activity has increased slowly, resulting in higher tax revenue projections. The General Fund s primary source of revenue, sales tax, is budgeted to 15

36 increase by 0.45% or approximately $18,736 over 2012 actuals, necessitating an increase in local taxable sales of $468,000 to hit the target. The recent increase in economic activity makes it very likely the City will exceed this target. Bed tax revenues were budgeted to increase by 2.9% over 2012 budget to $350,000, based on a slowly recovering bed tax trend. However, 2012 hotel activity rebounded better than expected and revenues ended the year at $380,210, so 2013 targets should be met. On the General Fund cost side, construction of the new library/museum is complete, resulting in cost increases associated with new debt service ($244,400), janitorial services ($50,611) and utilities and heating fuel. The operating costs associated with the old library building and the old museum space have not yet been factored into the budget, but as these facilities will house City programs and staff, funding for these needs must be addressed. Adjustments to the 2013 Budget were made mid-cycle to reflect a rise in utility and heating fuel costs. These rising costs are also impacting small business owners and residents who express concern that prolonged increases in fuel and utility prices may have an impact on their ability to afford to live or do business in Seward. Raw fish taxes are anticipated to increase, positively impacting the harbor s funding for critical and high-risk capital needs. The General Fund budget is balanced without utilization of reserves, and for the first time in many years, reserve levels are at more than 4 months, with a policy band requirement of 3-6 months. There are no proposed changes to tax rates in 2013 with the mill rate remaining at 3.12 mills, the City sales tax rate remaining at 4%, and the hotel/motel bed tax rate remaining at 4%. The harbor tariff includes a 2.6% rate increase in 2013, equal to the consumer price index for Anchorage averaged over the five previous full years. The Harbor capital renewal and replacement fee and a portion of raw fish tax proceeds will contribute $238,250 toward replacement of aging harbor infrastructure. The electric tariff rates will increase by 5% in 2013 to address significant critical and high-risk capital infrastructure needs, including continued upgrades to the electric generator project and the completion of right-of-way clearing. The Electric Fund will contribute $600,280 toward replacement of aging infrastructure, a considerable improvement over recent years in which little funding was available for capital needs. The water tariff will increase rates 6% in 2013 and the department will construct a new water storage tank with grant funds, to mitigate summer water storage capacity concerns. The Water Fund will contribute $198,883 toward replacement of aging infrastructure. The wastewater tariff will increase rates 6% in 2013 and those rate increases are necessary solely to keep the Fund from falling behind financially. These rate levels do not address critical or high-risk wastewater capital infrastructure needs. In the future, enterprise fund tariffs are expected to provide annual incremental rate increases equal at least to the CPI, enabling them to keep pace with the increased cost of goods and services, preventing further erosion of financial stability of those Funds. Requests for Information The City of Seward s financial statements and the accompanying information are designed to present users (citizens, taxpayers, elected officials, customers, investors, and creditors) with a general overview of the City s finances, and to demonstrate accountability to taxpayers and ratepayers. Questions concerning information in this report, or requests for additional information, can be addressed to the City of Seward, Attn: Finance Director, P.O. Box 167, Seward, Alaska

37 BASIC FINANCIAL STATEMENTS OVERVIEW These financial statements provide a summary overview of the financial position and results of operations of all funds of the City, aggregated at the government-wide and the major fund level. The following statements are included in this section: Statement of Net Position Statement of Activities Governmental Funds - Balance Sheet Reconciliation of Governmental Funds Balance Sheet to Statement of Net Position Governmental Funds - Statement of Revenues, Expenditures and Change in Fund Balances Reconciliation of the Changes in Fund Balances of Governmental Funds to Statement of Activities General Fund - Statement of Revenues, Expenditures and Change in Fund Balance - Budget and Actual Proprietary Funds - Statement of Net Position Proprietary Funds - Statement of Revenues, Expenses and Change in Net Position Proprietary Funds - Statement of Cash Flows Statement of Fiduciary Net Position Notes to Basic Financial Statements 17

38 Statement of Net Position December 31, 2012 Exhibit A-1 Primary Government Governmental Business-type Assets Activities Activities Total Cash and investments $ 8,533,674 10,433,228 18,966,902 Receivables, net of allowance for doubtful accounts: Taxes 532, ,067 Accounts 80,277 4,201,165 4,281,442 Assessments, due within one year - 13,252 13,252 Grants, shared revenues, and loans 1,789, ,207 2,232,342 Accrued interest 66,952-66,952 Other 16, , ,298 Prepaid items 456, ,417 Inventories 9, , ,284 Restricted cash and investments - 6,450,672 6,450,672 Other assets - 246, ,000 Assessments, due after one year - 25,877 25,877 Internal balances (513,586) 513,586 - Capital assets not being depreciated 22,266,187 18,238,032 40,504,219 Capital assets being depreciated, net of depreciation 43,035,576 89,438, ,474,014 Total assets 76,272, ,516, ,788,738 Deferred Outflows Unamortized deferred loss on refunding 49,440 72, ,211 Total assets and deferred outflows $ 76,321, ,589, ,910,949 Liabilities Accounts payable 1,140, ,892 2,015,483 Payable to Providence Health and Services - Washington - 3,418,000 3,418,000 Due to contractual agencies - 192, ,000 Accrued payroll and related liabilities 122,636 1,090,530 1,213,166 Accrued interest 55, , ,747 Other accrued liabilities 196, ,331 Funds held in trust 61,139-61,139 Customer deposits - 251, ,849 Unearned revenue 243,886 1,029,748 1,273,634 Noncurrent liabilities: Due within one year: Annual leave 115,547 46, ,847 Notes payable - 186, ,477 Bonds payable - 2,240,000 2,240,000 Capital lease obligations 198, ,178 Due in more than one year: Annual leave 339, , ,734 Notes payable - 1,968,687 1,968,687 Bonds payable, including bond premium 3,729,027 37,444,409 41,173,436 Capital lease obligations 31,320-31,320 Other liabilities - 220, ,000 Total liabilities 6,233,449 49,585,579 55,819,028 Net Position Net investment in capital assets 61,392,678 65,909, ,302,346 Restricted for capital projects, bond retirement, & commercial passenger vessel tax 26,080 5,150,114 5,176,194 Unrestricted 8,669,442 10,943,939 19,613,381 Total net position 70,088,200 82,003, ,091,921 Total liabilities and net position $ 76,321, ,589, ,910,949 See accompanying notes to basic financial statements. 18

39 Statement of Activities Year Ended December 31, 2012 Exhibit A-2 Net (Expense) Revenue and Program Revenues Changes in Net Position Fees, Fines & Operating Capital Business- Charges for Grants & Grants & Governmental type Functions: Expenses Services Contributions Contributions Activities Activities Total Governmental activities: General government $ 1,981, , ,189 - (1,585,277) - (1,585,277) Public safety 3,360, , ,845 (2,275,601) - (2,275,601) Public works 2,410,794 36, ,360 - (1,799,713) - (1,799,713) Parks and recreation 1,320, , ,314 - (468,791) - (468,791) Library 446,200 9,208 8,848 3,167,754 2,739,610-2,739,610 Sea Life Center 965, (965,206) - (965,206) Unallocated interest 206, (206,778) - (206,778) Total governmental activities 10,691,392 1,649,326 1,037,711 3,442,599 (4,561,756) - (4,561,756) Business-type activities: Electric 9,935,695 11,224,511 37, ,677-1,467,944 1,467,944 Water 1,246,997 1,150,109 21,984 20,070 - (54,834) (54,834) Wastewater 1,013, ,514 20, (63,168) (63,168) Harbor 4,243,734 3,169,744 73,050 1,324, , ,127 SMIC 928, , ,529 - (297,192) (297,192) PSMCC 21,856,797 18,728,364 1,000 30,000 - (3,097,433) (3,097,433) Parking 237, , ,921 55,921 Total business-type activities 39,462,695 35,910, ,295 1,732,343 - (1,665,635) (1,665,635) Total primary government $ 50,154,087 37,559,748 1,192,006 5,174,942 (4,561,756) (1,665,635) (6,227,391) General revenues: Taxes: Sales taxes $ 4,189,330-4,189,330 Property taxes 1,025,266-1,025,266 Other taxes 380, ,210 Payment in lieu of taxes 76,160-76,160 Grants and entitlements not restricted to a specific purpose 1,250, ,265 1,594,160 Investment income 119, , ,838 Transfers 1,970,983 (1,970,983) - Total general revenues and transfers 9,012,506 (1,418,542) 7,593,964 Change in net position 4,450,750 (3,084,177) 1,366,573 Beginning net position, as restated 65,637,450 85,087, ,725,348 Ending net position $ 70,088,200 82,003, ,091,921 See accompanying notes to basic financial statements. 19

40 Governmental Funds Balance Sheet December 31, 2012 Exhibit B-1 Major Funds Library/ Museum Total Capital Nonmajor Governmental Assets General Project Funds Funds Cash and investments $ 6,070, ,609 6,989,290 Receivables, net of allowance for doubtful accounts: Taxes 532, ,067 Accounts 80, ,277 Grants and shared revenues 239, , ,195 1,789,135 Other receivables - 13,635 2,500 16,135 Accrued interest 10, ,900 Prepaid items 448, ,522 Inventory 9, ,375 Due from other funds 896, ,995 Total assets $ 8,288, ,637 1,898,304 10,772,696 Liabilities Accounts payable 376, , , ,499 Accrued payroll and related liabilities 122, ,636 Accrued liabilities 196, ,331 Funds held in trust 61, ,139 Due to other funds - 107, , ,995 Unearned revenue 91, ,401 18, ,886 Total liabilities 847, ,557 1,019,319 2,426,486 Deferred Inflows Deferred property taxes 29, ,775 Total liabilities and deferred inflows 877, ,557 1,019,319 2,456,261 Fund Balances Nonspendable: Inventory 9, ,375 Prepaid items 448, ,522 Restricted for library and museum - 26,080-26,080 Committed: Working capital 1,500, ,500,000 Insurance 126, ,418 Hospital line of credit 500, ,000 Assigned: Parks and recreation - - 2,520 2,520 General government , ,495 Public works ,031 11,031 Library ,438 11,438 Capital projects , ,381 Unassigned (deficit) 4,827,055 - (12,880) 4,814,175 Total fund balances 7,411,370 26, ,985 8,316,435 Total liabilities, deferred inflows, and fund balances $ 8,288, ,637 1,898,304 10,772,696 See accompanying notes to basic financial statements. 20

41 Reconciliation of Governmental Funds Balance Sheet to Statement of Net Position December 31, 2012 Exhibit B-2 Total fund balances for governmental funds $ 8,316,435 Total net position reported for governmental activities in the Statement of Net Position is different because: Capital assets used in governmental activities are not financial resources and therefore are not reported in the funds. These assets, net of accumulated Internal depreciation consist of: Governmental Service Land $ 5,432,289 - Construction in progress 16,428, ,768 Buildings 58,381,690 - Improvements other than buildings 16,167,267 - Machinery and equipment 8,336,747 5,388,091 Accumulated depreciation (42,055,147) (3,183,072) Total capital assets $ 62,690,976 2,610,787 65,301,763 Other long-term assets are not available to pay for current period expenditures and therefore are deferred in the funds. 29,775 An internal service fund is used by the City to charge the cost of vehicles and heavy equipment to individual funds. The net position of the internal service fund attributable to governmental activities is included in the governmental column on the Statement of Net Position. Net position related to governmental activities $ 2,783,734 Less amount reported with capital assets (2,610,787) Plus amount reported with long-term liabilities 686, ,653 Long-term liabilities, including bonds payable, the related accrued interest and accrued leave are not due and payable in the current period and are therefore not Internal reported as fund liabilities. These liabilities consist of: Governmental Service General obligation bonds payable (3,480,000) - Accrued interest on bonds (53,133) (2,604) Capital leases payable - (229,498) Accrued leave - (454,604) Unamortized bond premium (249,027) - Total long term liabilities $ (3,782,160) (686,706) (4,468,866) In connection with long-term liabilities, deferred outflows of resources represent the consumption of the government's net position that is applicable to a future reporting period. This consists of an unamortized loss on refunding. 49,440 Total net position of governmental activities $ 70,088,200 See accompanying notes to basic financial statements. 21

42 Governmental Funds Statement of Revenues, Expenditures and Change in Fund Balances Year Ended December 31, 2012 Exhibit B-3 Major Funds Library/ Total Museum Govern- Capital Nonmajor mental General Project Funds Funds Revenues: Taxes $ 5,661, ,661,136 Licenses and permits 159, ,114 Intergovernmental 1,953,472 2,538,506 1,257,416 5,749,394 Charges for services 2,540, ,540,717 Fines and bails 8, ,386 Investment income 56, ,752 Other 51, ,248 19, ,170 Total revenues 10,431,339 3,167,816 1,276,514 14,875,669 Expenditures: Current: General government 2,651, ,751 2,943,471 Public safety 3,260, ,260,308 Public works 1,765, ,360 2,339,996 Parks and recreation 1,259, ,314 1,501,366 Library 419, ,561 Debt service: Retirement benefits 656, ,294 Interest and other costs 153, ,201 Capital outlay: General government , ,885 Public safety , ,845 Library - 6,871,873-6,871,873 Total expenditures 10,165,422 6,871,873 1,524,505 18,561,800 Excess of revenues over (under) expenditures 265,917 (3,704,057) (247,991) (3,686,131) Other financing sources (uses): Transfers in 3,378, ,056 4,263,668 Transfers out (2,267,584) - (25,101) (2,292,685) Net other financing sources (uses) 1,111, ,955 1,970,983 Net change in fund balances 1,376,945 (3,704,057) 611,964 (1,715,148) Beginning fund balances 6,034,425 3,730, ,021 10,031,583 Ending fund balances $ 7,411,370 26, ,985 8,316,435 See accompanying notes to basic financial statements. 22

43 Reconciliation of the Changes in Fund Balances of Governmental Funds to Statement of Activities Year Ended December 31, 2012 Exhibit B-4 Net change in fund balances - total governmental funds $ (1,715,148) The change in net position reported for governmental activities in the Statement of Activities is different because: Governmental funds report capital outlays as expenditures. However on the Statement of Activities, depreciation expense is recognized to allocate the cost of these items over their estimated useful lives. This is the amount by which capital outlays of $8,207,752 exceeded depreciation and loss on asset disposals of $2,129,522. 6,078,230 Revenues in the Statement of Activities that do not provide current financial resources are not reported as revenues in the funds. This is the increase in other long-term assets. 9,830 Issuance of long-term debt provides current financial resources to governmental funds, while the repayment of the principal of the long-term debt consumes financial resources in governmental funds. In addition, interest on long-term debt is not recognized under the modified accrual basis of accounting until due, rather than as it accrues. This adjustment combines the net change in these balances: Amortization of bond premium $ 10,827 Amortization of deferred loss on refunding (49,445) Increase in accrued interest on bonds (4,132) (42,750) An internal service fund is used by management to charge the cost of vehicles and heavy equipment to individual funds. A portion of the net revenue of these activities is reported with governmental activities. 120,588 Change in net position of governmental activities $ 4,450,750 See accompanying notes to basic financial statements. 23

44 General Fund Statement of Revenues, Expenditures and Change in Fund Balance - Budget and Actual Year Ended December 31, 2012 Exhibit B-5 Variance Original Final Positive Budget Budget Actual (Negative) Revenues: Taxes $ 5,588,636 5,588,636 5,661,136 72,500 Licenses and permits 161, , ,114 (1,961) Intergovernmental 1,127,652 1,836,190 1,953, ,282 Charges for services 2,555,093 2,552,843 2,540,717 (12,126) Fines and bails 11,000 11,000 8,386 (2,614) Investment income 89,000 89,000 56,690 (32,310) Other 27,000 44,250 51,824 7,574 Total revenues 9,559,456 10,282,994 10,431, ,345 Expenditures: Current: General government 2,633,572 2,787,578 2,651, ,858 Public safety 3,162,831 3,294,585 3,260,308 34,277 Public works 1,441,174 1,633,998 1,765,636 (131,638) Parks and recreation 1,168,427 1,289,300 1,259,052 30,248 Library 411, , ,211 23,292 Debt service: Principal payments 258, , ,308 Retirement benefits 537, , , ,591 Interest and other costs 231, , ,201 78,379 Total expenditures 9,845,237 10,717,737 10,165, ,315 Excess of revenues over (under) expenditures (285,781) (434,743) 265, ,660 Other financing sources (uses): Transfers in 1,956,300 3,299,720 3,378,612 78,892 Transfers out (1,670,519) (2,255,759) (2,267,584) (11,825) Net other financing sources (uses) 285,781 1,043,961 1,111,028 67,067 Net change in fund balance $ - 609,218 1,376, ,727 Beginning fund balance 6,034,425 Ending fund balance $ 7,411,370 See accompanying notes to basic financial statements. 24

45 Proprietary Funds Statement of Net Position December 31, 2012 Exhibit C-1 Enterprise Funds Total Internal Major Funds Nonmajor Enterprise Service Assets Electric Harbor SMIC PSMCC Funds Funds Funds Current assets: Cash and investments $ 1,896,567 3,769, ,503 2,435,687 2,187,442 10,433,228 1,544,384 Receivables: Accounts 1,088, ,033 53,691 3,456, ,724 4,988,368 - Accrued interest ,052 Assessments 1,897 4, ,069 13,252 - Interfund loans 17, ,650 71,745 Grants and loans - 401,087 34,035-8, ,207 - Other receivables 112, ,000 28, ,163 - Less allowance for doubtful accounts (49,001) (29,016) - (696,000) (13,186) (787,203) - Prepaid expenses ,895 Inventory 930, , ,909 - Total current assets 3,999,030 4,366, ,229 5,581,687 2,442,209 16,621,574 1,680,076 Noncurrent assets: Restricted cash and investments 1,738,289 2,383,536-1,973, ,487 6,450,672 - Assessments receivable, net of current portion 8,844 6, ,603 25,877 - Other assets , ,000 - Interfund loans, net of current portion 334, ,973,360 2,307, ,041 Property, plant and equipment: Total capital assets not being depreciated 230,951 5,213,240 12,238, ,491 18,238, ,768 Total capital assets being depreciated 56,724,356 30,789,006 41,132,868 37,617,408 21,554, ,818,467 5,388,091 Less accumulated depreciation (33,656,561) (12,345,984) (28,184,008) (11,879,713) (12,313,763) (98,380,029) (3,183,072) Total noncurrent assets 25,380,202 26,046,228 25,187,210 27,957,055 12,136, ,706,702 3,601,828 Total assets 29,379,232 30,412,647 25,419,439 33,538,742 14,578, ,328,276 5,281,904 Deferred Outflows Unamortized deferred loss on refunding 14,713 58, ,771 - Total assets and deferred outflows $ 29,393,945 30,470,705 25,419,439 33,538,742 14,578, ,401,047 5,281,904 Liabilities Current liabilities: Accounts payable 410, ,438 17, , , , ,092 Payable to Providence Health and Services - Washington ,418,000-3,418,000 - Due to contractual agencies , ,000 - Accrued payroll and related liabilities 31,724 17, ,031,000 9,737 1,090,530 - Accrued interest 26,332 29, ,465 23, ,010 2,604 Current portion: Accrued annual leave 21,972 15, ,190 46, ,547 Bonds payable 360, ,000-1,460,000-2,240,000 - Notes payable , ,477 - Capital lease obligations ,178 Interfund loans - 23,588-65,807-89,395 - Customer deposits 191,128 60, ,849 - Unearned revenue 22, ,501 40,321 32,000-1,029,748 - Total current liabilities 1,064,443 1,653,662 57,501 6,766, ,323 9,882, ,421 Noncurrent liabilities, net of current portion: Accrued annual leave 71,167 47, , , ,057 Bonds payable 6,025,000 6,060,000-24,860,000-36,945,000 - Unamortized bond premium 50,151 95, , ,409 - Notes payable ,968,687 1,968,687 - Other liabilities , ,000 - Capital lease obligations ,320 Interfund loans - 78,837-3,219,887-3,298,724 - Total noncurrent liabilities 6,146,318 6,281,847-28,653,175 2,010,157 43,091, ,377 Total liabilities 7,210,761 7,935,509 57,501 35,419,447 2,350,480 52,973, ,798 Net Position Net investment in capital assets 16,878,308 17,138,350 25,187,210 (935,593) 7,641,393 65,909,668 2,381,289 Restricted for bond retirement 677, ,910-1,973,360-3,361,181 - Restricted for commercial passenger vessel tax - 1,788, ,788,933 - Unrestricted (deficit) 4,626,965 2,898, ,728 (2,918,472) 4,586,343 9,367,567 1,978,817 Total net position 22,183,184 22,535,196 25,361,938 (1,880,705) 12,227,736 80,427,349 4,360,106 Total liabilities and net position $ 29,393,945 30,470,705 25,419,439 33,538,742 14,578,216 5,281,904 Adjustment to reflect the consolidation of internal service fund activities related to enterprise funds 1,576,372 Net position of business-type activities $ 82,003,721 See accompanying notes to basic financial statements. 25

46 Proprietary Funds Statement of Revenues, Expenses and Change in Net Positions Year Ended December 31, 2012 Exhibit C-2 Enterprise Funds Total Internal Major Funds Nonmajor Enterprise Service Electric Harbor SMIC PSMCC Funds Funds Funds Operating revenues: Charges for services $ 11,224,511 3,169, ,737 18,728,364 2,373,066 35,910,422 - Vehicle rental and interfund charges ,901 Total operating revenues 11,224,511 3,169, ,737 18,728,364 2,373,066 35,910, ,901 Operating expenses: Salaries and benefits 1,256,589 1,005,103 74,278 11,959, ,824 14,957, ,902 Services and supplies 5,731, , ,760 3,806, ,039 11,377,776 - Administration 855, ,766 96, , ,977 2,435,175 - Depreciation 1,721,199 1,081, ,831 4,012, ,320 7,952, ,597 Total operating expenses 9,565,297 3,252, ,458 20,512,579 2,465,160 36,723, ,499 Earnings (loss) from operations 1,659,214 (82,499) (513,721) (1,784,215) (92,094) (813,315) 83,402 Nonoperating revenues (expenses): Intergovernmental - PERS on-behalf 37,451 73, , ,295 - Fleet relocation grant Fleet relocation study Investment income 119,536 59, ,435 21, ,176 62,910 Interest expense (319,192) (299,765) - (1,348,255) (35,660) (2,002,872) (16,831) Commercial passenger vessel tax - 343, ,265 - Gain on disposal of capital assets ,037-4,037 1,522 Grant revenue ,000-1,000 - Other expenses (51,206) (51,206) - Dredging - (699,332) (699,332) - Net nonoperating revenues (expenses) (213,411) (523,571) 944 (1,334,783) 28,184 (2,042,637) 47,601 Earnings (loss) before contributions and transfers 1,445,803 (606,070) (512,777) (3,118,998) (63,910) (2,855,952) 131,003 Capital contributions 141,677 1,324, ,529 30,000 20,070 1,732,343 - Transfers in 150, , ,187 1,053,063-1,647,084 - Transfers out (1,234,951) (599,274) (89,964) (1,453,023) (240,855) (3,618,067) - Change in net position 503, ,723 (263,025) (3,488,958) (284,695) (3,094,592) 131,003 Beginning net position, as restated 21,679,821 22,096,473 25,624,963 1,608,253 12,512,431 4,229,103 Ending net position $ 22,183,184 22,535,196 25,361,938 (1,880,705) 12,227,736 4,360,106 Adjustment to reflect the consolidation of internal service fund activities related to enterprise funds 10,415 Change in net position of business-type activities $ (3,084,177) See accompanying notes to basic financial statements. 26

47 Proprietary Funds Statement of Cash Flows Year Ended December 31, 2012 Exhibit C-3 Enterprise Funds Total Internal Major Funds Nonmajor Enterprise Service Electric Harbor SMIC PSMCC Funds Funds Funds Cash flows from operating activities: Receipts from customers and users $ 11,028,065 3,045, ,070 18,976,364 2,364,358 35,999,226 - Payments to suppliers (5,914,948) (1,902,296) (249,043) (4,021,680) (773,458) (12,861,425) - Payments to employees (1,208,988) (929,233) (74,119) (11,828,000) (608,631) (14,648,971) (335,941) Payments for interfund services used (855,843) (327,766) (96,589) - (419,977) (1,700,175) - Receipts from interfund charges ,901 Net cash flows from operating activities 3,048,286 (113,926) 165,319 3,126, ,292 6,788, ,960 Cash flows from noncapital financing activities: Transfers in 110, , ,187 1,053,063-1,607,034 - Transfers out (1,234,951) (599,274) (89,964) (1,453,023) (240,855) (3,618,067) - Net cash flows from noncapital financing activities (1,124,167) (279,274) 33,223 (399,960) (240,855) (2,011,033) - Cash flows from capital and related financing activities: Principal payments on long-term debt (345,000) (400,000) - (1,565,000) (620,175) (2,930,175) (191,219) Interest payments on long-term debt (323,987) (304,553) - (1,308,736) (166,297) (2,103,573) (19,204) Issuance of interfund loans ,348,219-3,348,219 - Acquisition of property, plant and equipment (288,967) (1,616,685) (216,528) (43,687) (64,692) (2,230,559) (231,753) Proceeds from sale of capital assets ,522 Capital contributions received 142,106 1,760, ,494 31,000 21,295 2,136,980 - Interfund loan payments - (22,357) - (62,525) - (84,882) - Commercial passenger vessel tax receipts - 1,411, ,411,435 - Decrease in due to other funds - - (20,949) (169,000) - (189,949) - Transfers in 40, ,050 - Net cash flows from capital and related financing activities (775,798) 827,925 (54,983) 230,271 (829,869) (602,454) (440,654) Cash flows from investing activities: Investment income received 119,536 59, ,435 21, ,176 66,542 Interfund loan receipts 16, ,769 68,113 Net cash flows from investing activities 136,305 59, ,435 21, , ,655 Net increase (decrease) in cash and investments 1,284, , ,503 2,965,430 (487,382) 4,401, ,961 Beginning cash and investments 2,350,230 5,658,629-1,443,617 3,030,311 12,482,787 1,312,423 Ending cash and investments $ 3,634,856 6,152, ,503 4,409,047 2,542,929 16,883,900 1,544,384 Reconciliation of cash and investments to statement of net assets: Current assets 1,896,567 3,769, ,503 2,435,687 2,187,442 10,433,228 1,544,384 Restricted assets 1,738,289 2,383,536-1,973, ,487 6,450,672 - $ 3,634,856 6,152, ,503 4,409,047 2,542,929 16,883,900 1,544,384 See accompanying notes to basic financial statements. 27

48 Proprietary Funds Statement of Cash Flows, continued Exhibit C-3, continued Enterprise Funds Total Internal Major Funds Nonmajor Enterprise Service Electric Harbor SMIC PSMCC Funds Funds Funds Reconciliation of earnings (loss) from operations to net cash provided (used) by operating activities: Earnings (loss) from operations $ 1,659,214 (82,499) (513,721) (1,784,215) (92,094) (813,315) 83,402 Adjustments to reconcile earnings (loss) from operations to net cash flows from operating activities: Depreciation 1,721,199 1,081, ,831 4,012, ,320 7,952, ,597 Amortization of deferred loss Other nonoperating expenses (51,206) (699,332) (750,538) - Noncash expense - PERS on-behalf 37,451 73, , ,295 - Increase (decrease) in allowance for doubtful accounts 7,373 9,916 - (566,000) 6,122 (542,589) - (Increase) decrease in assets: Receivables (205,376) (80,975) 173, ,000 (14,830) 675,895 - Inventory (66,533) ,722 (62,811) - Other assets (213,680) - (213,680) - Increase (decrease) in liabilities: Accounts payable (65,543) (364,653) (93,283) (42,000) 68,859 (496,620) - Other payables , ,000 - Accrued payroll and related liabilities (845) (3,947) , ,787 - Accrued annual leave 10,995 6, ,979 28,741 28,961 Customer deposits 27,357 5, ,048 - Unearned revenue (25,800) (59,007) (2,743) 10,000 - (77,550) - Net cash flows from operating activities $ 3,048,286 (113,926) 165,319 3,126, ,292 6,788, ,960 Noncash capital and related financing activities - purchase of equipment included in accounts payable $ (235,092) See accompanying notes to basic financial statements. 28

49 Fiduciary Fund Statement of Fiduciary Net Position December 31, 2012 Exhibit D-1 Assets Teen Council Agency Fund Cash and investments $ 54,719 Other assets 150 Total assets $ 54,869 Liabilities Accounts payable 1,418 Due to Teen Council 53,451 Total liabilities $ 54,869 See accompanying notes to basic financial statements. 29

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51 Notes to Basic Financial Statements December 31, 2012 (1) Summary of Significant Accounting Policies Reporting Entity The City of Seward, Alaska (the City) was incorporated June 1, 1912 as a home-rule city and operates under a Council-Manager form of government. The City provides the full range of municipal services as provided for by Alaska Statute. This includes police and fire protection, electric, water and wastewater services, library, parks and recreation, public improvements, planning and zoning, port and harbor, hospital and long-term care, and general administrative services. The accompanying financial statements present the City of Seward. In 2011 the City adopted the provisions of GASB Statement number 61, The Financial Reporting Entity: Ombnibus. In connection therewith, the City reviewed its legal and contractual arrangements with the Providence Seward Medical Center which was previously reported as a discreet component unit, and determined that, for financial reporting purposes in accordance with generally accepted accounting principles, this activity is appropriately recorded as an enterprise fund of the City. The PSMCC facilities (hospital and long-term care facilities) are owned by the City of Seward. The facilities are managed by Providence Health & Services Washington, a nonprofit corporation (the Corporation), under a management and operating agreement. Under the operating agreement, the Corporation is responsible for day to day management of the PSMCC in exchange for a management fee. All financial risks and rewards from the operations of the PSMCC accrue to the City. The City is responsible for debt obligations, including payment of revenue bonds through revenues generated at the PSMCC. The City pays for all capital costs of the healthcare facilities and is legally obligated to finance potential deficits. Government-Wide and Fund Financial Statements The accounting policies of the City conform to accounting principles generally accepted in the United States of America as applicable to governments. The following is a summary of the more significant policies: The government-wide financial statements (i.e., the statement of net position and the statement of activities) report information on all of the nonfiduciary activities of the primary government. In general, the effect of interfund activity has been removed from these statements to minimize the double-counting of internal activities. Governmental activities, which normally are supported by taxes and intergovernmental revenues, are reported separately from business-type activities, which rely primarily on fees and charges to external parties. 31

52 Notes to Basic Financial Statements, continued Summary of Significant Accounting Policies, continued Government-Wide and Fund Financial Statements, continued The statement of activities demonstrates the degree to which the direct expenses of a given function or segment are offset by program revenues. Direct expenses are those that are clearly identifiable with a specific function or segment. Program revenues include 1) fees, fines and charges to customers or applicants who purchase, use, or directly benefit from goods, services, or privileges provided by a given function or segment and 2) grants and contributions that are restricted to meeting the operational or capital requirements of a particular function or segment. Taxes, investment income and other items not properly included among program revenues are reported instead as general revenues. Separate financial statements are provided for governmental funds, proprietary funds, and fiduciary funds, even though the latter are excluded from the government-wide financial statements. Major individual governmental funds and major individual enterprise funds are reported as separate columns in the fund financial statements. Measurement Focus, Basis of Accounting, and Financial Statement Presentation The government-wide and proprietary fund financial statements are reported using the economic resources measurement focus and the accrual basis of accounting. Revenues are recorded when earned and expenses are recorded when a liability is incurred, regardless of the timing of the related cash flows. Property taxes are recognized as revenues in the year for which they are levied. Grants and similar items are recognized as revenue as soon as all eligibility requirements imposed by the provider have been met. The Fiduciary Fund also uses the accrual basis of accounting. Governmental fund financial statements are reported using the current financial resources measurement focus and the modified accrual basis of accounting. Revenues are recognized as soon as they are both measurable and available. Revenues are considered to be available when they are collectible within the current period or soon enough thereafter to pay liabilities of the current period. For this purpose, the City considers all revenues, except reimbursement grants, to be available if they are collected within 60 days after year end. Reimbursement grants are considered available if they are collected within one year of the end of the current fiscal period. Expenditures generally are recorded when a liability is incurred, as under accrual accounting. However, debt service expenditures, as well as expenditures related to compensated absences are recorded only to the extent they have matured. Property taxes, sales taxes, charges for services, and interest associated with the current fiscal period are all considered to be susceptible to accrual and so have been recognized as revenues of the current fiscal period. Only the portion of special assessments receivable due within the current fiscal period is considered to be susceptible to accrual as revenue in the current period. Most other revenue items are considered to be measurable and available only when received by the government. 32

53 Notes to Basic Financial Statements, continued Summary of Significant Accounting Policies, continued Measurement Focus, Basis of Accounting, and Financial Statement Presentation, continued The City reports the following major funds based on the required quantitative criteria: Major Governmental Funds: The General Fund is the government s primary operating fund. It accounts for all financial resources of the general government, except those required to be reported in another fund. The Library/Museum Capital Project Fund accounts for all activities related to the design and construction of the new library and museum. Major Proprietary Funds: The Electric Enterprise Fund accounts for all activities related to the operation of the City s electric utility. The Harbor Enterprise Fund accounts for the marine-related activities of the City s harbor. The Seward Marine Industrial Center (SMIC) Enterprise Fund accounts for marine-related services on the east side of Resurrection Bay. The Providence Seward Medical & Care Center Enterprise Fund accounts for the local hospital and long-term care facilities. The City also reports two Internal Service Funds which account for the activities relating to the City s motor pool activities and accrued leave of the governmental funds. The Motor Pool Internal Service Fund reports revenues charged to the other funds based on rental fees and capital lease payments designed to cover the cost of the lease payments and to fund depreciation. The Compensated Annual Leave Internal Service Fund accounts for the accrual and payment of compensated absences of the governmental activities. In addition, the City maintains and reports on a single fiduciary fund. This fund records cash held in a fiduciary capacity on behalf of the local teen council. Private-sector standards of accounting and financial reporting issued prior to December 1, 1989, generally are followed in both the government-wide and proprietary fund financial statements to the extent that those standards do not conflict with or contradict guidance of the Governmental Accounting Standards Board. Governments also have the option of following subsequent privatesector guidance for their business-type activities and enterprise funds, subject to the same limitation. The City has elected not to follow subsequent private-sector guidance. 33

54 Notes to Basic Financial Statements, continued Summary of Significant Accounting Policies, continued Measurement Focus, Basis of Accounting, and Financial Statement Presentation, continued As a general rule the effect of interfund activity has been eliminated from the government-wide financial statements. Exceptions to this general rule are allocated administration fees and charges between the enterprise funds and the various other funds and departments. Elimination of these charges would distort the direct costs and program revenues reported for the various functions concerned. Amounts reported as program revenues include 1) charges to customers or applicants for goods, services, or privileges provided, 2) operating grants and contributions, and 3) capital grants and contributions, including special assessments. Internally dedicated resources are reported as general revenues rather than as program revenues. In addition, general revenues include all taxes, investment income, and State of Alaska entitlement revenues. Proprietary funds distinguish operating revenues and expenses from nonoperating items. Operating revenues and expenses generally result from providing services and producing and delivering goods in connection with a proprietary fund s principal ongoing operations. Operating expenses for the proprietary funds include the costs of sales and services, administrative expenses and depreciation on capital assets. All revenues and expenses not meeting this definition are reported as nonoperating revenues and expenses. Capital Assets Capital assets, which include property, plant, equipment and infrastructure assets (e.g. roads and similar items), are reported in the applicable governmental or business-type activities columns in the government-wide financial statements. Capital assets are defined by the City as assets with an initial, individual cost of more than $2,500 and an estimated useful life in excess of one year. Such assets are recorded at historical cost or estimated historical cost if purchased or constructed. Donated capital assets are recorded at estimated fair market value at the date of donation. In the case of the initial capitalization of infrastructure assets, the City chose to include all such items, regardless of their acquisition date. The costs of normal maintenance and repairs that do not add to the value of the asset or materially extend the useful life of the asset are not capitalized. Major outlays for capital assets and improvements are capitalized as projects are constructed. Interest incurred during the construction phase of capital assets of business-type activities is included as part of the capitalized value of the assets constructed. Property, plant, and equipment of the City is depreciated using the straight-line method over the following estimated useful lives: Buildings and improvements Infrastructure System infrastructure Machinery and equipment years 50 years years 3-8 years

55 Notes to Basic Financial Statements, continued Summary of Significant Accounting Policies, continued Central Treasury A central treasury is used to account for the City s cash and investments to maximize investment income. Investments are stated at fair value. Investment income is allocated among the funds based on their respective cash balances. Cash and Cash Equivalents For purposes of the statement of cash flows, the proprietary funds consider all cash and investments to be cash and cash equivalents. The central treasury, which holds cash and investments, is used essentially as a cash management pool by each fund. Prepaid Items Certain payments to vendors reflect costs applicable to future accounting periods and are recorded as prepaid items in both government-wide and fund financial statements. Cost is recorded as an expenditure or expense as the prepayment is applied (consumption method). Inventory Inventories are valued at cost in governmental funds and at the lower of cost or market in the proprietary funds. Cost is determined by the first-in, first-out method. The cost is recorded as an expenditure or expense at the time individual inventory items are consumed (consumption method). Grants and Other Intergovernmental Revenues In applying the measurable and available concepts to grants and intergovernmental revenues, the legal and contractual requirements of the numerous individual programs are used as guidance. There are, however, essentially two types of these revenues. In one, monies must be expended on the specific purpose or project before any amounts are considered earned ; therefore, revenues are recognized based upon expenditures recorded. In the other, monies are virtually unrestricted as to purpose of expenditure and are usually revocable only for failure to comply with prescribed compliance requirements. These resources are reflected as revenues at the time of receipt or earlier if the measurable and available criteria are met. Property Taxes Property taxes are liens on the assessed value of taxable property as of January 1. Pursuant to Alaska Statutes, the City establishes the mill rate and tax levy on or before June 15. The City is located within the Kenai Peninsula Borough, which acts as the City s agent in the billing and collection of property taxes. Tax bills for one-half of the taxes are mailed prior to July 1 and are payable on August 15; tax bills for the second-half of the taxes are mailed by October 1 and are payable on November 15. City property tax revenues are recognized in the fiscal year in which they are collectible and available (collected within sixty days after year-end) to finance expenditures of the fiscal year. At December 31, the delinquent real and personal property taxes not currently available are reflected as deferred revenues of the General Fund. 35

56 Notes to Basic Financial Statements, continued Summary of Significant Accounting Policies, continued Receivables and Payables Activity between funds that are representative of lending/borrowing arrangements outstanding at the end of the year are referred to as either due to / from other funds (i.e., the current portion of interfund loans) or advances to / from other funds (i.e., the noncurrent portion of interfund loans). All other outstanding balances between funds are reported as due to / from other funds. Any residual balances outstanding between the governmental activities and business-type activities are reported in the government-wide financial statements as internal balances. Accrued Annual Leave The City allows employees to accumulate earned but unused vacation and sick leave benefits. All accrued leave is accrued when incurred in the government-wide, proprietary fund, and governmental fund financial statements. Accrued leave that is earned in the governmental funds is accounted for in the Compensated Annual Leave Internal Service Fund. Long-Term Debt In the government-wide and the proprietary fund financial statements, long-term debt and other long-term obligations are reported as liabilities in the applicable governmental activities, businesstype activities, or proprietary fund type statement of net position. Bond premiums and discounts, are deferred and amortized over the life of the bonds using the straight-line method. Fund Balances In the fund financial statements, governmental funds report aggregate amounts for five classifications of fund balances based on the constraints imposed on the use of these resources. The nonspendable fund balance classification includes amounts that cannot be spent because they are either (a) not in spendable form prepaid items or inventories; or (b) legally or contractually required to be maintained intact. The spendable portion of the fund balances comprises the remaining four classifications: restricted, committed, assigned, and unassigned. Restricted fund balance This classification reflects the constraints imposed on resources either (a) externally by creditors, grantors, contributors, or laws or regulations of other governments; or (b) imposed by law through constitutional provisions or enabling legislation. Committed fund balance These amounts can only be used for specific purposes pursuant to constraints imposed by formal resolutions of the City Council the government s highest level of decision making authority. Those committed amounts cannot be used for any other purpose unless the City Council removes the specified use, also through resolution. This classification also includes contractual obligations to the extent that existing resources in the fund have been specifically committed for use in satisfying those contractual requirements. 36

57 Notes to Basic Financial Statements, continued Summary of Significant Accounting Policies, continued Fund Balances, continued Assigned fund balance This classification reflects the amounts constrained by the City s intent to be used for specific purposes, but are neither restricted nor committed. City Resolution delegates authority to assign fund balance to the City Manager and the Finance Director. Assigned fund balances, by default, include all remaining amounts (except negative balances) that are reported in governmental funds, other than the General Fund, that are not classified as nonspendable and are neither restricted nor committed. Unassigned fund balance This fund balance is the residual classification for the General Fund. It is also used to report negative fund balances in other governmental funds. When both restricted and unrestricted resources are available for use, it is the City s policy to use externally restricted resources first, then unrestricted resources committed, assigned, and unassigned in order as needed. Encumbrances Encumbrance accounting, under which purchase orders, contracts and other commitments for expenditures are recorded in order to reserve that portion of the applicable appropriation, is employed as an extension of formal budgetary integration in the General Fund during the year. However, it is the City s policy to stop issuing purchase orders in early December. As a result, there are no outstanding encumbrances at December 31, Outstanding purchase orders, if any, at December 31, are cancelled and new ones are issued in the subsequent year. Unearned Grant Revenue Amounts received from grantor agencies, which are restricted as to use and have not been expended for the intended use, are shown as unearned revenue. Change in Accounting Principle The City has adopted newly issued GASB pronouncements 63 and 65, resulting in a change in presentation of the government-wide and fund level financial statements. The new pronouncements require reporting two new categories of accounts. Certain items previously reported as assets are now categorized as deferred outflows. A deferred outflow represents the consumption of the government s net assets or fund balance that is applicable to a future reporting period. Other items previously categorized as liabilities are now categorized as deferred inflows. A deferred inflow represents the acquisition of net assets or fund balance that is applicable to a future reporting period. For example, revenues that have been earned but are not yet available in the governmental funds are now reported as deferred inflows. In the government-wide financial statements, the residual net of all of the accounts is now called net position. As discussed further in Note 9, these statements have been retrospectively applied resulting in a restatement of opening net position. Pension Plans With the exception of certain Electric Fund employees, substantially all other employees of the City participate in the Public Employees' Retirement System (PERS) administered by the State of Alaska. 37

58 Notes to Basic Financial Statements, continued (2) Stewardship, Compliance and Accountability Budgetary Accounting An operating budget is adopted each fiscal year for the General Fund on the same modified accrual basis used to reflect actual revenues and expenditures. Appropriations for this fund lapse at yearend to the extent that they have not been expended. Budgetary control is exercised at the department level. The City Manager is authorized to transfer budget amounts between departments within a fund or between line items within departments, but City Council approval is required to transfer budget amounts between funds. Allocation of Sales Tax Revenues When the City transferred the operations of the Hospital to Providence Seward Medical and Care Center on July 1, 1996, the City agreed to allocate 1% of the sales tax for the benefit of the Hospital. During construction, the allocated sales tax was used to offset losses and transition costs. Subsequent to completion of the construction, the allocated sales tax has been used to fund the debt service on the Hospital general obligation bonds. Upon maturity of hospital bonds, sales tax revenues will be used to fund healthcare capital and operating costs, and debt service on long-term care facility bonds, if necessary. All sales tax revenue is recorded in the General Fund. The allocated portion is then transferred to the PSMCC Enterprise debt service. (3) Cash and Investments The City of Seward maintains a central treasury that is available for use by all funds. Each fund s portion of the central treasury is displayed on the balance sheet as cash and investments or in the case of negative cash, is included in due to other funds. At year-end, $3,299,821 of the City s bank deposits were uninsured and uncollateralized. Investments City statutes authorize the City to invest in obligations of the U.S. Treasury and U.S. agencies, bankers acceptances, repurchase agreements, commercial paper issued by corporations or businesses and having the highest rating of a nationally-recognized rating service and maturing within nine months, certificates of deposit insured by federal depository insurance or secured by eligible collateral held by a third party in the City s name, and investments through the Alaska Municipal League Investment Pool (AMLIP). The City s investment policy does not specify a maximum investment maturity, but the City generally invests funds for less than three years from the date of purchase. The City has complied with its investment policy throughout the year. The City s investments are recorded at fair value. The AMLIP is an external investment pool which is rated AAAm for credit risk purposes. Alaska Statute establishes regulatory oversight of the pool. The law sets forth numerous requirements regarding authorized investments and reporting. On a monthly basis the investments in the pool are reviewed for fair value by an independent pricing service. The values of investments in the AML pool are approximately equal to fair value. 38

59 Notes to Basic Financial Statements, continued Cash and Investments, continued Reconciliation of Deposit and Investment Balances The following is a reconciliation of the City s deposit and investment balances to the financial statements as of December 31, 2012: Government- Fiduciary Fund Wide Statement of Statement Fiduciary of Net Position Net Position Totals Cash and investments $ 18,966,902 54,719 19,021,621 Restricted cash and investments 6,450,672-6,450,672 $ 25,417,574 54,719 25,472,293 Restricted Cash and Investments The City maintains bond redemption and reserve accounts as required by bond covenants. The balances at December 31, 2012 are as follows: PSMCC Fund $ 1,973,360 Electric Fund 677,911 Harbor Fund 709,910 $ 3,361,181 The City also includes in restricted cash and investments amounts that have been designated for capital projects. The total amount of restricted cash and investments that has been designated for capital projects follows: Harbor Fund $ 1,673,626 Electric Fund 1,060,378 Water Fund 243,372 Wastewater Fund 112,115 $ 3,089,491 Custodial Risk The fair value of the City s investments at year-end is shown below. GASB Statement 3, as amended by GASB Statement 40, establishes categories as an indication of the level of custodial risk involved in the investments. All of the City s remaining investments are in the category of least risk and include investments that are insured or registered in the City s name, or securities that are held by the City or its agent in the City s name. All of the United States treasury bills, treasury notes, and United States agency securities are held in custodial accounts in the U.S. Bank and Bank of New York Trust Departments and are recorded in the City s name, in accordance with safekeeping agreements. U.S. Bank and Bank of New York are not counter parties to security transactions. 39

60 Notes to Basic Financial Statements, continued Cash and Investments, continued Interest Rate Risk The fair value of the City s fixed-income investments fluctuate in response to changes in market interest rates. Increases in prevailing interest rates generally translate into decreases in fair value of those investments. Fair values of interest rate-sensitive instruments may be affected by the creditworthiness of the issuer, prepayment options, relative values of alternative investments, the liquidity of the instrument, and other general market conditions. The City manages interest rate risk by allocating specific percentages of the portfolio over specified time periods, and generally holds investments for less than five years, which minimizes the sensitivity of fair value to changes in market interest rates. The City has no formal policy relating to a specific deposit or interest rate risk. Investment types and their maturities at December 31, 2012 are as follows: Investment Maturities (in Years) Fair Less than 1 to 5 Over Investment Value 1 year years 5 years Certificates of deposit $ 7,381,493 2,283,274 5,098,219 - U.S. government agencies 3,841,826 2,972, ,490 - U.S. treasury SLGS 247, ,300 Repurchase agreements 4,757,244 4,757, Total subject to interest rate risk 16,227,863 10,012,854 5,967, ,300 Pooled investments 8,088,609 Money market account 592,292 Total investments 24,908,764 Bank deposits 563,529 Total cash and investments $ 25,472,293 Option Risk Option risk is the risk that an investment s counterparty may exercise a right embedded in the investment an embedded option. The City invests in securities issued by U.S. government agencies that contain call provisions. The exercise of the call option by the counterparty occurs during times of declining interest rates; therefore the City is exposed to the risk of having to reinvest at a lower interest rate. In the table above, securities are categorized according to the final maturity, regardless of call option dates. If call options were exercised at the next possible call date, many of the callable securities would mature in less than one year. 40

61 Notes to Basic Financial Statements, continued Cash and Investments, continued Concentration Risk The City s investment policy places no limit on the amount that can be invested in any one issuer. More than 2% of the total portfolio is invested in securities issued by federal agencies and currently 36% is held with the Federal Home Loan Bank. Credit Risk Generally, credit risk is the risk that an issuer of an investment will not fulfill its obligation to the holder of the investment. This is measured by the assignment of a rating by a nationally recognized statistical rating organization. The investments in U.S. government agencies include Federal Home Loan Bank and U.S. Treasuries. All of the U.S. government agencies investments are rated AAA by Standard and Poors. The City s investment policy specifies the types of investments that can be purchased, in order to limit credit risk. The City may invest in obligations of the United States government, its agencies and instrumentalities; insured or collateralized certificates of deposit; savings accounts; collateralized repurchase agreements; commercial paper maturing within nine months issued by corporations having the highest rating of a national rating agency; bankers acceptances; and the State investment pool. Credit risk is mitigated by limiting the eligible investment options. (4) Capital Assets Capital asset activity for the year ended December 31, 2012 was as follows: Balance Additions Deletions Balance January 1, and Reclass- and Reclass- December 31, 2012 ifications ifications 2012 Governmental activities Capital assets not being depreciated: Land and land improvements $ 5,432, ,432,289 Construction in progress 8,714,138 8,136,691 16,931 16,833,898 Total assets not being depreciated 14,146,427 8,136,691 16,931 22,266,187 Capital assets being depreciated: Buildings 57,991, ,048-58,381,690 Improvements other than buildings 16,119,523 47,744-16,167,267 Machinery and equipment 13,668, ,045 60,270 13,724,838 Total assets being depreciated 87,779, ,837 60,270 88,273,795 41

62 Notes to Basic Financial Statements, continued Capital Assets, continued Balance Additions Deletions Balance January 1, and Reclass- and Reclass- December 31, 2012 ifications ifications 2012 Governmental activities, continued Less accumulated depreciation for: Buildings $ 19,972,793 1,388,950-21,361,743 Improvements other than buildings 14,209, ,477-14,491,403 Machinery and equipment 8,560, ,242 59,820 9,385,073 Total accumulated depreciation 42,743,370 2,554,669 59,820 45,238,219 Total capital assets being depreciated, net 45,035,858 (1,999,832) ,035,576 Governmental activity capital assets, net $ 59,182,285 6,136,859 17,381 65,301,763 * The ending balances include $405,768, $5,388,091, and $3,183,072 of construction in progress, equipment cost, and accumulated depreciation, respectively, related to the Motor Pool Internal Service Fund. Balance Additions Deletions Balance January 1, and Reclass- and Reclass- December 31, 2012 ifications ifications 2012 Business-type activities Capital assets not being depreciated: Land and land improvements $ 17,483, ,483,769 Construction in progress 5,820,226 1,821,971 6,887, ,263 Total assets not being depreciated 23,303,995 1,821,971 6,887,934 18,238,032 Capital assets being depreciated: Buildings 39,005,181 30,289 1,013,983 38,021,487 Improvements other than buildings 125,247,574 7,774,910 4, ,017,867 Machinery and equipment 16,607, , ,155 16,779,113 Total assets being depreciated 180,860,414 8,319,808 1,361, ,818,467 Less accumulated depreciation for: Buildings 9,064,475 2,403,628-11,468,103 Improvements other than buildings 71,971,103 4,314,997 3,809 76,282,291 Machinery and equipment 9,733,964 1,234, ,696 10,629,635 Total accumulated depreciation 90,769,542 7,952, ,505 98,380,029 Total capital assets being depreciated, net 90,090, ,816 1,019,250 89,438,438 Business-type capital assets, net $ 113,394,867 2,188,787 7,907, ,676,470 42

63 Notes to Basic Financial Statements, continued Capital Assets, continued Depreciation expense was charged to the functions as follows: Depreciation Internal Excluding Service Internal Fund Total Service Fund Allocation Depreciation Governmental activities General government $ 193, , ,352 Public safety 170,801 99, ,072 Public works 100, , ,669 Parks and recreation 72,660 22,105 94,765 Library 23,830-23,830 Sea Life Center 1,566,981-1,566,981 Total governmental activities $ 2,129, ,597 2,554,669 Depreciation Excluding Internal Service Fund Business-type activities Electric $ 1,721,199 Water 221,179 Wastewater 291,173 Harbor 1,081,063 SMIC 601,831 Parking 23,968 PSMCC 4,012,579 Total business-type activities $ 7,952,992 (5) Interfund Receivables, Payables, and Transfers A schedule of interfund balances and transfers as of and for the year ended December 31, 2012, follows. Interfund balances typically result from short-term operating or capital advances. Transfers typically result from capital matching, operating subsidies, and payment in lieu of taxes. Due from other funds: Due to the General Fund from: Nonmajor governmental funds $ 789,661 Library/Museum Capital Project Fund 107,334 Total due from other funds $ 896,995 43

64 Notes to Basic Financial Statements, continued Interfund Receivables, Payables, and Transfers, continued Transfers: From General Fund to: SMIC Enterprise Fund $ 121,282 Harbor Enterprise Fund 320,000 Electric Enterprise Fund 110,784 PSMCC Enterprise Fund 1,053,063 Nonmajor governmental funds 662,455 Total transfers from General Fund 2,267,584 From Harbor Enterprise Fund to: Nonmajor governmental funds 222,601 General Fund 374,768 SMIC Enterprise Fund 1,905 Total transfers from Harbor Enterprise Fund 599,274 From Electric Enterprise Fund to General Fund 1,234,951 From nonmajor governmental funds to General Fund 25,101 From Water Enterprise Fund to General Fund 97,489 From Water Enterprise Fund to Electric Enterprise Fund 40,050 From Wastewater Enterprise Fund to General Fund 79,841 From SMIC Enterprise Fund to General Fund 89,964 From Parking Enterprise Fund to General Fund 23,475 From PSMCC Enterprise Fund to General Fund 1,453,023 Total transfers to other funds $ 5,910,752 The City has three outstanding interfund loans. In 2006, the Motor Pool Fund and the Electric Fund issued interfund loans in the total amount of $1,708,125 to the PSMCC Enterprise Fund for the purpose of paying the Seward General Hospital PERS unfunded liability. Repayment is scheduled over twenty years bearing interest at 5.25%. Also in 2006, the Motor Pool Fund loaned $220,258 to the Harbor Enterprise fund for the purpose of purchasing a 50-ton Boat Lift. The loan is for ten years and bears interest at 5.5% per year. In 2009, the Water Fund loaned $1,973,260 to the General Fund to be used as a debt service collateral account. Because the cash is restricted for debt service and is held in a bank account for that purpose, all interest earnings on the account accrues to the Water Fund and interest is not charged to the General Fund. In addition, there is no scheduled payback for the funds until they are released from debt service requirements. In 2012, the outstanding balance on the Seward General Hospital PERS liability ($1,312,334) and the debt service collateral loan ($1,973,360) were transferred and assigned to the PSMCC Enterprise Fund from the General Fund. 44

65 Notes to Basic Financial Statements, continued Interfund Receivables, Payables, and Transfers, continued Amounts outstanding at December 31, 2012 was as follows: Payable from the PSMCC Enterprise Fund to: Motor Pool Internal Service Fund $ 960,361 Electric Enterprise Fund 351,973 Water Enterprise Fund 1,973,360 Total payable from the PSMCC Enterprise Fund 3,285,694 Payable from the Harbor Enterprise Fund to Motor Pool Internal Service Fund 102,425 Total interfund loans payable $ 3,388,119 (6) Long-Term Debt The following is a summary of long-term debt transactions of the City for the year ended December 31, 2012: Balance Balance Due January 1, December 31, Within 2012 Additions Retired 2012 One Year Governmental activities General obligation bonds: $3,480, General Obligation bonds, due in annual installments of $85,000 to $240,000, plus interest at 4.0% to 5.0% through September 1, 2036 $ 3,480, ,480,000 - Capital leases: Fire truck capital lease obligation, due in annual installments of $110,177, including interest at 3.295% through May 13, , , , ,662 Loaders capital lease obligation, due in monthly installments of $7,895, including interest at 3.97% through April 21, ,825-87, ,836 91,516 Accrued annual leave 425, , , , ,547 Total governmental activities long-term liabilities $ 4,326, , ,195 4,164, ,725 Plus unamortized bond premium 249,027 $ 4,413,129 45

66 Notes to Basic Financial Statements, continued Long-Term Debt, continued Liquidation of the accrued annual leave is made by the Compensated Annual Leave Internal Service Fund. All other debt service payments above are made by the General Fund or Motor Pool Internal Service Fund directly or by transfers from the General Fund to the Debt Service Fund. Balance Balance Due January 1, December 31, Within 2012 Additions Retired 2012 One Year Business-type activities General obligation bonds: $5,150, refunding hospital bonds, due in final annual installment of $710,000, plus interest at 3.5% through April 1, 2013 $ 1,550, , , ,000 Revenue bonds: $6,000, Electric revenue bonds, due in annual installments of $115,000 to $375,000, plus interest at 4.0% to 6.0% through June 1, ,715, ,000 5,605, ,000 $27,000, Series One long term care facility bonds, due in annual installments of $750,000 to $1,875,000, plus interest at 4.0% to 5.1% through April 1, ,320, ,000 25,610, ,000 $4,500, harbor revenue bonds, due in annual installments of $190,000 to $330,000, plus interest at 4.0% to 5.0% through June 1, ,740, ,000 3,560, ,000 $1,965, refunding harbor revenue bonds, due in annual installments of $165,000 to $235,000, plus interest at 4.0% to 5.0% through June 1, ,935, ,000 1,780, ,000 $2,290, refunding electric revenue bonds, due in annual installments of $245,000 to $275,000, plus interest at 4.0% to 5.0% through June 1, ,015, , , ,000 $1,500, harbor revenue bonds, due in annual installments of $65,000 to $110,000, plus interest at 4.0% to 5.0% through June 1, ,205,000-65,000 1,140,000 65,000 46

67 Notes to Basic Financial Statements, continued Long-Term Debt, continued Balance Balance Due January 1, December 31, Within Business-type activities, continued 2012 Additions Retired 2012 One Year Notes payable: $26,231 sewer note payable to State of Alaska Department of Environmental Conservation, due in annual installments of $1,333, plus interest at 1.5% through July 15, 2014 $ 3,998-1,333 2,665 1,333 $901,851 sewer note payable to State of Alaska Department of Environmental Conservation, due in annual installments of $60,584, including interest at 1.5% through November 5, ,492-58,800 59,692 59,692 $2,652,849 water note payable to State of Alaska Department of Environmental Conservation, due in annual installments of $156,844, including interest at 1.5% through October 1, ,652, ,042 2,092, ,452 Accrued annual leave 177, , , ,977 46,300 Total business-type activities long-term liabilities $ 44,432, ,609 3,050,043 41,546,141 2,472,777 Plus unamortized bond premium 499,409 $ 42,045,550 Annual debt service requirements to maturity on the bonds, notes and capital leases follow: General Obligation Bonds Year Ending Governmental Activities Business-type Activities December 31, Principal Interest Total Principal Interest Total 2013 $ - 159, , ,000 12, , , , , , , , , , , , , , , ,300 1,232, , ,350 1,234, , ,500 1,234, ,000 97, , $ 3,480,000 2,361,150 5,841, ,000 12, ,425 47

68 Notes to Basic Financial Statements, continued Long-Term Debt, continued Revenue Bonds Year Ending Business-type Activities December 31, Principal Interest Total 2013 $ 1,530,000 1,791,364 3,321, ,610,000 1,715,438 3,325, ,685,000 1,638,207 3,323, ,475,000 1,562,482 3,037, ,550,000 1,495,709 3,045, ,515,000 6,425,842 14,940, ,905,000 4,437,120 13,342, ,350,000 2,237,487 11,587, ,480, ,308 3,845, ,000 9, ,844 $ 38,475,000 21,678,801 60,153,801 Notes Payable Year Ending Business-type Activities December 31, Principal Interest Total 2013 $ 186,477 32, , ,666 29, , ,244 27, , ,182 25, , ,150 23, , ,315 87, , ,130 34, ,221 $ 2,155, ,809 2,415,973 Capital Leases Year Ending Governmental Activities December 31, Principal Interest Total 2013 $ 198,178 6, , , ,572 $ 229,498 6, ,488 48

69 Notes to Basic Financial Statements, continued (7) Revenue Bond Requirements Certain covenants of the revenue bonds require establishment of bond redemption and reserve accounts. The balances are reflected as restricted cash and investments at December 31, 2012 as follows: Long-term care facility bond reserves $1,973,360 Electric bond reserves 677,911 Harbor bond reserves 709,910 The Electric and Harbor revenue bonds also require that rates be maintained at a level that will produce net revenues after certain adjustments, equal to 1.3 and 1.2, respectively, times the amount required each year to pay the principal and interest. The City met these revenue requirements for both bonds in The bond coverage calculations are as follows: Electric Revenue Bonds Total revenues, excluding grants $ 11,344,047 Total operating expenses, excluding depreciation (7,844,098) Available for debt service $ 3,499,949 Debt service payments: Principal $ 345,000 Interest (319,192) Total debt service payments $ 664,192 Debt coverage 5.27 Harbor Revenue Bonds Total revenues, excluding grants $ 3,228,955 Total operating expenses excluding depreciation (2,171,180) Available for debt service $ 1,057,775 Debt service payments: Principal $ 400,000 Interest (299,765) Total debt service payments $ 699,765 Debt coverage

70 Notes to Basic Financial Statements, continued (8) Capitalized Leases The City has entered into lease agreements as lessee for financing the acquisition of fire equipment and public works loaders. These lease agreements qualify as capital leases for accounting purposes (title transfers at the end of the lease term) and therefore, have been recorded at the present value of the future minimum lease payments. The following is a summary of the assets acquired with the capital leases that have an outstanding balance as of December 31, 2012: Internal Service Fund Machinery and equipment $ 944,415 Less accumulated depreciation (248,083) Carrying value $ 696,332 The following is a schedule of future minimum lease payments under the capital leases and the present value of the net minimum lease payments at December 31, 2012: Year Ending December 31, Internal Service Fund 2013 $ 204, ,572 Total minimum lease payments 236,487 Less interest portion (6,989) Present value of future minimum lease payments 229,498 Less current portion (198,178) Long-term portion $ 31,320 (9) Change in Accounting Principles Adoption of GASB Pronouncements - Restatement The City has adopted newly issued GASB pronouncement numbers 63 and 65, resulting in a change in presentation for the government-wide financial statements. The new pronouncements require, among other things, that debt issuance costs be recognized as an expense in the year incurred, rather than capitalizing and amortizing these costs over the life of the debt. Retroactive restatement of net position is required in the year of adoption. 50

71 Notes to Basic Financial Statements, continued Change in Accounting Principles Adoption of GASB Pronouncements - Restatement, continued The beginning net position in the Electric, Harbor, and PSMCC Enterprise Funds and the Business-type Activities have been restated as follows: Electric Harbor PSMCC Business- Enterprise Enterprise Enterprise type Fund Fund Fund Activities 2012 beginning net position, as previously presented $ 21,771,360 22,175,687 2,042,841 85,693,239 Restatement; write off unamortized debt issue costs (91,539) (79,214) (434,588) (605,341) 2012 beginning net position, as restated $ 21,679,821 22,096,473 1,608,253 85,087,898 (10) Fund Balances Fund balances, reported for the major funds and the nonmajor funds in the aggregate on the governmental funds balance sheet are subject to the following constraints: Library/Museum General Capital Project Nonmajor Fund Fund Funds Totals Nonspendable: Inventory $ 9, ,375 Prepaid items 448, ,522 Total nonspendable 457, ,897 Restricted for library and museum - 26,080-26,080 Committed: Working capital 1,500, ,500,000 Insurance 126, ,418 Hospital line of credit 500, ,000 Total committed 2,126, ,126,418 51

72 Notes to Basic Financial Statements, continued Fund Balances, continued Library/Museum General Capital Project Nonmajor Fund Fund Funds Totals Assigned: Park and recreation $ - - 2,520 2,520 General government , ,495 Public works ,031 11,031 Library ,438 11,438 Capital projects , ,381 Total assigned , ,865 Unassigned (deficit) 4,827,055 - (12,880) 4,814,175 Total fund balances $ 7,411,370 26, ,895 8,316,435 (11) Defined Benefit Pension Plan The City participates in the Public Employees Retirement System (PERS). PERS is a costsharing multiple employer plan which covers eligible State and local government employees, other than teachers. The Plan was established and is administered by the State of Alaska Department of Administration to provide pension, postemployment healthcare, death, and disability benefits. Benefit and contribution provisions are established by State law and may be amended only by the State Legislature. The Plan is included in a comprehensive annual financial report that includes financial statements and other required supplemental information. The report is available at the following address: Department of Administration Division of Retirement and Benefits P.O. Box Juneau, Alaska Conversion to Cost Sharing In April 2008, the Alaska Legislature passed legislation which converted the existing Public Employees Retirement System (PERS) from an agent-multiple employer plan to a costsharing plan with an effective date of July 1, Under the cost-sharing arrangement, the State of Alaska Division of Retirement and Benefits no longer tracks individual employer assets and liabilities. Rather, all plan costs and past service liabilities are shared among all participating employers. 52

73 Notes to Basic Financial Statements, continued Defined Benefit Pension Plan, continued Conversion to Cost Sharing, continued That same year, the State of Alaska passed additional legislation which statutorily capped the employer contribution, established a state funded on-behalf contribution, and required that employer contributions be calculated against all PERS eligible wages, including wages attributable to the defined contribution plan described later in these footnotes. Employee Contribution Rates Regular employees are required to contribute 6.75% of their annual covered salary (2.97% for pension and 3.78% for healthcare). Police and firefighters are required to contribute 7.5% of their annual covered salary (3.29% for pension and 4.21% for healthcare). Employer and Other Contribution Rates There are three contribution rates associated with the pension and healthcare contributions and related liabilities: Contractual Rate: This is the required funding rate for participating employers. The contractual rate is statutorily capped at a uniform 22% of eligible wages, subject to a wage floor, and other termination events. This 22% rate includes all PERS participating wages, including those wages attributable to employees in the defined contribution plan. ARM Board Adopted Rate: This is the rate formally adopted by the Alaska Retirement Management (ARM) Board. This rate is actuarially determined to calculate annual funding requirements of the Plan, without regard to the statutory rate cap. There are no constraints or restrictions on the actuarial cost method or other assumptions used in this valuation, other than those established and agreed to by the ARM Board. Current legislation provides that the State of Alaska will contribute the difference between the ARM Board adopted rate and the contractual (statutory) rate. These additional contributions are recognized by each employer as an on-behalf payment and are reflected within the financial statements. GASB 43 Rate: This is the rate used to determine the long-term pension and healthcare liability for plan accounting purposes in accordance with generally accepted accounting principles as established by GASB. Certain actuarial methods and assumptions for this rate calculation are mandated by GASB. For FY13, the rate uses an 8.00% pension discount rate and a 6.88% healthcare discount rate. Additionally, the GASB 43 rate disregards all future Medicare Part D payments. The GASB 43 rate differs significantly from the ARM board adopted rate as a direct result of differences in the actuarial valuation methodology and assumptions. 53

74 Notes to Basic Financial Statements, continued Defined Benefit Pension Plan, continued Employer and Other Contribution Rates, continued Contribution rates for the six months ended June 30, 2012 were determined as part of the June 30, 2009 actuarial valuation. Rates for the six months ended December 31, 2012 (State fiscal year 2013) were determined in the June 30, 2010 valuation. Employer ARM Board Contractual Adopted GASB 43 State FY12 Rate Rate Rate January to June Pension 9.92% 15.10% 23.10% Postemployment healthcare 12.08% 18.39% 32.74% Total contribution rate 22.00% 33.49% 55.84% State FY13 July to December Pension 9.67% 15.75% 24.95% Postemployment healthcare 12.33% 20.09% 39.93% Total contribution rate 22.00% 35.84% 64.88% Annual Pension and Postemployment Healthcare Cost The City is required to contribute 22% of covered payroll, subject to a wage floor. In addition, the State of Alaska contributed approximately 11.49% and 13.84% of covered payroll to the Plan for each six month period noted above, respectively. In accordance with the provisions of GASB Statement Number 24, the City has recorded the State on-behalf payment in the amount of $625,512 as revenue and expense/expenditures in these financial statements. However, because the City is not statutorily obligated for these payments, this amount is excluded from pension and OPEB cost as described here. Total Year Annual Annual Benefit City % of Ended Pension OPEB Cost Contri- TBC December 31 Cost Cost (TBC) butions Contributed 2012 $ 405,911 $ 517,664 $ 923,575 $ 923, % , , , , % , , , , % 54

75 Notes to Basic Financial Statements, continued (12) Defined Contribution Pension Plan Employees hired after July 1, 2006 participate in PERS Tier IV, a defined contribution plan. The Plan is administered by the State of Alaska, Department of Administration, and benefit and contribution provisions are established by State law and may be amended only by the State Legislature. The Alaska Retirement Management Board may also amend contribution requirements. Included in the Plan are individual pension accounts, retiree medical insurance plan and a separate Health Reimbursement Arrangement account that will help retired members pay medical premiums and other eligible medical expenses not covered by the medical plan. Employee Contribution Rates Employees are required to contribute 8.0% of their annual covered salary. This amount goes directly to the individual account. Employer Contribution Rates The City is required to contribute the following amounts based on covered salary: Others Police/Fire Tier IV Tier IV January to June Individual account 5.00% 5.00% Retiree medical plan Occupational death and disability benefits % 6.48% July to December Individual account 5.00% 5.00% Retiree medical plan Occupational death and disability benefits % 6.47% In addition, the employer must contribute to the Health Reimbursement Arrangement. AS establishes this contribution amount as three percent of the average annual employee compensation of all employees of all employers in the plan. As of July 1, 2012, for actual remittance, this amount is calculated as a flat rate for each full time or part-time employee per pay period and approximates $1,848 per year for each full-time employee, and $1.18 per hour for parttime employees. Employees are immediately vested in their own contributions and vest 25% per year in employer contributions. The City and employee contributions to PERS including the HRA contribution for the year ended December 31, 2012 were $134,724 and $113,648, respectively. 55

76 Notes to Basic Financial Statements, continued (13) International Brotherhood of Electrical Workers Certain Electric Fund employees are members of the International Brotherhood of Electrical Workers, which maintains its own defined contribution pension plan. There are two separate negotiated contracts for temporary and permanent employees. The City s contribution rate for temporary employees is $10.77 per compensable hour per the terms of a negotiated agreement expiring December 31, The City s contribution rate for permanent employees is $800 per employee per month per the terms of a negotiated agreement expiring June 30, The total City contribution for the year ended December 31, 2012 was $70,686. Employees are not required to contribute. (14) Deferred Compensation Plan The City offers its employees a voluntary deferred compensation plan created in accordance with Internal Revenue Code Section 457. The Plan, available to all employees, permits them to defer a portion of their salary until future years. The deferred compensation is not available to employees until termination, retirement, death, or unforeseeable emergency. The provisions of the Plan require that all assets and income of the Plan be held in trust for the exclusive benefit of participants and their beneficiaries. (15) Risk Management The City faces a considerable number of risks of loss, including (a) damage to and loss of property and contents, (b) employee torts, (c) professional liability; i.e., errors and omissions, (d) environmental damage, (e) workers compensation; i.e., employee injuries, and (f) medical insurance costs of employees. The City is a member of the Alaska Municipal League Joint Insurance Association (JIA), a governmental insurance pool established by the Alaska Municipal League. The JIA provides the City coverage for property, including building and contents, automobiles, mobile equipment, data processing equipment and boiler and machinery; casualty, including general liability, public officials and employees liability, law enforcement professional liability, auto liability and employee benefit liability; workers compensation, including employers liability; and commercial blanket bond. The City maintains supplemental marine insurance and firefighters group accident coverage with insurance companies placed through JIA. The City has no coverage for potential losses from environmental damages. The JIA is a public entity risk pool organized to share risks among its members. The Association s bylaws provide for the assessment of supplemental contributions from members in the event that losses and expenses for any coverage year exceed the annual contributions and income earned on such contributions for the year. Such supplemental contributions shall be based upon each member s deposit contribution in comparison to the aggregate deposit contributions of all members. The Association made no supplemental assessments during the year ended December 31,

77 Notes to Basic Financial Statements, continued Risk Management, continued The JIA provides loss control services and conducts periodic inspections to ensure safe operations. The City has utilized an established safety committee to review and recommend safety policies and procedures for all departments. The City Council designates a portion of the General Fund balance to meet potential losses not covered by insurance and insurance deductibles. The City also participates in the Alaska Public Utilities Insurance Trust, which provides insurance coverage for employee health benefits. The Plan is a public entity risk pool in which risks are shared among the members. Stop loss insurance limits participants liability for individual and aggregate claims. There was no significant reduction in the City s major categories of risk insurance coverage from the prior year, and the amount of settlements for the past three fiscal years did not materially exceed the City s insurance coverage. (16) Commitments and Contingencies Amounts received or receivable from grantor agencies are subject to audit and adjustment by grantor agencies, principally the state and federal government. Any disallowed claims, including any amount already collected, could become a liability of the applicable funds. The City of Seward is the owner of the Alaska Sealife Center ( Center ), which is operated on the City s behalf by the Seward Association for the Advancement of Marine Science ( SAAMS ). The City is obligated to abide by provisions of the Cooperative Agreement ( Agreement ) between the City and the State of Alaska Department of Fish and Game, which served as a significant funding source for the construction of the Center. The City has passed most of its obligations for operating the Center on to SAAMS through a management and operating agreement ( Operating Agreement ), but the City ultimately remains responsible to ensure that provisions of the Agreement with the State are met. The Operating Agreement requires, in part, that SAAMS maintain sufficient termination fund reserves to enable the City to operate the facility for up to one full year in the event SAAMS is unable to meet its obligations under the Operating Agreement. The estimated costs of operating the Center for a full year are not easily measured based on imprecise definitions of the requirements, but could approach $3 million per year. The Operating Agreement does not require SAAMS to maintain that level of reserves, and to the extent their termination fund reserve levels are inadequate, the City would be expected to cover any shortfall. The City does not currently have adequate reserves in its General Fund to cover this potential shortfall. Various other claims and lawsuits against the city are pending, but are either covered by insurance or are the type which are normal and reasonable in view of the City s operations. City management believes the total amount of the liability, if any, which may arise from such claims and lawsuits beyond that which is covered by insurance would not have a material effect on the City s financial condition or its ability to carry on its activities as now conducted. 57

78 Notes to Basic Financial Statements, continued (17) Fund Deficits The following funds had a deficit in fund balance at December 31, The deficits will be eliminated in the future with transfers from other funds. Flood Mitigation Capital Project Fund $ 10,019 Fire Department Equipment Capital Project Fund 478 Fish Ditch Restoration Special Revenue Fund 2,383 (18) Subsequent Events Subsequent to year end the City was awarded a $10 million State of Alaska legislative grant for expansion of the Seward Marine Industrial Center. Also following year end, the City entered into a settlement agreement with State of Alaska to resolve a rate claim for outstanding Medicaid billings. Under the terms of the agreement, the State will pay the City $6.1 million to settle claims for a four year period running from (19) New Accounting Pronouncements The Governmental Accounting Standards Board has passed several new accounting standards with upcoming implementation dates as follows: GASB 66 Technical Corrections 2012 Effective for year end December 31, 2013 This statement contains certain technical corrections to prior GASB statements on the topics of Risk Financing, Operating Leases, Loan Purchases, and Servicing Fees. GASB 67 Financial Reporting for Pension Plans 2013 Effective for year end December 31, 2014 This statement contains certain technical corrections to prior GASB statements on the topic of improving financial reporting by state and local governmental pension plans. GASB 68 Accounting and Financial Reporting for Pensions 2013 Effective for year end December 31, 2015 This statement contains certain technical corrections to prior GASB statements on the topics of Net Pension Liability and Pension Expense. GASB 69 Government Combination and Disposals of Government Operations 2013 Effective for year end December 31, 2014 This statement contains certain disclosures to be made about government combinations and disposals of government operations to enable financial statement users to evaluate the nature and effects of these transactions. 58

79 SUPPLEMENTARY INFORMATION 59

80 Nonmajor Governmental Funds Combining Balance Sheet December 31, 2012 Exhibit E-1 Special Capital Assets Revenue Projects Total Cash and investments $ 167, , ,609 Grants receivable 972,366 4, ,195 Other receivables 2,500-2,500 Total assets $ 1,142, ,210 1,898,304 Liabilities Accounts payable 211, ,260 Unearned revenue 18,398-18,398 Due to other funds 774,335 15, ,661 Total liabilities 1,003,993 15,326 1,019,319 Fund Balances Assigned: Parks and recreation 2,520-2,520 General government 115, ,495 Public works 11,031-11,031 Library 11,438-11,438 Capital projects - 751, ,381 Unassigned (deficits) (2,383) (10,497) (12,880) Total fund balances 138, , ,985 Total liabilities and fund balances $ 1,142, ,210 1,898,304 60

81 Nonmajor Governmental Funds Combining Statement of Revenues, Expenditures and Change in Fund Balances Year Ended December 31, 2012 Exhibit E-2 Special Capital Revenue Projects Total Revenues: Intergovernmental $ 982, ,845 1,257,416 Local grants 19,098-19,098 Total revenues 1,001, ,845 1,276,514 Expenditures: Current: General government 291, ,751 Public works 574, ,360 Parks and recreation 242, ,314 Library Capital outlay: General government - 140, ,885 Public safety - 274, ,845 Total expenditures 1,108, ,730 1,524,505 Excess of revenues over (under) expenditures (107,106) (140,885) (247,991) Other financing sources (uses): Transfers in 222, , ,056 Transfers out - (25,101) (25,101) Net other financing sources (uses) 222, , ,955 Net change in fund balances 115, , ,964 Beginning fund balances 22, , ,021 Ending fund balances $ 138, , ,985 61

82 Nonmajor Enterprise Funds Combining Statement of Net Position December 31, 2012 Exhibit F-1 Assets Water Wastewater Parking Total Current assets: Cash and investments $ 1,117, , ,389 2,187,442 Receivables: Accounts 78,003 90, ,724 Assessments 7, ,069 Grants and loans 8, ,085 Other 5,635 23,078-28,713 Less allowance for doubtful accounts (9,104) (4,082) - (13,186) Inventory 55, ,362 Total current assets 1,262, , ,389 2,442,209 Noncurrent assets: Restricted cash and investments 243, , ,487 Assessments receivable, net of current portion 10, ,603 Interfund loan 1,973, ,973,360 Property, plant and equipment, net of accumulated depreciation 4,911,919 4,759, ,497 9,796,557 Total noncurrent assets 7,139,254 4,871, ,497 12,136,007 Total assets $ 8,401,375 5,586, ,886 14,578,216 Liabilities Current liabilities: Accounts payable 100,461 3,611 7, ,072 Accrued payroll and related liabilities 5,016 4, ,737 Accrued interest 23, ,847 Current portion: Accrued annual leave 4,584 4,606-9,190 Notes payable 125,452 61, ,477 Total current liabilities 259,165 73,989 7, ,323 Noncurrent liabilities, net of current portion: Accrued annual leave 17,459 24,011-41,470 Notes payable 1,967,355 1,332-1,968,687 Total noncurrent liabilities 1,984,814 25,343-2,010,157 Total liabilities 2,243,979 99,332 7,169 2,350,480 Net Position Net investment in capital assets 2,819,112 4,696, ,497 7,641,393 Unrestricted 3,338, , ,220 4,586,343 Total net position 6,157,396 5,487, ,717 12,227,736 Total liabilities and net position $ 8,401,375 5,586, ,886 14,578,216 62

83 Nonmajor Enterprise Funds Combining Statement of Revenues, Expenses and Change in Net Position Year Ended December 31, 2012 Exhibit F-2 Water Wastewater Parking Total Operating revenues - charges for services $ 1,150, , ,443 2,373,066 Operating expenses: Salaries and benefits 295, ,664 89, ,824 Services and supplies 453, ,337 95, ,039 Administration 243, ,101 30, ,977 Depreciation 221, ,173 23, ,320 Total operating expenses 1,213,624 1,012, ,261 2,465,160 Earnings (loss) from operations (63,515) (82,761) 54,182 (92,094) Nonoperating revenues (expenses): Intergovernmental - PERS on-behalf 21,984 20,810-42,794 Investment income 10,951 7,066 3,033 21,050 Interest expense (33,908) (1,752) - (35,660) Net nonoperating revenues (expenses) (973) 26,124 3,033 28,184 Earnings (loss) before transfers (64,488) (56,637) 57,215 (63,910) Capital contributions 20, ,070 Transfers out (137,539) (79,841) (23,475) (240,855) Change in net position (181,957) (136,478) 33,740 (284,695) Beginning net position 6,339,353 5,624, ,977 12,512,431 Ending net position $ 6,157,396 5,487, ,717 12,227,736 63

84 Nonmajor Enterprise Funds Combining Statement of Cash Flows Year Ended December 31, 2012 Exhibit F-3 Water Wastewater Parking Total Cash flows from operating activities: Receipts from customers and users $ 1,157, , ,443 2,364,358 Payments to suppliers (358,685) (317,285) (97,488) (773,458) Payments to employees (270,075) (249,139) (89,417) (608,631) Payments for interfund services used (243,326) (146,101) (30,550) (419,977) Net cash flows from operating activities 285, ,213 75, ,292 Cash flows from noncapital financing activities - transfers out (137,539) (79,841) (23,475) (240,855) Cash flows from capital and related financing activities: Principal payments on long-term debt (560,042) (60,133) - (620,175) Interest payments on long-term debt (164,449) (1,848) - (166,297) Acquisition of property, plant and equipment (23,970) (40,722) - (64,692) Capital contributions received 21, ,295 Net cash flows from capital and related financing activities (727,166) (102,703) - (829,869) Cash flows from investing activities - investment income received 10,951 7,066 3,033 21,050 Net increase in cash and investments (568,663) 25,735 55,546 (487,382) Beginning cash and investments 1,929, , ,843 3,030,311 Ending cash and investments $ 1,360, , ,389 2,542,929 Reconciliation of cash and investments to statement of net assets: Current assets $ 1,117, , ,389 2,187,442 Restricted assets 243, , ,487 $ 1,360, , ,389 2,542,929 64

85 Nonmajor Enterprise Funds Statement of Cash Flows, continued Exhibit F-3, continued Water Wastewater Parking Total Reconciliation of earnings (loss) from operations to net cash provided (used) by operating activities: Earnings (loss) from operations $ (63,515) (82,761) 54,182 (92,094) Adjustments to reconcile earnings (loss) from operations to net cash flows from operating activities: Depreciation 221, ,173 23, ,320 Noncash expense - PERS on-behalf 21,984 20,810-42,794 Increase in allowance for doubtful accounts 5, ,122 (Increase) in assets: Accounts receivable 1,544 (13,296) - (11,752) Other receivable - (3,078) - (3,078) Inventory 3, ,722 Increase (decrease) in liabilities: Accounts payable 91,138 (19,948) (2,331) 68,859 Accrued payroll and related liabilities 397 (146) Accrued annual leave 3,118 7,861-10,979 Net cash flows from operating activities $ 285, ,213 75, ,292 65

86 Internal Service Funds Combining Statement of Net Position December 31, 2012 Compensated Motor Annual Assets Pool Leave Total Exhibit G-1 Current assets: Cash and investments $ 1,089, ,604 1,544,384 Receivables: Accrued interest 56,052-56,052 Interfund loans 71,745-71,745 Prepaid expenses 7,895-7,895 Total current assets 1,225, ,604 1,680,076 Noncurrent assets: Interfund loans, net of current portion 991, ,041 Property, plant and equipment: Equipment and vehicles 5,388,091-5,388,091 Less accumulated depreciation (3,183,072) - (3,183,072) Net property, plant and equipment in service 2,205,019-2,205,019 Construction in progress 405, ,768 Total noncurrent assets 3,601,828-3,601,828 Total assets $ 4,827, ,604 5,281,904 Liabilities Current liabilities: Accounts payable 235, ,092 Accrued interest 2,604-2,604 Current portion: Accrued annual leave - 115, ,547 Capital lease obligations 198, ,178 Total current liabilities 435, , ,421 Noncurrent liabilities, net of current portion: Accrued annual leave - 339, ,057 Capital lease obligations 31,320-31,320 Total liabilities 467, , ,798 Net Position Net investment in capital assets 2,381,289-2,381,289 Unrestricted 1,978,817-1,978,817 Total net position 4,360,106-4,360,106 Total liabilities and net position $ 4,827, ,604 5,281,904 66

87 Internal Service Funds Combining Statement of Revenues, Expenses and Change in Net Position Year Ended December 31, 2012 Exhibit G-2 Compensated Motor Annual Pool Leave Total Operating revenues - vehicle rental and interfund charges $ 508, , ,901 Operating expenses: Salaries and benefits - 364, ,902 Depreciation 425, ,597 Total operating expenses 425, , ,499 Earnings from operations 83,402-83,402 Nonoperating revenues (expenses): Gain on disposal of capital assets 1,522-1,522 Investment income 62,910-62,910 Interest expense (16,831) - (16,831) Net nonoperating revenues (expenses) 46,079-46,079 Change in net position 129, ,481 Beginning net position 4,229,103-4,229,103 Ending net position $ 4,358,584-4,358,584 67

88 Internal Service Funds Combining Statement of Cash Flows Year Ended December 31, 2012 Exhibit G-3 Compensated Motor Annual Pool Leave Total Cash flows from operating activities: Receipts from vehicle rentals, and interfund charges $ 508, , ,901 Payments to employees - (335,941) (335,941) Net cash flows from operating activities 508,999 28, ,960 Cash flows from capital and related financing activities: Principal payments on long-term debt (191,219) - (191,219) Interest payments on long-term debt (19,204) - (19,204) Acquisition of equipment and vehicles (231,753) - (231,753) Proceeds from sale of capital assets 1,522-1,522 Net cash flows from capital and related financing activities (440,654) - (440,654) Cash flows from investing activities: Interfund loan receipts 68,113-68,113 Investment income received 66,542-66,542 Net cash flows from investing activities 134, ,655 Net increase in cash and investments 203,000 28, ,961 Beginning cash and investments 886, ,643 1,312,423 Ending cash and investments $ 1,089, ,604 1,544,384 Reconciliation of earnings from operations to net cash provided (used) by operating activities: Earnings from operations 83,402-83,402 Adjustments to reconcile earnings from operations to net cash flows from operating activities: Depreciation 425, ,597 Increase in liabilities - accrued annual leave - 28,961 28,961 Net cash flows from operating activities $ 508,999 28, ,960 Noncash capital and related financing activities - purchase of equipment included in accounts payable $ (235,092) - (235,092) 68

89 GENERAL FUND The General Fund is established to account for the revenues and expenditures necessary to carry out basic governmental activities of the City such as fire and police protection, public works, recreation, planning, administrative services, etc. Appropriations are made from the General Fund annually. Revenue is recorded by source, i.e., taxes, charges for services, intergovernmental. Expenditures are recorded first by function then by activity and object of expenditures. 69

90 General Fund Balance Sheet December 31, 2012 (With Comparative Amounts for 2011) Exhibit H-1 Assets Cash and investments $ 6,070,681 6,729,580 Receivables: Taxes: Personal property 22,536 12,450 Less allowance for doubtful accounts (883) (425) Net personal property 21,653 12,025 Motor vehicle 7,006 5,863 Hotel/motel room 17,831 12,377 Real property 15,982 20,532 Sales 469, ,492 Net taxes 532, ,289 Accounts 80,277 68,614 Grants and shared revenues 239,938 26,160 Accrued interest 10,900 15,571 Total receivables 863, ,634 Prepaid items 448, ,526 Inventory 9,375 10,880 Due from other funds 896, ,598 Restricted cash and investments - bond reserve - 1,973,360 Total assets $ 8,288,755 10,524,578 70

91 General Fund Balance Sheet, continued Exhibit H-1, continued Liabilities Accounts payable $ 376, ,203 Accrued payroll and related liabilities 122, ,798 Accrued liabilities 196, ,865 Funds held in trust 61,139 54,659 Unearned revenue 91, ,284 Accrued interest - 72,180 Interfund loans payable - 3,348,219 Total liabilities 847,610 4,470,208 Deferred Inflows Deferred property taxes 29,775 19,945 Total liabilities and deferred inflows 877,385 4,490,153 Fund Balance Nonspendable: Inventory 9,375 10,880 Prepaid items 448, ,526 Committed: Working capital 1,500,000 1,500,000 Insurance 126, ,418 Hospital line of credit 500, ,000 Unassigned 4,827,055 3,510,601 Total fund balance 7,411,370 6,034,425 Total liabilities, deferred inflows, and fund balance $ 8,288,755 10,524,578 71

92 General Fund Schedule of Revenues, Expenditures and Change in Fund Balance - Budget and Actual Year Ended December 31, 2012 (With Comparative Amounts for 2011) Exhibit H Variance Positive Budget Actual (Negative) Actual Revenues: Taxes: Sales $ 4,164,946 4,189,330 24,384 4,147,010 Property 1,007,290 1,013,580 6,290 1,001,020 Hotel/motel room 340, ,210 40, ,824 Payments in lieu of taxes 75,000 76,160 1,160 78,574 Penalty and interest 1,400 1, ,821 Total taxes 5,588,636 5,661,136 72,500 5,563,249 Licenses and permits: Building permits 40,000 48,866 8,866 48,571 Taxi permits 1, (260) 1,285 Department of Motor Vehicles commissions 95,000 85,378 (9,622) 89,143 Animal control licenses (295) 312 Business licenses 20,000 21,720 1,720 16,500 Miscellaneous 4,300 1,930 (2,370) 4,285 Total licenses and permits 161, ,114 (1,961) 160,096 Intergovernmental: Jail contract 465, , , ,341 Dispatch contracts 98,180 99, ,660 Raw fish tax 519, , ,451 Shared fisheries and landing tax - 13,889 13,889 5,310 Liquor tax 16,000 17,100 1,100 20,950 Library grants 22,602 8,498 (14,104) 18,040 Revenue sharing 228, , ,509 PERS relief 472, , ,535 Other grants 14,030 27,544 13,514 33,050 Total intergovernmental 1,836,190 1,953, ,282 1,987,846 72

93 General Fund Schedule of Revenues, Expenditures and Change in Fund Balance - Budget and Actual, continued Exhibit H-2, continued Variance Positive Budget Actual (Negative) Actual Revenues, continued: Charges for services: Administrative $ 1,751,443 1,776,800 25,357 1,864,606 Rents and leases 132, ,425 1, ,681 Copying charges 14,000 9,107 (4,893) 8,927 Work orders 2,200 2, ,838 Recreation 628, ,342 (18,658) 620,943 Library 25,000 9,208 (15,792) 9,953 Total charges for services 2,552,843 2,540,717 (12,126) 2,645,948 Fines and bails 11,000 8,386 (2,614) 12,177 Investment income 89,000 56,690 (32,310) 25,744 Other: Sale of land, equipment and gravel 9,250 20,212 10,962 16,034 Refuse contract 15,200 13,674 (1,526) 23,038 Other 19,800 17,938 (1,862) 20,117 Total other 44,250 51,824 7,574 59,189 Total revenues 10,282,994 10,431, ,345 10,454,249 Expenditures: General government: Mayor and council: Salaries 36,307 48,160 (11,853) 49,517 Employee benefits 14,496 20,750 (6,254) 19,119 Audit 72,145 81,114 (8,969) 66,705 Legal 125,000 89,317 35,683 97,175 Purchased services 3,800 2, ,147 Supplies and maintenance 12,500 12, ,156 Legislative representation 157, ,980 (4,980) 164,593 General and administrative 75,332 63,533 11, ,756 Total mayor and council 496, ,087 16, ,168 73

94 General Fund Schedule of Revenues, Expenditures and Change in Fund Balance - Budget and Actual, continued Exhibit H-2, continued Variance Positive Budget Actual (Negative) Actual Expenditures, continued: General government, continued: City manager: Salaries $ 228, ,773 24, ,729 Employee benefits 121, ,400 (6,775) 129,306 Purchased services 10,500 7,857 2,643 27,486 Supplies and maintenance 10,500 4,832 5,668 18,725 General and administrative 35,500 49,318 (13,818) 50,941 Total city manager 406, ,180 12, ,187 City clerk: Salaries 136, ,207 6, ,636 Employee benefits 95,491 99,108 (3,617) 88,748 Purchased services 18,500 7,944 10,556 7,395 Supplies and maintenance (769) - General and administrative 18,550 16,649 1,901 15,565 Total city clerk 268, ,677 14, ,344 Management information systems: Salaries 137, ,174 10, ,774 Employee benefits 77,032 80,851 (3,819) 76,137 Purchased services 8,900 2,744 6,156 2,284 Supplies and maintenance 32,000 40,538 (8,538) 35,974 General and administrative 13,000 4,814 8,186 12,378 Total management information systems 268, ,121 12, ,547 Finance: Salaries 371, ,538 6, ,602 Employee benefits 236, ,114 (10,710) 218,819 Purchased services 25,300 9,255 16,045 11,775 Supplies and maintenance 52,500 39,634 12,866 60,945 General and administrative 15,600 22,526 (6,926) 18,482 Capital outlay - 7,799 (7,799) - Total finance 701, ,866 10, ,623 74

95 General Fund Schedule of Revenues, Expenditures and Change in Fund Balance - Budget and Actual, continued Exhibit H-2, continued Variance Positive Budget Actual (Negative) Actual Expenditures, continued: General government, continued: Community development: Salaries $ 135, ,694 21,499 92,791 Employee benefits 79,768 76,781 2,987 54,461 Purchased services 47,584 19,588 27,996 69,697 Supplies and maintenance 9,698 5,376 4,322 8,072 General and administrative 7,500 12,559 (5,059) 8,493 Capital outlay ,493 Total community development 279, ,998 51, ,007 General services: Purchased services 14,997 16,972 (1,975) 7,838 Supplies and maintenance 19,900 25,994 (6,094) 26,980 General and administrative 41,700 33,627 8, ,900 Total general services 76,597 76, ,718 Contributions to organizations: Senior Citizens 50,000 50,000-50,000 Museum ,000 Chamber of Commerce 164, , ,000 Boys and Girls Club 25,000 25, Other 51,000 33,000 18,000 3,000 Total contributions to organizations 290, ,198 18, ,000 Total general government 2,787,578 2,651, ,858 2,756,594 Public safety: Police: Salaries 976, ,536 58, ,913 Employee benefits 648, ,411 (18,088) 626,061 Purchased services 97, ,995 (22,451) 60,327 Supplies and maintenance 55,000 51,657 3,343 71,422 75

96 General Fund Schedule of Revenues, Expenditures and Change in Fund Balance - Budget and Actual, continued Exhibit H-2, continued Variance Positive Budget Actual (Negative) Actual Expenditures, continued: Public safety, continued: Police, continued: General and administrative $ 59,780 48,701 11,079 49,622 Capital outlay ,160 Total police 1,837,388 1,805,300 32,088 1,780,505 Jail: Salaries 281, ,619 13, ,020 Employee benefits 204, ,124 2, ,091 Purchased services 51,721 47,601 4,120 42,316 Supplies and maintenance 12,000 8,892 3,108 8,859 General and administrative 103, ,838 2, ,199 Total jail 652, ,074 25, ,485 Animal control: Purchased services 62,560 64,142 (1,582) 73,248 Supplies and maintenance 2,500-2, Total animal control 65,060 64, ,531 Fire: Salaries 197, ,215 26, ,110 Employee benefits 118, ,752 (7,369) 114,825 Purchased services 156, ,140 (69,240) 214,848 Supplies and maintenance 38,550 30,706 7,844 44,010 General and administrative 16,200 13,745 2,455 13,123 Total fire 527, ,558 (39,707) 549,916 Volunteer training: Employee benefits 6,700-6,700 5,000 Purchased services 7,400 2,272 5,128 3,891 Supplies and maintenance 30,273 29,139 1,134 28,264 General and administrative 27,000 28,803 (1,803) 21,306 Total volunteer training 71,373 60,214 11,159 58,461 76

97 General Fund Schedule of Revenues, Expenditures and Change in Fund Balance - Budget and Actual, continued Exhibit H-2, continued Variance Positive Budget Actual (Negative) Actual Expenditures, continued: Public safety, continued: Emergency preparedness: Purchased services $ 1,000 3,048 (2,048) 1,540 Supplies and maintenance 1,950 1, General and administrative 3, , Total emergency preparedness 6,450 5, ,250 Building inspector: Salaries 67,009 63,953 3,056 61,041 Employee benefits 43,414 44,218 (804) 39,624 Purchased services 11,531 9,175 2,356 3,415 Supplies and maintenance 5,500 8,144 (2,644) 2,561 General and administrative 6,200 5,066 1,134 7,060 Total building inspector 133, ,556 3, ,701 Total public safety 3,294,585 3,260,308 34,277 3,187,849 Public works: Roads and streets: Salaries 255, ,421 (12,327) 217,104 Employee benefits 138, ,868 (30,016) 137,377 Purchased services 285, ,051 (67,405) 258,247 Supplies and maintenance 284, ,252 21, ,608 General and administrative 9,435 13,414 (3,979) 2,206 Total roads and streets 973,507 1,066,006 (92,499) 801,542 77

98 General Fund Schedule of Revenues, Expenditures and Change in Fund Balance - Budget and Actual, continued Exhibit H-2, continued Variance Positive Budget Actual (Negative) Actual Expenditures, continued: Public works, continued: City shop: Salaries $ 136, ,739 (10,413) 147,151 Employee benefits 90, ,234 (17,447) 113,309 Purchased services 71,088 73,077 (1,989) 64,280 Supplies and maintenance 54,945 42,608 12,337 39,163 General and administrative 12,825 8,056 4,769 11,667 Total city shop 365, ,714 (12,743) 375,570 Municipal building: Salaries 81,903 78,169 3,734 76,630 Employee benefits 69,661 69,687 (26) 64,330 Purchased services 117, ,785 (16,854) 102,782 Supplies and maintenance 24,265 31,178 (6,913) 21,174 General and administrative ,744 Capital outlay - 6,435 (6,435) - Total municipal building 294, ,916 (26,396) 266,660 Total public works 1,633,998 1,765,636 (131,638) 1,443,772 Parks and recreation: Salaries 564, ,071 22, ,836 Employee benefits 293, ,793 (8,033) 286,239 Purchased services 243, ,995 (1,251) 217,275 Supplies and maintenance 91,375 82,821 8, ,444 General and administrative 28,505 19,872 8,633 39,320 Capital outlay 67,500 67,500-12,381 Total parks and recreation 1,289,300 1,259,052 30,248 1,241,495 Library: Salaries 194, ,663 9, ,130 Employee benefits 130, ,468 (965) 126,498 Purchased services 41,808 43,451 (1,643) 40,224 Supplies and maintenance 43,000 32,509 10,491 37,111 General and administrative 32,855 27,120 5,735 27,639 Total library 442, ,211 23, ,602 78

99 Expenditures, continued: CITY OF SEWARD General Fund Schedule of Revenues, Expenditures and Change in Fund Balance - Budget and Actual, continued Exhibit H-2, continued Variance Positive Budget Actual (Negative) Actual Debt service: Principal payments $ 258, , ,477 Retirement benefits 779, , , ,278 Interest and other costs 231, ,201 78,379 75,547 Total debt service 1,269, , , ,302 Total expenditures 10,717,737 10,165, ,315 9,838,614 Excess of revenues over (under) expenditures (434,743) 265, , ,635 Other financing sources (uses): Transfers in 3,299,720 3,378,612 78,892 1,938,448 Transfers out (2,255,759) (2,267,584) (11,825) (3,270,288) Net other financing sources (uses) 1,043,961 1,111,028 67,067 (1,331,840) Net change in fund balance $ 609,218 1,376, ,727 (716,205) Beginning fund balance 6,034,425 6,750,630 Ending fund balance $ 7,411,370 6,034,425 79

100 SPECIAL REVENUE FUNDS Special Revenue Funds are used to account for expenditures associated with dedicated or restricted revenue sources. Litter Control (ALPAR) To account for the cost of a City administered litter control program. The program employs local youth and is financed by grants from the nonprofit Alaskans for Litter Prevention and Recycling and the Kenai Peninsula Borough. Two Lakes Park To account for acquisition of land, survey and development of the park area, including site preparation, picnic tables, and other improvements. Miscellaneous Pass-Through Grants To account for grants that are passed through to other agencies. Historical Records Preservation To account for the costs of preserving the City s historical records. Funding is provided by a State grant and the City. Cruise Ship Transportation Grant To account for a transportation grant to assist cruise ship passengers. Natural Disasters To account for the costs associated with flooding and other natural events. Fish Ditch Restoration The purpose of this fund is to account for grant proceeds used to restore a failed fish passage/drainage system. The project will involve the removal and disposal of failed culverts, and the design and construction of an open drainage fish ditch passage. The new passage will consist of excavation and placing of rip-rap for bank stabilization, landscaping of upland vehicle turnarounds, and signage. Library This Fund includes the Alaska Statehood grant project, which celebrates Seward as the Home of Alaska s Flag. A Statehood symposium hosts historic presentations on the Alaskan Statehood experience, a one-act play centers on Alaska s flag, and the Seward Mural Society designs and completes a mural interpreting Alaska s flag and its unique history. In addition, this Fund contains a grant to provide public access to Seward s historical photographic records for properties on the Seward Register of Historic Places, and other historic sites. A website is designed to provide easy public access to this information. 80

101 Nonmajor Special Revenue Funds Combining Balance Sheet December 31, 2012 Exhibit I-1 Parks and Recreation General Government Public Works Library Two Miscellaneous Historical Cruise Ship Fish Litter Lakes Pass Through Records Transportation Natural Ditch Assets Control Park Grants Preservation Grant Disasters Restoration Library Total Cash and investments $ - 2, ,832-40,438 11, ,228 Grants receivable , , , ,366 Other receivables 2, ,500 Total assets $ 2,500 2,520 68, , , ,772 40,438 11,438 1,142,094 Liabilities Accounts payable ,167 65,946-90,326 42, ,260 Unearned revenue , ,398 Due to other funds 2,500-55, , , ,335 Total liabilities 2,500-68, , ,741 42,821-1,003,993 Fund Balances Assigned: Parks and recreation - 2, ,520 General government , , ,495 Public works , ,031 Library ,438 11,438 Unassigned (deficit) (2,383) - (2,383) Total fund balances (deficit) - 2,520-2, ,832 11,031 (2,383) 11, ,101 Total liabilities and fund balances $ 2,500 2,520 68, , , ,772 40,438 11,438 1,142,094 81

102 Nonmajor Special Revenue Funds Combining Statement of Revenues, Expenditures and Change in Fund Balances (Deficit) Year Ended December 31, 2012 Exhibit I-2 Parks and Recreation General Government Public Works Library Two Miscellaneous Historical Cruise Ship Fish Litter Lakes Pass Through Records Transportation Natural Ditch Control Park Grants Preservation Grant Disasters Restoration Library Total Revenues: Intergovernmental $ , , ,395 37, ,571 Local grants 5, , ,435-19,098 Total revenues 5, , , ,395 43, ,001,669 Expenditures: Salaries and employee benefits 4, , ,782 Contracted services , , ,769-43, ,619 Supplies , , ,759 General and administrative 84-20, , ,408 Miscellaneous ,000-3, ,563 Capital outlay , , ,644 Total expenditures 5, , , , ,395 43, ,108,775 Excess of revenues over (under) expenditures ,663 (109,769) (107,106) Other financing sources - transfers in , ,601 Net change in fund balances , , ,495 Beginning fund balances (deficit) - 2, ,031 (2,383) 11,438 22,606 Ending fund balances (deficit) $ - 2,520-2, ,832 11,031 (2,383) 11, ,101 82

103 CAPITAL PROJECT FUNDS Capital Project Funds are established to account for the resources expended to acquire or construct assets of a relatively permanent nature. Hoben Park To account for improvements to Hoben Park, located adjacent to the Alaska SeaLife Center, including removal and replacement of fencing, monuments and trees, and installation of a sidewalk. Water Front Pavilion To account for the design and construction costs of a new water front pavilion. Fire Department Equipment - To account for the costs of purchasing a fire department breathing air compressor to refill fire air packs. Flood Mitigation To account for all activities related to the construction of the Japanese Creek levee project. Fourth and Adams To account for the costs of building a town square park to include a public restroom facility, bus pullout, covered waiting area, and green space, servicing to revitalize the downtown area. Capital Acquisition To account for purchase of equipment not financed by the Motor Pool Fund and capital improvements and projects of at least $20,

104 Nonmajor Capital Project Funds Combining Balance Sheet December 31, 2012 Exhibit J-1 Public Safety General Government Fire Department Flood 4th and Capital Assets Equipment Mitigation Adams Acquisition Total Cash and investments $ - - 8, , ,381 Grants receivable - 4, ,829 Total assets $ - 4,829 8, , ,210 Liabilities Due to other funds , ,326 Fund Balances Assigned - capital projects - - 8, , ,381 Unassigned (deficits) (478) (10,019) - - (10,497) Total fund balances (deficits) (478) (10,019) 8, , ,884 Total liabilities and fund balances $ - 4,829 8, , ,210 84

105 Nonmajor Capital Project Funds Combining Statement of Revenues, Expenditures and Change in Fund Balances (Deficits) Year Ended December 31, 2012 Exhibit J-2 Parks and Recreation Public Safety General Government Water Fire Hoben Front Department Flood 4th and Capital Park Pavilion Equipment Mitigation Adams Acquisition Total Revenues - intergovernmental $ - - 4, , ,845 Expenditures: Contracted services , ,278 Supplies - - 1, ,370 Capital outlay , , ,524 Other services and charges - - 3,253 46,944-16,361 66,558 Total expenditures - - 4, , , ,730 Excess of revenues over (under) expenditures (140,885) (140,885) Other financing sources (uses): Transfers in , ,455 Transfers out (17,808) (7,293) (25,101) Net other financing sources (uses) (17,808) (7,293) , ,354 Net change in fund balances (17,808) (7,293) , ,469 Beginning fund balances (deficits) 17,808 7,293 (478) (10,019) 8, , ,415 Ending fund balances (deficits) $ - - (478) (10,019) 8, , ,884 85

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107 ENTERPRISE FUNDS Enterprise Funds are established to account for the financing of self-supporting activities of governmental units, which render services to the general public on a user-charge basis. Enterprise Funds are maintained on the accrual basis of accounting. Electric To account for the provision of electrical service to the residents of the City and other areas within the electric service area. Water To account for the provision of water services to the residents of the City. Wastewater To account for the provision of sewer services to the residents of the City. Harbor To account for the provision of harbor and marine services to the public within the Small Boat Harbor basin. Seward Marine Industrial Center (SMIC) To account for the provision of marinerelated services to the public on the east side of Resurrection Bay. Parking To account for the provision of public parking services. Providence Seward Medical and Care Center (PSMCC) To account for the provision of services provided by the hospital and long-term care facilities. 87

108 Electric Enterprise Fund Statement of Net Position December 31, 2012 (With Comparative Amounts for 2011) Exhibit K Assets 2012 (Restated) Current assets: Cash and investments $ 1,896, ,624 Receivables: Accounts 1,088, ,064 Assessments 1,897 1,720 Interfund loan 17,650 16,769 Other 112,450 70,930 Less allowance for doubtful accounts (49,001) (41,628) Net receivables 1,171, ,855 Inventory 930, ,014 Total current assets 3,999,030 2,476,493 Restricted cash and investments: Bond retirement 677, ,911 Capital projects 1,060,378 1,032,695 Total restricted cash and investments 1,738,289 1,710,606 Assessments receivable, net of current portion 8,844 9,450 Interfund loan, net of current portion 334, ,973 Property, plant and equipment: Land and land rights 230, ,951 Buildings 9,456,075 9,425,786 Improvements other than buildings 39,847,679 38,938,470 Equipment 7,420,602 7,403,999 Total property, plant and equipment in service 56,955,307 55,999,206 Less accumulated depreciation (33,656,561) (31,937,234) Net property, plant and equipment in service 23,298,746 24,061,972 Construction in progress - 669,006 Total property, plant and equipment 23,298,746 24,730,978 Total assets 29,379,232 29,279,500 Deferred Outflows Unamortized deferred loss on refunding 14,713 19,617 Total assets and deferred outflows $ 29,393,945 29,299,117 88

109 Electric Enterprise Fund Statement of Net Position, continued Exhibit K-1, continued 2011 Liabilities 2012 (Restated) Current liabilities: Accounts payable $ 410, ,904 Accrued payroll and related liabilities 31,724 32,569 Accrued interest 26,332 27,666 Current portion: Accrued annual leave 21,972 17,576 Bonds payable 360, ,000 Customer deposits 191, ,771 Unearned revenue 22,926 48,726 Total current liabilities 1,064,443 1,111,212 Noncurrent liabilities, net of current portion: Accrued annual leave 71,167 64,568 Bonds payable 6,025,000 6,385,000 Unamortized bond premium 50,151 58,516 Total noncurrent liabilities 6,146,318 6,508,084 Total liabilities 7,210,761 7,619,296 Net Position Net investment in capital assets 16,878,308 17,962,079 Restricted for bond retirement 677, ,911 Unrestricted 4,626,965 3,039,831 Total net position 22,183,184 21,679,821 Total liabilities and net position $ 29,393,945 29,299,117 89

110 Electric Enterprise Fund Statement of Revenues, Expenses and Change in Net Position Year Ended December 31, 2012 (With Comparative Amounts for 2011) Exhibit K (Restated) Operating revenues: Residential $ 3,344,416 3,122,897 Small general service 1,868,892 1,723,846 Large general service 4,581,176 3,797,012 Industrial 948,750 1,280,676 Harbor power 288, ,015 Street and yard lights 68,648 68,437 Miscellaneous 123,790 76,641 Total operating revenues 11,224,511 10,309,524 Operating expenses: Power 5,267,436 5,651,255 Distribution 121, ,174 Administration and general 2,454,668 2,625,100 Depreciation 1,721,199 1,486,392 Total operating expenses 9,565,297 10,106,921 Earnings from operations 1,659, ,603 Nonoperating revenues (expenses): Intergovernmental - PERS on-behalf 37,451 27,850 Investment income 119, ,384 Interest expense (319,192) (334,618) Other expenses (51,206) (40,321) Net nonoperating revenues (expenses) (213,411) (245,705) Earnings (loss) before contributions and transfers 1,445,803 (43,102) Capital contributions 141, ,551 Transfers in 150, ,846 Transfers out (1,234,951) (1,172,831) Change in net position 503,363 (706,536) Beginning net position, as restated 21,679,821 22,386,357 Ending net position $ 22,183,184 21,679,821 (Of the total depreciation expense of $1,721,199 above, $937,286 was attributable to capital assets that were funded with capital contributions.) 90

111 Electric Enterprise Fund Statement of Cash Flows Year Ended December 31, 2012 (With Comparative Amounts for 2011) Exhibit K (Restated) Cash flows from operating activities: Receipts from customers and users $ 11,028,065 10,393,414 Payments to suppliers (5,914,948) (6,001,217) Payments to employees (1,208,988) (1,178,557) Payments for interfund services used (855,843) (847,691) Net cash flows from operating activities 3,048,286 2,365,949 Cash flows from noncapital financing activities: Transfers in 110,784 - Transfers out (1,234,951) (1,172,831) Net cash flows from noncapital financing activities (1,124,167) (1,172,831) Cash flows from capital and related financing activities: Principal payments on long-term debt (345,000) (330,000) Interest payments on long-term debt (323,987) (339,299) Acquisition of property, plant and equipment (288,967) (280,202) Capital contributions received 142, ,360 Increase (decrease) in due to other funds - (233,894) Transfers in 40, ,846 Net cash flows from capital and related financing activities (775,798) (673,189) Cash flows from investing activities: Investment income received 119, ,384 Interfund loan receipts 16,769 15,933 Net cash flows from investing activities 136, ,317 Net increase in cash and investments 1,284, ,246 Beginning cash and investments 2,350,230 1,712,984 Ending cash and investments $ 3,634,856 2,350,230 Reconciliation of cash and investments to statement of net position: Current assets 1,896, ,624 Restricted assets 1,738,289 1,710,606 $ 3,634,856 2,350,230 Reconciliation of earnings from operations to net cash provided (used) by operating activities: Earnings from operations 1,659, ,603 Adjustments to reconcile earnings from operations to net cash flows from operating activities: Depreciation 1,721,199 1,486,392 Other nonoperating expenses (51,206) (40,321) Noncash expense - PERS on-behalf 37,451 27,850 Increase in allowance for doubtful accounts 7,373 2,448 (Increase) decrease in assets: Receivables (205,376) 40,876 Inventory (66,533) 175,331 Increase (decrease) in liabilities: Accounts payable (65,543) 442,505 Accrued payroll and related liabilities (845) (2,186) Accrued annual leave 10,995 (10,115) Customer deposits 27,357 (3,303) Unearned revenue (25,800) 43,869 Net cash flows from operating activities $ 3,048,286 2,365,949 91

112 Electric Enterprise Fund Schedule of Operating Expenses Year Ended December 31, 2012 (With Comparative Amounts for 2011) Exhibit K Power: Salaries and employee benefits $ 162,356 37,153 Purchased services 121, ,557 Power for resale 4,946,497 5,418,616 Supplies, maintenance and other 37,065 79,929 Total power 5,267,436 5,651,255 Distribution: Salaries and employee benefits 231, ,881 Salary credits - work orders (176,230) (132,565) Purchased services 176, ,563 Supplies and maintenance 12, ,165 Supply credits - work orders (123,319) (67,270) Administration and general Total distribution 121, ,174 Administration and general: Salaries and employee benefits 1,038, ,637 Purchased services 161, ,175 Supplies and maintenance 229, ,451 Administrative fee 855, ,291 Other 169, ,546 Total administration and general 2,454,668 2,625,100 Depreciation 1,721,199 1,486,392 Total operating expenses $ 9,565,297 10,106,921 92

113 Electric Enterprise Fund Schedule of Composition of Net Position December 31, 2012 (With Comparative Amounts for 2011) Exhibit K Grants and other external contributions $ 28,300,062 28,158,385 Related accumulated amortization (18,009,821) (17,072,535) City-generated equity 11,892,943 10,593,971 Total net position $ 22,183,184 21,679,821 93

114 Electric Enterprise Fund Schedule of Electric Capital Projects Year Ended December 31, 2012 Exhibit K-6 Customer Projects Funding source - Electric Fund customers $ 141,677 Capital outlay - contracted services $ (141,677) 94

115 Water Enterprise Fund Statement of Net Position December 31, 2012 (With Comparative Amounts for 2011) Exhibit K-7 Assets Current assets: Cash and investments $ 1,117,071 1,845,042 Receivables: Accounts 78,003 79,547 Assessments 7,069 7,069 Grants and loans 8,085 2,241 Other 5,635 5,635 Less allowance for doubtful accounts (9,104) (3,580) Net receivables 89,688 90,912 Inventory 55,362 59,084 Total current assets 1,262,121 1,995,038 Restricted cash and investments - capital projects 243,372 84,064 Assessments receivable, net of current portion 10,603 17,672 Interfund loan 1,973,360 1,973,360 Property, plant and equipment: Land and land rights 2,507 2,507 Buildings 1,287,853 1,287,853 Improvements other than buildings 6,203,911 6,164,576 Equipment 1,281,116 1,277,216 Total property, plant and equipment in service 8,775,387 8,732,152 Less accumulated depreciation (4,305,441) (4,084,262) Net property, plant and equipment in service 4,469,946 4,647,890 Construction in progress 441, ,238 Total property, plant and equipment 4,911,919 5,109,128 Total assets $ 8,401,375 9,179,262 Liabilities Current liabilities: Accounts payable 100,461 9,323 Accrued payroll and related liabilities 5,016 4,619 Accrued interest 23, ,193 Current portion: Accrued annual leave 4,584 4,584 Notes payable 125, ,838 Total current liabilities 259, ,557 Noncurrent liabilities, net of current portion: Accrued annual leave 17,459 14,341 Notes payable 1,967,355 2,069,011 Total noncurrent liabilities 1,984,814 2,083,352 Total liabilities 2,243,979 2,839,909 Net Position Net investment in capital assets 2,819,112 2,456,279 Unrestricted 3,338,284 3,883,074 Total net position 6,157,396 6,339,353 Total liabilities and net position $ 8,401,375 9,179,262 95

116 Water Enterprise Fund Statement of Revenues, Expenses and Change in Net Position Year Ended December 31, 2012 (With Comparative Amounts for 2011) Exhibit K Operating revenues: Residential $ 408, ,713 Small general service 116, ,659 Large general service 197, ,964 Industrial 230, ,721 Seward Marine Industrial Center 54,210 57,209 Ship water sales 65,243 62,427 Miscellaneous 76,879 67,039 Total operating revenues 1,150,109 1,069,732 Operating expenses: Salaries and benefits 295, ,490 Purchased services 289, ,494 Supplies and maintenance 53,594 84,050 Administration and general 243, ,744 Other 110,447 20,305 Depreciation 221, ,527 Total operating expenses 1,213,624 1,186,610 Loss from operations (63,515) (116,878) Nonoperating revenues (expenses): Intergovernmental - PERS on-behalf 21,984 17,612 Investment income 10,951 25,888 Interest expense (33,908) (44,040) Net nonoperating revenues (expenses) (973) (540) Loss before contributions and transfers (64,488) (117,418) Capital contributions 20, ,085 Transfers out (137,539) (91,745) Change in net position (181,957) (72,078) Beginning net position 6,339,353 6,411,431 Ending net position $ 6,157,396 6,339,353 (Of the total depreciation expense of $221,179 above, $28,997 was attributable to capital assets that were funded with capital contributions.) 96

117 Exhibit K-9 CITY OF SEWARD Water Enterprise Fund Statement of Cash Flows Year Ended December 31, 2012 (With Comparative Amounts for 2011) Cash flows from operating activities: Receipts from customers and users $ 1,157,177 1,070,679 Payments to suppliers (358,685) (440,018) Payments to employees (270,075) (272,676) Payments for interfund services used (243,326) (233,744) Net cash flows from operating activities 285, ,241 Cash flows from noncapital financing activities - transfers out (137,539) (91,745) Cash flows from capital and related financing activities: Principal payments on long-term debt (560,042) (38,622) Interest payments on long-term debt (164,449) (4,247) Acquisition of property, plant and equipment (23,970) (9,092) Capital contributions received 21, ,297 Net cash flows from capital and related financing activities (727,166) 476,336 Cash flows from investing activities - investment income received 10,951 25,888 Net increase (decrease) in cash and investments (568,663) 534,720 Beginning cash and investments 1,929,106 1,394,386 Ending cash and investments $ 1,360,443 1,929,106 Reconciliation of cash and investments to statement of net assets: Current assets 1,117,071 1,845,042 Restricted assets 243,372 84,064 $ 1,360,443 1,929,106 Reconciliation of loss from operations to net cash provided (used) by operating activities: Loss from operations $ (63,515) (116,878) Adjustments to reconcile loss from operations to net cash flows from operating activities: Depreciation 221, ,527 Noncash expense - PERS on-behalf 21,984 17,612 Increase (decrease) in allowance for doubtful accounts 5,524 (46) (Increase) decrease in assets: Accounts receivable 1, Inventory 3,722 10,738 Increase (decrease) in liabilities: Accounts payable 91,138 4,093 Accrued payroll and related liabilities 397 (3,317) Accrued annual leave 3,118 2,519 Net cash flows from operating activities $ 285, ,241 97

118 Water Enterprise Fund Schedule of Composition of Net Position December 31, 2012 (With Comparative Amounts for 2011) Exhibit K Grants and other external contributions $ 3,556,708 3,536,638 Related accumulated amortization (1,887,004) (1,858,007) Contributions from other funds 498, ,756 City-generated equity 3,988,936 4,161,966 Total net position $ 6,157,396 6,339,353 98

119 Wastewater Enterprise Fund Statement of Net Position December 31, 2012 (With Comparative Amounts for 2011) Exhibit K-11 Assets Current assets: Cash and investments $ 605, ,247 Receivables: Accounts 90,721 77,425 Other 23,078 20,000 Less allowance for doubtful accounts (4,082) (3,484) Net receivables 109,717 93,941 Total current assets 715, ,188 Restricted cash and investments - capital projects 112, ,115 Property, plant and equipment: Land and land rights 111, ,011 Buildings 2,418,398 2,418,398 Improvements other than buildings 8,952,968 8,952,968 Equipment 757, ,515 Total property, plant and equipment in service 12,239,614 12,198,892 Less accumulated depreciation (7,480,473) (7,189,300) Net property, plant and equipment in service 4,759,141 5,009,592 Total assets $ 5,586,955 5,795,895 Liabilities Current liabilities: Accounts payable 3,611 23,559 Accrued payroll and related liabilities 4,552 4,698 Accrued interest Current portion: Accrued annual leave 4,606 4,555 Notes payable 61,025 60,143 Total current liabilities 73,989 93,246 Noncurrent liabilities, net of current portion: Accrued annual leave 24,011 16,201 Notes payable 1,332 62,347 Total noncurrent liabilities 25,343 78,548 Total liabilities 99, ,794 Net Position Net investment in capital assets 4,696,784 4,887,102 Unrestricted 790, ,999 Total net position 5,487,623 5,624,101 Total liabilities and net position $ 5,586,955 5,795,895 99

120 Wastewater Enterprise Fund Statement of Revenues, Expenses and Change in Net Position Year Ended December 31, 2012 (With Comparative Amounts for 2011) Exhibit K Operating revenues: Residential $ 515, ,208 Small general service 156, ,725 Large general service 222, ,729 Seward Marine Industrial Center 29,120 32,513 Miscellaneous 5,908 5,565 Total operating revenues 929, ,740 Operating expenses: Salaries and benefits 277, ,509 Purchased services 235, ,402 Supplies and maintenance 48,936 40,125 Administration and general 146, ,120 Other 12,427 15,813 Depreciation 291, ,693 Total operating expenses 1,012,275 1,033,662 Loss from operations (82,761) (168,922) Nonoperating revenues (expenses): Intergovernmental - PERS on-behalf 20,810 17,285 Investment income 7,066 7,541 Interest expense (1,752) (10,809) Net nonoperating revenues (expenses) 26,124 14,017 Loss before contributions and transfers (56,637) (154,905) Capital contributions - 250,200 Transfers out (79,841) (75,380) Change in net position (136,478) 19,915 Beginning net position 5,624,101 5,604,186 Ending net position $ 5,487,623 5,624,101 (Of the total depreciation expense of $291,173 above, $222,329 was attributable to capital assets that were funded with capital contributions.) 100

121 Wastewater Enterprise Fund Statement of Cash Flows Year Ended December 31, 2012 (With Comparative Amounts for 2011) Exhibit K Cash flows from operating activities: Receipts from customers and users $ 913, ,498 Payments to suppliers (317,285) (299,687) Payments to employees (249,139) (263,071) Payments for interfund services used (146,101) (144,120) Net cash flows from operating activities 201, ,620 Cash flows from noncapital financing activities - transfers out (79,841) (75,380) Cash flows from capital and related financing activities: Principal payments on long-term debt (60,133) (116,355) Interest payments on long-term debt (1,848) (14,450) Capital contributions received - 250,200 Acquisition of property, plant and equipment (40,722) (21,935) Net cash flows from capital and related financing activities (102,703) 97,460 Cash flows from investing activities - investment income received 7,066 7,541 Net increase in cash and investments 25, ,241 Beginning cash and investments 692, ,121 Ending cash and investments $ 718, ,362 Reconciliation of cash and investments to statement of net assets: Current assets $ 605, ,247 Restricted assets 112, ,115 $ 718, ,362 Reconciliation of loss from operations to net cash provided (used) by operating activities: Loss from operations (82,761) (168,922) Adjustments to reconcile loss from operations to net cash flows from operating activities: Depreciation 291, ,693 Noncash expense - PERS on-behalf 20,810 17,285 Increase in allowance for doubtful accounts (Increase) decrease in assets: Accounts receivable (13,296) (3,395) Other receivable (3,078) - Increase (decrease) in liabilities: Accounts payable (19,948) 14,653 Accrued payroll and related liabilities (146) (3,138) Accrued annual leave 7,861 1,291 Net cash flows from operating activities $ 201, ,

122 Wastewater Enterprise Fund Schedule of Composition of Net Position December 31, 2012 (With Comparative Amounts for 2011) Exhibit K Grants and other external contributions $ 10,405,799 10,405,799 Related accumulated amortization (7,037,640) (6,815,311) Contributions from other funds 161, ,550 City-generated equity 1,957,914 1,872,063 Total net position $ 5,487,623 5,624,

123 Harbor Enterprise Fund Statement of Net Position December 31, 2012 (With Comparative Amounts for 2011) Exhibit K Assets 2012 (Restated) Current assets: Cash and investments $ 3,769,029 3,582,014 Receivables: Accounts 221, ,058 Grants 57, ,554 Commercial passenger vessel tax 343,265 1,411,435 Assessments 4,286 4,286 Less allowance for doubtful accounts (29,016) (19,100) Net receivables 597,390 2,026,233 Total current assets 4,366,419 5,608,247 Restricted cash and investments: Bond retirement 709, ,910 Capital projects 1,673,626 1,366,705 Total restricted cash and investments 2,383,536 2,076,615 Assessments receivable, net of current portion 6,430 10,716 Property, plant and equipment: Land and land rights 5,117,479 5,117,479 Buildings 610, ,169 Improvements other than buildings 28,596,393 22,416,800 Equipment 1,582,444 1,551,131 Total property, plant and equipment in service 35,906,485 29,695,579 Less accumulated depreciation (12,345,984) (11,264,921) Net property, plant and equipment in service 23,560,501 18,430,658 Construction in progress 95,761 4,689,982 Total property, plant and equipment 23,656,262 23,120,640 Total assets 30,412,647 30,816,218 Deferred Outflows Unamortized deferred loss on refunding 58,058 64,508 Total assets and deferred outflows $ 30,470,705 30,880,726 Liabilities Current liabilities: Accounts payable 152, ,091 Accrued payroll and related liabilities 17,910 21,857 Accrued interest 29,366 32,229 Current portion: Accrued annual leave 15,138 14,491 Bonds payable 420, ,000 Interfund loan 23,588 22,358 Unearned revenue 934, ,508 Customer deposits 60,721 55,030 Total current liabilities 1,653,662 2,056,564 Noncurrent liabilities, net of current portion: Accrued annual leave 47,040 40,920 Bonds payable 6,060,000 6,480,000 Interfund loan 78, ,424 Unamortized bond premium 95, ,345 Total noncurrent liabilities 6,281,847 6,727,689 Total liabilities 7,935,509 8,784,253 Net Position Net investment in capital assets 17,138,350 16,200,803 Restricted for bond retirement 709, ,910 Restricted for commercial passenger vessel tax 1,788,933 2,373,605 Unrestricted 2,898,003 2,812,155 Total net position 22,535,196 22,096,473 Total liabilities and net position $ 30,470,705 30,880,

124 Harbor Enterprise Fund Statement of Revenues, Expenses and Change in Net Position Year Ended December 31, 2012 (With Comparative Amounts for 2011) Exhibit K (Restated) Operating revenues: Moorage $ 1,572,263 1,455,315 Wharfage 43,783 36,508 Boat lift fees 90,711 98,418 Power sales 461, ,062 Rentals and leases 356, ,848 Passenger transit fees 551, ,421 Miscellaneous 94, ,449 Total operating revenues 3,169,744 2,968,021 Operating expenses: Salaries and benefits 1,005, ,929 Purchased services 533, ,259 Power for resale 243, ,946 Supplies and maintenance 61,472 76,396 Administration and general 327, ,230 Depreciation 1,081,063 1,086,311 Total operating expenses 3,252,243 3,127,214 Loss from operations (82,499) (74,050) Nonoperating revenues (expenses): Intergovernmental - PERS on-behalf 73,050 59,532 Dredging and breakwater grant - 95,145 Investment income 59,211 48,982 Commercial passenger vessel tax 343,265 1,411,435 Interest expense (299,765) (320,623) Dredging (699,332) (305,059) Net nonoperating revenues (expenses) (523,571) 989,412 Earnings (loss) before contributions and transfers (606,070) 915,362 Capital contributions 1,324,067 1,788,083 Transfers in 320, ,210 Transfers out (599,274) (391,849) Change in net position 438,723 3,306,806 Beginning net position, as restated 22,096,473 18,789,667 Ending net position $ 22,535,196 22,096,473 (Of the total depreciation expense of $1,081,063 above, $622,174 was attributable to capital assets that were funded with capital contributions.) 104

125 Exhibit K-17 CITY OF SEWARD Harbor Enterprise Fund Statement of Cash Flows Year Ended December 31, 2012 (With Comparative Amounts for 2011) (Restated) Cash flows from operating activities: Receipts from customers and users $ 3,045,369 3,026,492 Payments to suppliers (1,902,296) (2,074,216) Payments to employees (929,233) (857,287) Payments for interfund services used (327,766) (326,230) Net cash flows from operating activities (113,926) (231,241) Cash flows from noncapital financing activities: Transfers in 320, ,451 Transfers out (599,274) (391,849) Nonoperating intergovernmental revenues received - 95,145 Net cash flows from noncapital financing activities (279,274) 302,747 Cash flows from capital and related financing activities: Principal payments on long-term debt (400,000) (385,000) Interest payments on long-term debt (304,553) (326,486) Acquisition of property, plant and equipment (1,616,685) (1,831,003) Capital contributions received 1,760,085 2,768,897 Interfund loan payment (22,357) (21,194) Commercial passenger vessel tax receipts 1,411, ,294 Transfers in - 395,759 Net cash flows from capital and related financing activities 827, ,267 Cash flows from investing activities - investment income received 59,211 48,982 Net increase in cash and investments 493,936 1,095,755 Beginning cash and investments 5,658,629 4,562,874 Ending cash and investments $ 6,152,565 5,658,629 Reconciliation of cash and investments to statement of net assets: Current assets 3,769,029 3,582,014 Restricted assets 2,383,536 2,076,615 $ 6,152,565 5,658,629 Reconciliation of loss from operations to net cash provided (used) by operating activities: Loss from operations (82,499) (74,050) Adjustments to reconcile loss from operations to net cash flows from operating activities: Depreciation 1,081,063 1,086,311 Noncash expense - PERS on-behalf 73,050 59,532 Nonoperating expenses (699,332) (305,059) Decrease in allowance for doubtful accounts 9,916 - (Increase) decrease in assets - receivables (80,975) 7,449 Increase (decrease) in liabilities: Accounts payable (364,653) (1,060,556) Accrued payroll and related liabilities (3,947) (1,668) Accrued annual leave 6,767 5,778 Customer deposits 5,691 4,230 Unearned revenue (59,007) 46,792 Net cash flows from operating activities $ (113,926) (231,241) 105

126 Harbor Enterprise Fund Schedule of Composition of Net Position December 31, 2012 (With Comparative Amounts for 2011) Exhibit K (Restated) Grants and other external contributions $ 23,345,548 22,021,481 Related accumulated amortization (7,833,432) (7,211,258) Contributions from other funds 5,677,742 5,357,742 City-generated equity 1,345,338 1,928,508 Total net position $ 22,535,196 22,096,

127 Harbor Enterprise Fund Schedule of Harbor Capital Projects Year Ended December 31, 2012 Exhibit K-19 Cruise Ship Seward SBH Boardwalk Harbor Marine Repairs and Extension Expansion Center Dock Renovations Funding sources: State grants $ 16, ,715 1,029,736 9,578 Federal grants ,310 Harbor Fund ,034 - Total funding sources $ 16, ,715 1,307,770 47,888 Capital outlay - contracted services $ 16, ,715 1,307,770 47,

128 Seward Marine Industrial Center Enterprise Fund Statement of Net Position December 31, 2012 (With Comparative Amounts for 2011) Exhibit K-20 Assets Current assets Cash $ 144,503 - Account receivable 53, ,767 Grant receivable 34,035 - Total current assets 232, ,767 Property, plant and equipment: Land and land rights 12,021,821 12,021,821 Buildings 280, ,287 Improvements other than buildings 26,798,104 26,798,104 Equipment 908, ,789 Docks and floats 13,145,688 13,145,688 Total property, plant and equipment in service 53,154,689 53,154,689 Less accumulated depreciation (28,184,008) (27,582,176) Net property, plant and equipment in service 24,970,681 25,572,513 Construction in progress 216,529 - Total property, plant and equipment 25,187,210 25,572,513 Total assets $ 25,419,439 25,799,280 Liabilities Current liabilities: Accounts payable 17, ,304 Due to other funds - 20,949 Accrued payroll and related liabilities Unearned revenue 40,321 43,064 Total current liabilities 57, ,317 Net Position Net investment in capital assets 25,187,210 25,572,513 Unrestricted 174,728 52,450 Total net position 25,361,938 25,624,963 Total liabilities and net position $ 25,419,439 25,799,

129 Seward Marine Industrial Center Enterprise Fund Statement of Revenues, Expenses and Change in Net Position Year Ended December 31, 2012 (With Comparative Amounts for 2011) Exhibit K Operating revenues: Moorage $ 2,589 3,916 Wharfage 13,347 6,176 Boat lift fees 102, ,254 Storage 121, ,797 Rentals and leases 136, ,782 Power sales 31,957 26,115 Miscellaneous 5,442 3,414 Total operating revenues 414, ,454 Operating expenses: Salaries and benefits 74,278 73,568 Purchased services 104,352 87,788 Supplies and maintenance 51,408 45,892 Administration and general 96,589 88,630 Depreciation 601, ,831 Miscellaneous - 1,870 Total operating expenses 928, ,579 Loss from operations (513,721) (486,125) Nonoperating revenues (expenses): Intergovernmental - PERS on-behalf - 3,307 Fleet relocation grant - 180,389 Fleet relocation study - (180,389) Investment income Interest expense - (1,894) Net nonoperating revenues (expenses) 944 1,514 Loss before contributions and transfers (512,777) (484,611) Capital contributions 216,529 - Transfers in 123, ,640 Transfers out (89,964) (90,325) Change in net position (263,025) (450,296) Beginning net position 25,624,963 26,075,259 Ending net position $ 25,361,938 25,624,963 (Of the total depreciation expense of $601,831 above, $482,529 was attributable to capital assets that were funded with capital contributions.) 109

130 Seward Marine Industrial Center Enterprise Fund Statement of Cash Flows Year Ended December 31, 2012 (With Comparative Amounts for 2011) Exhibit K Cash flows from operating activities: Receipts from customers and users $ 585, ,372 Payments to suppliers (249,043) (40,777) Payments to employees (74,119) (72,093) Payments for interfund services used (96,589) (88,630) Net cash flows from operating activities 165,319 32,872 Cash flows from noncapital financing activities: Transfers in 123, ,640 Transfers out (89,964) (90,325) Net cash flows from noncapital financing activities 33,223 34,315 Cash flows from capital and related financing activities: Principal payments on long-term debt - (59,030) Interest payments on long-term debt - (2,066) Decrease in due to other funds (20,949) (6,192) Acquisition of property, plant, and equipment (216,528) - Capital contributions received 182,494 - Net cash flows from capital and related financing activities (54,983) (67,288) Cash flows from investing activities - investment income received Net increase in cash and investments 144,503 - Beginning cash and investments - - Ending cash and investments $ 144,503 - Reconciliation of loss from operations to net cash provided (used) by operating activities: Loss from operations (513,721) (486,125) Adjustments to reconcile loss from operations to net cash flows from operating activities: Depreciation 601, ,831 Noncash expense - PERS on-behalf - 3,307 (Increase) decrease in assets - accounts receivable 173,076 (182,146) Increase (decrease) in liabilities: Accounts payable (93,283) 94,773 Accrued payroll and related liabilities 159 (1,832) Unearned revenue (2,743) 3,064 Net cash flows from operating activities $ 165,319 32,

131 Seward Marine Industrial Center Enterprise Fund Schedule of Composition of Net Position December 31, 2012 (With Comparative Amounts for 2011) Exhibit K Grants and other external contributions $ 35,725,414 35,725,414 Related accumulated amortization (25,231,475) (24,748,946) Contributions from other funds 17,023,864 16,902,582 City-generated deficit (2,155,865) (2,254,087) Total net position $ 25,361,938 25,624,

132 Parking Enterprise Fund Statement of Net Position December 31, 2012 (With Comparative Amounts for 2011) Exhibit K-24 Assets Current assets - cash and investments $ 464, ,843 Property, plant and equipment: Improvements other than buildings 513, ,540 Equipment 139, ,806 Total property, plant and equipment in service 653, ,346 Less accumulated depreciation (527,849) (503,881) Net property, plant and equipment in service 125, ,465 Total assets $ 589, ,308 Liabilities Current liabilities: Accounts payable 7,000 9,331 Accrued payroll and related liabilities Total current liabilities 7,169 9,331 Net Position Net investment in capital assets 125, ,465 Unrestricted 457, ,512 Total net position 582, ,977 Total liabilities and net position $ 589, ,

133 Parking Enterprise Fund Statement of Revenues, Expenses and Change in Net Position Year Ended December 31, 2012 (With Comparative Amounts for 2011) Exhibit K Operating revenues - parking fees $ 293, ,105 Operating expenses: Salaries and employee benefits 89, ,824 Supplies and maintenance 15,586 17,952 Purchased services 66,571 10,669 Rents and leases 13,000 13,000 Administration and general 30,550 39,612 Depreciation 23,968 16,756 Total operating expenses 239, ,813 Earnings from operations 54,182 63,292 Nonoperating revenues: Intergovernmental - PERS on-behalf Investment income 3,033 3,532 Total nonoperating revenues 3,033 4,146 Earnings before transfers 57,215 67,438 Transfers out (23,475) (21,448) Change in net position 33,740 45,990 Beginning net position 548, ,987 Ending net position $ 582, ,

134 Parking Enterprise Fund Statement of Cash Flows Year Ended December 31, 2012 (With Comparative Amounts for 2011) Exhibit K Cash flows from operating activities: Receipts from customers and users $ 293, ,105 Payments to suppliers (97,488) (32,385) Payments to employees (89,417) (106,210) Payments for interfund services used (30,550) (39,612) Net cash flows from operating activities 75,988 89,898 Cash flows from noncapital financing activities - transfers out (23,475) (21,448) Cash flows from capital and related financing activities - acquisition of property, plant and equipment - (50,477) Cash flows from investing activities - investment income received 3,033 3,532 Net increase in cash and investments 55,546 21,505 Beginning cash and investments 408, ,338 Ending cash and investments $ 464, ,843 Reconciliation of earnings from operations to net cash provided (used) by operating activities: Earnings from operations 54,182 63,292 Adjustments to reconcile earnings from operations to net cash flows from operating activities: Depreciation 23,968 16,756 Noncash expense - PERS on-behalf Increase (decrease) in liabilities: Accounts payable (2,331) 9,236 Accrued payroll and related liabilities Net cash flows from operating activities $ 75,988 89,

135 Parking Enterprise Fund Schedule of Composition of Net Position December 31, 2012 (With Comparative Amounts for 2011) Exhibit K Grants and other external contributions $ 425, ,893 Related accumulated amortization (425,893) (425,893) Contributions from other funds 7,650 7,650 City-generated equity 575, ,327 Total net position $ 582, ,

136 Exhibit K-28 Providence Seward Medical & Care Center Enterprise Fund Statement of Net Position December 31, 2012 (With Comparative Amounts for 2011) 2011 Assets 2012 (Restated) Current assets: Cash and investments $ 2,435,687 1,434,633 Receivables: Accounts 3,456,000 3,739,000 Other 386, ,000 Less allowance for doubtful accounts (696,000) (1,262,000) Net receivables 3,146,000 3,384,000 Total current assets 5,581,687 4,818,633 Restricted cash and investments - capital projects Bond retirement 1,973,360 - Capital projects - 8,984 Total restricted cash and investments 1,973,360 8,984 Other assets 246,000 32,320 Property, plant and equipment: Buildings 23,968,704 24,982,687 Improvements other than buildings 8,959,585 8,317,429 Equipment 4,689,119 4,610,203 Total property, plant and equipment in service 37,617,408 37,910,319 Less accumulated depreciation (11,879,713) (8,207,769) Net property, plant and equipment in service 25,737,695 29,702,550 Total assets $ 33,538,742 34,562,487 Liabilities Current liabilities: Accounts payable 184, ,000 Accrued payroll and related liabilities 1,031, ,000 Accrued interest payable 383, ,703 Current portion: Capital leases - 15,000 Bonds payable 1,460,000 1,550,000 Interfund loan payable 65,807 - Unearned revenue 32,000 22,000 Payable to Providence Health and Services - Washington 3,418,000 2,819,000 Due to contractual agencies 192, ,000 6,766,272 6,220,703 Noncurrent liabilities, net of current portion: Bonds payable 24,860,000 26,320,000 Interfund loan payable 3,219,887 - Other 220,000 44,000 Unamortized bond premium 353, ,531 Total noncurrent liabilities 28,653,175 26,733,531 Total liabilities 35,419,447 32,954,234 Net Position Net investment in capital assets (935,593) 1,448,019 Restricted for bond retirement 1,973,360 - Unrestricted (deficit) (2,918,472) 160,234 Total net position (1,880,705) 1,608,253 Total liabilities and net position $ 33,538,742 34,562,

137 Providence Seward Medical & Care Center Enterprise Fund Statement of Revenues, Expenses and Change in Net Position Year Ended December 31, 2012 (With Comparative Amounts for 2011) Exhibit K (Restated) Operating revenues: Net patient service revenues $ 18,106,000 16,192,000 Miscellaneous 622, ,000 Total operating revenues 18,728,364 16,838,000 Operating expenses: Salaries and benefits 11,959,000 11,820,000 Purchased services 2,762,000 2,762,000 Supplies and maintenance 1,044,000 1,049,114 Administration and general 735, ,000 Depreciation 4,012,579 2,398,169 Total operating expenses 20,512,579 19,028,283 Loss from operations (1,784,215) (2,190,283) Nonoperating revenues (expenses): Investment income 8,435 15,701 Interest expense (1,348,255) (1,346,962) Nonoperating grant 1,000 - Gain (loss) on disposal of capital assets 4,037 (22,267) Net nonoperating revenues (expenses) (1,334,783) (1,353,528) Loss before contributions and transfers (3,118,998) (3,543,811) Capital contributions 30,000 - Transfers in 1,053,063 1,756,584 Transfers out (1,453,023) (134,704) Change in net position (3,488,958) (1,921,931) Beginning net position, as restated 1,608,253 3,530,184 Ending net position $ (1,880,705) 1,608,

138 Providence Seward Medical & Care Center Enterprise Fund Statement of Cash Flows Year Ended December 31, 2012 (With Comparative Amounts for 2011) Exhibit K (Restated) Cash flows from operating activities: Receipts from customers and users $ 18,976,364 15,380,253 Payments to suppliers (4,021,680) (3,206,114) Payments to employees (11,828,000) (11,754,000) Net cash flows from operating activities 3,126, ,139 Cash flows from noncapital financing activities: Transfers in 1,053,063 1,756,584 Transfers out (1,453,023) (134,704) Net cash flows from noncapital financing activities (399,960) 1,621,880 Cash flows from capital and related financing activities: Principal payments on long-term debt (1,565,000) (1,488,000) Acquisition of property, plant, and equipment (43,687) - Issuance of interfund loans 3,348,219 - Principal payments on interfund loans (62,525) - Capital contributions received 31,000 - Interest payments on long-term debt (1,308,736) (1,377,588) Decrease in due to other funds (169,000) (59,000) Net cash flows from capital and related financing activities 230,271 (2,924,588) Cash flows from investing activities - investment income received 8,435 15,701 Net increase (decrease) in cash and investments 2,965,430 (866,868) Beginning cash and investments 1,443,617 2,310,485 Ending cash and investments $ 4,409,047 1,443,617 Reconciliation of cash and investments to statement of net assets: Current assets 2,435,687 1,434,633 Restricted assets 1,973,360 8,984 $ 4,409,047 1,443,617 Reconciliation of loss from operations to net cash provided (used) by operating activities: Loss from operations (1,784,215) (2,190,283) Adjustments to reconcile loss from operations to net cash flows from operating activities: Depreciation 4,012,579 2,398,169 Increase (decrease) in allowance for doubtful accounts (566,000) 64,000 (Increase) decrease in assets: Accounts receivable 804,000 (1,513,747) Other assets (213,680) - Increase (decrease) in liabilities: Accounts payable (42,000) 3,000 Other payables 775,000 1,601,000 Accrued payroll and related liabilities 131,000 66,000 Unearned revenue 10,000 (8,000) Net cash flows from operating activities $ 3,126, ,

139 INTERNAL SERVICE FUNDS Motor Pool The Motor Pool Internal Service Fund accounts for payments from departments for the use of vehicles, in order to accumulate cash to forward-fund replacement of vehicles. This funding mechanism spreads the cost of the vehicles over the expected life of the vehicle in each program's annual budget, rather than to show the cost of vehicles as a one-time expenditure to each fund in the year of purchase. Compensated Annual Leave The Compensated Annual Leave Fund was created in 2005 for the purpose of accumulating cash reserves to pay annual leave cash-outs for governmental funds. 119

140 Motor Pool Internal Service Fund Statement of Net Position December 31, 2012 (With Comparative Amounts for 2011) Exhibit L-1 Assets Current assets: Cash and investments $ 1,089, ,780 Receivables: Accrued interest 56,052 59,684 Interfund loans 71,745 68,113 Prepaid expenses 7,895 7,895 Total current assets 1,225,472 1,022,472 Interfund loans, net of current portion 991,041 1,062,786 Property, plant and equipment: Equipment and vehicles 5,388,091 5,359,335 Less accumulated depreciation (3,183,072) (2,789,796) Net property, plant and equipment in service 2,205,019 2,569,539 Construction in progress 405,768 - Total property, plant and equipment 2,610,787 2,569,539 Total assets $ 4,827,300 4,654,797 Liabilities: Current liabilities: Accounts payable 235,092 - Accrued interest 2,604 4,977 Current portion of capital lease obligations 198, ,219 Total current liabilities 435, ,196 Noncurrent liabilities, net of current portion - capital lease obligations 31, ,498 Total liabilities 467, ,694 Net Position Net investment in capital assets 2,381,289 2,148,822 Unrestricted 1,978,817 2,080,281 Total net position 4,360,106 4,229,103 Total liabilities and net position $ 4,827,300 4,654,

141 Motor Pool Internal Service Fund Statement of Revenues, Expenses and Change in Net Position Year Ended December 31, 2012 (With Comparative Amounts for 2011) Exhibit L Operating revenues - vehicle rental $ 508, ,682 Operating expenses: Depreciation 425, ,842 Supplies and maintenance - 7,584 Total operating expenses 425, ,426 Earnings (loss) from operations 83,402 (8,744) Nonoperating revenues (expenses): Gain on disposal of capital assets 1,522 5,832 Investment income 62,910 65,504 Interest expense (16,831) (18,088) Net nonoperating revenues (expenses) 47,601 53,248 Change in net position 131,003 44,504 Beginning net position 4,229,103 4,184,599 Ending net position $ 4,360,106 4,229,103 (Of the total depreciation expense of $425,597 above, $0 was attributable to capital assets that were funded with capital contributions.) 121

142 Motor Pool Internal Service Fund Statement of Cash Flows Year Ended December 31, 2012 (With Comparative Amounts for 2011) Exhibit L Cash flows from operating activities: Receipts from vehicle rentals and other charges $ 508, ,682 Payments to suppliers - (15,479) Net cash flows from operating activities 508, ,203 Cash flows from capital and related financing activities: Principal payments on long-term debt (191,219) (184,507) Interest payments on long-term debt (19,204) (20,411) Acquisition of equipment and vehicles (231,753) (167,280) Proceeds from sale of capital assets 1,522 5,832 Net cash flows from capital and related financing activities (440,654) (366,366) Cash flows from investing activities: Interfund loan receipts 68,113 64,666 Investment income received 66,542 68,952 Net cash flows from investing activities 134, ,618 Net increase in cash and investments 203, ,455 Beginning cash and investments 886, ,325 Ending cash and investments $ 1,089, ,780 Reconciliation of earnings (loss) from operations to net cash provided (used) by operating activities: Earnings (loss) from operations $ 83,402 (8,744) Adjustments to reconcile earnings (loss) from operations to net cash flows from operating activities: Depreciation 425, ,842 Increase in assets - prepaid expenses - (7,895) Net cash flows from operating activities $ 508, ,203 Noncash capital and related financing activities - purchase of equipment included in accounts payable $ (235,092) - 122

143 Motor Pool Internal Service Fund Schedule of Composition of Net Position December 31, 2012 (With Comparative Amounts for 2011) Exhibit L Grants and other external contributions $ 97,289 97,289 Related accumulated amortization (97,289) (97,289) Contributions from other funds 832, ,324 City-generated equity 3,527,782 3,396,779 Total net position $ 4,360,106 4,229,

144 Compensated Annual Leave Internal Service Fund Statement of Net Position December 31, 2012 (With Comparative Amounts for 2011) Exhibit L-5 Assets Current assets - cash and investments $ 454, ,643 Liabilities Current liabilities - accrued annual leave 115, ,489 Long-term accrued annual leave 339, ,154 Total liabilities 454, ,643 Net Position Unrestricted - - Total liabilities and net position $ 454, ,

145 Compensated Annual Leave Internal Service Fund Statement of Revenues, Expenses and Change in Net Position Year Ended December 31, 2012 (With Comparative Amounts for 2011) Exhibit L Operating revenues - interfund charges $ 364, ,846 Operating expenses - salaries and benefits 364, ,846 Change in net position - - Beginning net position - - Ending net position $

146 Compensated Annual Leave Internal Service Fund Statement of Cash Flows Year Ended December 31, 2012 (With Comparative Amounts for 2011) Exhibit L Cash flows from operating activities: Receipts from interfund charges $ 364, ,846 Payments to employees (335,941) (412,391) Net cash flows from operating activities 28,961 (31,545) Beginning cash and investments 425, ,188 Ending cash and investments $ 454, ,643 Reconciliation of earnings from operations to net cash provided by operating activities: Earnings from operations $ - - Adjustments to reconcile earnings from operations to net cash flows from operating activities - increase (decrease) in accrued annual leave 28,961 (31,545) Net cash flows from operating activities $ 28,961 (31,545) 126

147 Teen Council Agency Fund Statement of Changes in Assets and Liabilities Year Ended December 31, 2012 Exhibit M-1 Assets Balance at Balance at January 1, December 31, 2012 Additions Deletions 2012 Cash and investments $ 47,351 30,691 23,323 54,719 Other assets Total assets $ 47,501 30,691 23,323 54,869 Liabilities Accounts payable 2,561-1,143 1,418 Due to Teen Council 44,940 30,691 22,180 53,451 Total liabilities $ 47,501 30,691 23,323 54,

148 Schedule of Governmental Capital Assets December 31, 2012 (With Comparative Amounts for 2011) Exhibit N Capital assets: Land and land improvements $ 5,432,289 5,432,289 Buildings 58,381,690 57,991,642 Improvements other than buildings 16,167,267 16,119,523 Equipment 8,336,747 8,308,728 Construction in progress 16,428,130 8,714,138 Total capital assets $ 104,746,123 96,566,

149 Schedule of Changes in Governmental Capital Assets Year Ended December 31, 2012 Exhibit N-2 Balance at Balance at January 1, December 31, 2012 Additions Deletions 2012 Land and land improvements $ 5,432, ,432,289 Buildings 57,991, ,048-58,381,690 Improvements other than buildings 16,119,523 47,744-16,167,267 Equipment 8,308,728 55,969 27,950 8,336,747 Construction in progress 8,714,138 7,730,923 16,931 16,428,130 $ 96,566,320 8,224,684 44, ,746,

150 Schedule of Governmental Capital Assets by Function and Activity December 31, 2012 Exhibit N-3 Land and Improve- Land ments Improve- Other than Function and Activity ments Buildings Buildings Equipment Total General government: City Council/Mayor $ ,554 44,554 City manager , ,198 City clerk ,988 37,988 Finance ,115 97,115 Community development - 5,232-7,142 12,374 Municipal building - 2,450,550 16,291 54,169 2,521,010 Alaska SeaLife Center - 49,160,493 3,193,270 4,445,742 56,799,505 General services - 1,479,080 8,005,937 53,025 9,538,042 Community and Senior Center - 1,473, ,473,935 Non-departmental 5,432,289 68, ,501,157 Total general government 5,432,289 54,638,158 11,215,498 5,230,933 76,516,878 Public safety: Police ,682,105 1,682,105 Jail ,408 9,408 Animal control - 156, ,720 Fire - 1,075,742 46, ,405 2,007,893 Building inspection ,600 2,600 Seward Volunteer Ambulance Corp ,210 12,210 Total public safety - 1,232,462 46,746 2,591,728 3,870,936 Public works: Streets - 254,567 3,324, ,374 3,835,253 Engineering ,621 3,621 City shop - 785,766-65, ,232 Total public works - 1,040,333 3,324, ,461 4,690,106 Parks and recreation - 744,071 1,567, ,956 2,437,938 Library - 726,666 12,800 62, ,135 Total capital assets allocated to functions $ 5,432,289 58,381,690 16,167,267 8,336,747 88,317,993 Construction in progress 16,428,130 Total capital assets $ 104,746,

151 Schedule of Changes in Governmental Capital Assets by Function and Activity Year Ended December 31, 2012 Exhibit N-4 Capital Capital Assets at Assets at January 1, December 31, Function and Activity 2012 Additions Deletions 2012 General government: City Council/Mayor $ 44, ,554 City manager 491, ,198 City clerk 37, ,988 Finance 65,386 31,729-97,115 Community development 12, ,374 Municipal building 2,478,189 42,821-2,521,010 Alaska Sealife Center 56,546, ,363 27,950 56,799,505 General services 9,538, ,538,042 Community and Senior Center 1,473, ,473,935 Non-departmental 5,501, ,501,157 Total general government 76,188, ,913 27,950 76,516,878 Public safety: Police 1,682, ,682,105 Jail 9, ,408 Animal control 156, ,720 Fire 1,960,386 47,507-2,007,893 Building inspection 2, ,600 Seward Volunteer Ambulance Corp 6,300 5,910-12,210 Total public safety 3,817,519 53,417-3,870,936 Public works: Streets 3,835, ,835,253 Engineering 3, ,621 City shop 851, ,232 Total public works 4,690, ,690,106 Parks and recreation 2,353,507 84,431-2,437,938 Library 802, ,135 Construction in progress 8,714,138 7,730,923 16,931 16,428,130 $ 96,566,320 8,224,684 44, ,746,

152 Schedule of Expenditures of Federal Awards Year Ended December 31, 2012 Exhibit O-1 Grant Title Catalog of Federal January 1, Federal December 31, Domestic Total 2012 Share of 2012 Assistance Grant Grant Receivable Expen- Federal Receivable Number Number Award (Deferred) ditures Receipts (Deferred) Department of Agriculture Passed through State of Alaska Department of Natural Resources Volunteer Fire Assistance Grant VFA $ 12,066-12,066 12,066 - Department of Commerce Passed through State of Alaska Department of Education & Early Development: Alaska OWL Project FY13 IT Aide Award B ,380-1,778 2,380 (602) Alaska OWL Project FY13 IT Aide Award B , ,380 (2,380) OWL Travel Grant (ARRA) Total Department Commerce - 2,039 5,021 (2,982) Department of Justice Passed through State of Alaska Department of Health and Social Services - Title V - Delinquency Prevention Grants ,000-9,000 9,000 - National Endowment for the Humanities Community Library Construction CH , , , ,104 Passed through Alaska Humanities Forum - Phase II: The 3-Country Jujiro Wade Global Archiving Project G ,000 (450) Total National Endowment for the Humanities (450) 332, , ,104 Institute of Museum and Library Services Passed through State of Alaska Department of Education and Early Development- Continuing Education Program CED ,500-1,500 1,500 - Department of Energy Passed through Alaska Energy Authority- Energy Efficiency and Conservation (ARRA) ,800 46,724 36,387 83,111 - Denali Commission D Float Replacement Seward Small Boat Harbor ,000-38,310-38,310 Department of Health & Human Services Affordable Care Act - Health Center Planning P04CS ,000-80,000-80,

153 Schedule of Expenditures of Federal Awards, continued Exhibit O-1, continued Grant Title Catalog of Federal January 1, Federal December 31, Domestic Total 2012 Share of 2012 Assistance Grant Grant Receivable Expen- Federal Receivable Number Number Award (Deferred) ditures Receipts (Deferred) Department of Homeland Security Assistance to Firefighters - Operation and Safety EMW-2010-FO $ 19,157 11,519 4,697 16,216 - Passed through State of Alaska Department of Military and Veterans Affairs: September 2012 Flood (FEMA) FEMA-4094-DR-AK 301, , ,468 November 2011 Windstorm (FEMA) FEMA-4054-DR-AK 50,491-50,491 31,474 19,017 Dairy Hill Drainage Upgrade (FEMA) ,487-45,628-45,628 Total CFDA ,587 31, ,113 State Homeland Security Program SS-T ,000 26,160-26,160 - Total Department of Homeland Security 37, ,284 73, ,113 Total Federal Financial Assistance $ 83, , , ,

154 Schedule of State Financial Assistance Year Ended December 31, 2012 Exhibit P-1 January 1, State December 31, Total 2012 Share of 2012 Grant Grant Receivable Expendi- State Receivable Grant Title Number Award (Deferred) Adjustments tures Receipts (Deferred) Department of Commerce, Community and Economic Development * Road/Levee Construction 09-DC-527 $ 1,750,000 47, , ,844 4,828 Fish Ditch Restoration 09-DC , ,143 1,143 - * Security and Fire Protection for Commercial Passenger Vessels 11-DC-640 2,000, , , ,252 9,936 * Mooring Dolphins and Dock Improvements at Seward Marine Center 11-DC-350 1,500, ,082-1,029,736 1,276,818 - * Community Library 11-DC-374 4,700,000 1,364,672-2,206,402 3,506,175 64,899 * Alutiiq Pride Shellfish Hatchery 12-DC , , , ,000 - Construction of New Water Storage Tank 12-RR-030 1,992,000 2,241-20,070 14,226 8,085 * CDQ Fishing Fleet Relocation Study 12-DC , , , ,374 - Cruise Ship Boardwalk Extension Grant 12-DM ,000 (25,000) - 16,729 - (8,271) D Float Replacement Seward Small Boat Harbor , ,578-9,578 * State Revenue Sharing N/A 228, , ,000 Shared Fishery Taxes N/A 13, ,889 13,889 - Total Department of Commerce, Community and Economic Development 2,168,665-4,309,111 6,160, ,055 Department of Military and Veteran Affairs Dairy Hill Drainage Upgrade , ,209-15,209 December 09 Storm Surge AK ,181 52, ,404 (18,398) November 2011 Windstorm FEMA-4054-DR-AK 16, ,830 10,491 6,339 * September 2012 Flood FEMA-4094-DR-AK 100, , ,489 Total Department of Military and Veteran Affairs 52, ,807 81, ,639 Department of Revenue * Fish Taxes N/A 519, , ,689 - Liquor Licenses N/A 17, ,100 17,100 - * Commercial Passenger Vessel Tax 2009 N/A 771,065 (587,877) - 587, * Commercial Passenger Vessel Tax 2010 (Note 2) N/A 374,293 (374,293) - 356,309 - (17,984) Commercial Passenger Vessel Tax 2011 (Note 2) N/A 324, ,865 (324,865) Passed through Kenai Peninsula Borough Commercial Passenger Vessel Tax 2011 (Note 2) N/A 1,086, ,086,570 (1,086,570) Total Department of Revenue (962,170) - 1,480,975 1,948,224 (1,429,419) Department of Natural Resources * Jesse Lee Home Rehabilitation Project, Phase II PT ,000, ,108 (45,395) 176,532 66, ,532 Department of Administration * PERS Relief N/A 625, , ,512 - Department of Corrections Community Jails Program 2011 N/A 9,785 (1,857) - 1, Department of Environmental Conservation Vessel Wash-Down and Wastewater Recycling Facility , ,544 39,507 34,037 Department of Education and Early Development FY13 Grant-In-Aid FY13GIA 1,998 1,998 1,998 - Public Library Assistance PLA , ,500 6,500 - Total Department of Education and Early Development - - 8,498 8,498 - Alaska Energy Authority Sea Life Center Heat Pump Project ,580 25,031-19,536 44,567 - Total State Financial Assistance $ 1,394,504 (45,395) 6,828,372 8,975,637 (798,156) * Major program 134

155 Notes to the Schedules of Expenditures of Federal Awards and State Financial Assistance Year Ended December 31, 2012 (1) Basis of Presentation The accompanying Schedules of Expenditures of Federal Awards and State Financial Assistance include the grant activity of City of Seward and are presented on the modified accrual basis of accounting. The information in the schedules is presented in accordance with the requirements of OMB Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations and the State of Alaska Audit Guide and Compliance Supplement for State Single Audits. (2) Commercial Passenger Vessel Tax Amounts shown as cash receipts on the commercial passenger vessel taxes have been receipted into revenue in Harbor Fund trial balance on an accrual basis. Any unspent portion of these funds, shown on the state schedule as deferred is reported as restricted net position in the fund financial statements. At December 31, 2012, the unspent receipted portion of the funding is $1,429,419. In addition, $343,365 has been accrued to revenue though not yet received or reported on the state schedule. In the fund financial statements total restricted net assets is reported as $1,788,933. (3) Current Year Adjustments The City received an audit in 2012 of the Jesse Lee Home Rehabilitation Project, Phase II from the State of Alaska Department of Natural Resources. At December 31, 2011, the expenditures incurred were reported to the State for reimbursement and recorded as a receivable at year end. The overall total error identified during the audit was $45,395 of expenditures that were deemed disallowed by the State. Due to these disallowed costs, the beginning receivable was adjusted to reflect this amount that would not be reimbursed by the State granting agency. 135

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157 STATISTICAL SECTION

158 Statistical Section This part of the City of Seward's comprehensive annual financial report presents detailed information as a context for understanding what the information in the financial statements, note disclosures, and required supplementary information says about the City's overall financial health. Contents Page Financial Trends These schedules contain trend information to help the reader understand how the City's financial performance and well-being have changed over time. Table 1 Net Assets/Position by Component 138 Table 2 Changes in Net Assets/Net Position Table 3 Fund Balances of Governmental Funds 141 Table 4 Changes in Fund Balances of Governmental Funds 142 Table 5 General Fund Revenues by Source 143 Table 6 General Fund Tax Revenues by Source 144 Revenue Capacity These schedules contain information to help the reader assess the City's most significant local revenue sources, sales and property tax. Table 7 Property Tax Rates 145 Table 8 Property Tax Levies and Collections 146 Table 9 Assessed and Estimated Actual Value of Taxable Property 147 Table 10 Principal Property Taxpayers 148 Table 11 Principal Taxable Sales by Line of Business 149 Debt Capacity These schedules present information to help the reader assess the affordability of the City's current level of outstanding debt and the City's ability to issue additional debt Table 12 Ratios of Outstanding Debt by Type 150 Table 13 Ratio of Net General Obligation Bonded Debt to Assessed Value and Net General Obligation Bonded Debt per Capita 151 Table 14 Computation of Direct and Overlapping Bonded Debt 152 Table 15 Legal Debt Margin 153 Table 16 Ratio of Annual Debt Service Expenditures for General Obligation Debt to Total General Fund Expenditures 154 Table 17 Revenue Bond Coverage - Electric Enterprise Fund 155 Table 18 Revenue Bond Coverage - Harbor Enterprise Fund 156 Demographic and Economic Information These schedules offer demographic and economic indicators to help the reader understand the environment within which the City's financial activities take place. Table 19 Demographic and Economic Statistics 157 Table 20 Prinipal Employers 158 Table 21 Full-Time Equivalent Employees by Fund 159 Table 22 Operating Indicators by Function 160 Table 23 Capital Asset Statistics by Function 161 Table 24 Property Value, Construction, and Bank Deposits 162 Table 25 Miscellaneous Statistics

159 Table 1 CITY OF SEWARD Net Assets/Position by Component Last Ten Fiscal Years (accrual basis of accounting) (amounts expressed in thousands) Governmental Activities: Invested in capital assets, net of related debt $ 57,398 55,726 56,495 56,663 58,016 58,016 56,208 56,122 56,122 61,393 Restricted , Unrestricted 5,009 6,636 5,946 5,901 5,025 5,993 8,619 9,983 5,785 8,669 Total governmental activities net amounts $ 62,407 62,362 62,441 62,564 63,041 64,009 64,827 66,105 65,637 70,088 Business-type Activities: Invested in capital assets, net of related debt $ 67,048 66,690 66,155 64,760 65,440 66,754 64,112 67,773 68,657 65,910 Restricted ,111 3,465 1,388 5,150 Unrestricted 10,354 9,727 12,089 12,837 14,595 14,796 14,777 10,290 15,649 10,944 Total business-type activities net assets $ 77,402 76,417 78,244 77,597 80,051 82,250 81,000 81,528 85,694 82,004 Primary government: Invested in capital assets, net of related debt $ 124, , , , , , , , , ,302 Restricted ,111 3,465 5,118 5,176 Unrestricted 15,363 16,363 18,035 18,738 19,620 20,789 23,396 20,273 21,434 19,613 Total primary government net assets/net position $ 139, , , , , , , , , ,

160 Table 2 CITY OF SEWARD Changes in Net Assets/Position Last Ten Fiscal Years (accrual basis of accounting) Expenses Governmental activities: General government $ 1,355,573 1,731,427 1,770,306 2,158,969 1,161,765 2,501,443 1,451, ,716 2,031,590 1,981,876 Public safety 2,286,556 2,299,873 2,383,911 2,440,488 2,980,785 2,934,607 3,029,935 3,168,421 3,140,921 3,360,091 Public works 1,145,730 1,265,153 1,383,178 1,704,296 2,650,977 1,310,474 1,456,468 1,991,925 1,988,748 2,410,794 Parks and recreation 996,112 1,046,681 1,099,556 1,075, ,222 1,236,411 1,247,366 1,462,365 1,395,705 1,320,447 Library 316, , , , , , , , , ,200 * Healthcare facilities 247, , , , , ,797 3,910,190 2,804, Sealife Center 1,839,836 1,804,367 1,028,302 1,578,315 1,672,365 1,736,147 1,294, ,528 51, ,206 Unallocated interest 466, , , , , , ,982 1,505, , ,778 Total governmental activities expenses 8,653,920 9,318,844 8,933,471 10,608,662 10,674,164 10,646,893 13,105,644 12,901,285 9,249,196 10,691,392 Business-type activities: Electric 5,926,703 6,419,925 6,863,724 9,195,187 8,029,054 8,626,745 10,363,820 8,569,240 10,493,512 9,935,695 Water 1,346, , , , ,799 1,194,311 1,066,860 1,093,419 1,230,833 1,246,997 Wastewater - 706, , , , , ,909 1,078,318 1,044,654 1,013,492 Harbor 2,441,498 2,282,991 2,402,810 2,648,290 2,457,216 3,006,069 3,934,866 5,947,066 3,676,190 4,243,734 Seward Marine Industrial Center 1,541,608 1,591,311 1,521,930 1,278,774 1,076,730 1,149, , ,290 1,081, ,458 * PSMCC ,416,615 21,856,797 Parking 75,983 95, , , , , , , , ,522 Total business-type activities expenses 11,331,891 11,783,310 12,366,348 14,745,742 13,299,906 14,998,060 17,391,230 17,771,562 38,149,073 39,462,695 Total primary government expenses $ 19,985,811 21,102,154 21,299,819 25,354,404 23,974,070 25,644,953 30,496,874 30,672,847 47,398,269 50,154,087 Program Revenues Governmental activities: Charges for services: General government $ 468, ,173 61, , , , , , , ,410 Public safety 683, , , , , , , , , ,645 Public works 149, , , , , ,833 84, ,196 40,910 36,721 Parks and recreation 471, , , , , , , , , ,342 Library 8,144 8,218 8,601 8,677 7,736 12,800 14,799 13,794 9,953 9,208 * Healthcare facilities ,569, Operating grants and contributions 182, , , , ,176 84, , ,310 1,128,278 1,037,711 Capital grants and contributions 146,170 1,053, ,372 2,124,245 1,459, ,171 2,860,172 1,709,977 3,573,497 3,442,599 Total governmental activities program revenues 2,109,601 2,852,725 2,581,354 3,918,885 3,958,124 2,706,214 5,092,725 6,574,765 6,304,580 6,129,636 Business-type activities: Electric 6,539,213 6,943,720 7,381,178 7,979,436 8,428,106 8,565,180 9,060,636 8,842,150 10,309,524 11,224,511 Water 1,445, ,970 1,019,832 1,008, , , ,713 1,034,888 1,069,732 1,150,109 Wastewater - 702, , , , , , , , ,514 Harbor 1,795,350 1,818,674 1,943,424 2,499,065 2,751,916 2,776,676 2,596,924 2,803,828 2,968,021 3,169,744 Seward Marine Industrial Center 330, , , , , , , , , ,737 * PSMCC ,838,000 18,728,364 Parking 114, , , , , , , , , ,443 Operating grants and contributions ,260,476 65, , ,228 2,674, , ,295 Capital grants and contributions 429, ,130 3,149, ,554 2,578,739 2,769,005 2,354,601 1,988,430 2,291,919 1,732,343 Total business-type activities program revenues 10,654,169 11,442,374 14,787,683 14,950,274 16,093,163 16,614,948 16,652,451 18,683,507 35,425,229 37,797,060 Total primary government program revenues $ 12,763,770 14,295,099 17,369,037 18,869,159 20,051,287 19,321,162 21,745,176 25,258,272 41,729,809 43,926,696 Net (expenses)/revenue: Governmental activities $ (6,544,319) (6,466,119) (6,352,117) (6,689,777) (6,716,040) (7,940,679) (8,012,919) (6,326,520) (2,944,616) (4,561,756) Business-type activities (677,722) (340,936) 2,421, ,532 2,793,257 1,616,888 (738,779) 911,945 (2,723,844) (1,665,635) Total primary government net expense $ (7,222,041) (6,807,055) (3,930,782) (6,485,245) (3,922,783) (6,323,791) (8,751,698) (5,414,575) (5,668,460) (6,227,391) * PSMCC (healthcare facilities) is a new enterprise fund in 2011 previously reported as governmental fund and discreetly presented component unit. See Statement of Activities; page 19 (Exhibit A-2) of CAFR 139

161 Table 2, continued CITY OF SEWARD Changes in Net Assets/Position Last Ten Fiscal Years (accrual basis of accounting) continued General Revenues and Other Changes in Net Assets/Position Governmental activities: Taxes: Sales tax $ 2,894,455 3,123,314 3,411,283 3,518,435 4,068,600 4,137,758 3,585,304 3,742,751 4,147,010 4,189,330 Property tax 670, , , , , , , , ,737 1,025,266 Other tax 77,135 89, , , , , , , , ,370 Grants and entitlements 462, , , , ,799 1,354, , ,653 1,346,755 1,250,895 Investment earnings 151, , , , , , , ,940 91, ,662 Other 4,754, ,501 - (287,018) - - 1,622, , Transfers 816, ,313 1,279,903 1,502, , ,319 1,466,933 1,258,053 (1,290,998) 1,970,983 NPO/OPEB , Total governmental activities 9,826,729 6,421,180 6,432,171 6,812,197 7,193,871 8,908,438 8,830,729 7,604,788 5,707,150 9,012,506 Business-type activities: Investment earnings 139, , , , , , , , , ,176 Grants and entitlements , , ,040 1,411, ,265 Other 71,125 22, , ,952-5, Transfers (816,854) (857,313) (1,279,903) (1,502,583) (989,801) (912,319) (1,466,933) (1,258,053) 1,290,998 (1,970,983) Total business-type activities (606,297) (718,593) (593,864) (852,505) (338,038) 581,088 (511,302) (383,725) 2,905,562 (1,418,542) Total primary government 9,220,432 5,702,587 5,838,307 5,959,692 6,855,833 9,489,526 8,319,427 7,221,063 8,612,712 7,593,964 Changes in Net Assets/Position Governmental activities $ 3,282,410 (44,939) 80, , , , ,810 1,278,268 2,762,534 4,450,750 Business-type activities $ (1,284,019) (1,059,529) 1,827,471 (647,973) 2,455,219 2,197,976 (1,250,081) 528, ,718 (3,084,177) Total primary government 1,998,391 (1,104,468) 1,907,525 (525,553) 2,933,050 3,165,735 (432,271) 1,806,488 2,944,252 1,366,573 Beginning Net Assets/Position $ 137,884, ,882, ,778, ,685, ,160, ,093, ,259, ,826, ,386, ,725,348 Ending Net Assets/Position $ 139,882, ,778, ,685, ,160, ,093, ,259, ,826, ,633, ,330, ,091,921 Change in Net Assets/Position 1,998,391 (1,104,468) 1,907,525 (525,553) 2,933,050 3,165,735 (432,271) 1,806,488 2,944,252 1,366,573 ** Beginning net assets/position restated for PSMCC becoming a new fund in See Pg 18 (Exhibit A-2) of CAFR for details 140

162 Fund Balances of Governmental Funds Last Ten Fiscal Years (modified accrual basis of accounting) Table 3 PRIOR TO GASB General Fund Reserved $ 369, , , , , , , ,948 Unreserved: Designated 2,104,417 2,019,418 2,569,418 2,569,418 2,126,418 2,126,418 2,126,418 2,126,418 Undesignated 2,967,799 3,169,462 2,819,780 1,076,827 1,433,552 1,289,619 2,983,424 4,039,264 Total General Fund $ 5,441,631 5,741,196 5,880,733 4,034,654 4,018,830 4,109,627 5,766,871 6,750,630 All Other Governmental Funds Reserved - debt service $ 811, , , , ,478 1,063,260 1,177,697 2,472,376 Unreserved, reported in: Special revenue funds 139, ,732 22,148 (510,560) (34,649) 409, ,330 75,369 Capital projects funds 543, , ,827 1,635,625 (315,698) 12,321, , ,860 Total all other Governmental Funds $ 1,494,895 1,267,509 1,193,981 1,786, ,131 13,793,964 1,586,512 2,783,605 Total all Governmental Funds $ 6,936,526 7,008,705 7,074,714 5,821,506 4,613,961 17,903,591 7,353,383 9,534,235 POST GASB 54 General Fund Nonspendable 397, ,897 Committed 2,126,418 2,126,418 Unassigned 3,510,601 4,827,055 Total General Fund 6,034,425 7,411,370 All Other Governmental Funds Restricted 3,730,137 26,080 Assigned 279, ,865 Unassigned (deficit) (12,880) (12,880) Total all other Governmental funds 3,997, ,065 Total all Governmental Funds 10,031,583 8,316,435 GASB 54 implementation effective from Prior years not restated. See p. 20 (Exhibit B-1) of CAFR 141

163 Table 4 CITY OF SEWARD Changes in Fund Balances of Governmental Funds Last Ten Fiscal Years (Modified Accrual Basis of Accounting) Revenues Taxes $ 3,637,867 4,201,664 4,581,860 4,756,073 5,363,265 5,535,081 4,932,555 5,102,154 5,563,249 5,661,136 Licenses and permits 286, , , , , , , , , ,114 Intergovernmental 1,239,445 1,935,598 1,891,500 3,057,175 2,072,811 2,355,038 3,907,151 3,409,407 6,542,863 5,749,394 Charges for Services 1,828,901 1,824,270 1,883,636 2,078,065 2,375,767 2,610,515 2,553,480 2,853,310 2,645,948 2,540,717 Investment earnings 151, , , , , , , ,940 25,744 56,752 Other revenues 284, , , , , ,411 2,448,998 3,334, , ,556 Total Revenues 7,428,590 8,538,656 8,910,517 10,862,496 10,396,325 12,032,612 14,186,121 14,987,430 15,104,934 14,875,669 Expenditures: General government 1,914,692 2,050,449 2,736,435 2,737,586 2,956,706 3,369,478 3,485,932 2,771,383 3,186,257 3,084,356 Public safety 2,408,441 2,987,078 2,878,864 2,792,296 3,011,920 3,333,433 4,774,604 4,127,704 4,767,575 3,535,153 Public works 1,377,601 1,401,447 1,425,348 1,962,053 2,678,493 1,662,695 1,618,075 1,886,709 1,883,297 2,339,996 Parks and Recreation 1,006, ,232 1,068,880 1,074,141 1,084,002 1,198,798 1,608,957 1,392,483 1,563,361 1,501,366 Library 283, , , , , , ,427 1,026,797 2,364,176 7,291,434 * Healthcare facilities 96, ,119 66,058 1,615,516 1,114,693 14,590,201 12,172,365 30, Debt service: Principal (a) 527, , , , , , , , ,477 - Retirement benefits (a) ,143 1,805, , , , , , ,294 Interest and other costs (a) 498, , , , ,544 1,328, ,299 1,461,315 75, ,201 Total expenditures 8,114,038 9,404,856 9,851,614 13,614,754 12,593,671 27,061,379 26,203,261 14,064,631 14,571,968 18,561,800 Excess of revenues over (under) expenditures (685,448) (866,200) (941,097) (2,752,258) (2,197,346) (15,028,767) (12,017,140) 922, ,966 (3,686,131) Other financing sources (uses) Proceeds from debt issuance: Par value ,480,000 - Premium ,854 - Transfers in 1,836,606 2,258,432 3,126,673 3,731,769 3,631,316 3,176,788 2,947,053 2,792,441 1,979,290 4,263,668 Transfers out (1,039,752) (1,401,119) (2,119,567) (2,232,719) (2,641,515) (2,264,469) (1,480,120) (1,534,388) (3,270,288) (2,292,685) Net bond proceeds 95,937 81, ,406, Total other financing sources (uses) 892, ,379 1,007,106 1,499, ,801 28,318,397 1,466,933 1,258,053 2,448,856 1,970,983 Net change in fund balance $ 207,343 72,179 66,009 (1,253,208) (1,207,545) 13,289,630 (10,550,207) 2,180,852 2,981,822 (1,715,148) Beginning fund balances $ 6,729,183 6,936,526 7,008,705 7,074,714 5,821,506 4,613,961 17,903,590 7,353,383 7,049,761 * 10,031,583 Ending fund balances 6,936,526 7,008,705 7,074,714 5,821,506 4,613,961 17,903,590 7,353,383 9,534,235 10,031,583 8,316,435 Net change in fund balances $ 207,343 72,179 66,009 (1,253,208) (1,207,545) 13,289,629 (10,550,207) 2,180,852 2,981,822 (1,715,148) Including Healthcare Facilities:# Debt service as a percentage of noncapital expenditures (a b) ^ 13.52% 15.88% 13.24% 10.18% 9.50% 7.85% 5.83% 17.39% 1.94% 1.48% Total non-capital expenditures (b) $ 7,586,426 $ 8,449,265 $ 9,050,686 $ 12,721,918 $ 11,738,694 $ 26,322,380 $ 25,415,566 $ 13,226,245 $ 9,074,143 $ 10,354,048 Excluding Healthcare Facilities: # Debt service as a percentage of noncapital expenditures (a b) ^ 13.70% 16.51% 13.34% 11.66% 10.50% 17.62% 11.20% 17.43% 5.58% 4.36% Total non-capital expenditures (b) $ 7,489,491 $ 8,129,146 $ 8,984,628 $ 11,106,402 $ 10,624,001 $ 11,732,179 $ 13,243,201 $ 13,196,169 $ 14,471,491 $ 18,561,800 * Beginning fund balances restated for PSMCC becoming a new enterprise fund in ^ Computed as follows: (Principal + Interest) / (Total expenditures - capitalized expenditures (principal)) # Health facilities are no longer classified as governmental funds after 2010, so for the sake of consistency, providing data both with and without health facilities. (a) Retirement costs are classified here as principal payments on debt because they are related to the unfunded liability of the pension plan. 142

164 General Fund Revenues by Source Last Ten Fiscal Years Table 5 Fiscal Year Taxes Licenses and Permits Intergovernmental Charges for Services Fines and Bails Interest Other Total 2003 $ 3,637,867 $ 286,837 $ 973,170 $ 1,828,901 $ 20,152 $ 135,686 $ 243,304 $ 7,125, ,201, , ,535 1,824,270 22, , ,685 7,398, ,581, , ,920 1,883,636 23, , ,649 7,976, ,756, ,015 1,066,093 2,078,065 16, , ,079 8,683, ,363, ,654 1,189,258 2,375,767 17, ,066 97,445 9,473, ,535, ,956 1,935,174 2,610,515 18, , ,602 10,597, ,932, ,966 1,576,765 2,553,480 11,836 50,311 1,741,084 11,080, ,102, ,948 1,411,651 2,853,310 10, , ,390 10,181, ,563, ,096 1,987,846 2,645,948 12,177 25,744 59,189 10,454, ,661, ,114 1,953,472 2,540,717 8,386 56,690 51,824 10,431,

165 General Fund Tax Revenues by Source Last Ten Fiscal Years Table 6 Fiscal Year Property Tax Sales Tax (1) Payments- in-lieu-of- Tax Hotel/Motel Tax (2) Other (3) Total 2003 $ 670,297 $ 2,671,613 $ 77,586 $ 215,145 $ 3,226 $ 3,637, ,901 3,123,314 89, ,660 2,863 4,201, ,503 3,411,283 96, ,656 1,804 4,581, ,875 3,518,435 77, ,570 1,479 4,756, ,513 4,068,600 76, ,162 1,381 5,363, ,957 4,137,758 80, ,004 1,236 5,535, ,687 3,585,304 84, ,313 1,329 4,932, ,687 3,742,751 75, ,396 1,003 5,102, ,001,020 4,147,010 78, ,824 1,821 5,563, ,013,580 4,189,330 76, ,210 1,856 5,661,136 1) Effective July 1, 2003, sales tax rate increased from 3% to 4%. Sales tax remains at 4% and 1/4 of all sales tax revenue is transferred out of the General Fund to the PSMCC Enterprise Fund to pay healthcare-related debt, capital and operating costs. 2) The hotel/motel tax rate is 4%. 3) Represents tax-related penalties and interest. 144

166 Property Tax Rates Direct and Overlapping Governments Last Ten Fiscal Years (Per $1,000 of Assessed Value) Table 7 Fiscal Year City Borough (1) KPCC (2) Flood Service (3) Total ) Includes Kenai Peninsula Borough only. 2) Kenai Peninsula Community College. 3) Seward/Bear Creek Flood Service Area created effective Source: "Alaska Taxable, 2012" 145

167 Property Tax Levies and Collections Last Ten Fiscal Years Table 8 Fiscal Year Total Tax Levy Current Tax Collections (a) Percent of Levy Collected Delinquent Tax Collections Total Tax Collections (a) Total Tax Collections as % of Levy Outstanding Delinquent Taxes Ratio of Delinquent Taxes as % of Total Levy 2003 $ 634,287 $ 618, % $ 26,536 $ 644, % $ 49, % , , % 18, , % 47, % , , % 15, , % 47, % , , % 21, , % 59, % , , % 17, , % 37, % , , % 54, , % 25, % , , % 28, , % 33, % , , % 28, , % 28, % , , % 18, , % 32, % , , % 9, , % 38, % Source: Kenai Peninsula Borough (a) Includes penalties and interest on levy; staff will research historical data to remove the effect of penalties and interest in future CAFRs. 146

168 Table 9 CITY OF SEWARD Assessed and Estimated Actual Value of Taxable Property Last Ten Fiscal Years Fiscal Year Assessed Value Real Property Personal Property Total Property Tax Rates Estimated Actual Value Assessed Value Estimated Actual Value Assessed Value Estimated Actual Value Direct (City of Seward) Overlapping (KPB & BCFSA) * Combined Tax Rate Ratio of Assessed Value to Total Est. Actual Value 2003 $ 159,864,700 $ 175,842,600 $ 56,833,535 $ 69,146,300 $ 216,698,235 $ 244,988, % ,163, ,098,900 60,038,915 79,244, ,202, ,343, % ,133, ,141,000 69,039,838 87,242, ,172, ,383, % ,325, ,649,800 74,203,884 93,273, ,528, ,923, % ,132, ,885,700 75,020, ,404, ,152, ,290, % ,858, ,373,700 81,943, ,717, ,802, ,091, % ,291, ,392,800 74,492, ,716, ,784, ,109, % ,855, ,037,200 81,421, ,936, ,277, ,973, % ,196, ,523,700 77,748, ,889, ,945, ,412, % ,716, ,609,300 92,111, ,568, ,827, ,178, % Source: "Alaska Taxable 2012", State of Alaska, and Kenai Peninsula Borough Certified Tax Roll. * Includes Kenai Peninsula Borough and Bear Creek Flood Service Area. 147

169 Principal Property Taxpayers December 31, 2012 Compared with Nine Years Ago Table 10 Percentage of Percentage of Total Taxable 2003 Total Taxable Type of 2012 Assessed Assessed Assessed Assessed Taxpayer (2) Business Value (1) Rank Value Value (1) Rank Value Ciri Alaska Tourism Tourism $ 16,015, % 11,564, % Icicle Seafoods Seafood processing 9,054, % 8,024, % Crowley Marine Services Marine 9,051, % Carr Gottstein Grocery 6,385, % Seward Hospitality LLC Hotel/Retail 6,379, % Breeze Inn Motel Hotel/Retail 6,132, % Kishan Group Hotel/Retail 5,317, % 3,208, % GCI Communications 4,835, % Shoreside Petroleum, Inc. Petroleum Products 4,546, % 4,277, % Delta Western, Inc. Petroleum Products 4,429, % Leirer Enterprises, Inc Real Estate/Leasing 8,740, % Seward Terminal, Inc Coal Export 7,218, % Seward Ships Drydock/Gateway Ship Repair/Gas Station 4,110, % Hotel Edgewater Hotel/Retail 3,377, % Afognak Logging Construction/Logging 2,973, % Tel Alaska Communications 2,515, % Total $ 72,147, % 56,010, % 1) Includes real and personal property 2) Source: Kenai Peninsula Borough assessing records. Above assessed values are a best effort to identify ten largest property taxpayers, although values reflect aggregation of multiple tax accounts. It is possible that some tax accounts may have different names, making it difficult to identify as being owned by the same entity. Therefore, some valuations may have been inadvertently omitted above. 3) Based on total assessed value of $216,698,235 in 2003 and $314,827,713 in

170 Principal Taxable Sales by Line of Business December 31, 2012 Table 11 Type of Business FY12 Taxable Sales (1) Percent of Total Taxable Sales (2) Retail Trade $ 43,453, % Guiding Water 17,564, % Restaurant/Bar 11,786, % Hotel/Motel/Bed & Breakfast 11,722, % Public Administration 7,366, % Wholesale Trade 6,271, % Information 2,805, % Services 1,719, % Rental Residential Property 1,377, % Rental Commercial Property 998, % Other 3,346, % $ 108,412, % 1) Taxable sales for 2012 are $108,412,790. Source: Kenai Peninsula Borough EDD. 2) Total sales tax collected in 2012 is $4,217,144. Source: Kenai Peninsula Borough Finance Department confirmation letter. Note: Information regarding the ten principal revenue payers and the amount collected from each, is not available. The Kenai Peninsula Borough collects sales tax on behalf of the City of Seward as required by State law. The Borough does not disclose sales tax data by individual business, even to the cities within the Borough. 149

171 Ratios of Outstanding Debt by Type (1) Last Ten Fiscal Years Table 12 Fiscal Year G.O. Bonds (2) Governmental Activities Revenue Bonds (6) Capital Leases G.O. Bonds (2) Business-Type Activities Revenue Bonds Capital Leases Loans Total Primary Government Debt as a % of Personal Income (3) Debt per Capita (4) Total Primary Gov't Governmental Governmental Total Primary Gov't Debt as a % of Estimated Actual Taxable Value of Property (5) 2003 $ 7,223,262 $ - $ 267,027 $ 1,386,738 $ 5,405,000 $ 185,000 $ 569,587 $ 15,036, % 18.6% $ 2,681 $ 5, % ,069, , ,068 5,155,000 95, ,722 13,830, % 17.8% 2,695 5, % ,348, , ,429 6,410, ,543 14,003, % 18.5% 2,601 5, % ,576, , ,854 10,590, ,429 17,135, % 20.5% 2,211 6, % ,737, , ,345 10,175,000-3,007,351 18,251, % 20.5% 1,845 6, % ,015,782-45, ,218 42,645,000-3,544,957 50,420, % 53.5% 1,526 18, % ,245, , ,124 42,000,000-3,487,373 49,658, % 49.0% 1,555 19, % ,425, ,731 59,030 41,325,000-2,930,316 47,355, % 44.8% 1,129 17, % ,480, ,717 1,550,000 39,930,000-2,775,339 48,156, % 43.7% 1,427 17, % ,480, , ,000 38,475,000-2,155,164 45,049, % $ 39.2% 1,347 16, % 1) Excludes other than debt instruments (i.e. compensated absences, net pension obligation, inter-fund loans) 2) G.O. Bonds represent general obligation bonds pledging the full faith and credit of the City. 3) Personal income is estimated by using Kenai Peninsula Borough income to calculate per capita income. (See 4) Population data can be found on Table 13. 5) Estimated Actual Taxable Value data can be found on Table 9. Note: Details regarding the City's outstanding debt can be found in the notes to the financial statements. Source: City of Seward 150

172 Ratio of Net General Obligation Bonded Debt to Assessed Value and Net General Obligation Bonded Debt per Capita Last Ten Fiscal Years Table 13 Fiscal Year Population (1) Assessed Value (2)# Gross Bonded Debt (3)# Debt Payable from Enterprise Revenues # Net Bonded Debt # Ratio of Net Bonded Debt to Assessed Value Net Bonded Debt per Capita ,794 $ 216,698 $ 8,610 $ 1,387 $ 7, % $ 2, , ,202 7, , % 2, , ,173 6, , % 2, , ,529 5, , % 2, , ,153 4, , % 1, , ,802 4, , % 1, , ,784 3, , % 1, , ,277 2, , % , ,945 5,030 1,550 3, % 1, , ,828 4,190-4, % 1,521 # Amounts expressed in thousands. 1) Alaska Department of Commerce, Community & Economic Development 2) From Table 9 (expressed in thousands) 3) Amount does not include revenue bonds Source: Kenai Peninsula Borough and State of Alaska, "Alaska Taxable 2012" 151

173 Computation of Direct and Overlapping Bonded Debt December 31, 2012 Table 14 Jurisdiction Net General Obligation Bonded Debt Outstanding Percentage Applicable to Seward Amount Applicable to City of Seward Direct: City of Seward $ 3,709,498 (1) 100% $ 3,709,498 Overlapping: Kenai Peninsula Borough (KPB) 29,969,000 (2) 6.5% (3) 1,961,771 $ 33,678,498 $ 5,671,269 1) Excluding general obligation bonds reported in the Enterprise Funds. Includes governmental activities' general obligation bonds, revenue bonds, and capital leases. 2) Source: KPB finance dept. Total $31,944,000 less Central Emergency Services unrelated to Seward. 3) Based on ratio of City of Seward assessed value (real and personal property = $369,320,053) to total assessed value of the Kenai Peninsula Borough ($5,641,918,435) Source: "2012 Alaska Taxable" p. 40, State of Alaska, and KPB main and supplemental tax rolls. Note: Excludes State assessed values which are exempt from taxation at City and Borough level. 152

174 Legal Debt Margin December 31, 2012 Table 15 No debt limit mandated by law. 153

175 Ratio of Annual Debt Service Expenditures for General Obligation Debt (1) to Total General Fund Expenditures Last Ten Fiscal Years Table 16 Fiscal Year Principal Interest Retirement Past- Service Cost Payments Total Debt Service (1) Total General Expenditures (2) Ratio of Debt Service to General Expenditures 2003 $ 527,612 $ 498,415 $ - $ 1,026,027 $ 7,726, % , ,182-1,341,773 8,124, % , , ,143 1,345,732 9,042, % , ,202 97,349 1,295,388 10,988, % , , ,114 1,408,635 9,514, % , , ,573 1,427,016 10,784, % , , ,907 1,579,901 11,162, % , , ,778 1,536,817 10,404, % ,477 75, , ,302 9,838, % , , ,495 10,165, % 1) General obligation debt reported in the Enterprise Funds, with government commitment, have been excluded. Beginning in 2005, retirement system payments attributed to past service costs are reflected as debt service payments in the General Fund. In 2006, excludes a one-time payoff of Seward General Hospital PERS costs in the amount of $1,708,126, to be consistent with reclassification of hospital-related items into enterprise fund in ) Total General Expenditures includes General Fund only beginning in Prior years included Hospital Debt Service Fund and Seward Mountain Haven Debt Service Fund which combined to become the Providence Seward Medical & Care Center enterprise fund in

176 Revenue Bond Coverage Electric Enterprise Fund Last Ten Fiscal Years Table 17 Fiscal Year Gross Revenues (1) Operating Expenses (2) Debt Service Requirements (3) Net Revenue Available for Debt Service Principal Interest Total Coverage (4) 2003 $ 6,715,607 $ 4,417,052 $ 2,298,555 $ 145,000 $ 144,536 $ 289, ,003,400 5,065,958 1,937, , , , ,542,541 5,539,190 2,003, , , , ,246,477 7,855, , ,000 87, , ,709,107 6,651,455 2,057, ,000 80, , ,920,730 6,396,886 2,523, , , , ,173,257 8,589, , , , , ,903,337 6,854,897 2,048, , , , ,410,908 8,620,529 1,790, , , , ,344,047 7,844,098 3,499, , , , ) Total revenues, including interest, exclusive of grants. 2) Total operating expenses exclusive of depreciation and payments in lieu of taxes. 3) Includes principal and interest of revenue bonds only. 4) Revenue bond agreements require Net Revenue Available for Debt Service be at least 1.30 times the amount of the total annual debt service requirement. 155

177 Revenue Bond Coverage Harbor Enterprise Fund Last Ten Fiscal Years Table 18 Fiscal Year Gross Revenues (1) Operating Expenses (2) Debt Service Requirements (3) Net Revenue Available for Debt Service Principal Interest Total Coverage (4) 2003 $ 1,837,517 $ 1,192,187 $ 645,330 $ 90,000 $ 153,568 $ 243, ,864,318 1,149, ,617 95, , , ,002,229 1,310, , , , , ,752,802 1,388,971 1,363, , , , ,905,013 1,472,842 1,432, , , , ,896,828 1,506,685 1,390, , , , ,632,937 1,903, , , , , ,850,942 1,784,887 1,066, , , , ,017,003 2,040, , , , , * ,228,955 2,171,180 1,057, , , , ) Total revenues, including interest, exclusive of grants. 2) Total operating expenses exclusive of depreciation and payments in lieu of taxes. 3) Includes principal and interest of revenue bonds only. 4) Revenue bond agreements require Net Revenue Available for Debt Service be at least 1.20 times the amount of the total annual debt service requirement. * Operating Expenses were restated in 2012 for FY2011. Note: 2000 Harbor Enterprise Fund revenue bonds refunded in Bonds issued in 2005 in amount of $1.5 million for float construction and in 2006 in the amount of $4.5 million for expansion of the south harbor. 156

178 Demographic and Economic Statistics Last Ten Fiscal Years Table 19 Fiscal Year Population School Enrollment City of Seward Personal Income Per Capita Personal Income (2) Median Age For the Kenai Peninsula Borough (A) Populatio n (1) School Enrollment Unemployment Rate (3) , $ 80,917,034 $ 28, ,398 9, % , ,916,825 28, ,398 9, % , ,709,780 29, ,980 9, % , ,399,818 32, ,224 9, % , ,131,483 33, ,350 9, % , ,239,315 35, ,017 9, % , ,380,522 38, ,990 9, % , ,818,742 39, ,578 9, % , ,071,575 40, ,575 9, % , ,040,088 41, ,369 9, % (A) Data for the City of Seward is not available, but should be comparable to this data which is for the Kenai Peninsula Borough (1) "Alaska Taxable" as of July 1 of each fiscal year (2) Data not available for Seward so utilizes Kenai Peninsula Borough data, which should be comparable. (3) Source: State of Alaska Department of Labor / Research and Analysis Section 157

179 Principal Employers - Current and Ten Years Ago Table Name Rank Rank * State of Alaska (excludes University of Alaska) 1 1 City of Seward 2 4 Providence Seward Medical & Care Center 3 Kenai Peninsula Borough School District 4 6 Safeway, Inc. 5 9 Alaska SeaLife Center 6 2 Ciri Alaska Tourism Corp 7 5 Seaview Community Services 8 Breeze Inn Motel 9 Rays Waterfront Bar & Grill 10 Icicle Seafoods 7 United States Government 3 Ocean Beauty 8 Seward Ships Drydock 10 Source: Alaska Department of Labor and Workforce Development, Research and Analysis * Data for 2003 not available; 2004 data is nearest available data. Beginning in 2012, the State of Alaska by statute, is no longer allowed to provide data relative to the number of employees working for an employer. Nor can it rank employers according to size. The City will seek alternate means to obtain relevant data but none is available at this time. 158

180 Full-Time Equivalent Employees by Fund Last Ten Fiscal Years Table General Fund: City Clerk City Manager and Legislative M.I.S Finance Police and Jail Fire Building Inspection Public Works Community Development Building Maintenance Parks & Recreation Library General Fund Total Parking Harbor and SMIC Electric Water Wastewater Total All Funds Source: City of Seward finance department 159

181 Operating Indicators by Function Last Ten Fiscal Years Table Function Public Safety Police Services: Physical arrests Traffic violations/warnings 1, ,406 1,010 1,187 1,187 1,084 1,633 1,466 1,129 Parking violations Fire and Emergency Services: Number of calls answered (a) Harbor Registered vessels 4,064 4,344 4,344 3,100 1,630 3,347 3,593 3,549 3,348 3,608 Number on waiting list for slips Number of boat lifts General cargo tonnage (b) , ,421 Fish product tonnage 23,405 16,787 21,300 12,972 21,873 16,299 12,018 20,647 13,471 17,119 Petroleum (gallons) (c) 2,614,014 2,362,865 2,569,060 2,691,297 2,957,732 2,780,723 2,349,695 2,595,958 2,310,694 3,934,806 Water and Wastewater Systems: Water service connections Daily average consumption (gallons) 1,300,000 1,565,000 1,300,000 1,300,000 1,233,010 1,029,077 1,580,641 Sewer service connections Daily average treatment (gallons) 870, , , , , , ,749 Electric System: Number of service connections 2,459 2,543 2,831 2,901 3,089 3,112 3,167 3,194 3,224 3,218 Total kilowatt hour sales 54,664,399 55,682,929 54,786,754 55,412,943 56,228,590 56,360,698 55,716,466 54,683,681 57,253,825 58,738,003 Year (a) Beginning June 2008, began providing aid response for medical calls. (b) In 2012, includes 20,361 tons dredged material removed from harbor. (c) In 2012, includes 1,344,546 gallons in barrels that crossed the dock. Source: City of Seward police, fire, harbor, water and wastewater, and finance departments 160

182 Capital Asset Statistics By Function Last Ten Fiscal Years Table Lane miles of street Number of street lights Public Safety: Number of fire stations Fire rating (ISO) 4/9 4/9 4/9 4/9 4/9 4/9 4/9 5/9 5/9 5/9 Number of fire hydrants Number of police stations Number of Facilities: Parks and playgrounds Libraries Sewer treatment plants Electric distribution line (miles) Electric substations Source: City of Seward fire, public works, and finance departments 161

183 Property Value, Construction, and Bank Deposits Last Ten Fiscal Years Table 24 Fiscal Year Total Real Property Value (1) Commercial Construction Number of Value of Permits Permits Residential Construction Number of Value of Permits Permits Bank Deposits 2003 $ 175,842, $ 6,611, $ 1,453,898 $ 47,679, ,098, ,080, ,645,400 54,006, ,141, , ,974,323 56,467, ,649, ,332, ,204,392 59,374, ,885, ,555, ,254 59,042, ,373, , ,928,879 60,821, ,392, ,694, ,926 54,337, ,037, ,376, ,261 57,426, ,523, ,468, ,920 76,678, ,609, ,254, ,400 82,765,489 1) "Estimated Actual Value" from Table 9. Source: Construction Data - City of Seward Engineering Department Bank Deposit Data - Local Banks (First National Bank Alaska and Wells Fargo) 162

184 Miscellaneous Statistics December 31, 2012 Table 25 Date of Incorporation June 1, 1912 Class Home Rule City Form of Government Council / Manager Area, Square Miles 22 Miscellaneous Operational Statistics: Library - number of volumes 31,478 Fire Department - Number of volunteers 26 Sewer System - Maximum daily capacity (gallons) 1,300,000 Water System - Maximum daily capacity (gallons) 8,856,000 Electric System: Miles of distribution lines 70 Miles of transmission lines 42 Harbor - Number of permanent slips 673 City Employees: Regular Employees - Full-time equivalent Temporary Employees - Full-time equivalent Demographics: School Enrollment, City of Seward (3) 593 Unemployment Rate - Borough-Wide (1) 8.4% Population (2) 2,754 Average annual earnings (4) 40,297 Qualified Voters 1,868 Facilities and Services not included in the reporting entity: Education: Elementary School Number of students enrolled 324 Number of teachers Middle School Number of students enrolled 89 Number of teachers 7.00 High School Number of students enrolled 180 Number of teachers Alaska Vocational Technical Center Number of students served annually 1,185 Number of teachers 47 Healthcare Facilities - a component unit of the reporting entity: Providence Seward Medical & Care Center Number of patient beds (6) combination of primary care & swing beds 6 Number of long-term care beds 40 Number of employees: Exempt 16 Non-Exempt 117 1) Kenai Peninsula Borough 2) State of Alaska, Department of Commerce, Community & Economic Development 3) Kenai Peninsula Borough School District 4) Kenai Peninsula Borough information extrapolated by Seward's population 163

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186 SINGLE AUDIT SECTION

187 Independent Auditor s Report on Internal Control Over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards Honorable Mayor and City Council City of Seward, Alaska We have audited, in accordance with the 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, the financial statements of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of City of Seward, Alaska, as of and for the year ended December 31, 2012, and the related notes to the financial statements, which collectively comprise City of Seward s basic financial statements and have issued our report thereon dated June 12, Our report includes a reference to other auditors who audited the operating account of the Providence Seward Medical and Care Center, as described in our report on City of Seward s financial statements. The operating account of Providence Seward Medical and Care Center was not audited in accordance with Government Auditing Standards. Internal Control Over Financial Reporting In planning and performing our audit of the financial statements, we considered City of Seward s internal control over financial reporting (internal control) to determine the audit procedures that are appropriate in the circumstances for the purpose of expressing our opinions on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of City of Seward s internal control. Accordingly, we do not express an opinion on the effectiveness of City of Seward s internal control. A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, misstatements on a timely basis. A material weakness is a deficiency, or combination of deficiencies, in internal control, such that there is a reasonable possibility that a material misstatement of the entity s financial statements will not be prevented, or detected and corrected, on a timely basis. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance C Street, Suite 600 * Anchorage, Alaska * (907) * Fax (907) *

188 Honorable Mayor and City Council City of Seward, Alaska Our consideration of internal control was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control that might be material weaknesses or significant deficiencies. Given these limitations, during our audit we did not identify any deficiencies in internal control that we consider to be material weaknesses. However, material weaknesses may exist that have not been identified. Compliance and Other Matters As part of obtaining reasonable assurance about whether City of Seward s financial statements are free of material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards. Purpose of this Report The purpose of this report is solely to describe the scope of our testing of internal control and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the entity s internal control or on compliance. This report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the entity s internal control and compliance. Accordingly, this communication is not suitable for any other purpose. Anchorage, Alaska June 12,

189 Independent Auditor s Report on Compliance For Each Major Federal Program and Report on Internal Control Over Compliance as Required by OMB Circular A-133 Honorable Mayor and City Council City of Seward, Alaska Report on Compliance for Each Major Federal Program We have audited City of Seward s compliance with the types of compliance requirements described in the OMB Circular A-133 Compliance Supplement that could have a direct and material effect on each of City of Seward s major federal programs for the year ended December 31, City of Seward s major federal programs are identified in the summary of auditor s results section of the accompanying schedule of findings and questioned costs. Management s Responsibility Management is responsible for compliance with the requirements of laws, regulations, contracts, and grants applicable to its federal programs. Auditor s Responsibility Our responsibility is to express an opinion on compliance for each of City of Seward s major federal programs based on our audit of the types of compliance requirements referred to above. We conducted our audit of compliance in accordance with auditing standards generally accepted in the United States of America; the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States; and OMB Circular A- 133, Audits of States, Local Governments, and Non-Profit Organizations. Those standards and OMB Circular A-133 require that we plan and perform the audit to obtain reasonable assurance about whether noncompliance with the types of compliance requirements referred to above that could have a direct and material effect on a major federal program occurred. An audit includes examining, on a test basis, evidence about City of Seward s compliance with those requirements and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion on compliance for each major federal program. However, our audit does not provide a legal determination of City of Seward s compliance. Opinion on Each Major Federal Program In our opinion, City of Seward complied, in all material respects, with the types of compliance requirements referred to above that could have a direct and material effect on each of its major federal programs for the year ended December 31, C Street, Suite 600 * Anchorage, Alaska * (907) * Fax (907) *

190 Honorable Mayor and City Council City of Seward, Alaska Report on Internal Control Over Compliance Management of City of Seward is responsible for establishing and maintaining effective internal control over compliance with the types of compliance requirements referred to above. In planning and performing our audit of compliance, we considered City of Seward s internal control over compliance with the types of requirements that could have a direct and material effect on each major federal program to determine the auditing procedures that are appropriate in the circumstances for the purpose of expressing an opinion on compliance for each major federal program and to test and report on internal control over compliance in accordance with OMB Circular A-133, but not for the purpose of expressing an opinion on the effectiveness of internal control over compliance. Accordingly, we do not express an opinion on the effectiveness of City of Seward s internal control over compliance. A deficiency in internal control over compliance exists when the design or operation of a control over compliance does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, noncompliance with a type of compliance requirement of a federal program on a timely basis. A material weakness in internal control over compliance is a deficiency, or combination of deficiencies, in internal control over compliance, such that there is a reasonable possibility that material noncompliance with a type of compliance requirement of a federal program will not be prevented, or detected and corrected, on a timely basis. A significant deficiency in internal control over compliance is a deficiency, or a combination of deficiencies, in internal control over compliance with a type of compliance requirement of a federal program that is less severe than a material weakness in internal control over compliance, yet important enough to merit attention by those charged with governance. Our consideration of internal control over compliance was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control over compliance that might be material weaknesses or significant deficiencies. We did not identify any deficiencies in internal control over compliance that we consider to be material weaknesses, as defined above. However, material weaknesses may exist that have not been identified. The purpose of this report on internal control over compliance is solely to describe the scope of our testing of internal control over compliance and the results of that testing based on the requirements of with OMB Circular A-133. Accordingly, this report is not suitable for any other purpose. Anchorage, Alaska June 12,

191 Independent Auditor s Report on Compliance For Each Major State Program and Report on Internal Control Over Compliance as Required by the State of Alaska Audit Guide and Compliance Supplement for State Single Audits Honorable Mayor and City Council City of Seward, Alaska Report on Compliance for Each Major State Program We have audited City of Seward s compliance with the types of compliance requirements described in the State of Alaska Audit Guide and Compliance Supplement for State Single Audits that could have a direct and material effect on each of City of Seward s major state programs for the year ended December 31, City of Seward s major state programs are identified in the accompanying Schedule of State Financial Assistance. Management s Responsibility Management is responsible for compliance with the requirements of laws, regulations, contracts, and grants applicable to its state programs. Auditor s Responsibility Our responsibility is to express an opinion on compliance for each of City of Seward s major state programs based on our audit of the types of compliance requirements referred to above. We conducted our audit of compliance in accordance with auditing standards generally accepted in the United States of America; the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States; and the State of Alaska Audit Guide and Compliance Supplement for State Single Audits. Those standards and the State of Alaska Audit Guide and Compliance Supplement for State Single Audits require that we plan and perform the audit to obtain reasonable assurance about whether noncompliance with the types of compliance requirements referred to above that could have a direct and material effect on a major state program occurred. An audit includes examining, on a test basis, evidence about City of Seward s compliance with those requirements and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion on compliance for each major state program. However, our audit does not provide a legal determination of City of Seward s compliance. Opinion on Each Major State Program In our opinion, City of Seward complied, in all material respects, with the types of compliance requirements referred to above that could have a direct and material effect on each of its major state programs for the year ended December 31, C Street, Suite 600 * Anchorage, Alaska * (907) * Fax (907) *