COOK INLET HOUSING AUTHORITY Anchorage, Alaska

Transcription

1 COOK INLET HOUSING AUTHORITY Management Discussion and Analysis, Basic Financial Statements, Supplemental Information, and Compliance Reports December 31, 2016 (With Comparative Totals for 2015)

2 Table of Contents Exhibit Page INDEPENDENT AUDITOR S REPORT 1-3 MANAGEMENT DISCUSSION AND ANALYSIS 4-16 BASIC FINANCIAL STATEMENTS Primary Government: Statements of Net Position A-1 17 Statements of Revenues, Expenses, and Changes in Net Position B-1 18 Statements of Cash Flows C-1 19 Notes to Basic Financial Statements SUPPLEMENTAL INFORMATION Combining Statements of Net Position Combining Statements of Revenues, Expenses, and Changes in Net Position 69 Combining Statements of Cash Flows 70 Combining Statements of Low Income Housing Tax Credit (LIHTC) Partnerships Net Position Combining Statements of Low Income Housing Tax Credit (LIHTC) Partnerships Revenues, Expenses, and Changes in Net Position 73 Combining Statements of Low Income Housing Tax Credit (LIHTC) Partnership Cash Flows 74 Schedule of Proportionate Share of the Net Pension Liability and Related Ratios 75 Schedule of Required Contributions 76 FEDERAL SINGLE AUDIT REPORTS Schedule of Expenditures of Federal Financial Awards 77 Notes to the Schedule of Expenditures of Federal Financial Awards 78 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 Report on Compliance with Requirements that could have a Direct and Material Effect on Each Major Program and on Internal Control over Compliance in Accordance with Title 2 U.S CFR Part 200, Uniform Guidance Summary of Auditor's Results and Schedule of Findings and Questioned Costs 83 Summary of Prior Year Audit Findings 84

3 Table of Contents, continued Exhibit Page STATE COMPLIANCE REPORTS Schedule of State Financial Assistance 85 Notes to schedule of State Financial Assistance 86 Report on Compliance with Requirements that could have a Direct and Material effect on Each Major Program and on Internal Control over Compliance in Accordance with the State of Alaska Audit Guide and Compliance Supplement for State Audits Summary of Auditor's Results and Schedule of Findings and Questioned Costs 89 Summary of Prior Year Audit Findings 90

4 Newhouse & Vogler Certified Public Accountants 237 E. Fireweed Lane, Suite (907) (907) Fax Independent Auditor's Report Board of Commissioners Cook Inlet Housing Authority Ladies and Gentlemen: Report on the Financial Statements We have audited the accompanying financial statements of Cook Inlet Housing Authority, as of and for the years ended December 31, 2016 and 2015, and the related notes to the financial statements, which collectively comprise Cook Inlet Housing Authority 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 financial statements of the blended component units of Strawberry Rose Limited Partnership, Kenaitze Pointe Limited Partnership, Tyonek Terrace Limited Partnership, Mountain View Village I Limited Partnership, Mountain View Village II Limited Partnership, Mountain View Village III Limited Partnership, Mountain View Village IV Limited Partnership, Creekside Village Limited Partnership, Eklutna Estates Limited Partnership, Loussac Place Limited Partnership, Eklutna Estates II Limited Partnership, Creekview Plaza 49 Limited Partnership, PJ33 Limited Partnership, Mountain View Village V Limited Partnership,, Grass Creek North Phase I Limited Partnership, or Coronado Park Limited Partnership, which represent 50 percent, 28 percent, and 23 percent, respectively, of the assets, net position, and revenues of Cook Inlet Housing Authority. Those financial statements were audited by other auditors whose report thereon has been furnished to us, and our opinion, insofar as it relates to the amounts included for Strawberry Rose Limited Partnership, Kenaitze Pointe Limited Partnership, Tyonek Terrace Limited Partnership, Mountain View Village I Limited Partnership, Mountain View Village II Limited Partnership, Mountain View Village III Limited Partnership, Mountain View Village IV Limited Partnership, Creekside Village Limited Partnership, Eklutna Estates Limited Partnership, Loussac Place Limited Partnership, Eklutna Estates II Limited Partnership, Creekview Plaza 49 Limited Partnership, PJ33 Limited Partnership, Mountain View Village V Limited Partnership, Grass Creek North Phase I Limited Partnership, or Coronado Park Limited Partnership, is based solely on the report of the other auditors. 1

5 Board of Commissioners Cook Inlet Housing Authority We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit 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. Opinion In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position Cook Inlet Housing Authority, as of December 31, 2016 and 2015, and the respective changes in financial position and, where applicable, cash flows thereof for the years then ended in accordance with accounting principles generally accepted in the United States of America. Other Matters Accounting principles generally acceptable in the United States of America require that the management s discussion and analysis on pages 4 through 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, and historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally acceptable in the United States of America, which consisted of inquiries of management regarding the methods 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 the 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. Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise Cook Inlet Housing Authority s financial statements. The combining financial statements, combining low income housing tax credit financial statements, and the Schedule of Expenditures of Federal Awards, required by the audit requirements of Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administration Requirements, Cost Principles, and Audit 2

6 Board of Commissioners Cook Inlet Housing Authority Requirements for Federal Awards (the Uniform Guidance), and the Schedule of State Financial Assistance, required by State of Alaska Audit Guide and Compliance Supplement for State Single Audits are presented for purposes of additional analysis and are not a required part of the financial statements. The combining financial statements, combining low income housing tax credit financial statements, the Schedule of Expenditures of Federal Awards, and the Schedule of State Financial Assistance are the responsibility of management and were derived from and relate directly to the underlying accounting and other records used to prepare the financial statements. The information has been subjected to the auditing procedures applied in the audit of the basic financial and certain other 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 combining financial statements, combining low income housing tax credit financial statements, the Schedule of Expenditures of Federal Awards, and the Schedule of State Financial Assistance are fairly stated in all material respects in relation to the basic financial statements as a whole. Report on Other Legal and Regulatory Requirements In accordance with Government Auditing Standards, we have also issued our report dated May 3, 2017 on our consideration of Cook Inlet Housing Authority 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 and should be considered in assessing the results of our audit. May 3,

7 Management Discussion & Analysis Management Discussion and Analysis is the section of Cook Inlet Housing Authority s ( CIHA ) Annual Report that management uses to highlight important business activities and financial results for the preceding year. It should be read in conjunction with CIHA s financial statements and footnotes. Cook Inlet Housing Authority was created in Alaska Statutes to provide affordable housing opportunities to eligible participants in the Cook Inlet Region. Please see Note 1 to the Financial Statements for more information about CIHA, the programs it offers, and developments it has constructed. CIHA is also an acronym that represents the Authority s core values: Compassion, Innovation, Honesty and Accountability. Examples of how CIHA has demonstrated each core value are shown below in this MD&A. The CIHA family of companies consists of several core companies and many more limited partnerships. For more information please see Note 1 to the Financial Statements: Cook Inlet Housing Authority Parent company, provides staffing and administrative support to housing activities undertaken by CIHA and subsidiaries Cook Inlet Lending Center 501(c)(3) created to promote and provide lending services for individuals and families in the Cook Inlet Region Cook Inlet Housing Development Corporation A 501(c)(3) development company that develops, builds and operates senior and affordable housing Ne vut Development Corporation Created to develop, own, and manage affordable housing primarily through the use of tax credits Cook Inlet Residential Services, Inc. A licensed real estate brokerage providing real estate referral services Tax Credit Limited Partnerships CIHA or CIHDC typically act as the general partner in limited partnerships created to build, own and operate senior and affordable housing developments 4

8 Management Discussion & Analysis CIHA highlights from 2016 Accountability Honesty Innovation Compassion CIHDC CILC CIHA CIHA Created 101 new housing opportunities in the CIRI Region Helped 46 Alaskans purchase a home with down payment assistance Provided funding to house 4 homeless Alaska Native teens in Mat Su Housed 578 senior households and 801 families in developments owned by CIHA CIHA CIHDC CIHA CIHDC Received national award for Values & Recognition Awarded development of 40 units of mixedincome housing in Anchorage Began Tribal HUD VASH pilot program for 20 Native American Veterans Began final predevelopment work on a 45 unit 4% LIHTC development in Muldoon ALL ALL ALL CILC Received unqualified opinion on financial statements CIHA Maintained a 95.24% occupancy on entire 1,205 unit portfolio Received no management letter comments from auditors CIHA Completed 38 LIHTC compliance audits State and Federal Single Audit reports had no exceptions CIHA Provided Technical Assistance to 4 Alaska Native/ Native Hawaiian Housing Entities CILC has developed a relationship with Bank2 to provide first mortgage loans to Alaska Natives/ American Indians CIHA Completed a Successful Tenant Accounting software system conversion 5

9 Management Discussion & Analysis CIHDC Created 101 new housing opportunities in the CIRI Region With the completion of 49 units of housing at Creekview Plaza 49 and 52 units of housing at Grass Creek North I, Cook Inlet Housing Authority now owns and operates 1,266 units of housing in the Cook Inlet Region. That includes 578 units of independent senior housing and 688 units of family housing. CIHA also manages 80 units of affordable housing owned by other entities. CILC Helped 46 Alaskans purchase a home with downpayment assistance Cook Inlet Lending Center provides downpayment assistance ( DPA ) and homebuyer classes on a variety of topics. In 2016, CILC had the fifth most HomeStart and NAHI grants in the Federal Home Loan Bank of Des Moines District, which includes over 1,400 members in 13 western states. CILC also offers a savings plan called the Individual Development Account where money saved by Alaskans is matched to apply towards a down payment on a home. For Alaska Natives and American Indians, CILC makes loans under the HUD Section 184 loan Guarantee Program and DPA with the HomeStart Plus program. My House is a non-profit that operates several for profit ventures that offer employment and training to homeless youth in the Matanuska-Susitna Valley. CIHA provided My House with funding in 2016 to expand the housing they make available to homeless teens, adding 4 more beds to their inventory. CIHA Provided funding for 4 homeless Alaska Native teens in Mat Su 6

10 Management Discussion & Analysis CIHA Received national award for Values & Recognition Program CIHA received the National Association of Housing and Redevelopment Officials award of merit for its Values & Recognition Program. Through the work of an employee led work group, CIHA launched its own in-house, on-line recognition/rewards program aimed at engaging and recognizing employees, while reinforcing a strong, values-based corporate culture. CIHA was successful in the competitive process for State funding of a 56 unit mixed income & mixed use development in Anchorage. The development will consist of 38 senior housing units, 18 affordable housing units, and 3,400 square feet of retail space. The construction will begin in 2017 and is expected to be completed in 14 months. CIHDC Awarded funding for 56 units of mixed income housing in Anchorage In 2016 CIHA was awarded 20 vouchers and $313,058 for a Tribal HUD Veterans Affairs Supportive Housing ( VASH ) Program. This is a pilot program, operated in conjunction with the Veteran s Administration, to provide rental assistance and supportive services to Native American veterans that are homeless or at risk of homelessness. CIHA Began Tribal HUD VASH pilot program for 20 Native American Veterans 7

11 Management Discussion & Analysis In 2016 CIHA applied for 9% tax credits for a 56 unit Senior & Family Housing and a 45 unit family housing development. The 56 unit development was awarded 9% credits, but the 45 unit family housing development came up just short of the cut-off in the competitive process. Staff immediately began reevaluating the available funding sources for the development and found additional sources of funding to fill the gap between the capital available under the 9% program and that which would be available under the 4% program. The development has been approved by the Board and will begin construction in CIHDC Began final predevelopment work on a 45 unit 4% LIHTC development in Muldoon Managing vacancies is critical to ensuring each property meets its cash flow goals and the maximum number of clients is served. CIHA s Asset Management group, through a coordinated effort from the Intake Staff that processes applications to the Maintenance Staff that prepare vacated units for new tenants, maintained a vacancy rate under 5% for the year. To lease 171 newly completed units in 2016 over 1,500 applications were processed. The clients not immediately placed in housing are maintained on a waiting list to fill future vacancies in CIHA properties. CIHA Maintained a 95.24% occupancy on entire 1,205 unit portfolio CIHA Provided Technical Assistance to 4 Alaska Native/Native Hawaiian Housing Entities CIHA provided Training and Technical Assistance to three Alaska Native organizations (Knik Tribe, Chilkoot Indian Association and the Native Village of Tyonek) and to the Department of Hawaiian Homelands. CIHA shared best practices in compliance, audit preparation, finance, grant management and Indian Housing Plan preparation. Staff undertook a conversion of one of CIHA s core software accounting systems in 2016, the Tenant Accounting System which tracks tenant and property data. Through multi-departmental cooperation that affected nearly every employee at CIHA, the conversion was a success. CIHA Successful Tenant Accounting software system conversion 8

12 Management Discussion & Analysis Resident Engagement CIHA s Resident Engagement Team provides opportunities for personal growth and community involvement for residents at its senior and family housing properties. APU Promise Tuition Grant Program Through a partnership with Alaska Pacific University (APU), CIHA s Resident Engagement Initiative connected 32 residents with information about postsecondary education opportunities at APU including APU s Promise Tuition Grant Program Senior Games Inspired by the 2016 Summer Olympics, the Resident Engagement team at senior housing organized a 7 week Senior Games fitness challenge. Residents competed in nine different activities and were awarded medals at a final awards ceremony. Participants experienced improved strength and weight loss, in addition to enjoying healthy competition with their neighbors. PFD Game Nights Resident Engagement and CIHA s Family Self Sufficiency Coordinator teamed up to offer four nights of PFD games to help residents make wise choices with their Alaska State Permanent Fund Dividend checks. Sixty-0ne residents participated playing four different games each night that illustrated scams, decisions, setting priorities and saving. 9

13 Management Discussion & Analysis CIHA Partners In 2016, CIHA furthered its mission by partnering with several service providers in the Anchorage area. Catholic Social Services/Brother Francis Shelter ( CSS/BFS ) CSS/BFS provided 39,290 shelter nights to Alaska Native & American Indian ( AN/AI ) clients during Intensive case management services are provided by two intake case managers, two mental health/substance abuse case managers, two comprehensive services case managers and a veteran s case manager. Those case managers helped 142 AN/AI clients in shelter residence and helping with personal crisis. An additional 134 AN/AI clients received direct financial assistance from CSS/BFS. Covenant House Alaska ( CHA ) In 2016 CHA assisted 127 AN/AI youth ages with developing a housing plan. CHA also assisted 74 AN/AI youth in reuniting with their families, and provided 499 young Alaskans with emergency shelter; 47% of whom were AN/AI youth. Cook Inlet Tribal Council, Inc. Chanlyut ( CITC/Chanlyut ) CITC/Chanlyut provide in-resident services to help clients maintain sobriety and build life skills necessary to obtain and maintain stable housing and employment. In 2016, CITC/Chanlyut assisted 56 clients including 17 AN/AI and graduated one of those clients who is now living independently. Financial Information CIHA accomplishes its mission by utilizing a variety of financial resources. Historically, those have included State and Federal grants and loans. CIHA s Board recognized that relying solely upon external revenue sources presents a potential risk of reductions that would affect its ability to continue to accomplish its mission. Building and owning quality rental developments and establishing a Permanent Fund will help provide a consistent source of unrestricted revenues and help to mitigate that risk. Overall, CIHA showed a strong financial position with an increase in total assets by 8.2% to $401.9 million in Despite an increase in total liabilities of 16.3% or $16.9 million, net position grew by 5.0% to $281.4 million in

14 Management Discussion & Analysis Table 1 Condensed Statement of Net Position (in millions) Change Percentage Assets: Cash and investments $ (2.5) 4.1% Other assets % Capital assets % Less accumulated depreciation (80.4) (71.2) (9.2) 12.9% Capital assets, net % Total assets $ % Liabilities Current liabilities % Noncurrent liabilities % Total liabilities % Net position Total net position % Total liabilities and net position $ % Current cash and investments totaled $57.9 million at year end, a decrease of 4.1% or $2.5 million from Except for $4.1 million and $3.7 million at December 31, 2016 and 2015, respectively, all cash and investments are fully insured by FDIC insurance or are invested in securities including U.S. Treasury and agency obligations which are fully backed by the U.S. government, money market funds, and mutual funds. More information on cash and investments is available in the footnotes to the financial statements. Current liabilities totaled $58.8 million, an increase of 13.7% or $7.1 million from Approximately $32.9 million of current liabilities comprise of refundable advance liabilities for grant funds received, but not expended, with $31.9 million related to HUD grant funds. Lines of credit payable increased $5.1 million to $17.4 million with the increase of construction debt from funds received for LIHTC partnerships. CIHA utilizes the line of credit for current construction activities which included Creekview Plaza, Grass Creek North I, Mountain View Village V, and 3600 Spenard developments. 11

15 Management Discussion & Analysis Revenue and Expenditures CIHA s core funding received from HUD is administered under the Indian Housing Block Grant (IHBG) program authorized by the Native American Housing Assistance and Self-Determination Act (NAHASDA). HUD awarded CIHA $15,715,228 in 2016, $15,419,160 of which was drawn down as of the end of the year. CIHA does not recognize these funds as revenues until it uses or expends the funds that are accounted for in refundable advances, a current liability. Table 2 Condensed Statement of Revenue, Expenditures and Change in Net Position (in millions) Change Percentage Operating revenues: NAHASDA $ (1.7) 9.9% Other operating (1.1) 4.3% Total operating revenues (2.8) 6.5% Operating expenditure % Operating income (8.5) 67.5% Non operating revenue (expenditure): (1.7) (2.5) % Income before capital contributions (7.7) 76.2% Capital contributions and minority interest: (1.4) 11.8% Change in net position (9.1) 41.4% Net positon beginning of year % Net position end of year $ % Compared to 2015, CIHA s use of NAHASDA revenues in 2016 decreased 9.9% or $1.7 million and other operating revenue decreased 4.3% or $1.1 million for an overall decrease of 6.5% or $2.8 million. Grant revenue is recognized when expenses are incurred against the grant. CIHA s used NAHASDA grant funds for normal operating activities as well as pre-development and development of senior and affordable housing in the Anchorage area. Other income increased in 2016 by $2.9 million for developer fees received, $1.1 million for rental income, and $1.2 million in federal and other grants. State grant funding decreased $6.6 million in 2016 from

16 Management Discussion & Analysis Overall 2016 operating expenses increased 18.9%, or $5.7 million to $35.9 million. Increases in salaries and benefits (due to an adjustment to pension and benefits), depreciation, utilities, repairs and maintenance were largely responsible for the increase. Table 3 Capital Assets by Entity (in millions) Entity Change Percentage Cook Inlet Housing Authority $ % Strawberry Rose Limited Partnership % Kenaitze Pointe Limited Patnership % Tyonek Terrace Limited Parntership % Mountain View Village I Limited Partnership % Mountain View Village II Limited Partnership % Mountain View Village III Limited Partnership % Mountain View Village IV Limited Partnership % Grass Creek Village Limited Partnership % Eklutna Estates Limited Partnership % Loussac Place Limited Partnership % Eklutna Estates II Limited Partnership % Creekview Plaza 49 Limited Partnership % Spenard 33 Limited Partnership % Cook Inlet Lending Center % Cook Inlet Real Estate Services % Cook Inlet Housing Development Corporation % CVP Land LLC % Accumulated depreciation (80.4) (71.2) (9.2) 12.9% Total capital assets $ % Capital Assets: Capital assets increased 8.9%, or $24.6 million, net of depreciation. Several affordable housing projects were completed and one began in CIHA completed and placed into service CreekView Plaza, a 49 unit senior rental development in East Anchorage, and Grass Creek North I, a family rental development in East Anchorage. The Spenard 33 family rental development broke ground in 2016 and was in process at year end. 13

17 Management Discussion & Analysis Debt Administration: Noncurrent liabilities are comprised of trust and deposit liabilities, notes payable and accrued interest on notes payable. Trust and deposit liabilities increased 28.6% or $200K from security deposits collected from rental tenants of CIHA owned property. Table 4 Long Term Liabilities (in millions) Change Percentage Trust and deposit liabilities $ % Notes payable % Accrued interest on note payable % Total long term liabilities $ % Notes payable, net of current portion, increased 9.6%, or $4.1 million to $46.6 million. Debt is incurred for the construction of affordable single and multifamily projects, leveraged with state and federal grants, investor equity proceeds from the award and sale of Low Income Housing Tax credits (LIHTC), and other funding. CIHDC incurred $4.2 million in debt for Mountain View Village V development and $1.2 million in debt and $7.5 million on a line of credit for the Grass Creek North I development in In 2016, CIHA incurred $8.9 million in debt for the Creekview Plaza 49 project and $3.0 million for the 3600 Spenard development began in Economic Factors and Trends: Market studies continue to show a strong need for affordable housing in Anchorage and within the Cook Inlet Region. CIHA s portfolio vacancy rate of under 5% and in excess of 1,500 applications received for 171 new units completed in 2016 are indicators of a healthy affordable housing market demand. Sources of Income The pie charts below show sources of CIHA s revenue from 2012 and Rental revenue increased over 80% from 2012 to 2016, increasing total revenues by 47%. NAHASDA 1 revenue increased 20% 1 Native American Housing Assistance and Self Determination Act of 1996; 2 programs administered by the U.S. Department of Housing and Urban Development (HUD), the Indian Housing Block Grant, and the Title VI Loan Guarantee Program. The grant funds shown in the chart are IHBG funds. 14

18 Management Discussion & Analysis and State of Alaska grants had no change during the 5 year period. However, because of the increase in rental revenue (and total revenues) NAHASDA and SOA revenues as a percentage of total revenues declined during the period Revenue Sources 2016 Revenue Sources NAHASDA Other Federal Recptrd. HOME/Prog Inc. Dev. Fees Asset Sales Other State of Alaska Other Grants Rental Inc. Mgmt. & Ref. Fees/Commiss. Int. Income Permanent Fund The Permanent Fund was established by the Board of Commissioners in 2012 to help CIHA reduce its dependency on grant revenues and increase its fiscal stability, with the stated goal of accumulating $20 million in the fund by the year The Fund is governed by a Board approved Contribution Policy which directs the contributions over a three year period. At the December, 2015 Board meeting the Board approved an annual contribution of $600,000 for the years ended At its February 2016 Board of Commissioners meeting, the CIHA Board directed staff to deposit $600,000 to the Permanent Fund, bringing the total contributions and earnings of the fund to over $8.6 million at December 31, With $600,000 annual contributions and a 3.3% earning assumption, CIHA will reach its goal of $20 million by Pension Plan As described in Note 10 Pension and Post Employment Healthcare Plans to the financial statements, the Authority participates in both defined benefit and defined contribution retirement plans administered by the State of Alaska. The State of Alaska Statutes limits the contribution from participants in the Defined Benefit Plan to 22% of covered payroll. However, due to a change in the calculation of the actual Net Pension Liability, 15

19 Management Discussion & Analysis which is an amount determined by actuarial projections of future pension costs, the contribution required to fully fund the accrued pension liability exceeds the maximum rate. That difference is anticipated to be funded by the State in future years, but the State Constitution precludes it from recording that liability, thus it is recorded in CIHA s financial statements as a Net Pension Liability. Requests for Information This report is designed to provide a general overview of the finances of the Cook Inlet Housing Authority to interested parties. Questions concerning any of the information provided in this report or requests for additional information should be addressed to: Cook Inlet Housing Authority 3510 Spenard Rd., Suite 100 Anchorage, AK

20 Combined Statements Net Position December 31, 2016 and Assets Current assets: Cash $ 19,567,889 23,093,890 Investments 32,915,108 27,556,771 Investments - board designated 8,454,660 7,377,124 Accounts receivable, net 1,930, ,164 Grants receivable 505, ,250 Notes receivable - current portion 930,105 1,148,932 Interest receivable 55, ,296 Prepaid items 278, ,430 Total current assets 64,637,695 60,397,857 Noncurrent assets: Investments 5,496,297 8,040,032 Investment in subsidiaries Deposits and reserves 5,496,555 5,188,954 Deferred tax asset 103, ,075 Notes receivable, net of current portion 20,611,025 20,027,590 31,707,064 33,359,762 Fixed assets: Land 47,614,193 45,295,450 Land improvements 31,073,991 28,863,337 Buildings 278,384, ,742,563 Equipment 9,449,597 8,673,862 Alternative energy 2,948, ,855 Permanent loan fees 1,456,356 1,140,173 Construction in progress 10,277,496 15,954, ,204, ,397,949 Less accumulated depreciation (80,356,030) (71,235,011) Total capital assets 300,848, ,162,938 Total noncurrent assets 332,555, ,522,700 Deferred outflows - pension related 4,014,583 1,539,864 Total assets $ 401,207, ,460,421 Liabilities and Net Position Liabilities: Current liabilities: Accounts payable $ 1,673,184 1,428,499 Accounts payable - intercompany - 18,478 Accrued liabilities 3,703,249 3,069,110 Construction retainage 811, ,904 Compensated absences 482, ,704 Unearned rent revenue 21,221 92,185 Refundable advances 32,997,144 33,223,424 Lines of credit payable 17,358,013 12,256,824 Notes payable - current portion 1,788, ,972 Total current liabilities 58,835,743 51,682,100 Noncurrent liabilities: Accrued interest on notes payable 438, ,871 Notes payable, net of current portion 46,592,595 42,478,482 Unamortized discount on purchased notes 4,090 8,180 Trust and deposit liabilities 853, ,407 Net pension liability 12,611,075 7,447,151 Total noncurrent liabilities 60,499,498 51,043,091 Total liabilities 119,335, ,725,191 Deferred inflows - pension related 1,083, ,400 Net Position Invested in capital assets, net of related debt 157,744, ,676,666 Unrestricted - board designated permanent fund 8,454,660 7,541,525 Unrestricted 114,589,819 88,656,639 Total net position 280,788, ,874,830 Total liabilities and net position $ 401,207, ,460,421 17

21 Combined Statements Revenues, Expenses, and Changes in Net Position Years Ended December 31, 2016 and Operating revenues: NAHASDA $ 15,419,160 17,110,708 State of Alaska 3,128,929 9,804,285 Other federal 1,481, ,558 Other grants 1,486, ,383 Program income - 26,400 Rental income 11,952,008 10,803,050 Management/developer fee 5,059,114 2,083,845 Referral fees/commissions 43,125 9,203 Proceeds from sale of assets 157,020 (21,649) Interest income from operations 356, ,282 Other 943, ,194 Total operating revenues 40,027,865 42,818,259 Operating expenses: Salaries and benefits 16,105,196 12,763,884 Depreciation and amortization 9,195,636 8,538,410 Program assistance 908, ,581 Professional services 1,253,482 1,071,835 Resident services 41,019 26,255 Utilities 2,352,419 2,010,177 Repairs and maintenance 2,666,700 1,647,953 Supplies 323, ,360 Insurance 696, ,604 Communications 125, ,899 Training and travel 230, ,516 Fees and licenses 720, ,205 Property taxes 536, ,581 Office and equipment lease 264, ,915 Board expense 86,125 55,924 Marketing and advertising 157, ,036 Bad debt 115,125 81,787 Building operations - 338,776 Direct sales expense 91,174 18,977 Donations 44,097 29,480 Total operating expenses 35,912,915 30,258,155 Total operating earnings 4,114,950 12,560,104 Nonoperating revenue (expense): Interest expense (2,246,578) (2,014,590) Investment income 725, ,805 Loss on disposal of assets (155,745) (554,528) Total nonoperating expense (1,676,940) (2,436,313) Income before capital contributions 2,438,010 10,123,791 Capital contributions 10,476,070 11,883,011 Total capital contributions 10,476,070 11,883,011 Increase in net position 12,914,080 22,006,802 Net position, beginning 267,874, ,817,617 Prior period adjustment - (6,949,589) Net position, beginning, restated 267,874, ,868,028 Net position, ending $ 280,788, ,874,830 18

22 Combined Statements Cash Flows Years Ended December 31, 2016 and Cash flows from operating activities: Receipts from grants $ 21,433,749 26,401,157 Receipts from others 1,606,615 (522,054) Receipts from clients 15,546,877 13,978,597 Payments to vendors (8,648,778) (10,597,548) Payments to employees (16,025,895) (12,752,586) Collection of home loans 1,249,429 1,052,332 Home loans disbursed (763,047) (1,862,993) Net cash provided by operating activities 14,398,950 15,696,905 Cash flows from capital and related financing activities: Acquisition and construction of capital assets (33,581,069) (25,454,623) Investment in subsidiaries (29,512) (859,652) Proceeds from sale of capital assets 284,197 1,180,228 Proceeds from issuance of debt 17,433,967 15,745,231 Proceeds from line of credit 8,046, ,268 Payments on line of credit (10,325,215) (499,287) Contributions received from general partners - 855,304 Contributions received from limited partners 10,505,692 11,028,989 Issuance of notes receivable - (4,937,907) Proceeds received on notes receivable (4,747,535) 1,461,446 Principal payment on notes payable (1,077,079) (8,869,735) Interest payment on debt (2,298,079) (1,674,029) Total cash used by capital and related financing activities (15,788,475) (11,806,767) Cash flows from investing activities: Proceeds from sale/maturities of investments 78,601,818 18,266,975 Purchase of investments (82,399,374) (22,424,140) Interest and dividends from investments 1,661, ,921 Net cash provided (used) by investing activities (2,136,477) (3,860,244) Net change in cash (3,526,002) 29,894 Cash at beginning of year 23,093,891 23,063,996 Cash at end of year $ 19,567,889 23,093,890 Reconciliation of operating earnings to net cash provided by operating activities: Operating earnings $ 4,114,950 12,560,104 Adjustments to reconcile operating income (loss) to net cash provided by operating activities: Depreciation and amortization 9,195,636 8,538,410 Bad debt 115,125 81,787 Non-cash admin/ developer fee - (291,337) Pension expense 2,912, ,852 (Increase) Decrease in accounts receivable (1,930,412) (562,535) (Increase) Decrease in grants receivable 197,176 (208,239) (Increase) Decrease in prepaids (98,961) 58,551 (Increase) Decrease in deposits (307,601) (539,054) (Increase) Decrease in interest receivable (865,690) (3,458) (Increase) Decrease in notes receivable 486,382 (1,274,869) Increase (Decrease) in interest payable (35,106) - Increase (Decrease) in accounts payable 223,983 1,158,102 Increase (Decrease) in accrued liabilities 63,787 (2,614,429) Increase (Decrease) in construction retainage 451,361 (1,429,885) Increase (Decrease) in compensated absences 56,851 17,001 Increase (Decrease) in refundable advances (224,221) (813,029) Increase (Decrease) in unearned revenue (69,743) 7,710 Increase (Decrease) in trust liabilities 112,960 77,223 Net cash provided by operating activities $ 14,398,950 15,696,905 19

23 Notes to Basic Financial Statements December 31, 2016 and 2015 NOTE 1 DESCRIPTION OF ORGANIZATION Description of Reporting Entity CIHA was created on December 17, 1974 as a public corporation in accordance with Alaska State Statute Sec and Sec to provide affordable housing opportunities to eligible participants in the Cook Inlet region. The governing body of CIHA is its Board of Commissioners (Board) which is composed of five members appointed by the Cook Inlet Tribal Council (CITC). Programs Administered by CIHA CIHA administers an Indian Housing Block Grant (IHBG) awarded under the Native American Housing Assistance and Self-Determination Act of 1996 (NAHASDA), which took effect on October 1, NAHASDA provides federal assistance to Indian Tribes in a manner that recognizes the right of Indian self-determination and tribal self-governance. IHBGs are awarded directly to tribal entities. The amount of the block grant is determined by a formula that includes the number of Current Assisted Stock (CAS) and the American Indian and Alaskan Native population within the Tribe s jurisdiction. The Cook Inlet Region, Inc. (CIRI) is designated as a tribe for NAHASDA purposes and is the recipient of IHBG funds for that region. CIRI has designated CIHA to be the Tribally Designated Housing Entity (TDHE) for its region. IHBGs are awarded only after an Indian Housing Plan (IHP), is submitted and approved by U.S. Department of Housing and Urban Development (HUD). The IHP demonstrates that the TDHE has made or will make adequate provisions to comply with the objectives and stewardship requirements of NAHASDA funds. CIHA combines NAHASDA revenue with other state, federal, and unrestricted revenue to provide homeownership loan programs, manage and operate rental properties, provide housing assistance programs and develop, construct, modernize, and operate affordable housing for clients in the Cook Inlet region. The Homeownership Loan Programs CIHA supports a homeownership program through its wholly owned affiliate, Cook Inlet Lending Center (CILC), a Community Development Financing Institution designated by the U.S. Treasury. CILC provides down payment assistance funded from a variety of sources. That assistance is in the form of a second mortgage loan to eligible individuals and families who are generally at or below 80% of the area median income and is secured by the property purchased by the borrower. CILC has successfully leveraged NAHASDA funding to provide an array of homeownership services including homeownership education, Individual Development Account (IDA) savings plans, and brokerage services for HUD Section 184 Guaranteed Loans. 20

24 Notes to Basic Financial Statements, continued NOTE 1 DESCRIPTION OF ORGANIZATION, continued Property Management Services As of December 31, 2016 CIHA owns a total of 1259 rental housing units of these units are internally managed by CIHA, while 82 units are managed by a third party property management firm. Additionally, CIHA provides property management services to 80 units of affordable rental housing owned by another entity, for a total of 1339 units owned and/or managed by CIHA. Of all units owned/managed by CIHA, 781 are multi-family units and 558 are senior housing rental units. Of the senior housing units, 267 were developed under HUD s 1937 Housing Act Program, and are considered Current Assisted Stock (CAS), which are required by HUD to be maintained by CIHA in accordance with NAHASDA regulations. CIHA provides a variety of unit types from efficiencies to 1 to 4 bedroom units to meet household needs, and offers rentals to accommodate individuals and families with different income levels, including market rate rental units. Housing Assistance Programs Mutual Help (MH) Homeownership is a lease-with-option to purchase program where the lessee entered into a 15 year lease-to-purchase contract with CIHA. Properties were developed under the 1937 Housing Act, and are eligible for rehabilitation to correct design or construction deficiencies using the current assisted stock portion of the IHBG. The final property from the program was sold in 2015 leaving MH stock at zero. Emergency Housing Services programs provide assistance to shelters for families who need emergency shelter due to displacement, or are homeless. Through case management provided by the Brother Francis Shelter and Covenant House, they connect individuals, families, and young adults to services, housing and employment opportunities. NAHASDA grant funds provided through CIHA are used to supplement these programs for the benefit of individuals through sub-recipient agreements. CIHA s Rental Assistance Program assisted 69 households with rental assistance in support of a family self-sufficiency goal. The rental assistance is provided to individuals who are below 80% of area median income at CIHA owned or managed properties. Case management is provided through CIHA s Family Self-Sufficiency program. The Tribal HUD-Veteran Administration Supportive Housing ( Tribal-VASH ) program provides rental assistance and supportive services to Native American Veterans that are homeless or at risk of homelessness living on or near a reservation or other Indian area. Cook Inlet Housing Authority ( CIHA ) in partnership with the Veterans Administration ( VA ) provides the tenant-based rental assistance to a maximum of twenty (20) eligible Veteran households in the Cook Inlet Region. CIHA provides the rental assistance administration and the VA provides the case management service via contracting with a Tribal healthcare provider. 21

25 Notes to Basic Financial Statements, continued NOTE 1 DESCRIPTION OF ORGANIZATION, continued Development and Modernization Programs CIHA provides construction management services, both for its own projects and developments and for third party nonprofit entities. CIHA completed construction of Mountain View Village V Limited Partnership (MVVVLP), a 44 unit multi-family scattered site project in Anchorage. MVVVLP is comprised of two single family rental homes, fifteen duplexes, a triplex, a four-plex and a five-plex, located on six sites. CIHA completed construction of Eklutna Estates II L.P., a 34 unit senior facility located on the Centennial Village campus in Anchorage. CIHA purchased 18 multi-family market rate units in the form of three six-plex buildings located in Anchorage. CIHA completed construction of the Anchorage Mountain View Phase I Limited Partnership which consists of two Low Income Housing Tax Credits (LIHTC) projects: Ridgeline Terrace, a 70 unit multi-family and senior facility; and Susitna Square, an 18 unit multi-family project. CIHA was awarded LIHTC for the development and construction of 52 unit multi-family development called Grass Creek North I (GCNILP); a 49 unit senior & mixed use project called Creek View Plaza 49 (CVP49LP), both located in East Anchorage; and a 33 unit multi-family and mixed use project located on Spenard Road in. CIHA administers a Weatherization grant from the Alaska Housing Finance Corporation (AHFC), which funds energy efficiency improvements to households with income below 100% of the area median income. During the grant period April 1, 2013 to March 31, 2015 CIHA will weatherize over 330 units in Anchorage, Tyonek, Mat-Su Valley, and Seldovia. CITC has awarded CIHA a grant for Mold Remediation and Prevention. CITC disburses funds awarded under this grant to CIHA for the purpose of assessing housing units owned and managed by CIHA, and/or any grant-eligible housing units within the Cook Inlet region which includes identifying mold-related issues and creating and implementing a prevention and remediation plan. CIHA plans to complete the work funded by this grant within two years, starting October 2015, with a target of 54 homes. CIHA was selected as a participant in the ArtPlace America Community Development Investments program. The intention of this program is to support organizations like CIHA to incorporate arts and cultural strategies into the implementation of CIHA s efforts in developing the community. 22

26 Notes to Basic Financial Statements, continued NOTE 1 DESCRIPTION OF ORGANIZATION, continued CIHA Family of Companies For the purpose of developing LIHTC projects and receiving certain types of non-nahasda grant funding, CIHA has created companies that are wholly owned and controlled by CIHA. Each company s activities are reported separately and also consolidated into the CIHA financial statements. Copies of financial statements can be obtained from Cook Inlet Housing Authority, 3510 Spenard Road, Suite 100, Anchorage, AK Cook Inlet Housing Development Corporation (CIHDC) was established in 1984 to carry out charitable activities directly and indirectly through the provision of housing and medical services to the elderly, needy, and such other charitable purposes as the Board of Directors may from time to time direct. CIHDC is the general partner in the CPLP; MVVVLP; and GCNILP via CIHDC Grass Creek LLC. In February 2015 CIHDC became the limited partner in the Grass Creek North I Limited Partnership; CIHDC withdrew from the partnership in July 2015 to admit Wells Fargo Affordable Housing Community Development Corporation to the partnership as the limited partner. CIHDC also became the limited partner in the CVP49LP in January 2015; CIHDC withdrew from the partnership in May 2015 to admit R4 CVP Acquisition LLC to the partnership as the limited partner. CIHDC is a wholly owned subsidiary of CIHA. Ne vut Development Corporation (Ne vut) was established on November 15, 2001 to develop, own, and manage affordable housing projects within the Cook Inlet region, primarily utilizing LIHTCs as the funding vehicle. The Board of Directors of Ne vut is also the Board of Commissioners of CIHA. Ne vut serves as an interim limited partner in the development of affordable housing utilizing LIHTCs. Ne vut is replaced by the investing limited partner when tax credits are awarded to CIHA and the investing limited partner purchases the tax credits. At December 31, 2016 and for the year then ended, Ne vut had no activity. Cook Inlet Lending Center, Inc. (CILC) was established on November 7, 2001 for religious, charitable, scientific, literary, or educational purposes under Section 501(c)(3) of the IRS Code and was originally known as Na Qenq a. The name was changed to Cook Inlet Lending Center in CILC promotes and provides: 1) lending services in Alaska; 2) community and economic development opportunities in the CIRI region; 3) access to credit markets; and 4) economic development and opportunities for local investment partnerships. In 2015 CILC formed their own Board of Directors; previously their board was also CIHA s. CILC is a blended component unit of CIHA. CILC offers four major programs: A Down Payment Assistance program; Individual Development Account (IDA) program; HUD Section 184 Loan guarantee program; and the Federal Home Loan Bank (FHLB) Native American Homeownership Initiative and HomeStart programs. 23

27 Notes to Basic Financial Statements, continued NOTE 1 DESCRIPTION OF ORGANIZATION, continued o Down Payment Assistance program offers assistance to eligible clients as they finance a home within the Cook Inlet region in the form of a second mortgage secured by a deed of trust on the property. The amount of down payment assistance, interest and repayment terms are tailored to address the variety of client needs based on household income, senior and special needs status, and marketing of homeownership within CIHA s Neighborhood Revitalization areas where CIHA has constructed homes for sale. o Individual Development Accounts is a national initiative to create wealth in the nation s lowest wealth populations. CILC successfully launched the IDA program in July It is structured for participants to save a portion of their earnings towards a home purchase, which is matched with $4 for every $1 saved up to $1,000, for a total savings of up to $5,000. IDA participants evaluate personal credit reports and work towards strengthening credit scores, develop and follow household budgets, participate in education forums, and enjoy one on one counseling where desired. o Homeownership for Alaska Native/Native Americans HUD Section 184 Loans were established in 1992 by Congress as a way for eligible Alaska Native/Native American individuals, families, tribes and tribally designated housing entities (including Indian Housing Authorities) to have homeownership opportunities, both on and off of native lands. These loans allow for a lower down payment and more flexible underwriting standards than conventional mortgage loan programs. o Native American Homeownership Initiative/HomeStart Programs CILC is a member of Federal Home Loan Bank of Des Moines (FHLB DM). CILC is allocated funds each year to help low income families purchasing a home. Applicants receive a grant in accordance with FHLB DM reservation amount dependent upon the grant they apply for with a deed restriction of 5 years. Numbers of grants available are based on allocations received by FHLB DM and range in amounts up to $10,000. o Cook Inlet Real Estate Services, Inc. (CIRES) was established in 2005 to provide consulting, property and project management services to other entities. CIRES is a wholly owned subsidiary of CIHA. In 2010, CIRES s property and project management services were discontinued and all functions were transferred to a third party. CIRES is a licensed real estate brokerage capable of providing professional real estate referral services. Strawberry Rose Limited Partnership (SRLP) is a partnership between CIHA, the Managing General Partner, Related Direct SLP LLC, the Special Limited Partner, and RCC Credit Facility, LLC, the Investor Limited Partner. SRLP was formed on November 19, 2001 in the State of Alaska with the specific purpose of developing, operating, and/or leasing property. As managing general partner and investing limited partner, CIHA, Related Direct SLP LLC and RCC Credit Facility, LLC, have a 0.01%, 0.01%, and a 99.98% interest in the profits, losses, and cash flows of operations of SRLP respectively. The partnership owns and operates Strawberry Village Cottages which is 60 single family affordable units located in. The development qualified for and was allocated low-income 24

28 Notes to Basic Financial Statements, continued NOTE 1 DESCRIPTION OF ORGANIZATION, continued housing tax credits under Internal Revenue Service Code Section 42, which regulates the use of the property as to occupant eligibility and unit gross rent. Strawberry Village Cottages was put into service in three phases during September and October, 2002 and January SRLP is a blended component unit of CIHA. Kenaitze Pointe Limited Partnership (KPLP) is a partnership between Cook Inlet Housing Authority, the Managing General Partner, Related Corporate Partners XXII SLP, L.P., the Special Limited Partner and Related Corporate Partners XXII, LP, the Investor Limited Partner. KPLP was formed on April 19, 2002 in the State of Alaska with the specific purpose of developing, operating, and/or leasing property. As managing general partner and investing limited partner, CIHA, Related Corporate Partners XXII SLP, LP, and Related Corporate Partners XXII, LP, have a 0.01%, 0.01%, and a 99.98% interest in the profits, losses, and cash flows of operations of KPLP respectively. The partnership owns and operates Kenaitze Pointe Senior Facility, a 53 unit affordable senior housing rental facility located in. The development qualified for and was allocated low-income housing tax credits under Internal Revenue Service Code Section 42, which regulates the use of the property as to occupant eligibility and unit gross rent. Kenaitze Point was put into service in September, KPLP is a blended component unit of CIHA. Tyonek Terrace Limited Partnership (TTLP) is a partnership between Cook Inlet Housing Authority, the Managing General Partner, Related Direct SLP LLC, the Special Limited Partner, and RCC Credit Facility, L.L.C., the Investor Limited Partner. TTLP was formed on September 19, 2002, in the State of Alaska with the specific purpose of developing, operating, and/or leasing property. As managing general partner and investing limited partner, CIHA, Related Direct SLP LLC, and RCC Credit Facility, L.L.C. have a 0.01%, 0.01%, and a 99.98% interest in the profits, losses, and cash flows of operations of TTLP respectively. The partnership consists of a 40 unit apartment project located in for rent to income eligible senior citizens. The development qualified for and was allocated low-income housing tax credits under Internal Revenue Service Code Section 42, which regulates the use of the property as to occupant eligibility and unit gross rent. The property was placed in service in September TTLP is a blended component unit of CIHA. Mountain View Village I Limited Partnership (MVVI) is a partnership between Cook Inlet Housing Authority, the Managing General Partner, Related Direct SLP LLC, the Special Limited Partner and RCC Credit Facility, L.L.C., the Investor Limited Partner. MVVI was formed on October 6, 2003 in the State of Alaska, with the specific purpose of developing, operating, and/or leasing property. As managing general partner and investing limited partner, CIHA, Related Direct SLP LLC, and RCC Credit Facility, L.L.C. have a 0.01%, 00.01%, and a 99.98% interest in the profits, losses, and cash flows of operations of MVVI respectively. The partnership owns and operates 16 multi-family units and 12 single family units in Anchorage, Alaska for affordable rentals for income-eligible families. The development qualified for and was allocated low-income housing tax credits under Internal Revenue Service Code Section 42, which 25

29 Notes to Basic Financial Statements, continued NOTE 1 DESCRIPTION OF ORGANIZATION, continued regulates the use of the property as to occupant eligibility and unit gross rent. The property was placed in service on October 1, MVVI is a blended component unit of CIHA. Creekside Village I Limited Partnership (CVILP) is a partnership between Cook Inlet Housing Authority, the Managing General Partner, Centerline SLP LLC, the Special Limited Partner, and Centerline Investor LP LLC, the Investor Limited Partner. CVILP was formed October 9, 2003 in the State of Alaska, with the specific purpose of developing, operating, and/or leasing property. As managing general partner and investing limited partner, CIHA, Centerline SLP LLC, and Centerline Investor LP LLC have a 0.01%, 0.01%, and a 99.98% interest in the profits, losses, and cash flows of operations of CVILP respectively. The partnership owns and operates 80 multi-family units in for rent to income eligible families. The development qualified for and was allocated low-income housing tax credits under Internal Revenue Service Code Section 42, which regulates the use of the property as to occupant eligibility and unit gross rent. The property was placed in service in phases beginning in February 2008, with completion in July 2008, in. CVILP is a blended component unit of CIHA. Mountain View Village II Limited Partnership (MVVII) is a partnership between Cook Inlet Housing Authority, the Managing General Partner, Related Corporate Partners XXIX SLP, L.P., the Special Limited Partner and Centerline Corporate Partners XXIX, LP, the Investor Limited Partner. MVVII was formed September 1, 2004 in the State of Alaska, with the specific purpose of developing, operating, and/or leasing property. As managing general partner and investing limited partner, CIHA, Related Corporate Partners, XXIX SLP, LP, and Centerline Corporate Partners XXIX, LP have a 0.01%, 0.01%, and a 99.98% interest in the profits, losses, and cash flows of operations of MVVII respectively, unless otherwise specified in the Limited Partnership Agreement. As of January 1, 2015 the Limited Partnership Agreement was amended to redistribute allocations of profits, losses and cash flows of operations in certain situations to the managing general partner, special limited partner and investing limited partner as 25%,.01% and 74.99% respectively. The partnership owns and operates 32 multi-family units and 15 single family units in Anchorage, Alaska for rent to income-eligible families. The development qualified for and was allocated low-income housing tax credits under Internal Revenue Service Code Section 42, which regulates the use of the property as to occupant eligibility and unit gross rent. The property was placed in service on December 31, MVVII is a blended component unit of CIHA. Mountain View Village III Limited Partnership (MVVIII) is a partnership between Cook Inlet Housing Authority, the Managing General Partner, Related Direct SLP LLC, the Special Limited Partner, and RCC Credit Facility, L.L.C., the Investor Limited Partner. MVVIII was formed September 8, 2005 in the State of Alaska, with the specific purpose of developing, operating, and/or leasing property. As managing general partner and investing limited partner, CIHA, Related Direct SLP LLC, and RCC Credit Facility, L.L.C. have a 0.01%, 0.01%, and a 99.98% interest in the profits, losses, and cash flows of operations of MVVIII respectively. 26

30 Notes to Basic Financial Statements, continued NOTE 1 DESCRIPTION OF ORGANIZATION, continued The partnership owns and operates 14 multi-family units and 24 single family units in Anchorage, Alaska for rent to income-eligible families. The development qualified for and was allocated low-income housing tax credits under Internal Revenue Service Code Section 42, which regulates the use of the property as to occupant eligibility and unit gross rent. The property was placed in service phases during September 2006 through November, MVVIII is a blended component unit of CIHA. Eklutna Estates Limited Partnership (EELP) is a partnership between Cook Inlet Housing Authority, the Managing General Partner and Wells Fargo Community Investment Holdings, LLC, the Investment Limited Partner. EELP was formed October 6, 2008 in the State of Alaska, with the specific purpose of developing, operating, and/or leasing property. As managing general partner and investing limited partner, CIHA, and Wells Fargo Community Investment Holdings, LLC respectively, have a 0.01%, and a 99.99% interest in the profits, losses, and cash flows of operations of EELP. The partnership owns and operates a 59 unit apartment project located in for rent to income eligible senior citizen tenants. The development qualified for and was allocated low-income housing tax credits under Internal Revenue Service Code Section 42, which regulates the use of the property as to occupant eligibility and unit gross rent. The property was placed in service on August EELP is a blended component unit of CIHA. Mountain View Village IV Limited Partnership (MVVIV) is a partnership between Cook Inlet Housing Authority, the Managing General Partner, and Wells Fargo Affordable Housing Community Development Corporation, the investing limited partner. MVVIV was formed November 11, 2009 in the State of Alaska, with the specific purpose of developing, operating, and/or leasing property. As managing general partner and investing limited partner, CIHA and Wells Fargo Affordable Housing Community Development Corporation have a 0.01%, and a 99.99% interest in the profits, losses, and cash flows of operations of MVVIV respectively. The partnership owns and operates 34 multi-family units of housing in for rent to income-eligible families. The development qualified for and was allocated low-income housing tax credits under Internal Revenue Service Code Section 42, which regulates the use of the property as to occupant eligibility and unit gross rent. The property was placed in service in phases from January to July MVVIV is a blended component unit of CIHA. Loussac Place Limited Partnership (LPLP) is a partnership between Cook Inlet Housing Authority, the Managing General Partner and Wells Fargo Affordable Housing Community Development Corporation, the Investor Limited Partner. LPLP was formed December 1, 2010 in the State of Alaska, with the specific purpose of developing, operating, and/or leasing property. As managing general partner and investing limited partner, CIHA, and Wells Fargo Affordable Housing Community Development Corporation respectively, have a 0.01%, and a 99.99% interest in the profits, losses, and cash flows of operations of LPLP. The partnership owns and operates 120 units of housing located in for rent to income eligible families. The development qualified for and was allocated low-income housing tax 27

31 Notes to Basic Financial Statements, continued NOTE 1 DESCRIPTION OF ORGANIZATION, continued credits under Internal Revenue Service Code Section 42, which regulates the use of the property as to occupant eligibility and unit gross rent. The property was placed in service in two phases August and November, LPLP is a blended component unit of CIHA. Coronado Park Limited Partnership (CPLP) is a partnership between Cook Inlet Housing Development Corporation, Managing General Partner, and R4 CPSV Acquisition LLC, Investor Limited Partner. CPLP was formed on January 24, 2013 in the State of Alaska with the specific purpose of developing, operating and/or leasing property. As managing general partner and investing limited partner, Cook Inlet Housing Development Corporation and R4 Capital LLC Investing Limited Partner have a.01% and a 99.99% interest in the profits, losses and cash flows of operation of CPLP respectively. The partnership owns and operates a 56 unit housing development located in available to income eligible senior citizens. The development qualified for and was allocated low-income housing tax credits under Internal Revenue Service Code Section 42, which regulates the use of the property as to occupant eligibility and unit gross rent. The property was placed in service in July CPLP is a blended component unit of CIHDC, which is a wholly owned subsidiary of CIHA. Eklutna Estates II Limited Partnership (EEIILP) is a partnership between Cook Inlet Housing Authority, General Partner, and R4 Housing Partners III LP, Investor Limited Partner. EEIILP was formed on January 15, 2014 in the State of Alaska with the specific purpose of developing, operating and/or leasing property. As general partner and investor limited partner Cook Inlet Housing Authority and R4 Housing Partners III LP have a.01% and a 99.99% interest in profits, losses and cash flows of operation of EEIILP respectively. The partnership owns and operates a 34 unit affordable senior housing rental facility located in Centennial Village in East Anchorage. The development qualified for and was allocated low-income housing tax credits under Internal Revenue Service Code Section 42, which regulates the use of the property as to occupant eligibility and unit gross rent. The property placed in service in July EEIILP is a blended component unit of CIHA. Mountain View Village V Limited Partnership (MVVVLP) is a partnership between Cook Inlet Housing Development Corporation, General Partner, and R4 MVV Acquisition LLC, Investor Limited Partner. MVVVLP was formed on March 3, 2014 in the State of Alaska with the specific purpose of developing, operating and/or leasing property. As managing general partner and investing limited partner, Cook Inlet Housing Development Corporation and R4 MVV Acquisition LLC, have a.01% and a 99.99% interest in profits, losses and cash flows of operation of MVVVLP respectively. 28 The partnership owns and operates 44 units of family housing on scattered sites in the Mountain View neighborhood of. The property was placed in service in phases beginning in December 2014 with completion in May The development qualified for and was allocated low-income housing tax credits under the Internal Revenue Service Code section 42, which regulates the use of the property as to occupant eligibility and unit gross rents. MVVVLP is a blended component unit of CIHDC, which is a wholly owned subsidiary of CIHA.

32 Notes to Basic Financial Statements, continued NOTE 1 DESCRIPTION OF ORGANIZATION, continued CVP Land, LLC (CVPLand) was established in 2014 and is a partnership between Cook Inlet Housing Authority, the Authorized Member, and Muldoon Community Improvement, LLC (MCI). CVPLand was formed to invest in, acquire, own, hold, manage, maintain, operate, finance, refinance, lease, sublease, improve, reconstruct, sell, exchange, dispose of and otherwise deal with the Real Property related to Creekview Plaza 49 Limited Partnership. CIHA and MCI each have a 50% interest in the profits, losses, and cash flows of operations of CVPLand. CIHDC Grass Creek LLC was established in 2015 and was formed solely to act as the General Partner in Grass Creek North I Limited Partnership. CIHDC Grass Creek LLC is a wholly owned subsidiary of CIHDC, which is a wholly owned subsidiary of CIHA. Grass Creek North I Limited Partnership (GCNILP) is a partnership between CIHDC Grass Creek, LLC, General partner, and Wells Fargo Affordable Housing Community Development Corporation, Investor Limited Partner. GCNILP was formed on January 26, 2015 in the State of Alaska with the specific purpose of developing, operating and/or leasing property. As general partner and investor limited partner CIHDC Grass Creek, LLC and Wells Fargo Affordable Housing Community Development Corporation have a.01% and a 99.99% interest in profits, losses and cash flows of operation of GCNILP respectively. The partnership owns and operates 52 units of affordable family housing located in East Anchorage. The development qualified for and was allocated low-income housing tax credits under the Internal Revenue Service Code section 42, which regulates the use of the property as to occupant eligibility and unit gross rents. The property was placed in service in phases beginning in June 2016 with completion in September GCNILP is a blended component unit of CIHDC, which is a wholly owned subsidiary of CIHA. Creekview Plaza 49 Limited Partnership (CVP49LP) is a partnership between Cook Inlet Housing Authority, General Partner, and R4 CVP Acquisition LLC, Investor Limited Partner. CVP49LP was formed on January 26, 2015 in the State of Alaska with the specific purpose of developing, operating and/or leasing property. As general partner and investor limited partner CIHA and R4 CVP Acquisition LLC have a.01% and a 99.99% interest in profits, losses and cash flows of operation of CVP49LP respectively. The partnership owns and operates 49 units of affordable senior housing and approximately 7,166 square feet of retail space located in East Anchorage. The development qualified for and was allocated low-income housing tax credits under the Internal Revenue Service Code section 42, which regulates the use of the property as to occupant eligibility and unit gross rents. The property placed in service in July CVP49LP is a blended component unit of CIHA. Spenard 33 Limited Partnership (SP33LP) is a partnership between Cook Inlet Housing Authority, General Partner, and R4 SPJ Acquisition LLC, Investor Limited Partner. SP33LP was formed on February 16, 2016 in the State of Alaska with the specific purpose developing, operating and/or leasing property. As General partner and investor limited partner CIHA and R4 SPJ Acquisition LLC have a.01% and 99.99% interest in profits, losses and cash flows of operation of SP33LP respectively. 29

33 Notes to Basic Financial Statements, continued NOTE 1 DESCRIPTION OF ORGANIZATION, continued The partnership is developing 33 mixed income single bedroom units and approximately 2,800 square feet of retail space located at the corner of Spenard and 36th Avenue in Anchorage, AK. The development qualified for and was allocated low-income housing tax credits under the Internal Revenue Service Code section 42, which regulates the use of the property as to occupant eligibility and unit gross rents. Development is projected to be completed in August SP33LP is a blended component unit of CIHA. NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Accounting The financial statements of CIHA are reported using the economic resources measurement focus and the accrual basis of accounting, whereby all revenues are recorded when earned and expenses are recorded when a liability is incurred, regardless of the timing of related cash flows. Depreciation and amortization of assets is recognized in the statements of revenues, expenses and changes in net position. All assets and deferred outflows, and liabilities and deferred inflows associated with the operations of CIHA are included in the statement of net position. CIHA has elected to report all activities as one major business-type activity in accordance with Governmental Accounting Standards Board (GASB) Statement No. 20, Accounting and Financial Reporting for Proprietary Funds and Other Governmental Entities That Use Proprietary Fund Accounting. CIHA applies all GASB pronouncements as well as Financial Accounting Standards Board (FASB) pronouncements issued before November 30, 1989, unless those pronouncements conflict with or contradict GASB pronouncements. After November 30, 1989, the Authority only applies applicable FASB pronouncements unless GASB standards specifically adopt FASB pronouncements. Intercompany activity has been removed or eliminated from the financial statements to abate an overstated effect on assets, liabilities, revenues and expenses of CIHA. Amounts reported as program revenues are funds awarded by state, federal, or local granting agencies which are restricted for specific purposes. Income earned from a NAHASDA supported activity or earned as a result of the Federal award is considered program income. With changes to the Code of Federal Regulations (CFR) (a)(5) and , effective January 1, 2013 program income is allowed to be retained and may be used for any housing or housing-related activities and are not subject to other federal requirements. This is a significant change from prior policy which required program income to be spent before NAHASDA funds were expended, resulting in flexibility in the timing and use of program income. Other revenue consists of all revenue not associated with federal, state or local grants. Operating revenues and expenses are distinguished from non-operating revenues and expenses. Operating revenues and expenses generally result from providing services and producing and delivering goods in connection with the affordable housing activities of CIHA. Principal operating revenues of CIHA are NAHASDA grant revenues, state and other federal grant revenue, rental income, management and developer fees, and other income from operations. 30

34 Notes to Basic Financial Statements, continued NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued Operating expenses of CIHA include standard operating categories including salaries and benefits, program assistance, depreciation, professional services, utilities, supplies, insurance, and repair and maintenance. Direct Sales expenses are expenses incurred on projects that CIHA is performing for third parties for which it receives payment. Non-operating items include interest income and expenses, and gain/loss on disposition of assets. Basis of Presentation CIHA s basic financial statements include the following reports: Consolidated Statements of Net Position, Consolidated Statements of Revenues, Expenses and Changes in Net Position, and Consolidated Statements of Cash Flows presented using the direct method. Use of Estimates Preparation of consolidated financial statements in conformity with Generally Accepted Accounting Principles (GAAP) requires management to make estimates and assumptions that affect the reported amount of assets and liabilities; disclosures of contingent assets and liabilities; and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. All accounts and notes receivables are shown net of allowance. An allowance is established based on a review by management of individual delinquent loans, current and anticipated economic conditions, past account and loan loss experience, and such other factors that in management s judgment deserve recognition in estimating potential account and loan losses. Cash and Investments Investments are reported at fair value on the statement of net position with changes in fair value recognized in the statement of revenues, expenses and changes in net position. Per 24 CFR , CIHA may invest IHBG funds in obligations issued, backed, or guaranteed by the U.S. Government, in obligations that mature within five years. For purposes of the statement of cash flows, CIHA considers all unrestricted, highly liquid investments with an initial maturity of three months or less to be cash equivalents. Payments in Lieu of Taxes and Property Taxes Pursuant to a cooperation agreement with the Municipality Of Anchorage, the Kenai Peninsula Borough, and the Matanuska Susitna Borough, CIHA makes payments in lieu of taxes for eligible properties within their taxing jurisdictions. CIHA is the managing general partner of partnerships which were formed for the exclusive purpose of developing and operating rental properties with proceeds from IRS authorized low income housing tax credits. Payments in lieu of property taxes are paid based on a state-derived methodology for properties constructed with low income housing tax credit proceeds. 31

35 Notes to Basic Financial Statements, continued NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued Income Taxes The Internal Revenue Code provides that gross income for tax purposes does not include amounts accruing to a state or territory or any political subdivision thereof, which is derived from the exercise of any essential governmental function or from any public utility. According to Alaska Statutes, CIHA constitutes an instrumentality of Alaska and is therefore exempt from state and federal income taxes. However, taxes accruing to partnerships are recorded in the statement of revenues and expenses and changes in net position, and annual tax returns are filed with the IRS. Retirement Plan All regular employees of CIHA who work at least 15 hours per week are required to participate in the State of Alaska Public Employees Retirement System (PERS). All employees participate in the State of Alaska Supplemental Benefits System unless waived by State legislation. CIHA follows GASB Statement No. 68, Accounting and Financial Reporting for Pensions and GASB Statement No. 45, Accounting and Financial Reporting by Employers for Postretirement Benefits Other Than Pensions. GASB Statements No. 68 and No. 45 establish standards for the measurement, recognition, and display of pension and postretirement health expenses and related liabilities, assets, net disclosure and applicable required supplementary information in the financial reports of state and local governmental employers. For purposes of measuring the net pension liability, deferred outflows of resources and deferred inflows of resources related to pensions, and pension expense, information about the fiduciary net position of PERS and additions to/from PERS fiduciary net position have been determined on the same basis as they are reported by PERS. For this purpose, benefit payments (including refunds of employee contributions) are recognized when due and payable in accordance with the benefit terms. Investments are reported at fair value. Notes Payable Notes payable are stated at their unpaid balance less any remaining premiums or discounts, plus any accrued interest. NOTE 3 CASH AND INVESTMENTS In March 2003, the GASB issued Statement No.40 Deposits and Investment Risk Disclosures. CIHA adopted GASB 40 effective January 1, Risk disclosures in previous financial statements (under the provision of GASB No. 3) focused only on custodial credit risk. GASB No. 40 not only addresses custodial credit but other common areas of investment risk as well (interest rate risk, credit risk, and concentration of credit risk). 32

36 Notes to Basic Financial Statements, continued NOTE 3 CASH AND INVESTMENTS, continued Cash consists of demand deposits and cash held in trust. The carrying amount of certain cash balances is restricted by federal regulation and other agreements. The bank balances and carrying amounts are shown below for the years indicated. December 31, 2016 Book Balance Bank Balance Cash in banks $ 8,670,582 8,887,857 Cash held with investment company 10,897,307 10,897,307 $ 19,567,889 19,785,164 December 31, 2015 Book Balance Bank Balance Cash in banks $ 17,885,446 18,918,113 Cash held with investment company 5,208,444 5,208,444 $ 23,093,890 24,126,557 Custodial Risk At December 31, 2016, CIHA s carrying amount of cash was $19,567,889, and the bank balance was $19,785,164. At December 31, 2015, CIHA s carrying amount of cash was $23,093,890, and the bank balance was $24,126,557. On December 31, 2016 and 2015 bank balances totaling $4,165,399 and $3,708,789, respectively, were unsecured or uncollateralized. All Indian Housing Block Grant funds were invested in accordance with 24 CFR CIHA also has cash balances held by two private real estate management companies related to their management of CIHA developments. The custodial risk for those balances is carried by the respective management companies. NOTE 4 INVESTMENTS IN SECURITIES Investment Policy CIHA has an Investment Policy that governs the investment of its funds. The investment of NAHASDA funds is restricted by law (24 CFR ) and the Policy as it relates to those funds is a restatement of the legal restriction. The key components of the Policy are: 33

37 Notes to Basic Financial Statements, continued NOTE 4 INVESTMENTS IN SECURITIES, continued Component NAHASDA Funds Other Funds Permitted Investments Fixed income securities issued, backed, or NAHASDA approved investments guaranteed by the US government Municipal and corporate bonds & notes rated AA or Money market funds that better invest in those same Stock Index Funds securities Commercial Paper rated Prime Certificates of Deposit insured by the FDIC Term Up to 5 years Up to 10 years Asset Allocation N/A >50% in NAHASDA approved investments <=5% in any one issuer <=15% in any one sector Board Designated Investment In 2012, CIHA elected to create a Board Designated Fund (the Permanent Fund ). The purpose of the fund is to increase fiscal stability and reduce dependency on grant revenue streams by making contributions to a permanent, dedicated fund that generates unrestricted income. The balance of the investment was $8,625,060 and $7,541,525 at December 31, 2016 and 2015 respectively. Balances include money market funds classified as cash. 34

38 Notes to Basic Financial Statements, continued NOTE 4 INVESTMENTS IN SECURITIES, continued Investment Balances At December 31, 2016 and 2015, CIHA had the following investment balances (at market value): Investments Held at December 31, 2016 ($000) Permanent Investment Type NAHASDA Fund CILC CIHDC Other Total U.S. Treasuries 5, ,972 7,163 U.S. Agencies 22, ,284 25,415 Corporate Debt ,272 2,624 Money Market Funds 8, ,672 10,897 Bond Index Funds - 3, ,948 Mortgage Backed Securities Stock Index Funds & - 5, ,578 7,121 Stocks Total Investments 35,934 8, ,045 11,519 57,763 Investments Held at December 31, 2015 ($000) Permanent Investment Type NAHASDA Fund CILC CIHDC Other Total U.S. Treasuries 3, ,987 6,487 U.S. Agencies 19, ,394 22,928 Corporate Debt ,568 2,568 Money Market Funds 3, ,463 5,207 Bond Index Funds - 2, ,594 Mortgage Backed Securities Stock Index Funds - 4, ,924 6,696 Total Investments 26,478 7, ,018 12,456 48,095 35

39 Notes to Basic Financial Statements, continued NOTE 4 INVESTMENTS IN SECURITIES, continued Concentration of Credit Risk CIHA places no limit on the amount it may invest in any one issuer; however types of investments are restricted by its Investment Policy. Those restrictions are measured individually for NAHASDA, with all others being aggregated. The actual percentage invested in each category is shown in the tables below. Investment Policy Concentration Limits and Actual Investment Percentages as of December 31, 2016 NAHASDA Permanent Fund CILC CIHDC Other Investment Type Policy Act. Policy Act. Policy Act. Policy Act. Policy Act. Securities of the US Government, Agencies, & Corporations * 29.7 * 45.6 Money Market Funds * 2.7 * 14.5 Other Corporate Debt Mortgage Backed Securities - - * Bond Index Funds - * Stock Index Funds - * *Note that the combined balance of these categories must exceed 50% 36

40 Notes to Basic Financial Statements, continued NOTE 4 INVESTMENTS IN SECURITIES, continued Investment Policy Concentration Limits and Actual Investment Percentages as of December 31, 2015 NAHASDA Permanent Fund CILC CIHDC Other Investment Type Policy Act. Policy Act. Policy Act. Policy Act. Policy Act. Securities of the US Government, Agencies, & Corporations * 57.9 Other Corporate Debt Mortgage Backed Securities * * 1.4 Bond Index Funds - - * * Stock Index Funds - - * * 30.0 * *Note that the combined balance of these categories must exceed 50% 37

41 Notes to Basic Financial Statements, continued NOTE 4 INVESTMENTS IN SECURITIES, continued Credit Risk The credit quality ratings for the Company s investments are listed below. The ratings are from Standard & Poor s as of the dates indicated. Credit Quality Ratings as of December 31, 2016 (in $000) Investment Permanent Type Rating NAHASDA Fund CILC CIHDC Other Total Securities of the US Government, Agencies, & Corporations AA+ 27, ,256 32,578 Money Market Funds 8, ,672 10,897 Other Corporate Debt AAA AA AA A A A BBB Mortgage Backed Securities Bond Index Funds - 3, ,948 Stock Index Funds - 5, ,578 7,121 Total 35,934 8, ,045 11,519 57,763 38

42 Notes to Basic Financial Statements, continued NOTE 4 INVESTMENTS IN SECURITIES, continued Credit Quality Ratings as of December 31, 2015 (in $000) Investment Permanent Type Rating NAHASDA Fund CILC CIHDC Other Total Securities of the US Government, Agencies, & Corporations AA+ 23, ,417 29,606 Other Corporate Debt AAA AA AA A A A BBB BBB Mortgage Backed Securities Bond Index Fund s - 2, ,602 Stock Index Fun s - 4, ,924 6,696 Total 23,101 7, ,080 43,138 Interest Rate Risk CIHA s investment policy does not limit investment maturities as a means of managing its exposure to losses in fair value arising from changing interest rates. The fair value of debt securities by maturity is shown below for the years ended December 31, 2016 and 2015 (in thousands). 39

43 Notes to Basic Financial Statements, continued NOTE 4 INVESTMENTS IN SECURITIES, continued Investment Maturities by Year at December 31, 2016 ($000) Less than More than 10 Total NAHASDA 26,941 8, ,934 Permanent Fund CILC 8, , CIHDC ,045 Other 5,906 4, ,519 Total 42,139 14, ,763 Investment Maturities by Year at December 31, 2015 ($000) Less than More than 10 Total NAHASDA 23,474 3, ,478 Permanent Fund CILC 7, , CIHDC 1, ,018 Other 8,350 2,572 1, ,456 Total 40,490 5,872 1, ,095 Foreign Currency Risk CIHA has no funds invested in foreign currency, and therefore has no associated risk. NOTE 5 INVESTMENT IN SUBSIDIARIES Cook Inlet Real Estate Services: CIRES is a wholly owned subsidiary of CIHA. CIRES is a for-profit corporation created to provide consulting, property and project management services to other entities. CIRES is a licensed real estate brokerage providing professional real estate referral services. Investment in CIRES is accounted for using the equity method of accounting, whereby CIHA s share of earnings or losses are reported as an increase or decrease in the investment balance. Distributions are reported as a decrease in the investment balance when received. CIRES is reported as a blended component unit and intercompany activity is fully eliminated in the combined financial statements. 40

44 Notes to Basic Financial Statements, continued NOTE 5 INVESTMENT IN SUBSIDIARIES, continued Low Income Housing Tax Credit Properties: CIHA utilizes a development financing strategy whereby CIHA invests capital in the development of affordable housing utilizing multiple funding streams including state and federal grant funds designated for this specific purpose. Limited partnerships are created to develop and operate affordable housing using LIHTCs received from Alaska Housing Finance Corporation through the Greater Opportunities for Affordable Living program. CIHA is the managing general partner and the company purchasing the tax credits is the investing limited partner. GASB Statement 34 requires all intercompany activity to be eliminated so as not to overstate amounts resulting from internal activity. In 2016 CIHA made investments in Spenard 33 totaling $29,622. All intercompany activity is fully eliminated in the combined financial statements. ANC MV, LLC: ANC MV, LLC is a partnership between Alaska Corporation for Affordable Housing and Cook Inlet Housing Authority, with a 99.99% and.01% member interest respectively. ANC MV LLC is the general partner to ANC MV Phase I Limited Partnership which was formed to develop and operate LIHTC projects in. CIHA accounts for the investment in ANC MV LLC using the equity method of accounting whereby CIHA s share of earnings or losses are reported as an increase or decrease in the investment balance. Distributions are reported as a decrease in the investment balance when received. CIHA s investment balance in ANC MV LLC was $112 and $111 on December 31, 2016 and December 31, 2015 respectively. CVP Land, LLC: CVP Land LLC was established in 2014 and is a partnership between Cook Inlet Housing Authority, the Authorized Member and Muldoon Community Improvement, LLC, each hold a 50% member interest. CVP Land LLC was formed to invest in, acquire, own, hold, manage, maintain, operate, finance, refinance, lease, sublease, improve, reconstruct, sell, exchange, dispose of and otherwise deal with the Real Property related to CVP49LP. CIHA s investment balance in CVP Land, LLC was $879,651 and $858,691 on December 31, 2016 and December 31, 2015 respectively. All intercompany activity is fully eliminated in the combined financial statements. NOTE 6 TRUST AND DEPOSIT LIABILITY Tenant Security Deposits Tenants are required to pay a security deposit upon moving into rental units. The tenant security deposits are refundable when the tenant vacates the unit, provided the unit s physical condition is satisfactory. The total trust and deposit liabilities consist entirely of tenant security deposits. Trust and deposit liabilities of $853,366 and $740,407 were outstanding at December 31, 2016 and 2015 respectively. 41

45 Notes to Basic Financial Statements, continued NOTE 7 NOTES RECEIVABLE Notes receivables consist of loans to income eligible borrowers for homeownership under CILC s Second Mortgage Loan Program, loans to qualified homeowners to finance home improvements in CIHA s Safe and Healthy Home Loan Program, loans to a builder for the purchase of CIHA land to develop modest homes for sale, and other loans made in support of affordable and workforce housing activities. Loan interest rates, loan terms and the maximum amount of each loan in CILC s Second Mortgage Loan Program have varied over time with loan interest rates from 0.5% to 4% to enhance accessibility of the loan funds for low to moderate income borrowers, seniors, and borrowers with special needs, and to promote homeownership in CIHA s Neighborhood Revitalization efforts. Each loan is secured by a deed of trust on the property. They are carried at the principal and accrued interest amount net of allowance for estimated loan losses. CIHA also has deferred home loans, where payment is due at the end of the loan term, or when the home is sold. Additional loans include home repair loans (Safe and Healthy Home). CIHA has discontinued the Safe and Healthy Loan Program, which offered home improvement loans to low income homeowners, at terms of 1% interest and maturing at 15 years. At the end of 15 years, the loan is forgiven, unless the borrower sells the home within the 15 year period, which obligates the borrower to repay CIHA for the amortized principal balance at the time of sale of the home. CIHA has two notes receivables from The Petersen Group (TPG), in exchange for the purchase of land from CIHA. One note is for land at the Clearwater development which is located adjacent to CIHA s Grass Creek Village multi-family rental property. TPG is building townhouses for sale and repaying CIHA upon the sale of each home the proportional amount for the lot sold. The loan is secured by the land. The second note is for land in Coronado Park in Eagle River, where TPG is also building townhouses for sale and repaying CIHA upon the sale of each home the proportional amount for the lot sold. The loan is secured by the land. At December 31, 2016, and 2015 the allowance for loan losses is $15,000 and $15,000, attributable to the Second Mortgage Loan program. Total notes receivable are $21,541,130 and $21,176,522 at December 31, 2016 and 2015 respectively. 42

46 Notes to Basic Financial Statements, continued NOTE 7 NOTES RECEIVABLE, continued Notes receivable - Second Mortgage Program $ 18,220,132 17,447,734 Notes receivable - Safe and Healthy Homes 288, ,959 Notes receivable - Homeownership Program 240, ,000 Notes receivable - TPG, Clearwater Development 1,831,666 1,929,862 Notes receivable - TPG, Coronado Park Development 614,392 1,300,671 Notes receivable - Rim First People 22,771 60,296 Notes receivable - ANC MV LLC 338,193 - Less: Allowance for doubtful accounts (15,000) (15,000) Notes receivable, net of allowance 21,541,130 21,176,522 Less: current portion (930,105) (1,148,932) Notes receivable, net of current portion $ 20,611,025 20,027,590 43

47 Notes to Basic Financial Statements, continued NOTE 8 CAPITAL ASSETS Acquisitions and dispositions in property, buildings, site improvements and equipment accounts at December 31, 2016 are: 44

48 Notes to Basic Financial Statements, continued NOTE 8 CAPITAL ASSETS, continued Acquisitions and dispositions in property, buildings, site improvements and equipment accounts at December 31, 2015 are: NOTE 9 CONSTRUCTION COMMITMENTS In 2016, CIHA completed construction on the following projects; Grass Creek North I and Creekview Plaza 49. Grass Creek North I is a 52 unit development located in the Muldoon area of Anchorage, Alaska. Creekview Plaza 49 is a two building 49 unit senior housing project with approximately 6,600 square feet of retail space, located in the Muldoon area of. Both projects were completed in the fall of CIHA completed 6 Scattered Site Duplexes located in various areas of Anchorage, being operated as market rate rentals. One duplex located in the Spenard neighborhood was started and completed in In 2016 CIHA commenced construction on two additional Scattered Site Duplex properties in Fairview that are being developed as duplexes with detached garages and a one bedroom apartment above the garages. CIHA also began construction on a Spenard Mixed Use Development which is a 33-unit family 45