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Home My WebLink AboutComprehensive Annual Financial Report 2017COMPREHENSIVE ANNUAL FINANCIAL REPORT Fiscal Year Ended June 30, 2017 COUNTY OF HAWAII Hilo, Hawaii Harry Kim Mayor Wilfred Okabe Managing Director Prepared by The Department of Finance Collins Tomei Director of Finance COUNTY OF HAWAII Comprehensive Annual Financial Report For the Fiscal Year Ended June 30, 2017 Table of Contents Page INTRODUCTORY SECTION Letter of Transmittal 1 GFOA Certificate of Achievement 8 Organization Chart 9 List of Elected Officials 10 List of Principal Officials 11 FINANCIAL SECTION Report of Independent Auditors 13 Management's Discussion and Analysis 16 Basic Financial Statements: Government -wide Financial Statements: Statement of Net Position 28 Statement of Activities 30 Fund Financial Statements: Balance Sheet - Governmental Funds 32 Reconciliation of the Governmental Funds Balance Sheet to the Statement of Net Position 33 Statement of Revenues, Expenditures, and Changes in Fund Balances - Governmental Funds 34 Reconciliation of the Change in Fund Balances of Governmental Funds to the Statement of Activities 36 Statement of Revenues, Expenditures, and Changes in Fund Balance - Budget and Actual (Budgetary Basis) - General Fund 38 Statement of Net Position - Proprietary Funds 42 Statement of Revenues, Expenses, and Changes in Fund Net Position - Proprietary Funds 43 Statement of Cash Flows - Proprietary Funds 44 Statement of Fiduciary Net Position - Fiduciary Funds 45 Statement of Changes in Fiduciary Net Position - Fiduciary Funds 46 Notes to the Basic Financial Statements 47 Required Supplementary Information 103 FINANCIAL SECTION (Continued) Page Combining and Individual Nonmajor Fund Statements and Schedules: Combining Balance Sheet - Nonmajor Governmental Funds 110 Combining Statement of Revenues, Expenditures, and Changes in Fund Balances - Nonmajor Governmental Funds 114 Schedules of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual (Budgetary Basis): Highway Fund 117 Sewer Fund 118 Solid Waste Fund 119 Cemetery Fund 120 Parking Meter Fund 121 Vehicle Disposal Fund 122 Bikeway Fund 123 Workforce Investment Act Fund 124 Golf Course Fund 125 Geothermal Relocation and Community Benefits Fund 126 Beautification Fund 127 Hawaii County Housing Agency 128 Park Dedication Fund 129 Combining Statement of Agency Funds Net Position - Agency Funds 130 Combining Statement of Changes in Assets and Liabilities - Agency Funds 132 Combining Statement of Private Purpose Trust Net Position - Private Purpose Trusts 136 Combining Statement of Changes in Net Position - Private Purpose Trusts 137 STATISTICAL SECTION Table 1 - Net Position by Component 139 Table 2 - Changes in Net Position 140 Table 3 - Fund Balances, Governmental Funds 142 Table 4 - Changes in Fund Balance, Governmental Funds 143 Table 5 - Real Property Assessed Values by Classification and Tax Rates 144 Table 6 - Principal Taxpayers 148 Table 7 - Property Tax Levies and Collections 149 Table 8 - Ratios of Outstanding Debt by Type 150 Table 9 - Ratios of General Bonded Debt Outstanding 151 Table 10 - Legal Debt Margin Information 152 Table 11 - Demographic and Economic Statistics 153 Table 12 - Principal Employers, County of Hawaii 154 Table 13 - Full -Time Equivalent County Government Employees by Function 155 Table 14 - Operating Indicators by Function 156 Table 15 - Capital Asset Statistics by Functions 157 INTRODUCTORY SECTION Harry Kim Mayor December 28, 2017 • County of Hawai i Finance Department 25 Aupuni Street, Suite 2103 • Hilo, Hawaii 96720 (808) 961-8234 • Fax (808) 961-8569 The Honorable Mayor and Members of the Council County of Hawai`i 25 Aupuni Street Hilo, Hawai`i 96720 Deanna S. Sako Director Nancy Crawford Deputy Director We transmit herewith the Comprehensive Annual Financial Report for the County of Hawai`i, State of Hawai`i (the County), for the fiscal year July 1, 2016 to June 30, 2017. This report was prepared by the County's Department of Finance. The accuracy of the financial statements and the completeness and fairness of their presentation are the responsibility of the County government. We believe the enclosed data are complete and accurate in all material respects and are reported in a manner designed to present fairly the financial position and results of operations of the various funds of the County. All disclosures necessary to convey the maximum understanding of the County's financial activities have been included. Management's discussion and analysis is also included to aid users of the financial statements. This report presents the financial position of the County of Hawai`i at June 30, 2017 and results of operations for the fiscal year then ended. The report is divided into three sections: The Introductory Section includes this transmittal letter, a Certificate of Achievement for Excellence in Financial Reporting, the County of HawaiTs organization chart and lists of elected and principal officials. • The Financial Section contains management's discussion and analysis, the basic financial statements, related notes, the combining and individual fund budgetary financial statements, and the independent auditors' report. • The Statistical Section includes selected financial and demographic information, generally presented on a multi-year basis. This report includes all funds of the County of Hawai`i, including its component unit, the Department of Water Supply, established by the County Charter as a semi -autonomous body of the County government. This component unit is included in the County's reporting entity because of its financial relationship with the County. Hawaii County is an equal opportunity provider and employer. - 1 - The County provides a full range of municipal services. These include police and fire protection; emergency medical care; public prosecutor; culture and recreation; sanitation; social services; water; planning and zoning; construction and maintenance of highways, streets and infrastructure; real property assessment and tax collection; and general administrative services. However, the County does not provide such other traditional services as public education, hospitals and courts. These services are provided by the State government. The County consists of the island of Hawai`i, 4,028 square miles in size. It is twice as large as the combined area of all the other inhabited islands in the Hawaiian Archipelago. Since there is no other local or municipal government within the County, there are no overlapping taxes and no overlapping debt. The County has an elected mayor and a nine -member council. Economic Condition and Outlook The island of Hawaii, commonly known as the Big Island, is located 214 miles from Honolulu, the state capital; 2,200 miles from the west coast of the continental United States; and 4,000 miles from Japan. The city of Hilo on the east side of the island serves as the county seat as well as the transportation and financial center for the Big Island. Hilo's infrastructure includes Hilo Harbor, a deep -water port, and Hilo International Airport, which is capable of handling fully - loaded wide-bodied aircraft. Kailua-Kona and South Kohala, major tourist destination areas on the west side of the Big Island, are served by flights from the United States mainland, Canada and now Japan through the Kona International Airport. Scheduled freight services are available between the islands by air and sea transport. Communities on the island are linked by a network of State and County maintained streets and highways. The Big Island is the most diversified of the neighbor island economies. As a result it is buffered to some extent when any one industry lags. Although the past few years proved challenging to the island's economy, it appears that the County will continue on its steady but slow road to improved financial health. This favorable outlook is supported by positive trends in the following key areas of the island's economy. The unemployment rate for the County for the current fiscal year is at approximately 3%, which represents a percentage point decline from last year's rate for the same period of 4% and an even larger decline from the high of 11% in 2011. Tourism —Tourism has always been one of the major industries on the island. In addition to the mild climate and natural beauty it shares with other areas in the state, the County features the Hawai`i Volcanoes National Park. A popular attraction, the park is the most visited site in the state, with over 3.9 million visitors this past fiscal year. The number of domestic and international visitors to the County for the current fiscal year was approximately 1.65 million, with an approximately 9 percent increase from the previous year's count of 1.51 million. After a seven year absence, Japan Airlines introduced the return of their direct flights from Tokyo to Kona in September 2017. According to the Hawaii Tribune Herald, the Hawaii Tourism Authority projected that this new service would result in approximately $84.2 million in visitor expenditures and about $9.8 million in state tax revenue and support about 900 jobs in the County as well. The $75 million improvements at the Kona International Airport include a centralized security area, a six -lane passenger screening checkpoint building and new restrooms. The expansion is anticipated to be completed by February 2019. Major Initiatives For the Year Public Safety — The Hawai'i Police Department has completed testing of the recently procured Spillman Records Management System (6 S) to better serve the community and has begun training officers in its use. Additionally, the department has been utilizing the modernized County Radio System with the result being a vastly improved communications structure. The Fire Department implemented major initiatives and measures to achieve greater efficiencies and to improve responses and services to the community, such as 1) an online training and records management system, which is training software that allows all personnel to complete didactic based training directly from the stations' computers and maintain training records, 2) a new Computer Aided Dispatch (CAD) software and Emergency Dispatch Center Console upgrades to provide the most current CAD service and, 3) the implementation of the Department's intranet which enables direct sharing of critical information amongst personnel within the department. Public Works — Over the past fiscal year the Department of Public Works (DPW) completed major projects in our community including: • The Kapi'olani Steet project, valued at $14.1 million, was completed in August, 2016. The extension provides an alternate emergency evacuation route and improves traffic flow on Kilauea Avenue, Kinocole Street, and the surrounding streets. The project involved the construction of concrete curbs, gutters and sidewalks; drainage improvements, utility installation, and relocation; traffic signals at two intersections and a concrete bridge across Waialea Stream. The Mamalahoa Highway Bypass Road and Napo`opo`o Road Intersection Improvement project, valued at $30 million, was completed in November, 2016. This project involved the construction of a two-lane roadway from Haleki`i Street 2.2 miles to the vicinity of the Napo`opo`o Road/Mamalahoa Highway intersection. The project included two travel lanes, paved shoulders, and traffic signals at the NapO`opo`o intersection, driveway tie-ins, water utilities, and drainage improvements. The bypass road mitigates traffic congestion in the north and south direction and safely moves traffic past such congested areas as Honalo, Kainaliu and Konawaena schools. • The Komohana Street Reconstruction (Waianuenue Avenue to Krik5au Street), valued at $4.6 million, was completed in May 2017. The project involved the reconstruction of approximately 4000 feet of roadway, traffic signal upgrades, pavement striping, and replacing utility valves and boxes. The project was completed in May 2017. Culture and Recreation — Parks and Recreation opened new and improved facilities in fiscal year 2017, providing park patrons additional and safer facilities while expanding recreational opportunities. New facilities that opened for use include Waimea District Park, Pahoa District Park and Ka'u Gym. Furthermore, the Department completed various projects which offer outdoor recreation such as Hilo Bay Front Trails Phase I, Kaamana Lani Park, Honaunau Rodeo Area Improvements as well as various ball field and court lighting improvement projects. For the Future Public Safety — The Fire Department celebrated the opening of the new Haihai Fire Station in Hilo in November 2017 which replaced the Kawailani Fire Station facility. The Department's legislative priorities include work towards the achievement of an additional Advanced Life Support Ambulance unit for the District of Puna and the expansion of its Ocean Safety Division to further protect popular beaches in West Hawai'i. The Emergency Medical Services Bureau will continue to grow its community based paramedicine program thereby reducing the burden on 911 emergency medical services. In the future, the Department continues to seek funding and a co -located site (partnering with the Fire Department) to serve as the main Puna District Station in the Kea'au area in lieu of the current Pahoa substation which is overcrowded and not centrally located. Securing funding for building a South Kona Police Station and the necessary attendant staffing continues to also remain a goal of the department. The department is also seeking funding for eventual implementation of a body worn camera system to assist our officers in the field. Public Works - DPW is currently working on a large Statewide Transportation Improvement Program (STIP) project. The Kawailani Street Improvement project ('Iwalani Street to Pohakulani Street) is valued at $21 million and started in fiscal year 2017. The Project includes grading, paving; installing drainage improvements, water mains, retaining walls, street lighting, and traffic signal systems; constructing sidewalks, curbs and gutters, driveways, curb ramps and paved swales; and installing pavement markings and signs. Traffic signals will be installed at the `Iwalani Street and Kawailani Street intersection and at the Kawailani Street and Pohakulani Street intersection with a projected finish of the project currently slated for the end of fiscal year 2018. DPW is looking forward to starting on the Mamalahoa Widening project (Mud Lane to Mand Road in Waimea), which is estimated at $20- $25 million. Bids for the project are due at the end of December 2017 and DPW is hoping construction on the project can start by the end of fiscal year 2018. Culture and Recreation — Parks and Recreation will continue to provide a wide array of recreational programs and services for diverse ages ranging from youth through elderly and provide safe facilities by conducting ongoing repairs and maintenance. Projects near completion include Mauna Kea Recreation Area which will feature bunkhouse and cabin lodging, a new Clubhouse and Improvements for Hilo Municipal Golf Course, new Kukuihaele Park, new Kuawa Fields, Panalewa Drag Strip and Skeet Range Improvements. - 4 - Other Financial Information Internal Control The management of the County is responsible for establishing and maintaining an internal control structure designed to ensure that the assets of the County are protected from loss, theft or misuse and to ensure that adequate accounting data are compiled to allow for preparation of financial statements in conformity with generally accepted accounting principles. The internal control structure is designed to provide reasonable, but not absolute, assurance that these objectives are met. The concept of reasonable assurance recognizes that (1) the cost of a control should not exceed the benefits likely to be derived; and (2) the valuation of costs and benefits requires estimates and judgments by management. Budgetary Control The County maintains budgetary controls to ensure that legal provisions of the annual budget are complied with and that those expenditures do not exceed budgeted amounts. Activities of the general fund and special revenue funds are included in the annual appropriated operating budget. Project -length financial plans are adopted for the capital projects fund. Budgetary control is established at the department level. Formal budgetary integration is employed as a management control device for the general fund, special revenue funds, and the capital projects fund. Budgetary control for the debt service fund is achieved through general obligation bond indenture provisions. The basis of accounting used for the budgets of the general and special revenue funds differs from generally accepted accounting principles. Intergovernmental revenues are recognized when awarded by the granting agency, encumbrances and unexpended allotments are treated as expenditures for purposes of determining legal compliance with the annual budget, all leases are treated as operating leases, and accounts payable are not accrued. The County also maintains an encumbrance accounting system as one technique of accomplishing budgetary control. Encumbrances outstanding at fiscal year end are included in the various fund balance categories based on whether the resources are restricted, committed or assigned and do not constitute expenditures or liabilities because they will be honored during the following year. As demonstrated by the statements and schedules included in the financial section of this report, the County continues to meet its responsibility for sound financial management. Significant Accounting Policies The County has implemented Governmental Accounting Standards Board Statement No. 14, The Financial Reporting Entity (GASB Statement No. 14), Statement No. 39, Determining Whether Certain Organizations Are Component Units (GASB Statement No. 39) and Statement No, 61, The Financial Reporting Entity: Omnibus an amendment of GASB Statements No. 14 and 34 (GASB Statement No. 61). All organizations, activities or functions that meet the criteria in GASB Statement No. 14, No. 39 and No. 61 for inclusion in the reporting entity are included in the County's basic financial statements. For further discussion on other significant accounting policies, refer to the notes to the basic financial statements. - 5 - Financial Highlights Total revenues decreased by $23.1 million from the prior year, which was due to capital grants and contributions decreasing by approximately $45.4 million, mostly in the area of highways and streets projects, being partially offset by a $20.5 million increase in property taxes. With a 5.0 percent decrease in revenues and an 18 percent increase in expenses, the County experienced a decrease in net position of $61.1 million, which represented a 265% decrease over the prior year's increase in net position. These results are prior to the impact of the prior year's cumulative effect of an accounting change related to the reporting of the County's net pension liability. The County's investment in capital assets increased by $68.0 million from the prior year, which represented a 5 percent increase. New and continued construction projects in the areas of highways and streets and culture and recreation accounted for the majority of the increase. Other Information Independent Audit The County Charter requires an annual audit by independent certified public accountants. N&K CPAs Inc. was selected in accordance with the County Charter and the procurement provisions of the Hawaii Revised Statutes (HRS) and Hawaii Administrative Rules (HAR) to perform the audit. Employee Union Contracts County employees are members of eight different bargaining units, of which five have contracts that expire on June 30, 2019 and one will expire on June 30, 2021. One of the remaining bargaining unit received an interest arbitration decision in November 2017, however, the cost items associated with that decision are currently subject to the approval of all legislative bodies. The County anticipates this cost approval process will conclude in January 2018. The final bargaining unit's interest arbitration is proceeding and will occur in January 2018. Certificate of Achievement The Government Finance Officers Association of the United States and Canada (GFOA) awarded a Certificate of Achievement for Excellence in Financial Reporting to the County of Hawai`i for its Comprehensive Annual Financial Report for the fiscal year ended June 30, 2016. This was the twenty-nineth consecutive year that the government has received this prestigious award. In order to be awarded a Certificate of Achievement, a government must publish an easily readable and efficiently organized comprehensive annual financial report. This report must satisfy both generally accepted accounting principles and applicable legal requirements. A Certificate of Achievement is valid for a period of one year only. We believe our current Comprehensive Annual Financial Report continues to meet the Certificate of Achievement Program's requirements, and we are submitting it to the GFOA to determine its eligibility for another certificate. - 6 - Acknowledgments The preparation of this report was made possible by the efficient and dedicated services of the entire staff of the Department of Finance and fiscal personnel in other departments. I am grateful for their help in preparing this report. I also thank the Mayor and the members of the County Council for their interest and support in assuring the continuing sound financial condition of the County of Havvai`i. (`)/" Deanna Sako Director of Finance 7 0 Government Finance Officers Association Certificate of Achievement for Excellence in Financial Reporting Presented to County of Hawaii Hawaii For its Comprehensive Annual Financial Report for the Fiscal Year Ended June 30, 2016 Executive Director/CEO County Council County of Hawaii Organization Chart County ec o ate County Clerk Legislative Auditor Mayor Prosecuting Attorney Office of Management: Managing Director Departments under direct supervision of the Managing Director: Corporation Counsel Finance Planning Environmental Management Research & Development Public Works Parks & Recreation Information Technology Agencies under direct supervision of the Managing Director: Civil Defense Office of Aging Mass Transit Office of Housing & Community Development 9 Departments under commissions and administrative supervision of the Mayor: Human Resources Police Liquor Control Fire Water Supply (semi -autonomous) County of Hawaii Elected Officials June 30, 2017 Administrative Officers (Term: 2016-2020) Harry Kim Mayor Mitchell Roth Prosecuting Attorney County Council (Term: 2016-2018) Valerie Poindexter Chair Karen Eoff Vice Chair Aaron S.Y. Chung Member Maile "Medeiros" David Member Dru Mamo Kanuha Member Susan L. K. Leeloy Member Eileen O'Hara Member Herbert M. Richards, III Member Jennifer Ruggles Member - 10- Principal Officials June 30, 2017 County Clerk Legislative Auditor Managing Director Deputy Managing Director Corporation Counsel Director of Finance Planning Director Director of Personnel Director of Research and Development Chief of Police Fire Chief Director of Public Works Director of Environmental Management Parks and Recreation Director Manager -Chief Engineer, Department of Water Civil Defense Administrator Director of Liquor Control Mass Transit Administrator Executive on Aging Administrator, Office of Housing and Community Development Director of Information Technology Supply Stewart Maeda Bonnie Nims Wilfred Okabe Barbara Kossow Joseph Kamelamela Collins Tomei Michael Yee Sharon Kamahele-Toriano Diane Ley Paul Ferreira Darren Rosario Frank Demarco William Kucharski Charmaine Kamaka Keith Okamoto Talmadge Magno Gerald Takase Tiffany Kai Christian Alameda Neil Gyotoku Julie Ung This page intentionally le blank. -l2- FINANCIAL SECTION N&K CPAs, Inc. ACCOUNTANTS I CONSULTANTS INDEPENDENT AUDITOR'S REPORT To the Chair and Members of the CountCouncil County of Hawai'i Report on the Financial Statements AMERICAN SAVINGS BANK TOWER 1001 BISHOP STREET, SUIT1700 HONOLULU, HAWAII 96813-3696 T (808)524-2255F (808) 523-2090 We have audited the accompanying financial statements of the governmental acbvitiam. the business -type ecUvUUae. the discretely presented component unit, each major fund, and the aggregate remaining fund information of the County of Havvoi'i. State of Hawaii (Counh/), as of and for the fiscal year ended June 30, 2017, and the related notes to the financial mtetemenbo, which collectively comprise the County'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 presentationoftheme 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 conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor's 'udgmen1, including the assessment of the risks of material misstatement of the financial otatonnents, whether due to fraud or error. In making those risk aeaesonnentu, 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 circumatonceo, 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 rnmnogement, as well as evaluating the overall financial statement presentation of the financial statements. -l3- N&K CPAs, Inc. ACCOUNTANTS I CONSULTANT We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions. Opinions In our opininn, the financial statements referred to above present haidv, in all material reapects, the resfinancial position of the governmental activities, the business -type activities, the discretely presented component unit, each major fund, and the aggregate remaining fund information of the County ofHovvai'i. State of Havvai'i, as of June 30, 2017, and the respective changes in financial position and, where applicable, cash flows thereof and the budgetary comparison for the general fund for the fiscal year then ended in accordance with accounting principles generally accepted in the United States of America. Emphasis of Matter Adoption of New Accounting Principles As discussed in Note 1 (page 61) to the financial statements, the County adopted new accounting guidance that clarifies standards for accounting and financial reporting for pensions that are provided to the employees of state and local governmental employers as well as extending the approach to accounting and financial reporting for pensions that were not within the scope of GASB Statement No. 68, Accounting and Financial Reporting for Pensions. Our opinion is not modified with respect to this matter. Other Matters Required Supplementary Information Accounting principles generally accepted in the United States of America require that the management's discussion and analysis (pages 16 through 26), schedule of funding progress for the Hawaii Employer Union Health Benefit Trust Fund (page 103), schedule of the County's proportionate share of the net pension liability (page 104), schedule of the employer pension contributions (page 105), and schedule of changes in total pension liability (page 107), be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management's responses to our inqu|,ieo, the basic financial etotornmnto, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. -l4- N&K CPAs, Inc. ACCOUNTANTS|CONSULTANTS Other Information Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the County's basic financial statement . The introductory section, combining and individual nonmjor fund financial statements and budgetary comparison schedules, and the statistical section are presented for purposes of additional analysis and are not a required part of the basic financial statements. The combining and individual nonmajorfund financial statements and budgetary comparison schedules are the responsibility of management and were derived from and relate directly to the underlying accounting and other records used to prepare the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements thomee|veo, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opiniVn, the combining and individual nonmajor fund financial statements and budgetary comparison schedules are fairly atated, in all material noupecta, in relation to the basic financial statements as a whole. The introductory and statistical sections have not been subjected to the auditing procedures applied in the audit of the basic financial otetements, and ocomn]ing|y, we do not express an opinion or provide any assurance on them. Other ReportingRemuirmdbvGmvernn*ntAudding8tendards In accordance with Government Auditing 3b*noanns, we have also issued our report dated December 28, 2017, on our consideration of the County's internal controover financial reporting arid on our tests of its compliance with certain provisions of laws, reQu|ationo, uontreoto, and grant agreements and other matters. The purpose of that report is solely 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 effectiveness of the County's internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the County's internal control over financial reporting and compliance. Honolulu, Hawaii December 28, 2017 - 15 - MANAGEMENT'S DISCUSSION AND ANALYSIS This section of the County of Hawai`i's (the County) Comprehensive Annual Financial Report presents a narrative overview and analysis of the financial activities of the County for the fiscal year ended June 30, 2017. We encourage readers to consider the information presented here in conjunction with additional information that we have furnished in our letter of transmittal. FIN CIAL HIGHLIGHTS The assets of the County exceeded its liabilities at the end of the fiscal year by $436.0 million (net position). This amount includes a negative balance of $470.7 million in unrestricted net position, a decrease of $82.3 million from the prior year, which is explained in the sections below. As of the close of the current fiscal year, the County's governmental funds reported combined ending fund balances of $161.5 million, a decrease of $30.4 million from the prior year. Approximately 44 percent of this total amount, $70.4 million, is available for spending at the County's discretion (unrestricted fund balance). At the end of the current fiscal year, unrestricted fund balance for the general fund was $27.1 million, or 9 percent of total general fund expenditures. OVERVIEW OF THE FINANCIAL STATEMENTS This discussion and analysis is intended to serve as an introduction to the County's basic financial statements. The County's basic financial statements comprise three components: (1) Government -wide financial statements, (2) Fund financial statements, and (3) Notes to the basic financial statements. This report also contains both required and other supplementary information in addition to the basic financial statements themselves. Government -wide Financial Statements The government -wide financial statements are designed to provide readers with a broad overview of the County's finances, in a manner similar to a private -sector business. The statement of net position presents information on all of the County's assets and liabilities, with the difference between the two reported as net position. Over time, increases or decreases in net position may serve as a useful indicator of whether or not the financial position of the County is improving or deteriorating. The statement of activities presents information showing how the County's net position changed during the most recent fiscal year. All changes in net position are reported as soon as the underlying event giving rise to the change occurs, regardless of the timing of related cash flows. Thus, revenues and expenses are reported in this statement for some items that will only result in cash flows in future fiscal periods, such as revenues pertaining to uncollected taxes and expenses pertaining to earned but unused vacation and sick leave. Both of the government -wide financial statements distinguish functions of the County that are principally supported by taxes and intergovernmental revenues (governmental activities) from other functions that are intended to recover all or a significant portion of their costs through user fees and charges (business -type activities). The governmental activities of the County include public safety, highways and streets, health, education and welfare, culture and recreation, sanitation and general government. The business -type activities of the County include rental housing for senior citizens and families. -16- The government -wide financial statements include not only the County itself (known as the primary government), but also the Department of Water Supply, a legally separate entity that the County is financially accountable for. Financial information for this component unit is reported separately from the financial information presented for the primary government itself. Fund Financial Statements The fund financial statements are designed to report information about groupings of related accounts which are used to maintain control over resources that have been segregated for specific activities or objectives. The County, like other state and local governments, uses fund accounting to ensure and demonstrate compliance with finance -related legal requirements. All of the funds of the County can be divided into the following three categories: governmental funds, proprietary funds, and fiduciary funds. Governmental funds. Governmental funds are used to account for essentially the same functions reported as governmental activities in the government -wide financial statements — i.e., most of the County's basic services are reported in governmental funds. These statements, however, focus on (I) how cash and other financial assets can readily be converted to available resources and (2) the balances left at year-end that are available for spending. Such information may be useful in determining what financial resources are available in the near future to finance the County's programs. Because the focus of governmental funds is narrower than that of the government -wide financial statements, it is useful to compare the information presented for governmental funds with similar information presented for governmental activities in the government -wide financial statements. By doing so, readers may better understand the long-term impact of the government's near-term financing decisions. Both the governmental funds balance sheet and the governmental funds statement of revenues, expenditures, and changes in fund balances provide a reconciliation to facilitate this comparison between governmental funds and governmental activities. The County maintains several individual governmental funds organized according to their type (general, special revenue, debt service, and capital projects). Information is presented separately in the governmental funds balance sheet and in the governmental funds statement of revenues, expenditures, and changes in fund balances for the general fund and capital projects fund, which are considered to be major funds. Data from the remaining governmental funds are combined into a single, aggregated presentation. Individual fund data for each of the non -major governmental funds is provided in the form of combining statements elsewhere in this report. The County adopts an annual appropriated budget for its general fund and special revenue funds. A budgetary comparison statement has been provided for these funds to demonstrate compliance with this budget. The budgetary comparison statement for the general fund is located in the basic financial statements, whereas the budgetary comparison schedules for the nonmajor special revenue funds are presented elsewhere in this report. Proprietary funds. Proprietary funds are generally used to account for services for which the County charges outside customers. Proprietary funds provide the same type of information as shown in the government -wide financial statements, only in more detail. The County maintains only one type of proprietary funds, enterprise funds. Enterprise funds are used to report the same functions presented as business -type activities in the government - wide financial statements. The County uses enterprise funds to account for the operations of the Kulaimano Elderly Housing Project and the Ouli Ekahi Affordable Housing Project. -17- Fiduciary funds. Fiduciary funds are used to account for resources held for the benefit of parties outside the County. The private -purpose trusts and the agency funds are reported under the fiduciary funds. Since the resources of these funds are not available to support the County's own programs, they are not reflected in the government -wide financial statements. The accounting used for fiduciary funds is much like that used for proprietary funds. Notes to the Basic Financial Statements The notes to the basic financial statements provide additional information that is essential to a full understanding of the data provided in the government -wide and fund financial statements. Other Supplementary Information In addition to the basic financial statements and accompanying notes, this report also presents certain required supplementary information, which is presented immediately following the notes to the basic financial statements. The combining statements referred to earlier in connection with nonmajor governmental funds and budgetary comparison schedules for the nonmajor special revenue funds are presented immediately following the required supplementary information. GOVERN NT -WIDE FINANCIAL ANALYSIS Condensed Statement of Net Position June 30, 2017 and 2016 Primary Government Governmental Activities 2017 Business -type Activities Total 2016. as restated 2017 2016 2017 2016. as restated Assets: Current arid other assets $ 234,095,834 $ 263,573,114 $ 1,109,367 5 1,093,403 $ 235,205,201 $ 264,666,517 Capital assets, net 1,301,647,095 1,233,637,293 1,448,941 1,495,053 1,303,096,036 1,235,132,346 Total assets 1,535,742,929 1,497,210,407 2,558,308 2,588,456 1,538,301,237 1,499,798,863 Deferred Outflows Of Resources: 252,872,831 75,172,222 252,872,831 75,172,222 Total Assets and Deferred Outflows of Resources 1,788,615,760 1,572,382,629 2,558,308 2,588,456 1,791,174,068 1,574,971,085 Liabilities: Long-term liabilities outstanding 1,291,082,705 994,872,052 924,649 1,014,014 1,292,007,354 995,886,066 Other liabilities 48,825,301 53,737,158 86,844 56,533 48,912,145 53,793,691 Total liabilities 1,339,908,006 1,048,609,210 1,011,493 1,070,547 1,340,919,499 1,049,679,757 Deferred Inflows Of Resources: 14,250,500 28,166,919 14,250,500 28,166,919 Total Liabilities and Deferred Inflows Of Resources 1,354,158,506 1,076,776,129 1,011,493 1,070,547 1,355,169,999 1,077,846,676 Net position: Net investment in capital assets 835,787,961 824,846,090 524,292 481,039 836,312,253 825,327,129 Restricted 70,439,580 74,694,901 -- — 70,439,580 74,694,901 Unrestricted (471,770,287) (403,934,491) 1,022,523 1,036,870 (470,747,764) (402,897,621) Total net position 5 434,457,254 S 495,606,500 1,546,815 $ 1,517,909 $436,004,069 $497,124,409 - 1 8 - Analysis of Net Position As noted earlier, net position may serve over time as a useful indicator of a government's financial position. In the case of the County, assets exceeded liabilities by $436.0 million at the close of the most recent fiscal year. By far the largest portion of the County's net position reflects its investment in capital assets (e.g., land, buildings, infrastructure, and equipment) less any related debt used to acquire those assets that is still outstanding. The County uses these capital assets to provide services to citizens; consequently, these assets are not available for future spending. Although the County's investment in its capital assets is reported net of related debt, it should be noted that the resources needed to repay this debt must be provided from other sources, since the capital assets themselves cannot be used to liquidate these liabilities. An additional portion of the County's net position represents resources that are subject to external restrictions on how they may be used. At the end of the current fiscal year, the County is able to report positive balances in two of its three categories of net position, both for the government as a whole, as well as for its separate governmental activities. All three categories of net position are positive for its business -type activities. The County's net position decreased by $61.1 million from the prior year, which was a decrease of $86.1 million (299%) from the increase that was experienced last fiscal year. The main reasons for the large decrease in the current year over last year's increase was due to (1) $37.5 million less in capital asset contributions, (2) $6.9 million increase in liability related to landfill closure and postclosure costs, (3) $45.6 million increase in pension expense and (4) $13.9 mullion increase in expense due to implementation of GASB Statement No. 82, Pension Issues an amendment of GASB Statements No, 67, No, 68, and No. 73, which resulted in the recognition of the employer paid employee contributions made subsequent to the measurement date that would previously have been recorded as a deferred outflow or resources. The County's net capital assets increased by $68.0 million (6 percent) due to the large amount of capital improvement projects done by the County during the current fiscal year and infrastructure related assets that were contributed. See further discussion of the increase in capital assets on page 23. The County's long-term liabilities outstanding increased by $296.1 million (30 percent) due primarily to the issuance of $8.1 million State Revolving Fund (SRF) loans and $59.8 million in Bond Anticipation Notes, which were offset by $20.9 in retirements and forgiveness of bonds and SRF loans; a $6.9 million increase in the liability related to the landfill closure and postclosure costs payable; a $5.2 million increase in the County's liability relating to the pre -funding of its postemployment benefits other than pensions; and a $237.2 million increase in the County's net pension liability. See further discussion of the increase in long-term debt outstanding on page 25. -19- Condensed Statements of Activities For the Fiscal Years Ended June 30, 2017 and 2016 Primary Government Governmental Activities Business -type Activities Total 2017 2016 as 2017 2016 2017 2016. as restated restated Revenues: Program revenues: Charges for services $ 49,289,344 $ 46,706,482 $ 469,082 $ 457,842 $ 49,758,426 $ 47,164,324 Operating grants and contributions 52,897,945 47,234,458 132,435 133,932 53,030,380 47,368,390 Capital grants and contributions 14,784,692 60,230,846 14,784,692 60,230,846 General revenues: Property taxes 268,869,322 248,353,113 268,869,322 248,353,113 Other taxes 24,662,766 26,739,088 24,662,766 26,739,088 Grants and contributions, unrestricted 19,810,090 19,557,513 - 19,810,090 19,557,513 Investment earnings 661,184 316,593 1,243 1,912 662,427 318,505 Other 7,092,071 12,081,055 - 7,092,071 12,081,055 Total revenues 438,067,414 461,219,148 602,760 593,686 438,670,174 461,812,834 Expenses: General government 72,836,020 65,064,440 72,836,020 65,064,440 Public safety 229,507,091 187,160,903 229,507,091 187,160,903 Highways and streets 51,368,841 45,255,305 - - 51,368,841 45,255,305 Health, education and welfare 40,299,077 39,722,480 573,854 544,808 40,872,931 40,267,288 Culture and recreation 35,213,973 27,315,451 - 35,213,973 27,315,451 Sanitation 56,605,864 48,521,434 56,605,864 48,521,434 Interest on long-term debt 13,385,794 11,162,756 13,385,794 11,162,756 Total expenses 499,216,660 424,202,769 573,854 544,808 499,790,514 424,747,577 Increase (Decrease) in net position (61,149,246) 37,016,379 28,906 48,878 (61,I20,34D) 37,065,257 Net position at beginning of year 495,606,500 472,181,912 1,517,909 1,469,031 497,124,409 473,650,943 Cumulative effect of accounting change - (13,591,791) - - - (13,591,791) Net position at beginning of year, as restated Net position at end of year $ 434,457,254 $ 495,606,500 $ 1,546,815 $ 1,517,909 $ 436,004,069 $ 497,124,409 ===. 495,606,500 458,590,121 1,517,909 1,469,031 497,124,409 460,059,152 Analysis of Changes in Net Position Governmental activities. Governmental activities, including the impact of the prior period restatement for GASB 73 and 82, decreased the County's net position by $61.1 million or basically all of the total decrease in net position of the County. The primary reasons for the $23.1 million (5 percent) decrease in total revenues was due to capital grants and contributions decreasing by approximately $45.4 million, which related mostly to decreases in highways and streets projects, and was offset by a $20.5 million increase in property taxes. The increase in property taxes was due to increases in the value of net taxable real property, of which the most notable was an $832.7 million increase in the residential classes that represented an 11 percent increase from the prior year. Total expenses increased by $75.0 million, which represented an 18 percent change from the prior year. There were the typical increases in salaries and wages and related employment benefit costs across all functions in the current fiscal year. The charts below illustrate the County's governmental expenses and revenues by function, and its revenues by source. As shown, public safety is the largest function in expense (46 percent), - 20 - followed by general government (15 percent) and sanitation (11 percent). General revenues such as property and other taxes are not shown by program, but are effectively used to support program activities countywide. For governmental activities overall, without regard to programs, property taxes are the largest single source of funds (61 percent), followed by capital grants and contributions (12 percent) and charges for services (11 percent). Expenses and Program Revenues — Governmental Activities Year Ended June 30, 2017 $250,000,000 $ 200, 000, 000 $150,000,000 $100,000,000 $50,000,000 Expenses ix IrQra m reVenues 0 Sf Revenue by Source — Governmental Activities Year Ended June 30, 2017 Investment earnings, _ $661,184 Grants and contributions not restricted to specific programs, $19,810,090 Other taxes, $24,662,766 Other, $7,092,071 Charges for services, $49,289,344 Operating grants and contributions, $52,897,945 -....zzm..„4mrrimilip iN,164 Property taxes, $268,869,322 - 21 - Capital grants and contributions, $14,784,692 Business -type activities. Business -type activities increased the County's net position by $28,906 versus an increase of $48,878 in the prior year. Expenses for health, education and welfare account for all of the $573,854 of expenses which represents a 5 percent increase from the prior year. Charges for services were $469,082, operating grants and contributions were $132,435 and investment earnings were $1,243, which were all comparable to the prior year. FINANCIAL ALYSIS OF THE COUNTY'S F IS As noted earlier, the County uses fund accounting to ensure and demonstrate compliance with finance -related legal requirements. Governmental funds. The focus of the County's governmental funds is to provide information on near-term inflows, outflows, and balances of spendable resources. Such information is useful in assessing the County's financing requirements. In particular, unrestricted fund balance may serve as a useful measure of a government's net resources available for spending at the end of the fiscal year. As of the end of the current fiscal year, the County's governmental funds reported combined ending fund balances of $161.5 million, a decrease of $30.4 million (16 percent) in comparison with prior year. Approximately 44 percent of this total amount ($70.4 million) constitutes unrestricted fund balance, The unrestricted portion of the fund balance is comprised of (1) $53.3 million in committed fund balance and (2) $17.1 million in assigned fund balance. The remainder of the fund balance is divided between $5.6 million in nonspendable fund balance for inventory and $85.5 million in restricted fund balance. Approximately 64 percent of the total restricted fund balance is due to restrictions relating to highways, streets and abandoned vehicles ($28.3 million) and debt service ($26.8 million). The general fund is the chief operating fund of the County. At the end of the current fiscal year, unrestricted fund balance of the general fund was $27.1 million, while total fund balance decreased to $47.7 million. As a measure of the general fund's liquidity, it may be useful to compare both unrestricted fund balance and total fund balance to total fund expenditures. Unrestricted fund balance represents 9 percent of total general fund expenditures, while total fund balance represents 16 percent of that same amount. The fund balance of the County's general fund decreased by $6.1 million during the current fiscal year as compared to an increase of $1.7 million in the prior year. Key factors in this decrease ($7.8 million) over last year's increase are as follows: • A positive increase of $17.5 million (7 percent) in real property tax revenues and $3.2 million (6 percent) in intergovernmental revenues. As explained previously, the increase in real property tax revenues is due to a slight increase in the value of net taxable real property as evidenced in the accompanying statistical tables. • The positive impact of the increase in revenues was offset by increases of $17.3 million (6 percent) in expenditures. $7.5 million of the total increase in expenditures is due to increases in salaries and wages from the prior year and $7.9 million in associated employee benefits. The fund balance of the County's capital projects fund decreased by $24.3 million (34 percent) during the current fiscal year. The decrease is primarily due to the fact that the $105.4 million of expenditures for various construction projects were only partially offset by the issuance of $8.1 million in SRF loans and $59.8 million in BANs. - 22 - The debt service funds consist of the Bond Redemption Fund and the InteresFund. These funds have combined total fund balances of $26.8 million, all of which is restricted for the payment of debt service. The net increase in the combined fund balances during the current year in the debt service funds was $3.3 million (1 percent). Proprietary funds. The County's proprietary funds provide the same type of information found in the government -wide financial statements, but in more detail. Unrestricted net position of the Kulaimano Elderly Housing Pject (Kulaimano) at the end of the year amounted to $575,541, and $446,982 for the Ouli Ekahi Affordable Housing Prject (Ouli Ekahi). The total net position for Kulaimano decreased by $26,177 and the net position for Ouli Ebubiincreased by$55,08]. Other factors concerning the finances of these two funds have already been addressed in the discussion of the County's business -type activities. GENERAL F BUDGETARY HIGHLIGHTS Differences between the oriinal budget and the final amended budget were primarily the result of a $7.7 million increase in appropriations, the most significant reasons werdue to increases in the appropriations for public safety ($4.2 million) and capital outlays ($2.6 million). Differences between the final budget and the actual (budgetary basis) resulted in approximately $10.3 million less revenues than expected and $27.2 million less expenditures than appropriated. This is primarilyduotode following factor : * The negative variance of $10.3 million in revenues is coised mostly of $1.9 million from real property and public service company taxes, $5.2 million in intergovernmental revenues for both the federal and state grants and $1.7 million in tot | charges for services. � $6.5 million of the unspent approiat|oua is related to salaries and wages and the various countywide expenditure accounts relating to salaries and wages. The variance is due primarily to unfilled vacancies and continued efforts by each department to control payroll costs during the budget year due to the tough economic conditions facing the County. The following functions are responsible for the mjority of the variance: public safety ($3.5 million) and general government ($2.1 million). � $3.8 million is due to lower than anticipated payments needing to be made in retirement related payments. With each department increasing efforts to control costs, overtime was also closely monitored and the corresponding pension expenditures were not incurred. � $1.2 million is due to the fact that the increase in health premiums for employees' was lower than originally anticipated. CAPITAL ASSET AND DEBT ADM a STRATION Capital assets. The County's investment in capital assetfor its governmentaand business -type activities as ofJune 30, 2017 amounts to $1.3 billion (net of accumulated depreciation). This investment in capital assets includes land and improvements, buildings and improvements, equipment, easements, and infrastructure assets, which consists of primarily roads and bridges. The total increase in the County's investment in capital assets for the current fiscal year was 6 percent. Major capital asset events during the current fiscal year included the following: • Construction continued on the Hokulia Bypass; construction in progress as of the end of the current fiscal year had reached $25.1 million with $7.2 million coming from the current fiscal year; the project was transferred to Infrastructure. • Construction continued on the Mass Transit agency baseyard and maintenance facility; construction in progress as of the end of the current fiscal year had reached $9.8 million with $5.8 million coming from the current fiscal year. • Construction continued on the Pahoa Park expansion project; construction in progress as of the end of the current fiscal year had reached $24.4 million with $3.8 million of it coming from the current fiscal year; project was transferred to Buildings. • Construction continued on the Hilo Municipal Golf Course new clubhouse project; construction in progress as of the end of the current fiscal year had reached $18.4 million with $8.7 million coming from the current fiscal year; the project was transferred to Buildings. • Construction continued on the Waimea District Park phase I; construction in progress as of the end of the current fiscal year had reached $19.5 million with $11.8 coming from the current fiscal year; project was transferred to Buildings. • Construction continued on the Honaunau Rodeo Arena Improvements; construction in progress as of the current fiscal year had reached $4.9 million with $3.1 million coming from the current fiscal year; the project was transferred to Buildings. • Construction continued on the Haihai Fire Station; construction in progress as of the end of the current fiscal year had reached $9.2 million with $6.9 million coming from the current fiscal year. • Construction continued on the Kuawa Soccer Field Development Project; construction in progress as of the current fiscal year had reached $3.4 million with $2.9 million coming from the current fiscal year. • Construction continued on the Kukuihaele Park Improvements; construction in progress as of the current fiscal year had reached $3.9 million with $3.7 million coming from the current fiscal year. • Construction continued on the Mauna Kea Recreation Area Improvements; construction in progress as of the current fiscal year had reached $10.2 million with $7.8 million coming from the current fiscal year. • Construction continued on the Kealakehe Wastewater Treatment Plant; construction in progress as of the current fiscal year had reached $14.8 million with $4.1 million coming from the current fiscal year; project was transferred to Buildings. • Construction began on the Kawailani Street Improvements ('Iwalani to Pohakulani); construction in progress as of the end of the current fiscal year had reached $3.2 million. • $1.2 million of dedicated roads were received by the County in the current fiscal year. - 24 - Capital Assets (net of depreciation) June 30, 2017 and 2016 Primary Government Governmental Activities Business -type Activities Total 2017 2016 2017 20 2017 2016 Land and improvements $ 239,187,891 S 233,498,340 $ 753,877 $ 753,877 S 239,941,768 $ 234,252,217 Infrastructure assets 328,917,985 307,227,977 - 328,917,985 307,227,977 Ground and site improvements 57,893 62,240 57,893 62,240 Buildings and improvements 597,987,986 504,617,544 610,498 646,540 598,598,484 505,264,084 Easements 4,244,255 4,170,517 4,244,255 4,170,517 Equipment 60,190,776 59,910,752 26,673 32,396 60,217,449 59,943,148 Construction work in progress 71,118,202 124,212,163 - 71,118,202 124,212,163 Total $1,301,647,095 $1,233,637,293 $ 1,448,941 S 1,495,053 $1,303,096,036 $1,235,132,346 Additional information on the County's capital assets can be found in note 6 to the basic financial statements. Long-term debt. Long-term debt is primarily comprised of bonds of $338.5 million, State Revolving Fund loans of $32.6 million and Bond Anticipation Notes of $59.8 million. At the end of the current fiscal year, the County had total bonded debt outstanding of $338.5 million. This entire amount was comprised of general obligation bonds which are backed by the full faith and credit of the County. The County's total bonded debt decreased by $18.1million (5 percent) during the current fiscal year due to the regularly scheduled principal payments. At the end of the fiscal year, the County held an "AA+" rating from Fitch and an "Aa2" rating from Moody's for general obligation debt. State statutes limit the amount of general obligation debt the County may issue up to 15 percent of the total assessed value of all county real property as established for tax purposes on the last tax assessment rolls. The current debt limitation for the County is $4.3 billion, which is in excess of the County's outstanding general obligation debt. Currently the County's outstanding debt represents 9 percent of our debt limitation. Additional information on the County's long-term debt can be found in note 10 to the basic financial statements. ECONOMIC FACTORS AND NEXT YEAR'S BUDGETS AND RATES The unemployment rate for the County for the current fiscal year is at approximately 3.0 percent, which represents a percentage point decline from last year's rate for the same period of 4.0 percent, a two percent decline from two years ago and an even larger decline from the high of 11.0 percent in 2011. The number of domestic and international visitors to the County for the current fiscal year was approximately 1.65 million, with an approximately 9 percent increase from the previous year's count of 1.51 million. For the most part, the County is less dependent on tourism than the other islands in the State, but the Kona airport terminal modernization project is budgeted at $60-70 million. These factors were considered in preparing the County's budget for the 2017 fiscal year. - 25 - At the end of the current fiscal yearunrestricted fund balance in the general fund was $27.l million. The County has appiated $20.2 million of this amount for spending in the 2018 fiscal year budgeand the m'ocityioiou\udcdiudz*uxnigoodportinooftbefuodbu/unue. This amount differs from the amount shown on the Governmental Funds Balance Sheet as assigned to subsequent year's budget due to a reclassification of a negative $8.6 million in the unassigned fund balance. The amount appropriated in the 2018 fiscal year budget is based on a different accounting basis and different set of accounting principles than those used in preparing the Governmental Funds Balance Sheet. REQUESTS FOR INFO TION This financial report is designed to provide a generaoverview of the County's finances for all those with an intcco in the government's finances. Questions concerning any of the information provided in this report or requests for additional information should be addressed to the Director ofFinance, County nfBa"/ui`i,25/\upuniStreet, Suite 2lO3,Hilo, Bawui^i90720. BASIC FINANCIAL S 'ATE NTS - 27 - COUNTY OF HAWAII Statement of NePosition June 30, 2017 Primary Government Governmental Business -type Component Activities Activities Total Unit Assets Current assets: Cash and cash equivalents (notes 3 and 14) $ 72,208,295 $ 790,911 $ 72.999,206 $ 24,522,616 Rcstricled cash and cash equivalents (note 3) 31.638,458 41.350 }].679,808 ' Investments (note 3) 3.761.249 199,994 3.90.243 5.000.000 Restricted investments (note 3) 53.691.590 - 53.691'590 ' Receivables, net (note 4) 47.712.126 4,027 47.716.153 7.931.767 Receivable from improvement district (notes 4and 10) 99,189 99.189 Internal balances (note 5) 1.350 (1.30) Inventories 5.561,433 5.50,4]] 1.540,784 Prepaid expnmv - 1,791 1J91 207196 Real estate held for sale 402551 402,557 Other 669.391 069,391 Total current assets 215,745,632 1,036,723 216,782,355 39,202,363 investments (note 3) 10,68.708 10,673J03 20,000,000 Restricted investments (note 3) 5,578,253 5,578,253 ' Restricted cash and casequivalents (note 3 and 14) 72,644 72,644 888,225 Receivable from improvement district, excluding current portion (notes 4 and 10) 2.098.246 2'098.246 Capital assts (notes 6, 8 and 14): Utility plant in service, net - 260,675/73 Infrastructure assetsnet 328.917.985 328.917.985 Ground and site improvements, net ' 57.893 57,893 Buildings and improvements, net 597,987,986 610.498 598'598.484 Equipment, net 60,190.776 26.673 60.217.449 Easements, net 4'244,255 4,244,255 Preliminary survey and investigation charges 5.337.002 Construction work in progress 71.118.202 71'118.202 29.979.075 Land and improvements 239,187.891 753,877 239.941.768 4.898'50 Total capital assets, net 1.30'647,095 1.448.941 1.303.090.00 ]00,890.63} Total noncurrent assets 1.3/9.997,297 1.521.505 1.321.518,882 321J78,858 Total assets 1.535.742.929 2.558.308 1.538.301.237 300.981.221 Deferred Outflows of Reo"nex Deferred loss on refunding 7,444,852 7,444,852 ' Deferred outflow relateto pensions (notes 13 and 14) 245.427.979 245.427.979 11.855,347 Total deferred outflows of resu,ces 252.872.01 252.87}.8]1 11.855.347 Total Assets and Deferred Outflows of Resources 1.788,615J0 2,558,308 1.791.174.068 372.06,568 (Continued) - 28 - COUNTY OF HAWAII Statement of Net Position June 30, 2017 (Concluded) Primary Government Governmental Business -type Component Activities Activities Total Unit Liabilities Current liabilities: Accounts payable and accrued liabilities $ 24,540,365 $ 75,057 $ 24,615,422 $ 3,638,562 Accrued payroll 10,021.844 10,021.844 1.352.376 Advance collections - intergovernmental 4,692)]1 660 4,692,791 ' Interest due on long-term deb5.603.828 11.127 5,614,955 690,864 Bonds and loans payable, current portion net (notes 10 and 14) 88.273'10 94.434 88.307.570 3.964.472 Compensated absences, current portion (note 10) 9.813.735 - 9.81].7]5 555,054 Claims and judgments, current portion (notes 10, 12 and 14) 2.923.529 2.923.529 130.417 Capital leases, current portion (notes 8 and 10) 1.989.281 1.989.281 Landfill costs payable, current portion (notes 9 and 10) }95.4O5 195.405 Customers' deposits ' 165.358 Other 10.01.898 10.8]}.898 ' Total current liabilities 158`885.152 /81.278 159,006.430 10,497'095 Noncurrent liabilities: Bonds and loans payable, net (notes 10 and 14) 395.733.065 830.215 390'563.280 61'50.439 Compensated absence(note 10) 29.672.107 29.672.167 1.126,928 Claims arid judgments (notes 10, 12 and 14) 11.512.104 11.512.104 452.583 Capital leases (notes 8 and 10) 4,576,299 4,576,299 LundfiUcosts payable (notes 9and 0) 29.327.595 29,327,595 Unearned revenuenoncurrent 1.50.953 Customers' deposits 16.921.289 Net pension liability (notes 13 and 14) 619,275,868 019.275.868 29,247.007 Other (note 13) 90.925.696 90.925.696 ' Total noncurrenliabilities 1.181.022.854 80.215 1,181.853.069 110.915.799 Total liabilities 1,339,908,006 1,011,493 1,340,919,499 121,412,894 Deferred Inflows of Resources Deferred inUo°s related to pension(notes 13 and 14) 12.03l88 12.50.00 2,442.714 Deferred inflows - other 1'667,402 1.607.462 8I22 Total Deferred Inflows of Resources 14.250.500 14.250'500 2.525.446 Total Liabilities and Deferred Inflows of Resources 1.354,158,506 1,011,493 1,355,169,999 123,938,340 Net Position Net investment in capital assets 835'787,901 524,292 836,312,253 236,230,947 Restricted for: Capital projects 18.928,452 18.928,452 Debt service (note 10) 26,805.689 26,805.089 Highways, streets and abandoned vehicles 8.079.232 8.079.732 Public access open space 14.686.566 14.686.566 Other 1.9}9'64) ' 1.939.641 Unrestricted (471.770,287) 1.022523 (470J47J04) 12.667.281 Total net position $ 434.457.254 $ 1.546.815 $ 436.004.069 $ 248,898,228 See accompanying notes to the basic financial statemen '29' COUNTY OF HAWAII Statement of Activities For the Fiscal Year Ended lune 30, 2017 Functio s/Progr ITIS Primary government: Governmental activities: General government Public safety Highways and streets Health, education and welfare Culture and recreation Sanitation Interest on long-term debt Total governmental activities Business -type activities: Health, education and welfare Total primary government Component unit: Water (note 14) Expenses $ 72,836,020 229,507,091 51,368,841 40,299,077 35,213,973 56,605,864 13,385,794 Program Revenues Operating Charges for Grants and Services Contributions $ 2,791,430 $ 2,291,764 5,739,064 25,504,660 16,712,641 1,143,412 1,305,662 23,175,661 1,844,380 380,140 20,896,167 402,308 499,216,660 49,289,344 52,897,945 14,784,692 Capital Grants and Contributions $ 7,331,999 5,879,014 511,410 1,062,269 573,854 469,082 132,435 $ 499,790,514 49,758,426 53,030,380 S 14,784,692 55,802,437 $ 47,146,550 $ 9,310,212 General revenues: Taxes: Property taxes, levied for general purposes Public service company taxes Public utility franchise taxes Fuel taxes Grants and contributions not restricted to specific programs Investment earnings Other Total general revenues Change in net position Net position, beginning of year, as previously stated Cumulative effect of accounting change Prior period adjustment Net position, beginning of year, as restated Net position, end of year See accompanying notes to the basic financial statements. - 30 - Net (Expense) Revenue and Changes in Net Position Primary Government Governmental Business -type Component Activities Activities Tata' Unit $ (60,420,827) $ (198,263,367) (27,633,774) (15,817,754) (32,478,043) (34,245,120) (13,385,794) (382,244,679) (382,244,679) $ (60,420,827) $ (198,263,367) (27,633,774) (15,817,754) (32,478,043) (34,245,120) (13,385,794) (382,244,679) 27,663 27,663 27,663 (382,217,016) 654,325 268,869,322 268,869,322 8,423,340 8,423,340 7,950,750 7,950,750 8,288,676 8,288,676 19,810,090 19,810,090 661,184 1,243 662,427 428,771 7,092,071 7,092,071 321,095,433 1,243 321,096,676 428,771 (61,149,246) 28,906 (61,120,340) 1,083,096 510,032,175 1,517,909 511,550,084 247,783,630 (14,425,675) (14,425,675) (417,718) 449,220 495,606,500 1,517,909 497,124,409 247,815,132 434,457,254 1,546,815 $436,004,069 $ 248,898,228 -31- COUNTY OF HAWAII Governmental Funds Balance Sheet June 30, 2017 General Bond Other Total Capital Redemption Governmental Governmental Projects Fund Funds Funds Assets Cash and cash equivalents (note 3) $ 22,415,846 $ 23,085,974 $ 10,118,703 $ 48,226,230 $ 103,846,753 Investments (note 3) 24,677,293 34,694,844 14,272,000 60,658 73,704,795 Receivables, net (note 4) 23,028,721 790,665 2,496,666 26,316,052 Due from other governmental funds (note 5) 1,907,254 940,274 389,994 3,237,522 Due from other nongovernmental funds (note 5) 1,350 1,350 Receivables from other governments (note 4) 13,586,271 5,813,197 1,996,606 21,396,074 Inventories 5,561,433 5,561,433 Real estate held for sale 402,551 402,551 Other 404,803 264,588 669,391 Total assets 65.324,951 $ 24_390 70a 1, 53_838.643 Liabilities, Deferred Inflows and Fund Balances Liabilities: Accounts payable $ 5,835,106 $ 14,446,264 S $ 4,258,995 $ 24,540,365 Accrued payroll 8,746,199 1,275,645 10,021,844 Due to other governmental funds (note 5) 541,460 478,843 2,217,219 3,237,522 Advance collections -intergovernmental 901,294 3,540,569 250,268 4,692,131 Other 3,114,421 348,004 185,000 319,708 3,967,133 Total liabilities 19,138,480 18,813,680 185,00Q 8:321,835 46,458,995 Deferred Inflows of Resources: Unavailable revenue (note 7) 24,696,113 Fund balances: Nonspendable: Inventory 5,561,433 Restricted for: Debt service (note 10) 24,205,703 2,599,986 26,805,689 Highways, streets and abandoned vehicles 20,209,784 8,079,232 28,289,016 Public access open space 14,686,566 14,686,566 Other 425,488 13,789,028 1,514,153 15,728,669 Committed to: Budget stabilization 6,231,235 Disaster and emergencies 5,777,352 Lower Puna area Rental assistance and subsidy Sanitation Self insurance 1,311,907 Highways, streets and abandoned vehicles 1,192,820 Parks and recreational projects 2,312,652 Zoning change impact mitigation (fair share) 3,795,198 Other 693,503 1,202,272 Assigned to: Subsequent year's budget Other Total fund balances 47 746,251 46,511,274 24 205,703 42,990,424 161,454,359 Total liabilities, deferred inflows, and fund balances : 65.324.954 2,526,384 27,222,567 5,561,433 11,668,006 1,391,468 4,009,520 6,231,235 5,777,352 4,087,297 4,087,297 1,219,449 1,219,449 16,474,899 16,474,899 1,311,907 8,721,604 9,914,424 88,426 2,401,078 3,795,198 205,378 2,101,153 11,668,006 5,400,988 See accompanying notes to the basic financial statements - 32 - COUNTY OF HAWAII Reconciliation of the Governmental Funds Balance Sheet to the Statement of Net Position June 30, 2017 Total fund balances - governmental funds $ 161,454,359 Amounts reported for governmental activities in the statement of net position are different because: Capital assets used in governmental activities are not financial resources and therefore are not reported in the funds. These assets consist of: Land and improvements 239,187,891 Infrastructure assets, net 328,917,985 Buildings and improvements, net 597,987,986 Equipment, net 60,190,776 Easements, net 4,244,255 Construction work in progress 71,118,202 Total capital assets, net 1,301,647,095 Deferred amounts on refunding and pension are reported as deferred outflows of resources in the government -wide financial statements but are not are not reported in the governmental fund statements 252,872,831 Some of the County's revenues will be collected after year-end but are not available soon enough to pay for the current period's expenditures and therefore are deferred (unearned) in the funds. (note 7) 25,555,105 Some liabilities are not due and payable in the current period and therefore are not reported in the funds. Those liabilities consist of: Bonds and loans payable, net of receivable from improvement district (481,808,766) Interest due on long-term debt (5,603,828) Capital leases (6,565,580) Compensated absences (39,485,902) Claims and judgments (14,435,693) Landfill costs payable (29,523,000) Pollution remediation (15,542,639) Other Postemployment Benefit Obligation (OPEB) (82,247,822) Net pension obligation (619,275,868) Total long-term liabilities Deferred amounts related to pension are reported as deferred inflows of resources in the government -wide financial statements but are not are not reported in the governmental fund statements (1,294,489,098) (12,583,038) Net position of governmental activities $ 434,457,254 See accompanying notes to the basic financial statements. - 33 - COLTNTYOF HAWAII Governmental Funds Statement of Revenues, Expenditures, and Changes in Fund Balances For the Fiscal Year Ended June 30, 2017 General Bond Other Total Capital Redemption Governmental Governmental Projects Fund Funds Funds Revenues Property taxe$268.517.397 $ $206.517.397 Public service company taxe8,423.340 8,423,348 Fuel taxe' 8.288,676 8.288.676 Public utility frachise taxes - 7�50,750 7,950,750 Licenses and permits 8.007.841 ' 14.323.738 22.931.579 Intergovernmental 53.304.066 4.1]7.]53 '21,778,885 79�20,304 Charges for services 4.010.376 17.091.787 21.708.163 Investment earnings 082.414 (54,058) 3,846 632.202 Other 2.502.990 5.1/2.451 4.115.316 11.790.757 Total revenues 344.114.424 9.195.746 74,152.998 427.463.168 Expenditures Current: General government 39,678.100 1.141.202 40.819,302 Public safety 128,710.6}} 7.451.863 130.162.496 1-lighways and streets 2,779.904 17.549.162 20.329.1I6 Health, education and welfar7.681.600 22.853.246 30,84.846 Culture and recreation 20,131.07 1.063.973 21.195.810 Sanitation 1.084.951 37.586.518 38'671.469 Pension and retirement contributions (note 13) 38.440.865 5.277.117 43.717.982 Employees' health insurance 29,741.108 2.405.553 32.146,061 Other postemployment benefits 11.495.000 - 11.495.000 Other 2.424.887 1.414.468 3.839.355 Debt service: Principal 1,484566 19,911.790 635,435 22.031.791 Interest 91,229 17.197.798 17,289,07 Capital outlay 5,680,868 105.428,028 111.108,891 Total expenditures 289,425,603 105.428.028 19,911.790 114,576,335 529.341J50 Excess (deficiency) of revenues - 34 COUNTY OF HAWAII Governmental Funds Statement of Revenues, Expenditures, and Changein Fund Balances For the Fiscal Year Ended June 30, 2017 General (Concluded) Bond Other Total Capital Redemption Governmental Governmental Projects Fund Funds Funds Other Financing Sources (Uses) Sale of assets $ 20,851 $ $ - $ 20.01 Increase in capitaleases (notes 8 and 10) 2,309,039 - 1,460,304 3J69,40 State Revolving Fund loans (note 10) 8.129,84 8.129.53* Issuance of Bond Anticipation Notes 59.800,000 - - 59,800.00 Transfers in (note 5) 3.997,524 23.790.601 ]9,1]5.700 06863.891 Transfers out (note 5) (62.911.066) ' (3.952.825) (66.863.891) Total other financing source(uses) (60,581.170) 71.927.058 23.730.661 38.643.245 71,719,788 Net change in fund balances (5,892.355) (24.]05.224) 3.818.871 (3.780.092) (30.10.800) Fund balances at beginning ofyear 53.852.258 70.810.498 20,386,832 46.770,516 191.820.104 Decrease in reserve for inventories (212.945) - - - (212.9*5) Fund balances at end of yea $ 47.740.958 % 40.511.774 $ 24,20570 %42.990,424 See accompanying notes to the basic financiastatements. ~35~ COUNTY OF HAWAII Reconciliation of the Change in Fund Balances of Governmental Funds to the Statement of Activities For the Fiscal Year Ended June 30, 2017 Net change in fund balances - total governmental funds $ (30,158,800) Amounts reported for governmental activities in the statement of activities are different because: Capital outlays are reported as expenditures in governmental funds. However, in the statement of activities, the cost of capital assets is allocated over their estimated useful lives as depreciation expense. In the current period, these amounts are: Capital outlay 109,612,683 Dedicated and contributed property 4,239,151 Depreciation expense and loss on disposals (45,842,032) Excess of capital outlay over depreciation expense Borrowings provide current financial resources to governmental funds; however, issuing debt increases long-term liabilities in the statement of net position. In the current period, assets financed through: Bond anticipation notes (59,800,000) State Revolving Fund loans (8,129,534) Capital leases (3,769,403) Total debt proceeds Repayment of long-term debt is reported as an expenditure in governmental funds, but the repayment reduces long-term liabilities in the statement of net position. In the current year, these amounts consist of: Bond principal retirement 17,979,082 State Revolving Fund loan repayments/forgiveness 2,967,508 Capital lease payments 2,120,001 Total long-term debt repayment Because some revenues will not be collected for several months after the County's fiscal year end, they are not considered "available" revenues and are "deferred" in the governmental funds. Unearned revenues increased by this amount this year. - 36 - 68,009,802 (71,698,937) 23,066,591 2,467,004 (Continued) COUNTY OF HAWAII Reconciliation of the Change in Fund Balanceof Governmental Funds to the Statement of Activities For the Fiscal Year Ended June 30, 2017 Some items reported in the statement of activities do not involve current financial resources and therefore are not reporteas expenditures in governmental funds. These activities are: Decrease in inventories & (212,945) Increase in OthePostemployment Benefit Obligation (OPEB) (net of intergovernmental tranfer to reduce liability) p`237.965) Increase in compensated absences (1.578.097) Increase in claims and judgments (576.197) Increase in landfill closure/postclosure care costs (0.090.000) Decrease in pollution remediation costs 871.471 Amortization of premium from bond issuance 4.331.131 Amortization of deferred loss on refunding (762,997) Net decrease in accrued interest 436,884 Increase to expenses related to pension and salaries and wages (43.216.191) Net additional expenses (Concluded) (52,834,906) Change in net position of governmental activities (61.149,246) See accompanying notes to the basic financial statements -}7- COUNTY OF HAWAII General Fund Statement of Revenues, Expeximreo and Changein Fund Balance Budget and Actual (Budgetary Basis) For the Fiscal Year Ended June 30, 2017 Revenues: Taxes and assessments: Property taxes Public service company taxes Total taxes and assessments Licenses and permits: Nonbusiness licenses and permits Business licenses Street use Actual Variance Original Final (Budgetary Positive BudEp/ Budget Basis) (Negative) $206,50\0m $ 266,500,000 $2@`5}7.]97 $ 17.397 10.340,00 10,340,000 8,423.340 (1,916,660 276.840.000 276.840,000 274.940.737 (1.899,263) }]D5,624 2,133,433 2,905,000 3,835,624 3,630,757 (204.867) ].13]/433 1,934,489 (198,944) 3,905,000 3.042.595 137,595 Total licenses and permits 8.874,057 8,874,057 8�7,841 (266,216) Intergovernmental: Federal: Programs for the aged 2,280,336 2,280,330 1.383'990 (896,346) Community development block gram ' 2.500,000 2'500,000 Law enforcement 3.}78.)17 3.809'914 1.714.111 (2.095'803) Other 3.031.036 4.628.129 4.683.475 55.346 Total federal 8,690.089 13,20.379 10,281,576 (2,936,803) State: State GeneraFund - Act 185, 8LB\o9D 19.158.000 19.158.000 19.10.000 ' Emergency medical services 14.30.592 15.067,08 16.530.274 868.846 Other 6.779.412 8.361.575 5.249.197 (3.112.}78) Total State 40,296,004 43.187,203 4O,94]'47| (2.343.732) Total intergovernmental revenue 48.986.093 56,405,02 51.2I5'047 (5.180,5}5) Charges for services: General government 5,553,907 5.553,907 4,153.855 (1,400,052) Culture and recreation 1.451.400 1`491.*00 1.258.808 (232,592) Highways and streets 1'204.000 1.264,000 1.20.281 (53'719) Public safety 111.368 111,308 116,115 4,747 Total chargefor services 8.380,675 8.420,675 0.739.059 (}.681.0{6) Fines and forfeitures 2.069,500 2.069.500 1,211.045 (858,455) Rents 207.500 207.500 208.052 1,152 - 38 - (Continued) COUNTY OF HAWAII General Fund Statement of Revenues, Expenditures, and Changes in Fund Balance - Budget and Actual (Budgetary Basis) For the Fiscal Year Ended June 30, 2017 Revenues (continued): Interest and penalties Miscellaneous Total revenues Actual Variance Original Final (Budgetary Positive Budget Budget Basis) (Negative) 800,000 $ 800,000 $ 654,579 $ (145,421) 5,174,433 5,274,433 5,016,183 (258,250) 351,332,258 358,891,747 348,603,143 (10,288,604) Expenditures: Current: General government: Finance 12,359,293 12,359,293 10,454,350 1,904,943 General government building 5,334,997 5,281,550 4,693,345 588,205 Legislative 4,261,915 3,452,215 3,206,920 245,295 Automotive equipment 4,720,717 4,720,717 3,912,183 808,534 Law 2,729,370 2,729,370 2,410,627 318,743 Research and development 3,565,557 3,766,758 3,106,152 660,606 Planning and zoning 3,923,315 3,923,315 3,620,608 302,707 Mayor's office 1,581,838 1,741,838 1,674,214 67,624 Engineering 1,673,406 1,673,406 1,335,557 337,849 Information technology 2,590,390 2,590,390 2,484,190 106,200 Human resources 2,006,658 2,006,658 1,741,145 265,513 Public works administration 1,737,538 1,790,485 1,693,319 97,166 Elections 1,058,525 1,058,525 881,796 176,729 Legislative auditor 757,084 757,084 578,907 178,177 Total general government 48,300,603 47,851,604 41,793,313 6,058,291 Public safety: Police department 65,098,683 65,314,785 60,278,989 5,035,796 Fire department 47,215,247 50,149,225 48,363,288 1,785,937 Prosecuting attorney 9,213,045 9,891,075 8,168,304 1,722,771 Protective inspection 3,429,595 3,454,595 2,985,601 468,994 Liquor control 2,123,128 2,286,645 2,068,447 218,198 Flood control 330,000 330,000 245,260 84,740 Civil defense agency 1,417,473 1,617,473 1,419,315 198,158 Animal control 2,081,625 2,081,625 2,081,625 -- Total public safety 130,908,796 135,125,423 125,610,829 9,514,594 Highways and streets: Mass transit 5,510,898 5,519,398 4,352,382 1,167,016 - 39 - (Continued) COUNTY OF HAWAII General Fund Statement of Revenues, Expenditures, and Changes in Fund Balance - Budget and Actual (Budgetary Basis) For the Fiscal Year Ended June 30, 2017 Actual Variance Original Final (Budgetary Positive Budget Budget Basis) (Negative) Expenditures (continued): Current (continued): Health, education and welfare: Elderly activities $ 3,848,900 $ 3,889,118 $ 3,222,318 $ 666,800 Office of aging 2,900,343 3,909,603 3,009,860 899,743 Education 58,500 58,500 30,276 28,224 Social programs 1,500,000 1,500,000 1,468,750 31,250 Cemeteries 403,322 403,322 373,241 30,081 Physical examination 133,826 133,826 133,825 1 Total health, education and welfare 8,844,891 9,894,369 8,238,270 1,656,099 Culture and recreation: Community music 283,210 283,210 198,157 85,053 Organized recreation: Maintenance 9,928,290 10,058,372 9,589,792 468,580 Recreation 3,013,150 3,045,216 2,722,601 322,615 Aquatics 2,496,791 2,496,791 2,161,183 335,608 Hoolulu park complex 1,035,811 1,030,811 978,248 52,563 Administration 2,030,972 2,231,051 2,068,885 162,166 Children's zoo 787,084 787,084 741,316 45,768 Summer/Intersession 508,098 514,099 363,378 150,721 Culture and arts 315,277 332,104 306,241 25,863 Elderly activities administration 626,254 698,832 646,304 52,528 Total culture and recreation 21,024,937 21,477,570 19,776,105 1,701,465 Sanitation: Environmental management 1,179,769 1,179,769 1,051,099 128,670 Pension and retirement contributions 41,281,132 41,281,132 37,505,237 3,775,895 Employees' health insurance 31,000,000 31,000,000 29,717,016 1,282,984 Other postemployment benefits 11,495,000 11,495,000 11,495,000 Other 4,603,500 4,238,550 2,631,967 1,606,583 Total current 304,149,526 309,062,815 282,171,218 26,891,597 -40- (Continued) COUNTY OF HAWAII General Fund Statement of Revenues, Expenditures, and Changes in Fund Balance - Budget and Actual (Budgetary Basis) For the Fiscal Year Ended June 30, 2017 (Concluded) Actual Variance Original Final (Budgetary Positive Budget Budget Basis) (Negative) Expenditures (continued): Capital Outlay: Community Development Block grants (HUD) 150,000 2,750,000 $ 2,624,789 $ 125,211 HOME Program 100,000 100,000 100,000 Other (45,568) 45,568 Total capital outlay 250,000 2,850,000 2,579,221 270,779 Total expenditures 304,399,526 311,912,815 284,750,439 27,162,376 Excess of revenues over expenditures 46,932,732 46,978,932 63,852,704 6,873,772 Other financing sources (ti es): Transfers out: Housing Fund (1,810,896) (1,822,396) (1,572,396) 250,000 Solid Waste Fund (18,679,575) (18,679,575) (18,679,575) Sewer Fund (2,120,785) (2,120,785) (2,120,785) Golf Course Fund (477,519) (477,519) (477,519) Capital Project Fund (44,700) (44,700) Highway Fund (10,000) (10,000) Disaster/Emergency Fund (250,000) (250,000) (250,000) Public Access, Open Space, and Natural Resources Preservation Fund (5,330,000) (5,406,000) (5,330,348) 75,652 Public Access, Open Space, and Natural (666,250) (666,293) Resources Preservation Maintenance Fund (675,750) 9,457 Budget Stabilization Fund (250,000) (250,000) (250,000) Debt Service Fund (43,858,131) (43,858,131) (43,858,131) Total transfers out (73,443,156) (73,594,856) (73,259,747) 335,109 Total other financing uses (73,443,156) (73,594,856) (73,259,747) 335,109 Excess (deficiency) of revenues and other sources over (under) expenditures and other uses (26,510,424) (26,615,924) (9,407,043) 17,208,881 Fund balance at beginning of year 53,852,258 53,852,258 53,852,258 Fund balance at end of year 5 27,341,834 27,236,334 $ 44,445,215 517,208,881 See accompanying notes to the basic financial statements. -41- COUNTY OF HAWAII Proprietary Funds Statement of Net Position June 30, 2017 Business -type Activities - Enterprise Funds Kulaimano Ouli Ekahi Elderly Affordable Housing Housing Project Project Total Assets Current assets: Cash and cash equivalents (note 3) S 391,881 $ 398,880 $ 790,761 Restricted cash and cash equivalents (note 3) 11,863 29,487 41,350 Investments (note 3) 199,994 199,994 Imprest fund (note 3) 50 100 150 Receivables, net (note 4) 127 3,900 4,027 Prepaid expenses 1,791 1,791 Total current assets 605,706 432,367 1,038,073 Noncurrent assets: Restricted cash and cash equivalents (note 3) 72,644 72,644 Capital assets (note 6): Land and site improvements 511,000 515,727 1,026,727 Buildings and equipment 1,243,908 487,229 1,731,137 Less accumulated depreciation (1,232,918) (76,005) (1,308,923) Total capital assets 521,990 926,951 1,448,941 Total noncurrent assets 521,990 999,595 1,521,585 Total assets 1,127,696 1,431,962 2,559,658 Liabilities Current liabilities: Accounts payable 5,424 29,720 35,144 Internal Balances (note 5) 1,350 1,350 Security deposits payable from restricted assets 11,863 28,050 39,913 Deferred revenue 401 259 660 Interest payable 11,127 11,127 Notes payable, current portion (note 10) 59,251 35,183 94,434 Total current liabilities 89,416 93,212 182,628 Noncurrent liabilities: Notes payable (note 10) 592,496 237,719 830,215 Total liabilities 681,912 330,931 1,012,843 Net Position Net investment in capital assets (129,757) 654,049 524,292 Unrestricted 575,541 446,982 1,022,523 Total net position 445,784 1,101,031 1,546,815 See accompanying notes to the basic financial statements. - 42 - COUNTY OF HAWAII Proprietary Funds Statement of Revenues, Expenses, and Changes in Fund Net Position For the Fiscal Year Ended June 30, 2017 Operating revenues: Rental receipts from tenants Rental subsidy from federal government - HUD Laundry receipts Other Total operating revenues Operating expenses: Utilities General and administration Maintenance and repairs Depreciation (note 6) Total operating expenses Operating income Nonoperating revenues (expenses): Investment income Interest expense Total nonoperating revenues (expenses) Change in net position Net position, beginning of year Net position, end of year See accompanying notes to the basic financial statements. - 43 Business -type Activities - Enterprise Funds Kulairnano Elderly Housing Project Ouli Ekahi A ffordable Housing Project 121,995 $ 132,435 3,284 574 258,288 Total 333,540 $ 455,535 132,435 3,284 9,689 10,263 343,229 601,517 34,570 54,779 89,349 126,713 109,403 236,116 53,505 106,754 160,259 35,687 17,228 52,915 250,475 288,164 538,639 7,813 55,065 62,878 1,225 18 1,243 (35,215) (35,215) (33,990) 18 (33,972) (26,177) 55,083 28,906 471,961 1,045,948 1,517,909 445,784 $ 1,101,031 $ 1,546,815 COUNTY OF HAWAII Proprietary Funds Statement of Cash Flows For the Fiscal Year Ended June 30, 2017 Business -type Activities - Enterprise Funds Kulaimano Ouli Ekahi Elderly Affordable Housing Housing Prolect Project Total Cash Flows from Operating Activities Receipts from tenants 125,904 $ 344,244 $ 470,148 Receipts from federal government - HUD 132,435 132,435 Payments to suppliers for goods and services (213,544) (243,023) (456,567) Net cash provided by operating activities 44,795 101,221 146,016 Cash Flows from Capital and Related Financing Activities Principal paid on notes payable (56,061) (33,304) (89,365) Interest paid on notes payable (36,279) (36,279) Purchase of capital assets (5,960) (843) (6,803) Net cash used in capital and related financing activities (98,300) (34,147) (132,447) Cash Flows from Investing Activities Proceeds from maturities of investments 200,000 200,000 Purchase of investments (200,000) (200,000) Interest on investments 1,267 18 1,285 Net cash provided by investing activities 1,267 18 1,285 Net increase (decrease) in cash and cash equivalents (52,238) 67,092 14,854 Cash and cash equivalents at beginning of year (including restricted cash and cash equivalents) 456,032 434,019 890,051 Cash and cash equivalents at end of year (including restricted cash and cash equivalents) 403,794 $ 501,111 $ 904,905 Reconciliation of Operating Income to Net Cash Provided by Operating Activities Operating income Adjustments to reconcile operating income to net cash provided by operating activities: Depreciation expense Change in assets and liabilities: 7,813 5 55,065 $ 62,878 35,687 17,228 52,915 Receivables, net (116) (959) (1,075) Prepaid expenses (77) (77) Accounts and other payables 1,241 30,570 31,811 Deferred revenue 247 (683) (43) Net cash provided by operating activities $ 44,795 $ 101,221 $ 146,016 Supplemental disclosure of cash flow information - Interest paid $ 36,279 $ - $ 36,279 Noncash investing, capital and financing activities: Net decrease in fair value of investments (6) $ (6) See accompanying notes to the basic financial statements - 44 COUNTY OF HAWAII Fiduciary Funds Statement of Fiduciary Net Position June 30, 2017 Private - Purpose Agency Trusts Funds Assets Cash and cash equivalents (note 3) S 1,688,045 $ 3,843,924 Investments (note 3) 3,090,291 420,930 Receivables: Due from other agency funds 3,623 Other receivables 449,374 Total receivables 452,997 Total assets 4,778,336 $ 4,717,851 Liabilities Due to other agency funds 3,623 Accrued liabilities 3,199,643 Advances payable 381,679 Assets held for the benefit of improvement districts 1,132,906 Total liabilities $ 4,717,851 Net Position Held in trust for other parties Total net position 4,778,336 4,778,336 See accompanying notes to the basic financial statements -45 - COth'4TY OF HAWAII Fiduciary Funds Statement of Changein Fiduciary Net Position For the Fiscal Year Ended June 30, 2017 Private- Purpose Trusts Additions Contributions: Puna GeothermaVenture $ 50,000 Investment earnings: Net increase in fair value of investments 59,624 Dividends and interest 53.869 Total additions 163.493 Deductions Claims Consultant 1'526 Grant payments 125.794 Investment Fees 13,144 Total deductions 140.464 Change in net position 23.029 Net position, beginning of yea4.755.307 Net position, end of year $ 4.778.]]6 See accompanying notes to the basic financial statements COUNTY OF A WAPI Notes to the Basic Financial Statements June 30, 2017 The accounting policies of the County of Hawai`i (the County) conform to U.S. generally accepted accounting principles (GAAP) as applicable to local governmental units. The following notes to the basic financial statements are an integral part of the County's Comprehensive Annual Financial Report (CAFR). 1. SU OF SIGNIFICANT ACCOUNTING POLICIES The Financial Reporting Entity The County has implemented Governmental Accounting Standards Board Statement No. 14, The Financial Reporting Entity (GASB Statement No. 14), Statement No. 39, Determining Whether Certain Organizations Are Component Units (GASB Statement No. 39) and Statement No. 61, The Financial Reporting Entity.. Omnibus an amendment of GASB Statements No. 14 and 34 (GASB Statement No. 61). All organizations, activities or functions that meet the criteria in GASB Statement No. 14, No. 39 and No. 61 for inclusion in the reporting entity are included in the County's basic financial statements. Primary Government The County operates under the Mayor -Council form of government under a charter that became effective on January 2, 1969, and was amended in 1979, 1982, 1990 and 2000. The County's operations are organized by the following functions: general government; public safety; highways and streets; sanitation; health, education and welfare; culture and recreation; pension and retirement contributions; health fund; miscellaneous; capital outlay; and debt service. The State of Hawaii (the State) assumes full responsibility for several major functions usually performed by local governments, including education, welfare, health and judicial functions. There are no separate city, county or township governments nor any school districts, special districts, authorities or public corporations with overlapping authority. GASB Statement No. 14, as amended, defines component units as legally separate organizations for which the elected officials of the primary government are financially accountable or for which the primary government may determine, through exercise of management's professional judgment, that the inclusion of an organization that does not meet the financial accountability criteria is necessary in order to prevent the reporting entity's financial statements from being misleading. "Financial accountability" is the level of accountability that exists if a primary government appoints a voting majority of an organization's governing board or if the organization is fiscally dependent on the primary government and is either able to impose its will on that organization or there is a potential for the organization to provide specific financial benefits to, or impose specific financial burdens on, the primary government. A primary government has the ability to impose its will on an organization if it can significantly influence the programs, projects, activities or level of services performed or provided by the organization. An organization has a financial benefit or burden relationship with the primary government if any one of three conditions exist: (1) The primary government is legally entitled to or can otherwise access the organization's resources; (2) The primary government is legally obligated or has otherwise assumed the obligation to - 47 - COUNTY OF HAWAI`I Notes to the Basic Financial Statements June 30, 2017 finance the deficits of, or provide financial support to, the organization; or (3) The primary government is obligated in some manner for the debt of the organization. As required by GAAP as set forth in GASB Statement No. 14, No. 39 and No. 61, these basic financial statements present the County ofHawaii (the primary government) and its component unit, the Department of Water Supply (the Department). This component unit is included in the County's reporting entity because of its financial relationship with the County. Discretely Presented Component Unit The component unit column in the basic financial statements includes the financial data of the Department, a legally independent agency of the County that is accounted for as an enterprise fund. It is reported in a separate column to emphasize that it is legally separate from the County. The members of the Water Board, the governing body of the Department, are appointed by the Mayor of the County and confirmed by the County Council. The Department is granted corporate powers by state statute and the County Charter. Although the County does not have the authority to approve or modify the Department's operational and capital budgets, the County has issued bonds on the Department's behalf that are general obligations of the County. Because the County is obligated to repay these bonds in the event of default by the Department, the County is financially accountable for the debts of the Department. See Note 14 for component unit disclosures for the Department. Complete financial statements of the Department can be obtained from the Department of Water Supply, 345 Kekilanao`a Street, Suite 20, Hilo, Hawai`i 96720, Basic Financial Statements The basic financial statements include both government -wide (based on the County as a whole) and fund financial statements. Both the government -wide and fund financial statements (within the basic financial statements) categorize primary activities as either governmental or business -type. In the government -wide statement of net position, both the governmental and business -type activities columns (a) are presented on a consolidated basis by column, (b) and are reflected, on a full accrual, economic resource basis, which incorporates long-term assets and receivables as well as long-term debt and obligations. The government -wide statement of activities reflects both the gross and net costs per functional category (general government, public safety, highways and streets, etc.) which are otherwise being supported by general government revenues (property taxes, certain intergovernmental revenues, etc.). The statement of activities reduces gross expenses (including depreciation) by related program revenues, operating and capital grants. The program revenues must be directly associated with the function (general government, public safety, highways and streets, etc.) or a business -type activity. The operating grants include operating -specific and discretionary (either operating or capital) grants while the capital grants column reflects capital -specific grants. The net cost (by function or business -type activity) is normally covered by general revenues. -48- COUNTY OF HAWAII Notes to the Basic Financial Statements June 30, 2017 The government -wide focus is more on the sustainability of the County as an entity and the change in aggregate financial position resulting from the activities of the fiscal period. The fund financial statements' emphasis is on the major funds in either the governmental or business -type categories. Nonmajor funds (by category) are summarized into a single column. The governmental funds in the fund financial statements are presented using the current financial resource focus and modified accrual basis of accounting. This is the manner in which these funds are normally budgeted. This presentation is deemed most appropriate to (a) demonstrate legal and covenant compliance, (b) demonstrate the source and use of liquid resources, and (c) demonstrate how the County's actual experience conforms to the budget fiscal plan. Since the governmental fund statements are presented using a different measurement focus and basis of accounting than the government -wide statements' governmental activities column, a reconciliation is presented on the page following each statement, which briefly explains the adjustments necessary to transform the fund based financial statements into the governmental activities column of the government -wide presentation. The County's fiduciary funds are presented in the fund financial statements by type (private purpose and agency). Since by definition these assets are being held for the benefit of a third party (private parties, state government, etc.) and cannot be used to address activities or obligations of the government, these funds are not incorporated into the government -wide statements. Government -wide and fund financial statements — The government -wide financial statements (i.e., the statement of net position and the statement of activities) report information on all of the nonfiduciary activities of the primary government and its component unit. The effect of interfund activity has been removed from these statements during the process of incorporating fund data but interfund services provided and used have not been eliminated in the process of consolidation. Governmental activities, which normally are supported by taxes and intergovernmental revenues, are reported separately from business - type activities, which rely to a significant extent on fees and charges for support. Likewise, the primary government is reported separately from certain legally separate component units for which the primary government is financially accountable. The statement of activities demonstrates the degree to which the direct expenses of a given function or segment are offset by program revenues. Direct expenses are those that are clearly identifiable with a specific function or segment. Program revenues include (a) charges to customers or applicants who purchase, use, or directly benefit from goods, services, or privileges provided by a given function or segment and (b) grants and contributions that are restricted to meeting the operational or capital requirements of a particular function or segment. Taxes and other items not included among program revenues are reported instead as general revenues. - 49 - COUNTY OF HAWAII Notes to the Basic Financial Statements June 30, 2017 Separate financial statements are provided for governmental funds, proprietary funds, and fiduciary funds, even though the latter are excluded from the government -wide financial statements. Major individual governmental funds and major individual enterprise funds are reported as separate columns in the fund financial statements. Activities in funds — The financial transactions of the County are recorded in individual funds. Each fund is accounted for by providing a separate set of self -balancing accounts that comprises its assets, deferred outflows of resources, liabilities, deferred inflows of resources, reserves, fund equity, revenues and expenditures/expenses. The various funds are reported by generic classification within the financial statements. GASB Statement No. 34, Basic Financial Statements — and Management's Discussion and Analysis —for State and Local Governments, sets forth minimum criteria (percentage of the assets, deferred outflows of resources, liabilities, deferred inflows of resources, revenues or expenditures/expenses of either fund category or the governmental and enterprise combined) for the determination of major funds. The nonmajor funds are combined in a column in the fund financial statements and detailed in the combining section. The County reports the following major governmental funds: General Fund —The general fund is the general operating fund of the County. It is used to account for all activities of the general government, except those required to be accounted for in other funds. Capital Projects Fund — Used to account for the costs of constructing County capital improvements financed with general obligation bond proceeds, federal and state grants, and general and special revenue fund revenues. The capital projects fund is used to account for financial resources to be used for the acquisition or construction of major general government capital facilities and infrastructure (other than those financed by proprietary funds and trust funds) when separate project centers are needed to control costs. Bond Redemption Fund — Used to accumulate moneys for the payment of general obligation bonds. Moneys required to retire the bonds are transferred from the General Fund one year in advance of maturity. The County reports the following major proprietary funds: Kula`intano Elderly Housing Project — Used to account for the operation of a rental housing project for low-income senior citizens located north of Hilo. Ouli Ekahi Affordable Housing Project — Used to account for the operation of a 33 -unit single-family affordable rental housing project located in Waimea. - 50 - COUNTY OF HAWAII Notes to the Basic Financial Statements June 30, 2017 The County reports the following fiduciary funds: Private -Purpose Trust Funds — Used to account for funds received from geothermal developers to mitigate the effects of geothermal energy development. Also used to account for investment income on funds received from import businesses at the port of Hilo and the related expenditures to promote health and safety on the Island of Hawai`i. Agency Funds — Used to account for assets held by the County for other governmental units and individuals. The agency funds are custodial in nature and do not involve measurement of results of operations. The County has the following agency funds: • State Weight Tax Fund • Improvement District No. 18 Fund • Improvement District No. 19 Fund • Improvement District Revolving Fund • Performance and Refundable Deposits Fund • Payroll Clearance Fund • Flexible Spending Account • Lapsed Warrants Fund • Non -Profit License Plates Fund • Organ and Tissue Education Fund • Business Improvement District l-Kailua Basis of Accounting Basis of accounting refers to the period in which revenues and expenditures (or expenses) are recognized in the accounts and reported in the basic financial statements. Basis of accounting relates to the timing of the measurements made, regardless of the measurement focus applied. The government -wide financial statements and the proprietary, fiduciary and component unit fund financial statements are presented on an accrual basis of accounting. The governmental funds in the fund financial statements are presented on a modified accrual basis. Accrual Basis - Revenues are recognized when earned and expenses are recognized when the related obligation is incurred. Modified Accrual Basis - Revenues are recorded when susceptible to accrual (that is, both measurable and available), "Measurable" means the amounts are determinable. "Available" means the amounts are collectible within the current period or soon enough thereafter (one year for intergovernmental revenues) to be used to pay liabilities of the current period. -51 - COUNTY OF HAWAII Notes to the Basic Financial Statements June 30, 2017 Licenses and permits, charges for current services, fines and forfeitures, penalties and miscellaneous revenues are recorded as revenues when received in cash because they are generally not measurable until actually received. Real property taxes and State Revolving Fund loan proceeds are considered available when collected. In applying the susceptible to accrual concept to intergovernmental revenues, the legal and contractual requirements of the numerous individual programs are used as guidance. There are essentially two types of these revenues. In one, monies must be expended on the specific purpose or project before any amounts will be paid to the County; therefore, revenues are recognized based upon the expenditures recorded. Most construction grants and many operating grants fall into this category, In the other, monies are virtually unrestricted as to purpose of expenditure and are usually revocable only for failure to comply with prescribed compliance requirements. These resources are reflected as revenues at the time of receipt or earlier if the susceptible to accrual criteria are met. The County reports deferred inflow of resources in its fund financial statements (see Note 7). Deferred inflows of resources arise when potential revenue does not meet both the "measurable" and "available" criteria for recognition in the current period. In subsequent periods, when both revenue recognition criteria are met, the deferred inflow is removed from the fund financial statements and revenue is recognized. Expenditures are recognized under the modified accrual basis of accounting in the accounting period in which the fund liability is incurred. Exceptions to this general rule include: (a) accumulated compensated absences and claims and judgments which are recognized as expenditures when paid; (b) liabilities related to municipal solid waste landfill closure and postclosure care costs; (c) principal and interest on general long-term debt which are recognized as expenditures when due; and (d) liabilities relating to pollution remediation . The County applies all applicable GASB pronouncements, including the adoption of GASB Statement No. 62, Codification of Accounting and Financial Reporting Guidance Contained in Pre -November 30, 1989 FASB (Financial Accounting Standards Board) and AICPA (American Institute of Certified Public Accountants) Pronouncements. Encumbrances The general, special revenue, and capital projects funds follow encumbrance accounting under which purchase orders, contracts and other commitments are recorded as an obligation of fund balance and provide authority for the carryover of appropriations to the subsequent year in order to complete these transactions. Encumbrances outstanding at year-end are included in the respective fund balance categories as appropriate and do not constitute expenditures or liabilities because the commitments will be honored during the subsequent year. - 52 - COUNTY OF HAWAII Notes to the Basic Financial Statements June 30, 2017 Cash and Investments Cash and cash equivalents include cash on hand, amounts in demand deposits and savings accounts, and short-term investments with a maturity date of three months or less from the date acquired by the County. Investments consist of certificates of deposit, repurchase agreements, and securities with original maturities exceeding three months. These include participating investment contracts (U.S. government sponsored agency issues and negotiable certificates of deposit) as well as nonparticipating investment contracts (time certificates of deposit and repurchase agreements). Both categories of investments are stated at fair value (see Note 3). Valuations of investments in government sponsored enterprises such as Federal National Mortgage Association (Fannie Mae) and Federal Home Loan Mortgage Corporation (Freddie Mac) are based on quoted market rates. Valuations of certificates of deposits are based on cost, which approximate fair value, as they almost invariably are held to maturity. Investments also consist of equity securities in the fiduciary fund financial statements. These investments are stated at fair value based on closing quoted prices. Real Property Taxes The County's real property taxes are levied on July 1 each year on assessed valuation as of January 1. The taxes become a lien on the property assessed as of the levy date. Taxes are due and payable in two equal annual installments on August 20 and February 20. Accordingly, real property taxes receivable as of June 30 are delinquent. Each delinquent installment bears interest at 1% per month and penalties of up to 10% of the amount due. Assessments are based on 100% of estimated fair market values prior to the application of exemptions or preferential assessments. The County provides real property tax abatement under five programs — Enterprise Zone, Historic Residential Dedication, Low and Moderate Income Housing, Agricultural Use Programs, and Solar Water Heater Credit: Enterprise Zone Exemption - Section 19-89.3 of the Hawai`i County Code provides buildings or other like structures which are built as a result of new construction by a qualified business within an enterprise zone to be exempt except for the minimum tax from real property taxes for a period of three years. The purpose of this program is to stimulate business and industrial growth. A qualified business in an enterprise zone must satisfy the requirements of Chapter 31 of the Hawai`i County Code and section 208E, Hawaii Revised Statutes. Historic Residential Dedication Exemption —Section 19-89.1 of the Hawai`i County Code and Rule 36 of the Rules and Regulations of the Director of Finance provides an exemption to encourage the preservation of residential structures that have been placed on the Hawai`i Register of Historic Places after January 1, 1977. The property owner must provide visual access on a year-round basis or open the property to the public for twelve days per year. The - 53 - COUNTY OF HAWAII Notes to the Basic Financial Statements June 30, 2017 owner certifies the current level of taxation is a material factor which threatens the continued existence of the historic status. This dedication is for a minimum period of ten years, automatically renewable indefinitely. Cancellation of the dedication by either the owner or the Director of Finance may only be made upon five years' written advance notice and no earlier than the end of the fifth tax year. Any person who becomes an owner of the dedicated real property shall be subject to the restrictions and retroactive tax assessment provisions. If the dedication is approved, the exemption based upon the dedication shall be effective July 1 of the tax year following the approval of the dedication. The dedicated exempt property or portion of the property approved shall be subject to the minimum tax provisions of Section 19- 90(e) of the Hawai`i County Code. If there is a breach in the agreement, the property would be subject to roll back taxes, including penalty and interest. Low and Moderate -Income Housing Exemption — Section 19-87 of the Hawai`i County Code and Rule 37 of the Rules and Regulations of the Director of Finance provides an exemption for a housing project which is owned and operated by a nonprofit or limited distribution mortgagor or by a qualified entity from taxation. Must participate in long-term housing project that have regulatory agreements mandating rent levels, occupancy of the project is limited to the elderly, handicapped, low or moderate income families. Applicants must submit an application form along with a copy of the recorded regulatory agreement. The exemption is equal to 100% of the assessed value for the portion of the real property that is dedicated as low- and moderate -income rentals, If the entire property is dedicated, then the net taxable is zero but the property is still subject to the minimum tax per Section 19-90(e) of the Hawai`i County Code. The exemption shall continue so long as the rental housing project is owned and operated by a nonprofit or limited mortgagor. If the rental units do not comply with the regulatory conditions, the property would be subject to roll back taxes, including penalty and interest. Non Dedicated Agricultural Use Assessment — Section 19-57 of the Hawai`i County Code and Rule 34 of the Rules and Regulations of the Director of Finance reduces assessments to encourage local agricultural production as well as the preservation of agricultural lands that could otherwise be further developed, by valuing these lands at the at two times the dedicate agricultural use value as opposed to the market value. Unlike the Dedicated Agricultural Use program, the zoning for this program must be agricultural. An application form must be filed along with a plot plan and provide details as to what agricultural activities is conducted on the property. Upon review and approval, the application is effective as of January 1 for the following tax year. Renewal of the application shall be in such form and at such time as requested by the director. Valuation consideration is given to the type of agricultural activity. Any breach to the terms of would result in an immediate rollback calculation of current plus two yeas taxes plus penalties and interest. Commercial Agricultural Use Dedication — Section 19-60 of the Hawai`i County Code and Rule 31 of the Rules and Regulations of the Director of Finance provides reduced assessments to encourage local agricultural production as well as the preservation of agricultural lands that could otherwise be further developed, by valuing the dedicated lands at the agricultural use - 54 - COUNTY OF HAWAII Notes to the Basic Financial Statements June 30, 2017 value as opposed to the market value. An application form must be filed along with a plot plan and provide details as to what agricultural activities is conducted on the property. Upon review and approval, the owner is required to record the dedication at the Bureau of Conveyances. There is currently only one available dedication length which is a 10 year period, however, previously there was a 20 year dedication. This dedication does not automatically renew. Valuation consideration is given to the type of agricultural activity. Any breach to the terms of the recorded dedication would result in the cancellation of the dedication, or portion thereof, and the immediate rollback calculation of taxes plus penalties and interest. Solar Water Healer Credit- Section 19-104 of the Hawai 'i County Code provides a one time tax credit per tax map key for up to $300 for the owner of real property who installs a solar water heater on the owner's property on or after January 1, 2008. This program was created with the purpose of providing an incentive to support renewable energy. The owner must apply for the credit. Information relevant to the disclosure of these programs for the fiscal year ended June 30, 2017 is as follows: Tax Abatement Program Amount of Taxes Abated - as defined by GASB77 Enterprise Zone $12,912.08 Historic Residential Dedication $195,948.29 Low and Moderate Income Housing $515,925.00 Agricultural Use Programs $31'457,674.46 Solar Water Heater Credit $1,200.00 Inventories Inventories consist of materials and supplies and are reported as expenditures at the time of purchase (purchase method). Police and fire departmentinventories are stated using the first in, first out (FFO) method. Other inventories are stated at average cost. Liquor Control Section 281 of the Hawa`i Revised Statutes requires thaliquor license revenues collected be used only for costs and expenses directly relating to operational and administrative costs actually incurred by the liquor commission collecting such fees. The unexpended fees at June 30, 2017 of $425,488 are reflected as a restriction of general fund balance. - 55 - COUNTY OF HAWAII Notes to the Basic Financial Statements June 30, 2017 Capital Assets Capital assets, which include property, plant, equipment, and infrastructure assets (e.g., roads, bridges, curbs and gutters, streets and sidewalks, drainage systems, lighting systems, and similar items), are reported in the applicable governmental or business -type activities columns in the government -wide financial statements. Capital assets are defined by the County as assets with an initial, individual cost of more than $1,000 and an estimated useful life in excess of one year. Such assets are recorded at historical cost or estimated historical cost if purchased or constructed. Donated capital assets are recorded at acquisition value if available or if not, at estimated fair market value at the date of donation. The costs of normal maintenance and repairs that do not add to the value of the asset or materially extend the life of the asset are not capitalized. Major outlays for capital assets and improvements are capitalized as projects are constructed. Interest incurred during the construction phase of capital assets of business -type activities is included as part of the capitalized value of the assets constructed. Capital assets of the primary government and enterprise fund are depreciated using the straight-line method over the following estimated useful lives of the assets: Assets Years Infrastructure 20 to 100 years Buildings and improvements 50 to 100 years Ground and site improvements 20 to 50 years Equipment 5 to 40 years Easements Dependent on terms of easement agreement Deferred Outflows of Resources and Deferred Inflows of Resources Deferred outflows of resources represent a consumption of net position that applies to a future period and will not be recognized as an outflow of resources (expense or expenditure) until that time. The County has two items that qualifies for reporting in this category. The County reports the deferred loss on refunding and deferred outflow related to pensions as a deferred outflow of resources in its statement of net position. Deferred inflows of resources represent an acquisition of net position that applies to a future period and will not be recognized as an inflow of resources (revenue) until that time. Property taxes, fees and other non-exchange transactions received in the current fiscal year for the ensuing fiscal year are reported as deferred inflows of resources. These amounts are deferred and recognized as an inflow of resources in the period that the amounts become available. The County also reports deferred inflows of resources related to pensions. - 56 - COUNTY OF HAWAII Notes to the Basic Financial Statements June 30, 2017 Long-term Obligations The County reports long-term debt of governmental funds at face value on the government - wide statement of net position. Certain other governmental fund obligations not expected to be financed with current available resources are also reported on the government -wide statement of net position. Long-term debt and other obligations financed by the proprietary funds are reported as liabilities in those funds. Compensated Absences Employees earn vacation credit at the rate of one and three-quarter working days for each month of service. Up to ninety days of vacation leave credits can be accumulated per employee. In addition, employees who work overtime can elect to take compensatory time off instead of overtime pay. The time off is earned at the rate of one -and -a -half hours for each hour of overtime worked. There is no statutory limit to the amount of compensatory time off an employee can accumulate. Both compensatory time off and vacation credits are converted to pay upon termination of employment. A liability for these amounts is reported in the governmental funds only if they have matured, for example, as a result of employee resignations and retirements. All vacation and compensatory time off pay is accrued in the government -wide statement of net position along with the estimated liability for social security and Medicare taxes and employers' retirement contributions on those amounts. Sick leave accumulates without limit. Sick leave can be taken only in the event of illness and is not convertible to pay upon termination of employment; therefore there is no related liability. However, a County employee who retires or leaves government service in good standing with 60 days or more of unused sick leave is entitled to additional service credit in the Employees' Retirement System of the State of Hawai` i. Accumulated sick leave at June 30, 2017 totaled $77,165,000 for the primary government. Leases Leases transferring substantially all of the risks and benefits of ownership are recorded as capital leases; other leases are operating leases (see Note 8). Capital leases are recorded as capital asset additions at their estimated fair value at the inception of the lease and the related present value of the future minimum lease obligations is recorded as long-term debt. Operating lease expenditures and expenses are recognized when the lease obligation is paid. Pensions 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 the Employees' Retirement System of the State of Hawaii (ERS) and - 57 - COUNTY OF HAWAII Notes to the Basic Financial Statements June 30, 2017 additions to and deductions from ERS's fiduciary net position have been determined on the same basis as they are reported by ERS. 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. Operating Revenues and Expenses Revenues and expenses are distinguished between operating and nonoperating items for the proprietary funds. Operating revenues generally result from providing services in connection with the proprietary funds' principal ongoing operations. The principal operating revenues of the proprietary funds are fees charged to residents for rent and rental subsidies received from the federal government. Operating expenses include the costs associated with providing housing for tenants, such as utilities, lease rent, and maintenance and repairs; administrative expenses; and depreciation on capital assets. All revenues and expenses not meeting these definitions are reported as nonoperating revenues and expenses. Use of Estimates The preparation of the basic financial statements in conformity with G requires management to make estimates and assumptions that affect the reported amounts of assets, deferred outflows of resources, liabilities, and deferred inflows of resources, as well as disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues, expenditures, and other financing sources and uses during the reporting period. Actual results could differ from those estimates. Fund Balances When both restricted and unrestricted fund balances are available for use, it is the County's policy to use restricted fund balance first, then unrestricted fund balance. Furthermore, committed fund balances are reduced first, followed by assigned amounts, and then unassigned amounts when expenditures are incurred for purposes for which amounts in any of those unrestricted fund balance classifications can be used. The County reports the following classifications: Nonspendable Fund Balance — Nonspendable fund balances are amounts that cannot be spent because they are either not in spendable form, or, for legal or contractual reasons, must be kept intact. The County has inventory included in their nonspendable fund balance. Restricted Fund Balance — Constraints placed on the use of these resources are either externally imposed by creditors (such as through debt covenants), grantors, contributors - 58 - COUNTY OF HAWAII Notes to the Basic Financial Statements June 30, 2017 or other governments or are imposed by law (under the Hawai`i Revised Statutes or County of Hawai`i Charter). Committed Fund Balance — Committed Fund Balances are amounts that can only be used for specific purposes as a result of constraints imposed by the County Council via ordinances and the County Code and can only be undone via the same manner. The committed fund balance of the General Fund includes the portion of fund balance committed to budget stabilization. The budget stabilization portion is authorized under County Code §2-219 to §2-223 and additions are made via the County budget or subsequent budget amendments. The fund balance may only be used when there is a reduction in budgeted revenue and the director of finance determines that such use is necessary to prevent a reduction in the level of public services. Assigned Fund Balance —Assigned fund balances are amounts that are constrained by the County's intent as determined by the Mayor but are neither restricted nor committed. The County's only assigned fund balances are in the General Fund and Capital Projects Fund and the majority consists of the portion of fund balance that is intended to balance the subsequent year's budget, which is conveyed by the Mayor via his approval of allotment requests and his approval of the current year's fund balance amount to be included in the submittal for next year's annual budget ordinance. Unassigned Fund Balance — This is the residual classification of the General Fund. The General Fund is the only fund that could potentially report a positive unassigned fund balance. Net Position When both restricted and unrestricted net position are available for use, it is the County's policy to use restricted net position first, and then unrestricted net position. New Accounting Pronouncements In June 2015, GASB issued Statement No. 73, Accounting and Financial Reporting for Pensions and Related Assets That Are Not within the Scope of GASB Statement 68, and Amendments to Certain Provisions of GASB Statements 67 and 68. The objectives of this Statement include improving the usefulness of information for decisions made by the various users of the general purpose external financial reports of governments whose employees — both active and inactive employees — are provided with pensions that are not within the scope of Statement No. 68, Accounting and Financial Reporting for Pensions, as amended and clarifying the application of certain provisions of Statement No. 67, Financial Reporting for Pension Plans, and Statement No. 68. Requirements of this Statement which are effective for the periods beginning after June 15, 2015 have either been implemented or have no impact on the County's financial statements as of and for the year ended June 30, 2016. For - 59 - COUNTY OF HAWAII Notes to the Basic Financial Statements June 30, 2017 requirements of this Statement which are effective for periods beginning after June 15, 2016, the County implemented these requirements as of and for the fiscal year ended June 30, 2017. In June 2015, GASB issued Statement No. 74, Financial Reporting for Postemployment Benefit Plans Other Than Pension Plans. The objective of this Statement is to improve the usefulness of information about postemployment benefits other than pensions (other postemployment benefits or OPEB) included in the general purpose external financial reports of state and local governmental OPEB plans for making decisions and assessing accountability. The requirements of this Statement are effective for the County for periods beginning after June 15, 2016 and did not have an impact on the County's financials for the year ending June 30, 2017. In June 2015, GASB issued Statement No. 75, Accounting and Financial Reporting for Postemployment Benefits Other Than Pensions. The primary objective of this Statement is to improve accounting and financial reporting by state and local governments for postemployment benefits other than pensions (other postemployment benefits or OPEB). The requirements of this Statement are effective for the County for periods beginning after June 15, 2017. The County has not yet determined the effect this Statement will have on its financial statements. In December 2015, GASB issued Statement No. 78, Pensions Provided through Certain Multiple -Employer Defined Benefit Pension Plans. The objective of this Statement is to address a practice issue regarding the scope and applicability of Statement No. 68, Accounting and Financial Reporting for Pensions. The requirements of this Statement are effective for reporting periods beginning after December 15, 2015 and did not have an impact on the County's financials for the year ending June 30, 2017. In January 2016, GASB issued Statement No. 80, Blending Requirements for Certain Component Units. The objective of this Statement is to improve financial reporting by clarifying the financial statement presentation requirements for certain component units. The requirements of this Statement are effective for reporting periods beginning after June 15, 2016 and did not have an impact on the County's financials for the year ending June 30, 2017. In March 2016, GASB issued Statement No. 81, Irrevocable Split -Interest Agreements. The objective of this Statement is to improve accounting and financial reporting for irrevocable split -interest agreement by providing recognition and measurement guidance for situations in which a government is a beneficiary of the agreement. The requirements of this Statement are effective for financial statements for periods beginning after December 15, 2016 and did not have an impact on the County's financials for the year ending June 30, 2017. In March 2016, GASB issued Statement No. 82, Pension Issues. The objective of this Statement is to improve consistency in the application of pension accounting and financial reporting requirements by addressing certain issues that have been raised with respect to previously issued Statements. The requirements of this Statement are effective for reporting - 60 - COUNTY OF HAWAII Notes to the Basic Financial Statements June 30, 2017 periods beginning after June 15, 2016 except that the requirements for the selection of assumptions in which an employer's pension liability is measured as of a date other than the employer's most recent fiscal year-end is effective in the first reporting period in which the measurement date of the pension liability is on or after June 15, 2017, The County implemented these requirements as of and for the fiscal year ended June 30, 2017. In November 2016, GASB issued Statement No. 83, Certain Asset Retirement Obligations. The objective of this Statement is to provide financial statement users with information about asset retirement obligations (AROs). The requirements of this Statement are effective for reporting periods beginning after June 15, 2018. The County has not yet determined the effect this Statement will have on its financial statements. In January 2017, GASB issued Statement No. 84, Fiduciary Activities. The principal objective of this Statement is to enhance the consistency and comparability fiduciary activity reporting by state and local governments. The requirements of this Statement are effective for reporting periods beginning after December 15, 2018. The County has not yet determined the effect this Statement will have on its financial statements. In March 2017, GASB issued Statement No. 85, Omnibus 2017. The objective of this Statement is to improve consistency in accounting and financial reporting by addressing practice issues that have been identified during implementation and application of certain GASB Statements. The requirements of this Statement are effective for reporting periods beginning after June 15, 2017. The County has not yet determined the effect this Statement will have on its financial statements. In May 2017, GASB issued Statement No. 86, Certain Debt Extinguishment Issues. The objective of this Statement is to improve consistency in accounting and financial reporting for certain debt extinguishments and to enhance the decision -usefulness of that information. The requirements of this Statement are effective for reporting periods beginning after June 15, 2017. The County has not yet determined the effect this Statement will have on its financial statements. In June 2017, GASB issued Statement No. 87, Leases. The objective of this Statement is to better meet the information needs of financial statement users by improving accounting and financial reporting for leases by governments. The requirements of this Statement are effective for reporting periods beginning after December 15, 2019. The County has not yet determined the effect this Statement will have on its financial statements. Adoption of New Accounting Principles The County and Department have adopted certain requirements of GASB Statement No. 82, Pension Issues an amendment of GASB Statements No. 67, No. 68, and No. 73 (GASBS 82), which are effective for reporting periods beginning after June 15, 2016. The adoption of GASBS 82 resulted in the reclassification of payments made by the County and Department to - 61 - COUNTY OF HAWAII Notes to the Basic Financial Statements June 30, 2017 satisfy employee (plan member) contribution requirements that were previously deferred in the period for which the contributions were assessed and recorded as expenses in the subsequent fiscal year. These changes have been applied retroactively by restating the beginning net position as of June 30, 2016. The effect for the fiscal year ended June 30, 2016 was a decrease to the change in net position of $833,884 for governmental activities and $3,406 for the component unit and a decrease in deferred outflows of resources related to pensions and ending net position by approximately $13,164,446 for governmental activities and $417,718 for the component unit. The County also adopted certain requirements of GASB Statement No. 73, Accounting and Financial Reporting for Pensions and Related Assets That Are Nat within the Scope of GASB Statement 68, and Amendments to Certain Provisions of GASB Statements 67 and 68 (GASBS 73), which extends the approach to accounting and financial reporting established in Statement 68 to all pensions. These changes have been applied retroactively by restating the beginning net position as of June 30, 2017. For the fiscal year ended June 30, 2017, the effect of the change reduced beginning net position by $1,261,229. Management of the County concluded that it was not practical to determine the amounts of all applicable deferred outflows of resources and deferred inflows of resources related to pensions. Accordingly, as permitted under the provisions of GASBS 73, the restatement of beginning net position did not include deferred inflows of resources or deferred outflows of resources. The combined impact on beginning net position due to adoption of both GASBS is summarized as follows: Net Position at June 30, 2016, as previously stated Prior period restatement: Employer paid employee contributions made subsequent to the measurement date Pension liability due to implementation of GASB 73 Net Position at June 30, 2016, as restated - 62 - Governmental Activities Component Unit $ 510,032,175 $ 247,783,630 (13,164,446) (417,718) (1,261,229) * ,5110 $ 247 365 912 COUNTY OF HAWAI'I Notes to the Basic Financial Statements June 30, 2017 2. STEW 9 Annual Budget CO CE ACCOUNTABILITY The County follows these procedures in establishing its operating and capital budgets: On or before March 1, the Mayor submits to the County Council poperating and capital pjects budgets for the fiscal year commencing the following July 1. The operating budget includes proposed expenditures for the general fund and special revenue funds, and the means of financing them. A prject-length budget is submitted to the County Council for the capital prjects fund. The Mayor submits to the County Council amendments to the proposed operating and capital budgets within ten working days after the close of the state legislature, b/k not � The County Council conductpublic hearings on the proposed operating and capita budgets after March 1 but priorb»deDrstrcudingontbchudgetbiUx,whichmmtbc after May 5. On or before June 30, the County Council adopts the budget . The legalevel of budgetary control is the department|eve)because the Mayor can transfer funds from any unencumbered appropriation to another within a department or agency without County Council approval. During the year, the budget may be amended by action of the County Council, except for appropriations required by law and appropriations for debt service, which may not be decreased or deleted. Supplemental appropriations were made during the 2016-2017 fiscal year to recognize revenue from sources not anticipated at the time of the original budget and to establish the authorization for such funds to be expended. Such supplemental appropriations totaled $7.7 million in the general fund and $3.3 million in the special revenue funds. Legally adopted budgets include the General Fund, Highway Fund, Sewer Fund, Solid Waste Fund, Cemetery Fund, Parking Meter Fund, Vehicle Disposal Fund, Bikeway Fund, Workforce Investment Act Fund, Golf Course Fund, Geothermal Relocation and Community Benefits Fund, Beautification Fund, Hawaii County Housing Agency Fund and Park Dedication Fund. Appropriations for the operating budget lapse at the end of the fiscal year to the extent that they have not been expended or encumbered. Aiations for capital expenditures thaare not encumbered lapse at the end of two fiscal years following the fiscal year that the appropriation was made. Formal is employed as a management controdevice du ' the year for the GeneraFund, special revenue funds, and Capital Projects Fund. Formal budgetary integration is not employed for debt service funds because effective budgetary control is alternatively achieved through general obligation bond indenture provisions. COUNTY OF HAWAI`I Notes to the Basic Financial Statements June 30, 2017 The accompanying statement of revenues, expenditures and changes in fund balances budget and actual (budgetary basis) for the General Fund presents a comparison of the legally adopted budget with actual data on a budgetary basis. Accounting principles applied for purposes of developing data on a budgetary basis differ significantly from those used to present financial statements in conformity with GAAP. On the budgetary basis, intergovernmental revenues are recognized when awarded by the granting agency, encumbrances and unexpended allotments are treated as expenditures, accounts payable are not accrued, and all leases are treated as operating leases. In preparing the financial statements on a GAAP basis, accounts payable are accrued and treated as a reduction of encumbrances for balance sheet presentation. Budget to GAAP Reconciliation The following is a summary of the adjustments necessary to convert fund balances of the County's General Fund from a GAAP basis to a budgetary basis at June 30, 2017: Ending fund balance — GAAP basis $47,746,958 Encumbrance adjustments: Beginning encumbrances and unexpended allotments 3,291,302 Ending encumbrances and unexpended allotments (1,203,398) Other adjustments (5,389,647) Ending fund balance — Non -GAAP budgetary basis 3. CASH AND INVEST NTS $4,445,215 The Director of Finance is responsible for the safekeeping of all monies paid to the County. The Director of Finance invests any monies of the County which in the Director's judgment are in excess of the amounts necessary for meeting the day-to-day operating needs of the County. Under Section 46-50 of the Hawai`i Revised Statutes, legally authorized investments include obligations of or guaranteed by the U.S. government, obligations of the State, federally insured savings and checking accounts, time certificates of deposit, and repurchase agreements with federally insured financial institutions. Cash The County maintains a number of checking and savings accounts for various funds and with various financial institutions. Bank deposits are under the custody of the Director of Finance. For financial statement reporting purposes, cash and short-term investments consist of cash and money market accounts. Cash and short-term investments also include repurchase agreements, certificates of deposit, and government sponsored securities with original maturities of three months or less. - 64 - COUNTY OF HAWAI'I Notes to the Basic Financial Statements June 30, 2017 The carrying amount of the County's deposits (cash, time certificates of deposit, and money market accounts) aoofJuno3O,2Ol7was $|02,729.005for the primarygovonnmeutund $5,784,904 for the fiduciary funds. Information relating to bank balance, insurance and collateraof cash deposits is determined on a county -wide basis. Total bank balances of deposits for the primary government and fiduciary funds amounted to $177,731,495 at June 30, 2017. Of that amount, $177,322.265 represents bank balances covered by federal deposit insurance or by collateral held by the County's fiscal agents in the name of the County. The remaining bank balances of $409,230 represent deposits held by a management agent and were uncollateralized. Accordingly, these deposits were exposed to custodial credit risk. Custodial credit risk is the risk that in the event of a bank failure, the County's deposits may not be returned to it. For checking and savings accounts, time certificates of deposit, and repurchase agreements, the County requires, in accordance with State statutes, that the depository banks pledge collateral based on the available bank balances for the protection of the funds deposited. All securities pledged as collateral are held by the County's fiscal agents in the name of the County. The County also requires that no more than 60% of the County's total funds available for deposit may be deposited in any one financial institution, in accordance with State statutes. Investments The County holds investments both for its own benefit and on behalf of some of the fiduciary funds. The County's investments of funds not required for immediate payments are predominately comprised of government sponsored securities (equivalent to the rating in U.S. Treasuries), repurchase agreements and certificates of deposit, while the fiduciary funds also hold equity securities. The framework for measuring fair value provides a fair value hierarchy that prioritizesthe inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (level 1) and the lowest priorityto unobservable inputs (level 3). The three levels of the fair value hierarchy are described as follows: Level l—Ioputxurequotoj prices(unabumted)inuchveoarketsfbrideodcoJuanetoor liabilities that a government can access at the measurement date. An active market is a market in which transactions for the asset or liability take place with sufficient frequency and volume to provide pricing information on an ongoing basis. Level 2 — Inputs other than quoted pricesinc|uded within level 1 that are observable for an asset or liability, either directly or indirectly. If the asset or liability has a specified (contractual) term, a level 2 input must be observable for mosof the full term of the asset or liability. Level 2 inputs include: Quoted prices for similar assets or liabilities in active markets, - 65 - COUNTY OF HAWAI`I Notes to the Basic Financial Statements June 30, 2017 • Quoted prices for identical assets or liabilities in markets that are not active, • Inputs other than quoted prices that are observable for the asset or liability, • Inputs that are derived principally from or corroborated by observable market data by correlation or other means. Level 3 — Inputs are observable for an asset or liability. Following is a description of the valuation techniques used by the County to measure fair value: Government sponsored securities of $17,638,965 and certificates of deposits of $58,230,282: Valued using quoted prices for identical or similar assets in markets that are not active (Level 2). Equity securities of $1,546,763: Valued using quoted prices in active markets for identical assets or liabilities that a government can access at the measurement date (Level 1). The County's investments and maturities at June 30, 2017 are as follows: Investments — Primary Government: Certificates of deposit Government sponsored securities Investments — Private -Purpose Trusts: Government sponsored securities Equity securities Investments — Agency Funds: Certificates of deposit Government sponsored securities Fair Value $ 57,977,347 15,927,442 $ 73,904 789 Maturity (in years) Less than 1 1 — 5 $ 52,899,419 4,753,414 $ 57,652,833 $ 5,077,928 11,174,028 $16,251 956 $ 1.543,528 $ $ 1,543 528 $ 1.546,7U $ 252,935 $ 167,995 $ 420,930 $ $ 252,935 167,995 I Interest Rate Risk: The County minimizes its exposure to interest rate risk by limiting the maturities of investments to five years or less in compliance with state statute. The County's policy is to hold investments until maturity and does not engage in trading for capital gains. Credit Risk: The County's investment portfolio primarily consists of U.S. government or agency obligations, bonds of government sponsored enterprises, time certificates of deposit and repurchase agreements. These investments are either insured by the FDIC, secured by collateral or c a credit rating equivalent to U.S. Treasuries. - 66 - COUNTY OF HAWAII Notes to the Basic Financial Statements June 30, 2017 Custodial Risk: Custodial risk is the risk of loss from the failure of the counterparty, which is defined as any entity that obtained an investment on behalf of the County. All of the County's deposits including repurchase agreements are secured by collateral which is kept by a third party custodian. Broker-dealers utilized by the County are members of the Securities Investor Protection Corporation, and all investment securities are held in the County's name. Concentration of Credit Risk: State law limits deposits to no more than 60% of the total in any one depository. The County seeks to further diversify its portfolio by purchasing from different issuers, by purchasing different types of investments and by purchasing investments at different maturities. The County also purchases its investments from a number of banks and broker-dealers both located locally and on the mainland. As of June 30, 2017, investments were distributed as follows: FTN Financial, 5.9%; Multi Bank Securities, 26.0%; First Hawaiian Bank, 33.3%; Raymond James, 2.6%; Territorial Savings Bank, 19.0%; Central Pacific Bank, 13.2%. Restricted Cash and Cash Equivalents and Investments Cash and cash equivalents and investments classified as restricted assets for the primary government at June 30, 2017 amounted to $91,022,295. Construction related contributions restricted to various capital improvement projects and fuel tax funds received are recorded as restricted assets in the Capital Projects Fund. Such funds totaled $37,439,837 at June 30, 2017. Cash and investments in the Bond Redemption Fund and the Interest Fund are restricted to debt service related payments and amounted to $27,053,888. Cash in the Highway Fund, Bikeway Fund and Beautification Fund are restricted to costs incurred relating to highways and streets and the beautification of such items and amounted to $9,226,574. Cash in the Hawaii County Housing Agency is restricted to providing public housing assistance and amounted to $1,885,925. The restricted cash and investments in the General Fund was comprised of cash restricted to costs incurred to administer the liquor commission and cash restricted to the acquisition and maintenance of lands or property entitlements for public outdoor recreation and education. Such amounts totaled $425,488 and $14,876,589, respectively. Tenant security deposits received by the County for the Kula`imano Elderly Housing Project and the Ouli Ekahi Affordable Housing Project are recorded as restricted assets. Such funds amounted to $11,863 and $29,487, respectively, at June 30, 2017. - 67 - COUNTY OF HAWAII Notes to the Basic Financial Statements June 30, 2017 An operating reserve fund was established by the Ouli Ekahi Affordable Housing Project pursuant to an agreement with the Hawaii Housing Finance and Development Corporation, who are the holders of the project's note. This restricted reserve amounted to $72,644 at June 30, 2017. 4. RECEIVABLES Receivables as of June 30, 2017, for the County's individual major funds and other funds in the aggregate, including the applicable allowances for uncollectible accounts, are as follows: Governmental activities: General Fund Real property taxes $25,670,969 Accounts receivable: Sewer Solid waste Capital projects Intergovernmental 13,586,271 Gross receivables 39,257,240 Less: allowance for uncollectibles (2,642,248) Net total receivables V6,61_4,922 S. .6,603,862 Capital Projects Fund 790,665 5,813,197 Other Governmental Funds $ 1,975,876 1,339,556 1,996,606 6,603,862 5,312,038 (818,766) 4A9. 12 Total $25,670,969 1,975,876 1,339,556 790,665 21,396,074 51,173,140 (3,461,014) $47,71_2,12.6 During fiscal year 2005, the County issued $3,887,493 in general obligation bonds on behalf of Improvement District No. 18, an agency fund. On February 12, 2013 bonds were issued to refund the outstanding principal balance of $1,345,945 for the Improvement District. During fiscal year 2014 and 2015, the County also issued $448,669 and $720,331, respectively, in general obligation bonds on behalf of Improvement District No. 19, an agency fund. At June 30, 2017, the outstanding balance for both Improvement Districts of $2,197,435 is reflected in the government -wide statement of net position as a receivable (see Note 10). Business -type activities: Accounts receivable: Rent Other Gross receivables Less: allowance for uncollectibles Net total receivables Enterprise Funds $11,733 701 12,434 (8,407) 4,023 - 68 - COUNTY OF HAWAII Notes to the Basic Financial Statements June 30, 2017 5. INTERFUND RECEIVABLES AND PAYABLES Interfund receivables and payables consist of the following at June 30, 2017: Receivable Fund Payable Fund Amount General fund Capital projects fund $ 478,843 Other governmental funds 1,428.411 1,907,254 Capital projects fund General fund 338,999 Other governmental funds 601,275 940,274 Other governmental funds General fund 202,461 Other governmental funds 187.533 3 89.994 Total $3.237.5? Other governmental funds Enterprise funds $1,35Q The above interfund balances result from the time lag between the dates that interfund goods and services are provided or reimbursable expenditures occur, transactions are recorded, and payment between funds are made. Transfers for the fiscal year ended June 30, 2017 consisted of the following: Transfers out: Other General Governmental Fund Funds Total Transfers in: Capital Projects Fund $ 44,699 $3,952,825 $ 3,997,524 Bond redemption fund 23,730,661 - 23,730,661 Other governmental funds 39,135,706 -- 39,135,706 $62,911,066 The interfund transfers noted above include transfers from the General Fund to provide support for various County programs and to provide resources for the payment of debt services. In addition, some of the other governmental funds have made transfers to the capital projects fund for the construction of various projects. - 69 - COUNTY OF HAWAII Notes to the Basic Financial Statements June 30, 2017 6. CAPITAL ASSETS Capital asset activity for the year ended June 30, 2017 for the County was as follows: Balance July 1, 2016 Governmental activities: Capital assets not being depreciated: Additions Balance Retirements/ June 30, Transfers 2017 Land and improvements $ 233,498,340 $ 5,689,551 $ -- $ 239,187,891 Easements 4,170,517 56,541 4,227,058 Construction work in progress 124,212,163 95,642,058 (148,736,019) 71,118,202 Total capital assets not being depreciated 361,881,020 101,388,150 (148,736,019) 314,533,151 Capital assets being depreciated: Buildings and improvements 610,381,599 103,966,870 (304,439) 714,044,030 Equipment 152,329,637 10,369,924 (7,089,789) 155,609,772 Easements 439,300 17,197 456,497 Infrastructure 572,990,504 46,845,712 - 619,836 216 Total capital assets being depreciated 1 336,141,040 161,199,703 (7,394,228) 1,489,946,515 Less accumulated depreciation for: Buildings and improvements (105,764,055) (10,399,070) 107,081 (116,056,044) Equipment (92,418,885) (9,455,080) 6,454,969 (95,418,996) Easements (439,300) - (439,300) Infrastructure (265,762,527) (25,155,704) (290,918,231) Total accumulated depreciation (464,384,767) (45,009,854) 6 562 050 (502,832,571) Total capital assets being depreciated, net 871,756,273 116,189,840 (832,178) 987,113,944 Governmental activities capital assets, net * ' $ 217, 2 b' * $1 301,647,095 - 70 - COUNTY OF HAWAI'I Notes to the Basic Financial Statements June 30, 2017 Balance Balance July 1, Retirements/ June 30, 2016 Additions Transfers 2017 Business -type activities: Capital assets not being depreciated: Land $ 753,877 $ 753,877 Capital assets being depreciated: Buildings and improvements Ground and site improvements Equipment Total capital assets being depreciated 1,593,187 272,850 134,776 2,000,813 6,803 Less accumulated depreciation for: 1,593,187 272,850 137,950 (3,629) 2,003,987 Buildings and improvements (946,647) (36.042) (982,689) Ground and site improvements (210/510) (4.347) (214,957) Equipment (102,]80) (12,526) 3,629 (111.277) Total accumulated Depreciation (1,259,637) (52,915) 3,629 (1,308,923) Total capital assets being depreciated, net Business -type activities capital assets, net 741,176 49 N0`112> 895,064 S(46]�� $ $1,448,941 - 71 - COUNTY OF HAWAPI Notes to the Basic Financial Statements June 30, 2017 Depreciation expense was charged to functiof the primary government as follows: Governmental activities: General government Public safety Highways and streets Sanitation Health, education and welfare Culture and recreation Total depreciation expense — governmental activities Business -type activities: Kula' imano Elderly Housing Project Ouli Ekahi Affordable Housing Pjcct Total depreciation expense — business -type activities 7. DEF0" D INFLOW OF RESOURCES $ 2,898,703 4,489,032 27,064,560 5,803,169 2,074,356 2,605.O]4 �450�9854 $35,687 17,228 —$12,9|5 Deferred inflow of resources consists of the following at June 30, 201 7: Governmental activities: Real property taxes Liquor control revenue Sewer revenue Housing revenue Solid waste revenue General Fund $245U5,648 $ 190,535 Total presented in fund financial statements 24'696,183 Add deferred inflows of resources related to pensions 12'583,038 Less adjustments for accrual of revenues (23'028.721) Total government - wide financial overnment-v,idcfinuncia| statements $ 14,250,5Q0 Capital Projects Fund - 72 - Bond Redemption Fund � Other Governmental Funds 1,235,896 29,718 1,260,770 2,526,384 Total Governmental Funds $ 24,505,648 190,535 1,235,896 29,718 |,260`77U 27,222,567 -- 12,583,038 (2_526,384) (25,555`105) COUNTY OF HAWAII Notes to the Basic Financial Statements June 30, 2017 LEASES The County leases machinery and equipment under noncancellable leases expiring at various dates through February 2022. These capital leases are financed from the resources of various funds. The estimated value of the leased machinery and equipment at the inception of the capital leases and accumulated depreciation, amounting to $10,441,877 and $1,729,701, respectively, and the related present value of the remaining obligations under the capital leases amounting to $6,565,580 at June 30, 2017 are included in capital assets and long-term debt, respectively. The County also leases land, office facilities and other equipment under noncancellable operating leases expiring through August 2045. Expenditures for such operating leases were $1,941,297 for the fiscal year ended June 30, 2017, The future minimum payments under capital and operating leases at June 30, 2017 are as follows: Year Ending June 30: 2018 2019 2020 2021 2022 2023 - 2027 2028 - 2032 2033 - 2037 2038 - 2042 2043 - 2047 Total minimum lease payments Less amount representing interest Obligations under capital leases Capital Operating Leases Leases $2,106,484 $1,734,554 1,819,727 730,079 1,513,150 611,071 1,146,408 484,670 236,936 374,651 -- 710,256 -- 32,480 -- 900 900 - 570 6,822,705 $4,680,131 (257,125) $6,565,580 9. SOLID WASTE L FILL CLOSURE AND POSTCLOS CARE COSTS Hilo Landfill The County owns and operates a landfill located in the city of Hilo. State and federal laws require the County to place covers on certain landfill sites and to monitor and maintain the sites for thirty years after the facility is closed. Although the closure and postclosure care costs will be paid near and after the date that the landfill stops accepting waste, the County recognizes a portion of the closure and postclosure care costs in each operating period. The liability for these costs is included in the government -wide statement of net position. The amount recognized each year is based on the landfill capacity used as of the - 73 - COUNTY OF HAWAI'1 Notes to the Basic Financial Statements June 30, 2017 statement of net position dat. At June 30, 2017, the County recognized a liabiliof $21,321,000, based on the use of 95% of the estimated capacity of the landfill. During the fiscal year ended June 30, 2017, there was $215,000 in expenditures incurred for the closure of the landfill. The remaining $1,194,000 in estimated cost of closure and postclosure care will be recognized as the remaining estimated capacity is used. The estimated remaining useful life of the landfill is approximately one year. These amounts are based on what it would cost to perform the required closure and postclosure care in 2017. Actual costs at that time may be higher due to inflation, changes in technology, or changes in regulations. Landfill capacity estimates are based on volumes going into the landfill subsequenttodhu last available engineer's calculation. The volumes going into the landfill do not account for decomposition, settlement, and corrosion; therefore the estimates are revised when new engineering calculations, based on aerial photos and surveys, are available. The County's permit to operate the landfill expired October 9, 1998. The County filed for an extension which was approved by the State until permitted capacity is reached. In accordance with state statute, the County is allowed to continue operations provided that the County acts consistently with the permit previously granted and the extension application, plans, specifications and all other information contained therein. Kealakehe In October 1993, the County closed its Kealakehe landfill in Kona. Under state and federal requirements, the County would have to monitor and maintain this site for ten years from the closure date. However, the County anticipates monitoring and maintaining the site for thirty years because there is presently a subterranean fire which requires active management. The estimated cost of closure and postclosure is $16,850,000, based on what it would cost to perform the required closure and postclosure care in 2017. Actual costs may be higher due to inflation, changes in technology, or changes in regulations. Through June 30, 2017, $8,648,000 was spent on closure and postclosure care of the landfill. The remaining estimated liability of $8,202,000 is included in the government -wide statement of net position. During the year ended June 30, 2017, $101,000 was spent on closure of the landfill. The County is providing financial assurance for postclosure care and remediation through self insurance as explained below. Pu'uumohu{u In May 1993, the County contracted with a private company to construcand operate a new landfill on County land at Pu'uanahulu in VVestHmwui^i. The present contract calls for County employees to perform the daily operations of the landfill, and for the private company to retain the overall management as well as perform all construction work on the landfill cells. Under the ternis of the contract, the County has no responsibility for remediation, closure or postclosure care. Accordingly, no liability for this landfill is included in the County's financial statements. COUNTY OF HAWAI'I Notes to the Basic Financial Statements June 30, 2017 Financial Assurance For fiscayear 2017, the County has provided for financial resources that will be available to provide for closure, postclosure care and remediation or containment of environmental hazards at the above landfills, except Pu'uanahulu. The Environmental Protection Agency's financial assurance rules include a local government financial test consisting of a financial component, a public notice component, and a recordkeeping component. Local governments are required to satisfy each of the three components to pass the annual test. Management believes that the County has satisfied each of the components of the local government financial assurance requirements. Infiscal year 2Ol],the County closed its two metal salvage facilities located near the Hilo and Kealakehe Transfer Stations, State law requires the County to perform necessary closure activities, including, but not limited to, the removal of all remaining solid waste and performing appropriate site assessments and remedial activities. The estimated liability ($15,542,639) for the remediation costs associated with these closures is included in the County's financial statements and is based on closure plans prepared by a science and engineering consultant contracted by the County, and the current value of costs expected to be incurred. The liability could change over time due to inflation or deflation, changes in technology, or changes in laws and regulations governing the remediation effort. 10. LONG -TE DEBT General ObligationBoodu The County issues general obligation bonds to provide funds for the acquisition and construction of major capital facilities. These bonds have been issued by the County for the primary government, component unit activities (see Note 14) and an improycmcntdiytrict. The 2010 Series B bonds were issued as "Recovery Zone Economic Development Bonds" under the American Recovery and Reinvestment Actof 2009. The County will receive a cash subsidy payment from the United States Treasury equal to 45% of the interest payable on the Series B bonds. The foll' is a summary of general obliion bond transactions reported in the governmental activities section of the government -wide statement of net position for the County for the fiscal year ended June 30, 2017: - 75 - COUNTY OF HAWAII Notes to the Basic Financial Statements June 30, 2017 Bonds Issue Bond Balance Authorized Amount July 1, 2016 2006 Series A $ 25,000,000 $ 1,180,000 $ 2007 Series A 85,000,000 7,920,000 2007 Series B 20,820,000 7,250,000 2007 Series C 10,787,388 6473,085 2008 Series A 50,000,000 6.835,000 2010 Series A 26,493,750 5,448,750 2010 Series B 18.506,250 16,878,750 2013 Series A 58,509,892 53,092,192 2013 Series B 21,010,000 17,515,000 2013 Series C 18,470,000 16,950,000 2013 PI Series A 1,169,000 1,147,782 2016 Series A 99,620,000 99,620,000 2016 Series B 13,497,500 13,497,500 2016 Series C 44,835,000 44,835,000 2016 Series D 28,860,000 28,860,000 2016 Series E 19,061.250 19,061,250 2016 Series F 10,040,000 10 040 000 551,680,030 356,604,309 Add unamortized premium 68,714,005 57,382.003 Issues Bond Balance Due Within Retirements June 30 2017 One Year (5 1,180,000) (3,865,000) 4,055,000 4,055,000 (2,300,000) 4,950,000 2,415,000 (968,517) 5,504,568 1,007,649 (2,160,000) 4,675,000 2,280,000 (1,271,250) 4,177,500 1,335,000 (858,750) 16,020,000 896,250 (2,003,939) 51,088,253 2,105,749 (1,860,000) 15,655,000 1,950,000 (1,585,000) 15,365,000 1,655,000 (21,801) 1,125,981 22,401 99,620,000 13.497,500 1,100,000 44,835,000 28,860,000 19,061,250 10,040,900 3 305 000 (18,074,257) 338,530,052 22,127,049 (4331.1311 53,050.872 4,238 994 51/20-39.4..0L15 .4.11.946-3_12 _1322-4.05 a9 1,580,924 SZLattiaza General obligation bonds payable reported in the governmental activities section on the government -wide statement of net position at June 30, 2017 are comprised of the following individual issues: Public improvement (P1) and/or refunding bonds: 2007 Series A at 4.0% to 5.0%, due through 2017 2007 Series B at 3.75% to 5.0%, due through 2018 2007 Series C at 4.0% to 5.0%, due through 2021 2008 Series A at 4.0% to 6.0%, due through 2018 2010 Series A at 4.0% to 5.0%, due through 2020 2010 Series B at 3.335% to 6.1%, due through 2030 2013 Series A at 2.0% to 5.0%, due through 2032 2013 Series B at 3.0% to 5.0%, due through 2023 2013 Series C at 4.0% to 5.0%, due through 2024 2013 P1 Series A at 2.75%, due through 2048 2016 Series A at 3.0% to 5.0%, due through 2035 2016 Refunding Series B at 3.0% to 5.0%, due through 2026 2016 Refunding Series C at 5.0%, due through 2027 2016 Refunding Series Dat 5.0%, due through 2028 2016 Refunding Series Eat 2.0% to 5.0%, due through 2029 2016 Taxable Series F at 1.2% to 1,55%, due through 2019 4,055,000 4,950,000 5,504,568 4,675,000 4,177,500 16,020,000 51,088,253 15,655,000 15,365,000 1,125,981 99,620,000 13,497,500 44,835,000 28,860,000 19,061,250 10.040,000 Total general obligation bonds payable $3, 530 *52 - 76 - COUNTY OF HAWAII Notes to the Basic FinanciaStatements June 30, 2017 Annual debt service requirements to maturity for the above general obligation bonds are as follows: Fiscal year ending June 30: 2018 2019 2020 2021 2022 2023 — 2027 2028 — 2032 2O33 -2O37 2U]8 -2O42 2043 — 2047 2048-2U49 Total Refunded Bonds Governmental Activities Principal Interest $ 22,127,049 22,353,209 20,4O9,4|O 22,027,709 Z],|O6.O84 1)4,0]3,221 76,581,464 ]7,352.76) 203,585 233,161 102,399 �B��JI�� $ 14,976,644 14,427,860 13,558,568 12,598,376 11,518,385 40,833,056 16,293,935 2,825,693 60,439 30,457 2,835 In periods prior prior to the year ended June 30, 201 7, the County defeased certain general obligation bonds by placing the proceeds of new bonds in irrevocable trusts to provide for all future debt service payments on the old bonds. Accordingly, the trust account assets and the liability for the defeased bonds are not included in the County's financial statements. As of June 30, 2017, approximately $102.6 million of bonds outstanding were considered defeased. Bond Premiums At June 30, 2017, totaunamortized bond premiums were $53,050,872, which are being amortized over the remaining life of the respective bond issues. Bonds Authorized and Unissued The County Council has authorized the issuance of $487.9 million in general obligation bonds to finance both specified and unspecified capital improvement pj*cts. At June 30, 2017, $233.2 million was not yet issued. Subsequent Events On July 6,2U|7.the County issued utotal of $139,895,000 in general obligation bonds. The interest rates range from 3.0% tol[%.The bonds are due through 2037. The bonds were authorized as noted above. On November 15, 2017, the County Council authorized the issuance of $2,437,000 in general obligation bonds for the County to finance specified capital improvement projects. The Improvement District is responsible for the payment of the debt service on - 77 - COUNTY OF HAWAI'I Notes to the Basic Financial Statements June 30, 2017 these bonds, but the County remains liable because they argeneral obligations of the County. General Obligation Bond Anticipation Notes The following is a summary of general obligation bond anticipation note transactions reported in the government -wide statement of net assets for the County for the fiscal year ended June 30, 2017: Issue Balance ao_tL,mo, Amount LW),/.zo/6 Issues Series C, Note R- I $ I 5,000,000 S — $ /5.000,000 Series C, Note R-2 8,000,000 — 8,000,000 Series C, Note R-3 2,00 0,000 — 2,000,00 Series C, Note R-4 5,00/00 5.000/00 Series c.Note u'5 5.000.000 5,000.000 Series c.wmz+-6 5.000,000 — 5,000,00 Series C, Note R-7 /.000,000 — 1/000,00 Series C, Note R-8 /.000,000 1,000,000 Series c.Note u'p 1,000,000 1,000,000 Series r.Note x'/n 1,000,000 |.00u.onn Series c.Note u'|1 500,000 500/00 Series C, Note R-12 500,000 500,000 Series c.Note n'|3 10,00 0,000 10,000,000 Series C, Note R -I4 4.800,00*,800,00 Series c.Note n'/5 15.000,000 |5,0u ,00 Series c.Note n -/a 8,000,000 8.000,000 Series c.Note n')7 2,000,000 2,000.000 Series c.Note x'|o 5,000,000 — 5,000,000 Series r.Note n'|9 10,000,000 10,000,000 Series C, Note R-20 *.8(0{QQ8 - 4�00,000 $104.600800 $104 60()..20.12 State Revolving Fund Loans Balance Retirements June s0,zu// m/5,0oumm) x (8,000,000) (2,000,000) (5,000,000) - _ 5,000,000 1,000,000 1,000,000 1,000,000 /,0o0,u00 500,000 - 500,000 (m.uoo.000) - M,800,000> - - /5ow/mu 8,000,000 2,000,000 5,000,000 - |u.00u,0un *VmlNN .10 II The County has obtained loans to assist in financing mandated wastewater pjects from the State Water Pollution Control Revolving Fund (SRF). The purpose of this revolving fund is to provide low-interest, long-term loans and other financial assistance to the four counties in the state to finance construction of wastewater pjeuLx. The County has nine pjects approved for funding with these loans. COUNTY OF HAWAII Notes to the Basic Financial Statements June 30, 2017 The schedule below shows the County's SRF transactions for the fiscal year ended June 30, 2017: Loans Approved Loan Balance Authorized Amount July 1, 2016 Cesspool Conversion S 8,363,773 S 4,673,319 Honoka'a LCC 4,513,158 2,867,665 Queen Lili'uokalani 9,421,732 6,991,527 Kalaniana'ole 8,621,409 5,613,236 Kealakehe WWTPAU 20,339,870 7,317,504 North Kona 3,454,500 Kealakche Effluent Reuse 1,813.544 $56.527.986 Loan Balance Due Within Additiool Rctirement5 June 30, 2017 One Year $ (434,669) S 4,238,650 S 436,794 (178,389) 2,689.276 179,284 (483,407) 6,508,120 485,832 (317,125) 5,296.111 318,718 5,821,440 (519,118) 12,619,826 686,465 1,958,708 (1,034,800) 923,908 349 386 349,386 532.625 221,i_2„...L.9.1.1192 The remaining loans bear interest at 0.25% to 0.5% exclusive of a 0.25% to 0.75% loan fee, and require payments through fiscal year 2039. Debt service to maturity for disbursements to date on these projects are as follows: Fiscal year ending June 30: 2018 2019 2020 2021 2022 2023 — 2027 2028 — 2032 2033 — 2037 2038 — 2039 Total Governmental Activities Principal $ 2,107,093 2,137,812 2,185,205 2,194,763 2,204,141 10,935,004 7,951,487 2,829,686 80,086 $32,625,217 - 79 - Interest $ 240,835 225,792 209,699 193,098 176,651 632,967 262,520 41,221 579 .$1,983,362. COUNTY OF HAWAII Notes to the Basic Financial Statements June 30, 2017 Other General Long -Term Obligations The following is a summary of other general long-term obligations transactions for the fiscal year ended June 30, 2017: Governmental activities: Compensated absences Claims and judgments (see Note 12) Capital leases (see Note 8) Landfill costs payable (see Note 9) Pollution remediation (see Note 9) Other post employment benefit obligation (see Note 13) Total Balance Balance Due Within July 1, 2016 Additions* Payments June 30, 2017 One Year $37,907,805 13,859,496 4,916,178 22,633,000 16,414,110 $14,635,464 4,478,097 3,769,403 7,205,521 $(13,057,367) $39,485,902 $9,813,735 (3,901,900) 14,435,693 2,923,529 (2,120,001) 6,565,580 1,989,281 (315,521) 29,523,000 195,405 (871,471) 15,542,639 6,864,765 77,009,857 36,830,000 (31,592,035) 82,247,822 122,,740,446 $66.918,485 $(51,858,295) 187 800 636 2.I 7 * Net of new claims liability and existing claims resolved at less than previous estimate. Historically, the County's general fund has been used to liquidate the majority of other long- term liabilities, including the other post employment benefit obligation and the compensated absences since most employees are paid by the general fund. Fund Balances - Debt Service Funds The fund balance in the debt service funds at June 30, 2017 includes $24,205,703, which is reserved for principal payments on general obligation bonds and $2,599,986, which is reserved for the payment of interest on the bonds. Enterprise Fund Notes, Bond and Loan Payable On February 12, 2013, the County issued general obligation bonds on behalf of Kula'imano Elderly Housing Project (Project) to pay off its two notes payable to the U.S. Department of Agriculture, Farmers Home Administration with principal and interest balances aggregating $835,108. The Project is responsible for the debt service payment related to their portion of the bonds, which is also secured with the County's general obligation pledge. Because the Project is responsible for only a portion of the total bonds issued, it was decided that the Project would continue to make bond payments equivalent to its previous monthly installment payments of $7,826 on the old notes at 5.547% interest. Under this payment schedule, the Project will make contributions through 2025 of the bonds 2032 maturity date. -80- COUNTY OF HAWAI'I Notes to the Basic Financial Statements June 30, 2017 The following is a summary of the Project's bond payable transactions for the fiscal year ended June 30, 2017: Balance at July 1, 2016 $ 707,808 Deductions (56,061) Balance at June 30, 2017 651,747 Less current portion (59.251) Note payable, net of current portion $ 592,490 The following is a summary of the annual maturities for the enterprise[undhondpuyah|c: Business -type Activities Fiscal year ending June 30: Principal Interest 2018 $ 59.251 $ 32,999 2019 62'622 29,533 2020 66'186 25,869 2021 69,952 21,997 2022 73/932 17'905 2O23 -2O26 319`884 27,056 Total $651,747 $115_,359 On October 29, 2012, the County assumed the loan of its lessee Ouli Ekahi Partnership with the Hawai`i Housing Finance and Development Corporation in the amount of $478,430, The loan is non-interest bearing and matures on February 27, 2041. In exchange, the County assumed ownership of the Ouli Ekahi pject which consists of a 33 single family affordable rental housing p'ccL. The following is a summary of enterprise fund loan payable transactions for the fiscal year ended June 30, 2017: Balance utJuly l,28l6 $306,206 Deductions (33,304) Balance at June 30, 2017 272,902 Less current portion (35.183) Loan payable, net of current portion $ 237,712 - 81 - COUNTY OF HAWA!1 Notes to the Basic Financial Statements June 30, 2017 The following is a summary of the annual maturities for the enterprise fund loan payable: Business -type Activities Fiscal year ending June 30: Principal 2018 $ 35,183 2019 16'580 2020 16,500 2021 10.500 2022 10.500 2O2]-2027 82.500 2O28-20]2 82,500 2033 6,719 Total S2.72 902 Special Assessment Bonds The County has issued general obligation bonds on behalf of Improvement District No. 18 for water improvements (see Note 4). These bonds were then refunded by a portion of the 201 3 Series A Bonds that were issued. The Improvement District is responsible for the payment of the debt service on these bonds, but the County remains liable because they are general obligations of the County. The improvement district's share of the refunded bonds matures annually through 2027 and bear interest at the previous rates o[4.]75Y6to4.75Y4. Total general obligation bonds payable included in the government -wide statement of net position were $1,071,453 at June 30, 2017. The County has also issued generaobligation bonds on behalf of Improvement District No. 19 for water improvements (see Note 4). The Improvement District is responsible for the payment of the debt service on these bonds, but the County remains liable because they are general obligations of the County. The improvement district's share of the refunded bonds matures annually through 2048 and bear interest at the previous rates of 2.75%. Total general obligation bonds payable included in the government -wide statement of net position were $1,125,982 at June 30, 2017. The bonds are secured by a first lien on the land benefited by the improvements, and are to be repaid from the annual assessments levied against the owners of the land. The County acts as an agent for the property owners within the improvement districts to collect assessments receivable, forward payments to bond -paying agents at appropriate dates and, if required, administer foreclosure proceedings. - 82 - COUNTY OF HAWAII Notes to the Basic Financial Statements June 30, 2017 The following is a summary of bond transactions for Improvement District No. 18, Coastview/Wonderview Water Improvements, and No. 19, Kona Ocean View Properties Subdivision for the fiscal year ended June 30, 2017: Balance at July 1, 2016 $2,292,610 Deductions (95,1751 Balance at June 30, 2017 $2 197 435 The following is a summary of the annual maturities for the improvement district general obligation bonds: Fiscal year ending June 30: Principal 2018 $ 99,189 2019 103,379 2020 107,752 2021 112,317 2022 117,082 2023 — 2027 664,559 2028 — 2032 276,248 2033 — 2037 177,762 2038 — 2042 203,586 2043 — 2047 233,161 2048 — 2049 102,400 Total Interest $ 78,752 74,470 70,001 65,336 60,466 221,440 112,296 86,619 60,440 30,457 2,834 $ $63 111 11. COMMIT NTS AND CONTINGENCIES Contractual commitments — Contractual commitments for capital projects, expenses, and supplies at June 30, 2017, except in the enterprise funds, are reflected in the balance sheets as a part of the respective fund balance categories and are as follows: General fund Capital projects fund Bond redemption fund Nonmajor funds $ 1,391,468 102,878,357 5,819,678 Contractual commitments for the enterprise funds were immaterial. Intergovernmental revenues — The County has received federal and state grants for specific purposes that are subject to review and audit by grantor agencies. Such audits could lead to requests for reimbursement to the grantor agency for expenditures disallowed under terms of the grants. In the opinion of management of the County, disallowed costs, if any, would not be material. - 83 - COUNTY OFBAWAl^l Notes to the Basic Financial Statements June 30, 2017 Claims — Numerous claims and lawsuits have been filed against the County in the normal course of its operations. A liability for probable losses is included on the government -wide statement of net position (see Note 12). Although the outcome of the various claims and lawsuits is not presently determinable, in the opinion of the County's Corporation Counsel, the resolution of such matters will not have a material adverse effect on the financial condition of the County. ADA compliance — The County entered into a stipulated agreement, filed on June 4, 1998, which relates to the Department of Parks and Recreation (Parks). The agrement required Parks to establish practices, policies and procedures regarding its programs, and prepare a transition plan by the middle of the year 2000. The self-evaluation and transition plan for programs, practices and procedures has been completed and approved by the County Council. The cost impact of implementation is not material because the necessary modifications are primarily procedural. The second part of this stipulated agreement is the reevaluation of all County facilities, which was completed and accepted by the County Council on June 30, 2000. Approximately 240 County facilities were surveyed as part of this effort. The tentative completion date of all necessary repairs and renovations was 12 yearfrom the date the County Council accepted the self-evaluation. The initial (1997-2000) estimated cost of the facilities repairs was $15.1 million, which would have been spent over the 12 -year period. Funding allocated initially for facilities repairs was $17.5 million, with another $4 million of federal funding anticipated through community development block grants over the next 2 years. The Department of Public Works has requested an additional $2 million a year for the other County ADA facilities' project. Because of severe disparities that surfaced between the original ADA projects' scoping and construction estimates and actual scopes and costs, as well as time/delivery issues that came into play because of necessary permits and reviews, and design professionals' costs that weren't facorcd into the effort, the County sought relief from the Court in the form of both a time extension and reprioritization of sites. As a result, the County obtained approval of a modified 4 -year plan wherein accessibility improvements would be required to be completed by December 31, 2016 at 35 remaining park sites. The balance of the inaccessible sites would be deferred indefinitely pending improvement/enhancement projects that would inherently trigger accessibility improvements due to the nature of scoping and applicable ADA requirements. Of the 35 remaining parks requiring accessibility improvements, 12 have been completed, 5 are in construction though substantially completed, 7 are in design, and 11 are either pending consultant selection or finalization of contract. A project that was previously deferred was placed back into the plan in the pending consultant selection category. The County has currently encumbered or spent $|7.6K4onthese projects. The County had spent $42.0 million for the construction and design fees to complete 50 park facilities (some having multiple ADA work being completed) prior to the development of the modified four year plan. In addition, the County's ADA coordinator (Equal Opportunity Officer) has access to an identifiable account of at least $50,000 to handle requests for reasonable accommodations for County departments; and the procedures for these requests have been finalized and are available on the Human Resources Department's Equal Opportunity and the ADA web page. Also, Parks has a Recreation COUNTY OF HAWA1'I Notes to the Basic Financial Statements June 30, 2017 Specialist who reviews and investigates requests for reasonable accommodations, and recommends specific actions on those requests. 12. RISK MANAGEMENT The County is exposed to various risks of losses related to torts; theft of, damage to, and destruction of assets; errors and omissions; injuries to employees; and natural disasters. The County maintains fire and commerial multiple peril insurance on County facilitiesflood insurance on selected utructurco, medical malpractice insurance for emergency medical technicians, aviation liability for helicopter operations, liability coverage on transit buses, privately owned police vehicles and retired senior volunteers, and property damage coverage on County Police fleet vehicles and Kohala Ranch fire truck. The County maintains fire and property coverage on several County housing pjeuts(}{u}u^imunoundOu|i Ekahi). There was no reduction in insurance coverage during the year from coverage in the prior year. During the past three fiscal years, the amount of settlements in cases covered by insurance has not exceeded the insurance coverage. The County is substantially self-insured for the m'ority of its vehicles as well as for all other perils including workers' compensation and general liability. The liability for claims and judgments is reported on the government -wide statement of net position and the mjority will be liquidated from the County's general fund. Liabilities are reported when bis probable that a loss has occurred and the amount of thaloss can be reasonably estimated. These losses include an estimate of claims that have been incurred but not reported (IBNR). Claim liabilities, including IBNR, are based on the estimated ultimate cost of settling the claims, and include incremental costs for the hiring of special counsel and expert witnesses. Claims liabilities are estimated by a case-by-case review of all claims and the application of historical experience to outstanding claims. Estimates of IBNR are based on historical experience. The liability for claims and judgments is reported on the government -wide statment of net position. At June 30, 2017, the amount of this liability was $14,435,693. This is the County's best estimate based on available information, Changes in the reported liability since July 1, 2015 are given below. Balance atJuly l,IO\5 Incurred claims (including IBNR)* Claim payments Balance at June 30, 2016 Incurred claims (including IBNR)* Claim payments Balance at June 30, 2017 General Liability $ 2,033.710 470,965 (0|4`59O) $ 2,490,086 199,478 (395.362) $ 2.294 292 Workers' Compensation $ 10,653`188 3,537,320 (2`821,098) $ 11,369.410 4,278,619 (3.506,538) L12_,141 491 Total Liability $ 13,286,907 4,008,285 (3/435,696) $ 13,859,406 4,478,097 (3,901,900) *Net of new claims liability and existing claims resolved at less than previous estimate, - 85 - COUNTY OF HAWAI'I Notes to the Basic Financial Statements June 30, 2017 13. EMPLOYEE BENEFIT PLANS Pemmiouo—Emmployeew`Reticeument System of the State of Hawai'i Pension Plan Description - All eligible employees of the State and counties are provided with pensions through a cost-sharing multiple -employer defined benefit pension plan administered by the Employees' Retirement System of the State of Hawaii (ERS). Benefit terms, eligibility, and contribution requirements are established by HRS Chapter 88 and can be amended through legislation. The ERS issues a publicly available financial report that can be obtuinedutGFiS`swchsiV::hUp://eo.ahawuii.gov/. Benefits Provided - The ERS provides retirement, disability, and deatbenefits that are covered by the provisions of the noncontributory, contributory, and hybrid retirement plans. The three plans provide a monthly retirement allowance equal to the benefit multiplier (generally l.25Y6or2%)multiplied 6vthe average final compensation multiplied by years of credited service. The benefit multiplier decreased by 0.25% for new hybrid and contributory plan members hired after June 30, 2012. Average final compensation is based on the five highest paid years of' service excluding the payment of salary in lieu of vacation for members hired after June 30, 2012. For those hired between January 1, 1971 and June 30, 2012, AFC is based on the three highest paid years of service excluding the payment of salary in lieu of vacation. If the employee was hired prior to January 1, 1971, the AFC is the average salary earned during the five highest paid years of service, including the payment of salary in lieu of vacation, or three highest paid years of service, excluding the payment of salary in lieu of vacation. For members hired before July 1, 2012, the original retirement allowance is increased by 2.5% each July 1 following the calendar year of retirement. This cumulative benefit is not compounded and increases each year by 2.5% of the original retirement allowance without a ceiling (2.5% of the original retirement allowance the first year, 5.0% the second year, 7.5% the third year, etc.). For members hired after June 30, 2012 the post-retirement annuity increase was decreased to 1.5% per year. Retirement benefits for certain groups, such as police officers, fisome investigators sewer workers, judges, and elected officials, vary from general employees. Noncontributory Plan Retirement Benefits - General employees' retirement benefits are determined as 12596 of average final compensation multiplied by the years of credited service. Employees with 10 years of credited service are eligible to retire at age 62. Employees with 30 years of credited service are eligible to retire at age 55. Disability Benefits - Members are eligible for service -related disabilibenefits regardless of length of service and receive a lifetime pension of 35% of their average - 86 - COUNTY OF HAWAI'I Notes to the Basic Financial Statements June 30, 2017 final compensation. Ten yearof credited service is required for ordinary disabili Ordinary disability benefits are determined in the same manner as retirement benefits but are payable immediately, without an actuarial reduction, and at a minimum of\2.5%of average final compensation. Death Benefits - For service -connected deaths, the surviving spouse/reciprocal beneficiary receives a monthly benefit of 30% of the average final compensation until remarriage or re-entry into a new reciprocal beneficiary relationship. Additional benefits are payable to surviving dependent children up to age 18. If there is no spouse/reciprocal beneficiary or dependent children, no benefit is payable. Ten years of credited service is required for ordinary death benefits. For ordideath benefits, the surviving sipnca beneficiary (until remarritry into a new reciprocal beneficiary relationship) and dependent children (up to age l8)receive a benefit equal to a percentage of member's accrued maximum allowance unreduced for age or, if the member was eligible for retirement at the time of death, the surviving spouse/reciprocal beneficiary receives 100% joint and survivor lifetime pension. Contributory Plan for Employees Hired Prior to July 1, 2012 Retirement Benefits - General employees' retirement benefits are determined as 2% of average final compensation multiplied by the years of credited service. General employees with 5 years of credited service are eligible to retire at age 55. Police and firefighters' retirement benefits are determined as 2.5% of average final compensation for each year of service up to a maximum of 80%. Police and firefighters with 10 years of credited service are eligible to retire at age 55. Disability Benefits - Members are eligible for service -related disability benefits regardless of length of service and receive a lifetime pension of 50% of their average final compensation. Ten yearof credited service is required for ordinary disability. Ordinary disability benefits are determined as 1.75% of average final compensation multiplied by the years of credit services and are payable immediately, without an actuarial reduction, and at a minimum of 30% of average final compensation. Death Benefits - For service -connected deaths, the surviving spouse/reciprocal beneficiary receives a lump sum payment of the member's contributions and accrued interest plus a monthly benefit of 50% of the average final compensation until remarriage or re-entry into a new reciprocal beneficiary relationship. If there is no surviving spouse/reciprocal beneficiary, surviving children (up to age 18) or dependent parents are eligible for the monthly benefit. If there is no spouse/reciprocal beneficiary or dependent children/parents, the ordinary death benefit is payable to the designated beneficiary. - 87 - COUNTY DFHAWAII Notes to the Basic Financial Statements June 30, 2017 Ordinary death benefits are available to employees who were active at time of death with at least 1 year of service. Ordinary death benefits consist of a lump sum payment of the member's contributions and accrued interest plus a percentage of the salary earned in the 12 months preceding death, or 50% Joint and Survivor lifetime pension if the member was not eligible for retirement at the time of death but was credited with at least 10 years of service and designated one beneficiary, or 100% Joint and Survivor lifetime pension if the member was eligible for retirement at the time of death and designated one beneficiary. Plan for E lo ees Hired Afte une3U 2012 Retirement Benefits — General employees' retirement benefits are determined as 1.75% of average final compensation multiplied by the years of credited service. General employees with 10 years of credited service are eligible to retire at age 60. Police and firefighter`redrementbcnefits are determined as 2.25% of average final compensation for each year of service up to a maximum of 80%. Police and firefighters with 10 years of credited service are eligible to retire at age 60. Disability and Death Benefits - Members are eli'hkc for service -related disability benefits regardless of length of service and receive a lifetime pension of 50% of their average final compensation plus refund of contributions and accrued interest. Ten years of credited service is required for ordinary disability. Ordinary disability benefits are 1.75% of average final compensation for each year of service for police and firefighters and are payable immediately, without an actuarial reduction, at a minimum of 30% of average final compensation. Death benefits for contributory plan members hired after June 30, 2012 are generally the same as those for contributory plan members hired June 30, 2012 and prior. Hybrid Plan for Employees Hired Prior to July 1, 2012 Retirement Benefits - General employees' retirement benefits are determined as 2% of average final compensation multiplied by the years of credited service. General employees with 5 years of credited service are eligible to retire at age 62. General employees with 30 years of credited service are eligible to retire at age 55. Disability Benefits - Members are eligible for service -related disability benefits regardless of length of service and receive a lifetime pension of 35% of their average final compensation plus refund of their contributions and accrued interest. Ten yearof credited service is required for ordinary disability. Ordinary disability benefits are determined in the same manner as retirement benefits but are payable immediately, without an actuarial reduction, and at a minimum of 25% of average final compensation. - 88 - COUNTY OFBAWAl^l Notes to the Basic Financial Statements June 30, 2017 Death Benefits - For service-connectd deaths, the surviving spouse/reciprocal beneficiary receives a lump sum payment of the member's contributions and accrued interest plus a monthly benefit of 50% of the average final compensation until remarriage or re-entry into a new reciprocal beneficiary relationship. If there is no surviving spouse/reciprocal hencfiuiu?/,surviving children (up 0mage \8)ordependent parents are eligible for the monthly benefit. If there is no spouse/reciprocal beneficiary or dependent children/parents, the ordinary death benefit is payable to the designated beneficiary. Ordinary death benefits are available to employees who weractive at time of deatwith at leas5 years of service. Ordinary death benefits consist of a lump sum payment of the member's contributions and accrued interest multiplied by |5OY6,or5OY6Joint and Survivor lifetime pension if the member was not eligible for retirement at the time of death but was credited with at least 10 years of service and designated one beneficiary, or 100% Joint and Survivor lifetime pension if the member was eligible for retirement at the time of death and designated one beneficiary. Hybrid Plan for Employees Hired After June 30, 2012 Retirement Benefits - General employees' retirement benefits are determined as 1J5Y6 of average final compensation multiplied by the years of credited service. General employees with 10 years of credited service are eligible to retire at age 65, Employees with 30 years of credited service are eligible to retire at age 60. Sewer workers, water safety officers, and EMTs may retire with 25 years of credited service at age 55. Disability and Death Benefits - Provisions for disabiliand death benefits generally remain the same except for ordinary death benefits. Ordinary death benefits are available to employees who were active at time of death with at least 10 years of service. Ordinaiy death benefits consist of a lump sum payment of the member's contributions and accrued interest multiplied by 120%, or 50% Joint and Survivor lifetime pension if the member was not eligible for retirement at the time of death and designated one beneficiary, or 100% Joint and Survivor lifetime pension if the member was eligible for retirement at the time of death and designated one beneficiary. Contributions - Contributions are established by HRS Chapter 88 and may be amended through legislation. The employer rate is set by statute based on the recommendations of the ER.S actuary resulting from an eicnce study conducted every five years. Since July 1, 2005, the employer contribution rate is a fixed percentage of compensation, including the normal cost plus amounts required to pay for the unfunded actuarial accrued liabilities. The contribution rates for fiscal year 2017 were 25.00% for police and firefighters and 17.0% for all other employees. Contributions to the pension plan from the County for the year ended June 30, 2017, 2016, and 2015 were $36,157,981, $34,013,001, and $31,456,148, respectively. - 89 - COUNTY OF HAWAI'1 Notes to the Basic Financial Statements June 30, 2017 The employer is required to make all contribuions for members in the noncontributory plan. For contributory plan employees hired prior to July 1, 2012, general employees are required to contribute 7.8% of their salary and police and firefighters are required to contribute 12.2% of their salary. For contributory plan employees hired after June 30, 2012, general employees are required to contribute 9.8% of their salary and police and firefighters are required to contribute 14.2% of their salary. Hybrid plan members hired prior July 1, 2012 are required to contribute 6.0% of their salary. Hybrid plan members hired after June 30, 2012 are required to contribute 8.0% of their salary. Pension liabilitiesexpense, and deferred outflows of resources and deferred inflows of resources related to pensions — At June 30, 2017, the County reported a liability of $618,129,088 for its proportionate share of the net pension liability, The net pension liability was measured as of June 30, 2016, and the total pension liability used to calculate the net pension liability was determined by an actuarial valuation as of that date. The County's proportion of the net pension liability was based on the actual employer contributions to the pension plan relative to the contributions of all participating employers. At June 30, 2016, the County's proportion was 4.62%, which was an increase o[.24Y6 from its proportion measured as of June 30, 2015. For the year ended June 30, 2017, the County recognized pension expense of $79,460,631. At June 30, 2017, the County reported deferred outflows of resources and deferred inflows of resources related to pensions from the following sources: Deferred Deferred Outflows Inflows of of Resources Resources Differences between expected and actual experience $ 22,931,024 $ 6,759,333 Net difference between projected and ootuu} investment earnings on pension plan investments 41,702,998 Changes in assumptions 126,260,518 Changes in proportion and differences between employer contributions and proportionate share of contributions 18.375,458 5,773.781 County contributions subsequent to the measurement date 36,157,981 Total $245'422.g19 $ 12,533'114 $36,157,981 reported as deferred outflows of resources related to the County's contributions to the pension plan subsequent to the measurement date will be recognized as a reduction of the net pension liability in the fiscal year ended June 30, 2018. Other amounts reported as deferred outflows of resources and deferred inflows of resources COUNTY OF HAWAI'I Notes to the Basic Financial Statements June 30, 2017 Fiscal Year Ending June 30, Amount 2018 $ 39'203'620 2019 39'203,620 I020 51.591.632 2021 44,572,275 2022 22`165.737 � /a°J30 M%+ Actuarial assumptions — The total liability in the June 30, 2016 actuarial valuation was determined using the following actuarial assumptions, applied to all periods included in the measurement: Inflation 2.50Y6 Payroll growth rate 3.50% per annum Salary increases 3.50% - 7.00%, including inflation Investment rate of return 7.00% per annum, including inflation Cost of living adjustments 2.50% / 1.50% Mortality rates used in the actuarial valuation as of June 30, 2016 were based on the following: Active member — Multiples of the RP 2014 mortality table for active employees based on the occupation of the member. Healthy retirees — The 2016 Public Retirees of Hawai'i mortality table, generational projection using the BB projection table from the year 2016 and with multipliers based on plan and group experience. Disabled retirees — Base Table for healthy retiree's occupation,set forward 5 years, generational pjection using the BB projectiontob|cfromdhcyoar2O\6. Minimum mortality rate of 3.5% for males and 2.5% for females. The actuarial assumions used in the June 30, 2016 valuation were baseon the results of an actuarial experience study for the five-year period ending June 30, 2015. Them jor changes to assumptions resulting from the 2015 actuarial experience study were (1) a decrease in the investment return assumption from 7.65% to 7.00Y6 and (2) the mortality assumptions were modified to assume longer life expectancies as well as to reflect continuous mortality improvement. ERS updates their experience studies every five years. The long -tern expected rate of return on pension plan investments was determined using a building-block method in which best -estimate ranges of expected future real rates of return (expected returns, net of pension plan investment expense and inflation) are developed for each mjor asset class. These ranges are combined to produce the long-term expected rate of - 91 - COUNTY OF HAWAI'I Notes to the Basic Financial Statements June 30, 2017 return by weighting the expected future real rates of return by the target asset allocation percentage and by adding expected inflation. The target allocation and best estimates of geometric rates of return for each major asset class are summarized in the following table: Strategic Allocation Target (Risk -Based Classes) Allocation Broad growth 63.0096 Crisis risk offset 20.00Y6 Real return 10.00% Principal protection 7.00% 100.00% Long -Term Expected Real Rate of' Return 8.35% 5.50% 6.15% 2.20% Discount rate — The discount ratused to measure the totapension liability was 7.00%, a decrease from the 7.65% rate used at the prior measurement date. The projection of cash flows used to deten'nine the discount rate assumed that employee contributions will be made at the current contribution rate and that contributions from the County will be made at statutorily required rates, actuarially determined. Based on those assumptions, the pension plan's fiduciary net position was projected to be available to make all projected future benefit payments of current active and inactive employees. Therefore, the |nn8'\cnn expected rate of return on pension plan investments was applied to all periods of pjected benefit payments to determine the total pension liability. Sensitivity of the county's proportionate share of the net pension liability to changes in the discount rate - The following presents the County's proportionate share of the net pension liability calculated using the discount rate of 7.00%, as well as what the County's proportionate share of the net pension liability would be if it were calculated using a discount rate that is 1 -percentage -point lower (6.00%) or 1 -percentage -point higher (8.00%) than the current rate: County's proportionate share of the net pension liability 1% Decrease (6.00%) ~6 1,* -7~ Current Discount Rate (7.00%) $__618,12 1% Increase (8.00%) $ 468 102,682 Pension plan fiduciary net position — Detailed information about the pension plan's fiduciary net position is available in the separately issued ERS Comprehensive Annual Financial Report that includes financial statements and required supplementary information. Payables to the pension plan — At June 30, 2017, the annual amount payable to the ERS totaled $4,O22,06],which represents the employer contribution for the second half of the COUNTY OF HAWAII Notes to the Basic Financial Statements June 30, 2017 month of June 2017, as required by HRS, and the excess pension cost under Act 153/SLH 2- 12 REFER HRS Section 88-100 for fiscal year ended June 30, 2017. Other Pension Plans - County of Hawaii Bandsmen Pension System The County also sponsors a nonqualified, governmental single employer defined benefit pension plan for members of the County Band (County of Hawai`i Bandsmen Pension System) who are or were ineligible for benefits under ERS and whose employment began before June 1, 1990. Under HRS Chapter 88, the County Pension provides retirement benefits that are computed based on the average annual salary during the last 10 years of employment with a minimum pension amount of $50 per month. There are no assets accumulated in a trust for the payment of benefits. As of the valuation date of June 30, 2017, there were 23 inactive employees or beneficiaries receiving benefits; 9 inactive employees not yet receiving benefit payments; and 8 active members. Pension liabilities, pension expense, and deferred outflows of resources and deferred inflows of resources related to pensions — At June 30, 2017, the County reported a liability of $1,146,780. The total pension liability was measured as of June 30, 2017 based on an actuarial valuation as of that date. For the year ended June 30, 2017, the County recognized a pension benefit of $11,178 and a deferred inflow of resources of $49,924. Actuarial assumptions — The total pension liability in the June 30, 2017 actuarial valuation was determined using the following actuarial assumptions, applied to all periods included in the measurement: Inflation Payroll growth rate Salary increases Cost of living adjustments 2.50% 3.50% per annum 3.50%, including inflation 2.50% Except for the salary increase and retirement rate assumptions, all other demographic assumptions are the same as those used to measure the total pension liability under the ERS plan. The discount rate used to measure the County's total pension liability was 3.56% based on the daily municipal bond rate closest to but not later than the measurement date of the Fidelity "20 -Year Municipal GO AA Index". The following presents the County's total pension liability calculated using the discount rate of 3.56%, as well as what the County's total pension liability would be if it were calculated using a discount rate that is 1 -percentage -point lower (2.56%) or 1 -percentage -point higher (4.56%) than the current rate: - 93 - COUNTY OF HAWAI'1 Notes to the Basic Financial Statements June 30, 2017 County's totapension liability 1% Decrease (2.56%) Schedule of Changes in Total Pension Liability Current Discount Rate (3.56%) Measurement year ending June 30, 2017 Total Pension Liability Service Cos $ 16.416 Interest on the Total Pension Liability 36,289 Assumption Changes (113,807) Benefit Payments (53,347) Net Change in Total Pension Liability (114'449) Total Pension Liability — Beginning 1,261 229 Total Pension Liability — Ending LI,14°7�� Post -Retirement Benefits 1% Increase (4.56%) $ 997 366 In addition to providing pension benefits, the County is required by state statute (HRS Chapter 87A) to contribute to the Hawai'i Employer -Union Health Benefits Trust Fund (the EUTF). The EUTF is an agent, multiple -employer defined benefit plan providing certain healthcare and life insurance benefits to all qualified retirees, active employees, their dependents and their beneficiaries. The EUTF was established on July 1, 2003 to design, provide, and administer medical, prescription drug, dental, vision, chiropractic, dual -coverage medical and prescription drug, and group life benefits. For employees hired priortmJuly\,l996,de County pays the entire monthly healthcare premium for employees retiring with 10 or more years of credited service, and 50% of the monthly premium for employees retiring with fewer than 10 years of credited service. The current (pay-as-you-go) premium costs are paid by the respective funds but the net other postemployment benefit obligation is paid by the General Fund. For employees hired after June 30, 1996, and who retire with fewer than 10 years of service, the County makes no contributions. For those retiring with at least 10 years but fewer than 15 years of service, the County pays 50% of the retired employees' monthly Medicare or non - Medicare premium. For employees hired after June 30, 1996, and who retire with at least 15 years but fewer than 25 years of service, the County pays 75% of the retired employees' monthly Medicare or non -Medicare premium. For those retiring with over 25 years of service, the County pays the entire healthcare premium. For employees hired after June 30, 2001, and who retire with fewer than 10 years of service, the County makes no contributions. For those retiring with at leas|Oyears but fewer than 15 COUNTY OF HAWAI'I Notes to the Basic Financial Statements June 30, 2017 years of service, the County pays 50% of the retired employees' monthly Medicare or non - Medicare premium based on the self -plan. For employees hired after June 30, 2001, and who retire with at least 15 years but fewer than 25 years of service, the County pays 75% of the retired employees' monthly Medicare or non -Medicare premium; for those retiring with over 25 years of service, the County pays the entire healthcare premium. For active employeesthe employee's contributions are based upon negotiated collective bargaining agreements. Employer contributions for employees not covered by collective bargaining agreements and for retirees are prescribed by the HRS. The County's annual other postemployment benefit (OPEB) cost is calculated based on the annual required contribution (ARC) of the employer, which is an amount actuarially determined in accordance with the parameters of Governmental Accounting Standards Board Statement No. 45, Accountiand Financial Reporting by Employers for Posteniploymeni Benefits Other than Pensions (GASB Statement No. 45). GASB Statement No. 45 addresses the failure of previous financial reporting practices to measure and recognize the cost of OpCBduring the periods when employees render the services or to provide relevant information about OPEB obligations and the extent to which progress is being made in funding those obligations. The ARC represents a level of funding that, if paid on an ongoing basis, is pjected to cover normal cost each year and amortize any unfunded actuarial liabilities (or funding excess) over a period not to exceed thirty (30) years. The current ARC rate is 22.1% of annual covered payroll. The following section shows the County's Annual OPEB cost for the year ended June 30, 2017, the amount actually contributed to the plan, and changes in the net OPEB liability: Annual required contribution $36,472,000 Interest on net OPEB obligation 5.391,000 Adjustment to annual required contribution (5,033,000) Annual OPEB Cos36,830,000 Contributions made (31,592,035) Increase in net OPEB liability 5,237,965 Net OPEB liability -beginning of year 77,009,857 Net OPEB liability -end of year $82,247,822 The abovnet OPEB liability at the end of the year is included in the Statement of Net COUNTY OF HAWAII Notes to the Basic Financial Statements June 30, 2017 The annual OPEB cost, the percentage of annual OPEB coscontributed to the plan, and the net OPEB (asset) liability for the year ended June 30, 2017 and the preceding two years were as follows: Fiscal Year Ended June 30, 2015 June ]U,2Olb June 30, 2017 Annual OPEB Cost $32`864'000 $34,002,000 $36,830,000 Percentage of Annual OPEB Cost Contributed 56.896 66.9% 85.8% Net OPEB Obligation $65,755,197 $77,009,857 $82.247,822 The schedule of funding progress based on the actuzio]vu|uudondateof]u|y |,20)5. is as follows: Actuarial accrued liability $466,874'008 Actuarial value of plan assets 91,574,000 Unfunded actuarial accrued liability (UAAL) $375,295,000 Funded ratio 19.6% Covered payroll (active plan members) $159,255'000 UAAL as a percentage of covered payroll 235.7% Actuarial valuations of an ongoing plan involve estimates of the value of reported amounts and assumptions about the probability of occurrence of events far into the future. Examples include assumptions about future employment, mortality, and the healthcare cost trend. Amounts determined regarding the funded status of the plan and the annual required contributions of the employer are subject to continual revision as actual results are compared with past expectations and new estimates are made about the future. The schedule of funding progrms, presented as required supplementary information following the notes to the financial statements, presents multiyear trend information that shows whether the actuarial value of plan assets is increasing or decreasing over time relative to the actuarial accrued liabilities for benefits. Projections of benefits for financial reporting purposes are based on the substantive plan (the plan as understood by the employer and plan members) and include the types of benefits provided at the time of each valuation and the historical pattern of sharing of benefit costs between the employer and plan members to that point. The actuarial methods and assumptions used include techniques that are designed to reduce short-term volatility in actuarial accrued liabilities and the actuarial value of assets, consistent with the long-term perspective of the calculations. In the July 1,2015 actuarial valuation, the entry age normalcost actuarial cosmethod was used. The actuarial assumptions included a 7.0% discount rate, which is based on the County's anticipated funding level, and an annual healthcare cost trend rate of 7.0-9.0% COUNTY OF HAWAII Notes to the Basic Financial Statements June 30, 2017 initially, reduced by decrements to an ultimate rate of 5.0% after eight years. The assumptions also include a 3.5% increase in payroll and a 3.0% inflation rate. The UAAL is being amortized as a level percentage of p'ccted payroll on a closed basis. The remaining amortization period at July 1,2015 for the UAAL balance varies depending on the date each portion was established but is set to not exceed 30 years. The equivalent single amortization period is 22.0. The EUTF issues a publicly available financial report that includes financial statements and required supplementary information, which is available on-line at their web -site www.eutf.hawaii.gov or by contacting them u1PD.Box 2l2l'Honolulu, H| 90805'2121. Deferred Compensation Plan County employees arpermitted to participate in a deferred compensation plan of the State of Huwui^i, adopted pursuant to Internal Revenue Code (IRC) section 457. The plan permits eligible employees to defer a portion of their salary until future years by contributing to a fund managed by a plan administrator. The deferred compensation amounts are not available to employees until termination, retirement, death, or unforeseeable emergency. All plan assets are held in a trust fund to protecthem from claims of general creditors and from diversion to any uses other than paying benefits to participants and beneficiaries. The County has no responsibility for loss due to the investment or failure of investment of funds and assets in the plans, but does have the duty of due care that would be required of an ordinary prudent investor. Therefore, the deferred compensation plan assets are not reported in the accompanying basic financial statements. 14' CO ONENT UNIT DISCLOS Deposits and Investments S At June 30, 2017, the carrying amount of cashtime certificates of deposit and money marke funds of $50,410,841, with bank balances of $51,709,283 were held by the County on behalf of the Department. These balances were fully insured or collateralized with securities held by the County's agent in the County's name. The deposits and investments include cash received by the Department that is restricted as to use and is recorded as a restricted asset. Such funds amounted to $888,225 at June 30, 2017. At June 30, 2017, the Department had $25,000,000 in investments. -g7- COUNTY OF HAWAI'I Notes to the Basic Financial Statements June 30, 2017 Capital Assets The Departmentbeoun operationsuonfJunuury 1, 1950. At that date, the utility plant in service was transferred to the Departmentfrom the County at the cost of the utility plant assets acquired by the County for its water system from January 1, 1924 to December 31, 1949, less accumulated depreciation. Acquisitions prior to 1924 and acquisitions by gift or grant prior to 1950 are not included in utility plant. Additions to utility plant since January 1, 1950 are stated at original cosand include contributions by governmental agencies, private subdividers and customers at their cost or estimated cost. Construction costs include amounts for contract work, engineering supervision and other direct and indirect costs. Construction period interest is capitalized on utility plan constructed with tax-exempt debt. Depreciation on the Department's utility plant assets in service is computed using the straight-line method over the estimated useful lives of the assets as follows: Structures and improvements Machinery and equipment Water systems 40 to 50 year 5 to 25 years 10 to 40 years The capital assets of the Department at June 30, 2017 were as follows: Utility plant in service Less: accumulated depreciation Preliminary survey and investigation charges Construction work in progress Land and rights Net capital assets $498,316,252 (237,640,279) 260,675,973 5,337,002 29,979,075 4,898,583 Long -Term Debt The County has issued general obligation bonds on behalf of the Department. The Department is responsible for the payment of the debt service on these bonds, but the County remains liable because they are general obligations of the County. The Department has recorded a liability for these general obligation bonds, which amounted to $29,861,558 at June 30, 2017. -90- COUNTY OF HAWAII Notes to the Basic Financial Statements June 30, 2017 General obligation bonds payable issued on behalf of the Department and other long-term debt at June 30, 2017 are comprised of the following: Public improvement bonds: 2004 Series D at 4.5%, due through 2039 $ 212,583 2008 Series A at 4.125%, due through 2043 129,793 2010 Series A at 4.0% to 5,0%, due through 2020 1,392,500 2010 Series B at 3.33% to 6.1%, due through 2030 5,340,000 Total public improvement bonds 7,074,876 Public improvement refunding bonds: 2007 Series C at 4.0% to 5.0%, due through 2021 2,935,432 2016 Series B at 3.0% to 5.0%, due through 2026 13,497,500 2016 Series E at 2.0% to 5.0%, due through 2029 6,353,750 Revolving fund loans: State revolving fund loans, interest up to 1.37%, due through 2037 33,756,825 Total long-term debt Add: Unamortized premium Total 63,618,383 1,929,528 $1)15_4/.911 At June 30, 2017, future principal and interest payments for long-term debt are scheduled as follows: Fiscal year ending June 30: Principal Interest Total 2018 $ 3,964,472 $ 1,983,860 $ 5,948,332 2019 4,744,774 1,836,847 6,581,621 2020 4,920,787 1,667,775 6,588,562 2021 5,028,479 1,475,968 6,504,447 2022 5,142,560 1,276,872 6,419,432 2023 — 2027 21,971,330 3,921,372 25,892,702 2028 — 2032 11,790,844 1,072,178 12,863,022 2033 — 2037 5,443,816 248,471 5,692,287 2038 — 2042 603,508 13,010 616,518 2043 7,813 322 8,135 Total $63,618,383 , + ; 5$ Contributions in Aid of Construction The Department recognized $9,310,212 of contributions in aid of construction for the fiscal year ended June 30, 2017. - 99 - COUNTY OF HAWAI'I Notes to the Basic Financial Statements June 30, 2017 Commitments and Contingent Liabilities Claims and judgments — The Department maintains property, auto liability, and genera liability insurance policies. The Department remains self-insured for workers' compensation and other perils. The liability u1June 3Q,20l7for workers' compensation claims of$583,OUO was estimated based on a combination of case-bycase review and the application of historical experience to outstanding claims. Construction contracts — The Department is obligated under construction contracts for the utility plant and other pjcuts. Such commitments approximated $19,594,317 at June 30, 2017. Pension Plan Pension liabilities, pension expense, and deferred outflowsofrexoorcrsund deferred inflows of resources related to pensions — At June 30, 2017, the Department reported a liability of $29,247,607 for its proportionate share of the net pension liability. The net pension liability was measured as ofJune 30, 2016, and the total pension liability used to calculate the net pension liability was determined by an actuarial valuation as of that date. The Department's proportion of the net pension liability was based on a pjection of the employer contributions to the pension plan relative to projected contributions of all participating employers. At June 30, 2016, the Department's proportion was .22%, which didn't change from its proportion measured as ofJune 30, 2015. For the year ended June 30, 2017, the Department recognized pension expense of $3,696,028. At June 30, 2017, the Department reported deferred outflows of resources and deferred inflows of resources related to pensions from the following sources: Differences between expected and actual experience Net difference between projecteduoducm/u|ioveutmcnt Earnings on pension plan investments Changes in assumptions Changes in proportion and differences between employer contributions and proportionate share of contributions Department contributions subsequent to the measurement date Total -l00- Deferred Deferred Outflows Inflows of of Resources Resources $ 582,442 $ 423,337 1,789,236 5,493,487 2.380,904 2,018,877 1,603,278 ,442 214 COUNTY OF HAWAII Notes to the Basic Financial Statements June 30, 2017 The $1,603,278 reported as deferred outflows of resources related to the Department's contributions to the pension plan subsequent to the measurement date will be recognized as a reduction of the net pension liability in the fiscal year ended June 30, 2018. Other amounts reported as deferred outflows of resources and deferred inflows of resources related to pensions will be recognized in pension expense as follows: Fiscal Year Ending June 30, 2018 2019 2020 2021 2022 Amount $ 1,667,202 1,667,203 2,015,569 1,497,749 962,132 $ 7,809.855 Sensitivity of the Department's proportionate share of the net pension liability to changes in the discount rate — The following presents the County's proportionate share of the net pension liability calculated using the discount rate of 7.00%, as well as what the County's proportionate share of the net pension liability would be if it were calculated using a discount rate that is 1 -percentage -point lower (6.00%) or I -percentage -point higher (8.00%) than the current rate: 1% Decrease (6.00%) Department's proportionate share of the net pension liability $ 37,400,588 Current Discount Rate (7.00%) $ 29.247,607 1% Increase (8.00%) $ 22,501,284 Pension plan fiduciary net position — Detailed information about the pension plan's fiduciary net position is available in the separately issued ERS Comprehensive Annual Financial Report that includes financial statements and required supplementary information. Payables to the pension plan — At June 30, 2017, the annual amount payable to the ERS totaled $134,225, which represents the employer contribution for the month of June 2017, as required by HRS. Post -Retirement Benefits Effective July 1, 2007, the Department adopted the provisions of GASB Statement No. 45. This statement addresses how state and local governments should account for and report their costs and obligations related to postemployment benefits, healthcare, and other nonpension benefits. The Department's annual required contribution for its postemployment benefit obligation for the year ended June 30, 2017 was $1,867,000. The Department made contributions of $1,867,239 during the year ended June 30, 2017 and recorded a postemployment benefit asset of $385 at June 30, 2017. - 101 - COUNTY OF HAWAII Notes to the Basic Financial Statements June 30, 2017 Prior Period Adjustment The financial statements of the Department for the fiscal year ended June 30, 2016 included several outstanding customer deposit balances for which service connections were made prior to the fiscal year end but no service connection income was recognized. Therefore, an adjustment was made to decrease customers' deposits and increase beginning net position by $449,220 for the fiscal year ended June 30, 2016. 'lO2' COUNTY OF HAWAII Required Supplementary Information June 30, 2017 Schedule of Funding Progress for the EUTF (In thousands) Actuarial Accrued UAAL as a Actuarial Liability Unfunded Percentage Actuarial Value of (AAL) — AAL Funded Covered of Covered Valuation Assets Entry Age (UAAL) Ratio Payroll Payroll Date a , b (b -a) (a/b) (c ((b-a)/c) July 1, 2011 $61,907 $394,633 $332,726 15.7% $130,170 255.6% July 1, 2013 $66,077 $410,182 $344,105 16.1% $137,810 249.7% July 1, 2015 $91,579 $466,874 $375,295 19.6% $159,255 235.7% - 103 - COUNTY OF HAWAII Required Supplementary Information June 30, 2017 Measurement Period Ended Schedule of the County's Proportionate Share of the Net Pension Liability (ERS) Last 10 Fiscal Years County's Proportion of the Net Pension Liability (%) County's Proportionate Share of the Net Pension Liability ($) County's Covered Payroll Proportionate Share of the Net Pension Liability as a %age of Covered Payroll Plan Fiduciary Net Position as a %age of the Total Pension Liability June 30, 2016 4.6% June 30, 2015 4.4% June 30, 2014 4.0% June 30, 2013 4.2% $618,129,088 $382,070,813 $322,626,262 $377,065,856 $156,556,514 $149,760,317 $137,669,418 $129,153,763 394.8% 255.1% 234.3% 292.0% 51.2% 62.4% 63.9% 58.0% * This schedule is intended to present information for 10 years, as of the measurement date of the collective net pension liability for each respective fiscal year. Additional years will be built prospectively as information becomes available. See accompanying notes to required supplementary information - 104 - COUNTY OF HAWAII Required Supplementary Information June 30, 2017 Fiscal Year Ended June 30, 2017 June 30, 2016 June 30, 2015 June 30, 2014 June 30, 2013 June 30, 2012 June 30, 2011 June 30, 2010 June 30, 2009 June 30, 2008 Schedule of the Employer Pension Contributions (ERS) Last Ten Fiscal Years Statutorily Required Contribution $ 36,157,981 $ 34,013,001 $ 31,456,148 $ 26,503,830 $ 23,763,101 $ 20,884,021 $ 21,424,642 $ 22,120,137 $ 22,310,600 $ 18,195,447 Actual County Contributions Recognized by the Plan $ 36,157,981 $ 34,013,001 $ 31,456,148 $ 26,503,830 $ 23,763,101 $ 20,884,021 $ 21,424,642 $ 22,120,137 $ 22,310,600 $ 18,195,447 Contribution Deficiency County's (Excess) Covered Payroll $ -- $ 163,626,447 $ - $ 156,556,514 $ -- $ 149,760,317 $ - $ 137,669,418 $ -- $ 129,153,763 $ -- $ 123,218,017 $ - $ 126,714,584 $ -- $ 132,253,481 $ $ 133,934,674 $ $ 126,897,194 See accompanying notes to required supplementary information - 105 - Contributions as a %age of Covered Payroll 22.1% 21.7% 21.0% 19.3% 18.4% 16.9% 16.9% 16.7% 16.7% 14.3% COUNTY OF HAWAII Required Supplementary Information June 30, 2017 Note — Changes of Assumptions Amounts reported in the schedule of the proportionate share of the net pension liability as of the measurement period ended June 30, 2016 were significantly impacted by the following changes of actuarial assumptions: • The investment return assumption decreased from 7.65% to 7.00% • Mortality assumptions were modified to assume longer life expectancies as well as to reflect continuous mortality improvement Prior to the measurement period ended June 30, 2016, there were no other factors, including the use of different assumptions that significantly affect trends reported in these schedules. - 106 - COUNTY OF WAII Required Supplementary Information June 30, 2017 Schedule of Changes in Total Pension Liability (Bandsmen Pension) Last Ten Fiscal Years Measurement year ending 2017 June 30, Total Pension Liability Service Cost 16,416 Interest on the Total Pension Liability 36,289 Assumption Changes (113,807) Benefit Payments (53,347) Net Change in Total Pension Liability (114,449) Total Pension Liability — Beginning 1,261,229 Total Pension Liability — Ending $ 1.146.780 Covered Employee Payroll $49,505 Total Pension Liability as a Percentage of Covered Employee Payroll 2,316.5% * This schedule is intended to present information for 10 years, as of the measurement date of the total pension liability for each respective fiscal year. Additional years will be built prospectively as information becomes available. - 107 - This pageintentionally left hank. NONMAJOR GOVERNMENTAL FUNDS SPECIAL REVENUE FUNDS HIGHWAY FUND - Used to account for the costs of maintaining the County's highways and streets. Financing is provided primarily by fuel, motor vehicle weight and public utility franchise taxes. SEWER FUND - Used to account for costs of operating the County's various sewer systems. Financing is provided by charges to users for sewer services. SOLID WASTE FUND — Used to accumulate moneys for the operation, maintenance, and administration of the County's solid waste management, collection and disposal systems. Financing is provided by tipping fees at the landfills and by disposal permit fees. CEMETERY FUND - Used to accumulate moneys to guarantee the future maintenance of County cemetery sites. Financing is provided from the sale of burial lots in County cemeteries. PARKING METER FUND - Used to account for the costs of maintaining County on -street and off-street parking areas. Financing is provided by the proceeds from parking meters. VEHICLE DISPOSAL FUND - Used to accumulate moneys for the towing, removal, disposal and recycling of abandoned or discarded automobiles and automobile parts. Financing is provided by annual fees collected with motor vehicle registrations. BIKEWAY FUND - Used to accumulate moneys for the construction of bikeways within the County. Financing is provided by bicycle license fees. WORKFORCE INVESTMENT ACT FUND - Used to account for employment and training services provided to economically disadvantaged adults, dislocated workers and youth. Financing is provided by federal grants. GOLF COURSE FUND - Used to account for the cost of operating the Hilo Municipal Golf Course. Funding is provided from green fees and payments from restaurant and pro shop concessionaires. GEOTHERMAL RELOCATION AND COMMUNITY BENEFITS FUND - Used to account for the County's share of geothermal resource royalties received from the operator of a geothermal power plant located in the County. The funds are earmarked for a geothermal relocation program and to benefit the lower Puna area. BEAUTIFICATION FUND - Used to accumulate moneys for the beautification of highways and disposal of abandoned vehicles within the County. Financing is provided by assessments on vehicle registrations. HAWAII COUNTY HOUSING AGENCY- Used to account for Federal and County moneys used to provide public housing assistance within the County. PARK DEDICATION FUND - Used to account for moneys deposited with the County by subdividers to provide land for parks and playgrounds in subdivisions. DEBT SERVICE FUND INTEREST FUND - Used to accumulate moneys for payment of interest on general obligation bonds. Moneys required to service interest maturities are transferred annually from the General Fund. This page intentionally left bank. - 109 COUNTY OF HAWAII Nonmajor Governmental Funds Combining Balance Sheet June 30, 2017 Special Revenue Funds Highway Fund Assets Cash and cash equivalents Investments Imprest fund Receivables: Due from other governments Due from other governmental funds Due from other nongovernmental funds Trade, net of allowance for doubtful accounts Real estate held for sale Other Total assets Liabilities, Deferred Inflows and Fund Balances Liabilities: Accounts payable Accrued payroll Due to other governmental funds Advance Collections -Intergovernmental Other Total liabilities Deferred Inflows of Resources Unavailable Revenue Fund balances: Restricted for: Debt service Highways, streets and abandoned vehicles Rental assistance and subsidy Committed to: Sanitation Highways, streets and abandoned vehicles Rental assistance and subsidy Cemetery Golf course Lower Puna area Parks and recreational projects Total fund balances Total liabilities, deferred inflows and fund balances Sewer Fund Solid Waste Fund Cemetery Fund Parking Meter Fund $ 7,930,984 $ 8,512,262 $11,727,077 $130,659 $ 261,634 1,194,653 150,058 400 250 11,033 392,945 202,410 174 1,350 1,235,896 1,260,770 9. 1,344,711 1,450,689 50,064 1,703,953 $ 13431,280 $ 130,659 $ 261,634 9,275,695 $ 9,963,351, ... � ..� $ 1,055,434 504,397 662,010 238,270 960 2,461,071 6,814,624 6,814,624 $ 238,216 188,088 375,470 79,245 881,019 $ 2,513,904 375,764 640,361 11,998 20 3,542,047 1,235,896 1,260,770 7,846,436 8,628,463 130,659 261,634 7,846,436 8,628,463 130,659 261,634 $ 9,275,695 $ 9,963,351 $13,431,280 $130,659 $ 261,634 -110- Special Revenue Funds Vehicle workforce --- Golf Cicothermal Rcloc Bcanti' Hawaii County Park Disposal Bikeway Innovation it Course &c"m="wty fication Housing Dedication Fund Fund *m="*"Fund Pund o^n"n`"��__�� Fund _�_Fund $8,884,938 $ 635,792 $ $ 123,658 $3.54O,621 $ 659,798 $3.\24,412 27,768 60,658 2,000 231,966 - - 402,551 38,994 504 144,694 270,960 504 547,245 $ 339,307 $ 13,903 1,580 4,648 47,509 81.0)] 270,960 2,346 8,459,970 8,459,970 621,889 74,719 800 166,009 37,352 233,693 569 16,811 $ 79,271 - 155,239 268 184`791 ' 176,284 569 17,079 595,585 4,087,297 6427)9 29,718 |,5)4.D] 1,219,449 88,426 621,889 74,719 4,087,297 642,719 2,733,602 88,426 $8.884,938 635,792 270,960 $ 126,154 $ 4,087,866Q 659,798$3,358,9O5 88,426 COUNTY OF HAWAII Nonmajor Governmental Funds Combining Balance Sheet June 30, 2017 (Concluded) Debt Service Fund Total Nonmajor Interest Governmental Fund Funds Assets Cash and cash equivalents Investments Imprest fund Receivables: Due from other governments Due from other governmental funds Due from other nongovernmental funds Trade, net of allowance for doubtful accounts Real estate held for sale Other Total assets Liabilities, Deferred Inflows and Fund Balances Liabilities: Accounts payable Accrued payroll Due to other governmental funds Advance Collections -Intergovernmental Other Total liabilities Deferred Inflows of Resources Unavailable Revenue Fund balances: Restricted for: Debt service Highways, streets and abandoned vehicles Rental assistance and subsidy Committed to: Sanitation Highways, streets and abandoned vehicles Rental assistance and subsidy Cemetery Golf course Lower Puna area Parks and recreational projects Total fund balances Total liabilities, deferred inflows and fund balances See accompanying independent auditors' report. - 112- $2,663,185 $ 48,222,780 60,658 3,450 1,996,606 389,994 1,350 2,496,666 402,55 I 264,588 5,551,755 2,663,185 $ 53,838,643 63,199 $ 4,258,995 1,275,645 2,217,219 250,268 319,708 63,199 8,321,835 2,599,986 2,526,384 2,599,986 8,079,232 1,514,153 16,474,899 8,721,604 1,219,449 130,659 74,719 4,087,297 88,426 2,599,986 42,990,424 $2,663,185 $ 53,838,643 This page intentionally eft bi, -113- COUNTY OF HAWAII Nonmo 'orGoveromuwntu)Fouda Combining Statement of Revenues, Expenditures, and Changes in Fund Balances For the Fiscal Year Ended June 30, 2017 Special Revenue Funds Solid Parking Highway Sewer Waste Cemetery x4cte, Fund Fund Fund Fund Fund Revenues Fuel taxes $ 8.288/676 Public utility franchise taxes 7,950.750 Licenses and permits 11.773'233 Intergovernmental 1,063,10I 288,840 Charges for services - 7,784,565 9.305.944 12.997 Investment earnings (loss) ' Other 405/693 30,304 1,560.507 11.750 Total revenues 29,481,454 7,814,869 11,155,351 11,750 12,997 Expenditures Current: General Government Public safety 7,451,063 Highways and streets 17,274.718 Health, education and welfare Culture and recreation Sanitation 7,733,585 28.148.574 Pension and retirement contributions 2.165,352 743,621 1,508,164 Employees' health insurance 1.024,730 278,192 704,852 Other 717.956 82.806 611,359 Debt service: Principal 154'549 475/27 Interest 12,128 30.389 Total expenditures 28,801,290 8,8 0,204 3\,470,26j Excess (deficiency) of revenuesover (under) expenditures 680,158 (1,015,3 5) (20,323,914) I 1,750 12,997 - Other Financing Sources (Uses Transfers in 10,000 2.120.785 18,679,575 Increases in capital leases 8,233 1.4}].164 Transfers out (]95],825) Total other financing sources (uses) (3,934,592) 2,120,785 20,092,739 Net change in fund balances (3,254,434) Fund balances at beginning of year 10,069,058 Fund balances at end of year 6,814,624 7,846,436 8,628,463 0,659 261,634 1,105,450 6,740,986 (231,175) 8,859,638 11,750 118,909 12,997 248,637 -||4' Special Revenue Funds Vehicle Workforce Golf Geothermal Reloc Beauti- Hawaii County Park Disposal Bikeway Innovation & Course & Community kation Housing Dedication Fund Fund _ ippon Acl Fund Fund _ Benefits Fund Fund Agency Fund 2,282,664 77,621 190,220 - 1,021,604 _ 19,017,328 2,724 - 585,557 3,831 15 13,777 1,113,208 .. 980,017 2,299,165 77,621 1,021,604 585,557 1,113,208 190,220 20,001,176 15 1,704,359 17,738 16,549 1,141,202 85,604 188,840 1,021,604 936,033 185,896 106,362 2,347 127,940 21,831,642 656,346 282,868 4,959 525 1,738,646 85,604 1,021,604 1,230,638 1,141,202 316,780 22,776,340 560,519 (7,983) (645,081) (27,994) (126,560) (2,775,164) 15 560,519 (7,983) 7,899,451 629,872 $ 8,459,970 $ 621,889 477,519 1,572,396 38,967 477,519 1,611,363 (167,562) (27,994) (126,560) (1,163,801) 15 769,279 3,897,403 88,411 242,281 4,115,291 74,719 5 4,087,297 - 115 - $ 642,719 2,733,602 88,426 (Continued) COUNTY OF HAWAII Nonmajor Governmental Funds Combining Statement of Revenues, Expenditures, and Changes in Fund Balances For the Fiscal Year Ended June 30, 2017 Revenues Fuel taxes Public utility franchise taxes Licenses and permits Intergovernmental Charges for services Investment earnings (loss) Other Total revenues (Concluded) Debt Service Fund Total Nonmajor Interest Governmental Fund Funds 388,011 388,011 $ 8,288,676 7,950,750 14,323,738 21,778,885 17,691,787 3,846 4,115,316 74,152,998 Expenditures Current: General Government 1,141,202 Public safety 7,451,863 Highways and streets 17,549,162 Health, education and welfare 22,853,246 Culture and recreation 1,063,973 Sanitation 37,586,518 Pension and retirement contributions - 5,277,117 Employees' health insurance 2,405,553 Other 1,414,468 Debt service: Principal 635,435 Interest 17,154,756 17,197,798 Total expenditures 17,154,756 114,576,335 Excess (deficiency) of revenues over (under) expenditures (16,766,745) (40,423,337) Other Financing Sources (Uses) Transfers in 16,275,431 39,135,706 Increases in capital leases 1,460,364 Transfers out (3,952,825) Total other financing sources (uses) 16,275,431 36,643,245 Net change in fund balances (491,314) (3,780,092) Fund balances at beginning of year 3,091,300 46,770,516 Fund balances at end of year $ 2,599,986 $ 42,990,424 See accompanying independent auditors' report. - 1 1 6 - COUNTY OF HAWAII Highway Fund Schedule of Revenues, Expenditures, and Changes in Fund Balance - Budget and Actual (Budgetary Basis) For the Fiscal Year Ended June 30, 2017 Actual Variance Original Final (Budgetary Positive Budget Budget Basis) (Negative) Revenues: Taxes: Fuel taxes $ 7,800,000 $ 7,800,000 $ 7,934,224 $ 134,224 Public utility franchise taxes 9,100,000 9,I00,000 7,950,750 (1,149,250) Total taxes 16,900,000 16,900,000 15,884,974 (1,015,026) Licenses and permits - motor vehicle weight taxes 11,100,000 11,100,000 11,773,233 673,233 Intergovernmental 1,503,567 1,590,036 1,053,719 (536,317) Charges for services 500,000 500,000 324,792 (175,208) Other 74,399 74,399 80,901 6,502 Total revenues 30,077,966 30,164,435 29,117,619 (1,046,816) Expenditures: General government -- -« Public safety - protective inspection 11,000 11,000 2,102 8,898 Public safety - traffic engineering 8,293,279 8,389,748 7,489,429 900,319 Highways and streets 12,261,132 12,261,132 9,406,925 2,854,207 Highways and streets mass transit 7,400,000 7,400,000 7,056,390 343,610 Pension and retirement contributions 2,497,650 2,347,650 2,163,307 184,343 Employees' health insurance 1,100,000 1,100,000 1,025,593 74,407 Other 854,000 1,004,000 709,698 294,302 Total expenditures 32,417,061 32,513,530 27,853,444 4,660,086 Excess (deficiency) of revenues over (under) expenditures (2,339,095) (2,349,095) 1,264,175 3,613,270 Other financing sources (uses) - transfers in (out) - Transfers in - General Fund 10,000 10,000 Transfers out - Capital Projects Fund (3,500,000) (3,720,566) (3,646,708) 73,858 Deficiency of revenues and other sources under expenditures and other uses Fund balance at beginning of year (5,839,095) (6,059,661) (2,372,533) 3,687,128 10,069,058 10,069,058 10,069,058 - Fund balance at end of year $ 4,229,963 $ 4,009,397 $ 7,696,525 $ 3,687,128 See accompanying independent auditors' report. -I17- COUNTY OF HAWAII Sewer Fund Schedule of Revenues, Expenditures, and Changes in Fund Balance - Budget and Actual (Budgetary Basis) For the Fiscal Year Ended June 30, 2017 Actual Variance Original Final (Budgetary Positive Budget Budget Basis) (Negative) Revenues: Charges for services - sewer fees $ 7,371,924 $ 7,371,924 $ 7,784,565 5 412,641 Other - - 30,304 30,304 Total revenues 7,371,924 7,371,924 7,814,869 442,945 Expenditures: Sanitation 10,108,110 10,108,1 10 8,698,771 1,409,339 Pension and retirement contributions 884,600 847,600 739,745 107,855 Employees' health insurance 306,000 306,000 268,963 37,037 Other 550,000 587,000 76,578 510,422 Total expenditures 11,848,710 11,848,710 9,784,057 2,064,653 Deficiency of revenues under expenditures (4,476,786) (4,476,786) (1,969,188) 2,507,598 Other financing sources: Transfers in - General Fund 2,120,785 2,120,785 2,120,785 Excess (deficiency) of revenues and other sources over (under) expenditures Fund balance at beginning of year Fund balance at end of year See accompanying independent auditors' report. (2,356,001) (2,356,001) 151,597 2,507,598 6,740,986 6,740,986 6,740,986 $ 4,384,985 $ 4,384,985 $ 6,892,583 $ 2,507,598 -118- COUNTY OF HAWAII Solid Waste Fund Schedule of Revenues, Expenditures, and Changes in Fund Balance - Budget and Actual (Budgetary Basis) For the Fiscal Year Ended June 30, 2017 Revenues: Intergovernmental Charges for services - tipping fees Other Total revenues Actual Variance Original Final (Budgetary Positive Budget Budget Basis) (Ne ative $ 428,013 $ 428,013 $ 295,001 $ (133,012) 8,507,450 8,507,450 9,305,944 798,494 247,212 247,212 1,560,567 1,313,355 9,182,675 9,182,675 11,161.512 1,978,837 Expenditures: Sanitation 28,591,211 28,541,21 I 26,167,821 Pension and retirement contributions 1,548,200 1,505,200 1,505,1 19 Employees' health insurance 770,000 704,000 703,464 Other 471,000 630,000 597,591 2,373,390 81 536 32,409 Total expenditures 31,380,411 31,380,411 28,973,995 2,406,416 Deficiency of revenues under expenditures (22,197,736) (22,197,736) (17,812,483) 4,385,253 Other financing sources: Transfers in - General Fund 18,679,575 18,679,575 18,679,575 Excess (deficiency) of revenues and other sources over (under) expenditures Fund balance at beginning of year Fund balance at end of year See accompanying independent auditors' report (3,518,161) 8,859,638 $ 5,341,477 - 119- (3,518,161) 8,859,638 $ 5,341,477 867,092 8,859,638 $ 9,726,730 4,385,253 $ 4,385,253 COUNTY OF HAWAII Cemetery Fund Schedule of Revenues, Expenditures, and Changes in Fund Balance - Budget and Actual (Budgetary Basis) For the Fiscal Year Ended June 30, 2017 Actual Variance Original Final (Budgetary Positive Budget Budget Basis) (Negative) Revenues - other - sale of cemetery plots 10,000 $ 10,000 ||,75U 1,750 Expenditures - health, education and welfare 10,000 10.00 10,000 Excess of revenues over expenditures 11,750 11J50 Fund balance at beginning of year })8.909 118,909 110.909 Fund balance at end of year 18.909 $ 118.909 $ 130.659 % l|,750 See accompanying independent auditors' report. -l2O- COUNTY OF HAWAII Parking Meter Fund Schedule of Revenues, Expenditures, and Changein Fund Balance - Budget and Actual (Budgetary Basis) For the Fiscal Year Ended June 30, 2017 Actual Variance Original Final (Budgetary Positive Budget Budget Basis) (Negative) Revenues - Charges for serices - highways and streets $ 12,997 12,997 Excess of revenues over expenditures 12,997 12,997 Fund balance at beginning of year 248,637 248/637 248,637 Fund balance at end of year $248.d]7 $ 248,637 $2h|,6]4 |2,997 See accompanying independent auditorsrepvm - 121 - COUNTY OF HAWAII Vehicle Disposal Fund Schedule of Revenues, Expenditures, and Changes in Fund Balance - Budget and Actual (Budgetary Basis) For the Fiscal Year Ended June 30, 2017 Actual Variance Original Final (Budgetary Positive Budget Budget Basis) (Negative) Revenues: Licenses and permits - vehicle disposal fee $ 2,178,552 $ 2,178,552 $ 2,282,664 $ 104,112 Charges for services - towing charges 1,000 1,000 2,724 1,724 Miscellaneous 12,500 12,500 13,778 1,278 Total revenues 2,192,052 2,192,052 2,299,166 107,114 Expenditures: Sanitation 5,282,563 5,282,563 1,466,479 3,816,084 Pension and retirement contributions 29,273 29,273 17,419 11,854 Employees' health insurance 24,000 24,000 16,504 7,496 Other 2,000 2,000 2,000 Total expenditures 5,337,836 5,337,836 1,500,402 3,837,434 Excess (deficiency) of revenues over (under) expenditures Fund balance at beginning of year Fund balance at end of year See accompanying independent auditors' report. (3,145,784) (3,145,784) 798,764 3,944,548 7,899,451 7,899,451 7,899,451 $ 4,753,667 $ 4,753,667 $ 8,698,215 $ 3,944,548 - 122 - COUNTY OF HAWAII Bikeway Fund Schedule of Revenues, Expenditures, and Changes in Fund Balance - Budget and Actual (Budgetary Basis) For the Fiscal Year Ended June 30, 2017 Actual Variance Original Final (Budgetary Positive Budget Budget Basis) (Negative) Revenues - licenses and permits - bicycle tax $ 75,000 $ 75,000 S 77.621 $ 2.621 Expenditures - highways and streets 102,495 102,495 24,780 77,715 Excess (deficiency) of revenues over (under) expenditures (27,495) (27,495) 52.841 80,336 Fund balance at beginning of yea629'872 629.872 629.872 Fund balance at end of year $602,377 $602,377 $682,713 $80,336 See accompanying independent auditors' report. - 123 - COUNTY OF HAWAII Workforce Innovation & Opportunity Act Fund Schedule of Revenues, Expenditures, and Changes in Fund Balance - Budget and Actual (Budgetary Basis) For the Fiscal Year Ended June 30, 2017 Revenues intergovernmental - federal grants Expenditures- health, education and welfare Excess of revenues over expenditures Fund balance at beginning of year Fund balance at end of year See accompanying independent auditors' report. Actual Variance Original Final (Budgetary Positive Budget Budget Basis) (Negative) - 124 - COUNTY OF HAWAII Golf Course Fund Schedule of Revenues, Expenditures, and Changes in Fund Balance - Budget and Actual (Budgetary Basis) For the Fiscal Year Ended June 30, 2017 Revenues: Charges for services Actual Variance Original Final (Budgetary Positive Budget Budget Basis) (Negative) $ 596,400 $ 596,400 $ 585,557 $ (10,843) Expenditures: Culture and recreation 1,020,918 1,020,918 932,877 Pension and retirement contributions 200,270 200,270 185,164 Employees' health insurance 114,504 114,504 106,324 Other 11,131 11,131 2,346 Total expenditures 1,346,823 1,346,823 1,226,711 Deficiency of revenues under expenditures (750,423) (750,423) (641,154) Other financing sources: Transfers in - General Fund 477,519 477,519 477,519 88,041 15,106 8,180 8,785 120,112 109,269 Excess of revenues and other sources over expenditures (272,904) (272,904) (163,635) 109,269 Fund balance at beginning of year 242,281 242,281 242,281 Fund balance at end of year $ (30,623) $ (30,623) $ 78,646 $ 109,269 Sec accompanying independent auditors' report. - 125 - COUNTY OF HAWAII Geothermal Relocation and Community Benefits Fund Schedule of Revenues, Expenditures, and Changes in Fund Balance - Budget and Actual (Budgetary Basis) For the Fiscal Year Ended June 30, 2017 Actual Variance Original Final (Budgetary Positive Budget Budget Basis) (Negative) Revenues Miscellaneous: Geothermal royalties $ 600,000 $ 600,000 % 360,850 $ (239.150) Sale of real property 706,225 706.225 Total revenues 600/000 800/000 1.067.075 467,075 Expenditures: General government: Planning and zoning Excess (deficiency) of revenues over (under) expenditures Fund balance at beginning of year 1,700,000 1,700,000 823,005 876,995 (1.100,000) 4,115,291 Fund balance at end of year $ 3,015,291 See accompanying independent auditorreport. -l26' (1,100,000) 4,115,2914,115,291 244,070 1,344,070 $ 3,015,291 $4,35A]6\ 8 1,344,070 COUNTY OF HAWAII Beautification Fund Schedule of Revenues, Expenditures, and Changes in Fund Balance - Budget and Actual (Budgetary Basis) For the Fiscal Year Ended June 30, 2017 Revenues - licenses and permits - highway beautification Actual Variance Original Final (Budgetary Positive Budget Budget Basis) (Negative) $ 182,000 $ 182,000 $ 190,220 $ 8,220 Expenditures: Highways and streets 179,800 179,800 178,800 1,000 Culture and recreation 131,300 131,300 112,762 18,538 Total expenditures 311,100 311,100 291,562 19,538 Deficiency of revenues under expenditures (129,100) (129,100) (101,342) 27,758 Fund balance at beginning of year 769,279 769,279 769,279 - Fund balance at end of year $ 640,179 $ 640,179 $ 667,937 $ 27,758 See accompanying independent auditors' report. - 127 - COUNTY OF HAWAII Hawaii County Housing Agency Schedule of Revenues, Expenditures, and Changes in Fund Balance - Budget and Actual (Budgetary Basis) For the Fiscal Year Ended June 30, 2017 Actual Variance Original Final (Budgetary Positive Budget Budget Basis) (Negative) Revenues: Intergovernmental - Federal - HUD - Voucher program $ 16,288,452 $ 19,288,452 $ 19,047,155 S (241,297) Investment earnings 1,609 1,609 3,831 2,222 Resale of property - 98,883 98,883 Other 68,744 68,744 528,914 460,170 Total revenues 16,358,805 19,358,805 19,678,783 319,978 Expenditures: Health, education and welfare 17,300,197 20,308,197 19,871,908 436,289 Pension and retirement contributions 713,198 713,198 654,719 58,479 Employees' health insurance 342,299 342,299 282,429 59,870 Total expenditures 18,355,694 21,363,694 20,809,056 554,638 Deficiency of revenues under expenditures (1,996,889) (2,004,889) (1,130,273) 874,616 Other financing sources - transfers in - Transfers in - General Fund 1,810,896 1,818,896 1,572,396 (246,500) Excess (deficiency) of revenues and other sources over (under) expenditures Fund balance at beginning of year Fund balance at end of year See accompanying independent auditors' report, (185,993) (185,993) 442,123 628,116 3,897,403 3,897,403 3,897,403 3,711,410 S 3,711,410 $ 4,339,526 $ 628,116 - 128- COUNTY OF HAWAII Park Dedication Fund Schedule of Revenues, Expenditures, and Changes in Fund Balance - Budget and Actual (Budgetary Basis) For the Fiscal Year Ended June 30, 2017 Actual Variance Original Final (Budgetary Positive Budget Budget Basis) (Negative) Revenues - investment earnings S $ 760 760 Excess of revenues over expenditures 760 760 Fund balance at beginning of year 88.411 88'411 88`411 Fund balance at end of year $ 88,411 $ 88,411 $ 89,171 760 See accompanying independent auditors' report. '|2g' COUNTY OF HAWAII Agency Funds Combining Statement of Agency Funds Net Position June 30, 2017 Performance State Improvement Improvement Improvement and Weight District District District Refundable Tax No. 18 No. 19 Revolving Deposits Fund Fund Fund Fund Fund Assets Cash arid cash equivalents $1.980.809 $ 478'889 $ 255.131 $ 5,627 X 357.893 Investments ' 252,935 167,995 ' Due from other agency funds Other receivables 4,252 1,556 105 Total assets $1'080.809 483,141 $ 509,622 173.622 $ 357,798 Liabilities Due to other agency funds $ 2,925 Accrued liabilities 1/980,809 0.009 3/956 ' Advances payable 13,737 8,069 354,873 Assets held for the benefit of improvement districts 463'395 492,597 173,622 Total liabilities $1,980,809 483,141 509,622 173,622 $ 357,798 See accompanying independent auditors' report. '|38' Non -Profit Organ and Business Payroll Flexible Lapsed License Tissue Improvement Clearance Spending Warrants Plates Education District Fund Account Fund Fund Fund 1 - Kailua Total 85,426 $ 354,875 $ 323,234 $ 1,025 $ 1,160 $ 55 5 3,843,924 420,930 3,623 - - 3,623 431,320 8,571 - 3,570 449,374 516,746 $ 354,875 $ 335,428 $ 1,025 $ 1,160 $ 3,625 $ 4,717,851 698 $ - $ - S 516,048 354,875 335,428 1,025 1,160 $ 3,623 333 3,199,643 381,679 3,292 1,132,906 $ 516,746 $ 354,875 35,428 $ 1,025 1,160 $ 3,625 $ 4,717,851 COUNTY OF HAWAII Agency Funds Combining Statement of Changes in Assets and Liabilities For the Fiscal Year Ended June 30, 2017 State Weight Tax Fund Assets Cash and cash equivalents Balance Balance July 1, June 30, 2016 Additions Deductions 2017 $ 1,933,982 $ 23,843,223 $ 23,796,396 $ 1,980,809 Liabilities Vouchers payable $ - $ 23,784,953 $ 23,784,953 $ - Accrued liabilities - due to State of Hawaii 1,933,982 23,858,979 23,812,152 1,980,809 Total liabilities $ 1,933,982 $ 47,643,932 $ 47,597,105 $ 1,980,809 Improvement District No. 18 Fund Assets Cash and cash equivalents $ 402,107 Other receivables 3,684 Total assets $ 405,791 243,426 $ 166,644 $ 478,889 258,713 258,145 4,252 502,139 $ 424,789 $ 483,141 Liabilities Vouchers Payable $ $ 889 $ 889 $ Due to other non -agency funds 1,878 1,757 1,878 1,757 Accrued liabilities 3,683 206,509 205,940 4,252 Advances payable 14,626 13,737 14,626 13,737 Assets held for the benefit of improvement districts 385,604 205,848 128,057 463,395 Total liabilities $ 405,791 $ 428,740 $ 351,390 $ 483,141 Improvement District No. 19 Fund Assets Cash and cash equivalents $ 222,675 5 101,800 $ 69,344 $ 255,131 Investments 258,205 - 5,270 252,935 Other receivables 4,312 80,301 83,057 1,556 Total assets $ 485,192 $ 182,101 $ 157,671 $ 509,622 Liabilities Vouchers Payable $ $ 7,133 $ 7,133 $ Due to other non -agency funds 2,540 2,400 2,540 2,400 Accrued liabilities 4,312 80,301 83,057 1,556 Advances payable 6,580 13,069 6,580 13,069 Assets held for the benefit of improvement districts 471,760 88,731 67,894 492,597 Total liabilities $ 485,192 $ 191,634 $ 167,204 $ 509,622 - 132- COUNTY OF HAWAII Agency Funds Combining Statement of Changes in Assets and Liabilities For the Fiscal Year Ended June 30, 2017 Improvement District Revolving Fund Assets Cash and cash equivalents Investments Total assets Liabilities Assets held for the benefit of improvement districts Performance and Refundable Deposits Fund Assets Cash and cash equivalents Due from other non -agency funds Total assets Liabilities Vouchers payable Due to other agency funds Advances payable Total liabilities Payroll Clearance Fund Assets Cash and cash equivalents Due from other non -agency funds Other receivables Total assets Liabilities Vouchers payable Due to other agency funds Accrued liabilities Total liabilities Balance July I, 2016 $ 3,536 170,056 $ 173,592 Balance June 30, Additions Deductions 2017 2,091 2,091 $ 5,627 2,061 167,995 2,061 $ 173,622 $ 173,592 2,091 $ 258,768 1,600 $ 260,368 564,970 2,061 $ 173,622 466,045 $ 357,693 105 1,600 105 5,678 254,690 565,075 454,867 2,925 559,450 $ 260,368 $ 1,017,242 467,645 $ 357,798 454,867 5,678 459,267 2,925 354,873 919,812 $ 357,798 $ 470,978 $ 281,895,652 271,558,809 2,179 429,141 $ 282,281,204 $ 85,426 271,558,809 431,320 $ 473,157 $ 553,883,602 $ 553,840,013 $ 516,746 $ 134,322,557 $ 134,322,557 177 3,035 2,514 472,980 299,346,752 299,303,684 698 516,048 $ 473,157 $ 433,672,344 $ 433,628,755 $ 516,746 - 133 - COUNTY OF HAWAII Agency Funds Combining Statement of Changes in Assets and Liabilities For the Fiscal Year Ended June 30, 2017 Flexible Spending Account Assets Cash and cash equivalents Liabilities Accrued liabilities Lapsed Warrants Fund Assets Balance Balance July 1, June 30, 2016 Additions Deductions 2017 $ 355,731 357701 358,557 354,875 $ 355J31 357,701 Cash and cash equivalents $ 311,363 Due from other agency funds 5,855 Other receivables 6,073 Total assets Liabilities 358,557 354,875 12,051 180 $ 323,234 3,623 5,855 3,623 8,571 6,073 8,571 23,291 24,245 12,108 $ 335,428 Vouchers payable 0 ' Accrued liabilities 323,291 Total liabilitie Non-Profit License Plates Fund Assets Cash and cash equivalents 180 & 180 $ ' 20,477 8,340 335,428 $ 32]29) 20,657 8,520 $ 335,428 S 1,125 4,550 4,650 1,0I5 Liabilities Vouchers payable 4,650 4,650 Accrued liabilities: Due to non-profit agency 1.125 4,550 4,650 1I25 Total liabilities Organ and Tissue Education Fund Assets Cash and cash equivalents Liabilities Vouchers payable Accrued liabilities due to State of Hawaii Total liabilities 1.125 9200 9,300 8 1/025 1,115 0 4,456 4,411 0 1,160 � 3,579 3,579 � 1.115 4,456 4,411 1,160 1.115 8,035 7,900 1,160 '|]4' COUNTY OF HAWAII Agency Funds Combining Statement of Changes in Assets and Liabilities For the Fiscal Year Ended June 30, 2017 Business Improvement District I-Kailua Assets Cash and cash equivalents Other receivables - BID I-Kailua Assessment Due from other non -agency funds Total assets Liabilities Vouchers payable Accrued liabilities - due to KVBID Due to other non -agency funds Assets held for the benefit of improvement districts Total liabilities Total - All Agency Funds Assets Cash and cash equivalents Investments Due from other agency funds Due from other non -agency funds Other receivables - BID I-Kailua Assessment Other receivables Total assets Liabilities Vouchers payable Due to other agency funds Due to other non -agency funds Accrued liabilities Accrued liabilities - due to non-profit agency Accrued liabilities - due to State of Hawaii Accrued liabilities - due to KVBID Advances payable Assets held for the benefit of improvement districts Total liabilities See accompanying independent auditors' report. Balance July 1, 2016 Additions 811 22,156 2 810,275 794,436 856 22,969 $ 1,605,567 Balance June 30, Deductions 2017 811,031 813,300 580 1,624,911 516 297 22,156 809,652 333 817 784,525 809,652 516 1,114 803,389 22,969 $ 1,595,327 1,614,671 $ 3,962,191 428,261 5,855 1,602 22,156 16,248 $ 307,840,195 3,623 271,559,770 794,436 776,726 $ 4,436,313 $ 580,974,750 5,855 4,715 1,159,997 1,125 1,935,097 516 275,896 $ 159,388,460 5,960 4,974 300,01 1,740 4,550 23,863,435 333 586,256 1,053,1 12 1,081,195 $ 307,958,462 7,331 5,855 271,560,989 813,300 347,275 $ 580,693,212 $ 159,388,460 8,192 5,532 299,959,578 4,650 23,816,563 516 480,473 55 3,292 278 3,625 333 3,292 3,625 $ 3,843,924 420,930 3,623 383 3,292 445,699 $ 4,717,851 3,623 4,157 1,212,159 1,025 1,981,969 333 381,679 1,001,401 1,132,906 $ 4,436,313 $ 484,946,903 $ 484,665,365 $ 4,717,851 - 135 - COUNTY OF HAWAII Private Purpose Trusts Combining Statement of Private Purpose Trust Net Position June 30, 2017 Geothermal Asset Assets Fund Cash and cash equivalents $ 743,344 Investments 1,543,528 Total assets 5 2,286,872 Net Position Held in trust for other parties Total net position See accompanying independent auditorsreport. Shippers' Total Wharf Private Trust Purpose Fund Trusts $ 944,701 1,688,045 1,546,763 3,090,291 $ 2,491,464 4,778,336 $ 2,286,872 $ 2,491,464 S 4,778,336 $ 2,286,872 $ 2,491,464 $ 4,778,336 - 136 - COUNTY OF HAWAII Private Purpose Trusts Combining Statement of Changes in Private Purpose Trust Net Position For the Fiscal Year Ended June 30, 2017 Shippers' Total Geothermal Wharf Private Asset Trust Purpose Fund Fund Trusts Additions Contributions: Puna Geothermal Venture 50.088 $ 50,000 Investment earnings: Net increase (decrease) in fair value of investments Dividends Interest Total additions Deductions Claims Consultan1,526 1,526 Grant payments 125J94 125]94 Investment Fees 13'144 13.144 Total deductions 1.526 138,938 140,464 Change in net position 48.877 (25,848) 23,029 Net position, beginning of year 2.237.995 2'517'312 4.755'307 Net position, end of year 2,491,464 $4'77Q.338 (18,942) 78,566 59,624 - 33,585 33.585 19'345 939 20,284 50,403 113,090 163,493 See accompanying independent auditors' report. 'l]7' This page intentionally left bank, - 138 - STATISTICAL SECTION (UNAUDITED) Contents Page Financial Trends — These schedules contain trend information to help help the reader understand how the County's financial performance and well-being have changed over time. 139 Revenue Capacity — These schedules contain information to help the reader assess the County's most significant local revenue source, the property tax. 144 Debt Capacity — These schedules present information to help the reader assess the affordability of the County's current levels of outstanding debt and the County's ability to issue additional debt in the future. Demographic and Economic Information — These schedules offer demographic and economic indicators to help the reader understand the environment within which the County's financial acitivities take place. Operating Information — These schedules contain service and infrastructure data to help the reader understand how the information in the County's financial report relates to the services provided and the activities performed by the County. 150 153 155 Net Position by Component 2 0 a Z0E av ro 60' 066:' ,0 tan ary govemme o. .0 o a -A 6 5 z — = CC 0 a� 2 73 -5; o 0 00E o LI 0 < rE; a E Z 5 '3. E <7 2 u En al 2 < '- 00 ,3 5 7, E 2x2 o. E o 04 a.9 0 C accompanying mde 0 0 0 u Last Ten Fiscal Years . . ION ChnIn. OIOI >,t>>>ff, V WW ...... njW,Mn.nON N >a a CO en co CO CO COCO CO N >IN at CO C1I. nr,,. twl nt C) CO an N — CO n- un oa. >a a> men> CO An NCNCO —C),>0 n.nt NrnenNoirnmo ,namat—t,inaanr, ---,w4'maW"° fl ra 01 C CO era—araNchoa—.0 —agan>: 01 01 CO m 01 N 00,C N 001,1. riwc5 0, CO 01 01 42, C) olz -A° ..; 012,7. C: f:11 ,;•• 28go, ti 4=7, V. OJ'. - 140 - E E Unaudited - see accompanying independent a - 141 - ,.. 0 Fund Balances, Governmental Funds (Modified accrual basis of accounting) - 142 - V* Unaudited - sec accompanying independent auditorsrepori ssible at this time NOTE—GASB 54 was implemented in 2011 Except for the unassigned category, conversion of prior year data to new categories is ' Amount for fiscal year 2014 has been changed for consistency Revenues: Property tax Public service company tax Fire? tax Public utility franchise tax licenses and permits Intergovernmental Charges fur services Investment earnings (loss)' Settlement contributions Other COUNTY OF HAWAII Change in Fund Balances, Governmental Funds (Modified accrual basis of accounting) Last Ten Fiscal Years (Amounts in thousands) 2009 2010 Table 4 2013 2014 2015 2016 2017 $208,313 4225,858 4215,548 4216,511 5208,7,3I S 201,201 4 223,482 $ 236,190 $249,054 4 266,517 8,381 10,229 9,647 9,297 9,897 10,766 10,380 10,386 9,801 8,423 7,888 7,662 7,406 7,603 8,293 6,353 7,373 7,633 7,934 8,289 9,027 11,018 8,963 9,416 11,065 11,087 10,793 10,824 9,004 7,951 15,918 14,972 14,725 15,097 15,790 15,991 19,619 22,046 22,432 22,932 72,601 70,869 77,614 93,748 100,867 79,912 75,257 86,272 85,173 79,220 22,154 21,404 18,909 10,416 16,885 17,055 19,392 20,357 21,672 21,708 12,144 8,914 2,253 510 406 (618) 1,704 716 614 632 - 12,500 . . 7,151 5,690 3,241 7,874 4,201 4,399 30,1184 9,769 16,132 14,791_ Total Revenues 363,577 376,716 358,306 376,472 375,635 358,646 398,083 404,193 421,816 427,463 Expenditures: Current: General government 42,991 45,882 40,586 34,251 35,088 33,360 36,079 40,805 40,488 40,819 Public safety 103,617 107,540 108,798 104,917 104,523 106,885 111,220 122,819 127,451 136,163 Highways and streets 09,529 17,159 20,222 07,004 17,338 17,923 20,270 20,904 22,479 20,329 Sanitation 33,405 35,025 35,675 28,424 29,511 30,672 29,949 31,464 34,015 38,671 Health, education and welfare 24,609 24,596 25,519 26,847 23,749 24,199 2,3,070 24,540 25,380 30,535 Odium and recreation 08,179 18,853 07,266 16,001 16,763 16,337 18,334 20,056 21,561 21,196 Pension and retirement contributions 24,296 28,870 28,509 27,284 27,773 29,816 33,032 38,405 41,359 43,718 Employees' health insurance 18,089 19,119 23,573 25,212 25,902 26,011 26,786 27,731 30,112 32,147 Other postemploymen1 benefits 13,629 14,950 15,700 17,307 - . 3,170 4,532 7,180 11,495 Other 5,344 6,257 4,773 4,758 4,183 2,991 3,238 4,686 3,931 3,839 Debt service: Ptincipal 16,548 19,749 20,720 42,233 24,834 25,718 19,013 22,004 22,432 22,032 Interest 13,116 I2,790 14,584 14,841 15,032 14,345 14,644 13,871 12,974 17,289 Capital outlay 70,156 89,368 100,653 87,782 71,220 48,565 50,369 79,390 144,288 111,109 Total Expenditures Revenues over (under) Expenditures Other Financing Sources (Uses): Sale of assets Capital leases State Revolving Fund loans Sale of bonds Issuance of bond anticipation notes (BANs) Refunding bonds Premium on bonds Refunding bonds/BANs issuance costs Payment to refunded bond escrow agent Retirement of refunded debt Transfers in Transfers out Total other financing sources Net change in fund balances Debt service as a percentage of noricapital expenditures 403,508 440,158 459,578 446,971 395,916 376,822 390,775 451,375 533,650 529,342 (39,931) (63,442) (98,272) (70,499) (20,201) (18,176) 7,308 (47,182) (111,834) (101,879) 3,470 5B 10 6 153 I 10 25 66 21 2,187 1,026 1,948 47 2,521 1,307 14 1,971 3,389 3,769 1,916 280 6,811 9,257 4,569 4,991 3,072 7,317 8,130 50,000 . 45,000 - 50,480 130,136 19,000 , . 59,800 47,510 106,254 185 2,078 17,570 23,174 (19) (506) (128,920) (45,352) (9,635) 64,929 56,697 61,495 56,099 59,970 51,356 61,230 59,394 57,412 66,864 (64,929) (56,697) (61,495) _(56,099) (59,9712 (51,356) (61,238) (59,394) (57,412) (66,864) 7,573 51,549 27,750 56,388 7,243 66,072 3,096 0,999 046,908 71,720 (32,358) ( H ,893) 5(70,522) 5 (14 1 1 1) $(l3,038) 48,696 $ 10,404 (45 18 S2U74 S(3059) 93% 90% 10 4% 05 9% 12 3% 13,9% l00% 9.3% 91% 94% Unaudited - see accompanying independent auditorsreport ' Ar -noun for fiscal year 2014 has been changed for consistency - 143 es by Classification and Tax Rates Property Assessed •-• '.0 00 0 ON rsi th N N CO N co on .,crrjfn Le -1 tr) co N N 'a- N 00 rTZ' N ,a• oo r- T))- r‘i 't00co a) rN C,f c) co 0000 vn ----cococorn 000000 O 0 0 00 69 Vn 00 v; Cr, N 0 0, 00 C N 00 rn tn0 N '.0 000 Cr. r- r- Lr) 00 00 ri0 N vi CO Q N 05 'D r — 0 0 r- N •,ct- co -1- oo rec -- 69 0 0 0 0 0 0 tn kr) ‘n — 00 m kr) kr) cc; 00 00 O\ 0.600 .cr .-- N 0000 r on vn N c) r- cv co on ..et, 05 co co' N vn ei on -- ry t C N ON N V) on vn, vo m 69 0 cn "a' -0 a) 2 (Id co. ECO 2CO E 0. o < < 011 00 N 0 N N 0, N 0 Ln N 0 N -- N. N. oo con,, oo on co on N a; co TT tri on" N -- CO r- CO \O co ‘.0,. c7N tri r tt-c 'Cr 0 0 0 0 0 Lri tei v-1 ,rt C.3 0 0 en tri Lel tr) 0300 0 0. 00 00 tr-) EA V'. 0, 00'. 0 Cl "Zr ••- •--. 0 'etN N NN CN C- — co oi 00 '0 N CC N Cr N N tn. N ON ."0r r1'0 "crC N CO 0 0, 0 0 0 tr) 0 0 0 rn N CO 0: 0: 0 v6 00 ,r) 69 CO co N 7- c3 a) E o c0 - 144 - 'Ct 0, N r- -0, — N V1'0 'Cr'. cr4' N N CO kr) Tr' co r- .ezr .1- .1- 0' M vn r- N N N" 69 kn CO 021 a.) 0 C) c 0) E cti C-' 17,) E ° E a.) 0. 0 o 7 o o CO C 0 CO ON N 0 t— Fiscal year 2009 total direct rate $7.68 Continued next page. Fiscal year 2010 total direct rate $7.75 N r1 N N N O' N V— N O 1 0 V1 CT V N N O\ 00 — a+ r-1 O r1 '.0 o0 N V Cr, ON '.0 — O O M O Vl N N 69 Lr) 0 0 V1 kr) V1 v1 O4 — r1 00 V1 vl fT Cri CT 00 O, 01 ..r1 69 r'1 R -- ON '1- '.0 r- "3- • ".i 00 01 0 N N CO h v'^ Cf Vl 00 00 O -= r1 N O 01 '.0 0\ V'1 00 r•1 u> rl 69 0 kr-1 V'1 0 O V1 Yl Ire +rt 00 00 — M 00 01 V1 Cr: CT 0 0 0 00 Cr kr; 01 69 00 — 00 V1 '.0 N O N '.0 '.0 '.0 '.0 r1 Ot 00 — 00 N N V N C- © r+-r.V N00" Oi 00 CT N Vl rn N 0 1n 00 N r N `7 -- 0 V'1 N fid N_ 69 0 0 LL 0) t z 0 c,.ic a ro ` ,0 v c E m d C) CI °: c 'C c E oGQXUSQUX 0 N - 145 - Affordable Rental Housing CO 00 — 01 N — 'Cr Cl N Ct\ N N tri v1 — 00 41- CT O cr S V1 ON r1 Cr, CT r• 1 M 01 Lri 00 C N Q• N — © CT \0 O N r'1 C1� rt 01 O 0-1 • O tC+ rrl • — cr 'r'S 69 O '/1 00 O O Vl 0'1 1n t 1 — CO 00 M DO V1 Vl CT 0; O1 CT CCJ fT Cl'. Irl 69 r1 00 O '.0 CO r"1 00 O 0t — N N 00 O N CO N '.0 t Ch N t` M - ri et ON <f' <f 0 M '0 N N N N V'1 ^ 00 '1'1 krl rl 1r1 r1 N N V1 V1 O O Cl'. Vl v1 V1 00 00 — — C0 00 V1 v'1 Ot cr.‘ 0t CT 00 O\ V1 vl O N a) V1 Ct 00 01 N - �O Q 00 N rrlO+ N N 00 O 00 - '0 '0 rl .r O N N h rf N '1- 00 ",Y N 0 V O -'t N C) z o 12 a4 iC .O N C `d E e < US<LU =XQ able Rental Hou O ,45 O Y N N Continued next page. .D CO E— P- 7 CO Z c'14) C) 01 cz) -0 0 0 C CO— aJ > Ln N 04- -1- kr, 0 oo 00 JC r- C 00 oo oo 00 00 00 00 'T. rn 00 S 66 N 00 N-zt 0,N N •cf N <cr 01/4 CO r, 0„ v-1 0 'n v-, C, tfl VI 1/419 VI —0000--rn CO VI ..r.1 6 6 6 6 oc; kr', kri 69 01/4 N 00 v-) 1/40 CT rn \ N r1/41 01/4 ON CP. 00 S rn CO N. <cr" CT 'C 1/46 r."1. )fli N N ‘zt• kto co 0N 00 0 1/40 VI. V.1 00 <1- N N N C kr) Ln 0 0 kr, oo co oo 0-; cr; kr, o sO 'I- N N ,r) 0000 CT) oo N r Cr, — co oc r, N L.% N — r-- uto Ct N 00 -61: S 1/40 71- tr) NN N N C N 00 r 00 Er9 )fl VI VI VI VI V Cl') C, DO CO. CD, 91 0 a) 0 6 a% 0 00 rn Cr, N N 00 N "rt 49 CO N 'Tr CD N 1/40 •-• C, N N 1/40—'0 C5 N r 9-1' VI r: N N 1/40 Cr 1/40 Cl91 '.0 • O "Cr S rn N • •-• 00 69 Fiscal year 2013 total direct rate VI kn tr, Cl Lr, LI') 00 00 0 N 00 6 6 6 6' 0 6 0 LC ,.c) cyci 0'‘ nt 0 v.) •ct 0 .-- Ln r-- 0'. co cn,. r.-1 (CON 0' in • —. 0.7 co- 05 vi. LA rei '0 -1- I-- 1/40 -or C1/41 N 69 <4N - - 146 - < 1. N 00 00 1/40 trl 1/40 1/40 CD S 00 N 1/40 <31- rn 'kr ON.. 00 %O.. 00 P-- v", Cr: 0' • S 1/40 N <4 CO rn S 0 0 un \ CO 01/4 \ rn... 1/40 N •cr LI') V") L/9 49 Cri C.In 1/4,-) v-) 0 00 00 0 0 N 00 0 6 0 6 0 6 6 kca N. Cl') CO CO 1/40 h 1/4n 0 CO (:::‘ cn rn CD rn Cl') co cr; Do" -or kr) 6 rn .o C- - co r-- N 1/40 N N 69 • Cl) C19 Cr') kr) Cr) Cr) CD 0000 0 D3 N 00 0 -- 0 6 6 6 e 6 66 .6 N 0 00 CD 09 1/40 N 1/40 VD 40 00 1/40 CO 0, rn 1/40 1/40 Cr: 1/40 0: co Cl') rn r- .cr oo r1/43▪ " Cr')CO C N Commercial C 0 3 CO Conservation Homeowners Affordable Rental Housing CO N ai C 00 CO C. C C 0 71 z mi 00 CD 0 zl O.0t 0 ON '41 CT ,C) V") 'Tr r's. N CO 00 .1- u.,0 \ 00 CP, CD 1/40 0 0. 00 N N v-) Lr) ..r) in .4-) v.) ir)CrC CO 00 00 0 0 N 00 — 0 0 6 00 co. 6 ‘.6 N .1- 000 v")CC rnri 1/40 Cr 00 ,01- oxl 0 0 •–• • 0 C7 00 0 1/4r) rn C:t N 0 00 0 rs1.- 0 CO 'i t N .1- N CrC C N -- (-4 r‘i 00 N N kr) kr-) (r) ItC ../-1 CII o co. 09 co co N 00 — •–• C7 6 00 0: 6 \O — N CD 0 'C— 00 N 0" CrC N ON 00 Crl •–• Li" 00. CT 0 cr N 00" v-) 00<3. 0 CT, CO trl •4- CO rn .1' r-- 1/40 -ct r,)o— ✓ N N N n" 69 00 C C 1/40 CD N Fiscal year 2016 N .1- 00 trl 1/40 -- C7 04 rn rn 0 N •01. N Lf)N CO N N N CO 0 0 N v.) N 69 ,r) Lr) u-)1./0 kr, C., 00 CO 6 co c-4 6 6 000(..r; 6 000 Cr 0 vl CDO N rt) Le-) 0 kr) v-4 r.-) N. N. t• -k 1/40 r- 00 .1., N 0 1/46 0' 0 N "I' N N '0CC N 00 Cr)N N kr) v.) kr1 ,r) 00 00 0 0 ri 00 — 6 6 6 6 6 q 6 — — N CI Lei 00 0 00 tr, 69 er 0 00 Vi CQ 0003 1/40 00 r"- 0. "cr. -- 1/40 " - 147 - UI C -to C N a) CO z 021 c 1.'2 c4 ° 2 a 3 -f4 00 o C o 00 N N (--;" year 2017 total direct rate $9.21 00 C ,7) C0 CO 'i, Department of Finance, Real Property Tax Division Cci 0 C U 011 a :E E Cu UI C CO NOTES: Asse C) CO a) Unaudited - se Taxpayer Kohanaiki Shores LLC Mauna Kea/Hapuna Beach Corps. Hualalai Investors LLC Hilton Resorts Corp. MAPS Orchid Hotel LLC Mauna Lani Resort Inc. Raptor Residence LLC Target Corporation 1-1 Retail Properties LTD Hilton Land Investment I C 1250 Oceanside Partners Mauna Kea Development Corp Kona BB Property YYByD Acquisition LLC WB-LCP Orchid Owner LLC Kona Coast Resort Ltd BR2/YYaiko|oxLLC COUNTY OF HAWAII Principal Taxpayers June 30, 2017 and 2008 Business Developer Developer/Hotel Developer/Hotel Timeshare Hotel Developer/Hotel Residential Retailer Retailer Hotel Developer Hotels/Dev. Hotel Developer Hotel Condo/Time Share Hotel Fiscal Year 2017 Percentage 2016 of Total Assessed Assessed Valuation Rank Valuation Q 278,850,500 I 1,0% 171.806,200 3 0.8% |O3,6d220U 4 0.6% 158,400.000 5 0.6% 121,777,400 6 0.4% 96,189.500 7 0.3% 73,925.900 8 0.396 66.389.900 10 0.2% 00.709.500 9 02Y6 210.286.200 2 0.7% Table 6 Fiscal Year 2008 2007 Assessed Valuation Percentage of Total Assessed Rank Valuation 241,692,800 1 0.8% 110,729,300 6 0.4% 225,835,700 95,440,700 204.812.400 64,923,900 150.186.100 162,254,700 82,733,300 73,931,400 Note: Gross valuation at January 1,2016:$28/673,8E4,179 Gross valuation at January |.2087: $30,724,281,200 Source: County of Hawai'i, Department of Finance, Real Property Tax Division Unaudited see accompanying independent auditors' report. - 148 - 2 7 3 10 5 4 8 9 0.7% 0.3% 0.7% 0.2% 0.5% 0.5% 0.3% r` 7-0 at a H N v Property Tax Levies and Co U M • OM CT N - ✓ t f N 00 r� v'i N ut vl vl 00 N M M N ON N M co O %.0 © 00 •^^a •^ rr1 `Ci O 0 0 0 0 o 0 o O 0 0 0 0 0 0 CT CT r-- 0 0 0 0 0 0 0 0 CT Cr Cr co N N CT er a0 ,r) ct u-) Cr CD © CT un coMCT cn C' ' ,Ci M 00 a, N N M N Q �t CT u1 00 CT vt ,r * N N v1 N 00 N M N 7Y Cr O N '0 V vi ▪ ? .O RC) CJ a O N ^- -� O CT M C1' v1 N N N N N --+ N N N N OOi N W - N V N 0^ 00 �t N Gr N 00 r M r- ONo ON — + rn O a, rn O O Lr) N O r" o vi et �r r1 o o o a v O CT Cn CT C, Cr, ON O� CT O� CT V ‘Zr M N M N CT N N N as • N N 00 N CT CT r*i D N GO D N N • 'h 'o • N ^+ O O�-+ r"1 cr `O NNNNN N N N N 0D CT O -+ N r 't vl 'O N O O O 0 0 0 0 0 0 0 0 0 N N N NNNNNNN - 149 - * Amounts reflect subsequent adju os of Outstanding Debt by Type 0 0 .11 ,0 0 r QC vn• a, wi 0",.0 Crs. rl" — N eeeeeeeee r1 ,0 rd ce) s.0 fl '0 '0'O ‘ri z eeeeeeeee , .0 0, .0 r• u•-;V1wi 4 v 0 0.0E C.) N N•sr ,e1. ars oo oo '0 ry. 0 0. cc +4:a vi N ev" N ,o Nt' ,t5" N (7,4 N N of3 0 CO N r,c N -0 vi N NrnrnrirnManrnsT N N N rn CO N 0' N 0 r+1 00'— 00 rn n 0 '0 N .0 ,r1 0' COrn Cs ON Cln 00 w a a -150- 0 found in the notes to the b garding the County's outstanding C U, Unaudited - see accomp Table 9 COUNTY OF HAWAI`1 Ratios of General Bonded Debt Outstanding Last Ten Fiscal Years Debt Percent of Applicable to Net Taxable Fiscal Legal Debt Property Per Year Margin (a) Value (b) Capita (c) 2008 265,431,280 1.0% 1,510 2009 296,535,925 1.0% 1,667 2010 277,481,633 1.0% 1,549 2011 305,615,691 1.2% 1,636 2012 317,699,844 1.3% 1,679 2013 315,676,941 1.3% 1,654 2014 298,709,020 1.3% 1,538 2015 312,632,049 1.2% 1,592 2016 362,963,113 1.4% 1,829 2017 405,488,342 1.4% N/A NOTES: (a) See Table 10 for debt applicable to legal debt margin. (b) See Table 5 for net taxable property values. (c) See Table 11 for population data. Details regarding the County's outstanding debt can be found in the notes to the basic financial statements. Unaudited - see accompanying independent auditors' report. - 151 - in Information Last Ten Fiscal Ye (Amounts in thousan DO 00 N en 00 N N N cc so kr, N ,0 N Debt applicable to limit Legal debt margin (b) N 00 a. ON 00 00 kr, ErN 00 a E Da a ea r -- 152 - I Year 2017 a al Debt Margin Cal •a• a. a. E a Fiscal Year Ended June 30, 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 *Resident Population as of July 1 177,733 181,506 183,629 185,381 187,229 189,191 190,821 194,190 196,428 198,449 COUNTY OF HAWAII Demographic and Economic Statistics Last Ten Fiscal Years *Personal Income (thousands of dollars) $ 5,509,169 $ 5,899,236 $ 5,517,497 $ 5,717,885 $ 6,114,237 $ 6,318,657 $ 6,544,583 $ 6,771,329 $ 7,067,347 $ 7,618,924 * Amounts reflect subsequent adjustments *Per Capita Personal School Income Enrollment $ 30,997 30,618 $ 32,502 30,408 $ 30,047 30,138 $ 30,844 29,741 $ 32,656 30,103 $ 33,398 30,314 $ 34,297 33,948 $ 34,870 29,985 $ 35,979 29,865 $ 38,392 29,753 Table 11 Unemployment Rate 3.4% 5.7% 9.9% 10.0% 9.7% 8.3% 6.6% 6.5% 5.2% 4.7% Source.: County of Hawaii, Department of Research and Development, Bureau of Economic Analysis, State of Hawaii Department of Labor, State of Hawaii DOE and University of Hawaii Hilo Unaudited - see accompanying independent auditors' report. - 153 - Employer COUNTY OF HAWAI'I Principal Employers, County of Hawaii June 30, 2017 and 2008 2017 2008 Table 12 Percentage Percentage of Total County of Total County Employees Rank Employment Employees Rank Employment State of Hawaii 14,200 | 20.9% 8,009 I 9.7% County of Hawa'i 2'700 2 4.0Y4 2,538 2 3.1Y6 United States Government 1,500 3 2.2% 1,279 3 1.5Y6 Four Seasons Resort Hualalai 1,240 4 1.8Y6 587 9 0.7% Mauna Kea and Hapuna Prince Resorts and Mauna Kea Services 880 6 13% Hilton Waikoloa Village 900 5 1.3% 1.200 4 1.5% KTA Super Stores 800 7 1.2Y6 800 6 1.0Y6 The Fairmont Orchid, Ba~ai'i 600 8 0.996 900 5 1.1Y6 Mauna Lani Resort (Operainoa)' Inc, 391 9 0.6Y6 - Hapuna Beach Prince Hotel ' 650 8 0.8% Mauna Lani Bay Hotel ' 785 7 0.9% North Hawaii Community Hospital 367 10 0.5Y6 438 10 0.5% Total 23,578 34.7% 17'186 28.1% Total employee count 67,942 82,750 Source: County of Hawai'i, Departmentof Research and Development !Jnaudited - see accompanying independentauditors' report. - 154 en Full -Time Equiv t Ten Fiscal Y N N 0) \ 0 0 0 0`, 0 0 ON 04 44 4a 44 — 0 N oo tel kr) 0 0 0, ,04C en N 00; 0 V' 0 0 fl 0 ,,re 0 04 en Len 0 • 0 it N it 00 00 it it * O it en N o ti 0 rt. N es co goo 8 8 o� • cD,oit "ier'tN0i Nit flu kr) -4- it N e n O en 0 Oh oo Oh en 8 0NOfli . 6 it r en r•ea NenO 0 N 0 0 — 155 - 0 Unaudited - see accompanying iride Operating Indicators by Function CO CO Ni N —0000 N rn r-, c, ,,,D N N., N: a Ni .--. a, rel CP. Or —� CD rn a ri ,.D O 0 N Ni 0 un v3 Ni NNN„ 0 en — 0,” —. I -- a 00 Ni r‘i c10 NiCi '000 ^a vim — NiNi Ni — NiNi 00 N r Ni ,0 N ent oto ,to r4 eel co N en 7r, r - Ni ,r) ON 00 0, CO CIh. 00 n kel Ni CS Ni C. et - 0 Tr.. Ni N 00 00 0, on Ni CO CC CC N CO • C:1, Ci N'S N N • un' — N 00 00 Ni CC °,0 ,s0 N rrt N 5r ra, CC N N 7- 0, — Os .-00m N Ni 00 Ni N ON tNN. NiNi ‘"4- 00 r 00„. -44:. O ▪ CO. CS 'o - 'r '0 00 N N Or, 0-5 ,r.0 Ni N M ▪ Ni 0 tr, m N sr. 0 N N ,e4" —. wi" r- ,r ,.0 •*- vi rj. N N, CC N N ‘0 tn 1-- ,C 0, rn ‘,0 ,-4:" tor rn.' 00 r - Ci 00 Ni NC CC CO 0 NiNiN 0 00 Os ‘.0 N — 0, NI 00 Ni CS N N. N Ni N 00 00 ko) N on r-- cr 0 0 00 '0' NO., N Ni NO Ni I"- No OS 05 Ni N N CO NO Ni Ni N N 0, N Ni 0 tett .11 0 Ni - 156- C) U E ed - see accompanying independent auditorsreport Capital Asset Statistics by Functions DO N 00 0 N • ,en krt o ,C) try r-+ ,zr 00 00 krt N fn aa' 00 0 0 rn rq kn. 00 Ch 00 • N ▪ C' 0, .1 N CO • 0 • rn '0 en 00 N of Research and -157- p p. Unaudited - see accompanying independent