This Preliminary Official Statement and the information contained herein are subject to completion, amendment or other change without notice. Under no circumstance shall this Preliminary Official Statement constitute an offer to sell or the solicitation of an offer to buy, nor shall there be any sale of these securities in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of such jurisdictions. THE APPENDICES)INITSENTIRETYBEFOREMAKINGANINVESTMENT DECISION. (INCLUDING STATEMENT OFFICIAL THIS READ TO ADVISED ARE INVESTORS BONDS. THE IN INVESTMENT AN TO RELATING FACTORS THIS COVER PAGE CONTAINS CERTAIN INFORMATION FOR QUICK REFERENCE ONLY. IT IS NOT INTENDED TO BE A SUMMARY OF ALL ITS ANNUALEXPIRATIONDATE. OBLIGATIONS UNDERTHEFACILITIESLEASE,NORIS STATEOBLIGATEDTORENEWTHEFACILITIESLEASEAFTER THE STATELEGISLATUREISNOTOBLIGATEDTOMAKEAPPROPRIATIONS FORTHEPAYMENTOFANNUALRENTOROTHER are subjecttoCongressionalappropriationDOEofsufficientfunds forpaymentofthesame. revenue for the Bonds for so long as the Facilities Subleases are in effect. The Operating Contractor’s rental payments under the Facilities Contractor”), pursuanttotheFacilitiesSubleases,issubjectappropriation annuallybytheState,andisanticipatedtobesourceofrepayment Subleases with the United States Department of Energy (“DOE”). The rent paid by BEA, or its successor under the Battelle M&O Contract to Facilities (collectively, the the “Operating sublease Energy to Alliance, LLC Subleases”) (“BEA”), a “Facilities limited the liability company (collectively, acting under agreements a sublease prime contract facilities for management two and operation into of enter INL (the to “M&O Contract”) intends SBOE The renewal attheelectionofState. and Appropriation Process” herein. The Bonds are not a debt or obligation of the State. The Facilities Lease is subject to annual appropriation and each annual lease term. See “DESCRIPTION OF THE BONDS,” “SECURITY AND SOURCES OF PAYMENT” and “STATE FINANCES – State Budget below, andotherfundslegallyavailabletherefor.UndertheFacilitiesLease,AnnualRentisdueinfullwithin30daysfollowingbeginning of to appropriation and renewal annually by the State, from the payments expected to be received by the SBOE under the Facilities Subleases, defined Board of Education (“SBOE”) (the “Facilities Lease”). The annual rental payment under the Facilities Lease (the “Annual Rent”) is payable, subject receipts derivedbytheAuthoritypursuanttoafacilitiesleaseagreementbetweenandState,actingthrough Idaho State Security: “USE OFPROCEEDS.” Improvements, the“Facilities”),(ii)capitalizeinterestonBonds,(iii)fundcertainreserves,and(iv)paycostsofissuing Bonds. See Computing Center(collectively,the“Improvements”),locateduponrealpropertytobeownedbyState(the“Land,”together withthe (“INL”) Researchand Education Campus in IdahoFalls,to be known as the Idaho Cybercore Integration Center and the Idaho Collaborative of certainrealproperty,andthedesign,development,construction,includingequipment,facilitiesnearIdahoNational Laboratory Idaho Code, as amended. The proceeds of the Bonds, together with certain funds of BEA (defined below), will be used to (i) finance the acquisition Authority andPurpose:TheBondsarebeingissuedpursuanttotheConstitutionofStateIdaho(the“State”)Title67,Chapter64, Redemption Provisions.” Redemption: March 1andSeptemberofeachyear,beginning1,2018. described in “APPENDIXH—Depository Trust CompanyInformation” attached hereto. Intereston the Bondswillbe payable semiannuallyon further as Bonds the of Owners Beneficial the to disbursement subsequent for participants DTC the to interest and principal such remit will turn, trustee fortheBonds,ZB,NationalAssociationdbaZionsBank,Boise,Idaho(the“Trustee”),inimmediatelyavailablefundstoDTC which,in The principalandinterestontheBondswillbepayablebyAuthority’spayingagent,bondregistrar,authenticatingtransfer agentand maturity andintegralmultiplesthereof. the Bonds.IndividualpurchasesandsalesofBondsmaybemadeinbook-entryformonlyminimumdenominations$5,000within asingle Co. asbondownerandnomineeforTheDepositoryTrustCompany(“DTC”),NewYork,York.DTCwillactsecuritiesdepository Project) (FederallyTaxable)(the“Bonds”)arebeingissuedasfullyregisteredbondsand,whenissued,willbeinthenameofCede& Description: (1) Preliminary, subjecttochange Dated: DateofDelivery from grossincomefortaxpurposesunderIdahoStatelaw.See“TaxMatters”hereinregardingcertainotherconsiderations. is notexcludiblefromgrossincomeforfederaltaxpurposes.IntheopinionofBondCounsel,interestonBonds In theopinionofBondCounsel,underexistinglawandassumingcompliancewithtaxcovenantdescribedherein,interestonBonds NEW ISSUE–BOOKENTRYONLY Bonds indefinitiveformwillbeready fordeliveryatthefacilitiesofDTCinNewYork,Yorkon or aboutApril19,2018. legal matterswillbepassedupon fortheUnderwriterbyHawleyTroxellEnnis&LLP,asUnderwriter’s counsel.Itisexpectedthatthe for the Authority by its counsel Meuleman Law Group PLLC, Boise, Idaho, and for the State by the Attorney General for the State of Idaho. Certain “Underwriter”), subjecttotheapproval oflegalitybySkinnerFawcettLLP,Boise,Idaho,BondCounsel. Certainlegalmatterswillbepassedupon Legal Matters:TheBondsareofferedwhen,as andifissuedreceivedbyWellsFargoBank,NationalAssociation asunderwriter(the TheBondsareaspecialobligationoftheAuthority,securedsolelybypledgeseparateandindependentrevenues,income,rent TheIdahoStateBuildingAuthority(the“Authority”)RevenueBonds,Series2018A(IdahoBoardofEducation Certain of the Bonds are subject to optional and mandatory redemption as described herein. See “DESCRIPTION OF THE BONDS—
PRELIMINARY OFFICIAL STATEMENT DATED MARCH 27, 2018 STAT ( I D A
IDAHO STATE BUILDING AUTHORITY HO E BU STAT I LD Maturity Schedule-SeeInside Cover W (FEDER ING E BO ells REVE A $84,045,000 F RD OFEDUC A argo LLY N UE BO S TA ecurities X (1) A N BLE) D ATI S , O S ER N PROJEC I Due: September1,asshownoninsidecover E S 2018 T A ) RATINGS: Moody’s:Aa2 See “ R atings S&P: AA ” herein
$84,045,000(1) IDAHO STATE BUILDING AUTHORITY STATE BUILDING REVENUE BONDS, SERIES 2018A (IDAHO STATE BOARD OF EDUCATION PROJECT) (FEDERALLY TAXABLE)
MATURITY SCHEDULE(1) Due Date Interest September 1 Amount Rate Yield CUSIP(2)
2020 $ 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033
$ ______Term Bonds due September 1 2040 @ ______CUSIP No.(2) (1) Preliminary, subject to change. (2) The CUSIP data herein is provided by the CUSIP Global Services, managed on behalf of the American Bankers Association by Standard and Poor’s. The CUSIP numbers are not intended to create a database and do not serve in any way as a substitute for the CUSIP service. CUSIP numbers have been assigned by an independent company not affiliated with the Authority and are provided solely for convenience and reference. The CUSIP numbers for a specific maturity are subject to change after the issuance of the Bonds. Neither the Authority nor the Underwriter takes responsibility for the accuracy of the CUSIP numbers.
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NO DEALER, BROKER, SALESPERSON, OR OTHER PERSON HAS BEEN AUTHORIZED BY THE AUTHORITY OR BY THE UNDERWRITER TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN AS CONTAINED IN THIS OFFICIAL STATEMENT, AND IF GIVEN OR MADE, SUCH OTHER INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE AUTHORITY OR THE UNDERWRITER. THIS OFFICIAL STATEMENT DOES NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY THE BONDS, NOR WILL THERE BE ANY SALE OF THE BONDS BY ANY PERSON, IN ANY JURISDICTION IN WHICH IT IS UNLAWFUL FOR SUCH PERSONS TO MAKE SUCH OFFER, SOLICITATION OR SALE. THE INFORMATION SET FORTH HEREIN HAS BEEN FURNISHED BY THE AUTHORITY, DTC AND CERTAIN OTHER SOURCES THAT ARE BELIEVED TO BE RELIABLE BUT IS NOT GUARANTEED AS TO ACCURACY OR COMPLETENESS BY, AND IS NOT TO BE CONSTRUED AS A REPRESENTATION BY, THE UNDERWRITER. THE INFORMATION AND EXPRESSIONS OF OPINION CONTAINED HEREIN ARE SUBJECT TO CHANGE WITHOUT NOTICE. ANY STATEMENTS MADE IN THIS OFFICIAL STATEMENT INVOLVING MATTERS OF OPINION OR ESTIMATES, WHETHER OR NOT SO EXPRESSLY STATED, ARE SET FORTH AS SUCH AND NOT AS REPRESENTATIONS OF FACT OR REPRESENTATIONS THAT THE ESTIMATES WILL BE REALIZED. IN CONNECTION WITH THIS OFFERING, THE UNDERWRITER MAY OVER ALLOT OR EFFECT TRANSACTIONS THAT STABILIZE OR MAINTAIN THE MARKET PRICE OF THE BONDS AT LEVELS ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH STABILIZATION, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME. NEITHER THE DELIVERY OF THIS OFFICIAL STATEMENT NOR ANY SALE MADE HEREUNDER WILL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE AUTHORITY OR THE STATE SINCE THE DATE HEREOF. THIS OFFICIAL STATEMENT IS NOT TO BE CONSTRUED AS A CONTRACT WITH THE PURCHASERS OF THE BONDS. STATEMENTS CONTAINED IN THIS OFFICIAL STATEMENT WHICH INVOLVE ESTIMATES, FORECASTS OR MATTERS OF OPINION, WHETHER OR NOT EXPRESSLY SO DESCRIBED HEREIN, ARE INTENDED SOLELY AS SUCH AND ARE NOT TO BE CONSTRUED AS REPRESENTATIONS OF FACT. THE AUTHORITY HAS ALSO UNDERTAKEN TO PROVIDE CONTINUING DISCLOSURE ON CERTAIN MATTERS, INCLUDING ANNUAL FINANCIAL INFORMATION AND SPECIFIC MATERIAL EVENTS, AS MORE FULLY DESCRIBED HEREIN. SEE “CONTINUING DISCLOSURE.” THE FOLLOWING SENTENCE HAS BEEN PROVIDED BY THE UNDERWRITER FOR INCLUSION IN THIS OFFICIAL STATEMENT: THE UNDERWRITER HAS REVIEWED THE INFORMATION IN THIS OFFICIAL STATEMENT IN ACCORDANCE WITH, AND AS PART OF, ITS RESPONSIBILITIES TO INVESTORS UNDER THE FEDERAL SECURITIES LAWS AS APPLIED TO THE FACTS AND CIRCUMSTANCES OF THIS TRANSACTION, BUT THE UNDERWRITER DOES NOT GUARANTEE THE ACCURACY OR COMPLETENESS OF SUCH INFORMATION. THE BONDS HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, IN RELIANCE UPON A SPECIFIC EXEMPTION CONTAINED IN SUCH ACT, NOR HAVE THEY BEEN REGISTERED UNDER THE SECURITIES LAWS OF ANY STATE. THE MUNICIPAL ADVISOR HAS PROVIDED THE FOLLOWING SENTENCE FOR INCLUSION IN THIS OFFICIAL STATEMENT. THE MUNICIPAL ADVISOR HAS REVIEWED THE INFORMATION IN THIS OFFICIAL STATEMENT IN ACCORDANCE WITH, AND AS PART OF, ITS RESPONSIBILITIES TO INVESTORS UNDER THE FEDERAL SECURITIES LAWS AS APPLIED TO THE FACTS AND CIRCUMSTANCES OF THIS TRANSACTION, BUT THE MUNICIPAL ADVISOR DOES NOT GUARANTEE THE ACCURACY OR COMPLETENESS OF SUCH INFORMATION. THE PRELIMINARY OFFICIAL STATEMENT HAS BEEN “DEEMED FINAL” BY THE AUTHORITY, PURSUANT TO RULE 15c2-12 PROMULGATED BY THE SECURITIES AND EXCHANGE COMMISSION UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, EXCEPT FOR INFORMATION WHICH IS PERMITTED TO BE EXCLUDED FROM THIS PRELIMINARY OFFICIAL STATEMENT UNDER SAID RULE 15c2-12.
IDAHO STATE BUILDING AUTHORITY 950 W. BANNOCK STREET, SUITE 490 BOISE, IDAHO 83702 (208) 345-6057
Board of Commissioners V.L. Bud Tracy, Chairman James C. Hammond, Vice Chairman Candice Allphin, Commissioner Timothy Anderson, Commissioner Shelly Enderud, Commissioner John R. Ewing, Commissioner Gregory J. Schade, DDS, MS, Commissioner
Executive Director, Secretary and General Counsel Wayne Meuleman Meuleman Law Group PLLC
______
Underwriter Wells Fargo Bank, National Association
Bond Counsel Skinner Fawcett LLP
Underwriter’s Counsel Hawley Troxell Ennis & Hawley LLP
Municipal Advisor Piper Jaffray & Co.
Trustee ZB, National Association dba Zions Bank TABLE OF CONTENTS
Page
INTRODUCTION ...... 1 IDAHO STATE BUILDING AUTHORITY...... 1 General ...... 1 Commissioners ...... 1 Executive Director and Secretary ...... 2 Annual Budget ...... 2 Financing Authority ...... 2 Authority Projects ...... 2 IDAHO STATE BOARD OF EDUCATION ...... 4 DESCRIPTION OF THE BONDS ...... 4 Authority to Issue the Bonds ...... 4 General ...... 4 Redemption Provisions ...... 5 Partial Redemption; Selection of Bonds ...... 6 The Trustee ...... 6 USE OF PROCEEDS ...... 6 The Bonds ...... 6 BEA Contribution ...... 7 Sources and Uses ...... 8 DEBT SERVICE REQUIREMENTS ...... 8 SECURITY AND SOURCES OF PAYMENT ...... 9 The Bond Resolution ...... 9 Pledge for the Bonds ...... 9 No Cross-Collateralization ...... 9 Flow of Funds...... 9 No Debt Service Reserve Account for the Bonds ...... 10 Maintenance and Repair Fund ...... 10 General Reserve Fund ...... 10 Covenants ...... 10 The Ground Lease ...... 10 The Facilities Lease ...... 10 Annual Rent ...... 10 Facilities Lease Term ...... 11 Appropriation Process ...... 11 Non-Renewal and Non-Appropriation; Remedies ...... 11 Facilities Subleases ...... 12 Facilities Sublease Terms ...... 12 Additional Bonds ...... 13 Destruction of the Facilities ...... 13 Open Market Purchase ...... 13 THE FACILITIES ...... 13 Summary ...... 13 Plan of Collaboration for the Facilities ...... 13 Construction ...... 14 Idaho National Laboratory ...... 15 Battelle ...... 15 STATE FINANCES ...... 15 State Budget and Appropriation Process...... 15
v State Revenues, Expenditures and Fund Balance ...... 17 State Reserve Funds ...... 18 Outstanding Obligations of the State and its Independent Agencies ...... 18 2018 Legislative Actions ...... 19 Appropriations for Authority Lease Payments...... 20 PUBLIC EMPLOYEE RETIREMENT SYSTEM ...... 20 Optional Retirement Program ...... 22 Other Post-employment Benefits ...... 22 RISKS TO BONDHOLDERS ...... 23 Limited Obligations ...... 23 Limitations on Enforceability ...... 23 Construction and Completion Risks ...... 23 State’s Obligations Subject to Annual Renewal and Appropriation ...... 24 Dependency on Appropriations Process of the United States Congress ...... 24 Legislative Authority Relating to the Financing ...... 24 Special Use Facilities ...... 25 CONTINUING DISCLOSURE ...... 25 TAX MATTERS ...... 25 Bond Premium ...... 26 Original Issue Discount ...... 26 RATINGS ...... 26 UNDERWRITING ...... 26 MUNICIPAL ADVISOR ...... 26 INDEPENDENT AUDITORS ...... 27 LEGAL MATTERS ...... 27 LEGALITY OF THE BONDS FOR INVESTMENT ...... 27 PENDING AND THREATENED LITIGATION ...... 27 ADDITIONAL INFORMATION ...... 27
APPENDIX A – Selected Data on the State of Idaho APPENDIX B – Bond Resolution APPENDIX C – Facilities Lease APPENDIX D – Audited Financial Statements of Authority APPENDIX E – State of Idaho Comprehensive Annual Financial Report APPENDIX F – Form of Continuing Disclosure Agreement APPENDIX G – Form of Opinion of Bond Counsel APPENDIX H – Depository Trust Company Information
vi PRELIMINARY OFFICIAL STATEMENT
IDAHO STATE BUILDING AUTHORITY
$84,045,000(1) STATE BUILDING REVENUE BONDS, SERIES 2018A (IDAHO STATE BOARD OF EDUCATION PROJECT) (FEDERALLY TAXABLE)
INTRODUCTION The purpose of this Official Statement is to set forth information regarding the Idaho State Building Authority (the “Authority”) and the issuance by the Authority of its State Building Revenue Bonds, Series 2018A (Idaho State Board of Education Project) (Federally Taxable) (the “Bonds”). Capitalized terms as used herein, but not defined herein, shall have the same meaning given to them in the Bond Resolution defined under “DESCRIPTION OF THE BONDS—Authority to Issue the Bonds.” See “APPENDIX B—Bond Resolution.” IDAHO STATE BUILDING AUTHORITY General The Authority is a body corporate and politic of the State of Idaho (the “State”), created as a public instrumentality by the Idaho State Building Authority Act, being Title 67, Chapter 64, Idaho Code, as amended (the “Act”), for the purpose of assisting in the acquisition, construction, operation and financing of State governmental facilities and the facilities of community college districts. In accordance with the Act, the Authority is authorized to issue its bonds or notes to finance governmental facilities pursuant to agreements entered into with departments, boards, commissions or agencies of the State (“State Bodies” or “State Body”) or with community college districts (together with the State Bodies, collectively, the “lessees”), subject to prior approval of the legislature of the State (the “State Legislature”) by concurrent resolution. To that end, the Authority issues bonds secured by annual rent payments equal to debt service on such bonds for the applicable fiscal year, plus certain administrative costs of the Authority (the “Administrative Costs”) and any required deposits to reserve or operating funds or accounts for such fiscal year, payable by the State, acting by and through one or more lessees under the terms of facilities leases relating to the project or projects being financed or refinanced, as applicable, by such bonds. All facilities leases are subject to annual notice of intent to renew, and once renewed, the annual rent payments payable thereunder are subject to annual appropriation by the State, as appropriate. Annual rent payments for each facilities lease typically are due and payable in full within 30 days after commencement of each annual lease term. There is no specified maximum amount of indebtedness the Authority may incur. See “DESCRIPTION OF THE BONDS,” “SECURITY AND SOURCES OF PAYMENT,” and “STATE FINANCES—Budget and Appropriations Process” herein. Commissioners The powers of the Authority are vested in a board of seven commissioners appointed by the Governor of the State, with the advice and consent of a majority of the members of the State Senate. Appointments are for staggered five- year terms. The Commissioners annually select a chairman and vice-chairman from their number and employ an Executive Director, who also serves as Secretary of the Authority. The Executive Director administers, manages and directs the affairs and business of the Authority subject to the policy, control and direction of the Commissioners. Commissioners whose terms have expired continue to serve until a replacement is appointed and confirmed. The current Commissioners serving the Authority are set forth below. ______(1) Preliminary, subject to change.
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COMMISSIONERS Board Member Residence Occupation Term Expires V.L. Bud Tracy, Chairman Malta Retired CEO, Electric Cooperative January 1, 2021 James C. Hammond, Vice Chairman Coeur d’Alene Retired City Administrator, Retired Idaho State January 1, 2022 Senator Candice Allphin Boise Retired Vice President & General Manager, U.S. January 1, 2019 Bank Timothy Anderson Pocatello Certified Public Accountant, MAcc January 1, 2023 Shelly Enderud Post Falls Post Falls City Administrator January 1, 2021 John R. Ewing Meridian General Construction Contractor January 1, 2019 Gregory J. Schade, DDS, MS Boise Retired Orthodontist January 1, 2022
Executive Director and Secretary Wayne Meuleman has served as Executive Director and Secretary of the Authority since 1980. Mr. Meuleman is a partner in the law firm of Meuleman Law Group PLLC, Boise, Idaho, which also serves as general legal counsel to the Authority. The Authority has no permanent full-time employees and contracts for professional services on a consulting basis as required. Annual Budget Pursuant to the respective bond resolutions authorizing each series of the Authority’s outstanding bonds, the Authority is required to prepare, not less than 30 days prior to the beginning of each fiscal year, an annual budget setting forth in reasonable detail the estimated receipts and expenditures of the Authority for the ensuing fiscal year. Financing Authority The Authority fulfills its statutory responsibilities to provide facilities for use by State Bodies or community college districts of the State through a variety of development activities, including master planning, land acquisition, financing, design and construction, and continuing maintenance and operation of facilities. In general, the Authority finances the acquisition and/or construction of facilities for use by State Bodies and community college districts with proceeds of bonds issued by the Authority for such purpose. The Authority’s bonds are secured by annual rent payments payable to the Authority by the State, acting by and through one or more State Bodies or community college districts under the terms of separate facilities leases entered into at the time the Authority issues its bonds to finance the respective facilities. Prior to the issuance of bonds to finance a facility, the State Legislature, by concurrent resolution, must authorize a State Body or community college district to enter into a facilities lease or other agreement with the Authority to provide for the specific facility, and the Authority must make a determination that the facility or project will be of public use and will provide a public benefit. Authority Projects The Authority has multiple series of bonds and notes outstanding in the aggregate principal amount of $128,647,884 as of June 30, 2017, plus its State Building Revenue Bonds, Series 2017A (State Office Campus Project) and its State Building Revenue Bonds, Series 2017B (State Office Campus Project)(Federally Taxable) (collectively, the “2017 Bonds”) issued by the Authority in December 2017 in the aggregate amount of $144,550,000, for a total of $273,197,884 in outstanding indebtedness. Each series of bonds is separately secured by a facilities lease substantially similar to the facilities lease securing the Bonds. Each facilities lease provides, among other things, (i) annually renewable terms at the election of the State, acting through the lessee under the facilities lease, (ii) the right of the lessee to terminate the facilities lease in the event funds are not appropriated by the State for the annual rent payments, as necessary, and (iii) the obligation of the lessee to provide repairs, operations and maintenance of the subject facilities. Except for refunding bonds relating to the same project, and two series of bonds related to the same project, no series of bonds is cross-collateralized with any other series. Every facilities lease between a lessee and the Authority is subject to annual appropriation by the State. The State has never failed to make an appropriation for a facilities lease. As such, every lessee has paid all lease payments in
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each year under all facilities leases with the Authority, and the Authority has never failed to make any payment of principal or interest on its bonds when due. The following table summarizes the construction and financing activities related to each outstanding bond issue of the Authority, as well as the outstanding principal amount of each issue as of June 30, 2017, with the addition of the 2017 Bonds. See “Audited Financial Statements of the Authority” for year ended June 30, 2017 included herein as APPENDIX D. Except as noted in the following table, all bonds and notes require payments of principal on September 1 of each year and payments of interest on March 1 and September 1 of each year.
Final Maturity Date of Facilities (September 1 or Project Lease Bond or Note Status(1) as indicated) Prison Facilities, near Boise (operated under Management October 14, 1997 $33,545,000 Series 2008A 2025 Contract with Corrections Corporation of America) Refunding Bonds Southwest Idaho Treatment Center, Nampa(2) August 1, 2001 $4,164,968 2012A 2024 Refunding Bonds Idaho Water Center, Boise December 17, 2002 $36,915,000 Series 2012B 2040 Refunding Bonds and $9,970,000 Series 2003B Revenue Bonds (Taxable) Idaho State University, Pocatello July 17, 2003 $5,405,000 Series 2012C 2023 Refunding Bonds Boise State University, West Campus, Nampa July 17, 2003 $3,850,000 Series 2012D 2023 Refunding Bonds University of Idaho, Moscow July 17, 2003 $5,180,000 Series 2012E 2023 Refunding Bonds Lewis-Clark State College, Lewiston July 17, 2003 $4,445,000 Series 2012F 2023 Refunding Bonds North Idaho College, Coeur d’Alene July 17, 2003 $4,905,000 Series 2012G 2023 Refunding Bonds College of Southern Idaho, Twin Falls July 17, 2003 $2,390,000 Series 2012H 2023 Refunding Bonds Idaho State Police/POST Academy, Meridian July 17, 2003 $1,020,000 Series 2012I 2023 Refunding Bonds Eastern Idaho Technical College, Idaho Falls August 25, 2005 $6,355,000 Series 2013B 2026 Revenue Bonds Lava Hot Springs Foundation, City of Lava Hot Springs September 12, 2008 $307,916 Revenue Note, 10/1/2023 Series 2008 Idaho Department of Parks and Recreation Office Building September 25, 2012 $2,160,000 Series 2012J 2021 Refunding Revenue Bonds (Taxable) Capitol Mall Parking Facility, Boise December 13, 2012 $8,035,000 Series 2013A 2033 Revenue Bonds State Office Campus Project, Boise December 21, 2017 $46,025,000 Series 2017A 2048 Revenue Bonds $98,525,000 Series 2017B 2043 Revenue Bonds (Taxable)
(1) As of June 30, 2017, with the exception of the 2017 Bonds. (2) Formerly Idaho State School and Hospital, Nampa, Idaho; renamed Southwest Idaho Treatment Center by the 2011 State Legislature. Source: Audited Financial Statements of the Authority, attached hereto as Appendix D, with the exception of the 2017Bonds.
The Authority’s Audited Financial Statements, attached as Appendix D, list three additional projects, numbered in the Authority’s Audited Financial Statements as 24, 25 and 26. The Authority has not issued bonds for those projects. See “APPENDIX D—Audited Financial Statements of the Authority.”
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Concerning the Prison Facilities near Boise project only, in June 2008 the Authority issued its $53,130,000 Series 2008A Refunding Variable Rate Revenue Bonds (the “Variable Rate Bonds”) to refund the Authority’s State Building Revenue Bonds, 1998A. In connection with such refunding, the Authority executed a fixed interest rate exchange contract (the “Contract”). The Authority applies the receipts from the Contract, plus other funds received as rent under the facilities lease relating to the project and, if necessary, other funds of the Authority, to payment of debt service on the Variable Rate Bonds. For further description of the Contract, see “APPENDIX D—Audited Financial Statements of the Authority.” Wells Fargo Bank, National Association has entered into a Standby Bond Purchase Agreement (the “Standby Agreement”), pursuant to which Wells Fargo Bank, National Association provides liquidity in support of the Authority’s Variable Rate Bonds. The Standby Agreement is scheduled to expire on June 26, 2020. No other Authority bonds, other than the Variable Rate Bonds, are affected by the Contract or the rate on the Variable Rate Bonds. IDAHO STATE BOARD OF EDUCATION The Idaho State Board of Education (“SBOE”) consists of eight voting members, seven of which are appointed by the Governor of Idaho for a term of five years. The eighth member is the State Superintendent of Public Instruction, who is an ex-officio voting member elected to a term of four years.
Board Member Residence Occupation Term Expires Linda Clark (President) Meridian Retired Superintendent June 30, 2020 Debbie Critchfield (Vice President) Oakley Community Education Leader June 30, 2020 David Hill (Secretary) Boise Retired Deputy Director at ID National Laboratory June 30, 2018 Emma Atchley Ashton Community Leader June 30, 2020 Andrew Scoggin Boise Executive VP for Albertsons Companies June 30, 2021 Don Soltman Twin Lakes Retired Hospital Executive June 30, 2019 Richard Westerberg Preston Retired Officer of PacifiCorp June 30, 2019 Sherri Ybarra * Mountain Home Superintendent of Public Instruction Elected ______* Serves ex officio on the State Board of Education in her capacity as State Superintendent of Public Instruction.
The SBOE has an approximately 27 member, full time professional staff headed by its Executive Director, Matt Freeman. The SBOE is constitutionally and statutorily charged with supervising public education in Idaho.
DESCRIPTION OF THE BONDS Authority to Issue the Bonds The Bonds are issued under and pursuant to the authority of the Constitution of the State of Idaho (the “Constitution”), the Act, Senate Concurrent Resolution No. 105 (“Concurrent Resolution No. 105”), adopted by the State Legislature during the First Regular Session of the Sixty-Fourth Legislature, and Resolution 2018-003 of the Authority adopted on March 8, 2018 (the “Bond Resolution”). General The Bonds will be dated the date of issuance and will bear interest from their dated date at the rates, and will mature in the principal amounts and in the years, noted on the inside cover page of this Official Statement. Interest on the Bonds will be payable on September 1, 2018, and semiannually thereafter on March 1 and September 1 of each year. The Bonds are issued as fully registered serial and/or term bonds, in book-entry form only, and, when issued, will be registered in the name of Cede & Co. as bondowner and as nominee for The Depository Trust Company (“DTC”), New York, New York. DTC will act as securities depository for such Bonds. Individual purchases and sales of the Bonds may be made in book-entry form only in minimum denominations of $5,000 within a single maturity and integral multiples thereof. The principal of and interest on the Bonds will be payable by ZB, National Association dba Zions Bank, Boise, Idaho (the “Trustee”) in immediately available funds to DTC which, in turn, will remit such principal and interest to those financial institutions for whom DTC effects book-entry transfers and pledges of securities deposited with DTC, as such listing of participants exists at the time of such reference (the “DTC - 4 -
Participants”) for subsequent disbursement to the Beneficial Owners of the Bonds. See “APPENDIX H— Depository Trust Company Information” attached hereto. In the event the Authority elects to discontinue the book-entry system, the principal of and premium, if any, on the Bonds will be payable at the Principal Corporate Trust Office of the Trustee in Boise, Idaho. In such event, interest on the Bonds will be payable by check or draft mailed on the interest payment date to the registered owners at the addresses appearing on the registry books kept by the Trustee on the 15th day of the month preceding each interest payment date. Redemption Provisions1 Optional Redemption The Bonds maturing on and after September 1, 20__, are subject to optional redemption on September 1, 20__, and on any date thereafter in whole or part (with bonds selected for redemption based on a “Pro Rata Pass-Through Distributions of Principal” basis, as described below) at the principal amount thereof, plus interest accrued to the date of redemption. In addition, the Bonds are subject to redemption at the option of the Authority as a whole or in part on any date with the maturities and interest rates to be selected by the Authority, at a redemption price described below (the “Make- Whole Redemption Price”) with bonds selected for redemption based on a “Pro Rata Pass-Through Distributions of Principal” basis, as described below. The Make-Whole Redemption Price is equal to the greater of (1) 100% of the principal amount of the Bonds to be redeemed; or (2) the sum of the present value of the remaining scheduled payments of principal and interest on the Bonds to be redeemed, not including any portion of those payments of interest accrued and unpaid as of the date of which the Bonds are to be redeemed, discounted to the date on which the Bonds are to be redeemed on a semi- annual basis, assuming a 360-day year consisting of twelve 30-day months, at the Treasury Rate plus __ basis points (0.__%); plus, in each case, accrued interest on the Bonds to be redeemed to the date on which the Bonds are to be redeemed. “Business Day” means any day, other than a Saturday or Sunday, and other than a day on which the Trustee is required, or authorized or not prohibited, by law (including without limitation, executive orders) to close and is closed.
“Comparable Treasury Issue” means, with respect to any redemption date for a particular Bond, the United States Treasury security selected by the Independent Investment Banker which has an actual maturity comparable to the remaining average life of the Bonds of such maturity to be redeemed, and that would be utilized in accordance with customary financial practice in pricing new issues of debt securities of comparable maturity to the remaining average life of such Bond to be redeemed.
“Comparable Treasury Price” means, with respect to any redemption date for a particular Bond, (A) the average of the applicable Reference Treasury Deal Quotations for the redemption date, after excluding the highest and lowest of such Reference Treasury Dealer Quotations, or (B) if the Independent Investment Banker for the Bonds obtains fewer than four such Reference Treasury Dealer Quotations, the average of all such Quotations.
“Independent Investment Banker” means one of the Reference Treasury Dealers as designated by the Authority.
“Reference Treasury Dealer” means each of four firms, as designated by the Authority, and their respective successors; provided, however, that if any of them ceases to be a “Primary Treasury Dealer” (defined as a primary U.S. Government securities dealer in the City of New York), the Authority will substitute another Primary Treasury Dealer.
“Reference Treasury Dealer Quotation” means, with respect to each Reference Treasury Dealer and any redemption date for the Bonds of a particular maturity, the average, as determined by the Independent Investment Banker and communicated to the Authority, of the bid and asked prices for the applicable Comparable Treasury Issue (expressed in each case as a percentage of its principal amount) quoted in writing to the Independent Investment Banker and
1 Preliminary, subject to change. - 5 -
communicated to the Trustee by such Reference Treasury Dealer at 3:30 p.m., New York City time, on the third Business Day preceding that redemption date.
“Treasury Rate” means, with respect to any redemption date for a particular Bond, the rate per annum equal to the semi-annual equivalent yield to maturity of the Comparable Treasury Issue with respect thereto, computed as of the second business day immediately preceding that redemption date, assuming a price for the Comparable Treasury Issue (expressed as a percentage of its principal amount) equal to the Comparable Treasury Price with respect thereto for that redemption date. Mandatory Sinking Fund Redemption. The Bonds maturing on September 1, 20__, shall be subject to mandatory redemption and retirement prior to maturity, in part, with Bonds selected for redemption based on a “Pro Rata Pass-Through Distributions of Principal” basis, as described below, on September 1, in the years ______to ______, inclusive, at 100% of the principal amount thereof plus accrued interest to the date of redemption, from deposits into the Debt Service Fund in the amounts set forth below: Mandatory Redemption Date Mandatory September 1 Redemption Amount 2034 2035 2036 2037 2038 2039 2040* *Final maturity
Partial Redemption; Selection of Bonds If less than all of the Bonds of a maturity and interest rate are called for prior redemption, the particular Bonds or portions thereof to be redeemed shall be selected on a “Pro Rata Pass-Through Distributions of Principal” basis in accordance with DTC procedures, provided that, so long as the Bonds are held in book-entry form, the selection for redemption of such Bonds shall be made in accordance with the operational arrangements of DTC then in effect that currently provide for adjustment of the principal by a factor provided by the Trustee pursuant to DTC operational arrangements. If the Trustee does not provide the necessary information and identify the redemption as on a Pro Rata Pass-Through Distributions of Principal basis or if DTC’s operational arrangements no longer provide for selection on a pro rata basis, the Bonds will be selected for redemption in accordance with DTC procedures by lot. If the Bonds are no longer held by DTC, they shall be selected for redemption on a pro rata basis.
The Trustee By appointment of the Authority, ZB, National Association dba Zions Bank, shall act as trustee, bond registrar, authenticating agent, paying agent and transfer agent with respect to the Bonds. Except for the contents of this section, the Trustee assumes no responsibility for the nature, content, accuracy or completeness of the information set forth in this Official Statement.
USE OF PROCEEDS The Bonds The Bonds are being issued to finance, together with funds from Battelle Energy Alliance, LLC (“BEA”), the costs of acquiring certain real property and developing the Facilities (as hereafter defined), to make a deposit of capitalized interest into the Debt Service Fund, to make deposits into the Maintenance and Repair Fund and the General Reserve Fund, and to pay the costs of issuing the Bonds. The State, acting through the SBOE, will acquire a parcel of real property with approximately $1,000,000 of Bond proceeds. A portion of that parcel, together with a portion of a second parcel already owned by the SBOE (collectively, together with any existing improvements thereon, the “Land”), is located near the Idaho National
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Laboratory (the “INL”) Research and Education Campus in Idaho Falls, Idaho. The Authority will acquire a leasehold interest expiring June 30, 2058 in the Land by entering into a Ground Lease (the “Ground Lease”) with the State, acting by and through the SBOE. No rent will be paid by the Authority under the Ground Lease. Concurrent with its execution of the Ground Lease, the Authority will enter into a development agreement with the State acting by and through the SBOE (the “Development Agreement”) under which the Authority agrees to design and construct improvements on the Land in accordance with the terms of the Development Agreement, consisting of research and educational facilities to be known as the Idaho Cybercore Integration Center (the “Cybercore Center”) and the Idaho Collaborative Computing Center (the “Computing Center” and collectively with the Cybercore Center, the “Improvements”) utilizing Bond proceeds and funds from BEA (the “BEA Contribution”). Together, the Improvements and the Land are referred to in this Official Statement as the “Facilities.” Pursuant to the Development Agreement, the Authority agrees to issue revenue bonds in an amount sufficient, along with the BEA Contribution, to finance its design, development, construction and equipping of the Improvements. In connection with its financing of the Improvements, the Authority will enter into a separate annually renewable lease agreement with the State acting through the SBOE (the “Facilities Lease”), under which the Authority agrees to finance the Improvements, together with the BEA Contribution, and lease the Facilities to the State, in exchange for payment of annual rent sufficient to pay the debt service on the Bonds and the Authority’s Administrative Costs allocable to the Facilities (the “Annual Rent”). The terms of the Facilities Lease are described herein under “Security and Sources of Payment.” Contemporaneous with its execution of the Facilities Lease, the State acting through the SBOE intends to enter into two sublease agreements relative to the Cybercore Center and Computing Center (collectively, the “Facilities Subleases”) under which the Facilities will be subleased to BEA, a limited liability company acting under a prime contract for management and operation of INL (the “M&O Contract ”) with the United States Department of Energy (“DOE”). As a condition of the Facilities Subleases, BEA, or its successor under the M&O Contract (collectively, the “Operating Contractor”), are required to include and accommodate research and education opportunities with the State’s public higher education institutions. See “THE FACILITIES—Summary.” The rent paid by the Operating Contractor under the Facilities Subleases is expected to be the source of funds appropriated for Annual Rent for the Bonds for so long as the Facilities Subleases are in effect. The Operating Contractor’s rental payments under the Facilities Subleases are subject to Congressional appropriation to DOE of sufficient funds for payment of the same. For a further description of the terms of the Facilities Lease, the Facilities Subleases, and the Ground Lease see “Security and Sources of Payment” below and see “APPENDIX B—Summary of Ground Lease, Facilities Lease and Facilities Subleases.” BEA Contribution Pursuant to an Agreement Regarding Special Funding Account between the Authority and BEA, BEA has agreed to deposit the BEA Contribution in the amount of $12,922,848 in a special funding account (the “Special Funding Account”) to be utilized to construct certain portions of the Improvements pursuant to the Facilities Subleases. The BEA Contribution will be deposited into the Special Funding Account prior to the sale of the Bonds and cannot be withdrawn by BEA without prior written consent from the Authority. BEA has already invested approximately $5,900,000 into various design aspects of the Facilities. (Remainder of page intentionally left blank)
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Sources and Uses The sources and uses of the proceeds of the Bonds are as shown below: Source of Funds Par Amount of the Bonds $______BEA Contribution $______Total Source of Funds: $______Use of Funds Deposit to Construction Fund $______Deposit to Debt Service Fund for Capitalized Interest $______Deposit to the Maintenance and Repair Fund $______Deposit to the General Reserve Fund $______Underwriter’s Discount $______Costs of Issuance(1) $______Total Use of Funds: $
(1) Includes rating agency fees, municipal advisor fees, legal fees, printing costs, and other costs of issuing the Bonds.
DEBT SERVICE REQUIREMENTS
The following table shows the annual debt service on the Bonds to be paid by the Authority: DEBT SERVICE SCHEDULE Fiscal Year Ending June 30 Principal Interest Total Debt Service
2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 2037 2038 2039 2040 2041
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SECURITY AND SOURCES OF PAYMENT The Bond Resolution Pledge for the Bonds The Bonds are a special obligation of the Authority secured by and payable solely from a pledge of (i) all revenues, income, rents and receipts derived by the Authority from or attributable to the ownership or leasing of the Facilities, including all revenues attributable to the Facilities or to the payment of the costs thereof received by the Authority under the Facilities Lease, (ii) all moneys held in funds created pursuant to the Bond Resolution, except for moneys held in the Administrative Fund, (iii) the proceeds of any insurance covering business interruption loss relating to the Facilities, and (iv) interest received on any money or securities held pursuant to the Bond Resolution, except for interest received on money or securities in the Administrative Fund (collectively, “Revenues”). Capitalized funds not defined herein are funds created and established by the Bond Resolution and shall have the meaning ascribed to them therein. During the term of the Facilities Subleases, Annual Rent under the Facilities Lease is expected to be paid, subject to appropriation annually by the State, from the rent receivable under the Facilities Subleases (the “Sublease Rent”) and other funds legally available therefor. In the event of expiration or termination of one or both of the Facilities Subleases, to the extent necessary, Annual Rent, or a portion thereof, may be payable from an appropriation of the State. Under the Facilities Lease, Annual Rent is due in full within 30 days following the beginning of each annual lease term. Annual Rent includes Basic Rent and Additional Rent. Basic Rent is an amount equal to principal and interest on the Bonds. Additional Rent includes other sums payable to the Authority with respect to the Facilities and in accordance with the Facilities Lease. No Cross-Collateralization The Bonds are secured by a pledge of Revenues under the Bond Resolution, including Annual Rent under the Facilities Lease, which is pledged only to the Bonds. The Bonds are not cross-collateralized with any other series of bonds issued by the Authority, unless Additional Bonds (as defined in the Bond Resolution) are issued related to the Improvements. Flow of Funds Upon receipt, all Revenues received by the Authority are to be deposited in the Revenue Fund established by the Bond Resolution. As soon as practicable in each month after the deposit of such Revenues, but in any case no later than the last Business Day of such month, the Trustee shall withdraw from the Revenue Fund established by the Bond Resolution and deposit into the following funds for each series in the following order of priority the amounts set forth below: First: Into the Debt Service Fund, the receipts of such Revenues so that the balance therein shall be sufficient to pay the total amount of principal, if any, and interest due during the then current Fiscal Year, including amounts required for redemption of Bonds. Second: Into the Administrative Fund, the sum budgeted for Administrative Costs (as defined in the Bond Resolution) allocable to the Facilities for the then current Fiscal Year, as directed in writing by an Authorized Officer. Third: Into the General Reserve Fund, the remaining balance, if any, of money in the Revenue Fund after making the above deposits. In the event that the Authority exercises its right to take actual possession of the Facilities upon the occurrence of an Event of Default or Event of Nonrenewal pursuant to the provisions of the Facilities Lease, the Trustee shall then withdraw from the Revenue Fund and deposit into the following funds for the Bonds in the following order of priority the amounts set forth below:
First: Into the Administrative Fund, the sum budgeted for Administrative Costs allocable to the Facilities for the then current Fiscal Year, as directed in writing by an Authorized Officer.
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Second: Into the Debt Service Fund, the receipts of Revenues so that the balance therein shall be sufficient to pay the total amount of principal, if any, and interest due during the then current Fiscal Year, including amounts required for redemption of Bonds.
Third: Into the General Reserve Fund, the remaining balance, if any, of money in the Revenue Fund after making the above deposits.
No Debt Service Reserve Account for the Bonds There is no debt service reserve account established for the Bonds. Maintenance and Repair Fund Bond proceeds in the amount of $1,500,000 will be used to fund the Maintenance and Repair Fund to be used for certain maintenance, repairs and improvements that the SBOE deems necessary for the Facilities in its discretion as further described in the Facilities Lease. During the term of the Facilities Lease, funds will be available to reimburse maintenance and repair costs incurred by the SBOE, at the direction of the Authority. In the event there are remaining funds in the Maintenance and Repair Fund upon the expiration or termination of the Ground Lease at the option of the State, such funds will be applied to any remaining payments on the Bonds and any further remainder shall be paid to the SBOE. In all other events, any remaining funds shall be paid to the Authority. General Reserve Fund Bond proceeds in the amount of $500,000 will be used to fund the General Reserve Fund. Such funds will be applied upon direction from the Authority to any lawful purpose of the Authority relating to the Facilities. To the extent that amounts in the General Reserve Fund exceed $500,000, such excess funds may be deposited to the Debt Service Fund to be used for the payment of interest on and principal of the Bonds at the direction of Authority upon request of SBOE. In the event there are remaining funds in the General Reserve Fund upon the expiration or termination of the Ground Lease at the option of the State, such funds will be applied to any remaining payments on the Bonds and any further remainder shall be paid to the SBOE. In all other events, any remaining funds shall be paid to the Authority. Covenants The Bond Resolution contains affirmative and negative covenants by the Authority including, but not limited to, covenants with respect to (i) restrictions on liens against the Revenues or other monies, securities, and funds pledged under the Bond Resolution; (ii) preparation of an Annual Budget to be filed with the Trustee; (iii) operation and maintenance of the Facilities; (iv) collection of rents, fees, and other charges for the Facilities; (v) maintenance of insurance coverage on the Facilities; (vi) preparation and maintenance of books of record and accounts relating to the Facilities and the funds and accounts under the Bond Resolution; (vii) preparation and provision of information reports; (viii) restrictions on the issuance of Additional Bonds; and (ix) restrictions on the assignment, mortgage, and subletting of the Facilities. For a more detailed description of the provisions of the Bond Resolution, see “APPENDIX B—Bond Resolution” attached hereto. The Ground Lease The Land upon which the Improvements are to be constructed will be leased by the State, acting through SBOE, as lessor, to the Authority pursuant to the Ground Lease. In accordance with the Act, the Ground Lease provides that no rent be paid by the Authority. The Ground Lease expires on June 30, 2058. The State, however, has the right to terminate the Ground Lease at its option, provided that all sums owing for the Bonds have been paid or provisions have been made for such repayment. In the event that the Bonds remain unpaid, or the State fails to renew the Facilities Lease or fails to appropriate Annual Rent payable under the Facilities Lease, the Ground Lease continues through its stated term. The Facilities Lease Annual Rent The primary source of Revenues for payment of the Bonds is Annual Rent payable to the Authority by the State acting by and through the SBOE, pursuant to the Facilities Lease. Such payment, subject to annual appropriation by the State, is expected to be from Sublease Rent payable by the Operating Contractor to SBOE pursuant to the
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Facilities Subleases as long as such Facilities Subleases are in effect. In the event of a termination of one or both of the Facilities Subleases, to the extent necessary, Annual Rent, or a portion thereof, could be payable from an appropriation of the State. Pursuant to the Facilities Lease, Annual Rent is equal to (i) the principal (including sinking fund payments) and interest due on the Bonds and any Additional Bonds for the corresponding fiscal year, (ii) the Authority’s Administrative Costs allocable to the Facilities Lease (as defined therein), and (iii) any other amounts payable with respect to the Bonds and any Additional Bonds and the amount, if any, of deposits to any operating fund, and any other reserve or expense accounts required to meet all terms and conditions of the Bond Resolution. The Authority’s Administrative Costs are generally limited to administrative expenses attributable to the Facilities incurred by the Authority under the Facilities Lease and, absent an event of default under such Facilities Lease, do not generally include the costs associated with operating, repairing and maintaining the Facilities, which costs are the responsibility of the State, except to the extent they are payable from the Maintenance and Repair Fund or assigned to the Operating Contractor during the term of the Facilities Subleases. Annual Rent is due in full in advance within 30 days after commencement of each annual lease term. See “APPENDIX C—Facilities Lease.” As described below, the Facilities Lease requires SBOE to pay Annual Rent and perform other obligations only to the extent that the cost and expense of such performance may have been provided for through an appropriation by the State Legislature or from any other legally available funds. See “STATE FINANCES— Appropriations for Authority Lease Payments.” Facilities Lease Term The Facilities Lease is subject to annual renewal by the State giving notice of intent to renew (“Notice of Intent to Renew”). Additionally, and even assuming the State gives Notice of Intent to Renew the Facilities Lease, the obligation of the State to pay Annual Rent due under the Facilities Lease is subject to the State’s right not to appropriate funds to make such payments. No penalties are imposed for an election not to renew the Facilities Lease. The initial term of the Facilities Lease extends through June 30, 2018, and is subject to annual renewal thereafter by the State. The State is required to provide its Notice of Intent to Renew for the period following the initial term of the Facilities Lease no later than May 1, 2018. It is currently the State’s intention to provide such Notice of Intent to Renew upon closing of the Bonds. Appropriation Process The State will pay Annual Rent under the Facilities Lease; provided, however, that the State’s obligation to make Annual Rent payments under the Facilities Lease is subject to annual renewal and appropriation. During the term of the Facilities Subleases, the source of funds utilized for the annual appropriation to pay Annual Rent is expected to be Sublease Rent. The State is not obligated to give Notice of Intent to Renew the Facilities Lease and the State is not obligated to make appropriations for the payment of Annual Rent or other obligations thereunder. There is no assurance that the Bonds will be paid in full if the State elects not to renew the Facilities Lease or the State Legislature fails to appropriate money to pay Annual Rent due under the Facilities Lease. During the term of the Facilities Subleases, the Authority expects that the State Legislature will appropriate funds for Annual Rent in an amount equal to Sublease Rent, as one or more appropriation items in the budget for SBOE. In the event of termination or expiration of the Facilities Subleases, the Authority expects, consistent with the process for the Authority’s other bonds, that should SBOE elect to renew the Facilities Lease, SBOE will seek an appropriation to pay Annual Rent from the State. The actual disbursement of the Annual Rent payment during July of each year will be made by the State Controller to the Authority. In the Fiscal Note to Concurrent Resolution No. 105, the State Legislature stated that as sponsor of the Facilities the SBOE would provide no State dollars for design, construction, financing, or operations of the Facilities. Accordingly, all costs for design, construction and financing are being provided by Bond proceeds and funds provided by BEA. The State Legislature, however, may elect to appropriate State funds to pay Annual Rent in the absence of sufficient Sublease Rent to pay the same. Non-Renewal and Non-Appropriation; Remedies If the State elects not to give its Notice of Intent to Renew the Facilities Lease, or if the State Legislature does not appropriate sufficient funds to pay the Annual Rent thereunder, the Authority may at the end of the then current renewal term re-enter and take possession of the Facilities, subject to the Facilities Sublease pursuant to a Nondisturbance and Attornment Agreement described below, and exercise reasonable diligence to re-let or sell its interest in the Facilities. There can be no assurance, however, that the Authority will be able to realize an amount - 11 -
sufficient to pay principal of and interest on the Bonds from the re-leasing or sale of its interest in the respective Facilities. Facilities Subleases As used in this Official Statement, the term “Facilities Subleases” collectively refers to two separate facility sublease agreements to be entered into between SBOE, as sublessor, and BEA, as sublessee, relative to the Cybercore Center (the “Cybercore Sublease”) and the Computing Center (the “Computing Sublease”) to be constructed with Bond proceeds, together with the BEA Contribution, near the INL Research and Education Campus in Idaho Falls, Idaho (the “INL Campus”). As more fully provided in the terms and conditions of the Facilities Subleases, Memorandum and Plan (both as defined below), BEA, or another Operating Contractor, which has taken assignment of the Facilities Subleases, is required to include and accommodate research and education opportunities with the State’s public higher education institutions, as well as pay for the maintenance and operations costs of the Facilities, except to the extent maintenance expenses are payable from the Maintenance and Repair Fund. As more fully provided in the terms and conditions of the Facilities Subleases, BEA will pay rent under the Cybercore Sublease in the annual amount of $2,940,000 and rent under the Computing Sublease in the annual amount of $3,180,000, for an aggregate annual amount of Sublease Rent equal to $6,120,000, commencing the first day of the month following the date the respective Improvements thereunder are determined to be substantially complete pursuant to the provisions of the applicable Facilities Sublease (the “Rent Commencement Date”) and each year thereafter. The Sublease Rent paid by the Operating Contractor under the Facilities Subleases is expected to be the source of repayment revenue for the Bonds for so long as the Facilities Subleases are in effect. The Operating Contractor’s rental payments under the Facilities Subleases are subject to Congressional appropriation to DOE of sufficient funds for payment of the same as further described in the section “Facilities Sublease Terms” below. Facilities Sublease Terms As more fully provided in the terms and conditions of the Facilities Subleases, the Facilities Subleases have fixed fifteen (15) year terms beginning on the Rent Commencement Date. The terms of the Facilities Subleases expire prior to the final maturity of the Bonds. New subleases could be negotiated by the SBOE and the Operating Contractor, with the approval of DOE. Each Facilities Sublease may be cancelled by the Operating Contractor upon three hundred sixty-five (365) days written notice in the event that Congress fails to appropriate to DOE sufficient funds for the Sublease Rent due thereunder. In the event of cancellation, the Operating Contractor shall pay a cancellation penalty to SBOE, in addition to the annual Sublease Rent covering the remaining 365 days of each cancelled Facilities Sublease. The cancellation penalty shall be ten percent (10%) of the total remaining Sublease Rent amounts for the remaining years of the sublease term, and shall be paid at the time the 365 day written cancellation notice is given to the SBOE. Such cancellation penalty would be subject to appropriation by the State prior to the being available to pay debt service on the Bonds. Nondisturbance and Attornment Agreement BEA and the Authority will enter into a Nondisturbance and Attornment Agreement (“NDA”) whereby BEA, or another Operating Contractor, has the right but not the requirement to continue possession pursuant to the Facilities Subleases, even in the event of nonrenewal or nonappropriation by the State. In this instance, this right of nondisturbance is subject to certain requirements including that the Operating Contractor attorn to the Authority, as lessor under the Facilities Subleases. Furthermore, rental payments from BEA, or another Operating Contractor, to the Authority pursuant to the NDA would be pledged for debt service on the Bonds under the Bond Resolution. DOE Intent Regarding the Facilities Subleases BEA and DOE, by and through its Idaho operations office, have, by a Letter of Representations dated October 5, 2017 (the “Letter of Representations”), acknowledged to the best of their knowledge based on information reasonably available to them on October 5, 2017, that (1) the Sublease Rent and the costs of certain upgrades, are allowable costs under the M&O Contract, (2) DOE will seek, and BEA (or its successor) will, to the extent permitted by law and by the M&O Contract, assist DOE’s efforts to seek, annual appropriation of monies sufficient to fund the Sublease Rent and the M&O Contract or the successor management and operation contract, (3) DOE will require any successor Operating Contractor to assume all obligations of BEA under the Facilities Subleases and to execute an assignment with respect to the same, and (4) in the event there is a period of time during which DOE operates and manages INL itself, it will assume the obligations of BEA or any successor under the Facilities Subleases. In addition, the Letter of Representations states that DOE anticipates its mission at INL and the Facilities will continue for a period of time ending no earlier than the full term of the Facilities Subleases.
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Additional Bonds Under the Bond Resolution, the Authority may issue Additional Bonds in order to provide funds to acquire, construct, reconstruct, install, or replace any equipment, facilities, additions, betterments, or other capital improvements to the Facilities for which it is authorized by law to issue revenue bonds or to refund outstanding revenue bonds, provided that the conditions set forth in the Bond Resolution are satisfied. Destruction of the Facilities If any useful portion of the Facilities shall be damaged or destroyed, the Authority shall, as expeditiously as possible, continuously and diligently prosecute or cause to be prosecuted the reconstruction or replacement thereof, unless it is determined under the provisions of the Facilities Lease that such reconstruction and replacement are not to be undertaken. The proceeds of any insurance paid on account of such damage or destruction, other than business interruption loss insurance, shall be held by the Trustee in a special account and made available for, and to the extent necessary be applied to, the cost of such reconstruction or replacement. The Authority shall not be required to rebuild, replace, restore or repair the Facilities if (1) the Authority shall reasonably determine, as evidenced by a certificate of an independent consulting engineer, that not to do so would not materially adversely affect the operation of the Facilities, or (2)(a) the Authority shall reasonably determine, as evidenced by a certificate of an independent certified public accountant that the proceeds of any insurance received by the Authority, together with other legally available money of the Authority, will be sufficient to pay the principal of, and premium and interest on the Bonds due up to and including such time as the Bonds may be called for optional redemption, and (b) the Authority irrevocably deposits such insurance proceeds and other money into an escrow fund to redeem the Bonds on the first date such Bonds may be redeemed. Open Market Purchase The Authority reserves the right to purchase any Bonds on the open market at any time and at a price (exclusive of accrued interest) not to exceed the principal amount outstanding, in accordance with Section 67-6414(f), Idaho Code. THE FACILITIES Summary The Facilities consist of the Land and two separate buildings—the Cybercore Center and the Computing Center, both of which consist of laboratory and office space. The Cybercore Center will be approximately 79,000 square feet and the Computing Center will be approximately 66,000 square feet. The Cybercore Center is expected to house approximately 200 lab researchers working on cybersecurity infrastructure protection. The Computing Center will be the home of INL’s next supercomputer and is also expected to house about 200 employees. The Computing Center will additionally contain office spaces for computer coders. Throughout the term of the Facilities Subleases, the Operating Contractor is required to include and accommodate research and educational opportunities with the State’s public higher education institutions as mandated by Concurrent Resolution No. 105. In addition, the SBOE, and INL/BEA signed a non-contractual Preliminary Plan of Collaboration (the “Plan”) and Boise State University, Idaho State University and the University of Idaho signed a non-contractual Memorandum of Understanding (the “Memorandum”), that set forth the intended research and educational objectives for the Cybercore Center and the Computing Center.
The estimated construction costs of the Facilities to be contributed from the proceeds of the Bonds is not less than $73,500,000. The BEA Contribution, in the amount of $12,922,848, which will be deposited into the Special Funding Account prior to pricing of the Bonds, will be used to finance special feature improvements that are above standard commercial grade. BEA has already invested approximately $5,900,000 into various design aspects of the Facilities. Operation and maintenance of the Facilities will be the responsibility of the Operating Contractor under the Facilities Subleases, except to the extent maintenance expenses are payable from the Maintenance and Repair Fund.
Plan of Collaboration for the Facilities A major objective is to document and facilitate collaboration between the State colleges and universities (the “Institutions”) and INL/BEA with respect to the Facilities. All eight Institutions support the collaboration and construction of the Facilities. A main objective is to advance specific initiatives through collaborative research and state-wide academic cooperation. The parties recognize the capabilities, resources and benefit each can receive from - 13 -
one another. While the SBOE recognizes the greatest benefit is through collaboration with INL/BEA, the SBOE believes there are benefits for the Institutions extending beyond the Facilities Subleases. See “RISK TO BONDHOLDERS— Legislative Authority Relating to the Financing” herein.
Construction The Improvements are being constructed on the Land to be owned by the State and leased to the Authority pursuant to the Ground Lease. The Authority is undertaking the construction of the Facilities. Construction is anticipated to be complete in September 2019, however, interest shall be capitalized through March 1, 2020, to provide for unanticipated construction delays. See “BONDHOLDER RISKS—Construction and Completion Risk.” Construction Management Agreement The Authority has entered into a ConsensusDocs 500 Standard Agreement and General Conditions (the “Construction Management Agreement”) with J.E. Dunn Construction Company (“J.E. Dunn”) to serve as construction manager for the Improvements. J.E. Dunn will utilize the services of Engineered Structures, Inc. (“ESI,” and together with J.E. Dunn, the “Construction Manager”) to provide a portion of its services under the Construction Management Agreement. Subject to the terms and conditions of the Construction Management Agreement, the Construction Manager agrees to perform all the construction, administrative and management services necessary or incidental to completion of the Improvements (the “Work”). The Work shall be performed in accordance with the Construction Management Agreement and in compliance with all laws and conditions of any governmental or regulatory agencies having jurisdiction over the Improvements. The Construction Manager has agreed to provide the Work for a guaranteed maximum price (the “GMP”), subject to changes to the Work or date of Substantial Completion (as defined by the Construction Management Agreement) that are determined according to the methods set forth in the Construction Management Agreement to result in an increase to the GMP. The Construction Management Agreement is a construction manager at-risk contract. J.E. Dunn is a privately held company founded in 1924, with experience in advanced technology installation, ranging from microelectronics, nanotechnology, cleanrooms and renewable energy. J.E. Dunn is a leading provider of construction management services, design-build, and integrated project delivery. ESI is a privately owned general contracting and construction management firm headquartered in Meridian, Idaho and licensed in 43 states. Architect Flad & Associates, Inc has been selected by the Authority to perform design services for the Improvements and administration of the Construction Management Agreement where appropriate. Design services for the Improvements are 100% complete and approved. Schedule of Work J.E. Dunn has provided a schedule for the construction to begin April 25, 2018, with Substantial Completion of the Improvements scheduled for on or before September 2019. Changes may be made to the date of Substantial Completion if the Construction Manager is delayed at any time by any cause beyond the control of the Construction Manager, or if the Work changes as permitted by the Construction Management Agreement. If the date of Substantial Completion is delayed by any other reason, the Construction Manager shall pay the Authority liquidated damages in the amount of $10,000 for each building for each Day that Substantial Completion of each of the Cybercore Center and Computing Center extends beyond sixty (60) days following the date of Substantial Completion, as amended, for each of the Cybercore Center and Computing Center. The Authority and the Construction Manager otherwise agree to waive all claims for any consequential damages, including but not limited to the Authority’s loss of rental income. Date of Substantial Completion Substantial Completion of the Work, or of a designated portion of the Work, occurs on the date when the Work is sufficiently complete in accordance with the Construction Management Agreement so that the Authority, and in turn the State, can beneficially occupy or utilize the Improvements, or a designated portion, for the use for which it is intended, without unapproved disruption. The date of Substantial Completion is expected to occur on or before September 2019. - 14 -
Insurance Requirements Before starting the Work and as a condition precedent to payment, Construction Manager is required to procure and maintain (i) Workers Compensation Insurance, (ii) Employers’ Liability Insurance, (iii) Business Automobile Liability Insurance, (iv) Commercial General Liability Insurance and (v) any other insurance required under the Construction Management Agreement through the use of a controlled insurance program. All such insurance shall be maintained throughout the duration of the Construction Management Agreement in the amounts set forth therein. Construction Manager waives, to the fullest extent permitted by law, all claims or rights against the Authority to recovery of damages to the extent those damages are not covered by said insurance. Construction Manager shall also obtain and maintain a Builder’s Risk Policy upon the Improvements for the full cost of replacement at the time of loss, including existing structures, until the date of Final Completion. Idaho National Laboratory Idaho National Laboratory (INL) consists of an 890-square-mile area in southeastern Idaho typically referred to as the “INL Site,” as well as laboratories and administrative buildings located at the INL Campus approximately 35 miles to the east of the INL Site in the city of Idaho Falls. Day-to-day operations are conducted at three primary facility areas—each hosting the complementary resources necessary to support national priority research. One area focuses on nuclear materials and processing, another on reactor technologies and the third on science, technology and education integration. INL is one of the top ten largest employers in Idaho with approximately 4,200 employees and more than 350 interns. In 2015, INL had a total business volume of approximately $917.1 million. INL is part of the DOE’s complex of national laboratories. INL performs work in each of the strategic goal areas of DOE: energy, national security, science and environment and is the nation’s lead laboratory for nuclear energy research, development, demonstration and deployment. INL is managed by BEA for the DOE’s Office of Nuclear Energy. BEA is a limited liability company whose sole member company is Battelle Memorial Institute (“Battelle”). See “Battelle” below. BEA’s contract with DOE to manage the facilities at INL is currently set to expire on September 30, 2019. However, DOE has formally announced its intent to extend BEA’s contract for another five years through September 30, 2024. The extension and other updated terms are expected to be finalized and executed in the coming months. The Facilities will be located on land to be owned by the State near the INL Campus. The Center for Advanced Energy Studies (CAES) facility (in which the INL and Idaho and other universities cooperate to conduct on-site research, classroom instruction, and technical conferences) and INL-related facilities are also on the INL Campus.
Battelle BEA is a limited liability company organized under the laws of the State of Delaware. The sole member company of BEA is Battelle Memorial Institute, which is a non-profit corporation organized under the laws of the State of Ohio. Battelle or its subsidiary LLCs have been a contractor or subcontractor to the government of the United States and its energy missions and laboratories for over sixty years, including at seven national laboratories: six for the DOE and one for the U.S. Department of Homeland Security. These laboratories include the Pacific Northwest National Laboratory and the National Biodefense Analysis and Countermeasures Center (the latter is managed by Battelle National Biodefense Institute, LLC – Battelle is the sole member) and is the co-manager of the Oak Ridge Laboratory (managed by UT-Battelle, LLC – consisting of Battelle and the University of Tennessee), the National Renewable Energy Laboratory (managed by Alliance for Sustainable Energy, LLC - consisting of Battelle and MRIGlobal), and Brookhaven National Laboratory (managed by Brookhaven Science Associates, LLC -- consisting of Battelle and The Research Foundation of the State University of New York). Battelle is also a subcontractor at the Lawrence Livermore National Laboratory. STATE FINANCES State Budget and Appropriation Process The State sets an annual budget based on the State’s fiscal year which begins on July 1 and ends on the following June 30. Both the executive and legislative branches play a role in the budget setting process. All State agencies submit a budget request to the Division of Financial Management (“DFM”) in the Governor’s office and to the Legislative Services Office (the “LSO”) not later than September 1 of each year. The Governor, through DFM, then prepares a proposed budget for the subsequent fiscal year, and submits this budget recommendation to the Legislature within five days after the commencement of the annual legislative session in early January. The Governor’s budget recommendation is based on revenue projections developed by DFM. - 15 -
A joint committee composed of the Senate Finance Committee and the House Appropriations Committee (“JFAC”) then initiates legislative action on the State budget. Taking into account the Governor’s recommendation, JFAC hears presentations of, or reviews without hearings, budget requests by all State agencies and drafts a series of appropriation bills that are sent to the entire legislative body. Upon passage by each legislative body, the appropriation bills for each agency are sent to the Governor for signature. The Governor has “line–item” veto power for distinct appropriations. The Idaho Constitution requires a balanced budget, stating that appropriations must match the projected revenues currently provided for by law. The State Legislature usually adjourns before April 1, once it has adopted a budget, set appropriations for the upcoming fiscal year, and, if necessary, revised the current fiscal year’s budget. The appropriations, as enacted by the State Legislature, constitute the limit for each agency’s authorized expenditures, subject to limited flexibility for emergency situations and/or unanticipated revenue. If, in the course of a fiscal year prior to the commencement of the legislative session, the Governor determines that the expenditures authorized by the State Legislature for the current fiscal year exceed anticipated revenues expected to be available to meet those expenditures, the Governor by executive order may reduce (“holdback”) the spending authority on file in the office of the State Controller for any department, agency or institution of the State.
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State Revenues, Expenditures and Fund Balance The following table shows the State’s Revenues, Expenditures and Changes in Fund Balances for fiscal years ended June 30, 2016 through 2017: REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES*
2017 2016 REVENUES Sales Tax $ 1,631,295 $ 1,572,965 Individual and Corporate Taxes 1,854,351 1,696,814 Other Taxes 59,845 58,274 Licenses, Permits, and Fees 25,421 23,001 Sale of Goods and Services 26,549 30,598 Grants and Contributions 16,262 12,327 Investment Income 47,915 16,318 Tobacco Settlement 22,964 25,297 Other Income 36,623 44,038
Total Revenues $ 3,721,225 $ 3,479,632
EXPENDITURES Current General Government $ 139,844 $ 133,860 Public Safety and Correction 316,286 300,189 Health and Human Services 24,696 26,445 Education 1,817,866 1,690,567 Economic Development 48,163 47,789 Natural Resources 55,636 $ 62,562 Capital Outlay 99,907 49,300 Intergovernmental Revenue Sharing 267,921 252,426 Debt Service 12,071 12,607
Total Expenditures $ 2,782,390 $ 2,575,745
Revenues Over (Under) Expenditures 938,835 $ 903,887
OTHER FINANCING SOURCES (USES) Capital Lease Acquisitions $ 7 Sale of Capital Assets 2,655 383 Transfers In 252,679 209,079 Transfers Out (1,033,052) (979,266)
Total Other Financing Sources (Uses) $ (777,718) $ (769,797)
Net Change in Fund Balances $ 161,117 $ 134,090
FUND BALANCES Fund Balance-Beginning of Year, as Restated $ 1,315,057 $ 1,164,436 Fund Balance-End of Year 1,476,174 1,298,526
Source: 2017 Comprehensive Annual Financial Report; Division of Financial Management. *Dollar amounts in $000.
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State Reserve Funds The balances in the State’s four primary reserve funds, the Budget Stabilization Fund (the “BSF”), the Economic Recovery Reserve Fund (the “ERRF”), the Public Education Stabilization Fund (the “PESF”), and the Higher Education Stabilization Fund (the “HESF”) at fiscal year-end are shown below for years 2014 through 2017 and estimated for 2018. A full description of each fund is included below. Budget Stabilization Fund Section 57-814, Idaho Code, creates the BSF in the State Treasury for the purpose of meeting General Fund revenue shortfalls and to meet expenses incurred as the result of a major disaster declared by the Governor. Interest earnings from the investment of moneys in this fund by the State Treasurer will be credited to the Permanent Building Account subject to the provisions of Section 67-1210, Idaho Code. The Budget Stabilization Fund is funded with a portion of excess receipts from the General Fund each fiscal year, as well as a portion of excess in the General Fund after all obligations have been met for the fiscal year. The balance for Fiscal Year 2017 was approximately $323.9 million and the balance estimated by Idaho’s Division of Financial Management for Fiscal Year 2018 is $353.7 million. Economic Recovery Reserve Fund Section 67-3520, Idaho Code, creates the ERRF in the State Treasury for the purpose of meeting General Fund revenue shortfalls, meeting expenses incurred as the result of a major disaster declared by the Governor, or providing one-time tax relief payments to the citizens of the State. Moneys in the ERRF consist of moneys remitted pursuant to Section 63-2520, Idaho Code. Interest earnings from the investment of moneys in this fund by the State Treasurer will be retained in the ERRF. For purposes of the CAFR, the BSF balance shown above includes the ERRF funds. Public Education Stabilization Fund Section 33-907, Idaho Code, created the PESF in the State Treasury as a fund detail of the Public School Income Fund. The PESF consists of moneys transferred to the fund according to the provisions of Sections 33-905 and 33- 1018, Idaho Code, and any other moneys made available through legislative transfers or appropriations. Moneys in the PESF are continuously appropriated for the purposes stated in Sections 33-1018 and 33-1018B, Idaho Code, and may only be expended for the purposes stated in Sections 33-1018, 33-1018A and 33-1018B, Idaho Code. Interest earned from the investment of moneys in the PESF will be retained in the PESF. Any accumulated balances in the PESF that are in excess of 8.334% of the current fiscal year’s total appropriation of State funds for public school support will be transferred to the State Bond Levy Equalization Support Program Fund. Senate Bill 1041, passed in the 2017 legislative session, added a new Section 33-1018C, Idaho Code, which specifies that in the event that moneys are withdrawn from the PESF for the circumstances authorized pursuant to Section 33-1018 or Section 33- 1018B, Idaho Code, then the joint finance-appropriations committee will consider transferring the amount of the withdrawal as a supplemental appropriation to the PESF for the current fiscal year. The balance for Fiscal Year 2017 was $85 million and the balance estimated by Idaho’s Division of Financial Management for Fiscal Year 2018 is $65.3 million. Higher Education Stabilization Fund Section 33-3726, Idaho Code, created the HESF in the State Treasury as a strategic reserve to be utilized as a mitigation tool to minimize the impact of economic downturns on higher education in the State. Funding for the HESF is generated from two revenue sources, flowing into three accounts. The first account is established through the interest generated from the submission of tuition and fees to the State General Account. The second and third accounts are funded through the appropriation of surplus monies in times of economic abundance. House Bill 459 in the 2016 legislative session established a fourth account, the Community College Start-up Account. Additionally, Senate Bill 1429 from the 2016 legislative session transferred $5 million from the General Fund to the Community College Start-up Account. The balance for Fiscal Year 2017 was $8.9 million and the balance estimated by Idaho’s Division of Financial Management for Fiscal Year 2018 is $5.3 million. Outstanding Obligations of the State and its Independent Agencies The State has no outstanding general obligation bond debt and its capital lease obligations total less than one percent of the State’s budget. In addition to the Authority’s bonds described above under “Idaho State Building Authority – Authority Projects,” the following is a brief description of State indebtedness.
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Idaho Housing and Finance Association
The Idaho Housing and Finance Association (“IHFA”) is authorized by State statute to issue revenue bonds for single and multifamily housing projects, nonprofit projects, economic development projects and highway transportation projects through the Grant Anticipation Revenue Vehicle (“GARVEE”) program pursuant to Title 23 of the United States Code. IHFA is governed by seven commissioners, appointed for alternating four-year terms by the Governor of the State, one of whom is selected chairman by the Governor. IHFA has no taxing power and neither the State nor any political subdivision thereof is liable for its bonds or other indebtedness. IHFA’s mortgage loans are either guaranteed by Federal agencies, insured by private mortgage guarantee policies, or collateralized by IHFA’s net assets. IHFA’s GARVEE obligations are primarily funded with future federal aid highway apportionments. The GARVEE bond legislation does not authorize or pledge State general fund revenues to make payments on bonds or notes.
State Universities
The State’s colleges and universities utilize revenue bonds to finance and refinance construction projects. These revenue bonds are secured by student fees, revenues from sale of goods and services, contributions, and certain other revenues. The foundations of the State’s colleges and universities also issue revenue bonds secured by donations, leases and other revenues. State general fund revenues are not pledged or used to support bonds of the State’s colleges and universities or bonds issued by their foundations. Idaho Bond Bank Authority The Idaho Bond Bank Authority (“IBBA”) was created as an independent public body corporate and politic in 2001 to issue revenue bonds to make loans to municipalities including cities, counties, school districts, and other political subdivisions. The IBBA Board consists of five members: the State Treasurer or his or her designee, one member of the State Senate appointed by the president pro tempore of the Senate, one member of the State House of Representatives appointed by the Speaker of the House, and two members appointed by the Governor.
IBBA bonds are secured by the revenues pledged by the underlying municipalities, the intercept of State payments to the municipalities and the State sales tax, but are intended to be paid by the underlying municipality. In the event the municipality does not make payment on the applicable bond, the State Treasurer may make payments on the bonds from the State sales tax account and intercept the receipt of any payment of sales tax moneys to be distributed to the defaulting municipality or any other source of operating moneys provided by the State to the defaulting municipality. Such State intercept operates by force of law and not by consent of the municipality. The State sales tax has never been needed to make payments on IBBA bonds.
State Tax Anticipation Notes The State typically issues tax anticipation notes annually for cash flow purposes. Currently, the State has $485,770,000 outstanding, which is due June 29, 2018.
School Bond Guaranty Idaho Code Section 33-5303 requires the State to guarantee the bonds of any school district qualified by the State Treasurer. If the State is required to make the bond payment of any school district, the State will redirect distribution normally made to the school district to reimburse the State. For more information on State obligations, see “APPENDIX E—State of Idaho Comprehensive Annual Financial Report--Note 13 “Bonds, Notes and Other Long-Term Liabilities” and Note 16 “Litigation, Contingencies Commitments and Encumbrances.” 2018 Legislative Actions The 2018 State Legislature, which met January through March 2018, budgeted a total General Fund appropriation of $3,652.7 million for Fiscal Year 2019, a 5.8% increase from Fiscal Year 2018. The 2019 State Legislature may make adjustments, if needed, to the Fiscal Year 2019 budget and appropriations, and will set the budget and appropriations for the fiscal year beginning July 1, 2019, and ending June 30, 2020. The General Fund Revenue Book (“GFRB”) is an annual publication prepared by the DFM which provides input into the Governor's proposed budget. It consists of General Fund projections by source, the economic forecast upon - 19 -
which the revenue forecasts are based, and a section devoted to the State’s tax structure. The January 2018 GFRB forecast $3,780.5 million of General Fund revenues for Fiscal Year 2019. The DFM revised this forecast upward to $3,823.1 million in the February 2018 publication of its Idaho General Fund Revenue Report (“GFRR”) to include the impacts of the federal Tax Cut and Jobs Act of 2018. The current Fiscal Year 2019 general fund revenue forecast of $ 3,823.1 million represents a 5.3% growth over the current Fiscal Year 2018 general fund revenue forecast of $ 3,630.8 million. The Fiscal Year 2018 general fund revenue forecast of $ 3,630.8 million represents a 5.3% growth over the actual Fiscal Year 2017 general fund revenues of $ 3,448.4 million.
The GFRB and GFRR are available on the internet at https://dfm.idaho.gov/publications/eab/econ_index.html (which website is not incorporated into this Official Statement by such reference and is not a part hereof). Appropriations for Authority Lease Payments The State Legislature has never failed to appropriate lease payments for facilities leases between agencies of the State and the Authority.
PUBLIC EMPLOYEE RETIREMENT SYSTEM The Public Employee Retirement System of Idaho (“PERSI”) is the administrator of a multiple-employer cost- sharing defined benefit public employee retirement system that includes the State’s employees. All benefit-eligible State employees, which consist of employees who work 20 or more hours per week for five consecutive months, must enroll in one of two retirement plans: PERSI or the Optional Retirement Program (“ORP”), described below. A retirement board (the “PERSI Board”), appointed by the Governor and confirmed by the State Legislature, manages the system, including selecting investment managers to direct the investment, exchange, and liquidation of assets in the managed accounts and to establish policy for asset allocation and other investment guidelines. The retirement board is charged with the fiduciary responsibility of administering the plan. PERSI is the administrator of seven fiduciary funds, including three defined benefit retirement plans, the Public Employee Retirement Fund Base Plan (“PERSI Base Plan”) and the Firefighters’ Retirement Fund and the Judge’s Retirement Fund; two defined contribution plans, the Public Employee Retirement Fund Choice Plans 414(k) and 401(k); and two Sick Leave Insurance Reserve Trust Funds, one for State employers and one for school district employers. PERSI membership is mandatory for eligible employees of participating employers. Employees must be (i) working 20 hours per week or more; (ii) teachers working a half-time contract or greater; or (iii) persons who are elected or appointed officials. Membership is mandatory for State agency and local school district employees, and membership by contract is permitted for participating political subdivisions such as cities and counties. As of June 30, 2017, PERSI had 70,073 active members, 34,151 inactive members (of whom 12,669 are entitled to benefits), and 45,468 annuitants. In addition, as of June 30, 2017, there were 783 participating employers in the PERSI Base Plan and total membership in PERSI was 149,692. The net position for all pension and other funds administered by PERSI increased $1.6 billion during Fiscal Year 2017 and decreased $40.6 million during Fiscal Year 2016. The increase in the defined benefit plans reflects the total of contributions received and an investment return of more than benefits paid and administrative expenses. All of the plans experienced investment gains in Fiscal Year 2017 as a result of positive market performance. Net investment income for all of the funds administered by PERSI for the Fiscal Years ended June 30, 2017 and 2016 was $1.9 billion and $228 million, respectively. Based on the July 1, 2017 actuarial valuation, PERSI’s actuarial gain is $439.5 million resulting in a change in funding status from 86.3% on July 1, 2016 to 89.6% on June 30, 2017. The funding ratio is the ratio of the actuarial value of the assets over the value of the actuarial accrued liability. Below is a table that details the analysis of actuarial gains and losses.
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ANALYSIS OF ACTUARIAL GAINS OR LOSSES (ALL DOLLAR AMOUNTS IN MILLIONS)
Gain (Loss) for Period 2014-2015 2015-2016 2016-2017 Investment Income Investment income was greater (less) than expected. $ (587.5) $ (742.9) $ 772.1
Pay Increases Pay increases were less (greater) than expected. 91.7 165.5 (198.0)
Membership Growth (Additional) liability for new members. (17.9) (13.6) (18.9)
Return to Employment Less (more) reserves were required for terminated members returning to work. (12.4) (11.3) (10.2)
Death After Retirement Retirees died younger (lived longer) than expected. 22.5 11.8 17.6
Cost of Living Adjustment (COLA) (1) Different Automatic COLA than expected. 68.5 NA NA
Other Miscellaneous gains (and losses) resulting from other (2) causes. (46.3) (44.0) (68.3)
Total Gain (Loss) During the Period From Actuarial Experience $ (481.4) $ (634.5) $ 494.3
Contribution Income Actual contributions were greater (less) than the normal cost and interest on the Unfunded Actuarial Accrued Liability. 43.5 0.3 (42.5)
Non-Recurring Items (3) Changes in actuarial assumptions caused a gain (loss) None (13.2) None Changes in actuarial methods caused a gain (loss) None None None Changes in plan provisions caused a gain (loss)(4) Changes to Contribution Rate Increase Schedule None (68.5) (9.0) None None (3.3)
Composite Gain (Loss) During the Period $ (437.9) $ (715.9) $ 439.5
Note: Effects related to losses are shown in parentheses. Numerical results are expressed as a decrease (increase) in the actuarial accrued liability. (1) For 2015, this reflects the increase in CPI of 0.20%. (2) Reflects losses on active and inactive member experience. (3) For 2015-2016, this reflects changes made to the demographic assumptions adopted according to the 2016 Experience Study. (4) For 2015-2016, this reflects the 0.80% retroactive COLA, effective March 1, 2016. For 2016-2017 this reflects the 0.10% discretionary COLA, effective March 1, 2017. Source: Public Employee Retirement System of Idaho, 2017 Comprehensive Annual Financial Report, Milliman Actuarial Section, Exhibit 6.
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Annual actuarial valuations for PERSI are provided by the private actuarial firm of Milliman, which has provided the actuarial valuations for PERSI since PERSI’s inception. As a result of the statutory requirement that the amortization period for the unfunded actuarial liability be 25 years or less, the PERSI Board, at its October 18, 2016 meeting, approved a total contribution rate increase of 1% scheduled to take effect July 1, 2018. However, PERSI ended Fiscal Year 2017 with a 12.25% net investment return, providing the PERSI Board with the ability to reconsider the increase. During its October 2017 meeting, the PERSI Board voted to delay implementation of the 1.0% contribution rate increase for one year, making the new effective date July 1, 2019. Until July 1, 2019, PERSI contribution rates will remain unchanged. The contribution rates for the year ended June 30, 2017 follow:
Contribution Rates Member Employer
General/ Fire/ General/ Fire/ Teacher Police Teacher Police Contribution Rates: 6.79% 8.36% 11.32% 11.66% Source: Financial Statements June 30, 2017 - Public Employee Retirement System of Idaho.
The next major PERSI experience study, to be completed in 2018, will cover the period July 1, 2013 through June 30, 2017. Beginning in Fiscal Year 2015, employers are required to record a liability and expense equal to their proportionate share of the collective net pension liability and expense of PERSI due to the implementation of GASB 68. The Authority has no employed staff and engages outside professional services as needed in conducting the business of the Authority. Accordingly, the Authority has no net pension liability under PERSI as of June 30, 2017. PERSI issues a publicly available financial report that includes financial statements and required supplementary information. That report may be obtained at, www.persi.idaho.gov (which website is provided purely for convenience and is not incorporated or made a part of this Official Statement by this reference). Optional Retirement Program Certain employees of State higher education institutions are eligible to participate in an ORP established under Sections 33-107A and 33-107B, Idaho Code, by the State Board of Education. Commencing July 1, 2007, 1.49% of the payroll of higher education faculty and staff covered by the ORP is payable to PERSI until July 1, 2025. From July 1, 1997 to July 1, 2011, 3.83% of the payroll of faculty and staff at post-secondary professional-technical education institutions covered by the ORP was payable to PERSI. Effective July 1, 2011, this 3.83% is payable to the ORP. The payments to PERSI are in lieu of amortization payments and withdrawal contributions otherwise required under PERSI statutes related to future payments to higher education employees who elected to remain in PERSI. The ORP is a portable, multiple-employer, defined contribution retirement plan in accordance with Internal Revenue Code section 401(a), with options offered by Teachers Insurance and Annuity Association/College Retirement Equities Fund (“TIAA/CREF”) and Variable Annuity Life Insurance Company (“VALIC”). The total contribution rate is the same for all employees, with a portion of the employer’s contribution for ORP members that are four-year institutions (pursuant to Idaho Code §33-107A) being credited to the employee’s account and a portion to the PERSI unfunded liability until 2025. See “APPENDIX E—State of Idaho Comprehensive Annual Financial Report” for additional information. Other Post-employment Benefits The State administers post-employment benefits for health, disability, and life insurance for retired or disabled employees of State agencies, public health districts, state colleges and universities, and other political subdivisions that participate in the plans. PERSI participates in the State’s post-employment benefit programs. The State administers the retiree healthcare plan, which allows eligible retirees to purchase health insurance coverage for themselves and their eligible dependents. Retirees eligible for medical health insurance pay the majority of the premium cost; however, the retiree plan costs are subsidized up to a maximum benefit amount of $1,860 per retiree per year. The plan provides long-term disability income benefits for active employees who become disabled, generally up to a maximum age of 70. The gross benefit equals 60% of monthly pre-disability salary or $4,000, whichever is less. Disabled employees may continue healthcare coverage for up to 30 months following the date of disability. The - 22 -
State reports the liability for retiree healthcare and long-term disability benefits using the most recent actuarial valuation, which is as of July 1, 2014. The plan also provides basic life and dependent life coverage for disabled employees, generally up to a maximum age of 70. Basic life insurance is provided to eligible retirees of certain institutions of higher education, the Judicial Department, and the Department of Labor. Specific details of these other post-employment benefits are available in the State’s Comprehensive Annual Financial Report, which may be accessed at www.sco.idaho.gov (which website is provided purely for convenience and is not incorporated or made a part of this Official Statement by this reference). RISKS TO BONDHOLDERS Prospective purchasers of the Bonds should consider carefully all possible factors that may affect both the operations and revenues of the Facilities and consequently create the possibility that payment on the Bonds will not be made, or that the Bonds will be redeemed prior to maturity. The following discussion, while not setting forth all the factors that must be considered, contains some of the factors that should be considered prior to purchasing the Bonds. There can be no assurance that other risk factors will not become material in the future. Limited Obligations The Bonds are limited obligations of the Authority payable from and secured solely by the revenues, funds, and securities pledged therefor under the Bond Resolution. The Bonds, and the interest payable thereon, do not constitute a debt or liability or a pledge or lending of the faith and credit of the State, the State Legislature, or any political subdivisions, or agencies of the State, other than the Authority to the extent herein described. Except to the extent the State is obligated to pay Annual Rent under the Facilities Lease and the State has appropriated funds for such lease payments, the issuance of the Bonds does not directly, indirectly, or contingently obligate the Authority, the State, the State Legislature, or any political subdivision of the State to levy or collect any form of taxation or to make any appropriation for the payment thereof, and any such levy is prohibited. The Bonds and the interest payable thereon do not now and never will constitute a debt of the State within the meaning of the Constitution or the statutes of the State and do not now and never will constitute a charge against the credit or taxing power of the State or any political subdivision thereof. Limitations on Enforceability Upon the occurrence of an Event of Default under the Bond Resolution, the Trustee may, and shall, upon the request of the owners of at least 25% in aggregate principal amount of the Bonds, declare all of the principal and interest on the Bonds due and payable. Upon such declaration, the Authority and the Trustee shall immediately declare all rental payments due under the Facilities Lease to be immediately due and payable as provided therein. All the rental payments due at any time under the Facilities Lease will not be greater than one year’s rental payments, as such obligation under the Facilities Lease is subject to annual appropriation. Upon the occurrence of any Event of Default or an Event of Nonrenewal under the Facilities Lease, the Authority shall take actual possession of the Facilities at the end of the then current renewal term under the Facilities Lease and the Authority may sell its interest in the Facilities, subject to the rights of BEA, or another Operating Contractor, under the NDA, or hold, operate and manage the same. Notwithstanding these remedies, the enforceability of the rights and remedies available to the Trustee with respect to the Bonds may be subject to certain limitations, including, but not limited to, applicable real property, bankruptcy, insolvency, moratorium, reorganization, or other laws relating to or affecting the enforcement under the State law of certain remedies, the reasonable and necessary exercise of the State’s police power in matters of public safety, and other legitimate public purposes. Any such proceedings or the exercise of public powers by State or federal governments, if initiated, could subject owners of the Bonds to judicial discretion and interpretation of their rights which, in turn, may result in risks of delay, limitation or modification of their rights. The Authority does not have the power to levy taxes of any kind. Construction and Completion Risks The State, acting through the SBOE, is obligated to pay Annual Rent under the Facilities Lease beginning with the renewal term commencing July 1, 2020. However, BEA is not obligated to pay Sublease Rent until Substantial Completion of the Improvements. The Authority, the SBOE, and BEA have structured the Facilities Lease, the Facilities Subleases and the Construction Management Agreement, including providing capitalized interest on the Bonds and damages for certain delays, to mitigate the risk that failure to achieve Substantial Completion of the Improvements on schedule would result in a default on the Bonds. Capitalized Interest will be funded through March 2020, approximately five months beyond the expected date of Substantial Completion, which is estimated to - 23 -
occur in September 2019. However, in the event Substantial Completion of the Improvements is not achieved by the end of the capitalized interest period, even with construction damages for missing the Substantial Completion deadline, there will likely be insufficient funds for payment of the Bonds, unless the State makes an appropriation. See “THE FACILITIES—Construction” herein.
Potential for Nonrenewal of the Facilities Lease
Because the Facilities Lease is subject to annual renewal and appropriation by the State, rather than make an appropriation, the SBOE may elect not to renew the Facilities Lease without further obligation in the event that Substantial Completion of the Project shall not have occurred prior to the time that SBOE is required to give Notice of Intent to Renew. In the event the SBOE does not renew the Facilities Lease, the Authority would take possession of the Facilities and relet or sell its interest subject to the rights of BEA pursuant to the NDA.
State’s Obligations Subject to Annual Renewal and Appropriation The State may elect not to give a Notice of Intent to Renew under the Facilities Lease. Additionally, and even assuming the State gives its Notice of Intent to Renew the Facilities Lease, the obligation of the State to pay the Annual Rent due under the Facilities Lease is subject to the State’s right not to appropriate funds to make such payments. Upon the occurrence of any Event of Default or an Event of Nonrenewal under the Facilities Lease, the Authority shall take actual possession of the Facilities at the end of the then current renewal term under the Facilities Lease and the Authority may sell its interest in the Facilities, subject to the rights of BEA, or another Operating Contractor, under the NDA, or hold, operate and manage the same. Dependency on Appropriations Process of the United States Congress During the terms of Facilities Subleases, the BEA’s obligation to pay Sublease Rent will be sufficient to pay the principal of and interest on the Bonds, as well as other costs to be payable by the SBOE under the Facilities Lease. The terms of the Facilities Subleases are fifteen years, which expire prior to the final maturity of the Bonds. In the event BEA does not seek to negotiate new Facilities Subleases, the State would need to make an appropriation to pay Annual Rent under the Facilities Lease. In the Letter of Representations, DOE acknowledges that the rental obligations of the BEA under the Facilities Subleases are an allowable expense under the M&O Contract, however DOE’s access to funds requires appropriations by the United States Congress. DOE’s ability to make payments under the M&O Contract, and in-turn BEA’s ability to pay Sublease Rent, requires such appropriation to the general operating expenses budget of DOE from which the reimbursable expenses under the M&O Contract, as well as other expense and operating payments of DOE, will be paid. There can be no assurance that the United States Congress will make such appropriations for DOE operations or for INL and its programs, including the Facilities, or that such appropriations will be made timely in any fiscal year. In the event the United States Congress does not make such appropriations and DOE does not have sufficient available funds to continue operations, the Authority’s ability to provide sufficient funds to pay the debt service on the Bonds could be adversely affected. Continued availability of funding for INL and its programs depends upon the long term commitment of DOE to INL. There is no guarantee that the United States Congress would not choose to fund facilities competing with INL or relocate the activities conducted at the INL to other laboratories. Pursuant to the Letter of Representations, DOE anticipates its mission at the INL and the Facilities will continue for a period of time ending no earlier than the full term of the Facilities Subleases, however such period ends prior to the maturity of the Bonds. See “SECURITY AND SOURCES OF PAYMENT—Facilities Subleases—DOE Intent Regarding the Facilities Subleases” for further description of Letter of Representations. Legislative Authority Relating to the Financing In conjunction with the State Legislature’s passage of Concurrent Resolution No. 105, providing for the Authority to issue the Bonds, the State Legislature stated that as sponsor of the Facilities the SBOE would provide no State dollars for design, construction, financing, or operations of the Facilities. Accordingly, all costs for design, construction and financing are being provided by Bond proceeds and funds provided by BEA. The State Legislature, however, may elect to appropriate State funds to pay Annual Rent in the absence of sufficient Sublease Rent to pay the same. Thus, in the event Substantial Completion is not achieved prior to use of all capitalized interest funds, or one or both of the Facilities Subleases are terminated due to nonappropriation by Congress to DOE or new leases are not
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negotiated at the end of their terms, the SBOE may decide to not renew the Facilities Lease, or the State may choose not to appropriate. In that case, the Authority may have no source of funds to pay debt service on the Bonds. However, as described herein, it is currently the intent of the SBOE to continue to utilize research and educational operations at the Facilities beyond the terms of the Facilities Subleases with BEA. The SBOE feels that given the Facilities’ compatibility with the Institutions’ research and education missions, the Facilities could be directly utilized by the Institutions, if desired. Accordingly, while there is no assurance that the Bonds will be paid in full if BEA terminates its obligations under one or both of the Facilities Subleases and the State fails to renew and appropriate sufficient monies to pay the Annual Rent due under the Facilities Lease, it is currently the intent of the State to utilize the Facilities beyond expiration or termination of the Facilities Subleases. See “THE FACILITIES— Plan of Collaboration for the Facilities.” Special Use Facilities In the event of a termination of one or both of the Facilities Subleases and a nonrenewal or nonappropriation by the State under the Facilities Lease, the Authority’s ability to sell its interest or relet the Facilities to other tenants will depend on the market demand for such Facilities. Given the specialized nature of certain portions of the Facilities, the likelihood of finding a tenant to replace BEA at the Facilities, as currently designed, is unclear. CONTINUING DISCLOSURE The Authority will enter into a continuing disclosure undertaking (the “Undertaking”) for the benefit of the Bondholders. Pursuant to the Undertaking, the Authority will agree to send certain information annually and to provide notice of certain events to the Municipal Securities Rulemaking Board pursuant to the requirements of Section (b)(5) of Rule 15c2-12 (the “Rule”) adopted by the Securities and Exchange Commission. The information to be provided on an annual basis, the events which will be noticed on an occurrence basis, and a summary of other terms of the Undertaking, including termination, amendment, and remedies, are set forth in the Undertaking, the proposed form of which is attached as APPENDIX F to this Official Statement. Any failure by the Authority or the State to perform the above described obligations shall not constitute an Event of Default under the Bond Resolution or the Bonds; rather, the right to enforce such provisions is limited to the right to compel performance. Except as described hereunder, the Authority has not failed in the past five years to perform any obligation with respect to any existing undertaking to provide continuing disclosure under the Rule. For Fiscal Year 2012, the Authority filed its audited financial statements with the MSRB eight days late. The Authority filed a notice of late filing with the MSRB on April 25, 2013. In connection with its 2017 financing, the Authority discovered (i) certain CUSIPs were not properly linked to the Authority’s and State’s audited financials, (ii) certain audited financial statements of PERSI were filed without an accountant’s signature and (iii) certain financial information of underlying lessees in previous Authority transactions were not filed as required. On November 28, 2017, the Authority filed a Notice of Late Filing and in the days prior thereto all appropriate information was filed and properly linked to all CUSIPs. A failure by the Authority to comply with the Undertaking must be reported in accordance with the Rule and must be considered by any broker, dealer or municipal securities dealer before recommending the purchase or sale of the Bonds in the secondary market. Consequently, such a failure may adversely affect the transferability and liquidity of the Bonds and their market price. TAX MATTERS In the opinion of Bond Counsel, under existing law, interest on the Bonds is exempt from State of Idaho income taxes. HOWEVER, INTEREST ON THE BONDS IS NOT EXCLUDED FROM GROSS INCOME FOR FEDERAL INCOME TAX PURPOSES. PROSPECTIVE PURCHASERS OF THE BONDS SHOULD CONSULT THEIR TAX ADVISORS AS TO THE FEDERAL, STATE AND LOCAL, AND FOREIGN TAX CONSEQUENCES OF THEIR ACQUISITION, OWNERSHIP AND DISPOSITION OF THE BONDS. Circular 230. THE FOREGOING DISCUSSION OF TAX MATTERS REGARDING THE BONDS WAS NOT INTENDED OR WRITTEN BY BOND COUNSEL TO BE USED, AND IT CANNOT BE USED, FOR THE PURPOSE OF AVOIDING PENALTIES THAT MAY BE IMPOSED ON AN OWNER OF THE BONDS. THE FOREGOING DISCUSSION OF TAX MATTERS WAS WRITTEN TO SUPPORT THE PROMOTION OR MARKETING OF THE BONDS. EACH PROSPECTIVE PURCHASER OF THE BONDS SHOULD SEEK - 25 -
ADVICE BASED ON THE PROSEPCTIVE PURCHASER’S PARTICULAR CIRCUMSTANCES FROM AN INDEPENDENT TAX ADVISOR. Bond Premium Beneficial Owners who purchase Bonds in the initial offering at a price in excess of the par amount of such Bonds or at a price other than the original offering price shown on the inside cover page of this Official Statement and owners who purchase the Bonds after the initial offering should consult their own tax advisors with respect to the tax consequences of the ownership of the Bonds. Owners of the Bonds also should consult their own tax advisors with respect to the state and local tax consequences of owning the Bonds. It is possible that, under the applicable provisions governing determination of state and local taxes, accrued original issue premium on the Bonds may be deemed to be received in the year of accrual even though there will not be a corresponding cash payment. Original Issue Discount Beneficial Owners who purchase Bonds in the initial offering at a price less than the original offering price shown on the inside cover page hereof (“Discount Bonds”) and owners who purchase Discount Bonds after the initial offering should consult their own tax advisors with respect to the tax consequences of the ownership of the Discount Bonds. Beneficial Owners who are subject to state or local income taxation (other than Idaho state income taxation) should consult their tax advisor with respect to the state and local income tax consequences of ownership of the Discount Bonds. It is possible that, under the applicable provisions governing determination of state and local taxes, accrued original issue discount on the Discount Bonds may be deemed to be received in the year of accrual even though there will not be a corresponding cash payment. RATINGS Moody’s Investor Service and S&P Global Ratings, Inc. have assigned municipal bond ratings of “Aa2,” and “AA,” respectively, to the Bonds. The ratings reflect only the views of the rating agencies and an explanation of the significance of the ratings may be obtained from the rating agencies. There is no assurance the ratings will be retained for any given period of time or that the ratings will not be revised downward or withdrawn entirely by the rating agencies if, in their judgment, circumstances so warrant. Any such downward revision or withdrawal of the ratings will be likely to have an adverse effect on the market price of the Bonds. UNDERWRITING The Bonds are being purchased by Wells Fargo Bank, National Association, acting as sole underwriter (the “Underwriter”). The purchase contract provides that the Underwriter will purchase all of the Bonds, if any are purchased, at an aggregate price of $______, representing $______principal amount of the Bonds, and less underwriter’s discount of $______. Wells Fargo Securities is the trade name for certain securities-related capital markets and investment banking services of Wells Fargo & Company and its subsidiaries, including Wells Fargo Bank National Association, which conducts its municipal securities sales, trading and underwriting operations through the Wells Fargo Bank, NA Municipal Products Group, a separately identifiable department of Wells Fargo Bank, National Association, registered with the Securities and Exchange Commission as a municipal securities dealer pursuant to Section 15B(a) of the Securities Act of 1934. Wells Fargo Bank, National Association, acting through its Municipal Products Group (“WFBNA”), the senior underwriter of the Bonds, has entered into an agreement (the “WFA Distribution Agreement”) with its affiliate, Wells Fargo Clearing Services, LLC (which uses the trade name “Wells Fargo Advisors”) (“WFA”), for the distribution of certain municipal securities offerings, including the bonds. Pursuant to the WFA Distribution Agreement, WFBNA will share a portion of its underwriting or remarketing agent compensation, as applicable, with respect to the Bonds with WFA. WFBNA has also entered into an agreement (the “WFSLLC Distribution Agreement) with its affiliate Wells Fargo Securities, LLC (“WFSLLC”), for the distribution of municipal securities offerings, including the Bonds. Pursuant to the WFSLLC Distribution Agreement, WFBNA pays a portion of WFSLLC’s expenses based on its municipal securities transactions. WFBNA, WFSLLC and WFA are each wholly- owned subsidiaries of Wells Fargo & Company. MUNICIPAL ADVISOR The Authority has retained Piper Jaffray & Co., Boise, Idaho, as municipal advisor (the “Municipal Advisor”) in connection with the preparation of the Authority’s financing plans and with respect to the authorization and issuance of the Bonds. The Municipal Advisor is not obligated to undertake and has not undertaken to make any independent - 26 -
verification or to assume responsibility for the accuracy, completeness, or fairness of the information contained in this Official Statement. The Municipal Advisor is a full service investment banking firm that provides financial advisory and underwriting services to state and local governmental entities. While under contract to the Authority the Municipal Advisor may not participate in the underwriting of any Authority debt. INDEPENDENT AUDITORS The financial statements of the Authority as of and for the year ended June 30, 2017, which appear in APPENDIX D to this Official Statement, have been audited by Eide Bailly LLP, Boise, Idaho, independent auditors. LEGAL MATTERS All legal matters incidental to the authorization and issuance of the Bonds by the Authority are subject to the approval of Skinner Fawcett LLP, Boise, Idaho, as Bond Counsel, whose approving opinion will be delivered with the Bonds in the form attached as APPENDIX G. Certain legal matters will be passed upon for the Authority by its counsel, Meuleman Law Group PLLC, Boise, Idaho, and for the State by the Attorney General of the State of Idaho. Certain legal matters will be passed upon for the Underwriter by Hawley Troxell Ennis & Hawley LLP, as Underwriter’s counsel. LEGALITY OF THE BONDS FOR INVESTMENT Pursuant to the Act, the Bonds are eligible for investment in Idaho by State and municipal officers, banks, trust companies, savings banks and savings associations, savings and loan associations, national banking associations, insurance companies, executors, trustees and other fiduciaries, and all other persons who are authorized to invest in bonds or other obligations of the State. PENDING AND THREATENED LITIGATION No litigation is pending or, to the knowledge of the Authority, threatened in any court or before any administrative body (1) to restrain or enjoin the issuance or delivery of the Bonds; (2) in any way contesting or affecting the validity of the Bonds, the Bond Resolution, the Facilities Lease, or the related documents, or the Authority’s power to collect and pledge the revenues; or (3) that would otherwise affect the ability of the Authority to pay the principal of or interest on the Bonds when due. ADDITIONAL INFORMATION The references in this Official Statement to the Act, the Bond Resolution, the Ground Lease, the Facilities Lease and the Facilities Subleases are brief summaries of certain provisions thereof. Such summaries do not purport to be complete and reference is made to the Act, the Bonds, the Bond Resolution, the Ground Lease, the Facilities Lease, and the Facilities Subleases for full and complete statements of such and all provisions contained therein. The agreements of the Authority with the bondowners are fully set forth in the Bond Resolution, and neither any advertisement of the Bonds nor this Official Statement are to be construed as an agreement with the bondowners. References to website addresses presented herein are for informational purposes only and may be in the form of a hyperlink solely for the reader’s convenience. Unless specified otherwise, such websites and the information or links contained therein are not incorporated into, and are not part of, this final official statement for purposes of, and as that term is defined in, SEC rule 15c2-12. The execution and delivery of this Official Statement on behalf of the Authority by one of its authorized officers has been duly authorized by the Authority. IDAHO STATE BUILDING AUTHORITY
By /s/ V.L. Bud Tracy V.L. Bud Tracy Chairman
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[THIS PAGE INTENTIONALLY LEFT BLANK] APPENDIX A
SELECTED DATA ON THE STATE OF IDAHO
Idaho State Government State Government in Idaho originates from the State Constitution adopted at the constitutional convention of August 6, 1889, and ratified by the people in November of the same year. The United States Congress approved the Constitution and admitted the State to the Union on July 3, 1890.
The Executive Department The Idaho Executive Department consists of seven constitutionally empowered elected officials: Governor, Lieutenant Governor, Secretary of State, State Controller, State Treasurer, Attorney General, and Superintendent of Public Instruction.
The Governor is vested with the “supreme executive power.” The Governor appoints department heads and members of boards and commissions. On extraordinary occasions, the Governor can convene special sessions of the Legislature. The Governor gives final approval, by signing, of bills passed by the Legislature, and has the power to veto bills but must list the objections. The Legislature can override a veto by a two-thirds vote of each chamber.
The Lieutenant Governor presides over the State Senate and, when the Governor is absent from the State, serves as Acting Governor. In case of vacancy for any reason in the Governor’s office, the Lieutenant Governor succeeds to that office.
The Secretary of State is primarily a ministerial official. The Secretary of State is the custodian of records, including those of corporations, and of the Great Seal of the State of Idaho. The Secretary of State is the State’s Chief Election Officer and has administrative duties as a member of the Board of Examiners, the State Land Board, and State Board of Canvassers.
The State Controller, as Chief Accounting Officer, is responsible for the accounting records and is the State’s cash disbursement officer. The State Controller is also responsible for maintaining the Statewide system of internal control procedures. The State Controller is the State Administrator of Social Security, a member of the State Land Board, ex officio Secretary of the Board of Examiners, and a member of the State Board of Canvassers.
The State Treasurer, as Chief Financial Officer, receives all State revenues and fees and is cash manager and investor for all State revenues. The State Treasurer pays all State bills by redeeming State warrants and is custodian of the Worker’s Compensation Fund and the Public School Endowment Fund. The State Treasurer also is a member of the State Board of Canvassers, and serves as advisor to the Idaho Housing and Finance Association.
The Attorney General is the Chief State Legal Officer and represents State officers and agencies in legal matters. The Attorney General must provide legal opinions in writing when requested by government officials. The Attorney General is required to supervise all county prosecuting attorneys and to assist them in law enforcement if they so request. The Attorney General is in charge of consumer protection laws and has jurisdiction to enforce State antitrust laws. The Attorney General is a member of the Board of Examiners and the State Land Board.
The State Superintendent of Public Instruction is an ex officio and voting member of the State Board of Education, the executive officer of the State Department of Education and advisor to school districts on all aspects of education. The State Superintendent also is a member of the State Land Board and serves as ex officio member of the State Library Board.
Description of Area Located in the northwestern portion of the United States, the State is bordered by Washington, Oregon, Nevada, Utah, Wyoming, Montana and Canada. The State’s land area consists of 82,751 square miles of varied terrain.
The State has substantial water resources which have dominated its history and development. There are 26,000 miles of rivers and streams and more than 2,000 natural lakes. Three of the State’s rivers—the Clearwater, the Kootenai and the Salmon—are more than half as large as the Colorado River. The Snake River Plain Aquifer is one of the largest fractured basalt aquifers in the world. Equally important to quantity is the quality of the State’s waters, which remains outstanding. The drop in elevation of rivers like the Snake allows valuable hydropower production, affording the State some of the lowest electricity rates in the nation.
A-1 The State enjoys a broad base of economic wealth ranging from extensive mining and timber resources to notably productive agricultural lands, which benefit from a highly developed series of man-made reservoirs and irrigation systems. More than four million acres are irrigated in the Snake River Basin, placing the State fourth in the nation for irrigated acreage.
The State traditionally has been an agricultural state. Livestock, beef and dairy cattle, and sheep are important to the economy, while the major crops of the State’s farmers include potatoes, wheat, barley, sugar beets, peas, lentils, seed crops and fruit. Major manufacturing industries include food processing, forest products, phosphate processing, and electronics. Mining has played an important role in the development of the State, with phosphate rock, silver, lead, zinc and molybdenum among the resources mined.
Idaho Economic Overview and Outlook The Idaho Economic Forecast (“IEF”), a quarterly publication prepared by the Division of Financial Management (“DFM”), provides historical and forecast values for the State’s economy. The historical and forecast data are presented at both quarterly and annual frequencies. The IEF is published in January, April, July, and October of each year. Data covered in the IEF include population, housing, personal income, and nonfarm employment. The most recent IEF was published in January 2018. It estimates total nonfarm employment to increase by 54,600 jobs over the next four years, maintaining a 1.9% expansion rate. The next IEF is scheduled to be released in April 2018.
The tables on the following pages provide historical economic and demographic data for the State.
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A-2
IDAHO ECONOMIC INDICATORS
Actual Projected 2015 2016 2017 2018 2019 Idaho Economic Indicators Personal Income ($ millions) $ 64,209 $ 66,433 $ 69,071 $ 72,001 $ 75,364 Percent Change 5.7% 3.5% 4.0% 4.2% 4.7%
Total Nonfarm Employment 672,493 693,840 715,557 730,138 742,206 Percent Change 2.8% 3.2% 3.1% 2.0% 1.7%
Goods-Producing Employment 104,316 109,950 114,789 118,142 120,508 Percent Change 4.3% 5.4% 4.4% 2.9% 2.0%
Nongoods-Producing Employment 568,176 583,890 600,768 611,996 621,698 Percent Change 2.5% 2.8% 2.9% 1.9% 1.6%
Population (thousands) 1,653 1,683 1,708 1,734 1,760 Percent Change 1.2% 1.8% 1.5% 1.5% 1.5%
Housing Starts-Single Unit 8,250 10,031 10,807 12,121 12,879 Housing Starts-Multiple Unit 2,024 2,368 2,609 2,054 1,966
Selected US Production Indices (2012=100.0) Lumber and Wood Products 112.1 116.5 120.8 126.5 129.6 Computer and Electronic Products 109.0 110.5 113.6 118.1 123.1 Semiconductors and Other Components 135.4 138.8 142.2 149.7 160.8 Food 104.8 107.6 112.0 114.8 117.1 Paper 98.3 96.2 95.3 95.0 95.4 Agricultural Chemicals 103.0 114.6 127.2 136.8 144.8 Metal Ore Mining 100.3 101.3 102.8 101.7 103.0
Selected US Producer Prices (1982=1.000) All Items 1.904 1.854 1.928 1.953 1.994 Lumber and Wood Products 2.219 2.227 2.296 2.318 2.335 Machinery and Equipment 1.370 1.369 1.379 1.392 1.397 Farm 1.738 1.570 1.611 1.630 1.744 Pulp, Paper and Allied Products 2.488 2.477 2.553 2.587 2.601 Chemicals 2.659 2.651 2.787 2.830 2.879
Sources: IHS Economics, and Idaho Division of Financial Management.
A-3 STATE OF IDAHO POPULATION TRENDS
Year Population 2000(1) 1,299,430 2010(1) 1,570,912 2011 1,583,180 2012 1,594,673 2013 1,610,187 2014 1,630,391 2015 1,649,324 2016 1,680,026
(1) Census data. Source: US Census Bureau.
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A-4 STATE OF IDAHO LABOR FORCE AND NONFARM PAYROLL JOBS ANNUAL (1)
2011 2012 2013 2014 2015 2016 2010 2009 2008 2007 2006 2005 2004
Civilian Labor Force 765,178 769,256 771,892 780,872 797,049 814,571 761,056 757,131 755,153 754,438 747,377 731,670 703,062 Unemployment 63,712 55,552 47,455 37,883 33,647 31,137 68,230 66,409 38,500 23,203 26,031 29,379 34,621 Percent of Labor Force Unemployed 8.3% 7.2% 6.1% 4.9% 4.2% 3.8% 9.0 8.8 5.1 3.1 3.5 4.0 4.9 Total Employment 701,466 713,704 724,437 742,989 763,402 783,434 692,826 690,722 716,653 731,235 721,346 702,291 668,441
Nonfarm Payroll Jobs-NAICS(2) 610,700 622,200 637,900 654,500 672,400 696,200 603,600 609,900 648,800 654,900 638,400 611,300 587,900 Goods Producing 89,000 92,400 97,200 100,000 104,200 110,200 87,900 92,300 112,100 122,700 122,300 112,700 106,100 Natural Resources and Mining 3,900 4,000 4,000 3,800 3,800 3,800 3,500 3,200 4,200 4,400 4,200 4,100 4,000 Construction 30,400 31,400 33,600 35,800 38,200 41,700 31,300 34,300 44,900 52,000 52,000 45,000 39,900 Manufacturing 54,800 57,000 59,600 60,400 62,200 64,700 53,200 54,800 63,000 66,300 66,100 63,600 62,200 Durable Goods 31,400 33,000 34,400 34,800 36,100 37,400 29,900 31,100 38,400 42,400 42,800 40,500 39,100 Non-Durable Goods 23,400 24,000 25,300 25,500 26,100 27,300 23,300 23,600 24,600 23,900 23,300 23,000 23,200 Service Providing 521,700 529,800 540,800 554,500 568,100 586,000 515,700 517,500 536,700 532,300 516,200 498,600 481,800 Trade, Transportation and Utilities 121,800 125,100 127,700 130,800 135,100 137,700 120,300 121,800 130,800 131,600 126,900 121,900 117,100 Trade 100,600 103,600 106,100 108,400 111,700 114,100 99,600 101,100 109,100 110,000 106,000 101,900 97,500 Transportation, Warehousing and Utilities 21,200 21,500 21,500 22,400 23,400 23,700 20,700 20,700 21,700 21,600 20,800 20,000 19,600 Information 9,500 9,400 9,300 9,300 9,300 9,000 9,600 10,000 11,000 10,900 10,600 10,300 9,700 Financial Activities 29,900 30,300 31,200 32,700 33,300 34,100 29,200 29,600 31,700 32,400 31,700 29,700 28,000 Professional and Business Services 76,400 76,700 78,700 80,700 81,900 86,300 75,200 75,900 81,900 83,900 82,000 78,300 73,600 Professional and Technical Services 30,500 30,700 30,400 31,900 33,400 35,400 29,700 29,900 31,700 31,600 30,500 28,300 27,300 Management of Companies and Entrepreneurs 5,600 5,400 5,300 5,500 5,500 5,400 5,800 6,000 6,600 7,200 7,000 7,000 6,700 Administrative, Support, Waste Management 40,300 40,700 43,000 43,400 43,000 45,600 39,700 39,900 43,600 45,100 44,500 43,000 39,600 Educational and Health Services 86,500 88,400 91,000 94,200 97,500 101,000 83,800 81,000 77,700 74,000 70,200 67,600 65,300 Leisure and Hospitality 59,300 61,200 63,500 65,900 68,400 72,200 58,000 58,700 63,200 63,300 59,800 57,200 55,600 Other Services 21,200 21,500 22,000 22,600 23,400 24,300 21,100 21,200 21,200 19,400 19,000 18,500 18,300 Total Government 117,200 117,300 117,400 118,200 119,200 121,500 118,600 119,500 119,200 116,800 116,100 115,200 114,200 Federal Government 12,700 12,600 12,400 12,300 12,600 12,900 13,700 13,500 13,200 12,900 12,900 13,100 13,300 State and Local Government 104,500 104,600 105,000 105,900 106,600 108,600 104,900 106,000 106,000 103,900 103,300 102,100 100,900 State Government 28,600 28,700 28,900 29,000 29,500 29,800 28,500 30,000 29,800 29,300 29,100 29,000 29,100 Local Government 75,900 75,900 76,100 76,900 77,100 78,800 76,400 76,000 76,200 74,600 74,200 73,100 71,800
(1) Benchmarked data. (2) Estimates include all full-or part time wage and salary workers who worked or received pay in the industry groups pay period ending the 12th of the month
Source: Idaho Department of Labor, Communication & Research Division.
A-5 STATE OF IDAHO NONFARM PAYROLL JOBS—BY PLACE OF WORK(1) Percent Change From From Feb 2017 Jan 2017(1) Feb 2016 Last Month Last Ye ar Nonfarm Payroll Jobs-NAICS (2) 699,400 693,100 676,500 0.9% 3.4% Goods Producing 108,500 108,500 104,300 0.0% 4.0% Natural Resources 3,700 3,700 3,600 0.0% 2.8% Construction 40,400 40,000 37,200 1.0% 8.6% Manufacturing 64,400 64,800 63,500 -0.6% 1.4% Durable Goods 37,400 37,600 36,700 -0.5% 1.9% Nondurable Goods 27,000 27,200 26,800 -0.7% 0.7% Service Providing 590,900 584,600 572,200 1.1% 3.3% Trade, Transportation, And Utilities 136,100 138,100 134,500 -1.4% 1.2% Trade 29,300 29,200 28,400 0.3% 3.2% Transportation, Warehousing, And Utilities 23,300 24,100 23,500 -3.3% -0.9% Information 9,200 9,200 8,900 0.0% 3.4% Financial Activities 35,000 34,700 33,100 0.9% 5.7% Professional and Business Services 86,700 86,000 82,200 0.8% 5.5% Professional and Technical Services 36,300 36,400 34,700 -0.3% 4.6% Management of Companies and Enterprises 5,400 5,400 5,400 0.0% 0.0% Administrative, Support, Waste Management 45,000 44,200 42,100 1.8% 6.9% Education and Health Services 103,800 102,200 100,000 1.6% 3.8% Leisure and Hospitality 69,700 68,500 68,300 1.8% 2.0% Other Services 24,400 24,200 23,500 0.8% 3.8% Total Government 126,000 121,700 121,700 3.5% 3.5% Federal Government 12,000 12,000 11,800 0.0% 1.7% State and Local Government 114,000 109,700 109,900 3.9% 3.7% State Government 32,400 29,800 30,700 8.7% 5.5% Local Government 81,600 79,900 79,200 2.1% 3.0% (1) Benchmarked data. (2) Estimates include all full- or part-time wage and salary workers who worked or received pay in the industry group’s pay period ending the 12th of the month. Source: Idaho Department of Labor, Communication & Research Division.
STATE OF IDAHO AGRICULTURAL EMPLOYMENT ESTIMATES
Percent Change From From Feb Jan Feb Last Last 2017 2017 2016 Month Year
Total Agricultural Employment 43,901 43,035 43,432 2.0% 1.1% Operators and Unpaid Family 13,740 13,728 13,545 0.1% 1.4% Hired Workers 30,161 29,307 29,887 2.9% 0.9%
Source: Idaho Department of Labor, Communication & Research Division.
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STATE OF IDAHO LARGEST EMPLOYERS
Employer Number of Employees Industry
St. Luke's Regional Medical Center 13,600 - 13,649 Health Care Wal-Mart 7,850 - 7,899 Retail Trade Micron Technology 6,700 - 6,749 Manufacturing Brigham Young University - Idaho 5,250- 5 299 Education, Private Boise State University 4,950 - 4,999 Education, State St. Alphonsus Regional Medical Center 4,750 - 4,799 Health Care University of Idaho 4,600 -4,649 Education, State West Ada Joint School District No. 2 4,300 - 4,349 Education, Local Battelle Energy Alliance (Idaho National Laboratory) 4,000 - 4,049 Professional and Technical Services Boise Independent School District No. 1 3,850 - 3,899 Education, Local Idaho State University 3,600 - 3,649 Education, State Idaho Department of Health & Welfare 2,850 - 2,899 State, Administration Kootenai Medical Center 2,700 - 2,749 Health Care J.R. Simplot Company 2,700 - 2,749 Manufacturing U.S Forest Service and Natural Resources Conservation Service 2,550 - 2,599 Federal Government U.S. Postal Service 2,500 - 2,549 Federal Government
*NOTE: Not all companies are listed, affecting the rank order. Only employers that have given the Department permission to release employment range data are listed. Source: Quarterly Census of Employment & Wages, Preliminary Annual Average 2016. Idaho Department of Labor, Communications & Research Division.
STATE OF IDAHO COMPARISON OF IDAHO AND NATIONAL AVERAGE ANNUAL WAGE
Idaho National Calendar Average Average Annual Year Wage Annual Wage
2006 34,327 44,389 2007 35,245 46,342 2008 35,569 47,597 2009 35,842 47,617 2010 36,607 48,924 2011 37,069 50,274 2012 37,353 51,651 2013 38,060 52,181 2014 39,228 53,812 2015 40,184 55,415 2016 41,045 56,028
Source: IHS Economics and Idaho Division of Financial Management.
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APPENDIX B Bond Resolution
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RESOLUTION NO. 2018-003
A RESOLUTION OF THE BOARD OF COMMISSIONERS OF THE IDAHO STATE BUILDING AUTHORITY PROVIDING FOR THE ISSUANCE, SALE AND DELIVERY BY THE AUTHORITY OF ITS STATE BUILDING REVENUE BONDS, SERIES 2018A (IDAHO STATE BOARD OF EDUCATION PROJECT) (FEDERALL Y TAXABLE), IN THE PRINCIPAL AMOUNT OF UP TO $90,000,000, FOR THE PURPOSE OF PROVIDING THE FUNDS WITH WHICH TO ACQUIRE, DESIGN AND CONSTRUCT, OR REIMBURSE EXPENDITURES FOR, CERTAIN FACILITIES TO BE USED BY THE STATE OF IDAHO ACTING THROUGH THE IDAHO STATE BOARD OF EDUCATION; FIXING THE DATE, FORM, SCHEDULE OF MATURITIES, INTEREST RATES, TERMS AND COVENANTS OF SUCH SERIES 2018A BONDS; PROVIDING FOR THE SALE AND DELIVERY OF THE SERIES 2018A BONDS TO WELLS FARGO BANK, NATIONAL ASSOCIATION; AND PROVIDING FOR OTHER MATTERS PROPERLY RELATING THERETO.
March 8, 2018 TABLE OF CONTENTS
ARTICLE I: DEFINITIONS ...... 3 Section 1.1 Interpretation ...... 3 Section 1.2 Definitions ...... 4
ARTICLE II: THE BONDS ...... 10 Section 2.1 Description of the Bonds ...... 10 Section 2.2 Place and Manner of Payment ...... 11 Section 2.3 Redemption of Bonds; Open Market Purchase ...... l1 Section 2.4 Book-Entry Only System ...... 12 Section 2.5 Successor Securities Depository ...... 13
ARTICLE III: THE TRUSTEE ...... 13 Section 3.1 The Trustee ...... 13 Section 3.2 Tmstee; Acceptance of Duties ...... , .13 Section 3.3 Responsibilities of Tmstee ...... 14 Section 3.4 Evidence on Which Tmstee May Act...... 14 Section 3.5 Compensation ...... 15 Section 3.6 Resignation of Trustee ...... 15 Section 3.7 Rellloval of Trustee ...... 15 Section 3.8 Appointment of Successor Tmstee ...... 15 Section 3.9 Transfer of Rights and Property to Successor Tmstee ...... 16 Section 3.10 Merger or Consolidation ...... 16 Section 3.11 Survival ...... 16
ARTICLE IV: SOURCES AND USES OF BOND PROCEEDS ...... 16 Section 4.1 Sources and Uses of Bond Proceeds ...... 16
ARTICLE V: FUNDS AND ACCOUNTS ...... 17 Section 5.1 The Revenue Fund ...... 17 Section 5.2 Payments into Certain Funds ...... 17 Section 5.3 The Debt Service Fund ...... 18 Section 5.4 The Administrative Fund ...... 18 Section 5.5 General Reserve Fund ...... 18 Section 5.6 Construction Fund ...... 19 Section 5.7 Maintenance and Repair Fund ...... 20 Section 5.8 Valuation and Sale ofInvestments ...... 21
ARTICLE VI: DEFEASANCE ...... 21 Section 6.1 Discharge of Indebtedness ...... 21 Section 6.2 Provision for Defeasance of the Bonds ...... 22 Section 6.3 Disposition of Funds and Accounts ...... 22 ARTICLE VII: COVENANTS ...... 22 Section 7.1 Assignment of Revenues; Pledge of Revenues ...... 22 Section 7.2 Payment of the Bonds ...... '" ...... 23 Section 7.3 Extension of Payment of the Bonds ...... 23 Section 7.4 Further Assurance ...... 23 Section 7.5 Power to Issue the Bonds and Execute Pledges Hereunder ...... 23 Section 7.6 Power to Fix and Collect Rents, Fees and Charges ...... 24 Section 7.7 Creation of Liens ...... 24 Section 7.8 Annual Budget ...... 24 Section 7.9 Operation and Maintenance of the Facilities ...... 24 Section 7.10 Rents, Fees and Charges ...... 24 Section 7.11 Facilities Lease; Amendments to Facilities Lease; Non-renewal of Facilities Lease ...... 25 Section 7.12 Maintenance of Insurance ...... 25 Section 7.13 Reconstruction; Application ofInsurance Proceeds ...... 26 Section 7.14 Eminent Domain ...... 27 Section 7.15 Accounts and Reports ...... 27 Section 7.16 Payment of Taxes and Charges ...... 28 Section 7.17 [Reserved] ...... Section 7.18 Additional Bonds ...... 29 Section 7.19 Prompt Realization of Security ...... 31 Section 7.20 Continuing Disclosure Agreement...... 31 Section 7.21 Sale, Assignment and Subletting ...... 31
ARTICLE VIII: AMENDMENTS ...... 31 Section 8.1 Amendments to this Resolution ...... 31
ARTICLE IX: EVENTS OF DEFAULT AND REMEDIES ...... 33 Section 9.1 Events of Default ...... 33 Section 9.2 Renledies ...... 33 Section 9.3 Accounting and Examination of Records After DefauIL ...... 35 Section 9.4 Application of Funds and Money After Default ...... 35 Section 9.5 Appointment of Receiver ...... 3 7 Section 9.6 Proceedings Brought by Trustee ...... 37 Section 9.7 Restriction on Action of Registered Owners ...... 38 Section 9.8 Remedies Not Exclusive ...... 38 Section 9.9 Effect of Waiver and Other Circumstances ...... 38 Section 9.10 Notice of Default ...... 39
ARTICLE X: EXECUTION ...... 39 Section 10.1 Execution of the Bonds ...... 39
11 ARTICLE XI: MISCELLANEOUS ...... 40 Section 11.1 Lost, Stolen, Mutilated or Destroyed Bonds ...... 40 Section 11.2 Transfer of Bonds ...... 41 Section 11.3 Exchange of Bonds ...... 41 Section 11.4 Conditions for Sale of Bonds ...... 42 Section 11.5 Preliminary Official Statement Approved ...... 42 Section 11.6 [Reserved] ...... 42 Section 11.7 Investment Agreement Authorization and Approval...... 42 Section 11.8 Severability ...... 43 Section 11.9 Conflict with Facilities Lease ...... 43 Section 11.10 Repealer ...... 43 Section 11.11 Effective Date ...... 43 Exhibit A FOlm of Series 2018 Bonds ...... A-I Exhibit B Form of Terms Celiificate ...... B-l Exhibit C Form of Requisition for Payment...... C-l
III RESOLUTION NO. 2018-003
A RESOLUTION OF THE BOARD OF COMMISSIONERS OF THE IDAHO STATE BUILDING AUTHORITY PROVIDING FOR THE ISSUANCE, SALE AND DELIVERY BY THE AUTHORITY OF ITS STATE BUILDING REVENUE BONDS, SERIES 2018A (IDAHO STATE BOARD OF EDUCATION PROJECT) (FEDERALLY TAXABLE), IN THE PRINCIPAL AMOUNT OF UP TO $90,000,000, FOR THE PURPOSE OF PROVIDING THE FUNDS WITH WHICH TO ACQUIRE, DESIGN AND CONSTRUCT, OR REIMBURSE EXPENDITURES FOR, CERTAIN FACILITIES TO BE USED BY THE STATE OF IDAHO ACTING THROUGH THE IDAHO STATE BOARD OF EDUCATION; FIXING THE DATE, FORM, SCHEDULE OF MATURITIES, INTEREST RATES, TERMS AND COVENANTS OF SUCH SERIES 2018A BONDS; PROVIDING FOR THE SALE AND DELIVERY OF THE SERIES 2018A BONDS TO WELLS FARGO BANK, NATIONAL ASSOCIATION; AND PROVIDING FOR OTHER MATTERS PROPERL Y RELATING THERETO.
IDAHO STATE BUILDING AUTHORITY STATE BUILDING REVENUE BONDS, SERIES 2018A (IDAHO STATE BOARD OF EDUCATION PROJECT) (FEDERALL Y TAXABLE)
BE IT RESOLVED BY THE BOARD OF COMMISSIONERS OF THE IDAHO STATE BUILDING AUTHORITY AS FOLLOWS:
WHEREAS, the Idaho State Building Authority (the "Authority") is an independent public body corporate and politic of the State of Idaho (the "State"), created by and existing under the authority of the Idaho State Building Authority Act, being Title 67, chapter 64, Idaho Code, as amended and supplemented (the "Act");
WHEREAS, the Authority is authorized to conduct proceedings and to issue revenue bonds pursuant to the terms and provisions of the Act for achieving any of its corporate purposes;
WHEREAS, the Authority has determined, and hereby affirms, that it would be financially advantageous for the Authority and State, acting through the Idaho State Board of Education (the "SBOE"), to acquire, design, develop, construct, and equip, or reimburse expenditures for, the costs of construction of certain facilities known as the Idaho Cybercore Integration Center (the "Cybercore Center") and the Idaho Collaborative Computing Center (the "Collaborative Center"), located in Idaho Falls, Idaho, for use by
RESOLUTION - PAGE 1 Battelle Energy Alliance LLC ("BEA"), acting under a Prime Contract with the Department of Energy (DOE), the Authority, SBOE, and Idaho higher education entities for educational purposes (collectively, the "Improvements") to the real property on which the Improvements are to be located and constructed (the "Site");
WHEREAS, the Authority hereby determines that it will be financially advantageous to the State for the Authority to issue its bonds to acquire a portion of the Site and acquire, design, develop, construct, equip or reimburse expenditures for the Improvements;
WHEREAS, prior approval by the legislature has been given by Senate Concurrent Resolution No. 105, as adopted by the First Regular Session of the Sixty Fourth Idaho Legislature, authorizing the SBOE to enter into agreements with the Authority to provide the Improvements to the State;
WHEREAS, the Authority is expected to enter into a Development Agreement with the State pursuant to which the Authority will be responsible for the design, construction and development of the Improvements;
WHEREAS, the Authority is expected to enter into a Ground Lease (the "Ground Lease"), with the State, acting through the SBOE, to acquire a leasehold interest in the Site;
WHEREAS, the Authority is expected to enter into a Facilities Lease (the "Facilities Lease"), pursuant to which the Authority will lease the Site, together with the Improvements (collectively, the "Facilities"), to the State acting through the SBOE;
WHEREAS, the Authority intends to issue its State Building Revenue Bonds, Series 2018A (Idaho State Board of Education Project) (Federally Taxable) (the "Bonds" or "Series 2018 Bonds"), to finance the costs of acquiring a portion of the Site and acquiring, designing, developing, constructing and equipping the Improvements, to fund capitalized interest, maintenance reserves and general reserves, and to pay the costs of issuing the Bonds;
WHEREAS, the SBOE, to further document the State's public use of the Facilities, has established a plan for collaboration on the use of the Facilities by the State and BEA (the "Plan") which Plan has been acknowledged by BEA;
WHEREAS, the Authority hereby finds that the acquisition, design and construction of the Improvements and the leasing of the same, together with the Site, to the State, acting through the SBOE, will be of public use and will provide a public benefit;
WHEREAS, Wells Fargo Bank, National Association, has contracted to purchase the Bonds at the prices and according to the terms set forth in the Bond Purchase Contract hereinafter described; and
RESOLUTION - PAGE 2 WHEREAS, SBOE is also entering into a sublease with BEA for the Cybercore Center and a sublease with BEA for the Collaborative Center (each a "Sublease" and collectively, the "Subleases").
NOW, THEREFORE, IT IS HEREBY FOUND, DETERMINED AND ORDERED as follows:
ARTICLE I: DEFINITIONS
Section 1.1 Interpretation. For all purposes of this Resolution, except as otherwise expressly provided or unless the context otherwise requires:
A. All references in this Resolution to designated "Articles," "Sections" and other subdivisions are to the designated Articles, Sections and other subdivisions of this Resolution. The words "herein," "hereof," "hereto," "hereby," and "hereunder" and other words of similar import refer to this Resolution as a whole and not to any particular Articles, Section or other subdivision.
B. The terms defined in this Article I have the meanings assigned to them in this Article I and include the plural as well as the singular, and words importing persons shall include firms, associations, corporations, partnerships (including limited partnerships), trusts and other legal entities, including public boards, as well as natural persons.
C. Any headings preceding the texts of the several sections of this Resolution and the table of contents shall be solely for convenience of reference and shall not constitute a part of this Resolution, nor shall they affect its meaning, construction or effect.
D. All accounting terms not otherwise defined herein have the meanings assigned to them in accordance with generally accepted accounting principles in effect from time to time.
E. Every "request," "order," "demand," "application," "appointment," "notice," "statement," "celiificate," "consent" or similar action hereunder by the Authority shall, unless the form thereof is specifically provided, be in writing signed by an Authorized Officer.
F. In the computation of a period of time from a specified date to a later specified date, the word "from" means "from and including" and each of the words "to" and "until" means "to but excluding."
G. Words importing the redemption or redeeming of a Bond or the calling of a Bond for redemption do not include or connote the payment of such Bond at its stated maturity or the purchase of such Bond.
H. References to the payment of the Bonds shall be deemed to include references to the payment of interest thereon.
RESOLUTION - PAGE 3 I. Words of the masculine gender shall be deemed and construed to include correlative words of the feminine and neutral genders.
J. If any action or payment required hereunder occurs on a weekend or a national holiday, said action or payment shall be taken on the next succeeding Business Day.
Section 1.2 Definitions. For all purposes of this Resolution, except as otherwise expressly provided or unless the context otherwise requires, the following telIDS shall have the following meanings:
Act shall mean the Idaho State Building Authority Act, codified at chapter 64 of Title 67 of the Idaho Code, as amended and supplemented.
Additional Bonds shall mean any revenue bonds that the Authority may hereafter issue having a lien upon the Revenues for the payment of the principal thereof, premium, if any, and interest thereon equal to the lien upon the Revenues to pay the principal of, premium, if any, and interest on the Series 2018 Bonds.
Administrative Costs shall mean the Authority's expenses (including reasonable reserves for such expenses), to the extent properly attributable to the Facilities and/or the Bonds and payable by the Authority, for administration and general expenses of the Authority; expenses for maintenance and repairs, insurance premiums, utility charges, legal, financial, architectural and engineering expenses; fees and expenses of fiduciaries under the Bond Resolution; bond insurance, guaranty and/or letter of credit fees, interest and finance charges; costs, fees and expenses arising out of the State's and any sublesee's use of the Facilities, including, without limitation, those arising out of (i) claims against or damages incurred by the Authority resulting from such use, (ii) the loss of any tax exemption status of interest on the Bonds under any state law, or (iii) any defects, encumbrances, clouds, restrictions or other matters affecting title to the real property or Facilities existing at the time such are leased to the Authority pursuant to the Ground Lease; any other expenses or contingencies to be paid or provided for by the Authority; and all other costs and expenses allocable to Administrative Costs as provided in the Facilities Lease. Administrative Costs shall not include any expenses for maintenance and repairs, utility services or insurance paid for or provided by the State.
Administrative Fund shall mean the fund of that name referred to in Section 5.4 of this Resolution.
Annual Budget shall mean the annual budget of the Authority adopted or in effect for a particular Fiscal Year, as the same may be amended or supplemented.
Annual Debt Service shall mean the net amount required in a given Fiscal Year for the sum of any payment of the principal of and interest on Bonds, except interest to be paid from the proceeds of Bonds. With respect to any Bonds that are term bonds, the words "principal of and interest on Bonds" shall be deemed to exclude from "principal"
RESOLUTION - PAGE 4 an amount of the tenn Bonds equal to the mandatory deposits of money into any sinking fund account to provide for payment of the principal of such term Bonds, and from "interest" the interest on such term Bonds subsequent to the date of the respective deposits, and to include in lieu thereof all mandatory sinking fund deposits as of the date required and interest on the term Bonds provided for by such deposits only to the dates of the respective deposits.
Annual Rent shall mean the atmual rent payable under the Facilities Lease.
Authority shall mean the Idaho State Building Authority, an independent public body corporate and politic of the State, created by and existing under the Act.
Authorized Denominations shall mean in the case of the Series 2018 Bonds, denominations of $5,000 each or any integral multiple thereof.
Authorized Officer shall mean the Chairman, Vice Chairman, Executive Director, Secretary, Treasurer or any officer or employee of the Authority authorized to perfonn specific acts or duties pursuant to the Act, the bylaws of the Authority or a resolution duly adopted by the Authority.
Beneficial Owner(s) shall meatl the owners of Bonds whose ownership is recorded under the Book-Entry-Only System maintained by the Securities Depository as described in Section 2.4.
Board shall mean the Board of Commissioners of the Authority, as the same shall be duly and regularly constituted from time to time.
Bond or Bonds shall mean the Series 2018 Bonds and any Additional Bonds.
Bond Counsel means an attorney or a firm of attorneys of nationally recognized standing in matters pertaining to the tax-exempt status of interest on obligations issued by states and their political subdivisions, duly admitted to the practice of law before the highest court of any state of the United States.
Bondholder shall mean the Registered Owner of a Bond.
Bond Purchase Contract shall mean the agreement relating to the purchase and sale of the Series 2018 Bonds as described in Section 11.4 hereof.
Bond Register shall mean the registration records of the Authority, maintained by the Trustee, on which shall appear the names and addresses of the Registered Owners.
Book-Entry System shall mean the book-entry system of registration of the Bonds described in Section 2.4 of this Resolution.
Business Day shall mean a day other than Saturday or Sunday on which banks located in the State are open for the purpose of conducting commercial banking business.
RESOLUTION - PAGE 5 Cede & Co. or Cede shall mean Cede & Co., as nominee of The Depository Trust Company, New York, New York.
Chairman shall mean the de facto or de jure Chairman of the Board, or any presiding officer or titular head of the Board, or his successor in functions, if any.
Closing Date shall mean the date of issuance and delivery of the Bonds.
Construction Fund shall mean the Construction Fund created by Section 5.6 of this Resolution.
Continuing Disclosure Agreement means the continuing disclosure agreement with respect to the Bonds between the Authority and the Trustee as authorized by Sections 7.20 and 11.4 of this Resolution.
Cost of Acquisition, Construction and Financing shall mean any proper and reasonable cost, whether or not specifically mentioned herein, of purchasing real property for the uses contemplated by the Development Agreement, the Ground Lease and the Facilities Lease; developing, designing and constructing the Improvements and fixtures, machinery, apparatus and equipment therefore in accordance with the Development Agreement; of leasing the Site from the State; of engineering and architectural services, designs, plans, specifications and surveys; of planning, analysis, project management, administration, inspection and similar services in connection with the Facilities; all costs related to or arising out of the leasing of the Facilities back to the State under the Facilities Lease and the State's use in connection therewith; of any indemnity and surety bonds and insurance premiums; of allocable administrative and general expenses of the Authority; of allocable portions of reasonable inspection expenses, legal fees, fees and expenses of any trustees, depositories and paying agents for the Bonds; the amount of any discount on the Bonds, the cost of issuance of the Bonds; reasonable financing charges pertaining to Bonds issued by the Authority; and fees and expenses of financial advisors and consultants in connection therewith; cost of audits; payments of any bonds or notes of the Authority (including any interest and redemption premiums) issued to temporarily finance the payment of any item or items of cost described herein; and all other reasonable expenses not specified herein as may be necessary or incidental to the acquisition and leasing of the Facilities, the financing thereof, and the placing of the same in use and operation.
Debt Service Fund shall mean the "Debt Service Fund" created by 5.3 of this Resolution.
Development Agreement shall mean the Development Agreement dated as of the Closing Date, between the Authority and the State, acting tlu'ough the SBOE.
DTC or Depository shall mean The Depository Trust Company, New York, New York.
RESOLUTION - PAGE 6 DTC Participants shall mean those financial institutions for whom the Securities Depository effects book-entry transfers and pledges of securities deposited with the Securities Depository, as such listing of Participants exists at the time of such reference.
Event of Default shall mean anyone or more of the Events of Default set forth in Section 9.1 hereof.
Facilities shall have the meaning set forth in the Facilities Lease.
Facilities Lease shall mean that certain Facilities Lease dated as of the Closing Date, by and between the Authority as lessor and the State, acting by and through the SBOE as lessee, providing for the leasing of the Facilities, as said Facilities Lease may be further amended and supplemented.
Fiscal Year shall mean the fiscal year of the Authority which shall be set and, if necessary, changed by the Authority so as to always coincide with the then current fiscal year of the State.
General Reserve Fund shall mean the fund of that name created by Section 5.5 of this Resolution.
Ground Lease means the Ground Lease dated as of the Closing Date, between the Authority and the State of Idaho, acting by and through the SBOE, providing for the lease, by the Authority from the State, of the Site.
Holder shall mean a Registered Owner.
Improvements shall mean the acquisition, construction, renovation, restoration, expansion and improvement of the Site, as more particularly described in Exhibit B of the Facilities Lease, together with any related surface parking, utilities and other appropriate improvements, and additional improvements to the Facilities as may be financed by the issuance of Additional Bonds pursuant to Section 7.18B hereof.
Insurance Consultant means a person other than an officer, director, trustee or employee of the Authority or a fim1 which is qualified to recommend insurance coverage for organizations engaged in like operations similar to those of the Facilities.
Interest Payment Date, with respect to the Bonds means each September! and March 1, commencing September 1,2018.
Investment Agreement means an Investment Agreement entered into by the Authority pursuant to Section 11.7 of this Bond Resolution and meeting the requirements set forth in the definition of Permitted Investments hereunder.
Issuer means the Idaho State Building Authority, as issuer of the Series 2018 Bonds.
RESOLUTION - PAGE 7 Maintenance and Repair Fund shall mean the fund established and described in Section 5.7 hereof.
Moody's shall mean Moody's Investors Service.
Obligations shall mean the Series 2018 Bonds.
Outstanding shall mean, when used with reference to Bonds, as of any particular date, all such Bonds that have been issued, executed, authenticated and delivered under this Resolution, except (1) such Bonds that have been cancelled because of payment or redemption prior to their stated dates of maturity, and (2) any such Bond (or portion thereof) deemed to have been defeased pursuant to the resolution under which it was issued.
Participants shall mean those broker-dealers, banks and other financial institutions from time to time for which DTC holds Bonds.
Participating Undenvriter shall mean the Underwriter and any other original underwriter, if any, of the Bonds required to comply with Rule ISc2-12(b)(5) of the Securities and Exchange Commission.
Paying Agent shall mean ZB, National Association dba Zions Bank, of Boise, Idaho, or its successor in function, as now or hereafter designated, which shall act as registrar, authenticating agent, paying agent and transfer agent with respect to the Bonds.
Permitted Investments shall mean any investments allowed under Section 67- 6409(m), Idaho Code.
Principal Corporate Trust Office shall mean, with respect to the Trustee, the office of the Trustee at Boise, Idaho; provided, however, that with respect to payments on the Bonds and any exchange, transfer, or slllTender of the Bonds, means the office of the Trustee at 800 W. Main Street, Ste. 700, Boise, ID 83702, or such other or additional offices as may be specified by the Trustee.
Redemption Price means, when used with respect to a Bond or portions thereof to be redeemed, the principal amount of such Bond or such portions thereof plus the applicable premiums, if any, payable upon redemption thereof.
Registered Owner shall mean the person in whose name a Bond shall be registered in the registration books of the Authority maintained by the Trustee in accordance with the tenns of this Resolution.
Representation Letter shall mean the Blanket Representation Letter between the Authority and DTC.
Resolution shall mean this Resolution No. 2018-003, adopted by the Board on March 8, 2018, authorizing the issuance of the Bonds.
RESOLUTION - PAGE 8 Revenue Fund shall mean the Revenue Fund created by Section 5.1 of this Resolution, into which all of the Revenues are pledged to be deposited.
Revenues shall mean (i) all revenues, income, rents and receipts derived by the Authority from or attributable to the ownership or leasing of the Facilities, including all revenues attributable to the Facilities or to the payment of the costs thereof received by the Authority under the Facilities Lease, (ii) the proceeds of any insurance covering business interruption loss relating to the Facilities, (iii) all moneys held in funds created pursuant to this Resolution, except for moneys held in the Administrative Fund, (iv) and all interest received on any money or securities held pursuant to this Resolution, except for interest received on money or securities in the Administrative Fund. "Revenues" shall not include insurance proceeds that are applied in accordance with Section 7.13 hereof or condemnation awards that are applied in accordance with Section 7.14 hereof.
Rule shall mean Securities and Exchange Commission Rule 15c2-12 as amended.
SBOE means the Idaho State Board of Education and its successors.
S&P shall mean S&P Global Ratings.
Secretary shall mean the de facto or de jure Secretary of the Authority, or other officer of the Authority who is the custodian of the seal of the Authority and of the records of the proceedings of the Board, or his successor in functions, if any.
Securities Depository shall mean The Depository Trust Company, New York, New York, or any successor securities depository appointed pursuant to Section 2.5.
Series 2018 Bonds shall mean the herein authorized "State Building Revenue Bonds, Series 2018A (Idaho State Board of Education Project) (Federally Taxable)."
Site means the real property and existing improvements thereon, as more particularly described in Exhibit A of the Facilities Lease, on which the Improvements will be located and constructed.
State shall mean the State of Idaho and every agency and instrumentality thereof with the power to lease the Facilities from the Authority.
Supplemental Resolution shall mean any resolution amending or supplementing the terms of this Resolution which has been duly adopted and approved by the Authority under the Act and adopted in accordance with the provisions of the Resolution.
Terms Certificate shall mean the Terms Certificate in substantially the fOlm set forth set in Exhibit B hereto to provide certain terms for the Series 2018 Bonds based upon the sale of the Series 2018 Bonds in accordance with this Resolution, which certificate shall be executed by the Underwriter and the Delegated Officer of the Authority and be delivered to the Trustee at or before the issuance and delivery of the Series 2018 Bonds.
RESOLUTION - PAGE 9 Trustee shall mean ZB, National Association dba Zions Bank, or its successor in function, as now or hereafter designated, which shall act as registrar, authenticating agent, paying agent and transfer agent with respect to the Bonds.
Undenvriter shall mean Wells Fargo Bank, National Association, Charlotte, North Carolina or its successor in function, as the original purchaser of the Bonds.
ARTICLE II: THE BONDS
Section 2.1 Description of the Bonds. The Board hereby authorizes the issuance of bonds designated "State Building Revenue Bonds, Series 2018A (Idaho State Board of Education Project) (Federally Taxable)." The Series 2018 Bonds shall be registered as to both principal and interest. Interest on the Series 2018 Bonds shall be calculated on the basis of a 360-day year consisting of twelve 30-day months and shall be payable semiannually. The Series 2018 Bonds shall be dated the date of delivery, shall be in Authorized Denominations, and the Series 2018 Bonds shall bear interest payable semiannually commencing on September 1, 2018, and on each March 1 and September 1 thereafter until their date of maturity. The Bonds issued under this Resolution shall rank on a parity with each other in right of payment from the Revenues, and the funds and accounts and proceeds thereof, as pledged hereunder.
A. The Board hereby delegates to the Chairman, Vice Chairman, Executive Director, or Secretary of the Authority, each with the authority to act alone (hereinafter each referred to as the "Delegated Officer"), the power to make the following determinations on or before the date of the sale of the Bonds to the Underwriter, without any requirement that the members of the Board meet to approve such determinations, but subject to the limitations provided:
(1) The true interest cost of the proposed rates of interest to be borne by the Bonds which does not exceed 5.00%.
(2) The principal amount of the Bonds which shall not exceed the aggregate of $90,000,000.
(3) The principal payment dates for the Bonds with a final maturity date which does not to exceed September 1,2043.
(4) The amount of principal of the Bonds maturing in any particular year, and the rate of interest accruing thereon.
(5) The dates, if any, on which, and the prices at which, the Bonds will be subject to optional, mandatory or sinking fund redemption.
(6) The amount of capitalized interest for the Bonds.
(7) The amount of proceeds of the Bonds to be deposited into the Construction Fund.
RESOLUTION - PAGE 10 (8) The amount of proceeds of the Bonds to be deposited into the General Reserve Fund.
(9) The amount of proceeds of the Bonds to be deposited into the Maintenance and Repair Fund.
B. Prior to or concurrently with the sale of the Bonds to the Underwriter, the Delegated Officer and the Underwriter shall execute the TelIDS Certificate substantially in the form attached hereto as Exhibit "B" reflecting the final terms and provisions of the Bonds and certifying that the final terms and provisions of the Bonds are consistent with, not in excess of and no less favorable than the terms set forth in subparagraph A above.
Section 2.2 Place and Manner of Payment. The principal of, premium, if any, and interest on the Bonds are payable in lawful money of the United States to the Registered Owners thereof.
Payment of each installment of interest shall be made on its semiannual due date to the Registered Owner whose name appears on the Bond Register on the fifteenth day of the calendar month immediately preceding the interest payment date and shall be paid by check or draft of the Trustee mailed to such Registered Owner on the due date at his address appearing on the Bond Register or at such other address as may be furnished in writing by such Registered Owner to the Trustee.
The principal of and premium, if any, on each Bond shall be payable to the Registered Owner, upon presentation and surrender of such Bond on or after the date of maturity or prior redemption, at the Principal Corporate Trust Office of the Trustee. Upon the payment of the Bonds at maturity, and/or upon payment of the Redemption Price of any Bonds being redeemed, each check or other transfer of funds issued for such purpose shall bear the CUSIP number, if any, identifying, by issue and maturity, the Bonds being paid or redeemed with the proceeds of such check or other transfer.
The Authority and the Trustee may deem and treat the Registered Owner of each Bond as the absolute owner of such Bond for the purpose of receiving payments of principal and interest due on such Bond and for all other purposes, and neither the Authority nor the Trustee shall be affected by any notice to the contrary.
Section 2.3 Redemption of Bonds; Open Market Purchase
A. Series 2018 Bonds -- Optional Redemption. The Bonds are subject to optional redemption on and after the date(s) and in the amounts to be identified in the Terms Certificate executed by the Delegated Officer and the Underwriter pursuant to Section 2.1 of this Resolution
B. Open Market Purchase. The Authority hereby reserves the right to purchase Bonds on the open market at a price equal to or less than par. In the event that the Authority shall purchase Bonds at a price (exclusive of accrued interest) of less than
RESOLUTION - PAGE 11 the principal amount thereof, the Bonds so purchased shall be credited at the par amount thereof against the debt service requirement or, if term Bonds, to the sinking fund deposit next becoming due. If any Bonds are purchased on the open market by the Authority the Bonds will be delivered to the Trustee for cancellation.
Section 2.4 Book-Entry Only System.
A. The Bonds initially shall be registered on the Bond Register in the name of Cede & Co., the nominee for the Securities Depository, and no Beneficial Owner will receive certificates representing their respective interests in the Bonds, except in the event the Trustee issues Replacement Bonds as provided below. It is anticipated that during the term of the Bonds, the Securities Depository will make book-entry transfers among the DTC Participants and will receive and transmit payments of principal of and interest on the Bonds until and unless the Trustee authenticates and delivers Replacement Bonds to the Beneficial Owners as described below.
B. If the Securities Depository determines to discontinue providing its services with respect to the Bonds and the Authority cannot obtain a qualified successor Securities Depository, or if the Authority determines not to use the book-entry system of the Securities Depository, the Authority shall execute and the Trustee shall authenticate and deliver one or more Bond certificates (the "Replacement Bonds") to the DTC PaIiicipants in principal amounts and maturities corresponding to the identifiable Beneficial Owners' interests in the Bonds, with such adjustments as the Trustee may find necessary or appropriate as to accrued interest and previous calls for redemption, if any. In such event, all references to the Securities Depository herein shall relate to the period of time when the Securities Depository has possession of at least one Bond. Upon the issuance of Replacement Bonds, all references herein to obligations imposed upon or to be performed by the Securities Depository shall be deemed to be imposed upon and performed by the Trustee, to the extent applicable with respect to such Replacement Bonds.
C. With respect to Bonds registered in the name of Cede & Co. as nominee for the Securities Depository, neither the Authority nor the Trustee shall have any responsibility to any Beneficial Owner with respect to:
(1) the sending of transaction statements or maintenance, supervision or review of records of the Securities Depository;
(2) the accuracy of the records of the Securities Depository or Cede & Co. with respect to any ownership interest in the Bonds;
(3) the payment to any Beneficial Owner or any person other than the Securities Depository of any amount with respect to principal of, interest on, or redemption premium, if any, on the Bonds; or
(4) any consent given or other action taken by the Securities Depository or Cede & Co. as owner ofthe Bonds.
RESOLUTION - PAGE 12 D. The Authority and DTC have entered into the Representation Letter in connection with the issuance of the Bonds. Such Representation Letter is for the purpose of effectuating the initial Book-Entry System for the Bonds through DTC as Securities Depository and shall not be deemed to amend, supersede or supplement the terms of this Resolution, which are intended to be complete without reference to the Representation Letter. In the event of any conflict between the terms of the Representation Letter and the terms of this Resolution, the terms of this Resolution shall control. The Securities Depository may exercise the rights of a Registered Owner hereunder only in accordance with the terms hereof applicable to the exercise of such rights.
Section 2.5 Successor Securities Depository. In the event the Securities Depository resigns, is unable to properly discharge its responsibilities or is no longer qualified to act as a securities depository and registered clearing agency under the Securities and Exchange Act of 1934, as amended, or other applicable state or federal statute or regulation, the Trustee, with the written consent of the Authority, may appoint a successor Securities Depository, provided the Trustee receives written evidence satisfactory to the Trustee with respect to the ability of the successor Securities Depository to discharge its responsibilities. Any such successor Securities Depository shall be a securities depository which is a registered clearing agency under the Securities and Exchange Act of 1934, as amended, or other applicable state or federal statute or regulation. Upon the appointment of a successor Securities Depository, the former Securities Depository shall surrender the Bonds to the Trustee for transfer to the successor Securities Depository, and the Trustee shall cause the authentication and delivery of Bonds to the successor Securities Depository in appropriate denominations and form as provided herein.
ARTICLE III: THE TRUSTEE
Section 3.1 The Trustee.
A. The Trustee shall keep, or cause to be kept at its Principal Corporate Trust Office, the Bond Register for the registration and transfer of the Bonds, which shall at all reasonable times be open to inspection by the Authority.
B. The Trustee shall be responsible for its representations contained in the Certificate of Authentication on the Bonds.
C. The Trustee may become the Registered Owner of Bonds with the same rights it would have if it were not the Trustee, and, to the extent permitted by law, may act as depositary of the funds and accounts hereunder, and permit any of its officers or directors or agents to act as a member of, or in any other capacity with respect to, any committee formed to protect the rights of Registered Owners.
Section 3.2 Trustee; Acceptance of Duties. The Trustee shall signify its acceptance of the duties and obligations imposed upon it by this Resolution by executing and delivering to the Authority a written acceptance thereof. By executing such acceptance,
RESOLUTION - PAGE 13 the Trustee shall be deemed to have accepted such duties and obligations with respect to all the Bonds thereafter to be issued but only, however, upon the terms and conditions set forth in this Resolution.
Section 3.3 Responsibilities of Trustee.
A. The recitals of fact herein and in the Bonds contained shall be taken as the statements of the Authority and the Trustee shall not be responsible for the correctness of the same. The Trustee makes no representation as to the validity or sufficiency of this Resolution, of any Bonds issued hereunder or of the security afforded by this Resolution, and the Trustee shall not incur any liability in respect thereof. The Trustee shall not be under any responsibility or duty with respect to the application of any money paid by such Trustee to the Authority or to any successor Trustee in accordance with the provisions of this Resolution. Except for information provided by the Trustee, the Trustee shall have no responsibility or liability with respect to any information, statement or recital in any offering memorandum or other disclosure material prepared or distributed with respect to the issuance of these Bonds. The Trustee shall not be under any obligation or duty to perform any act which would involve it in expense or liability or to institute or defend any suit in respect thereof, or to advance any of its own money, unless properly indemnified.
B. Subject to the provisions of subsection C of this Section 3.3, the Trustee shall not be liable in connection with the performance of its duties hereunder except for its own negligence, misconduct or default. The Trustee may execute any of the trusts or powers hereof and perform any of its duties by or through attorneys, agents or receivers.
C. The Trustee, prior to the occurrence of an Event of Default and after Events of Default have been cured, undeliakes to perform such duties and only such duties as are specifically set forth in this Resolution. If an Event of Default occurs and is not cured, the Trustee shall exercise such of the rights and powers vested in it by this Resolution and use the same degree of care and skill in its exercise as a prudent person would exercise or use under the circumstances in the conduct of his own affairs. Any provisions of this Resolution relating to action taken or to be taken by the Trustee or to evidence upon which the Trustee may rely shall be subject to the provisions of this Section 3.3.
Section 3.4 Evidence on Which Trustee May Act.
A. The Trustee, upon receipt of any notice, resolution, request, consent, order, certificate, repOli, opinion, bond or other paper or document furnished to it pursuant to any provision of this Resolution, shall examine such instrument to determine whether it conforms to the procedural requirements of this Resolution and shall be protected in acting upon any such instrument believed by it to be genuine and to have been signed or presented by the proper patiy or patiies. The Trustee may consult with counsel, who mayor may not be counsel to the Authority, and the opinion of such counsel shall be full at1d complete authorization and protection in respect of any action taken or suffered by it under this Resolution in good faith and in accordance therewith.
RESOLUTION - PAGE 14 B. Whenever the Trustee shall deem it necessary or desirable that a matter be proved or established prior to taking or suffering any action under this Resolution, such matter (unless other evidence in respect thereof be therein specifically prescribed) may be deemed to be conclusively proved and established by a certificate of an Authorized Officer, and such certificate shall be full wananty for any action taken or suffered in good faith under the provisions of this Resolution upon the faith thereof; but in its discretion, the Trustee may in lieu thereof accept other evidence of such fact or matter or may require such further or additional evidence as it may deem reasonable.
C. Except as otherwise expressly provided in this Resolution, any request, order, notice or other direction required or permitted to be furnished pursuant to any provision thereof by the Authority to any Trustee shall be sufficiently executed in the name of the Authority by an Authorized Officer.
Section 3.5 Compensation. The Authority shall pay to the Trustee from time to time reasonable compensation for all services rendered under this Resolution and also all reasonable expenses, charges, counsel fees and other disbursements, including those of its attorneys, agents and employees, incurred in good faith in and about the performance of its powers and duties under this Resolution.
Section 3.6 Resignation of Trustee. The Trustee may, at any time, resign and be discharged of the duties and obligations created by this Resolution by giving not less than 60 days written notice to the Authority, specifying the date when such resignation shall take effect, and such resignation shall take effect upon the day specified in such notice unless previously a successor shall have been appointed by the Authority or the Registered Owners as provided in Section 3.8, in which event such resignation shall take effect immediately on the appointment of such successor.
Section 3.7 Removal of Trustee. So long as there is no Event of Default hereunder, the Trustee may be removed at any time upon giving 30 days notice by an instrument in writing filed with the Trustee and signed by the Authority.
Section 3.8 Appointment of Successor Trustee.
A. The Authority shall appoint a successor Trustee if at any time (1) the Trustee shall resign, be removed, become incapable of acting, or be adjudged bankrupt or insolvent, (2) a receiver, liquidator or conservator of the Trustee, or of its property, shall be appointed, or (3) any public officer shall take charge or control of the Trustee or of its property or affairs.
B. If a successor Trustee is not appointed by the Authority hereunder within 45 days after the Trustee' gives written notice to the Authority as provided in Section 3.6 or after a vacancy in the office of the Trustee occurs by reason of its inability to act, the Trustee or the Registered Owner of any Bond may apply to any court of competent jurisdiction to appoint a successor Trustee. Said cOUli may thereupon, after such notice, if any, as such court may deem proper, appoint a successor Trustee.
RESOLUTION - PAGE 15 C. Any Trustee appointed under the prOVISIons of this Section 3.8 in succession to the Trustee shall be a bank or trust company or national banking association, (1) having trust powers and (2) having capital stock and surplus aggregating at least $50,000,000.
Section 3.9 Transfer of Rights and Property to Successor Trustee.
A. Any successor Trustee appointed under this Resolution shall execute, acknowledge and deliver to its predecessor Trustee and to the Authority, an instrument accepting such appointment, and thereupon such successor Trustee, without any further act, shall become fully vested with all rights, powers, duties and obligations of such predecessor Trustee, with like effect as if originally named as Trustee.
B. The predecessor Trustee, on the written request of the Authority or of the successor Trustee, shall (1) execute, acknowledge and deliver such instrument of conveyance and of further assurance and do such other things as may reasonably be required to more fully vest and confirm in the successor Trustee all rights, title and interest of the predecessor Trustee in and to any property held by it under this Resolution, and (2) pay over, assign and deliver to the successor Trustee any money or other propelty subject to the trusts and conditions herein set forth. Should any deed, conveyance or instrument in writing from the Authority be required by such successor Trustee to more fully vest in and confirm to such successor Trustee any estates, rights, power and duties, any and all such deeds, conveyances and instruments shall, on request, and so far as may be authorized by law, be executed, acknowledged and delivered by the Authority.
Section 3.10 Merger or Consolidation. Any company into which any Trustee may be merged, converted or consolidated, or any company resulting from any such merger, conversion or consolidation, or any company to which any Trustee may sell or transfer all or substantially all of its corporate trust business, shall be the successor to the Trustee without the execution or filing of any paper or the performance of any fulther act, provided such company shall satisfy the requirements set forth in Section 3.8C, hereof.
Section 3.11 Survival. The Trustee's right to payment of its fees, expenses and indemnities provided herein shall survive its resignation or removal and the final payment or defeasance of the Bonds.
ARTICLE IV: SOURCES AND USES OF BOND PROCEEDS
Section 4.1 Sources and Uses of Bond Proceeds. The proceeds of the Bonds shall be deposited into the following funds and accounts in such amounts to be provided in the Terms Certificate:
(1) To the Construction Fund for Cost of Acquisition, Construction and Financing.
(2) To the Debt Service Fund for capitalized interest.
RESOLUTION - PAGE 16 (3) To the Maintenance and Repair Fund for celiain maintenance expenses.
(4) To the General Reserve Fund to be applied to any lawful purpose of the Authority relating to the Facilities and, to the extent that the amount in the General Reserve Fund exceeds $500,000, such excess amount to be applied toward the payment of interest on and principal of the Bonds as further set forth in Section 5.5 below.
ARTICLE V: FUNDS AND ACCOUNTS
Section 5.1 The Revenue Fund. There is hereby established a fund to be held by the Trustee and designated the "Revenue Fund." All Revenues upon receipt promptly shall be deposited by the Authority with the Trustee for credit into the Revenue Fund.
Section 5.2 Payments into Certain Funds. As soon as practicable in each month after the deposit of Revenues required by Section 5.1 hereof, but in any case no later than the last Business Day of such month, except as provided in Section 9.2B hereof, the Trustee shall withdraw from the Revenue Fund and deposit into the following funds in the following order of priority the amounts set forth below:
First: Into the Debt Service Fund, the receipts of Revenues so that the balance therein shall be sufficient to pay the total amount of principal, if any, and interest due during the then current Fiscal Year, including an10unts required for redemption of Bonds.
Second: Into the Administrative Fund, the sum budgeted for Administrative Costs allocable to the Facilities for the then current Fiscal Year, as directed in writing by an Authorized Officer.
Third: Into the General Reserve Fund, the remaining balance, if any, of money in the Revenue Fund after making the above deposits.
Notwithstanding the foregoing, to the extent there shall be held in the Debt Service Fund an amount sufficient to pay in full all Bonds then Outstanding in accordance with their terms (including principal or interest thereon), no deposits shall be required to be made into the Debt Service Fund. In accordance with state law, any moneys so deposited into the Debt Service Fund held by the Trustee for amounts due and payable to the Registered Owners of the Bonds and not paid to such Registered Owners within five (5) years after the date on which the same shall have become due shall be paid by the Trustee to the State of Idaho free from the trusts created by this Resolution for deposit in its unclaimed property account. Thereafter, Registered Owners of the Bonds shall be entitled to recourse only against the State of Idaho pursuant to its unclaimed property procedure. The State of Idaho shall not be liable for any interest on the sums paid to it pursuant to this section and shall not be regarded as a trustee or trustees of such money. If the monies are not claimed and paid over or delivered as an allowed claim, the monies shall become payable by escheat to the State of Idaho. RESOLUTION - PAGE 17 Section 5.3 The Debt Service Fund. There is hereby established a fund to be held by the Trustee and designated the "Debt Service Fund" (herein referred to as the "Debt Service Fund"), with such amounts to be deposited therein from proceeds of the Bonds and from eligible funds in the General Reserve Fund pursuant to Section 5.5 below. The Debt Service Fund shall be used solely for the purpose of paying the principal of, premium, if any, and interest on the Bonds. The Trustee shall payout of the Debt Service Fund (i) on or before each Interest Payment Date for any of the Series 2018 Bonds and any Additional Bonds, the amount required for the interest payable on such payment date; (ii) on or before each principal installment due date, the amount required for the principal installment payable on such due date for any of the Series 2018 Bonds, and any Additional Bonds; (iii) on each redemption date or purchase date the purchase price or Redemption Price of any Series 2018 Bonds redeemed or purchased in lieu of redemption by related sinking fund installments. Such amounts shall be applied by the Trustee on the due dates thereof. The Trustee shall also payout of the Debt Service Fund the capitalized interest and accrued interest included in the purchase price of the Series 2018 Bonds, and any capitalized interest from proceeds of the issuance of any Additional Bonds. In the event there are any amounts remaining in the Debt Service Fund upon the expiration or termination of the Ground Lease pursuant to Section 8 of the Ground Lease, such funds shall be applied to any remaining payments on the Bonds and any further remainder shall be paid to the SBOE, all upon the written 'instruction from the Authority to the Trustee. In all other events, upon the final payment of interest on and principal of the Bonds, such funds shall be paid to the Authority upon the written instruction from the Authority to the Trustee.
Section 5.4 The Administrative Fund. There has heretofore been established a fund held by the Authority and designated the Authority's "Administrative Fund" (herein referred to as the "Administrative Fund"). Amounts in the Administrative Fund may be paid out from time to time by the Authority for reasonable and necessary Administrative Costs allocable to the Facilities, including the financing costs peliaining to the Bonds and operating costs of other facilities of the Authority. Amounts in the Administrative Fund in excess of the requirements thereof may, at the discretion of the Authority, be carried forward in the Administrative Fund for operating purposes in the next succeeding Fiscal Year.
Section 5.5 General Reserve Fund. There is hereby created a fund separate and apart from all other funds of the Authority to be held by the Trustee and designated the "General Reserve Fund" (the "General Reserve Fund"), or such other designation conforming to generally accepted accounting practices. Amounts in the General Reserve Fund may be applied by the Trustee, upon written instruction from an Authorized Officer, to any lawful purpose of the Authority relating to the Facilities. To the extent that the amount in the General Reserve Fund exceeds $500,000, such excess amount may be deposited to the Debt Service Fund by the Trustee, upon written instruction from the Authority at the request of SBOE, to be used for the payment of interest on and principal of the Bonds. In the event there are any amounts remaining in the General Reserve Fund upon the expiration or termination of the Ground Lease pursuant to Section 8 of the Ground Lease, such funds shall be applied to any remaining payment on the Bonds and any further remainder shall be paid to SBOE, all upon the written instruction from the
RESOLUTION - PAGE 18 Authority to the Trustee. In all other events, upon the final payment of interest on and principal of the Bonds, such funds shall be paid to the Authority upon the written instruction from the Authority to the Trustee.
Section 5.6 Construction Fund.
A. Creation of the Construction Fund. There is hereby created a fund separate and apart from all other funds of the Authority, to be held by the Trustee and designated the "Construction Fund" (the "Construction Fund"), or such other designation conforming to generally accepted accounting practices. The proceeds of the Series 2018 Bonds and any Additional Bonds, allocated to pay the Cost of Acquisition, Construction and Financing, including the costs of issuing the Series 2018 Bonds and any Additional Bonds, shall be deposited into the Construction Fund pursuant to the Terms Certificate and shall be used and applied to pay the Cost of Acquisition, Construction and Financing as directed by the Authority.
B. Deposits into the Construction Fund.
(1) There shall be paid into the Construction Fund the amounts required to be so paid by the provisions of this Resolution, and there may be paid into the Construction Fund, at the option and upon written direction of the Authority to the Trustee, any money received for or in comlection with the Improvements by the Authority from any source, unless required to be otherwise applied as provided by this Resolution, or any money made available to the Authority by BEA under the Subleases. Amounts in the Construction Fund shall be applied to the Cost of Acquisition, Construction and Financing of the Improvements financed by the Series 2018 Bonds.
(2) The proceeds of insurance, excluding business interruption loss insurance, maintained pursuant to this Resolution andlor the Facilities Lease against physical loss of or damage to the Facilities or of contractors' performance bonds with respect thereto, pertaining to periods of construction, if any, shall be paid into the Construction Fund, pursuant to written direction of the Authority to the Trustee.
RESOLUTION - PAGE 19 C. Payments from the Construction Fund. The Trustee shall make payments from the Construction Fund, except payments and withdrawals pursuant to subsection D of this Section 5.6, in the amounts, at the times, in the manner, and on the other terms and conditions set forth in this subsection C. Before any such payment shall be made from the Construction Fund, the Authority shall file with the Trustee a requisition therefor substantially in the form attached hereto as Exhibit C, signed by an Authorized Officer ofthe Authority, stating in respect of each payment to be made (a) the name and address of the person, firm or corporation to whom payment is due, (b) the amount to be paid, (c) the particular item of the Cost of Acquisition, Construction and Financing with respect thereto to be paid, (d) that the cost or the obligation in the stated amount is a proper charge against the Construction Fund and is a proper item of the Cost of Acquisition, Construction and Financing of Improvements, and has not been paid, and (e) the means of payment which shall be either by check or wire transfer. The Trustee shall make each payment required by such requisition.
(2) Upon completion of the acquisition, design and construction of Improvements, a certificate of an Authorized Officer of the Authority shall be filed with the Trustee stating (a) that the Improvements have been acquired and completed, and (b) the amount, if any, required in the opinion of the Authorized Officer for the payment of any remaining part of the Cost of Acquisition, Construction and Financing of such Improvements. Upon the filing of such certificate and if all costs of issuance shall have been paid, upon written direction from the Authority to the Trustee, the balance in the Construction Fund, in excess of the amount, if any, stated in such certificate shall be transferred from the Construction Fund to the Debt Service Fund.
D. Costs of Issuance. That pOliion of the Construction Fund allocated to costs of issuance of the Bonds, as determined from time to time by the Authority, shall be used by the Trustee to pay costs of issuing the Bonds, pursuant to written direction by the Authority to the Trustee.
Section 5.7 Maintenance and Repair Fund. There is hereby created separate and apart from all other funds of the Authority a Maintenance and Repair Fund to be used for certain maintenance, repairs, or improvements that the SBOE deems necessary for the Facilities in its discretion as further described in the Facilities Lease, with the funds therein deposited pursuant to the Terms Certificate. Before any such payment shall be made from the Maintenance and Repair Fund, the Authority shall file with the Trustee a requisition therefor substantially in the fOlm attached hereto as Exhibit C, signed by an Authorized Officer of the Authority, stating in respect of each payment to be made (a) the amount to be paid to SBOE, (b) the particular item to be paid to SBOE, (c) that the cost or the obligation in the stated amount is a proper charge against the Maintenance and Repair Fund and has not been paid, and (d) the means of payment which shall be either by check or wire transfer. The Trustee shall make each payment to SBOE required by such requisition. In the event there are any amounts remaining in the Maintenance and Repair Fund upon the expiration or termination of the Ground Lease pursuant to Section 8 of the Ground Lease, such funds shall be applied to any remaining payments on the Bonds and any further remainder shall be paid to the SBOE, all upon the written instruction from the Authority to the Trustee. In all other events, upon the final payment
RESOLUTION - PAGE 20 of interest on and principal of the Bonds, such funds shall be paid to the Authority upon the written instruction from the Authority to the Trustee.
Section 5.8 Valuation and Sale of Investments.
A. Method of Valuation. In computing the amount in any fund or account hereunder, obligations purchased as investments shall be valued at the amortized cost of such obligations plus accrued interest.
B. Credit or Debit to Funds and Accounts. Obligations purchased as an investment of money in the Construction Fund, the Debt Service Fund, the Administrative Fund. the General Reserve Fund, and the Maintenance and Repair Fund and the accounts therein, shall be deemed at all times to be a pati of such fund or account, and any profit realized from the liquidation of such investment shall be credited to, and any loss resulting from the liquidation of such investment shall be charged to the computation of net interest earned on the money and investments of such fund or account. Income received from the investment of moneys in any fund or account shall be credited to such fund or account.
C. Investment Direction. Except as otherwise provided herein, all moneys held by the Trustee in any of the funds or accounts established pursuant to this Resolution, including investment earnings unless otherwise specified herein, shall be invested as directed in writing by the Authority. If the Trustee does not receive such written direction, it shall not be required to invest the moneys. Any such written request shall state that, in the opinion of the authorized officer, the investment of money requested in such written request is a Permitted Investment. The Trustee shall be entitled to assume that any investment, which at the time of purchase is a Permitted Investment, remains a Permitted Investment thereafter, absent receipt of written notice or information to the contrary. The Trustee shall not be liable or responsible for making any such investment in the manner provided above or for any loss resulting from any such investment.
The Trustee may make any and all investments permitted by the provisions of this Resolution through its own or any of its affiliate's investment departments.
The Authority acknowledges that to the extent regulations of the Comptroller of the Currency or any other regulatory entity grant the Authority the right to receive brokerage confirmations of the security transactions as they occur, the Authority specifically waives receipt of such confirmations to the extent permitted by law unless the Authority shall otherwise request confirmations on a specific transaction. The Trustee will furnish the Authority monthly cash transaction statements which include the detail for all investment transactions made by the Trustee hereunder.
ARTICLE VI: DEFEASANCE
Section 6.1 Discharge of Indebtedness. If the Authority shall payor cause to be paid, or there shall otherwise be paid, to the Beneficial Owners the principal of and interest due or to become due on the Bonds, at the times and in the manner stipulated
RESOLUTION - PAGE 21 therein and in the Resolution, then the pledge of any Revenues and other monies, securities and funds pledged under the Resolution and all covenants, agreements and other obligations of the Authority to the Beneficial Owners shall thereupon cease, terminate and become void and be discharged and satisfied, and such Bonds shall cease to be entitled to any lien, benefit or security under the Resolution.
Section 6.2 Provision for Defeasance of the Bonds. In the event that Pelmitted Investments satisfying the requirements of Section 67-6416 of the Act maturing or having guaranteed redemption prices at such time or times and bearing interest to be earned thereon in such amounts as are sufficient (together with any resulting cash balances), as certified by a certified public accountant selected by the Authority, to redeem and retire part or all of the Bonds in accordance with their terms, are hereafter irrevocably set aside in a special account and pledged to effect such redemption and retirement, then no further payments need be made into the Debt Service Fund therein for the payment of the principal of and interest on the Bonds so provided for, and such Bonds and interest accrued thereon shall then cease to be entitled to any lien, benefit or security of this Resolution, except the right to receive the funds so set aside and pledged, and such Bonds and interest accrued thereon shall no longer be deemed to be Outstanding.
Section 6.3 Disposition of Funds and Accounts. Upon the deposit with the Trustee of moneys sufficient to pay all principal of, premium, if any, and interest on the Bonds, or upon the making of adequate provisions for the payment of such amounts, subject to the provisions for payments set forth in Sections 5.3, 5.5 and 5.7 above, all moneys remaining in all funds and accounts under this Resolution, except moneys necessary to pay principal or premium, if any, and interest on the Bonds, shall be paid to the Authority upon the written instruction of the Authority to the Trustee.
ARTICLE VII: COVENANTS
The Authority covenants and agrees with the Registered Owners of the Bonds as follows:
Section 7.1 Assignment of Revenues; Pledge of Revenues. The Authority hereby assigns and transfers to the Trustee all Revenues, and the Authority hereby gives to and confers upon the Trustee the right, power and authority to collect such Revenues. The Authority ilTevocably appoints the Trustee its true and lawful attorney-in-fact, at the option of the Trustee at any time and from time to time during the continuance of this Resolution, to demand, receive and enforce payment of Revenues attributable to the Facilities; to give receipts, releases and satisfactions; and to sue in the name of the Authority or the Trustee for all Revenues attributable to the Facilities. The Authority hereby pledges the Revenues to the payment of Annual Debt Service all in accordance with Section 5.2 hereof.
The assignment of the Revenues in this Section 7.1 is intended to be an absolute and unconditional assignment from the Authority to the Trustee and not merely the passing of a security interest. In accordance with Section 67-6414(d) of the Act, the pledge of Revenues shall be valid and binding from the time when the pledge is made,
RESOLUTION - PAGE 22 and the assigned Revenues and Revenues thereafter received by the Authority or the Trustee shall immediately be subject to such pledge of Revenues without any physical delivery thereof or further act, and such pledge shall be valid and binding as against all parties having claims of any kind in tort, contract or otherwise against the Authority, irrespective of whether such parties have notice thereof.
Notwithstanding the foregoing, under no circumstances does the Authority pledge or assign revenues from, or give a security in, other revenues, propeliies or facilities of the Authority or of the State.
Section 7.2 Payment of the Bonds. The Authority shall duly and punctually payor cause to be paid from the Revenues and the proceeds of the Bonds pledged therefor by this Resolution, the principal of, premium, if any, and interest on every Bond, at the dates and places, and in the manner mentioned in the Bonds, according to the true intent and meaning thereof.
Section 7.3 Extension of Payment of the Bonds. The Authority shall not directly or indirectly extend or consent to the extension of the maturity of any of the Bonds, or the time of payment of any claims for interest by the purchase or funding of such Bonds, or claims for interest or by any other arrangement, and if the maturity of any of the Bonds, or the time for payment of any such claims for interest shall be extended, such Bonds, or claims for interest shall not be entitled, in case of any default under this Resolution, to the benefit of this Resolution or to any payment out of Revenues of the funds established by this Resolution, including the investments thereof, if any, pledged under this Resolution or the money (except money held in trust for the payment of particular Bonds or claims for the interest pursuant to this Resolution) held by any fiduciary, except subject to the prior payment of the principal of all Outstanding Bonds, the maturity of which has not been extended and of such pOliion of the accrued interest on the Bonds, as shall not be represented by such extended claims for interest. Nothing herein shall be deemed to limit the right of the Authority to issue refunding bonds and such issuance shall not be deemed to constitute an extension of maturity of the Bonds.
Section 7.4 Furtber Assurance. The Authority shall, as far as it may be authorized by law, pass, make, do, execute, acknowledge and deliver, all and every such further resolutions, acts, deeds, conveyances, assignments, transfers and assurances as may be necessary or desirable for the better assuring, conveying, granting, pledging, assigning and confirming all and singular the rights, Revenues and other money, securities and funds hereby pledged or assigned, or intended so to be, or which the Authority may become bound to pledge or assign.
Section 7.5 Power to Issue the Bonds and Execute Pledges Hereunder. The Authority is duly authorized under all applicable laws to create and issue the Bonds and to adopt this Resolution and to pledge the Revenues and other money, securities and funds purported to be pledged by this Resolution in the manner and to the extent provided in this Resolution. Except to the extent otherwise provided in this Resolution, the Revenues and other money, securities and funds so pledged for the payment and security of the Bonds are and will be free and clear of any pledge, lien, charge or encumbrance
RESOLUTION - PAGE 23 thereon or with respect thereto prior to, or of equal rank with, the pledge created by this Resolution, and all corporate or other action on the part of the Authority to that end has been and will be duly and validly taken.
The Bonds and the provisions of this Resolution are and will be the valid and legally enforceable obligations of the Authority in accordance with their terms. The Authority shall at all times, to the extent permitted by law, defend, preserve and protect the pledge of the Revenues and other money, securities and funds pledged under this Resolution and all the rights of the Registered Owners under this Resolution against all claims and demands of all persons whomsoever.
Section 7.6 Power to Fix and Collect Rents, Fees and Charges. The Authority has, and will have as long as any Bonds are Outstanding, good right and lawful power to fix and collect rents, fees and charges with respect to the leasing of the Facilities.
Section 7.7 Creation of Liens. Except to the extent otherwise provided in Section 7.18 of this Resolution, the Authority shall not issue any bonds, notes, debentures or other evidences of indebtedness of similar nature, other than the Bonds, that are payable out of or secured by a pledge of the Revenues or other money, securities or funds held or set aside by the Authority under this Resolution, and shall not create or cause to be created any lien or charge on the Revenues, or such money, securities or funds; provided, however, that nothing contained in this Resolution shall prevent the Authority from issuing, if and to the extent pemlitted by the Act (i) bond anticipation notes or (ii) evidences of indebtedness payable out of, or secured by a pledge of Revenues to be derived on and after such date as the pledge of the Revenues provided in this Resolution shall be discharged and satisfied as provided in Section 6.1 hereof.
Section 7.8 Annual Budget. Not less than 30 days prior to the begilming of each Fiscal Year, the Authority shall prepare and file with the Trustee an Annual Budget for the ensuing Fiscal Year which shall set forth in reasonable detail the estimated receipts and expenditures of the Authority in relation to the Facilities for such ensuing Fiscal Year.
Section 7.9 Operation and Maintenance of the Facilities. The Authority shall at all times operate or cause the Facilities to be operated properly and in an efficient and economical mmmer, consistent with good business practices, and shall maintain, preserve, reconstruct and keep the same or cause the same to be so maintained, preserved, reconstructed and kept, with the appurtenances and every part and parcel thereof, in good repair, working order and condition, and shall from time to time make, or cause to be made, all necessary and proper repairs, replacements and renewals so that at all times the leasing of the Facilities may be properly and advantageously conducted. Nothing in this Section 7.9 shall conflict with the rights or obligations of the State, acting by and through the SBOE, as lessee under the Facilities Lease.
Section 7.10 Rents, Fees and Charges. The Authority shall at all times charge and collect rents, fees and other charges for the Facilities as shall be required to provide
RESOLUTION - PAGE 24 Revenues at least sufficient in each Fiscal Year, together with other available funds, for the payment of the sum of:
A. Annual Debt Service during such Fiscal Year;
B. Administrative Costs during such Fiscal Year; and
c. All other charges or liens whatsoever payable out of Revenues during such Fiscal Year.
Section 7.11 Facilities Lease; Amendments to Facilities Lease; Non-renewal of Facilities Lease. The Authority shall collect all amounts payable to it pursuant to the Facilities Lease. The Facilities Lease shall be a "triple net" lease in which the State, acting by and through the SBOE, will payor cause to be paid all expenses of insuring, maintaining and operating the Facilities. The Authority shall enforce the provisions of the Facilities Lease and duly perform the Authority's covenants and agreements thereunder. The Authority will not consent or agree to or permit any rescission of or amendment to or otherwise take any action under or in connection with the Facilities Lease that will reduce the payments required to be made by the State thereunder or which will in any manner impair or adversely affect the rights ofthe Authority thereunder or the rights or security of the Registered Owners under this Resolution, and any action by the Authority in violation of this covenant shall be null and void as to the Authority and the State. The renewal of the Facilities Lease shall not constitute such an amendment. Prior to execution by the Authority of any amendment, a copy thereof certified by the Authority shall be filed with the Trustee.
In the event the State fails to renew the Facilities Lease during the time that the Bonds remain Outstanding, the Authority:
A. shall re-enter and take possession of the Facilities at the end of the then current renewal term under the Facilities Lease, and
B. shall exercise reasonable diligence to re-Iet or otherwise dispose of the Facilities.
Section 7.12 Maintenance of Insurance.
A. The State shall at all times maintain or cause to be maintained such insurance as shall be required by the provisions of the Facilities Lease, with the Authority and the Trustee named as loss payees. The Authority shall also maintain any additional or other insurance which it shall deem necessary or advisable to protect its interests and those of the Registered Owners of the Bonds. The Trustee shall not be responsible for the sufficiency of the insurance, such determination being made solely by the Authority.
B. Any such insurance shall be in the form of policies or contracts for insurance with insurers of good standing or under an established program of self insurance adopted by the State.
RESOLUTION - PAGE 25 C. The Authority shall file with the Trustee annually, within 120 days after the close of each Fiscal Year, a celiificate of its Insurance Consultant stating, with respect to the Facilities, that the Authority and/or State has complied in all respects with the requirements of this Section 7.12. The Trustee makes no representations as to and shall have no responsibility for the sufficiency of the insurance.
D. Within 120 days after any portion of the Facilities has been damaged or destroyed, the Authority shall file with the Trustee a certificate of an Authorized Officer setting forth a description of the nature and extent of such damage and the amount of insurance proceeds covering such loss or damage and specifying the Authority's reasonable and necessary costs of reconstruction or replacement thereof.
Section 7.13 Reconstruction; Application of Insurance Proceeds.
A. If any useful portion of the Facilities shall be damaged or destroyed, the Authority shall, as expeditiously as possible, continuously and diligently prosecute or cause to be prosecuted the reconstruction or replacement thereof, except as provided in paragraph B of this Section 7.13. The proceeds of any insurance paid on account of such damage or destruction, other than business interruption loss insurance, shall be held by the Trustee in a special account and made available for, and to the extent necessary be applied to, the cost of such reconstruction or replacement. The Trustee shall make payments from such account for the cost of such reconstruction or replacement only upon being furnished requisitions signed by an Authorized Officer stating in respect of each such payment to be made (1) the particular account from which such payment is to be made, (2) the name and address of the particular person, firn1 or corporation to whom payment is due, (3) the amount to be paid, (4) the particular item of the cost of reconstruction or replacement to be paid, and (5) that the cost or obligation in the stated amount is a proper charge against such account, is a proper item of the cost of reconstruction or replacement and has not been paid. Pending such application, such proceeds may be invested by the Trustee in Permitted Investments at the written , direction of an Authorized Officer which mature not later than such times as shall be necessary to provide money when needed to pay such costs of reconstruction or replacement or may be invested as otherwise provided for under the Facilities Lease. The interest, as well as the gain, if any, on such investments shall remain a part of any such special account to be applied as provided in this Section 7.13. The proceeds of any insurance not set aside within 12 months after receipt thereof by the Authority to repair or replace damaged or destroyed property, or in respect of which notice in writing of intention to apply the same to the work of repairing or replacing the property damaged or destroyed shall not have been given to the Trustee by the Authority within such 12-month period, or which the Authority shall at any time notify the Trustee are not to be so applied, and which shall not have been applied to redeem Bonds pursuant to paragraph B of this Section 7.13, shall be deposited in the Debt Service Fund as directed in writing by an Authorized Officer, unless the Bonds have been redeemed, in which case such proceeds shall be released to the Authority.
B. The Authority shall not be required to rebuild, replace, restore and repair the Facilities, as provided in the Facilities Lease, if (1) the Authority shall reasonably
RESOLUTION - PAGE 26 determine, as evidenced by a celiificate of an independent consulting engineer, that not to do so would not materially adversely affect the operation of the Facilities, or (2)(a) the Authority shall reasonably determine, as evidenced by a certificate of an independent certified public accountant that the proceeds of any insurance received by the Authority, together with other legally available money of the Authority, will be sufficient to pay the principal of, and premium and interest on the Bonds due up to and including such time as the Bonds may be called for optional redemption, and (b) the Authority irrevocably deposits such insurance proceeds and other money into an escrow fund to redeem the Bonds on the first date such Bonds may be redeemed. Excess insurance proceeds, if any, remaining after redemption of the Bonds shall be released from the escrow fund back to the Authority.
C. Notwithstanding any full or partial damage or destruction of the Facilities, the Authority shall be obligated to continue to pay all amounts required to be paid by it pursuant to this Resolution.
Section 7.14 Eminent Domain.
A. In the event that the Facilities, or any part thereof, are taken by any governmental body through the exercise or the threat of the exercise of the power of eminent domain, any condemnation award payable on account of such taking shall be deposited with the Trustee, and the net proceeds thereof (after payment of expenses incurred in obtaining the award) shall be used to rebuild, replace, repair or restore the Facilities or to redeem Bonds in the manner set forth in this Section 7.14.
B. Notwithstanding any full or partial taking of the Facilities under the exercise of the power of eminent domain, the Authority shall be obligated to continue to pay all amounts required to be paid by it pursuant to this Resolution.
C. Any net proceeds of condemnation awards payable on account of a partial taking of the Facilities shall be delivered to the Trustee, to be used for redemption of Bonds.
D. Net proceeds of condemnation awards payable on account of a total taking of the Facilities shall be payable first, to the Trustee to be used for redemption of Bonds, and second, to the Authority for the remaining value of its interest in the Facilities.
Section 7.15 Accounts and Reports.
A. The Authority shall keep proper books of record and account (separate from all other records and accounts) in which complete and correct entries shall be made of its transactions relating to the Facilities and each fund and account established under this Resolution and which, together with all books and papers of the Authority, including insurance policies, relating to the Facilities shall at all times be subject to the inspection of the Trustee and the Registered Owners of an aggregate of not less than five percent in principal amount of the Bonds then Outstanding or their representatives duly authorized in writing.
RESOLUTION - PAGE 27 B. The Trustee shall advise the Authority promptly as requested by the Authority, but in no event less often than monthly, of its transactions during such period relating to each fund and account held by it under this Resolution.
C. The Authority shall annually, within 120 days after the close of each Fiscal Year, file with the Trustee, and otherwise as provided by law, a copy of an annual report for such Fiscal Year, accompanied by an accountant's certificate relating to the Facilities and including the following statements in reasonable detail: (l) a statement of assets and liabilities as of the end of such Fiscal Year, to the extent relating to the Facilities; (2) a statement of receipts and expenditures for such Fiscal Year; and (3) a summary with respect to each fund and account established under this Resolution of the receipts therein and disbursements therefrom during such Fiscal Year and the amount held therein at the end of such Fiscal Year. Such accountant's certificate shall state whether or not, to the knowledge of the signer, the Authority or the State is in default with respect to any of the covenants, agreements or conditions on their parts contained in this Resolution or in the Facilities Lease, and if so, the nature of such default. The Trustee has no obligation to review the accountant's certificate or verify the statements therein.
D. The repOlis, statements and other documents required to be furnished to the Trustee pursuant to any provisions of this Resolution shall be available for the inspection of Registered Owners at the Principal Corporate Trust Office of the Trustee and the reports mentioned in subsection C shall be mailed to each Registered Owner who shall file a written request therefor with the Authority.
E. The Authority shall file with the Trustee forthwith upon becoming aware of any Event of Default or default in the performance by the Authority or the State of any covenant, agreement or condition in this Resolution or in the Facilities Lease, a certificate signed by an Authorized Officer and specifying such Event of Default or default.
Section 7.16 Payment of Taxes and Charges. The Authority will from time to time duly pay and discharge, or cause to be paid and discharged, all taxes, assessments and other governmental charges, or required payments in lieu thereof, lawfully imposed upon the propeliies of the Authority or upon the rights, revenues, income, receipts, and other money, securities and funds of the Authority when the same shall become due (including all rights, money and other property transfen'ed, assigned or pledged under this Resolution), and all lawful claims for labor and material and supplies, except those taxes, assessments, charges or claims which the Authority shall in good faith contest by proper legal proceedings if (i) the Authority shall in all such cases have set aside on its books reserves deemed adequate with respect thereto and (ii) the Authority shall furnish the Trustee an opinion of counsel that such contest shall not jeopardize the lien of this Resolution, the Authority's title to the Facilities or the Authority's rights under the Facilities Lease.
RESOLUTION - PAGE 28 Section 7.17 Reserved.
Section 7.18 Additional Bonds.
A. Restriction Against Prior Lien Bonds. The Authority hereby covenants and agrees with the Registered Owners of the Bonds, for as long as any of the same remain Outstanding, that the Authority will not issue any bonds having a greater priority of lien upon the Revenues to pay and secure the payment of the principal of, premium, if any, and interest on such bonds than the priority of lien created on such Revenues to pay and secure the payment of the principal of, premium, if any, and interest on the Bonds. The Authority shall not issue any bonds having an equal priority of lien upon the Revenues to pay and secure the payment of the principal of, premium, if any, and interest on such bonds than the priority of lien created on such Revenues to pay and secure the payment of the principal of, premium, if any, and interest on the Bonds except as provided in this Section 7.18.
B. Purposes For Which Additional Bonds May Be Issued. The Authority reserves the right to issue Additional Bonds for the purposes of:
(1) Providing funds to acquire, construct, reconstruct, install or replace any equipment, facilities, additions, betterments or other capital improvements to the Facilities for which it is authorized by law to issue revenue bonds, or
(2) Refunding at or prior to their maturity, any revenue bond anticipation notes or outstanding revenue bonds or other obligations payable out of the Revenues.
C. General Provisions for the Issuance of Additional Bonds. Whenever the Authority shall determine to issue any series of Additional Bonds, the Authority shall adopt a Supplemental Resolution which:
(1) Shall specify the authorized principal amount and senes designation of such Additional Bonds;
(2) Shall specify the date and the maturity date or dates of the Additional Bonds of such series, provided that (a) each maturity date shall fall upon an interest payment date, and (b) all the Bonds of like maturity shall be identical in all respects, except as to denominations and number;
(3) Shall specify the interest rate or rates of the Bonds of such series, or the manner of determining such rate or rates, and the interest payment dates therefor, provided that the interest payment dates may be as provided in the Supplemental Resolution authorizing such series of Additional Bonds;
(4) Shall specify the authorized denomination or denominations of the Bonds of such series;
RESOLUTION - PAGE 29 (5) Shall, specify the redemption terms, if any, for the Bonds of such senes;
(6) Shall specify the foml of the Bonds of such senes and of the Trustee's certificate of authentication; and
(7) Shall require the Authority to deposit in the Debt Service Fund the amount of such proceeds, if any, representing accrued interest on such series of Additional Bonds to the date of delivery thereof.
D. Conditions of Issuing Additional Bonds. Additional Bonds may be issued only if the following conditions are satisfied:
(1) The Authority and the State shall have complied with the provisions of the Facilities Lease relating to Additional Bonds, including, if not already obtained, the agreement of the State to pay Annual Rent under the Facilities Lease equal to the principal of, premium if any, and interest on, the Additional Bonds proposed to be issued in addition to the principal of, premium if any, and interest on the Series 2018 Bonds.
(2) The Authority shall pledge that payments will be made out of the Revenues and into the applicable Debt Service Account within the Debt Service Fund to pay and secure the payment of the principal of, premium, if any, and interest on such Additional Bonds on a parity with the payments required herein to be made out of the Revenues into such accounts to pay and secure the payment of the principal of, premium, if any, and interest on any Bonds then Outstanding.
(3) At the time of the issuance of any Additional Bonds there is no deficiency in the Debt Service Fund.
(4) Prior to the delivery of any Additional Bonds, the Authority shall file with the Trustee a certificate showing that the Facilities Lease, as such may be amended, provides for the payment of Annual Rent (as defined in the Facilities Lease) in an anlount that is sufficient to pay the principal of and interest on the Bonds, including the Additional Bonds proposed to be issued.
(5) Neither the Authority nor the State shall be in default under the Facilities Lease, and the Authority shall not be in default under the Resolution.
(6) The Authority and the Trustee shall have received the opinion of Bond Counsel that the Additional Bonds have been validly issued under the Act and the Resolution.
E. Other Obligations. Nothing herein contained shall prevent the Authority from issuing bonds secured and payable from sources other than the Revenues specified herein.
RESOLUTION - PAGE 30 Section 7.19 Prompt Realization of Security. If the State defaults under the Facilities Lease, the Authority will promptly and fully exercise its remedies thereunder.
Section 7.20 Continuing Disclosure Agreement. The Authority hereby covenants and agrees that it will comply with and carry out all of the provisions of the Continuing Disclosure Agreement. Notwithstanding any other provision of this Resolution, failure of the Authority to comply with the Continuing Disclosure Agreement shall not be considered an Event of Default under this Resolution; however, the Trustee may (and, at the request of any Participating Underwriter or the Holders of at least 25 percent aggregate principal amount of Outstanding Bonds if indemnified to its satisfaction by such Holder or Participating Underwriter, shall) or any holder or Beneficial Owner of a Bond may take such actions as may be necessary and appropriate, including seeking mandate or specific perfomlance by court order, to cause the Authority to comply with its obligations under this Section. For purposes of this Section, Beneficial Owner shall mean any person who has the power, directly or indirectly, to vote or consent with respect to, or to dispose of ownership of, any Bonds (including persons holding Bonds through nominees, depositories or other intermediaries).
Section 7.21 Sale, Assignment and Subletting.
A. As long as the Series 2018 Bonds are Outstanding, the Authority:
(1) shall not sell, assign, mortgage or sublet the Facilities or any portion thereof without the prior written consent of the Trustee, and
(2) shall not grant its consent under Sections 5.2 and 11.5 of the Facilities Lease to the assignment, mOligage or sublease of the Facilities by the State without the prior written consent of the Trustee.
ARTICLE VIII: AMENDMENTS
Section 8.1 Amendments to this Resolution.
A. The Authority from time to time and at any time may adopt one or more Supplemental Resolutions hereto, which Supplemental Resolutions thereafter shall become a part of this Resolution, for anyone or more of all of the following purposes:
(1) to add to or delete from the covenants and agreements of the Authority in this Resolution, provided such additions or deletions shall not adversely affect, in any material respect, the interests of the Registered Owner of any Bond, or to surrender any right or power herein reserved;
(2) to cure, correct or supplement any defective or ambiguous provision contained in this Resolution in regard to matters or questions arising hereunder as the Board may deem necessary or desirable and not inconsistent herewith, provided such changes do not adversely affect, in any material respect, the interests of the Registered Owners; or
RESOLUTION - PAGE 31 (3) to authorize a senes of Additional Bonds in accordance with Section 7.18 hereof.
Any such Supplemental Resolution may be adopted without the consent of the Registered Owners of any Bonds at any time Outstanding, notwithstanding any of the provisions of subsection B of this Section 8.1.
B. With the consent of the Registered Owners of not less than 55 percent in aggregate principal amount of the Bonds then Outstanding, the Board may adopt a Supplemental Resolution for the purpose of adding any provisions to, or changing in any manner, or eliminating any of the provisions of this Resolution or of any Supplemental Resolution; provided, however, that no such Supplemental Resolution shall:
(1) Extend the fixed maturity of any Bonds, reduce the rate of interest thereof, extend the time of payments of interest from their due date, reduce the amount of the principal thereof, or reduce any premium payable on the redemption thereof, without the consent of the Registered Owner of each Bond so affected;
(2) Reduce the aforesaid percentage of Registered Owners required to approve any such Supplemental Resolution, without the consent of the Registered Owners of all of the Bonds then Outstanding; or
(3) Modify the rights, obligations, duties or privileges of the Trustee without consent of the Trustee.
It shall not be necessary for the consent of the Registered Owners under this subsection B to approve the particular form of any proposed Supplemental Resolution, but it shall be sufficient if such consent shall approve the substance thereof.
The Trustee shall mail by first-class mail notice of the proposed execution of such Supplemental Resolution to the Registered Owners of the Bonds at their addresses as the same shall last appear upon the registration records. Such notice shall briefly set forth the nature of the proposed Supplemental Resolution and shall state that copies thereof are on file at the designated office of the Trustee for inspection by all Registered Owners. If, within 60 days following the mailing of such notice, the Registered Owners of the requisite principal amount of the Bonds Outstanding at the time of the execution of any such Supplemental Resolution shall have consented to and approved the execution thereof as herein provided, no Registered Owner of any Bond shall have any right to object to any of the terms and provisions contained therein, or the operation thereof, or in any manner to question the propriety of the execution thereof, or to enjoin or restrain the Trustee or the Authority from executing the same or from taking any action pursuant to the provisions thereof.
C. Upon the adoption of any Supplemental Resolution pursuant to the provisions of this Section 8.1, this Resolution shall be deemed to be modified and amended in accordance therewith, and the respective rights, duties and obligations of the Authority under this Resolution and all Registered Owners of Bonds Outstanding hereunder shall thereafter be determined, exercised and enforced thereunder, subject in RESOLUTION - PAGE 32 all respects to such modification and amendments, and all terms and conditions of any such Supplemental Resolution shall be deemed to be part of the terms and conditions of this Resolution for any and all purposes.
D. Bonds executed and delivered after the execution of any Supplemental Resolution adopted pursuant to the provisions of this Section 8.1 may have a notation as to any matter provided for in such Supplemental Resolution, and if such Supplemental Resolution shall so provide, new Bonds so modified as to confonn in the opinion of the Board to any modification of this Resolution contained in any such Supplemental Resolution, may be prepared and delivered without cost to the Registered Owners of any affected Bonds then Outstanding, upon surrender for cancellation of such Bonds in equal aggregate principal amounts.
ARTICLE IX: EVENTS OF DEFAULT AND REMEDIES
Section 9.1 Events of Default. The following shall be Events of Default hereunder:
A. The Authority fails to pay the principal of or premium, if any, on any Bond when and as the same shall become due and payable, whether at maturity or by call for redemption or otherwise.
B. The Authority fails to pay the interest on any Bond when and as such interest shall become due and payable.
C. The Authority fails to perform or observe any covenant, agreement or condition on its part contained in this Resolution or in the Bonds, and such default shall continue for a period of 30 days after written notice thereof to the Authority by the Trustee, or to the Authority, and to the Trustee by the Registered Owners of not less than ten percent of the principal amount of Bonds then Outstanding.
D. The Authority is dissolved or liquidated, the Authority files a voluntary petition in bankruptcy, the Authority commits an act of bankruptcy, the Authority is adjudged to be bankrupt, the Authority executes an assignment for the benefit of its creditors, the Authority enters into an agreement of composition with its creditors, or a court of competent jurisdiction approves a petition applicable to the Authority in any proceeding for its reorganization instituted under the provisions of the federal bankruptcy act, as amended, or under any similar act in any jurisdiction which may now be in effect or which may hereafter be enacted.
E. An order or decree is entered, with the consent or acquiescence of the Authority, appointing a receiver of the Facilities, or any part thereof, or of the rents, fees, charges or other revenues therefrom, or such an order or decree is entered without the consent and acquiescence of the Authority and is not vacated, discharged or stayed within 90 days after the entry thereof.
F. The occurrence of an "Event of Default" under the Facilities Lease.
Section 9.2 Remedies.
RESOLUTION - PAGE 33 A. Acceleration. Upon the occurrence of an Event of Default, the Trustee, by notice in writing given to the Authority, may, and shall, upon the written request of the owners of 25 percent in aggregate principal amount of Series 2018 Bonds, declare the principal amount of the Series 2018 Bonds then Outstanding and the interest accrued thereon to be immediately due and payable, and said principal and interest shall thereupon become immediately due and payable. Upon any declaration of acceleration hereunder, the Authority and the Trustee shall immediately declare all rental payments under the Facilities Lease to be immediately due and payable, as provided in Section 12.2 of the Facilities Lease.
B. Right of Entry. Upon the occurrence of any Event of Default or an Event of Nonrenewal under the Facilities Lease, the Authority shall take actual possession of the Facilities pursuant to the provisions of the Facilities Lease, and the Authority may sell the Facilities or hold, operate and manage the same and from time to time make all needful repairs and improvements, and shall remit the rents, revenues, income or other proceeds thereof to the Trustee. In the event that the Authority exercises its right to take actual possession of the Facilities pursuant to this Section 9.2B and the provisions of the Facilities Lease, the Trustee shall then withdraw from the Revenue Fund and deposit into the following funds in the following order of priority the amounts set forth below:
First: Into the Administrative Fund, the sum budgeted for Administrative Costs allocable to the Facilities for the then current Fiscal Year, as directed in writing by an Authorized Officer.
Second: Into the Debt Service Fund, the receipts of Revenues so that the balance therein shall be sufficient to pay the total amount of principal, if any, and interest due during the then current Fiscal Year, including amounts required for redemption of Bonds.
Third: Into the General Reserve Fund, the remaining balance, if any, of money in the Revenue Fund after making the above deposits.
C. Declaration May Be Rescinded. The right of the Trustee or of the Registered Owners of not less than 25 percent in principal amount of Bonds to make any such declaration as aforesaid, however, is subject to the condition that if at any time after such declaration but before the Bonds shall have matured by their terms, all overdue installments of interest upon the Bonds, together with interest on such overdue installments of interest to the extent pennitted by law and the reasonable and proper charges, expenses and liabilities of the Trustee, and all other sums then payable by the Authority under this Resolution (except the principal of and interest accrued since the immediately preceding interest date on the Bonds due and payable solely by virtue of such declaration), shall either be paid by or for the account of the Authority or provision satisfactory to the Trustee shall be made for such payment, and all defaults under the Bonds or under this Resolution (other than the payment of principal and interest due and payable, solely by reason of such declaration) shall be made good or be secured to the satisfaction of the Trustee or provision deemed by the Trustee to be adequate shall be
RESOLUTION - PAGE 34 made therefor, then and in every such case the Registered Owners of 25 percent in principal amount of Bonds then Outstanding, by written notice to the Authority and to the Trustee, may rescind such declaration and aImul such default in its entirety or, if the Trustee shall have acted itself without direction of the Registered Owners it may rescind such declaration and annul such default in its entirety or, if the Trustee shall have acted upon direction of the Registered Owners of not less than 25 percent in principal amount of Bonds, unless there shall have been delivered to the Trustee written direction to the contrary by the Registered Owners of a majority in principal amount of the Bonds then Outstanding, the Trustee may rescind such declaration and annul such default in its entirety, but no such rescission or annulment shall extend to or affect any subsequent default or impair or exhaust any right or power consequent thereon.
D. Knowledge of Defaults. The Trustee shall not be deemed to have knowledge of any Event of Default hereunder unless and until it shall have actual knowledge thereof, or shall have received written notice thereof from the Authority, or the Registered Owners of at least 25 percent in aggregate principal amount of Bonds then Outstanding. Except as otherwise expressly set out herein, the Trustee shall not be bound to asceliain or inquire as to the performance or observance of any of the telIDs, conditions, covenants or agreements herein or of any of the documents executed 111 connection with the Bonds, or as to the existence of an Event of Default thereunder.
Before taking any action available to the Trustee under this Section 9.2, at the request or direction of the Registered Owners, the Trustee may require that an indemnity bond satisfactory to the Trustee be fumished by the Registered Owners for the reimbursement of all expenses to which it may be put and to protect it against all liability, except liability which is adjudicated to have resulted from its negligence or its willful misconduct in connection with any action so taken.
Section 9.3 Accounting and Examination of Records After Default. The Authority covenants that if an Event of Default occurs and is not cured, (1) the books of record and account of the Authority and all other records relating to the Facilities shall at all reasonable times be subject to the inspection and use by the Trustee, its agents and its attomeys, and (2) the Authority, upon demand of the Trustee, will account, as if it were the trustee of an express trust, for all money, securities and funds pledged or held under this Resolution for such period as shall be stated in such demand.
Section 9.4 Application of Funds and Money After Default.
A. The Authority covenants that if an Event of Default occurs and is not cured, the Authority, upon demand of the Trustee, shall pay over or cause to be paid over to the Trustee fOlihwith (1) all money, securities and funds then held by the Authority in any fund under this Resolution, except for moneys held in the Administrative Fund, and (2) all Revenues as promptly as practicable after receipt thereof.
B. During the continuance of an Event of Default, the Trustee shall apply all money, securities, funds and Revenues received by the Trustee pursuant to any right
RESOLUTION - PAGE 35 given or action taken under the provisions of this Article IX as follows and in the following order:
First: To the payment of the reasonable and proper charges, expenses and liabilities of the Trustee, its counsel and agents and any other fiduciaries;
Second: To the payment of the amounts required for reasonable and necessary Administrative Costs, reasonable and necessary costs for the management, maintenance and upkeep of the Facilities and costs for the reasonable renewals, repairs and replacements of the Facilities, all as are necessary to prevent deterioration of the Facilities or loss of Revenues therefrom;
Third: To the payment of the principal of, premium if any, and interest then due on the Bonds as follows:
(1) unless the principal of all of the Bonds shall have become or has been declared due and payable,
First: To the payment to the persons entitled thereto of all installments of interest then due in the order of the maturity of such installments, together with accrued and unpaid interest on the Bonds theretofore called for redemption, and, if the amount available shall not be sufficient to pay in full any installment maturing on the same date, then to the payment thereof ratably, according to the amounts due on such date, to the persons entitled thereto, without any discrimination or preference; and
Second: To the payment to the persons entitled thereto of the unpaid principal of any Bonds which shall have become due and, if the amount available shall not be sufficient to pay in full the Bonds due on any date, then to the payment thereof ratably, according to the principal due on such date, to the persons entitled thereto, without any discrimination or preference;
(2) if the principal of all of the Bonds shall have become or has been declared due and payable, to the payment of the principal and interest then due and unpaid upon the Bonds without preference or priority of principal over interest or of interest over principal, or of any installment of interest over any other installment of interest, or of any Bond over any other Bond, ratably, according to the amounts due respectively for principal and interest, to the persons entitled thereto without any discrimination or preference except as to any difference in the respective rates of interest specified in the Bonds.
c. If and whenever all overdue installments of interest on all Bonds, together with the reasonable and proper charges, expenses and liabilities of the Trustee, and all other sums payable by the Authority under this Resolution, including the principal and redemption price of and accrued unpaid interest on all Bonds which shall then be payable by declaration or otherwise, shall either be paid by or for the account of the Authority, or provision satisfactory to the Trustee shall be made for such payment, and RESOLUTION - PAGE 36 all defaults under this Resolution or the Bonds shall be made good or secmed to the satisfaction of the Trustee or provision deemed by the Trustee to be adequate shall be made therefor, the Authority and the Trustee shall be restored, respectively, to their former positions and rights under this Resolution. No such restoration of the Authority and the Trustee to their former positions and rights shall extend to or affect any subsequent default under this Resolution or impair any right consequent thereon.
Section 9.5 Appointment of Receiver. The Trustee or the Registered Owners of not less than 25 percent of Bonds shall have the right if and to the extent pelmitted by law to apply in an appropriate proceeding for the appointment of a receiver of the Facilities.
Section 9.6 Proceedings Brought by Trustee.
A. If an Event of Default occms and is not cured, then and in every such case, the Trustee, by its agents and attorneys, may proceed, and upon written request of the Registered Owners of not less than 25 percent in principal amount of Bonds, shall proceed to protect and enforce its rights and the rights of the Registered Owners of the Bonds under this Resolution fOlihwith by a suit in equity or at law, whether for the specific performance of any covenant herein contained, or in aid of the execution of any power herein granted, or for an accounting against the Authority as if the Authority were the trustee of an express trust, or in the enforcement of any other legal or equitable right as the Trustee, being advised by counsel, shall deem most effectual to enforce any of its rights or to perform any of its duties under this Resolution.
B. All rights of action under this Resolution may be enforced by the Trustee without the possession of any of the Bonds or the production thereof on the trial or other proceedings, and any such suit or proceedings instituted by the Trustee shall be brought in its name.
C. The Registered Owners of not less than a majority in principal amount of Bonds may direct the time, method and place of conducting any proceeding for any remedy available to the Trustee, or exercising any trust or power conferred upon the Trustee, provided that the Trustee shall have the right to decline to follow any such direction if the Trustee shall be advised by counsel that the action or proceeding so directed may not lawfully be taken, or if the Trustee in good faith shall determine that the action or proceeding so directed would involve the Trustee in personal liability.
D. Upon commencing a suit in equity or upon other commencement of judicial proceedings by the Trustee to enforce any right under this Resolution, the Trustee shall be entitled to exercise any and all rights and powers conferred in this Resolution and provided to be exercised by the Trustee upon the occmrence of any Event of Default.
E. Regardless of the happening of an Event of Default, the Trustee shall have power to, but unless requested in writing by the Registered Owners of a majority in principal amount of the Bonds then Outstanding, and furnished with secmity and indemnity acceptable to it, shall be under no obligation to institute and maintain such
RESOLUTION - PAGE 37 suits and proceedings as it may be advised shall be necessary or expedient to prevent any impairment of the security under this Resolution by any acts which may be unlawful or in violation of this Resolution, and such suits and proceedings as the Trustee may be advised shall be necessary or expedient to preserve or protect its interest and the interests of the Registered Owners.
Section 9.7 Restriction on Action of Registered Owners.
A. Except as otherwise provided in Section 9.5, no Registered Owner of any Bond shall have any right to institute any suit, action or proceeding at law or in equity for the enforcement of any provision of this Resolution or the execution of any trust under this Resolution or for any remedy under this Resolution, unless such Registered Owner shall have previously given to the Trustee written notice of the happening of an Event of Default, as provided in this Aliicle IX, and the Registered Owners of at least 25 percent in principal amount of Bonds shall have filed a written request with the Trustee, and shall have offered it reasonable opportunity, either to exercise the powers granted in this Resolution or by the Act or by the laws of the State or to institute such action, suit or proceeding in its own name, and unless such Registered Owners shall have offered to the Trustee adequate security and indemnity against the costs, expenses and liabilities to be incurred therein or thereby, the Trustee shall have refused to comply with such request for a period of 60 days after receipt by it of such notice, request and offer of indemnity, it being understood and intended that no one or more Registered Owners of Bonds shall have any right in any manner whatever by his or their action to affect, disturb or prejUdice the pledge created by this Resolution, or to enforce any right under this Resolution, except in the manner herein provided; and that all proceedings at law or in equity to enforce any provision of this Resolution shall be instituted, had and maintained in the maimer provided in this Resolution and for the equal benefit of all Registered Owners of the Bonds Outstanding, subject only to the provisions of this Resolution.
B. Nothing in this Resolution or in the Bonds contained shall affect or impair the obligation of the Authority, which is absolute and unconditional, to pay at the respective dates of maturity and places therein expressed the principal of (and premium, if any) and interest on the Bonds to the respective Registered Owners thereof, or affect or impair the right of action, which is also absolute and unconditional, of any Registered Owner to enforce such payment of his Bond.
Section 9.8 Remedies Not Exclusive. No remedy by the terms of this Resolution conferred upon or reserved to the Trustee or the Registered Owners of the Bonds is intended to be exclusive of any other remedy, but each and every such remedy shall be cumulative and shall be in addition to every other remedy given under this Resolution or existing at law or in equity or by statute on or after the date of adoption of this Resolution.
Section 9.9 Effect of Waiver and Other Circumstances.
RESOLUTION - PAGE 38 A. No delay or omission of the Trustee or any Registered Owner to exercise any right or power arising upon the happening of an Event of Default shall impair any right or power or shall be construed to be a waiver of any such Event of Default or be an acquiescence therein; and every power and remedy given by this Aliicle IX to the Trustee or to the Registered Owners may be exercised from time to time and as often as may be deemed expedient by the Trustee or by the Registered Owners.
B. Prior to the declaration of maturity of the Bonds as provided in Section 9.2, the Registered Owners of not less than 66-2/3 percent in principal amount of Bonds at the time Outstanding, or their attorneys-in-fact duly authorized, may on behalf of the Registered Owners of all of the Bonds waive any past default under this Resolution and its consequences, except a default in the payment of interest on, principal of, or premium, if any, on any of the Bonds. No such waiver shall extend to any subsequent or other default or impair any right consequent thereon.
Section 9.10 Notice of Default. The Trustee shall promptly mail to the Registered Owners of Bonds then Outstanding written notice of the OCCUlTenceof any Event of Default of which it is deemed to have knowledge under Section 9.2D hereof provided that, except in the case of a default in the payment of principal installments of or interest on any of the Bonds, the Trustee may withhold such notice if, in its sole judgment, it determines that the withholding of such notice is in the best interests of the Bondholders.
ARTICLE X: EXECUTION
Section 10.1 Execution of the Bonds. Without unreasonable delay the Authority shall cause definitive Bonds to be prepared, executed and delivered. The Bonds shall be executed on behalf of the Authority by the manual or facsimile signature of the Chairman or Vice Chairnlan, shall be attested by the manual or facsimile signature of the Secretary, and shall have the seal of the Authority or a facsimile thereof impressed or imprinted thereon.
The Bonds shall then be delivered to the Trustee for authentication. The Bonds shall be numbered separately in the manner and with any additional designation as the Trustee deems necessary for purposes of identification.
In case any of the officers who shall have signed or attested any of the Bonds shall cease to be such officer or officers of the Authority before the Bonds so signed or attested shall have been authenticated or delivered by the Trustee, or issued by the Authority, such Bonds may nevertheless be authenticated, delivered and issued and, upon such authentication, delivery and issue, shall be as binding upon the Authority as though those who signed and attested the same had continued to be such officers of the Authority. Any Bond may also be signed and attested on behalf of the Authority by such persons as at the actual date of execution of such Bond shall be the proper officers of the Authority although at the original date of such Bond any such person shall not have been such officer of the Authority.
RESOLUTION - PAGE 39 Such of the Bonds as shall bear thereon a Certificate of Authentication in the form set forth in Exhibit A hereto, manually executed by an authorized officer of the Trustee, shall be valid or obligatory for any purpose or entitled to the benefits of this Resolution, and such Certificate of Authentication shall be conclusive evidence that the Bonds so authenticated have been duly executed, authenticated and delivered hereunder and are entitled to the benefits of this Resolution.
ARTICLE XI: MISCELLANEOUS
Section 11.1 Lost, Stolen, Mutilated or Destroyed Bonds.
A. If any Bond shall become mutilated, destroyed, lost or stolen, the affected Registered Owner shall be entitled to the issuance of a substitute Bond only as follows:
(1) in the case of a lost, stolen or destroyed Bond, the Registered Owner shall (a) provide notice of the loss, theft or destruction to the Authority and the Trustee within a reasonable time after the Registered Owner receives notice of the loss, theft or destruction, (b) request the issuance of a substitute Bond, (c) provide evidence, satisfactory to the Authority and the Trustee, of the ownership and the loss, theft or destruction of the affected Bond, and (d) file in the offices of the Authority and the Trustee a written affidavit specifically alleging on oath that said Registered Owner is the proper owner, payee or legal representative of such owner or payee of the Bond that has been lost, stolen or destroyed, giving the date the Bond was issued, the number, principal amount and series of such Bond, and stating that the Bond has been lost, stolen or destroyed, and has not been paid and has not been received by such Registered Owner;
(2) in the case of a mutilated Bond, the Registered Owner shall sUlTender the Bond to the Trustee for cancellation; and
(3) in all cases, the Registered Owner shall provide indemnity against any and all claims arising out of or otherwise related to the issuance of substitute Bonds pursuant to this Section 11.1 satisfactory to the Authority and the Trustee.
Upon compliance with the foregoing, a new Bond of like tenor and denomination, bearing the same number as the mutilated, destroyed, lost or stolen Bond, and with the word "DUPLICATE" stamped or printed plainly on its face, shall be executed by the Authority, authenticated by the Trustee and delivered to the Registered Owner, all at the expense of the Registered Owner to whom the substitute Bond is delivered. Notwithstanding the foregoing, the Trustee shall not be required to authenticate and deliver any substitute Bond for a Bond which has been called for redemption or which has matured or is about to mature and, in any such case, the principal or Redemption Price and interest then due or becoming due shall be paid by the Trustee in accordance with the terms of the mutilated, destroyed, lost or stolen Bond without substitution therefor.
B. Upon the issuance and authentication of any substitute Bond under the provisions of this Section 11.1, the Trustee shall enter upon the Bond Register a notation that the original Bond was cancelled and a substitute Bond was issued therefor. RESOLUTION - PAGE 40 C. Every substituted Bond issued pursuant to this Section 11.1 shall constitute an additional contractual obligation of the Authority and shall be entitled to all the benefits of this Resolution equally and proportionately with any and all other Bonds duly issued hereunder unless the Bond alleged to have been destroyed, lost or stolen shall be at any time enforceable by a bona fide purchaser for value without notice. In the event the Bond alleged to have been destroyed, lost or stolen shall be enforceable by anyone, the Authority may recover the substitute Bond from the Registered Owner to whom it was issued or fi-om anyone taking under the Registered Owner except a bona fide purchaser for value without notice.
D. All Bonds shall be held and owned upon the express condition that the foregoing provisions are exclusive with respect to the replacement or payment of mutilated, destroyed, lost or stolen Bonds, and shall preclude any and all other rights or remedies, notwithstanding any law or statute existing or hereafter enacted to the contrary with respect to the replacement or payment of negotiable instruments or of investment or other securities without their surrender.
Section 11.2 Transfer of Bonds. The Bonds shall be transferable by the Registered Owners thereof in person, or by their attorneys duly authorized in writing, upon sUlTender of the Bonds at the Principal Corporate Trust Office of the Trustee for cancellation and issuance of new Bonds registered in the name of the transferee, in exchange therefor.
Whenever any Bond shall be sUlTendered for transfer, the Authority shall execute by facsimile signatures and seal, and the Trustee shall authenticate, issue and deliver to the transferee in exchange therefor, a new fully registered Bond of authorized denomination, of the same maturity and interest rate, and for the aggregate principal amount of such Bond being surrendered. Bonds may be transferred only if endorsed in the manner provided thereon and surrendered to the Trustee. The Trustee shall require the payment by the Registered Owner requesting such transfer of any tax, fee or governmental charge required to be paid with respect to such transfer.
Notwithstanding the foregoing, the Trustee shall not be required to transfer any Bond after the 15th day of the month preceding any interest and/or principal payment date.
Section 11.3 Exchange of Bonds. Any Bond may be exchanged by the Registered Owners thereof in person, or by their attorneys duly authorized in writing, in accordance with their terms and upon their sUlTender to the Trustee at the Trustee's Principal Corporate Trust Office, for a new fully registered Bond of any authorized denomination, of an equal aggregate principal amount and of the same interest rate and maturity as such Bond being exchanged. The Trustee shall require the payment by the Registered Owner requesting such exchange of any tax, fee or governmental charge required to be paid with respect to such exchange.
Notwithstanding the foregoing, the Trustee shall not be required to transfer any Bond after the 15th day of the month preceding any interest and/or principal payment date.
RESOLUTION - PAGE 41 Section 11.4 Conditions for Sale of Bonds. The Series 2018 Bonds authorized to be issued herein are hereby sold to the Underwriter at an aggregate purchase price equal to the terms and conditions to be set forth in the Terms Certificate, and subject to the parameters set forth in Section 2.1(A) and (B) hereof. To evidence the acceptance of the Underwriter's offer to purchase the Series 2018 Bonds, provided the parameters set forth in Section 2.1(A) and (B) hereof are met, the Chainnan or Vice Chairman of the Board is hereby authorized to execute and deliver the Bond Purchase Contract in substantially the form presented at this meeting. In order to comply with subsection (b)(S) of SEC Rule ISc2-12, the Underwriter will provide in the Bond Purchase Contract that it is a condition to delivery of the Series 2018 Bonds that the Authority and the Trustee shall have executed and delivered the Continuing Disclosure Agreement. The form of Continuing Disclosure Agreement is hereby approved in all respects and the Chairman or Vice Chairman of the Board, the Executive Director, and the Secretary of the Authority are, and each of them is, hereby authorized to execute and deliver and the Secretary to attest the Continuing Disclosure Agreement in substantially the form presented to this meeting.
The Chairman or Vice Chairman of the Board, the Executive Director, and the Secretary of the Authority are, and each of them is, hereby authorized to do or perform all such acts as may be necessary or advisable to comply with the Bond Purchase Contract and the Continuing Disclosure Agreement and to carry the same into effect.
Section 11.5 Preliminary Official Statement Approved. The preliminary official statement with regard to the Series 2018 Bonds, in the form presented to the Board, is hereby approved and ratified, and has been deemed final as of its date within the meaning of the Rule. The Executive Director and the Secretary are authorized to make changes in the preliminary official statement necessary so that it does not contain an lmtrue statement of a material fact, or omit to state a material fact, necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. The Chaimlan or Vice Chairman of the Board, the Executive Director, and the Secretary are, and each of them is, hereby authorized to execute a certificate to said effect and to the effect that the preliminary official statement is final as of its date within the meaning of the Rule.
The Authority agrees to cooperate with the Underwriter to deliver or cause to be delivered, within seven business days from the date of the Bond Purchase Contract and in sufficient time to accompany any confirmation that requests payment from any customer of the Underwriter, copies of a final official statement in sufficient quantity to comply with the SEC Rule ISc2-12 and the rules of the Municipal Securities Rulemaking Board.
Section 11.6 [Reserved].
Section 11.7 Investment Agreement Authorization and Approval. In the event that the entering into an Investment Agreement is specifically recommended and deemed beneficial and appropriate by the Secretary of the Authority at any time in the future, the Authority hereby grants its authorization and approval of the execution and delivery of one or more Investment Agreements with respect to this Resolution. In such event, the
RESOLUTION - PAGE 42 Chairman, Vice Chairman or the Secretary of the Authority is hereby authorized and directed to accept the best bid received for the investment services, duties and responsibilities to be covered and provided under such Investment Agreement and this Resolution, and to execute and deliver such Investment Agreement on behalf of the Authority in such form as the Secretary may de'em necessary and appropriate.
Section 11.8 Severability. If anyone or more of the covenants or agreements provided in this Resolution to be performed on the part of the Authority shall be declared by any court of competent jurisdiction to be contrary to law, then such covenant or agreement shall be null and void and shall be deemed separable from the remaining covenants and agreements in this Resolution and shall in no way affect the validity of the other provisions of this Resolution or of the Bonds.
Section 11.9 Conflict with Facilities Lease. If any of the provisions of this Resolution conflict in any respect with the provisions of the Facilities Lease and cannot be reconciled, the provisions of this Resolution shall control over provisions in the Facilities Lease.
Section 11.10 Repealer. All resolutions or patis thereof in conflict herewith are, to the extent of such conflict, hereby repealed, and shall have no fmiher force or effect.
Section 11.11 Effective Date. This Resolution shall take effect immediately upon its adoption and approval.
RESOLUTION - PAGE 43 ADOPTED this 8th day of March, 2018.
IDAHO STATE BUILDING AUTHORITY
RESOLUTION - PAGE 44 * * * * * * * * * * * * * * * * * * * * * * * * * * CERTIFICATE
I, Wayne V Meuleman, the Secretary of the Board of Commissioners of the Idaho State Building Authority, hereby certify that the foregoing Resolution is a full, true and con-ect copy of a resolution duly adopted at a special meeting of said Board duly and regularly held in Boise, Idaho, on March 8, 2018, at 9:30 a.m., of which meeting all Commissioners had due notice and at which a majority thereof were present; and that at said meeting said Resolution was adopted by the following vote:
AYES: ~
NAYS: J2f
ABSENT: I
ABSTAIN: tP
I further certify that I have carefully compared the same with the original Resolution on file and of record in my office; that said Resolution is a full, true and correct copy of the original Resolution adopted at said meeting; and that said resolution has not been amended, modified or rescinded since the date of its adoption, and is now in full force and effect.
IN WITNESS WHEREOF, I have set my hand and affixed the official seal of said Authority on March 8, 2018.
ILDING AUTHORITY
RESOLUTION - PAGE 45 EXHIBIT A
FORM OF SERIES 2018 BONDS
UNITED STATES OF AMERICA STATE OF IDAHO
IDAHO STATE BUILDING AUTHORITY STATE BUILDING REVENUE BOND, SERIES 2018A (IDAHO STATE BOARD OF EDUCATION PROJECT) (FEDERALL Y TAXABLE)
INTEREST RATE MATURITY DATE DATED DATE CUSIPNO. % III I 118 451443
Registered ***CEDE & CO.*** Owner:
Principal Amolmt: *** ______DOLLARS***
The IDAHO STATE BUILDING AUTHORITY (the "Authority"), an independent public body corporate and politic ofthe State ofIdaho, hereby acknowledges itself to owe and for value received, promises to pay from the Debt Service Fund (the "Debt Service Fund"), established by Resolution No. 2018-003 adopted by the Board of Commissioners of the Authority on March 8, 2018 (the "Resolution"), to the Registered Owner or his registered assigns, on the Maturity Date specified above, the principal sum of DOLLARS ($ ) and to pay interest thereon from the aforesaid Debt Service Fund from the Dated Date, or the most recent date to which interest has been paid or duly provided for, at the rate per annum specified above, payable semiannually commencing on September 1, 2018, and on each March 1 and September 1 thereafter, to the Maturity Date specified above. Interest shall be calculated on the basis of a 360 day year consisting of twelve 30 day months. All capitalized terms used in this Bond and not defined herein shall have the same meanings set forth in the Resolution.
The principal of and interest on this Bond are payable in lawful money of the United States of America to the Registered Owner hereof, whose name and address shall appear on the registration books of the Authority (the "Bond Register") maintained by the Trustee, which initially shall be ZB, National Association dba Zions Bank, Boise, Idaho. Payment of each installment of interest shall be made to the Registered Owner hereof whose name appears on the Bond Register on the fifteenth day of the calendar month preceding the interest payment date, and shall be paid by check or draft of the Trustee mailed to such Registered Owner on the due date at the address appearing on the Bond Register, or at such other address as may be furnished in writing by such Registered Owner to the Trustee. Principal on this Bond shall be paid to the Registered Owner upon
A-I presentation and surrender of this Bond on or after the date of maturity at the Principal Corporate Trust Office of the Trustee.
This Bond and the series of which it is one shall not be or become an indebtedness or obligation of the State of Idaho, or of any department, board, commission, agency, political subdivision, body corporate and politic, or instrumentality of, municipality or county within the State of Idaho, nor shall such Bond constitute the giving or loaning of the credit of the State of Idaho, or of any department board, commission, agency, political subdivision, body corporate and politic, or instrumentality of or municipality or county within the State of Idaho, nor shall it be payable out of any funds other than those of the Authority pledged under the Resolution.
In accordance with Section 67-6418 of the Idaho State Building Authority Act (the "Act"), the State of Idaho pledges to and agrees with the holders of any notes or bonds issued under the Act that the State of Idaho will not limit or alter the rights vested in the Authority to fulfill the terms of any agreements made with the said holders thereof or in any way impair the rights and remedies of such holders until such notes and bonds, together with the interest thereon, with interest on any unpaid installments of interest, and all costs and expenses in connection with any action or proceeding by or on behalf of such holders, are fully met and discharged.
This Bond is one of a duly authorized issue of State Building Revenue Bonds, Series 2018 (Idaho State Board of Education Project) (the "Bonds") of like date, tenor and effect, except for variations required to state denominations, numbers, interest rates and dates of maturity, aggregating $ principal amount. The Bonds are issued as serial bonds, in fully registered form, in denominations of $5,000 each or integral multiples thereof, within a single maturity. The Bonds mature aImually on September 1, __ through September 1, __ . The Bonds are limited obligations of the Authority payable solely from Revenues deposited to the Debt Service Fund. For a more particular description of said Debt Service Fund, the Revenues to be deposited therein, and the nature and extent of the security afforded thereby, reference is made to the provisions of the Resolution. This Bond is not a general obligation of the Authority, and its full faith and credit are not pledged for payment of the principal hereof and interest hereon.
The Bonds constitute a prior lien and charge upon the Revenues equal to and superior to all other charges of any kind or nature.
This Bond and the issue of which it is one are issued by the Authority pursuant to and in strict compliance with the Constitution and laws of the State of Idaho, particularly chapter 64 of Title 67 of the Idaho Code, and the Resolution, for the purpose of providing the money with which to pay the Cost of Acquisition, Construction and Financing of the certain facilities known as the Idaho Cybercore Integration Center and the Idaho Collaborative Computing Center located in Idaho Falls, Idaho (collectively, the "Facilities").
A - 2 The Bonds maturing on and after September 1, 202_, are subject to optional redemption on September 1, 202_, and on any date thereafter in whole or part (with bonds selected for redemption based on a "Pro Rata Pass-Through Distributions of Principal" basis, as described below) at the principal amount thereof, plus interest accrued to the date of redemption.
In addition, the Bonds are subject to redemption at the option of the Authority as a whole or in part on any date with the maturities and interest rates to be selected by the Authority, at a redemption price described below (the "Make-Whole Redemption Price") with bonds selected for redemption based on a "Pro Rata Pass-Through Distributions of Principal" basis, as described below.
The Make-Whole Redemption Price is equal to the greater of (1) 100% of the principal amount of the Bonds to be redeemed; or (2) the sum of the present value of the remaining scheduled payments of principal and interest on the Bonds to be redeemed, not including any portion of those payments of interest accrued and unpaid as of the date of which the Bonds are to be redeemed, discounted to the date on which the Bonds are to be redeemed on a semi-annual basis, assuming a 360-day year consisting of twelve 30-day months, at the Treasury Rate plus 20 basis points (0.20%); plus, in each case, accrued interest on the BOllds to be redeemed to the date on which the Bonds are to be redeemed.
"Treasury Rate" means, with respect to any redemption date for a patiicular Bond, the rate per annum equal to the semi-annual equivalent yield to maturity of the Comparable Treasury Issue with respect thereto, computed as of the second business day immediately preceding that redemption date, assuming a price for the Comparable Treasury Issue (expressed as a percentage of its principal amount) equal to the Comparable Treasury Price with respect thereto for that redemption date.
"Comparable Treasury Issue" means, with respect to any redemption date for a particular Bond, the United States Treasury security selected by the Independent Investment Banker which has an actual maturity comparable to the remaining average life of the Bonds of such maturity to be redeemed, and that would be utilized in accordance with customary financial practice in pricing new issues of debt securities of comparable maturity to the remaining average life of such Bond to be redeemed.
"Comparable Treasury Price" means, with respect to any redemption date for a patiicular Bond, (A) the average of the applicable Reference Treasury Deal Quotations for the redemption date, after excluding the highest and lowest of such Reference Treasury Dealer Quotations, or (B) if the Independent Investment Banker for the Bonds obtains fewer than four such Reference Treasury Dealer Quotations, the average of all such Quotations.
"Independent Investment Banker" means one of the Reference Treasury Dealers as designated by the Authority.
"Reference Treasury Dealer" means each of four firms, as designated by the Authority, and their respective successors; provided, however, that if any of them ceases
A - 3 to be a "Primary Treasury Dealer" (defined as a primary U.S. Government securities dealer in the City of New York), the Authority will substitute another Primary Treasury Dealer.
"Reference Treasury Dealer Quotation" means, with respect to each Reference Treasury Dealer and any redemption date for the Bonds of a particular maturity, the average, as determined by the Independent Investment Banker and communicated to the Authority, of the bid and asked prices for the applicable Comparable Treasury Issue (expressed in each case as a percentage of its principal amount) quoted in writing to the Independent Investment Banker and communicated to the Trustee by such Reference Treasury Dealer at 3:30 p.m., New York City time, on the third Business Day preceding that redemption date.
"Business Day" means any day, other that a Saturday or Sunday, and other than a day on which the Trustee is required, or authorized or not prohibited, by law (including without limitation, executive orders) to close and is closed.
If less than all of the Bonds of a maturity and interest rate are called for prior redemption, the particular Bonds or portions thereof to be redeemed shall be selected on a "Pro Rata Pass-Through Distributions of Principal" basis in accordance with DTC procedures, provided that, so long as the Bonds are held in book-entry form, the selection for redemption of such Bonds shall be made in accordance with the operational arrangements of DTC then in effect that currently provide for adjustment of the principal by a factor provided by the Trustee pursuant to DTC operational arrangements. If the Trustee does not provide the necessary infOlmation and identify the redemption as on a Pro Rata Pass-Through Distributions of Principal basis or if DTC's operational arrangements no longer provide for selection on a pro rata basis, the Bonds will be selected for redemption in accordance with DTC procedures by lot. If the Bonds are no longer held by DTC, they shall be selected for redemption on a pro rata basis.
Notice of redemption of the Bonds or any portion thereof shall be mailed by first class mail, postage prepaid, not less than thirty (30) days nor more than sixty (60) days before the redemption date to the registered owner hereof, but failure to receive such notice shall not affect the sufficiency of such proceedings for redemption. If notice of redemption has been duly given as aforesaid and money for payment of the above-described redemption price is held by the Trustee, then the Bonds or such portions thereof shall, on the redemption date designated in such notice, become due and payable at the above described redemption price; and from and after the date so designated interest on the Bonds or such portions thereof so called for redemption shall cease to accrue and registered owners of the Bonds or such portions thereof shall have no rights in respect thereof except to receive payment of such redemption price thereof.
The Bonds maturing on September 1, 20_ shall be subject to mandatory redemption and retirement prior to maturity, in part, with Bonds selected for redemption based on a "Pro Rata Pass-Through Distributions of Principal" basis, as described above, on September 1 in the years 20_ to 20_, inclusive, at 100% of the principal amount
A-4 thereof plus accrued interest to the date of redemption, from deposits into the Debt Service Account in the amounts set forth below.
Mandatory Redemption Date: Mandatory September 1 Redemption Amount
The Authority has reserved the right to purchase Bonds on the open market at a price equal to or less than par. In the event that the Authority shall purchase Bonds at a price (exclusive of accrued interest) of less than the principal amount thereof, the Bonds so purchased shall be credited at the par amount thereof against the debt servIce requirement or, if term Bonds, to the sinking fund deposit next becoming due.
The Bonds are initially issued in the form of a separate single certificated fully registered Bond for each maturity, and registered in the name of Cede & Co., as nominee of The Depository Trust Company, New York, New York ("DTC").
Unless this Bond is presented by an authorized representative of DTC to the Authority or its agent for registration of transfer, exchange, or payment, and any certificate issued is registered in the name of Cede & Co. or in such other name as is requested by an authorized representative of DTC (and any payment is made to Cede & Co. or to such other entity as is requested by an authorized representative of DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the Registered Owner hereof, Cede & Co., has an interest herein.
The Authority and the Trustee may deem and treat the Registered Owner hereof as the absolute owner hereof for the purpose of receiving payments of principal hereof and interest due hereon and for all other purposes, and neither the Authority nor the Trustee shall be affected by any notice to the contrary.
The Authority has covenanted and agreed with the Registered Owners of the Bonds that it will keep and perform all of the covenants of this Bond and of the Resolution to be by it kept and performed. The Authority has fmiher bound itself to maintain the Facilities in good repair, working order and condition, to operate the same in an efficient manner and at a reasonable cost, and to fix, maintain and collect rents, fees and charges with respect to the leasing of the Facilities, sufficient in amount, for as long as any of the Bonds of this issue are Outstanding, to make available from Revenues, all amounts required to be paid into the Debt Service Fund in any year hereafter to pay the principal of, premium, if any, and interest on the Bonds.
The covenants contained herein and in the Resolution may be discharged by making provision, at any time, for the payment of the principal of, premium, if any, and interest on this Bond in the manner provided in the Resolution.
It is hereby certified and declared that all acts, conditions and things essential to the validity of this Bond and the Bonds of this issue do exist, have happened, and have A - 5 been done and that every requirement of the Constitution and statutes of the State of Idaho and the resolutions of the Authority affecting the issue thereof has been duly complied with; that the Revenues, to be derived from the operation of the Facilities, including any future improvements, additions or extensions thereto, have been pledged and will be set aside into the Debt Service Fund to be used for the payment of principal of, premium, if any, and interest on this Bond in the order of priority provided in the Resolution.
This Bond shall not be valid or become obligatory for any purpose or be entitled to any security or benefit under the Resolution until the Certificate of Authentication hereon shall have been manually signed by the Trustee.
(The remainder of this page is intentionally left: blank.)
A- 6 IN WITNESS WHEREOF, the Idaho State Building Authority has caused this Bond to be executed by the manual or Facsimile signature of the Chairman of the Board of Commissioners, attested by the manual or Facsimile signature of the Secretary, and the seal of the Authority to be reproduced hereon as of this __ day of ,2018.
IDAHO STATE BUILDING AUTHORITY
Chaimlan, Board of Commissioners
ATTEST:
Secretary
(SEAL)
A -7 CERTIFICATE OF AUTHENTICATION
Date of Authentication:
This Bond is one of the State Building Revenue Bonds, Series 2018 (Idaho State Board of Education Project), of the Idaho State Building Authority, dated as of __ _ _ , 2018, and described in the within-mentioned Resolution.
ZB, NATIONAL ASSOCIATION dba ZIONS BANK, as Trustee
By ______Authorized Officer
A - 8 ASSIGNMENT
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers unto: Name of Transferee: ------Address: ------Tax Identification N 0. ______the within Bond and hereby irrevocably constitutes and appoints ______to transfer said Bond on the books kept for registration thereof with full power of substitution in the premises. Dated: ______Registered Owner NOTE: The signature of this Assignment must correspond with the name of the Registered Owner as it appears upon the face of the within Bond in every particular, without alteration or enlargement or any change whatever.
SIGNATURE GUARANTEED:
NOTICE: The signature(s) should be guaranteed by an eligible guarantor institution, (banks, stoc;kbrokers, savings and loan associations and credit unions with membership in an approved signature medallion program), pursuant to S.E.C. Rule 17Ad-15.
A- 9 EXHIBITB
FORM OF TERMS CERTIFICATE
Idaho State Building Authority State Building Revenue Bonds, Series 2018A (Idaho State Board of Education Project) (Federally Taxable)
In connection with a Resolution of the Idaho State Building Authority (the "Authority") adopted on March 8, 2018 (the "2018 Resolution") authorizing the issuance and sale of the Authority's State Building Revenue Bonds, Series 2018A (Idaho State Board of Education Project) (Federally Taxable) (the "Bonds"), the undersigned hereby executes and delivers this Terms Certificate (as such tenn is defined in the Resolution) specifYing certain terms of the Bonds:
Principal amount: $ ______
Dated Date: Closing Date
Date of Delivery: Closing Date
Closing Date: ____ ,' 2018, or such other date agreed upon by the Underwriter and the Authority. Underwriter's Discount: $------Purchase Price: $ (the par amount thereof plus $_____ ofnet original issue premium (discount) less an underwriter's discount of $______
Principal Payment Schedule with interest rates: see attached
All-in True Interest Cost*: %
Final Maturity Date: ______
[Optional Redemption: The Series 2018 Bonds are subject to optional or mandatory redemption as follows:]
*True Interest Cost is the rate necessary to discount the debt service payments compounding semi-annually to the Purchase Price received by the Authority on the Closing Date (Par Amount plus Original Issue Bond Premium/(Discount) less Underwriter's Discount).
B-1 Sources and Uses of Bond Proceeds:
Sources: Par Amount $------Net Original Issue Premium (Discount) $.______Total $ Uses: ------Deposit to Construction Fund for Cost of Acquisition, Construction and Financing Costs $ ______Deposit to General Reserve Fund $ ______Deposit to Maintenance and Repair Fund $______Capitalized Interest to Debt Service Fund $______Underwriter's Discount $ Total $------______
Other terms: ------
DATED this _ day of ______, 2018
IDAHO STATE BUILDING AUTHORITY
By: ______Wayne Meuleman, Executive Director
WELLS FARGO BANK, NATIONAL ASSOCIATION
By: ______[NAME] [TITLE]
B-2 Principal Payment Schedule (to come)
B-3 EXHIBITC
FORM OF REQUISTION FOR PAYMENT
IDAHO STATE BUILDING AUTHORITY
REQUISITION FOR PAYMENT
Date: Requisition No. __
To:
Attention:
Account #______You are hereby requested to pay on behalf of the Idaho State Building Authority as follows:
Payee: Special Instructions (if any): Address:
Budget Item Description Invoice Date Amount Due
TOTAL $0.00
The undersigned certifies that payment requested is supported by appropriate documentation and hereby authorizes payment in the amount(s) stated.
Wayne Meuleman Executive Director
c - 1 APPENDIX C Facilities Lease
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FACILITIES LEASE
THIS FACILITIES LEASE, made as of the ______day of______, 2018 (the “Effective Date”), between the IDAHO STATE BUILDING AUTHORITY (the "Authority"), as lessor, and the STATE OF IDAHO (the "State"), acting by and through the IDAHO STATE BOARD OF EDUCATION (“SBOE”), as lessee.
RECITALS
WHEREAS, the Authority was created by the Idaho State Building Authority Act, Title 67, Chapter 64, Idaho Code, to finance, acquire, own, construct and operate facilities for the purposes set forth in the Act; and
WHEREAS, the Authority is empowered by the Act, among other powers, to acquire property; to enter into agreements with the State and any agency, board, department or commission thereof in furtherance of the purposes of the Act, including acquisition, development, maintenance, operation, and financing of any facility and to provide for the construction, reconstruction, improvement, alteration, or repair of any facility or part thereof, and to lease such facilities as provided by the Act; and
WHEREAS, in accordance with the provisions of Idaho Code, Section 67-6410(a), the Idaho Legislature, pursuant to Senate Concurrent Resolution No. 105, First Regular Session of the Sixty-fourth Legislature (the “Authorizing Legislation”), has authorized the State to enter into agreements with the Authority as may be reasonable and necessary to provide for the financing and development of certain research and educational facilities near the Idaho National Laboratory (“INL”) Research and Education Campus in Idaho Falls, Idaho, to be known as the Idaho Cybercore Integration Center and the Idaho Collaborative Computing Center; and
WHEREAS, concurrently herewith, the Authority has entered into a Ground Lease of certain real property located in Bonneville County, Idaho, described in Exhibit A hereof (the "Land"), which is or will be owned by the State; and
WHEREAS, the Authority and the State have entered a Development Agreement (the “Development Agreement”), whereby the Authority will undertake the financing and development of the Land by constructing certain improvements thereon as described in Exhibit B hereof (the (“Improvements” and together with the Land, collectively the “Facilities”); and
WHEREAS, the Facilities are hereby leased to the State pursuant to the terms and conditions set forth in this Facilities Lease and the State will enter into two facility sublease agreements (each a “Facility Sublease” and collectively, the “Facility Subleases”) to sublease the Facilities to Battelle Energy Alliance, LLC a limited liability company acting under a prime contract for management and operation of INL with the United States Department of Energy, or its successors or assigns as permitted under the Subleases (“BEA” or the “Sublessee”); and
WHEREAS, the Authority will finance the costs of the acquisition, design, development, construction and equipment of the Facilities and related costs by the issuance of bonds or other evidences of indebtedness as authorized by the Act, together with certain funds from BEA; and
FACILITIES LEASE – Page 1
WHEREAS, the State and the Authority acknowledge that there shall be no merger of the State's leasehold interest in the Facilities and its ownership interest in the real property described in Exhibit A; and
WHEREAS, the Authority will be responsible for the design and construction and funding of certain maintenance and repair costs of the Facilities pursuant to the terms of this Facilities Lease and the Development Agreement.
NOW, THEREFORE, in consideration of the mutual promises, conditions, and covenants set forth herein, the parties agree:
ARTICLE I FINDINGS AND DECLARATION
SECTION 1.1 Findings. The Authority has found and declared, in accordance with Section 67-6410(c), Idaho Code, that the Facilities will be of public use and will provide a public benefit to the people of the State of Idaho.
SECTION 1.2 Declaration. The parties acknowledge that the Recitals contained in this Facilities Lease are true to the best of their knowledge and belief and are incorporated into this Facilities Lease as if set forth in full. This Facilities Lease shall constitute the agreement of the Authority to provide the Facilities as required by Section 67-6410(b), Idaho Code.
ARTICLE II DEFINITIONS
The terms used herein shall have the following meanings:
A. "Act" shall mean Chapter 64, Title 67, Idaho Code, as it now exists and as it may hereafter be amended and supplemented.
B. "Additional Rent" shall mean that Additional Rent described in Section 6.1(2)(b) hereof.
C. "Administrative Costs" shall mean the Authority's expenses (including reasonable reserves for such expenses) for lease of any real property, assessments, allocable administration and general expenses of the Authority, expenses for maintenance and repairs, insurance premiums, arbitrage rebate expenses, utility charges, legal, financial, architectural and engineering expenses, amounts to satisfy any deficiencies in the General Reserve account under the Bond Resolution, fees and expenses of fiduciaries under the Bond Resolution, any bond insurance, guaranty and/or letter of credit fees, interest and finance charges, costs, fees and expenses arising out of or relating to the State’s or any sublessee’s use and occupancy of the Facilities, and any other expenses or contingencies to be paid or provided for by the Authority, all to the extent properly attributable to the Facilities and payable by the Authority. Administrative Costs shall not include any Cost of Acquisition, Construction and Financing or any provision for depreciation, amortization or similar charges or any expenses for maintenance and repairs, utility services or insurance required to be paid for or provided by the State pursuant to this Facilities Lease.
FACILITIES LEASE – Page 2
D. "Annual Rent" shall mean, with respect to the initial term of this Facilities Lease and each renewal term thereof, the Basic Rent and Additional Rent determined in accordance with Article VI hereof due and payable by the State to the Authority with respect to the Facilities for such lease term.
E. "Authority" shall mean the Idaho State Building Authority, an independent public body corporate and politic of the State, created by and existing under the Act.
F. "Basic Rent" shall mean an amount equal to the principal installments, including sinking fund deposits, and interest payable on the Bonds in the corresponding Fiscal Year of the Facilities Lease.
G. "Bonds" shall mean any bond or bonds, note or notes, or other evidences of indebtedness issued by the Authority for the purpose of financing the Cost of Acquisition, Construction and Financing and bonds or notes issued to refinance all or any part thereof and any bonds or notes issued to finance any additions, modifications or replacements of the Facilities from time to time hereafter.
H. "Bond Resolution" shall mean the resolution or resolutions of the Authority, as amended and supplemented, authorizing the issuance of Bonds.
I. "Code" shall mean the Internal Revenue Code of 1986, as amended, regulations thereunder and rulings and judicial decisions interpreting or construing the Code.
J. “Construction Contracts” shall mean those contracts the Authority shall enter into with third parties for the planning, design and construction of the Improvements and such additional contracts as may be reasonable and necessary for the complete development of the Facilities.
K. "Cost of Acquisition, Construction and Financing" shall mean any proper and reasonable cost, whether or not specifically mentioned herein, of purchasing real property for the uses contemplated by the Development Agreement, Ground Lease and this Facilities Lease; of developing, designing and constructing the Improvements and fixtures, machinery, apparatus and equipment therefore in accordance with the Development Agreement; of leasing the Land from the State; of engineering and architectural services, designs, plans, specifications and surveys; of planning, analysis, project management, administration, inspection and similar services in connection with the Facilities; all costs related to or arising out of the leasing of the Facilities back to the State under this Facilities Lease and the State's use in connection therewith; of any indemnity and surety bonds and insurance premiums; of allocable administrative and general expenses of the Authority; of allocable portions of reasonable inspection expenses, legal fees, audits, fees and expenses of any trustees, depositories and paying agents, financial advisors, and underwriters; of issuance of the Bonds, interest on and other financing charges, and fees and expenses of other advisors and consultants necessary or appropriate in connection therewith; of the payment of any Bonds of the Authority (including any interest and redemption premiums) issued to temporarily finance the payment of any item or items of cost of the Improvements; of expenses necessary or incidental to determining the feasibility or practicability of the Improvements; and of all other reasonable expenses not specified herein as may be necessary or incidental to the development, design, construction and acquisition of the Land and the Improvements, the financing thereof, and the placing of the same in use and operation.
FACILITIES LEASE – Page 3
L. "Development Agreement" shall mean an agreement entered into between the Authority and the State pertaining to the Facilities.
M. "Facilities" shall mean the Authority's interest in the Land and all buildings, equipment, fixtures, improvements, easements and appurtenances, together with the Improvements to be designed, constructed and installed by or for the Authority pursuant to this Facilities Lease and the Development Agreement.
N. "Facilities Lease" shall mean this Facilities Lease, including any amendments or supplements thereto.
O. "Fiscal Year" shall mean the twelve-month period of each year beginning July 1 and ending on the following June 30.
P. "Ground Lease" shall mean the Ground Lease entered into concurrently herewith between the Authority and the State containing the terms and conditions of the lease of the Land to the Authority.
Q. "Improvements" shall mean all work, materials, equipment and other improvements described in Exhibit B hereto.
R. "Land" shall mean the land and existing improvements thereon as more particularly described on Exhibit A hereto.
S. “Trustee” shall mean ZB, National Association dba Zions Bank, or its successor in function, which shall act as registrar, authenticating agent, paying agent and transfer agent with respect to the Bonds.
ARTICLE III LEASE OF PROJECT; TERM OF LEASE
SECTION 3.1. Lease of Facilities. The Authority hereby leases the Facilities to the State in accordance with the Authorizing Legislation and in furtherance of the public benefit, and the State hereby leases the Facilities from the Authority on the terms and conditions set forth herein.
SECTION 3.2. Term of Lease. This Facilities Lease shall be in full force and effect from the Effective Date hereof. The initial term of the Facilities Lease shall extend from the Effective Date through June 30, 2018 (the “Initial Term”). On or before May 1, 2018, of the Initial Term, and on or before October 1 of each renewal term, beginning July 1 through the following June 30 (a “Renewal Term”), the State may, in its sole discretion, renew this Facilities Lease for the next subsequent Renewal Term by giving notice of intent to renew to the Authority and the Trustee (the “Notice of Intent to Renew”). After the Initial Term, each Notice of Intent to Renew shall include the State’s confirmation that it will seek an appropriation of funds sufficient to pay Annual Rent for the next subsequent Renewal Term. These provisions are subject to the limitations of Section 14.1 hereof, and in the event that the State fails to appropriate funds sufficient to pay Annual Rent for the next subsequent Renewal Term, an Event of Nonrenewal (defined below) shall be deemed to have occurred.
FACILITIES LEASE – Page 4
In the event the Authority shall not have received the Notice of Intent to Renew by May 1, 2018, of the Initial Term, the Authority will promptly notify the State of such non-receipt, and the State shall then have until June 1, 2018, to deliver to the Authority its Notice of Intent to Renew.
After the Initial Term, in the event the Authority shall not have received the Notice of Intent to Renew by October 1 of any year preceding the next Renewal Term, the Authority will promptly notify the State of such non-receipt, and the State shall then have until December 1 to deliver to the Authority its Notice of Intent to Renew.
If the State does not deliver the Notice of Intent to Renew by June 1, 2018, of the Initial Term, or by December 1 of any year preceding the next Renewal Term as provided above, or if the State shall at any time notify the Authority and the Trustee that the State has elected to not renew this Facilities Lease for the next subsequent Renewal Term, an “Event of Nonrenewal” shall be deemed to have occurred. Upon an Event of Nonrenewal, this Facilities Lease shall expire on June 30 of the Initial Term or the then current Renewal Term. This Facilities Lease shall terminate automatically upon termination or expiration of the Ground Lease.
ARTICLE IV ACQUISITION, DEVELOPMENT AND FINANCING
SECTION 4.1. Acquisition and Development of Facilities. The Authority agrees to diligently undertake development of the Facilities, including the design and construction of Improvements and to enter into such agreements as may be necessary or appropriate for the management of the project and for design, construction, and installation of materials, equipment and other elements of the Improvements, subject to the terms of the Development Agreement.
SECTION 4.2. Financing of Improvements by the Authority. The Authority agrees to finance the Cost of Acquisition, Construction and Financing of the Facilities by the issuance of Bonds as authorized by the Act, together with certain funds from BEA. The Authority may from time to time issue additional bonds, with the consent of the State to finance additional costs. The Authority may refinance or refund such Bonds as the Authority may deem appropriate; provided the Authority shall not refinance or refund such Bonds without the written consent of the State if to do so would increase the Basic Rent due hereunder. The Authority shall give written notice to the State of its intent to refinance or refund such Bonds.
SECTION 4.3. Bond Anticipation Notes. The Authority may issue bond anticipation notes payable from proceeds of Bonds with the prior written consent of the State.
ARTICLE V USE OF FACILITIES
SECTION 5.1. Use of Facilities. The State agrees that it shall use its best efforts to ensure the Facilities shall be used in accordance with the Authorizing Legislation.
SECTION 5.2. Sublease by State. The Authority hereby acknowledges that the Facilities will be subleased to and used by BEA, and its successors and assigns, in accordance with the Facility Subleases entered into between the State and BEA and hereby
FACILITIES LEASE – Page 5
consents thereto. With the written consent of the Authority, which shall not be unreasonably withheld, the State may sublease or enter into agreements with others for the use, operation and/or maintenance of the Facilities or for the use or occupancy of all or portions of the Facilities.
ARTICLE VI RENT
SECTION 6.1. Payment of Annual Rent. In consideration of the lease of the Facilities, the State shall pay to the Authority, in advance and without any set off or deduction whatsoever, the following Annual Rent:
(1) From the Effective Date hereof through June 30, 2020, the State shall pay no Annual Rent.
(2) For the Renewal Term of this Facilities Lease commencing July 1, 2020 and for each annual Renewal Term thereafter, the State shall, not later than thirty (30) calendar days following the commencement of such renewal terms, pay in advance:
(a) As and for Basic Rent, an amount not to exceed $6,000,000 for such term which shall equal the principal installments, including sinking fund deposits, and interest payable in the corresponding Fiscal Year in accordance with the Bond Resolution with respect to the Bonds; and
(b) As and for Additional Rent, (i) the amount estimated by the Authority to be sufficient to provide the Authority with adequate monies to pay all Administrative Costs attributable to the Facilities for the applicable term of this Facilities Lease, plus (ii) other sums payable with respect to the Bonds and the amount, if any, of deposits to any operating fund, and any other reserve or expense accounts required to meet all terms and conditions of the Bond Resolution. The Authority will provide to the State an estimate of Administrative Costs which shall accompany its statement for Additional Rent.
(3) Except as set forth in paragraph (5) below, Annual Rent payable for any Renewal Term shall not be deferred or abated because of delays in completion of the construction of the Improvements.
(4) Annual Rent may be prepaid in whole or part at any time. Any installment of Annual Rent which is not paid by the State on or before the due date thereof shall, from and after said due date, bear interest until paid at the highest rate per annum borne by any of the Bonds then outstanding; time being of the absolute essence of this obligation.
(5) The Authority and the State hereby agree that Basic Rent in any Facilities Lease term shall be reduced by any amounts on deposit with the Authority legally available for and allocated by the Authority to the payment of principal and interest on the Bonds, including, without limitation, rent received from any sublease, capitalized interest from proceeds of the Bonds and funds on deposit in the Debt Service Fund or the General Reserve Fund established under the Bond Resolution, or any monetary damages received by the Authority under any Construction Contracts as liquidated damages as a result of delays in completion of construction. Basic Rent shall be increased or decreased as appropriate to
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reflect the issuance by the Authority of any additional Bonds issued to refinance the Bonds, in whole or in part, or any additional Bonds issued for the purposes set forth in Section 9.1 hereof or issued to finance additions, modification or replacement of the Facilities or any part thereof.
(6) Annual Rents shall be payable in lawful money of the United States of America, which shall be legal tender for public and private debts under the laws of the United States at the time of payment, provided that, upon prior written approval of the Authority, the State may transfer funds through electronic funds transfer. Payment shall be made at the office of the Authority or such other place or places as may be designated in writing by the Authority.
(7) The State and the Authority have agreed and determined that such Annual Rent represents the fair market rental value of the Facilities. In making such determination, consideration has been given to the Cost of Acquisition, Construction and Financing of the Facilities, and the costs of issuing Bonds, and the Administrative Costs of the Facilities, and the uses and purposes of the Facilities which will accrue to the State and the Authority and the general public in accordance with the Authorizing Legislation and ownership by the Authority.
(8) Upon an Event of Nonrenewal, all obligations of the State under this Facilities Lease shall cease effective as of June 30 of the Initial Term or the then current Renewal Term. It is hereby acknowledged and agreed that the State shall have no obligation to pay Annual Rent or any other obligations hereunder for the next subsequent Renewal Term following an Event of Nonrenewal.
SECTION 6.2. Application of Rent. The Authority covenants to use and apply Annual Rent, and other monies received by the Authority pursuant to Section 6.1(5), solely to payment of debt service on the Bonds, Administrative Costs, deposits to required reserve accounts and other appropriate purposes pertaining to the Facilities and/or the Bonds pursuant to the Bond Resolution and this Facilities Lease.
ARTICLE VII OPERATION AND MAINTENANCE OF THE FACILITIES
Section 7.1 Operation, Repairs and Maintenance. The State shall keep and maintain, or shall cause the Sublessee to keep and maintain, the Facilities and all equipment, fixtures, additions and improvements thereof, in good order and condition, and shall make or cause to be made all ordinary and necessary repairs, renewals, and replacements with respect to the Facilities, throughout the Initial Term of this Facilities Lease and each Renewal Term thereof, at the State's (or Sublessee’s) cost and expense. To the extent that the costs of required repairs, renewals or replacements are covered by (i) reserve funds maintained by the Authority, or (ii) insurance under policies maintained by Authority, the State shall be entitled to the benefit of such funds to the extent of the actual costs incurred by the State. Subject to Section 10.1, in the event the Facilities or any part thereof are damaged or destroyed by an uninsured or partially uninsured casualty of any kind, the State shall either replace or rebuild the Facilities of equal value, or pay such sums to the Authority as may be required to fully pay and discharge the Bonds.
Section 7.2 Maintenance and Repair Fund. The Authority shall establish a fund (the “Maintenance and Repair Fund”) from proceeds of the Bonds to be used for the purpose of funding any maintenance, repairs, or improvements the State deems necessary, in its sole
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discretion, for the Facilities. Upon request by the State to the Authority, the Authority shall make a request to the Trustee for the payment or reimbursement of the actual costs incurred by the State for maintenance or repair of the Facilities from the Maintenance and Repair Fund. Upon termination of this Facilities Lease pursuant to Section 8 of the Ground Lease, the Authority shall apply any funds remaining in the Maintenance and Repair Fund to debt service on the Bonds and shall release any remaining balance to the State.
Section 7.3 Utilities. The State shall pay or cause Sublessee to pay all costs, expenses, and charges for steam, gas, electricity, fuel, water, garbage, sewer, and other services and utilities furnished to the Facilities during the term of this Facilities Lease and each Renewal Term.
Section 7.4 Insurance. The State shall cause the Sublessee to maintain at its sole cost and expense the following minimum insurance coverage from the Effective Date of the Facility Subleases throughout the term of the Facility Subleases and any extensions or renewals thereof:
1. Commercial general liability insurance in the minimum amount of five million dollars ($5,000,000) per occurrence, and with an aggregate limit of not less than five million dollars ($5,000,000);
2. Workers compensation insurance in accordance with the laws of the State of Idaho.
3. Business Auto Liability Insurance in the minimum amount of not less than $1,000,000 per individual and $3,000,000 per occurrence.
All insurance required hereunder shall be maintained in full force and effect through a company or companies reasonably satisfactory to the State. All insurance required above shall name the State of Idaho, the Idaho State Board of Education and Idaho State Building Authority, and each of their respective officers, employees, agents and assigns (all of whom are collectively referred to as the “State Insureds”) as additional insureds, and shall contain a clause requiring written notice to the State sixty (60) days in advance of the cancellation, non- renewal, or material modification of said insurance as evidenced by return receipt of United States certified mail; provided, however, that the Sublessee’s insurance shall name State Insureds as additional insureds solely with regard to claims arising out of the Sublessee’s use of the Facilities and nothing in this paragraph shall be construed to extend the Sublessee’s insurance policies to any of the State Insureds with regard to any claims that arise out of or result from the sole action/inactions of the State Insureds. Coverage on a claims made basis shall survive for a period of not less than three (3) years after termination of the Facility Subleases. Certificates of insurance evidencing compliance with this provision shall be supplied to State contemporaneously with substantial completion of construction of the Improvements, a copy of which shall be provided to the Authority.
If insurance is not provided through the Sublessee as required above, the State shall maintain or cause to be maintained with responsible insurers or under an established program of self- insurance the following insurance with respect to the Facilities and/or the use of the Facilities at all times from the Effective Date of the Facility Subleases through the expiration or termination of this Facilities Lease:
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(a) Self-Insurance or commercial general liability insurance (CGL) and, if necessary, commercial umbrella insurance and property damage liability as shall afford protection to the Authority in an amount of not less than $500,000 for each occurrence or such greater amount provided under the Idaho Tort Claims Act. The insurance shall cover liability arising from premises, operations, independent contractors, product- completed operations, personal injury and advertising injury, and liability assumed under an insured contract. Such insurance shall protect the Authority to the same extent as the State is protected from claims, demands, causes of actions, penalties, including costs and attorney fees, arising out of the use or occupancy of the Facilities.
(b) Workmen's Compensation Insurance in the amount and in the form which the State is required by law to maintain.
(c) Any other insurance agreed to in writing by the State and the Authority.
(d) Any other insurance required by the terms and conditions of the Bonds.
All insurance procured and any self-insurance plan maintained by the State shall comply with the following requirements:
(a) Each policy or policies of insurance shall be written by insurance companies authorized to do business in the State and furnished through an insurance carrier or carriers satisfactory to the Authority or through a self-insurance plan satisfactory to the Authority and an insurance consultant pursuant to the Bond Resolution.
(b) True, correct and complete copies of all insurance policies or self- insurance plan and all endorsements, changes, amendments and supplemental provisions thereto shall be continually maintained by the State and shall be available for inspection and copying by the Authority at all times during the State's regular office hours.
(c) All such insurance, except for insurance provided by the Sublessee, shall provide that coverage shall not be canceled or amended except upon sixty (60) calendar day prior written notice to the Authority. The Authority shall be furnished current certificates upon the commencement of the Initial Term and each Renewal Term of this Facilities Lease showing that all such insurance fully complies with the terms of this Facilities Lease, and current certificates shall be furnished at any other time or times as may be reasonably requested.
(d) All policies of insurance obtained by and any self-insurance plan maintained by the State shall include provisions that coverage shall not be affected, reduced or waived by any inaccurate or misleading statement or information furnished by the State in obtaining such insurance nor shall insurance under such policies furnished to the Authority be reduced by any actual or alleged breach of warranties made by the State in obtaining such insurance. All liability insurance furnished by the State shall include insurance covering the obligations of the State under Article VIII of this Facilities Lease.
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(e) All insurance provided to the Authority by the State pursuant to this Facilities Lease shall name the Authority as an additional insured and contain a loss payable clause providing for payment of proceeds to the Authority and the Trustee to the extent of their interest therein, and the Annual Rent otherwise payable by the State with respect to the Facilities shall be reduced by the amount of business interruption or loss of rents insurance payments, if any, made to the Authority and/or the Trustee.
The Authority shall provide and maintain or cause to be provided and maintained “All Risk” builders risk insurance as required by the Development Agreement through the date of the substantial completion of the Facilities. After the substantial completion of the Facilities, the State shall provide and maintain property and casualty insurance on the Facilities, together with rental interruption insurance, insuring the Facilities against damage or loss resulting from fire or other casualty. Such property and casualty insurance acquired by State shall (i) be acquired on an agreed amount basis, and (ii) provide for 100% replacement cost value.
The Authority and the State hereby release each other from any and all liability or responsibility to the other as to any person claiming through or under either by way of subrogation or otherwise for any loss or damage to property caused by any casualty insured by the above-described coverages, even if the loss is caused by the fault or negligence of the other party or by any party for whom the other party is responsible.
ARTICLE VIII COVENANT TO ENFORCE CONTRACTS
SECTION 8.1. State's Covenant. The State hereby agrees to exercise diligence in enforcement of the Facility Subleases for the benefit of the Authority and to take other action necessary and appropriate to protect the interests of the Authority under this Facilities Lease and the Facility Subleases.
SECTION 8.2. Authority's Covenant. The Authority hereby agrees to exercise diligence in enforcement of its Construction Contracts, including without limitation enforcement of warranties and liquidated damages for construction delays, for the benefit of the State.
ARTICLE IX ALTERATIONS, ADDITIONS AND IMPROVEMENTS
SECTION 9.1. Alterations, Additions, and Improvements. The State shall have the right, at any time and from time to time during the term of this Facilities Lease, at the State's (or the Sublessee’s) cost and expense, to make or permit such repairs, replacements, alterations, additions, expansions and improvements, structural or otherwise, to the Facilities, as the State shall deem necessary or desirable in connection with its use of the Facilities.
Notwithstanding the foregoing, the State shall not make any alterations, additions, expansions or improvements which are structural or will lessen the market value of the Facilities without the prior written consent of the Authority which shall not be unreasonably withheld. Once commenced, all alterations, additions, expansions and improvements shall be diligently pursued to completion. All such alterations, additions and improvements shall be of such character as to not reduce or otherwise adversely affect the value of the Facilities or the rental value thereof and all the costs thereof shall be promptly paid or discharged so that the
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Facilities shall at all times be free of liens or claims for labor and materials supplied thereto. All, alterations, additions, fixtures and permanent improvements to the Facilities shall be and become a part of the Facilities and shall become the property of the Authority. Detachable fixtures and non-structural alterations may be removed by the State (or the Sublessee’s), provided that the State shall restore the Facilities to their condition prior to installation, reasonable wear and tear excepted. In addition, structural alterations or additions to the Facilities made at the expense of the State, or the Sublessee, may be removed with prior written approval of the Authority which shall not be unreasonably withheld, conditioned, or delayed.
ARTICLE X DAMAGE, DESTRUCTION, AND CONDEMNATION
SECTION 10.1. Damage, Destruction and Condemnation. In the event of damage, destruction, or condemnation of the Facilities, or any part thereof, the net proceeds of any insurance or condemnation awards with respect to the Facilities and, to the extent necessary, the proceeds of any additional Bonds which may be issued by the Authority for such purpose pursuant to the terms and conditions of the Bonds, shall be used and applied by the Authority in accordance with the terms of the Bonds to repair, restore, rebuild, or replace the Facilities; provided, however, that, in the event of total or substantial destruction or condemnation of the Facilities or in the event that the aforesaid insurance proceeds, condemnation awards, and proceeds of Bonds are not sufficient to repair, restore, rebuild, or replace the Facilities, the Authority may elect not to repair, restore, rebuild, or replace the Facilities, in which case the net proceeds of all insurance and condemnation awards, together with all other available funds, shall be applied in accordance with the terms of the Bond Resolution. Any such repair, restoration, rebuilding, or replacement of the Facilities may be in accordance with such different design, plans, and specifications approved by the State as will or may provide facilities of the same or different nature or use, so long as any such change therein or thereof shall not reduce or otherwise adversely affect the value of the Facilities or the rental value thereof. In consideration of the Authority proceeding with the repair, restoration, rebuilding, or replacement of the Facilities as above provided, the State shall continue to pay the Annual Rent due under this Facilities Lease, except to the extent the Authority actually receives proceeds of business interruption or loss of rents insurance described in Section 7.4 hereof.
ARTICLE XI PARTICULAR COVENANTS
SECTION 11.1. Compliance with Laws and Regulations. The State shall, at its own cost and expense, promptly comply with, or cause to be complied with, all laws and ordinances, rules, regulations and other governmental requirements, whether or not the same require structural repairs or alterations, which may be applicable to the State, the Facilities or the use or manner of use of the Facilities. The State shall also observe and comply with the requirements of all policies and arrangements of insurance at any time in force with respect to the Facilities.
SECTION 11.2. Covenant Against Waste. The State covenants not to do or suffer or permit to exist any Hazardous Substances, contamination, waste, damage, disfigurement or injury to, or public or private nuisance, in or upon the Facilities in violation of
FACILITIES LEASE – Page 11
any State or federal laws or regulations and agrees to pay all costs, changes, penalties or any other expense reasonably incurred or to be incurred to remove, restore or reclaim the Facilities, provided, however that during the term of any sublease, and any renewal or extension thereof, the State shall cause the Sublessee to be responsible for tracking, recording, and proper use and disposal of any and all Hazardous Substances that are received, stored, handled or disposed of on or from the Facilities, including spills or accidents involving hazardous substances within the Facilities, and both planned and unplanned releases to the environment, including without limitation any Environmental Law violations. The State and the Sublessee are responsible for fully remediating, responding to and resolving any Environmental Law violations which may occur during the term of the sublease. As used herein, the term "environmental laws" shall mean any laws governing Hazardous Substances or their use, storage, transportation, release, generation, handling, treatment or disposal, pollution, contamination or protection of the environment (including natural resources) and/or protection of human health and safety. As used herein, the term "Hazardous Substances" or ‘Hazardous Materials” shall mean, collectively, (a) any petroleum or petroleum product or waste, explosive, radioactive material, asbestos, asbestos containing material, urea formaldehyde foam insulation, polychlorinated biphenyls and lead (including, without limitation, lead-based paint); (b) any substance, material, product, derivative, compound, mixture, mineral, chemical, waste, medical waste or gas, in each case whether naturally occurring, human-made or the by-product of any process; (i) that is now or hereafter becomes defined as, listed as, or included within the definition of a “hazardous substance,” “hazardous waste,” “hazardous material,” “toxic chemical,” “toxic substance,” “hazardous chemical,” “extremely hazardous substance,” “pollutant,” “contaminant,” or any other words of similar meaning under any Environmental Law or any other law relating to human health, safety, natural resources or the environment; (ii) exposure to which or the presence, use, generation, handling, treatment, release, transport or storage of which is now or hereafter prohibited, limited, restricted or regulated under any applicable Environmental Law or by any governmental or regulatory authority having jurisdiction over the land; and (c) any other chemical, material, gas, substance, or waste, exposure to which, or the presence of which, is now or hereafter prohibited, limited, restricted or regulated by any governmental or regulatory authority.
SECTION 11.3. Right of Inspection. The State covenants and agrees to permit the Authority and the authorized agents and representatives of the Authority to enter the Facilities at reasonable times during usual business hours for the purpose of inspecting the same, subject to reasonable security requirements and procedures of the State and any sublessee occupying the Facilities.
SECTION 11.4. Condition of Facilities. The Authority makes no representation regarding the condition of the Facilities or land underlying or adjacent thereto and the Authority shall not be liable for any latent or patent defects therein.
SECTION 11.5. Assignment. The State shall not assign or mortgage this Facilities Lease or any right hereunder or interest herein without prior written consent of the Authority, which consent shall not be unreasonably withheld.
SECTION 11.6. Covenant of Quiet Enjoyment. The Authority covenants that it has full right and lawful authority to enter into this Facilities Lease and that, so long as the State shall pay the Annual Rent and shall duly observe all of its covenants and agreements in this Facilities Lease, the State shall have, hold, and enjoy, during the Initial Term of this
FACILITIES LEASE – Page 12
Facilities Lease and each Renewal Term thereof, peaceful, quiet, and undisputed possession of the Facilities. No defect, encumbrance, cloud, restriction or other matter affecting title to the land on which the Facilities shall be developed existing at the time the land is acquired or leased to the Authority shall constitute a breach of this Facilities Lease by the Authority.
ARTICLE XII DEFAULT
SECTION 12.1. Events of Default. The following shall be events of default under this Facilities Lease:
(a) Failure by the State to pay Annual Rent as the same shall become due, or
(b) Failure by the State or anyone contracting with the State to observe and perform any other covenant, condition, or agreement to be observed or performed under this Facilities Lease for a period of ninety (90) calendar days after written notice, specifying the nature of such failure and requesting that it be remedied, given to the State by the Authority or Trustee, unless the Authority or Trustee shall agree in writing to an extension of such time prior to its expiration.
SECTION 12.2. Remedies. Whenever any event of default referred to in Section 12.1 hereof shall occur, the Authority may take any one or more of the following remedial steps:
(a) Declare all Annual Rent payable for the applicable lease term then in effect to be immediately due and payable, together with applicable interest thereon.
(b) Re-enter and take possession of the Facilities, exclude the State from possession thereof, and terminate this Facilities Lease.
(c) Take such action at law or in equity as may appear necessary or desirable to collect all sums due and thereafter to become due, or to enforce performance and observation of any obligation, agreement, or covenant of the State under this Facilities Lease.
SECTION 12.3. Remedies for Default by the Authority or its Contracting Parties. Whenever any event of default by the Authority or any parties contracting with the Authority shall occur, including the event of failure by such parties to commence any repair required, for which it is obligated under this Facilities Lease, within a reasonable time after receipt of written notice regarding the performance deficiency, but in no event later than thirty (30) days from the receipt of written notification, the State (or the Sublessee) shall have the right to secure said repair at its discretion. The State may seek reimbursement from the Authority by submitting an itemized invoice and justification for reimbursement consistent with the provisions of this Facilities Lease.
SECTION 12.4. Remedies Not Exclusive. No remedy herein conferred upon or reserved to the Authority is intended to be exclusive of any other available remedy or remedies, but each and every such remedy shall be cumulative and shall be in addition to every other remedy given under this Facilities Lease, or now or hereafter existing at law or in
FACILITIES LEASE – Page 13
equity. No delay or omission to exercise any right or power accruing upon any default shall impair any such right or power or shall be construed to be a waiver thereof, but any such right and power may be exercised from time to time and as often as may be deemed expedient. In the exercise of any remedy reserved to the Authority in this Article, it shall not be necessary to give any notice, other than such notice as may be herein expressly required.
ARTICLE XIII SURRENDER OF FACILITIES
SECTION 13.1. Surrender of Facilities. In the event that the State elects not to renew or extend the term of this Facilities Lease or this Facilities Lease is otherwise terminated, the State shall quit and surrender the Facilities to the Authority in the same condition in which it existed at the date the construction of all Facilities was completed by the Authority, subject to any alterations, additions, expansions or improvements made in accordance with Section 9.1 hereof, ordinary wear and tear excepted, at the end of the Initial Term or the then current Renewal Term.
ARTICLE XIV LIMITATION ON OBLIGATIONS
SECTION 14.1. Obligations of the Authority and the State Limited to Certain Resources. Notwithstanding any other provisions of this Facilities Lease, no obligation assumed by or imposed upon the Authority by this Facilities Lease shall require the performance of any act by the Authority except to the extent, if any, that the cost and expense of such performance may be paid from the proceeds of the Bonds issued by the Authority or from other funds legally available to the Authority to meet the cost and expense of such performance, and no obligation assumed by or imposed upon the State by this Facilities Lease shall require the performance of any act by the State, including, but not limited to, the payment of Annual Rent, except to the extent that funds may be available for such performance or payment from State general appropriations or other funds legally available therefor. This Facilities Lease shall not be construed as obligating the Legislature of the State of Idaho to make future appropriations for the payment of Annual Rent or the performance of any other obligations under this Facilities Lease for the Initial Term or for any Renewal Term hereof. In the event that appropriated funds are not legally available for payment of Annual Rent or other obligations hereunder for any term, then this Facilities Lease shall be terminated. The liability of the State for payment of Annual Rent as it becomes due shall be in consideration of the right of the State, whether or not exercised, to occupy and/or use the Facilities for the then-current lease term.
ARTICLE XV MISCELLANEOUS
SECTION 15.1. Pledge of Rent, Proceeds, and Facilities Lease. It is expressly understood and agreed by the parties hereto that the Authority has the right to pledge and assign Annual Rent, all proceeds receivable by the Authority from any sale of the Facilities, and its rights and interest under this Facilities Lease to secure: (i) the payment of the principal of and the interest on and redemption premium, if any, on the Bonds; and (ii) other obligations of the Authority under the terms and conditions of the Bonds.
FACILITIES LEASE – Page 14
SECTION 15.2. Notices. All notices or other communications hereunder shall be sufficiently given and shall be deemed given on the second business day following the day on which the same are mailed by certified mail, postage prepaid, addressed as follows:
(a) If to the State, to the attention of the Executive Director, Idaho State Board of Education, P.O. Box 83720, Boise, Idaho 83720-0037;
(b) If to the Authority, to the attention of Executive Director, Idaho State Building Authority, 950 Bannock Street, Suite 490, Boise, Idaho 83702.
The State or the Authority may, by notice given hereunder, designate any further or different addresses to which subsequent notices or other communications shall be sent.
SECTION 15.3. Severability. In case any one or more of the provisions of this Facilities Lease shall for any reason be held to be illegal or invalid, such illegality or invalidity shall not affect any other provisions of this Facilities Lease, but this Facilities Lease shall be construed and enforced as if such illegal or invalid provision had not been contained herein.
SECTION 15.4. Attorney Fees. In the event either party to this Agreement is required to initiate or defend litigation with respect to the terms hereof or to enforce any of its rights hereunder, the prevailing party in such litigation shall be entitled to reasonable attorney's fees incurred in such litigation, including all discovery costs and costs of expert witnesses, together with all reasonable litigation expenses as awarded by the court.
SECTION 15.5. Headings. The article and section headings contained herein are for convenience and reference and are not intended to define or limit the scope of any provision of this Facilities Lease.
SECTION 15.6. Counterparts. This Facilities Lease may be simultaneously executed in several counterparts, each of which shall be an original and all of which shall constitute but one and the same instrument.
SECTION 15.7. Amendments. Notwithstanding a refinancing pursuant to Section 4.2 hereof, the Authority and the State shall not, without the written consent of the Trustee or other legally-authorized representative of the interests of the owners of the Bonds, consent or agree to or permit any rescission of or amendment to or otherwise take any action under or in connection with this Facilities Lease which will reduce the payments required to be made by the State hereunder during the Initial Term or any Renewal Term hereof, or which will in any manner materially impair or adversely affect the rights of the Authority hereunder, and any action by the Authority or the State in violation of this covenant shall be null and void as to the Authority and the State. Further, any voluntary amendment, modification or termination of this Facilities Lease shall require the written consent of all parties.
SECTION 15.8. Effective Date. This Facilities Lease shall be effective as of the date stated above upon its execution.
(The remainder of this page is intentionally left blank.)
FACILITIES LEASE – Page 15
IN WITNESS WHEREOF, the parties hereunto have caused this Facilities Lease to be executed as of the day and year first hereinabove set forth.
IDAHO STATE BUILDING AUTHORITY STATE OF IDAHO State Board of Education
By: ______By: ______V. L. Bud Tracy, Its Chairman Dr. Linda Clark, Board President
Date: ______Date: ______
FACILITIES LEASE – Page 16
EXHIBIT A DESCRIPTION OF LAND
(to come)
FACILITIES LEASE – Page 17
EXHIBIT B DESCRIPTION OF IMPROVEMENTS
The Improvements on the Land are described in the plans and specifications prepared by Flad & Associates, Inc., dated February 2, 2018 (the “Plans”), which Plans are incorporated herein by this reference. The Improvements shall be substantially completed in every material respect as described in the Plans.
FACILITIES LEASE – Page 18 APPENDIX D Audited Financial Statements of the Authority
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/ APPENDIX E State of Idaho Comprehensive Annual Financial Report
[THIS PAGE INTENTIONALLY LEFT BLANK] State of Idaho
2017 Comprehensive Annual Financial Report
For the Fiscal Year Ended June 30, 2017 Bayhorse Ghost-Town
On the cover: Perrine Bridge
All photos Courtesy of Idaho Tourism State of IDAHO Comprehensive Annual Financial Report
For the Fiscal Year Ended June 30, 2017
C.L. “Butch” Otter Governor
Brandon D Woolf State Controller
Prepared by the Office of the State Controller This document and related information are available at www.sco.idaho.gov Brandon D Woolf State Controller
ACKNOWLEDGMENTS:
Patrick Hodges, MBA Administrator Division of Statewide Accounting
Brandon Purcell, CGFM, CFE Bureau Chief Bureau of Reporting and Review
Jennifer Bonilla Ethan Draves Chris Floyd, CPA, CGFM Roni Harlan Tiffini LeJeune, CGFM Kaydee McCleve Justin Powell Kirsten Pruett, CPA Chris Stratton, CGFM
Thanks and appreciation to the Bureaus of Accounting Operations, Systems Administration, and Application Development in the Office of the State Controller.
Special appreciation to all fiscal and accounting personnel throughout the State whose efforts to contribute accurate, timely financial data for their agencies make this report possible. Comprehensive Annual Financial Report IDAHO For the Fiscal Year Ended June 30, 2017
Table of Contents Introductory Section State Controller's Letter of Transmittal ...... vi Certificate of Achievement for Excellence in Financial Reporting...... ix State Government Organization Chart...... x Statewide Elected Officials...... xi Financial Section Independent Auditor’s Report...... 2 Management’s Discussion and Analysis...... 5 Basic Financial Statements Government-Wide Financial Statements Statement of Net Position ...... 14 Statement of Activities...... 16 Governmental Funds Financial Statements Balance Sheet...... 18 Reconciliation of the Governmental Funds Balance Sheet to the Statement of Net Position...... 21 Statement of Revenues, Expenditures, and Changes in Fund Balances ...... 22 Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balances - Governmental Funds to the Statement of Activities...... 25 Proprietary Funds Financial Statements Statement of Net Position ...... 26 Statement of Revenues, Expenses, and Changes in Fund Net Position...... 28 Statement of Cash Flows...... 30 Fiduciary Funds Financial Statements Statement of Fiduciary Net Position ...... 32 Statement of Changes in Fiduciary Net Position ...... 33 Component Units Statement of Net Position ...... 34 Statement of Revenues, Expenses, and Changes in Fund Net Position...... 36 Index for Notes to the Financial Statements...... 38 Notes to the Financial Statements...... 39 Required Supplementary Information Budgetary Comparison Schedule - General Fund and Major Special Revenue Funds ...... 116 Note to Budgetary Reporting...... 118 Infrastructure - Modified Approach Reporting...... 119 Pension - Schedules and Note...... 121 Other Postemployment Benefits - Schedules...... 124 Combining Financial Statements Nonmajor Governmental Funds Narrative...... 129 Balance Sheet...... 130 Statement of Revenues, Expenditures, and Changes in Fund Balances ...... 132 Schedule of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual...... 134
iii Comprehensive Annual Financial Report IDAHO For the Fiscal Year Ended June 30, 2017
Nonmajor Enterprise Funds Narrative...... 141 Statement of Net Position ...... 142 Statement of Revenues, Expenses, and Changes in Fund Net Position...... 143 Statement of Cash Flows...... 144 Internal Service Funds Narrative...... 145 Statement of Net Position ...... 146 Statement of Revenues, Expenses, and Changes in Fund Net Position...... 147 Statement of Cash Flows...... 148 Fiduciary Funds Narrative...... 149 Statement of Fiduciary Net Position - Pension and Other Employee Benefit Trust Funds ...... 150 Statement of Changes in Fiduciary Net Position - Pension and Other Employee Benefit Trust Funds ...... 152 Statement of Fiduciary Net Position - Investment Trust Funds...... 154 Statement of Changes in Fiduciary Net Position - Investment Trust Funds ...... 155 Statement of Assets and Liabilities - Agency Fund ...... 156 Statement of Changes in Assets and Liabilities - Agency Fund ...... 157 Statistical Section Index to the Statistical Section ...... 159 Schedule 1 - Net Position by Component...... 160 Schedule 2 - Changes in Net Position...... 162 Schedule 3 - Fund Balances - Governmental Funds...... 164 Schedule 4 - Changes in Fund Balances - Governmental Funds...... 166 Schedule 5 - Revenue Base...... 168 Schedule 6 - Revenue Rates ...... 170 Schedule 7 - Revenue Payers by Industry/Category...... 172 Schedule 8 - Outstanding Debt Ratios...... 174 Schedule 9 - Other Long-Term Liabilities...... 175 Schedule 10 - Pledged Revenue Coverage ...... 176 Schedule 11 - Demographic and Economic Indicators...... 178 Schedule 12 - Principal Employers...... 180 Schedule 13 - Education Enrollment ...... 180 Schedule 14 - State Employees by Function ...... 181 Schedule 15 - Operating Indicators by Function ...... 182 Schedule 16 - Capital Assets by Function ...... 184 Schedule 17 - Assets, Liabilities, and Fund Balances - General Fund Accounts ...... 186 Schedule 18 - Revenues, Expenditures, and Changes in Fund Balances - General Fund Accounts ...... 188 Schedule 19 - Miscellaneous Statistics...... 190
iv Introductory Section
Bruneau Sand Dunes STATE OF IDAHO OFFICE OF THE STATE CONTROLLER Brandon D Woolf
December 20, 2017
To: The Citizens, Governor, and Members of the Idaho State Legislature
As the State’s Chief Fiscal Officer, I am pleased to present PROFILE OF THE GOVERNMENT the Comprehensive Annual Financial Report (CAFR) for the fiscal year ended June 30, 2017, in accordance with The State of Idaho was admitted into the Union as the 43rd Idaho Code Section 67-1001. This report represents Idaho’s state in 1890. The State covers 83,557 square miles and has a continued commitment to sound and effective fiscal population of 1.7 million people. management and responsible financial reporting based on generally accepted accounting principles (GAAP) Idaho’s government is divided into three branches. The established by the Governmental Accounting Standards Executive Branch is comprised of the Governor, Lieutenant Board. Governor, Secretary of State, State Controller, State Treasurer, Attorney General, and Superintendent of Public Instruction. The Office of the State Controller assumes responsibility The Legislative Branch is comprised of two houses, a 35- for both the reliability and completeness of the information member Senate and a 70-member House of Representatives. presented in this report. Internal controls are designed to The Judicial Branch is administered and supervised by the provide reasonable, but not absolute, assurance that the Idaho Supreme Court, which is presided over by a Chief Justice financial statements are free from material misstatement. I and four Associate Justices. am confident the information presented is accurate in all material respects and fairly sets forth the financial position The State provides services such as education, health and of state operations based upon the internal control structure human services, highway maintenance and construction, established by management. public safety and correction, natural resource management, and economic development programs. The financial reporting In accordance with Idaho Code Section 67-702, the entity includes all funds of the primary government as well as Legislative Audit Division of the Idaho Legislature has material component units for which the primary government audited the State’s basic financial statements for the fiscal is financially accountable. Additional information on year ended June 30, 2017. Based upon that audit, the component units can be found in Note 1 to the financial independent auditor has issued an unmodified opinion that statements. the State of Idaho’s basic financial statements are fairly presented in conformity with GAAP. The Independent The annual budgetary process serves as the foundation for the Auditor’s Report is located at the front of the financial State’s financial planning and control. Budgets are annually section of this report. appropriated for the following governmental funds: general, special revenue, capital projects, and earnings of the permanent In addition, the Legislative Audit Division conducts funds. The budget is generally appropriated by agency, fund, statewide audits under the Federal Single Audit Act of 1984 program, and object. Legal level of budgetary control is and the Code of Federal Regulations Title 2, Grants and maintained at the same level of detail as appropriated. Agreements, in order to meet the special needs of federal Budgetary controls are incorporated into the Statewide grantor agencies. Information regarding Idaho’s Single Accounting and Reporting System (STARS) to ensure Audit is issued in a separate report. expenditures do not exceed authorized appropriations. The expenditures of any fiscal year may not exceed anticipated Management’s Discussion and Analysis (MD&A) revenues, ensuring a balanced budget. The budgetary process immediately follows the Independent Auditor’s Report on is further described in the note to the budgetary schedule on page 5 and provides a narrative introduction, overview, and page 118 and the separately issued Legal Basis Financial analysis to accompany the basic financial statements. The Report. intent of this letter of transmittal is to complement the MD&A and should be read in conjunction with it.
vi ECONOMIC CONDITION 10,800 in 2017, single family home starts are expected to rise to 13,400 in 2021 and average of 1,900 multi-family Financial Policies housing units per year. Article VII of the Idaho Constitution allows for state revenue generation from a number of sources. This Food processing and export is another important part of balanced approach to funding essential services allows the Idaho's economy. It includes companies such as ZoRoCo, State to operate on a sound fiscal basis in a variety of Simplot, and the Caviness Group. Despite many positive as economic conditions. In comparison to some neighboring well as negative variances, food processing in Idaho has states that rely primarily upon sales tax or income tax, Idaho grown 3.1 percent per year since 2011, and is anticipated derives comparable amounts of its own-source revenues to grow 3.2 percent through 2021. from both sources, ensuring that vital services are less prone to disruption. The State’s mining provides opportunities in several parts of the state. Phosphate mining in southeast Idaho provides Per Idaho Code the State is able to maintain reserves for the some diversification and many jobs. New projects are in- purposes of meeting General Fund revenue shortfalls, line to provide jobs for more rural parts of the state, such meeting expenses incurred because of a major disaster, as Salmon and Blackfoot. providing tax relief to the citizens of Idaho on a one-time basis, or providing a uniform and thorough system of public Idaho forestry, through Good Neighbor Authority (GNA), education. Overall increases in the reserve funds indicate aids the United States Forest Service with timber sales. the State’s continued economic stability and growth. Standing dead trees in 11 western states represent roughly 17 percent of the standing trees. With GNA deals in four FY17 End Dollar national forests within Idaho, around 65 million board feet Fund and Idaho Code Balances Change of lumber will be extracted in 3-5 years. Currently, the wood Budget Stabilization (57-814) $ 318.8 M $ 55.5 M industry employs 7,800 workers, and is expected to grow Economic Recovery (67-3520) 5.1 M (15.0) M through 2021 when almost 8,600 workers are expected to Public Education Stabilization (33-907) 85.0 M (3.6) M be working in the field. Higher Education Stabilization (33-3726) 8.9 M 5.8 M Totals $ 417.8 M $ 42.7 M Statewide, population is expected to expand by 1.5 percent on average each year, Personal Income is expected to rise Note 14 contains additional detailed information regarding by 1.3 percent per year, and total nonfarm jobs to reach reserve funds. 770,100 by 2021, up 1.8 percent on average, per year.
Economy Long-Term Financial Planning The unemployment rate within the state met a historic low Indications appear to show a continued upward trend in in August, registering at 2.9 percent with workforce holding General Fund revenues. In January 2017 economists around the 825,000 jobs level this year. While baby projected fiscal year 2018 General Fund receipts to be boomers are retiring, holding back on the workforce, more $3.5 billion; the revised number as of August 2017 projects people are working, lightening the unemployment level. receipt collection will be $3.6 billion. Revenue forecasts The statistics revealing that Idaho's economy, which most for fiscal year 2018 predict individual income tax economist would consider, to be at or very near full collections of $1.7 billion, sales tax collections of employment. $1.4 billion, corporate income tax collections of $225.1 million, and product tax collections of Opportunities are not only becoming available for $58.3 million. individual workers, but also for industries and communities. Projects such as Clearwater Paper’s installation of a new In order to improve and maintain the State’s system of roads chemical digester for its pulp mill, Micron’s expansion (to and highways, the Legislature in 2006 authorized the Idaho be completed in 2018), Twin Fall’s fire department Transportation Board to issue Grant Anticipation Revenue expansion, Caldwell’s redeveloping of its downtown, and Vehicle (GARVEE) bonds. The GARVEE program allows Lewiston’s plans to upgrade storm water system are some the planning, designing, and building of more highway of the specific opportunities around the state. projects in less time than traditional funding methods. As of June 30, 2017, $797.2 million has been borrowed from Although housing starts are leveling off nationally and issued bonds. the apartment vacancy rates are up at 4.5 percent from 4.1 percent a year ago, rising home values have not yet seen a real slowing. Typical reports for the major metro counties in Idaho record at least 5 percent price appreciation. From vii Major Initiatives Financial Reporting to the State of Idaho for its CAFR for the fiscal year ended June 30, 2016. This is the 20th • The Department of Health and Welfare received an consecutive year the State has achieved this prestigious appropriation of $2.9 billion in fiscal year 2018, an award. To be awarded a Certificate of Achievement, the increase of 2.9 percent from the previous year. report must satisfy both generally accepted accounting Medicaid spending represents 79.9 percent of the principles and applicable legal requirements. A Certificate Department’s total appropriation. Federal funding of Achievement is valid for a period of one year. We believe provided 61.3 percent of the Department’s total that our current CAFR continues to meet the Certificate of appropriation. General Fund funding for Medicaid Achievement Program’s requirements and we are increased 3.6 percent. submitting it to the GFOA to determine its eligibility for another certificate. The State Controller’s Office is • The Public Schools’ appropriation is $2.0 billion for committed to this ongoing effort and intends to maintain a fiscal year 2018, a General Fund increase of highly qualified and professional staff to make Idaho’s $100.6 million and a $114.7 million overall increase certification possible. from fiscal year 2017. Some of the highlights of the increased appropriation include: The State Controller’s Office takes great pride in the preparation of this comprehensive report. I am pleased to • $62 million for teacher compensation recognize the professionalism and dedication demonstrated by financial managers and accountants of the state agencies • $23 million for operational support and component units, along with staff within the State Controller’s Office. In addition, the auditing staff of the • $7 million for 3 percent base salary increase Legislative Services Office must be recognized for their independence, dedication, and professionalism. Credit • $5 million for classroom technology must also be given to Governor Otter and other state leaders for their dedication towards the management of Idaho’s • $5 million for information technology staff finances.
• A total appropriation of $247.1 million for the Respectfully submitted, Department of Correction in fiscal year 2018 is an overall increase of 1 percent from the prior year.
AWARDS AND ACKNOWLEDGEMENTS
The Government Finance Officers Association (GFOA) Brandon D Woolf awarded a Certificate of Achievement for Excellence in Idaho State Controller
viii
Citizens of Idaho
LEGISLATIVE BRANCH EXECUTIVE BRANCH JUDICIAL BRANCH Senate Governor Supreme Court House of Representatives Lieutenant Governor Court of Appeals Legislative Services Attorney General District Court Secretary of State Magistrate Court State Controller State Treasurer Superintendent of Public Instruction
State Entities by Function
General Government Education Natural Resources Economic Development Board of Tax Appeals Boise State University Departments of: Appellate Public Defender Commissions: Division of Career- Environmental Quality Boards of: Aging Technical Education Fish and Game Accountancy Arts Eastern Idaho Lands Dentistry Blind and Visually Technical College Parks and Recreation Engineers and Surveyors Impaired Idaho State University Water Resources Medicine Idaho Code Lewis-Clark State College Endowment Fund Nursing Tax Public Broadcasting Investment Board Outfitters and Guides Uniform Laws State Board of Education Fish and Wildlife Foundation Pharmacy Department of Administration University of Idaho Lava Hot Springs Veterinary Medicine Divisions of: Vocational Rehabilitation Foundation Bureau of Occupational Financial Management Office of Energy Licenses Human Resources Resources Commissions: Liquor Wolf Control Board Dairy Products Military Hispanic Affairs Offices of: Industrial Drug Policy Libraries Performance Evaluations Public Safety Health and Human Services Potato Species Conservation Brand Inspector Catastrophic Health Care Public Defense Public Employee Commissions: Department of Health Public Utilities Retirement System Pardons and Parole and Welfare Real Estate State Bar Racing Soil and Water Conservation State Building Authority Correctional Industries Wheat STEM Action Center Departments of: Departments of: Correction Agriculture Juvenile Corrections Commerce Idaho State Police Finance Insurance Labor Transportation Divisions of: Building Safety Veterans Services Idaho State Lottery State Historical Society
x Statewide Elected Of icials Idaho
C.L. “Butch” Otter Governor
Lawerence Denney Brandon D Woolf Brad Little Secretary of State State Controller Lieutenant Governor
Ron G. Crane Lawrence G. Wasden Sherri Ybarra State Treasurer Attorney General Superintendent of Public Instruction
Scott Bedke Roger S. Burdick Brent Hill Speaker, Chief Justice, President Idaho House of Idaho Supreme Court Pro Tempore, Representatives Idaho State Senate
xi
Financial Section
Sawtooth Mountains Legislative Services Office Idaho State Legislature
Eric Milstead Director
December 20, 2017 Independent Auditor’s Report
Honorable C.L. "Butch" Otter, Governor Honorable Members of the Legislature Honorable Brandon D Woolf, State Controller
Report on the Financial Statements
We have audited the accompanying financial statements of the governmental activities, the business-type activities, the aggregate discretely presented component units, each major fund, and the aggregate remaining fund information of the State of Idaho, as of and for the year ended June 30, 2017, and the related notes to the financial statements, which collectively comprise the State’s basic financial statements as listed in the table of contents.
Management’s Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.
Auditor’s Responsibility
Our responsibility is to express opinions on these financial statements based on our audit. We did not audit the financial statements of Boise State University, Eastern Idaho Technical College, Idaho State University, Lewis- Clark State College, University of Idaho, and their respective component units, Idaho Fish and Wildlife Foundation, Idaho Potato Commission, Idaho Dairy Products Commission, Idaho State Bar, Idaho Wheat Commission, Endowment Fund Investment Board, State Lottery Commission, Public Employee Retirement System of Idaho, Public Employees' Deferred Compensation Plan, IDeal Idaho College Savings Program, Idaho Individual High Risk Reinsurance Pool, Idaho Small Employer Health Reinsurance Program, Idaho Health Insurance Exchange, State of Idaho Idle Pool, Local Government Investment Pool, Diversified Bond Fund, Idaho Building Authority, Bond Bank Authority, and the Idaho Housing and Finance Association (including The Housing Company, a discretely presented component unit of the Idaho Housing and Finance Association), which represent total assets and revenues of the government-wide financial statements and total assets and revenues of the fund financial statements as follows:
Opinion Unit Percent of Assets Percent of Revenues Governmental Activities 36.2% 4.9% Business-Type Activities 70.1% 71.8% Aggregate Discretely Presented Component Units 98.7% 98.2% General Fund 62.4% 0.2% Health and Welfare Fund 14.2% 0.2% Transportation Fund 73.8% 0.4% Land Endowments Fund 96.4% 99.9% College and University Fund 100.0% 100.0%
Mike Nugent, Manager Paul Headlee, Manager April Renfro, Manager Glenn Harris, Manager Research & Legislation Budget & Policy Analysis Legislative Audits Information Technology
Statehouse, P.O. Box 83720 Tel: 208-334-2475 Boise, Idaho 83720-0054 www.legislature.idaho.gov
Unemployment Compensation Fund 25.4% 1.4% Loan Fund 30.7% 8.9% Aggregate Remaining Fund Information 98.3% 84.3%
Those statements were audited by other auditors, whose report has been furnished to us, and our opinion, insofar as it relates to the amounts included for those agencies and component units, is based solely on the report of the other auditors. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. The financial statements of Boise State University Foundation, Eastern Idaho Technical College Foundation, Idaho State University Foundation, Idaho Fish and Wildlife Foundation, Idaho Housing and Finance Association (including The Housing Company, a discretely presented component unit of the Idaho Housing and Finance Association), and the Public Employees' Deferred Compensation Plan were not audited in accordance with Government Auditing Standards, and accordingly, are not covered by our report in accordance with Government Auditing Standards.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis of our audit opinions.
Opinions
In our opinion, based on our audit and the report of other auditors, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, the business-type activities, the aggregate discretely presented component units, each major fund, and the aggregate remaining fund information of the State of Idaho, as of June 30, 2017, and the respective changes in financial position and, where applicable, cash flows thereof for the year then ended in accordance with accounting principles generally accepted in the United States of America.
Other Matters
Required Supplementary Information
Accounting principles generally accepted in the United States of America require that the management’s discussion and analysis and other required supplementary information listed in the table of contents 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 and other auditors have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management’s responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance.
Other Information
Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the State of Idaho’s basic financial statements. The introductory section, the combining and individual fund financial statements and 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 fund financial statements and schedules are the responsibility of management and were derived from and related 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 themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America by us and other auditors. In our opinion, based on our audit, the procedures performed as described above, and the report of the other auditors, the combining and individual fund financial statements and schedules are fairly stated in all material respects, in relation to the basic financial statements as a whole.
The introductory section and statistical section have not been subjected to the auditing procedures applied in the audit of the basic financial statements, and accordingly, we do not express an opinion or provide any assurance on it.
Other Reporting Required by Government Auditing Standards
In accordance with Government Auditing Standards, we will issue our report on our consideration of the State of Idaho’s internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on 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 State of Idaho’s internal control over financial reporting and compliance.
Sincerely,
April Renfro, CPA, Manager Legislative Services Office, Audits Division
State of Idaho Management's Discussion and Analysis
INTRODUCTION This section of the State’s annual financial report presents our discussion and analysis of the State’s financial performance during the fiscal year that ended June 30, 2017. Please read it in conjunction with the transmittal letter, which can be found on page vi of the Introductory Section, and the financial statements beginning on page 14.
OVERVIEW OF THE FINANCIAL STATEMENTS
This discussion and analysis is an introduction to the State’s federal grants are the major funding sources for most of basic financial statements, which include the following these activities. three components: 1) government-wide financial Business-type activities account for operations that statements, 2) fund financial statements, and 3) notes to the function in a manner similar to a private business, where financial statements. In addition to the basic financial all or a significant portion of costs are recovered through statements, this financial report includes required user fees and charges to external customers. These activities supplementary information and other supplementary primarily include higher education, unemployment benefit information. payments, loans to cities and counties to make Government-Wide Financial Statements improvements to wastewater and drinking water systems, and lottery and liquor sales. The government-wide financial statements include the Statement of Net Position and the Statement of Activities, Discretely presented component units are organizations which provide information about the State as a whole and legally separate yet financially accountable to the State. present a long-term view of the State’s finances using Discretely presented component units include the Idaho accounting methods similar to those used in the private Housing and Finance Association, college and university sector. The statements are prepared using the economic foundations, Petroleum Clean Water Trust Fund, Idaho resources measurement focus and accrual basis of Individual High Risk Reinsurance Pool, Idaho Small accounting, under which the current year’s revenues and Employer Health Reinsurance Program, Idaho Bond Bank expenses are recorded as transactions occur rather than Authority, and Idaho Health Insurance Exchange. when cash is received or paid. Fund Financial Statements The Statement of Net Position reports all of the State’s assets The fund financial statements provide detailed information plus deferred outflows of resources minus liabilities and about the State’s most significant funds. A fund is a deferred inflows of resources, with the remainder reported grouping of related accounts that is used to maintain control as net position. Over time, increases or decreases in the over resources that have been segregated for a specific State’s net position may serve as a useful indicator of purpose. Fund accounting is used to demonstrate whether the financial position of the State is improving or compliance with finance-related legal requirements. The deteriorating. State’s funds are divided into the following three categories: The Statement of Activities presents information showing Governmental funds account for most of the State’s basic how the State’s net position changed during the most recent services and provide a detailed short-term view of the fiscal year. All changes in net position are reported as soon State’s general government operations. They account for as the underlying event giving rise to the change occurs, essentially the same functions reported as governmental regardless of the timing of related cash flows. Therefore, activities in the government-wide financial statements. revenues and expenses are reported in this Statement for However, the fund financial statements focus on near-term some items that will only result in cash flows in future fiscal inflows and outflows of resources, as well as on balances periods (such as uncollected taxes and earned but unused available at the end of the fiscal year that are available for vacation leave). This Statement reports expenses and future spending. Such information may be useful in revenues in a format that focuses on the net cost of each evaluating the State’s near-term financial position. This function, allowing you to see which state functions draw approach is known as using the current financial resources upon the general revenues of the State and which functions measurement focus and the modified accrual basis of contribute to the general revenues of the State. accounting. Governmental funds include the General Fund, The government-wide financial statements are divided into special revenue funds, permanent funds, and capital the following three categories: projects funds. Governmental activities encompass most of the State’s Two schedules in the governmental fund financial basic services such as general government, public safety statements (pages 21 and 25) reconcile the amounts reported and correction, health and human services, education, on the governmental fund financial statements (short-term economic development, and natural resources. Taxes and focus) with governmental activities and balances reported
State of Idaho 5 Comprehensive Annual Financial Report State of Idaho Management's Discussion and Analysis
on the appropriate government-wide statements (long-term Required Supplementary Information focus). Comparing the information presented for The notes to the financial statements are followed by governmental funds with similar information presented in required supplementary information that further supports the government-wide financial statements may provide a the information in the financial statements. The Required better understanding of the long-term impact of the State’s Supplementary Information section begins on page 116 and near-term financing decisions. includes the following: Proprietary funds account for activities similar to for-profit • Budgetary comparison schedules and note disclosure enterprises, where the determination of net income is that show how the General, Health and Welfare, and necessary for sound financial administration. Proprietary Transportation funds presented in the governmental funds include enterprise and internal service funds. fund financial statements reconcile to the legally Enterprise funds report activities that provide supplies or adopted budget services to the general public; internal service funds report activities that provide supplies or services to other funds or • Condition and maintenance data regarding the State’s departments of the primary government. Internal service infrastructure reported using the modified approach funds are reported as governmental activities on the • Schedules of funding progress, employer government-wide statements since their services primarily contributions, and actuarial information related to the benefit the State. Proprietary funds provide the same type State’s obligation to provide pension and of information as the government-wide financial postemployment benefits to certain employees statements, only in greater detail. As in the government- wide statements, proprietary fund financial statements use Other Supplementary Information the accrual basis of accounting. Combining financial statements, starting on page 130, are Fiduciary funds account for resources held for the benefit presented to provide more detail for nonmajor special of parties outside the State. Fiduciary funds are not reflected revenue, capital projects, proprietary, and fiduciary funds. in the government-wide financial statements because the The total columns of these combining financial statements resources of those funds are not available to support the agree with the applicable combined fund financial State’s programs. These funds are reported using the statement. accrual basis of accounting. Notes to the Financial Statements The notes to the financial statements (beginning on page 38) provide additional information that is essential to an understanding of the data provided in the government-wide and fund financial statements.
FINANCIAL ANALYSIS OF THE STATE AS A WHOLE Net Position
Net position measures the difference between assets and combined net position increased $856.0 million over the deferred outflows of resources versus liabilities and course of this fiscal year’s operations. Net position of deferred inflows of resources. Net position may serve over governmental activities increased $738.8 million and time as a useful indicator of the State’s financial position. business-type activities’ net position increased The State’s assets and deferred outflows of resources $117.2 million. Net position changes between the current exceeded liabilities and deferred inflows of resources by and prior year are described in the governmental activities $13.0 billion for the most recent fiscal year. The State’s and business-type activities sections on page 9.
State of Idaho 6 Comprehensive Annual Financial Report State of Idaho Management's Discussion and Analysis
Net Position June 30, 2017 and 2016 (dollars in thousands) Governmental Activities Business-Type Activities Total Primary Government 2017 2016* 2017 2016* 2017 2016* Assets Current and Other Assets $ 5,536,979 $ 5,525,434 $ 2,039,623 $ 1,920,166 $ 7,576,602 $ 7,445,600 Capital Assets 6,675,259 6,546,160 1,196,931 1,199,483 7,872,190 7,745,643 Total Assets 12,212,238 12,071,594 3,236,554 3,119,649 15,448,792 15,191,243 Deferred outflows of Resources 215,727 208,502 48,236 48,526 263,963 257,028 Total Assets and Deferred Outflows of Resources 12,427,965 12,280,096 3,284,790 3,168,175 15,712,755 15,448,271 Liabilities Other Liabilities 524,790 988,209 129,156 143,863 653,946 1,132,072 Long-Term Liabilities 1,340,919 1,331,060 613,134 571,600 1,954,053 1,902,660 Total Liabilities 1,865,709 2,319,269 742,290 715,463 2,607,999 3,034,732 Deferred Inflows of Resources 54,586 191,986 10,397 37,820 64,983 229,806 Total Liabilities and Deferred Inflows of Resources 1,920,295 2,511,255 752,687 753,283 2,672,982 3,264,538 Net Position: Net Investment in Capital Assets 5,963,951 5,793,691 764,323 758,031 6,728,274 6,551,722 Restricted 3,397,251 3,028,105 1,450,042 1,353,036 4,847,293 4,381,141 Unrestricted 1,146,468 947,045 317,738 303,825 1,464,206 1,250,870 Total Net position $ 10,507,670 $ 9,768,841 $ 2,532,103 $ 2,414,892 $ 13,039,773 $ 12,183,733
*Amounts in these columns have been restated. More detailed information regarding net position can be found in Note 14.
The largest component of the State’s net position, the State’s discretion but often has limitations on use based 51.6 percent ($6.7 billion), reflects its investment in capital on state statutes. assets (e.g., land, infrastructure, buildings, machinery, At the end of the current fiscal year, the State reported equipment, software, and capital assets in progress), net of positive balances in all three categories of net position for accumulated depreciation and less any related debt the State as a whole, as well as for its separate governmental outstanding that was needed to acquire or construct the and business-type activities. The same situation held true assets. The State uses these capital assets to provide services for the prior fiscal year. to citizens. These assets are not available for future spending. Change in Net Position Restricted net position is the next largest component, Over time, increases or decreases in the State’s net position comprising 37.2 percent ($4.8 billion). These resources are are an indicator of whether its financial health is improving not available for general use due to restrictions placed on or deteriorating. The following condensed financial them by external parties such as creditors, grantors, or information was derived from the current and prior year contributors; or by state law through constitutional government-wide Statement of Activities and reflects how provisions or enabling legislation. the State’s net position changed during the fiscal year: The remaining 11.2 percent ($1.5 billion) of net position represents unrestricted net position, which may be used at
State of Idaho 7 Comprehensive Annual Financial Report State of Idaho Management's Discussion and Analysis
Changes in Net Position For the Fiscal Years Ended June 30, 2017 and 2016 (dollars in thousands) Governmental Business-Type Total Activities Activities Primary Government Total Percent 2017 2016* 2017 2016* 2017 2016* Change Revenues Program Revenues Charges for Services $ 870,151 $ 783,468 $ 1,139,214 $ 1,129,831 $ 2,009,365 $ 1,913,299 5.0 Operating Grants and Contributions 2,869,284 2,676,844 293,977 291,830 3,163,261 2,968,674 6.6 Capital Grants and Contributions 12,425 11,021 23,533 17,200 35,958 28,221 27.4 General Revenues Sales Tax 1,636,125 1,580,542 1,636,125 1,580,542 3.5 Individual and Corporate Taxes 1,848,281 1,518,740 1,848,281 1,518,740 21.7 Other Taxes 562,693 587,288 562,693 587,288 (4.2) Other 37,833 44,032 37,833 44,032 (14.1) Total Revenues 7,836,792 7,201,935 1,456,724 1,438,861 9,293,516 8,640,796 7.6
Expenses General Government 507,700 487,106 507,700 487,106 4.2 Public Safety and Correction 410,975 398,539 410,975 398,539 3.1 Health and Human Services 2,668,755 2,697,376 2,668,755 2,697,376 (1.1) Education 2,089,048 1,955,642 2,089,048 1,955,642 6.8 Economic Development 862,427 847,761 862,427 847,761 1.7 Natural Resources 295,879 278,100 295,879 278,100 6.4 Interest Expense 15,879 45,271 15,879 45,271 (64.9) College and University 1,106,464 1,063,222 1,106,464 1,063,222 4.1 Unemployment Compensation 108,022 108,187 108,022 108,187 (0.2) Loan 8,119 7,537 8,119 7,537 7.7 State Lottery 192,314 185,115 192,314 185,115 3.9 State Liquor 162,792 153,901 162,792 153,901 5.8 Correctional Industries 9,102 8,960 9,102 8,960 1.6 Total Expenses 6,850,663 6,709,795 1,586,813 1,526,922 8,437,476 8,236,717 2.4
Increase (Decrease) in Net Position before Transfers 986,129 492,140 (130,089) (88,061) 856,040 404,079 111.8 Transfers (247,300) (233,723) 247,300 233,723 Change in Net Position 738,829 258,417 117,211 145,662 856,040 404,079 111.8 Net Position, Beginning of Year, as Restated 9,768,841 9,510,424 2,414,892 2,269,230 12,183,733 11,779,654 3.4 Net Position, End of Year $ 10,507,670 $ 9,768,841 $ 2,532,103 $ 2,414,892 $ 13,039,773 $ 12,183,733 7.0
*Amounts in these columns have been restated. The Total Percent Change column shows the percentage change in operation from fiscal year 2016 to 2017 for each line item. Readers should be cautious when using this column to evaluate the overall change in net position. Although a line may show a large percentage change (e.g., 64.9 percent decrease for Interest Expense of $29.4 million), it may not have as significant of an effect on the overall change in net position as a change in a more material line item with a smaller percentage change (e.g., 6.8 percent increase for Education of $133.4 million).
State of Idaho 8 Comprehensive Annual Financial Report State of Idaho Management's Discussion and Analysis
Governmental Activities Taxes revenue dropped 4.2 percent ($24.6 million) mainly due to decreased fuel tax collections. Revenues The overall financial position for Governmental Activities Expenses significantly improved during the fiscal year, as evidenced Overall expenses for the State increased 2.1 percent by the 7.6 percent ($738.8 million) increase in net position. ($140.9 million). Education expenses rose 6.8 percent Revenues continued to outpace expenses increasing in most ($133.4 million) primarily due to an increase in the categories. Individual and corporate income taxes revenue distributions of public school funds for the third consecutive increased 21.7 percent ($329.5 million). Operating grant year. Expenses for natural resources grew 6.4 percent revenue increased 7.2 percent ($192.4 million), primarily ($17.8 million) because of increased land purchases and due to large increases in the fair market value of Endowment employee costs. General government expenses increased Fund Investment Board investments. Increased collection 4.2 percent ($20.6 million) due to the increased cost of of employee insurance premiums, sale of Public School insurance premiums. Finally, health and human services Endowment land, and across the board increases to the fair expenses experienced a 1.1 percent ($28.6 million) value of investments helped revenue from charges for decrease from the prior year primarily due to a reduction in services rise 11.1 percent ($86.7 million). Sales Tax machinery and equipment purchases. revenue improved 3.5 percent ($55.6 million), while Other
The following charts depict revenues and expenses of the governmental activities for fiscal year ended June 30, 2017:
Total Revenues = $7.8 billion Total Expenses = $6.9 billion
Business-Type Activities Business-type activities’ net position increased by • Unemployment Compensation fund net position 4.9 percent ($117.2 million) during the fiscal year. The improved 11.1 percent ($77.9 million) due to sustained largest changes were seen in the following funds: collection of unemployment assessments and Idaho's low unemployment rate. • The College and University fund net position increased by 2.1 percent ($23.2 million) from the prior year to $1.1 billion. Operating expenses grew 4.1 percent ($43.2 million) mainly due to a $34.7 million uptick in wage and salary costs.
State of Idaho 9 Comprehensive Annual Financial Report State of Idaho Management's Discussion and Analysis
The following charts depict revenues and expenses of the business-type activities:
Total Revenues = $1.5 billion Total Expenses = $1.6 billion
FINANCIAL ANALYSIS OF THE STATE’S FUNDS Governmental Funds 12.3 percent ($161.1 million) primarily due to a hefty $157.5 million increase in individual and corporate tax At the close of the fiscal year, the State’s governmental revenue. funds reported combined ending fund balances of $4.5 billion, an increase of $473.2 million in comparison • The Health and Welfare fund balance decreased with fiscal year 2016. The governmental fund balance is 311.2 percent ($14.1 million) during the fiscal year. classified as follows: The primary driver of the fund balance decline was an increase in incurred but uncollected medical assistance • Nonspendable either due to its form or legal constraints payments for Medicaid and rehabilitation services. such as permanent trusts: $1.5 billion (33.9 percent) • The Transportation fund balance increased • Restricted for a specific purpose either by creditors, 11.5 percent ($40.2 million) during the fiscal year grantors, constitutional provisions, or enabling primarily due to a significant decrease in capital outlay legislation: $1.8 billion (39.6 percent) for infrastructure, machinery, and equipment. • Committed for specific purposes by the Legislature or • The Land Endowments fund balance increased for satisfying contractual requirements: 13.4 percent ($249.8 million) from the prior year $442.8 million (9.8 percent) primarily due to strong investment returns and the • Assigned for a specific purpose as that intent is ongoing sales of endowment land. expressed by the Legislature or by a governing body • The Nonmajor Governmental fund balance increased or official to whom the Legislature has delegated the 6.9 percent ($36.1 million) during the fiscal year. authority: $117.3 million (2.6 percent) Increases in revenues and decreases in expenditures • Unassigned is the General Fund balance that has not across most categories contributed to the net position been designated for another fund and that has not been gain. restricted, committed, or assigned to a specific purpose within the General Fund: $640.3 million (14.2 percent) Proprietary Funds Changes in the fund balance noted above are described by Proprietary funds provide the same type of information major fund type as follows: found in the Business-Type Activities columns of the • The General Fund is the chief operating fund of the government-wide financial statements, but in more detail. State. During the fiscal year the fund balance increased
State of Idaho 10 Comprehensive Annual Financial Report State of Idaho Management's Discussion and Analysis
GENERAL FUND BUDGETARY HIGHLIGHTS
The State does not adopt a revenue budget; therefore, the 14.5 percent ($18.0 million). The cash balance carried over Budgetary Comparison Schedule reflects budgeted into fiscal year 2017 was 73.4 million. Overall, General revenues as being equal to actual revenues. General Fund Fund receipts were $264.7 million more in fiscal year 2017 revenues for the fiscal year ended on a strong note coming than in fiscal year 2016. in at $4.1 billion. Most of the General Fund revenue comes The original expenditures budget amount on the Budgetary from various types of tax collections; these collections Comparison Schedule represents the original appropriation, increased 8.3 percent over 2016. The sum of the collections prior year reappropriations, and continuous appropriations. increase significantly surpassed the 5.4 percent projected The final budget amount includes the original budget plus growth. All five collection categories contributed to the supplemental (positive or negative) appropriations, fiscal year 2017 surplus. Individual income tax receipts Governor’s holdbacks, Board of Examiners reductions, ($1.7 billion) topped the forecast by 3.8 percent object transfers, activity transfers, and receipts to the ($60.3 million). Corporate income tax receipts appropriation. The variance between the final budget and ($214.0 million) came in 5.7 percent ($11.6 million) above actual spending was a favorable $202.1 million forecast ($202.5 million). Sales tax contributions (5.4 percent). The natural resources function within the ($1.4 billion) exceeded projections by 0.2 percent General Fund reported a negative variance of $14.3 million ($2.7 million). Product tax revenue ($58.1 million) for the stemming from fire suppression deficiency warrants. This year surpassed anticipated collections ($56.9 million) by deficit is allowed by statute and will be funded with future 2.1 percent ($1.2 million). And miscellaneous sources appropriations. ($142.7 million) exceeded projections ($124.6 million) by
CAPITAL ASSETS AND DEBT ADMINISTRATION Capital Assets At the end of fiscal year 2017 the State had $7.9 billion (net of accumulated depreciation) invested in a broad range of capital assets, as can be seen in the table below. Depreciation expense for this fiscal year totaled $181.3 million.
Capital Assets as of June 30, 2017 and 2016 (Net of depreciation, dollars in thousands) Governmental Business-Type Total Activities Activities Primary Government 2017 2016* 2017 2016 2017 2016* Land and Land Use Rights $ 1,100,814 $ 1,092,300 $ 131,224 $ 132,361 $ 1,232,038 $ 1,224,661 Capital Assets in Progress 1,085,521 1,021,578 12,901 45,325 1,098,422 1,066,903 Infrastructure-not Depreciated 2,727,379 2,691,875 2,727,379 2,691,875 Historical Art and Collections 122 122 2,392 2,396 2,514 2,518 Buildings and Improvements 569,438 582,636 917,523 883,912 1,486,961 1,466,548 Improvements Other Than Buildings 74,148 67,563 30,717 29,234 104,865 96,797 Machinery, Equipment , and Other 293,153 250,153 102,174 106,252 395,327 356,405 Infrastructure-Depreciated 824,684 839,933 824,684 839,933 Total $ 6,675,259 $ 6,546,160 $ 1,196,931 $ 1,199,480 $ 7,872,190 $ 7,745,640
*These columns have been restated. More detailed information can be found in Note 6. This year’s major capital asset additions include is not reported. Approximately 12,274 lane miles of roads $160.6 million spent for infrastructure assets, which are accounted for under the modified approach. The State includes capital assets in progress ($118.3 million), manages its roadway network using its Pavement roadways ($40.5 million), and rights-of-way Management System to monitor road surface condition. ($1.8 million). The roadway surface condition is determined using three pavement condition data elements: International The State uses the traditional method of depreciation for its Roughness Index, rutting depth, and pavement distress 1,823 bridges and 41 rest areas or ports of entry. The State (cracking). Roadway surface is categorized as good, fair, adopted the modified approach for reporting roads. Under poor, or very poor. The State’s established condition level this alternative method certain maintenance and is to have no more than 30 percent of pavement in poor or preservation costs are expensed, and depreciation expense very poor condition. The latest condition assessment rating
State of Idaho 11 Comprehensive Annual Financial Report State of Idaho Management's Discussion and Analysis
showed that the State had 15.4 percent of its road surfaces Idaho Transportation Board, with the approval of the in poor or very poor condition. During fiscal year 2017 the Legislature, can approve debt financing for transportation State spent $128.8 million to maintain Idaho’s road infrastructure projects utilizing future federal-aid highway surfaces. This amount is 14.4 percent ($16.2 million) more revenues. Opinions have been received from the Office of than the estimated amount of $112.5 million required to the Attorney General, based on the Idaho Supreme Court maintain Idaho’s road surfaces. More detailed information decision in Ada County v. Wright, to the effect that this about the State’s capital assets is presented in Notes 1 and 6 procedure does not create a liability of the State in violation to the financial statements and in the Required of the Idaho Constitution. Supplementary Information. During fiscal year 2017, the Idaho Housing Finance Association did not issue any new GARVEE debt for Long-Term Debt highway projects. The notes payable ending balance for Article VIII Section 1 of the Idaho Constitution, amended highway projects was $562.0 million. in 1998, specifies that the Legislature shall not create any Moody’s Investors Service has assigned the State of Idaho debts or liabilities, except in extreme emergencies, unless an issuer rating of Aa1 with a stable outlook. Idaho currently authorized by law and then approved by the people at a has no general obligation debt outstanding. The State’s Tax general election. This does not apply to liabilities incurred Anticipation Notes, which carry the faith and credit pledge for ordinary operating expenses, nor debts or liabilities that of the State, are rated MIG 1. The rating for the state are repaid by the end of the fiscal year. The debts or building revenue bonds issued by the Idaho State Building liabilities of independent public bodies corporate and politic Authority is rated Aa2, with a stable outlook. And Moody's created by law, and which have no power to levy taxes or assigned Aa1 to Idaho Bond Bank Authority revenue bonds obligate the General Fund of the State, are not debts or with a stable outlook. More detailed information about the liabilities of the State. State’s long-term debt is presented in Notes 1 and 13 to the Idaho Code Title 40 addresses the increasing need for timely financial statements. improvements to Idaho’s highway infrastructure. The
ECONOMIC FACTS AND NEXT YEAR’S BUDGET
Idaho’s unemployment rate dropped another nine-tenths ongoing 3 percent merit-based salary increase for state since last year’s report to 2.9 percent in August 2017, its employees. The State’s budget reserves increased lowest level in 10 years. The State’s labor force grew over $42.7 million during fiscal year 2017. the last year from 816,697 in August 2016 to 819,848 in The Legislature moved aggressively for the third August 2017. The national unemployment rate in August consecutive year to bolster the State’s public education was 4.4 percent. Idaho’s rate has remained below the system. The Legislature approved the following General national rate for 16 years. Total state employment in Fund appropriation increases related to education: September was 796,430, up from 785,732 in 2016. • Public schools (K-12): 6.3 percent ($100.6 million) Revenue projections for fiscal year 2018 represent another • Community colleges: 6.7 percent ($2.5 million) consecutive year of economic growth in the state. Fiscal year 2018 General Fund revenues are expected to grow • Career technical education: 5.3 percent ($3.3 million) 3.8 percent ($130.9 million). Finally, the Legislature moved to address long-term projects as well as harsh winter damage from last winter. The overall General Fund budget for fiscal year 2018 is Legislation included authorization of $300.0 million in $3.5 billion (5.4 percent increase). Medicaid received GARVEE bonds and usage of $15.2 million in sales tax $531.9 million (2.4 percent increase); and the revenue to address state and local transportation projects. Department of Correction received $220.4 million (2.4 percent increase). The Legislature approved an
CONTACTING THE STATE’S FINANCIAL MANAGEMENT
This financial report is designed to provide citizens, the Legislature, investors, and creditors with a general overview of the State’s finances and to show the State’s accountability for the money it receives. If you have questions about this report or need additional financial information, please contact: Office of the State Controller 700 West State Street, P.O. Box 83720 Boise, Idaho 83720-0011 (208) 334-3150, [email protected]
State of Idaho 12 Comprehensive Annual Financial Report Basic Financial Statements
Lewiston State of Idaho Statement of Net Position June 30, 2017 (dollars in thousands) Primary Government Governmental Business-Type Component Activities Activities Total Units ASSETS Cash and Cash Equivalents $ 13,037 $ 620,241 $ 633,278 $ 50,045 Pooled Cash and Investments 1,583,205 199,158 1,782,363 2,777 Investments 2,368,736 439,271 2,808,007 544,638 Accounts Receivable, Net 117,988 137,518 255,506 42,257 Taxes Receivable, Net 468,812 468,812 Internal Balances 12,938 (12,938) Due from Other Entities 251,890 251,890 Inventories and Prepaid Items 61,480 29,480 90,960 607 Due from Primary Government 604,527 Due from Component Unit 2,443 2,443 Loans, Notes, and Pledges Receivable, Net 8,485 397,776 406,261 970,804 Other Assets 115,750 12,564 128,314 8,975 Restricted Assets: Cash and Cash Equivalents 127,172 96,933 224,105 135,641 Investments 407,486 117,177 524,663 304,881 Capital Assets: Nondepreciable 4,913,836 146,517 5,060,353 8,251 Depreciable, Net 1,761,423 1,050,414 2,811,837 82,332 Total Assets 12,212,238 3,236,554 15,448,792 2,755,735 DEFERRED OUTFLOWS OF RESOURCES Deferred Outflows 215,727 48,236 263,963 47,996 Total Assets and Deferred Outflows of Resources $ 12,427,965 $ 3,284,790 $ 15,712,755 $ 2,803,731 LIABILITIES Accounts Payable $ 156,991 $ 30,611 $ 187,602 $ 2,883 Payroll and Related Liabilities 31,097 31,012 62,109 909 Medicaid Payable 155,948 155,948 Due to Other Entities 94,974 7,310 102,284 Unearned Revenue 48,390 44,478 92,868 5,821 Amounts Held in Trust for Others 21,101 3,994 25,095 87,847 Due to Primary Government 13,686 Due to Component Unit 117 117 Other Accrued Liabilities 16,289 11,634 27,923 200,311 Long-Term Liabilities: Due Within One Year 147,392 41,946 189,338 305,854 Due in More Than One Year 1,193,527 571,188 1,764,715 1,234,821 Total Liabilities 1,865,709 742,290 2,607,999 1,852,132 DEFERRED INFLOWS OF RESOURCES Deferred Inflows 54,586 10,397 64,983 1,484 NET POSITION Net Investment in Capital Assets 5,963,951 764,323 6,728,274 43,872 Restricted for: Claims and Judgments 36,933 36,933 Debt Service 4,700 4,700 130,403 Transportation 387,105 387,105 Regulatory 91,840 91,840 Natural Resources and Recreation 239,675 239,675 Unemployment Compensation 778,250 778,250 Permanent Trust - Expendable 646,087 58,584 704,671 172,236 Permanent Trust - Nonexpendable 1,773,202 1,773,202 363,301 Other Purposes 217,709 613,208 830,917 179,668 Unrestricted 1,146,468 317,738 1,464,206 60,635 Total Net Position 10,507,670 2,532,103 13,039,773 950,115 Total Liabilities, Deferred Inflows of Resources, and Net Position $ 12,427,965 $ 3,284,790 $ 15,712,755 $ 2,803,731
The accompanying notes are an integral part of the financial statements. State of Idaho 14 Comprehensive Annual Financial Report
State of Idaho Statement of Activities For the Fiscal Year Ended June 30, 2017 (dollars in thousands) Program Revenues Charges Operating Capital for Grants and Grants and Expenses Services Contributions Contributions FUNCTIONS Primary Government Governmental Activities General Government $ 507,700 $ 144,390 $ 74,624 $ 6,703 Public Safety and Correction 410,975 45,859 10,434 Health and Human Services 2,668,755 116,548 1,836,375 Education 2,089,048 14,691 256,273 Economic Development 862,427 325,848 366,138 1,207 Natural Resources 295,879 222,815 325,440 4,515 Interest Expense 15,879 Total Governmental Activities 6,850,663 870,151 2,869,284 12,425 Business-Type Activities College and University 1,106,464 489,375 278,869 23,533 Unemployment Compensation 108,022 189,816 3,135 Loan 8,119 9,648 11,973 State Lottery 192,314 240,686 State Liquor 162,792 199,778 Correctional Industries 9,102 9,911 Total Business-Type Activities 1,586,813 1,139,214 293,977 23,533 Total Primary Government $ 8,437,476 $ 2,009,365 $ 3,163,261 $ 35,958 Component Units Idaho Housing and Finance Association $ 167,491 $ 150,362 $ 49,651 $ 2,130 College and University Foundation 62,440 5,315 100,805 Petroleum Clean Water Trust 2,616 2,793 Health Reinsurance 819 744 Bond Bank Authority 11,931 11,950 Health Insurance Exchange 18,652 8,182 11,142 Total Component Units $ 263,949 $ 179,346 $ 161,598 $ 2,130
GENERAL REVENUES Sales Tax Individual and Corporate Taxes Fuel Tax Other Taxes Tobacco Settlement Unrestricted Investment Earnings Transfers Total General Revenues, Contributions, and Transfers Change in Net Position Net Position - Beginning of Year, as Restated Net Position - End of Year
The accompanying notes are an integral part of the financial statements. State of Idaho 16 Comprehensive Annual Financial Report Net (Expense) Revenue and Changes in Net Position Primary Government Governmental Business-Type Activities Activities Total Component Units
$ (281,983) $ (281,983) (354,682) (354,682) (715,832) (715,832) (1,818,084) (1,818,084) (169,234) (169,234) 256,891 256,891 (15,879) (15,879) (3,098,803) (3,098,803)
$ (314,687) (314,687) 84,929 84,929 13,502 13,502 48,372 48,372 36,986 36,986 809 809 (130,089) (130,089) (3,098,803) (130,089) (3,228,892)
$ 34,652 43,680 177 (75) 19 672 79,125
1,636,125 1,636,125 1,848,281 1,848,281 331,399 331,399 231,294 231,294 22,964 22,964 14,869 14,869 (247,300) 247,300 3,837,632 247,300 4,084,932 738,829 117,211 856,040 79,125 9,768,841 2,414,892 12,183,733 870,990 $ 10,507,670 $ 2,532,103 $ 13,039,773 $ 950,115
State of Idaho 17 Comprehensive Annual Financial Report State of Idaho Balance Sheet Governmental Funds June 30, 2017 (dollars in thousands) Health and General Welfare Transportation ASSETS Cash and Cash Equivalents $ 1,453 $ 6 Pooled Cash and Investments 978,473 $ 15,530 188,210 Investments 37,035 20 162,811 Accounts Receivable, Net 28,286 32,268 17,627 Taxes Receivable, Net 415,797 147 47,227 Interfund Receivables 7,789 14 22 Due from Other Entities 163,071 30,031 Inventories and Prepaid Items 11,257 7,861 20,508 Loans, Notes, and Pledges Receivable, Net 4,862 232 Other Assets 4,842 138 1,684 Restricted Assets: Cash and Cash Equivalents 2,197 5,888 41,951 Investments 291,014 4,523 Total Assets $ 1,783,005 $ 229,460 $ 510,309 LIABILITIES Accounts Payable $ 26,509 $ 21,659 $ 45,039 Payroll and Related Liabilities 12,377 5,972 3,178 Medicaid Payable 155,948 Interfund Payables 1,343 1,986 674 Due to Other Entities 51,731 43,241 Unearned Revenue 9,817 10,651 Amounts Held in Trust for Others 12,471 7,523 Other Accrued Liabilities 2,583 1,448 7,008 Total Liabilities 116,831 194,536 109,791 DEFERRED INFLOWS OF RESOURCES Deferred Inflows 190,000 53,575 10,164 FUND BALANCES Nonspendable: Permanent Trusts Inventories and Prepaid Items 11,257 7,861 20,508 Noncurrent Receivables 50 Restricted 349,697 366,597 Committed 332,704 38 3,249 Assigned 115,618 Unassigned 666,848 (26,550) Total Fund Balances 1,476,174 (18,651) 390,354 Total Liabilities, Deferred Inflows of Resources, and Fund Balances $ 1,783,005 $ 229,460 $ 510,309
The accompanying notes are an integral part of the financial statements. State of Idaho 18 Comprehensive Annual Financial Report Land Nonmajor Endowments Governmental Total
$ 11,578 $ 13,037 $ 79,761 282,757 1,544,731 2,026,027 93,779 2,319,672 18,793 20,893 117,867 5,641 468,812 1,287 9,112 58,788 251,890 17,837 57,463 3,391 8,485 7,732 2,887 17,283
40,203 90,239 111,949 407,486 $ 2,132,313 $ 650,990 $ 5,306,077
$ 19,819 $ 43,103 $ 156,129 9,073 30,600 155,948 1,471 5,474 2 94,974 9,618 30,086 1,107 21,101 2 3,688 14,729 19,821 68,062 509,041
24,331 278,070
1,466,405 7,298 1,473,703 17,837 57,463 50 646,087 424,951 1,787,332 106,856 442,847 1,655 117,273 640,298 2,112,492 558,597 4,518,966 $ 2,132,313 $ 650,990 $ 5,306,077
State of Idaho 19 Comprehensive Annual Financial Report
State of Idaho Reconciliation of the Governmental Funds Balance Sheet To the Statement of Net Position June 30, 2017 (dollars in thousands)
Total Fund Balances - Governmental Funds $ 4,518,966
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 the following: Land and Land Use Rights $ 1,100,813 Capital Assets in Progress 1,085,052 Infrastructure 3,835,244 Historical Art and Collections 72 Buildings and Improvements 983,566 Improvements Other Than Buildings 128,927 Machinery, Equipment, and Other 741,362 Accumulated Depreciation (1,213,950) Total Capital Assets 6,661,086
Other long-term assets are not available to pay for current-period expenditures and, therefore, are not reported in the funds. 104,060
Deferred Outflows of Resources benefit future periods and are not reported in the funds. The deferred outflows of resources consist of the following: Debt Defeasance 4,190 Hedging Derivatives 3,756 Pension Related Deferrals 130,332 Pension Contributions Subsequent to Measurement Date 74,081 Total Deferred Outflows of Resources 212,359
Internal service funds are used by management to charge the costs of certain activities to individual funds. The assets, deferred outflows of resources, liabilities, and deferred inflows of resources of the internal service funds are included in governmental activities in the Statement of Net Position. 107,925
Some liabilities are not due and payable in the current period and, therefore, are not reported in the funds. These liabilities consist of the following: Compensated Absences Payable (54,213) Bonds, Notes, and Capital Leases Payable (715,597) Accrued Interest on Bonds (1,452) Claims and Judgments (72,812) Other Long-Term Liabilities (476,965) Total Long-Term Liabilities (1,321,039)
Deferred Inflows of Resources benefit future periods. The deferred inflows of resources consist of the following: Unavailable Revenue 275,599 Pension Related Deferrals (51,286) Total Deferred Inflows of Resources 224,313
Net Position - Governmental Activities $ 10,507,670
The accompanying notes are an integral part of the financial statements. State of Idaho 21 Comprehensive Annual Financial Report State of Idaho Statement of Revenues, Expenditures, and Changes in Fund Balances Governmental Funds For the Fiscal Year Ended June 30, 2017 (dollars in thousands) Health and General Welfare Transportation REVENUES Sales Tax $ 1,631,295 Individual and Corporate Taxes 1,854,351 Other Taxes 59,845 $ 26,584 $ 324,198 Licenses, Permits, and Fees 25,421 20,891 180,060 Sale of Goods and Services 26,549 107,241 7,717 Grants and Contributions 16,262 1,906,929 271,017 Investment Income 47,915 134 385 Tobacco Settlement 22,964 Other Income 36,623 (377) 1,586 Total Revenues 3,721,225 2,061,402 784,963 EXPENDITURES Current: General Government 139,844 Public Safety and Correction 316,286 3,734 Health and Human Services 24,696 2,647,877 Education 1,817,866 Economic Development 48,163 204,830 Natural Resources 55,636 Capital Outlay 99,907 20,260 287,998 Intergovernmental Revenue Sharing 267,921 58,660 192,895 Debt Service: Principal Retirement 1,036 30,365 Interest and Other Charges 11,035 27,380 Total Expenditures 2,782,390 2,730,531 743,468 Revenues Over (Under) Expenditures 938,835 (669,129) 41,495 OTHER FINANCING SOURCES (USES) Capital Lease Acquisitions Sale of Capital Assets 2,655 117 16,462 Transfers In 252,679 674,735 Transfers Out (1,033,052) (19,838) (17,714) Total Other Financing Sources (Uses) (777,718) 655,014 (1,252) Net Change in Fund Balances 161,117 (14,115) 40,243 Fund Balances - Beginning of Year, as Restated 1,315,057 (4,536) 350,111 Fund Balances - End of Year $ 1,476,174 $ (18,651) $ 390,354
The accompanying notes are an integral part of the financial statements. State of Idaho 22 Comprehensive Annual Financial Report Land Nonmajor Endowments Governmental Total
$ 6,545 $ 1,637,840 24 1,854,375 152,160 562,787 179,291 405,663 $ 72,613 36,283 250,403 509,516 2,703,724 234,110 14,003 296,547 22,964 (137) 16,427 54,122 306,586 914,249 7,788,425
68,223 208,067 63,050 383,070 2,672,573 246,566 2,064,432 192,364 445,357 37,305 163,904 256,845 6,832 28,860 443,857 61,089 580,565
9,163 40,564 5,982 44,397 44,137 839,201 7,139,727 262,449 75,048 648,698
19 19 50,734 3,530 73,498 3,727 46,661 977,802 (67,085) (89,151) (1,226,840) (12,624) (38,941) (175,521) 249,825 36,107 473,177 1,862,667 522,490 4,045,789 $ 2,112,492 $ 558,597 $ 4,518,966
State of Idaho 23 Comprehensive Annual Financial Report
State of Idaho Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balances - Governmental Funds to the Statement of Activities For the Fiscal Year Ended June 30, 2017 (dollars in thousands)
Net Change in Fund Balances - Governmental Funds $ 473,177 Capital outlays are reported as expenditures in governmental funds. However, in the Statement of Activities, these costs are allocated as depreciation expense. Capital outlays exceeded depreciation expense in the current year by the following amount: Capital Outlay $ 246,509 Depreciation Expense (110,239) 136,270 Miscellaneous transactions involving capital assets such as sales (gain/loss) and donations are reported in the Statement of Activities but only proceeds from sales are reported in the governmental funds. (7,218)
Revenues reported in the Statement of Activities that do not provide current financial resources are not reported as revenues in the governmental funds. (50,488)
The issuance of long-term debt provides current financial resources to governmental funds; however, issuing debt increases long-term liabilities in the Statement of Net Position. In the current year the following debt was incurred: Capital Leases (19) (19) 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 consisted of: Bond and Note Principal 39,508 Capital Leases 1,056 40,564
Some expenses reported in the Statement of Activities do not require the use of current financial resources and, therefore, are not reported as expenditures in the governmental funds. Some expenditures reported in the governmental funds either increase or decrease long-term liabilities reported in the Statement of Net Position. In the current year these amounts consisted of: Accrued Interest and Amortization 28,306 Compensated Absences (1,072) Claims and Judgments 96,303 Other Long-Term Liabilities 6,341 129,878 Internal service funds are reported separately from governmental funds in the fund statements. In the government-wide statements, internal service funds are included with governmental activities. 16,665 Change in Net Position - Governmental Activities $ 738,829
The accompanying notes are an integral part of the financial statements. State of Idaho 25 Comprehensive Annual Financial Report State of Idaho Statement of Net Position Proprietary Funds June 30, 2017 (dollars in thousands)
Business-Type Activities - Enterprise Funds College and Unemployment Nonmajor University Compensation Loan Enterprise Funds ASSETS Current Assets Cash and Cash Equivalents $ 95,461 $ 522,185 $ 92 $ 2,503 Pooled Cash and Investments 145,725 4,967 24,736 23,730 Investments 69,953 Accounts Receivable, Net 76,246 58,112 1,420 1,740 Interfund Receivables 3,443 124 185 Inventories and Prepaid Items 9,449 20,031 Due from Component Unit 2,443 Loans, Notes, and Pledges Receivable, Net 4,663 18,634 Other Current Assets 1,053 18 5,793 229 Total Current Assets 408,436 585,406 50,675 48,418 Noncurrent Assets Restricted Cash and Cash Equivalents 7,371 40,188 49,374 Investments 175,910 193,408 Restricted Investments 117,177 Loans, Notes, and Pledges Receivable, Net 19,009 355,470 Other Noncurrent Assets 5,463 8 Capital Assets, Net 1,154,287 30,521 12,123 Total Noncurrent Assets 1,362,040 193,408 543,356 61,505 Total Assets 1,770,476 778,814 594,031 109,923 DEFERRED OUTFLOWS OF RESOURCES Deferred Outflows 44,984 3,252 Total Assets and Deferred Outflows of Resources $ 1,815,460 $ 778,814 $ 594,031 $ 113,175 LIABILITIES Current Liabilities Accounts Payable $ 18,012 $ 19 $ 273 $ 12,307 Payroll and Related Liabilities 30,496 516 Interfund Payables 1,556 6,639 Due to Other Entities 7,310 Unearned Revenue 31,605 12,873 Amounts Held in Trust for Others 3,994 Due to Component Unit 117 Other Accrued Liabilities 8,581 545 5 2,503 Compensated Absences Payable 21,936 734 Bonds, Notes, and Capital Leases Payable 19,225 51 Policy Claim Liabilities Total Current Liabilities 135,522 564 13,151 30,060 Noncurrent Liabilities Bonds, Notes, and Capital Leases Payable 458,975 64 Policy Claim Liabilities Other Long-Term Obligations 104,780 7,369 Total Noncurrent Liabilities 563,755 7,433 Total Liabilities 699,277 564 13,151 37,493 DEFERRED INFLOWS OF RESOURCES Deferred Inflows 9,569 828 NET POSITION Net Investment in Capital Assets 721,797 30,520 12,006 Restricted for: Claims and Judgments Unemployment Compensation 778,250 Permanent Trust - Expendable 58,584 Other Purposes 550,360 62,848 Unrestricted 326,233 Total Net Position 1,106,614 778,250 580,880 74,854 Total Liabilities, Deferred Inflows of Resources, and Net Position $ 1,815,460 $ 778,814 $ 594,031 $ 113,175
The amount reported for the total net position on this statement differs from the amount reported for Business-Type Activities on the Government-wide Statement of Net Position because of an $8,495 consolidation adjustment for internal service fund activities on the Government-wide statement.
The accompanying notes are an integral part of the financial statements. State of Idaho 26 Comprehensive Annual Financial Report Governmental Activities Internal Service Total Funds
$ 620,241 199,158 $ 38,474 69,953 137,518 121 3,752 805 29,480 4,017 2,443 23,297 7,093 2,889 1,092,935 46,306
96,933 36,933 369,318 49,064 117,177 374,479 5,471 14 1,196,931 14,173 2,160,309 100,184 3,253,244 146,490
48,236 3,368 $ 3,301,480 $ 149,858
$ 30,611 $ 865 31,012 497 8,195 7,310 44,478 18,304 3,994 117 11,634 108 22,670 959 19,276 289 3,000 179,297 24,022
459,039 1,714 8,138 112,149 7,232 571,188 17,084 750,485 41,106
10,397 827
764,323 12,659
36,933 778,250 58,584 613,208 54,366 326,233 3,967 2,540,598 107,925 $ 3,301,480 $ 149,858
State of Idaho 27 Comprehensive Annual Financial Report State of Idaho Statement of Revenues, Expenses, and Changes in Fund Net Position Proprietary Funds For the Fiscal Year Ended June 30, 2017 (dollars in thousands)
Business-Type Activities - Enterprise Funds College and Unemployment Nonmajor University Compensation Loan Enterprise Funds OPERATING REVENUES Assessments $ 183,811 Licenses, Permits, and Fees $ 427,381 $ 2,566 Scholarship Allowances (83,220) Sale of Goods and Services 128,879 2,079 $ 449,445 Grants and Contributions 154,385 3,135 11,973 Other Income 14,681 (8) (117) 776 Total Operating Revenues 642,106 186,938 16,501 450,221 OPERATING EXPENSES Personnel Costs 686,974 17,306 Services and Supplies 255,080 2 1,046 143,056 Benefits, Awards, and Premiums 60,222 108,034 160,305 Depreciation 68,465 226 1,196 Other Expenses 17,152 (14) 345 7,628 Total Operating Expenses 1,087,893 108,022 1,617 329,491 Operating Income (Loss) (445,787) 78,916 14,884 120,730 NONOPERATING REVENUES (EXPENSES) Gifts and Grants 124,484 Investment Income 1,478 6,013 5,120 119 Interest Expense (17,274) (8) Intergovernmental Distributions (2,136) (34,709) Gain (Loss) on Sale of Capital Assets (1,297) (4,366) 35 Other Nonoperating Revenues (Expenses) 176 Total Nonoperating Revenues (Expenses) 107,567 6,013 (1,382) (34,563) Income (Loss) Before Contributions and Transfers (338,220) 84,929 13,502 86,167 Capital Contributions 23,533 Transfers In 338,644 781 2,167 Transfers Out (730) (7,804) (1,520) (84,238) Change in Net Position 23,227 77,906 14,149 1,929 Total Net Position - Beginning of Year, as Restated 1,083,387 700,344 566,731 72,925 Total Net Position - End of Year $ 1,106,614 $ 778,250 $ 580,880 $ 74,854
The accompanying notes are an integral part of the financial statements. State of Idaho 28 Comprehensive Annual Financial Report Governmental Activities Internal Service Total Funds
$ 183,811 429,947 (83,220) 580,403 $ 331,859 169,493 151 15,332 395 1,295,766 332,405
704,280 14,849 399,184 18,572 328,561 278,251 69,887 1,179 25,111 5,370 1,527,023 318,221 (231,257) 14,184
124,484 12,730 849 (17,282) (93) (36,845) (5,628) (7) 176 (6) 77,635 743 (153,622) 14,927 23,533 341,592 1,738 (94,292) 117,211 16,665 2,423,387 91,260 $ 2,540,598 $ 107,925
State of Idaho 29 Comprehensive Annual Financial Report State of Idaho Statement of Cash Flows Proprietary Funds For the Fiscal Year Ended June 30, 2017 (dollars in thousands) Business-Type College and Unemployment University Compensation CASH FLOWS FROM OPERATING ACTIVITIES Receipts from Assessments $ 181,368 Receipts from Customers $ 463,305 Receipts from Interfund Services Receipts from Grants and Contributions 150,002 3,135 Payments to Employees (692,176) Payments to Suppliers (263,086) (2) Payments for Interfund Services Payments for Benefits, Awards, and Claims (53,458) (106,501) Other Receipts 13,479 14 Other Payments (9,689) (8) Net Cash Provided (Used) by Operating Activities (391,623) 78,006 CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES Gifts, Grants, and Endowments Received 125,422 Intergovernmental Distributions Transfers In 338,644 781 Transfers Out (730) (7,804) Proceeds from Bonds, Notes, and Loans 181,199 Repayments of Bonds, Notes, and Loans (177,043) Interest Payments Net Cash Provided (Used) by Noncapital Financing Activities 467,492 (7,023) CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES Capital Grants and Contributions 14,303 Proceeds from Bonds and Notes 77,755 Principal Payments (66,376) Interest Payments (16,466) Proceeds from Disposition of Capital Assets 44 Acquisition and Construction of Capital Assets (64,165) Net Cash Provided (Used) by Capital and Related Financing Activities (54,905) CASH FLOWS FROM INVESTING ACTIVITIES Receipt of Interest and Dividends 3,293 11,828 Purchase of Investments (319,959) (17,738) Redemption of Investments 288,706 Other Investing Activities (646) Net Cash Provided (Used) by Investing Activities (28,606) (5,910) Net Increase (Decrease) in Cash, Cash Equivalents, and Pooled Cash (7,642) 65,073 Beginning Cash, Cash Equivalents, and Pooled Cash 256,199 462,079 Ending Cash, Cash Equivalents, and Pooled Cash $ 248,557 $ 527,152 Reconciliation of Operating Income (Loss) to Net Cash Provided (Used) by Operating Activities Operating Income (Loss) $ (445,787) $ 78,916 Adjustments to Reconcile Operating Income to Net Cash Provided (Used) by Operating Activities: Depreciation and Amortization 68,465 Maintenance Costs Paid by Department of Public Works 1,526 Net Changes in Assets and Liabilities: Accounts Receivable/Interfund Receivables (5,774) Inventories and Prepaid Items 1,800 Notes Receivable (147) Other Assets 325 (1,269) Accounts Payable/Interfund Payables (1,102) Unearned Revenue 19 Compensated Absences 1,284 Policy Claim Liabilities Other Accrued Liabilities (4,715) 340 Net Changes in Deferred Outflows/Inflows of Resources (7,498) Net Cash (Used) by Operating Activities $ (391,623) $ 78,006 Noncash Transactions (dollars in thousands): Investments decreased in fair value by $2,128 for colleges and universities, $5,831 for Unemployment Compensation, $2,861 for the Loan Fund, and $816 for Internal Service funds. Colleges and universities acquired assets of $4,074 through donations, $1,141 through state capital appropriations, disposed of capital assets at a loss of $1,722, and amortization of deferred amounts on refunding and bond premiums of $433.
The accompanying notes are an integral part of the financial statements. State of Idaho 30 Comprehensive Annual Financial Report Activities - Enterprise Funds Governmental Activities Nonmajor Internal Loan Enterprise Funds Total Service Funds
$ 181,368 $ 3,934 $ 445,720 912,959 $ 20,587 4,501 4,501 309,930 11,973 165,110 151 (17,772) (709,948) (15,271) (834) (151,530) (415,452) (23,370) (48) (997) (1,045) (1,668) (161,567) (321,526) (277,917) 13,493 55 (430) (196) (10,323) (636) 14,595 118,159 (180,863) 11,861
125,422 (2,136) (34,529) (36,665) 1,738 2,167 341,592 (1,520) (84,031) (94,085) 181,199 (177,043) (1) (1,489) (118,560) 340,420 1,737
14,303 66 77,821 (46) (66,422) (261) (8) (16,474) (107) 35 79 1 (497) (611) (65,273) (912) (497) (564) (55,966) (1,279)
7,848 102 23,071 1,457 (36,298) (373,995) (17,698) 24,204 312,910 483 (2) (648) (4) (4,248) 102 (38,662) (15,762) 8,361 (863) 64,929 (3,443) 56,655 76,470 851,403 78,850 $ 65,016 $ 75,607 $ 916,332 $ 75,407
$ 14,884 $ 120,730 $ (231,257) $ 14,184
226 1,196 69,887 1,179 1,526
(11) 51 (5,734) 26 (712) 1,088 144 (147) (491) (1,435) (648) 196 (2,235) (3,141) (1,684) (700) (681) (1,260) (4) 1,280 42 334 1,614 (2,761) (456) (1,990) (9,488) $ 14,595 $ 118,159 $ (180,863) $ 11,861 The Loan Fund had loan forgiveness in the amount of $2,136 and capitalized interest of $877. Nonmajor Enterprise funds disposed of an asset at a loss of $17. The Internal Service funds disposed of capital assets at a loss of $7. Nonmajor Enterprise funds recorded an interfund payable of $207 due on July 1, 2017, and issued bonds and notes for $66.
State of Idaho 31 Comprehensive Annual Financial Report State of Idaho Statement of Fiduciary Net Position Fiduciary Funds June 30, 2017 (dollars in thousands)
College Savings Pension Investment Private-Purpose Trust Trust Trust Agency ASSETS Cash and Cash Equivalents $ 2,201 $ 5,723 $ 503 $ 23,112 Pooled Cash and Investments 2,506 25,840 Investments: Pooled Short Term 228,082 396,550 11,771 Fixed Income Investments 4,177,239 1,827,336 409,070 Marketable Securities 9,768,583 Mutual Funds and Private Equities 1,993,098 384,750 Mortgages and Real Estate 1,290,208 56,481 Other Investments 2,229 12,378 Receivables: Investments Sold 75,939 67 Contributions 4,428 Interest and Dividends 50,575 5,708 158 Interfund Receivables 2,137 Other Receivables 405 Other Assets 69,782 Capital Assets, Net 11,982 Total Assets 17,679,394 2,291,798 409,469 $ 458,180 LIABILITIES Accounts Payable 913 24 285 $ 161 Interfund Payables 2,137 Due to Other Entities 238 Amounts Held in Trust for Others 457,123 Investments Purchased 114,076 87 Policy Claim Liabilities 2,128 Other Accrued Liabilities 11,782 1,895 658 Total Liabilities 131,036 1,919 372 $ 458,180 NET POSITION Held in Trust For: Employee Pension Benefits 17,043,808 Postemployment Healthcare Benefits 503,217 External Investment Pool Participants 2,289,879 Trust Beneficiaries 1,333 409,097 Total Net Position $ 17,548,358 $ 2,289,879 $ 409,097
The accompanying notes are an integral part of the financial statements. State of Idaho 32 Comprehensive Annual Financial Report State of Idaho Statement of Changes in Fiduciary Net Position Fiduciary Funds For the Fiscal Year Ended June 30, 2017 (dollars in thousands) College Savings Pension Investment Private-Purpose Trust Trust Trust ADDITIONS Contributions Member $ 305,477 Employer 415,080 Transfers In from Other Plans 25,102 Participant Deposits $ 4,452,105 $ 51,658 Total Contributions 745,659 4,452,105 51,658 Investment Income: Net Increase (Decrease) In Fair Value of Investments 1,603,098 (16,394) 26,963 Interest, Dividends, and Other 362,515 15,822 8,278 Less Investment Expense Investment Activity Expense (48,806) (305) Securities Lending Interest Expense Net Investment Income 1,916,807 (877) 35,241 Miscellaneous Income 36 Total Additions 2,662,502 4,451,228 86,899 DEDUCTIONS Benefits and Refunds Paid to Plan Members 972,712 Transfers Out to Other Plans Administrative Expense 13,008 1,736 Earnings Distribution 16,799 Participant Withdrawals 20,735 4,119,615 31,476 Total Deductions 1,006,455 4,136,414 33,212 Change in Net Position Held in Trust for: Employee Pension Benefits 1,596,143 Employee Postemployment Healthcare Benefits 60,189 External Investment Pool Participants 314,814 Trust Beneficiaries (285) 53,687 Net Position - Beginning of Year 15,892,311 1,975,065 355,410 Net Position - End of Year $ 17,548,358 $ 2,289,879 $ 409,097
The accompanying notes are an integral part of the financial statements. State of Idaho 33 Comprehensive Annual Financial Report State of Idaho Statement of Net Position Component Units June 30, 2017 (dollars in thousands) Idaho Housing College and and Finance University Petroleum Clean Health Association Foundation Water Trust Reinsurance ASSETS Cash and Cash Equivalents $ 26,585 $ 8,085 $ 5,564 Pooled Cash and Investments $ 2,455 Investments 276,410 218,992 33,139 16,097 Accounts Receivable, Net 38,147 2,677 394 236 Due from Other Entities Inventories and Prepaid Items 400 130 Due from Primary Government 600,395 4,132 Loans, Notes, and Pledges Receivable, Net 597,476 25,715 Other Current Assets 752 3,726 158 17 Restricted Assets: Cash and Cash Equivalents 114,775 20,866 Investments 304,881 Capital Assets: Nondepreciable 6,229 1,495 Depreciable, Net 45,718 13,908 Total Assets 1,706,887 604,607 36,146 21,914 DEFERRED OUTFLOWS OF RESOURCES Deferred Outflows 47,996 Total Assets and Deferred Outflows of Resources $ 1,754,883 $ 604,607 $ 36,146 $ 21,914 LIABILITIES Accounts Payable $ 1,143 $ 1,653 $ 34 Payroll and Related Liabilities 827 Unearned Revenue 5,220 601 Amounts Held in Trust for Others 64,197 23,650 Due to Primary Government 13,686 Due to Other Entities Other Accrued Liabilities 195,297 24 $ 78 200 Long-Term Liabilities: Due Within One Year 283,452 1,426 1,328 105 Due in More Than One Year 894,128 9,649 2,921 Total Liabilities 1,444,264 50,689 4,327 339 DEFERRED INFLOWS OF RESOURCES Deferred Inflows 1,484 NET POSITION Net Investment in Capital Assets 20,639 Restricted for: Debt Service 130,403 Permanent Trust - Expendable 172,236 Permanent Trust - Nonexpendable 363,301 Other Purposes 158,093 21,575 Unrestricted 18,381 31,819 Total Net Position 309,135 553,918 31,819 21,575 Total Liabilities, Deferred Inflows of Resources, and Net Position $ 1,754,883 $ 604,607 $ 36,146 $ 21,914
The accompanying notes are an integral part of the financial statements. State of Idaho 34 Comprehensive Annual Financial Report Bond Bank Health Insurance Authority Exchange Total
$ 9,811 $ 50,045 $ 322 2,777 544,638 803 42,257
77 607 604,527 347,613 970,804 4,322 8,975
135,641 304,881
527 8,251 22,706 82,332 352,257 33,924 2,755,735
47,996 $ 352,257 $ 33,924 $ 2,803,731
$ 53 $ 2,883 82 909 5,821 87,847 13,686
$ 4,322 390 200,311
19,490 53 305,854 328,123 1,234,821 351,935 578 1,852,132
1,484
23,233 43,872
130,403 172,236 363,301 179,668 322 10,113 60,635 322 33,346 950,115 $ 352,257 $ 33,924 $ 2,803,731
State of Idaho 35 Comprehensive Annual Financial Report State of Idaho Statement of Revenues, Expenses, and Changes in Fund Net Position Component Units For the Fiscal Year Ended June 30, 2017 (dollars in thousands) Idaho Housing College and and Finance University Petroleum Clean Health Association Foundation Water Trust Reinsurance EXPENSES Personnel Costs $ 13,603 $ 3,307 Services and Supplies 13,388 7,729 $ 1,212 $ 171 Benefits, Awards, and Premiums 47,289 50,206 1,404 643 Interest Expense 89,486 298 5 Depreciation 3,444 352 Other Expenses 281 548 Total Expenses 167,491 62,440 2,616 819 PROGRAM REVENUES Charges for Services: Licenses, Permits, and Fees 29,565 2,462 Sale of Goods and Services 5,951 43 588 Investment Income 110,621 331 156 Other Income 4,225 4,080 Operating Grants and Contributions 49,651 100,805 Total Program Revenues 200,013 104,928 2,793 744 Net Revenues (Expenses) 32,522 42,488 177 (75) GENERAL REVENUES Payments from State of Idaho Total General Revenues Capital Contributions 2,130 Permanent Endowment Contributions 1,192 Change in Net Position 34,652 43,680 177 (75) Net Position - Beginning of Year, As Restated 274,483 510,238 31,642 21,650 Net Position - End of Year $ 309,135 $ 553,918 $ 31,819 $ 21,575
The accompanying notes are an integral part of the financial statements. State of Idaho 36 Comprehensive Annual Financial Report Bond Bank Health Insurance Authority Exchange Total
$ 3,123 $ 20,033 $ 454 5,717 28,671 99,542 11,448 101,237 9,810 13,606 29 2 860 11,931 18,652 263,949
455 8,143 40,625 6,582 11,448 29 122,585 47 10 8,362 11,142 161,598 11,950 19,324 339,752 19 672 75,803
2,130 1,192 19 672 79,125 303 32,674 870,990 $ 322 $ 33,346 $ 950,115
State of Idaho 37 Comprehensive Annual Financial Report State of Idaho Notes to the Financial Statements For the Fiscal Year Ended June 30, 2017
INDEX FOR NOTES TO THE FINANCIAL STATEMENTS Note 1. Summary of Significant Accounting Policies A. Reporting Entity ...... 39 B. Government-Wide and Fund Financial Statements ...... 41 C. Measurement Focus, Basis of Accounting, and Financial Statement Presentation ...... 42 D. Financial Statement Elements ...... 43 E. Net Position / Fund Balance ...... 45 Note 2. Deposits, Investments, and Restricted Assets A. Deposits ...... 46 B. Investments ...... 47 C. Restricted Assets ...... 66 Note 3. Derivative Instruments ...... 68 Note 4. Intraentity Transactions A. Interfund Balances ...... 72 B. Interfund Transfers ...... 72 C. Significant Transactions with Related Parties ...... 73 Note 5. Noncurrent Receivables ...... 74 Note 6. Capital Assets ...... 75 Note 7. Deferred Outflows of Resources and Deferred Inflows of Resources A. Deferred Outflows of Resources - Government-Wide ...... 77 B. Deferred Inflows of Resources – Government-Wide ...... 77 C. Deferred Inflows of Resources – Governmental Funds ...... 77 Note 8. Pension Plans A. Summary of Plans Administered by the Public Employee Retirement System of Idaho ...... 78 B. Other State-Sponsored Retirement Plans ...... 84 Note 9. Postemployment Benefits Other Than Pensions A. Summary of Plans ...... 86 B. Sick Leave Insurance Reserve Trust Funds ...... 90 Note 10. Risk Management ...... 93 Note 11. Leases A. State as Lessee ...... 94 B. State as Lessor ...... 95 Note 12. Short-Term Debt ...... 96 Note 13. Bonds, Notes, and Other Long-Term Liabilities A. Compensated Absences ...... 97 B. Revenue Bonds ...... 97 C. Advance and Current Refundings ...... 98 D. Notes Payable ...... 99 E. Claims and Judgments ...... 101 F. Changes in Long-Term Liabilities ...... 102 G. Conduit Debt ...... 103 Note 14. Equity A. Restatement of Beginning Fund Balances and Net Position ...... 104 B. Net Position Restricted by Enabling Legislation ...... 104 C. Governmental Fund Balances – Restricted, Committed, and Assigned ...... 104 D. Budget Stabilization and Minimum Fund Balance ...... 106 Note 15. Donor-Restricted Endowments ...... 107 Note 16. Litigation, Contingencies, Commitments, and Encumbrances A. Litigation and Contingencies ...... 109 B. Commitments ...... 109 C. Encumbrances ...... 110 Note 17. Tax Abatements ...... 111 Note 18. Subsequent Events ...... 113
State of Idaho 38 Comprehensive Annual Financial Report State of Idaho Notes to the Financial Statements For the Fiscal Year Ended June 30, 2017
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The accompanying financial statements of the State of separate organizations for which the State is financially Idaho have been prepared in conformity with generally accountable. Financial accountability exists if the State accepted accounting principles (GAAP) as prescribed by appoints a voting majority of the organization’s governing the Governmental Accounting Standards Board (GASB). board and either 1) is able to impose its will on the The GASB is the standard-setting body for governmental organization or 2) a potential exists for the organization to accounting and financial reporting principles. provide financial benefits to, or impose financial burdens on, the State. During fiscal year 2017, the State implemented the following GASB Guidance: For those entities for which the State does not appoint a • Statement No. 73, Accounting and Financial Reporting voting majority of the governing body, inclusion of the for Pensions and Related Assets That Are Not within entity is required if the organization is fiscally dependent the Scope of GASB Statement 68, and Amendments to on the State. Component units also include legally separate Certain Provisions of GASB Statements 67 and 68. and tax-exempt organizations whose economic resources Accounting and Financial Reporting for Pensions and directly benefit the State, the State is entitled to or has the Related Assets That Are Not within the Scope of GASB ability to access those resources, and the resources are Statement 68 was implemented in 2017. significant to the State. • Statement No. 74, Financial Reporting for Blended Component Unit Postemployment Benefit Plans Other Than Pension Blended component units are legally separate from the State Plans. but are so intertwined with the State that they are, in • Statement No. 77, Tax Abatement Disclosures. substance, the same as the State. The component units are reported as part of the primary government and blended into • Statement No. 78, Pensions Provided through Certain the appropriate funds. Multiple-Employer Defined Benefit Pension Plans. The Fish and Wildlife Foundation was established to • Statement No. 79, Certain External Investment Pools preserve and sustain Idaho's fishing, hunting, and wildlife and Pool Participants. heritage. The Foundation finances construction of offices • Statement No. 80, Blending Requirements for Certain and relies on the State's leasing agreements, resulting in a Component Units - an amendment of GASB Statement significant financial benefit/burden relationship. The No. 14. Foundation is blended as a nonmajor special revenue fund • Statement No. 82, Pension Issues - an amendment of within the Fish and Game fund. The Foundation's financial GASB Statements No. 67, No. 68, and No. 73. statements may be obtained from the following address: Idaho Fish & Wildlife Foundation, 600 S. Walnut St. Boise, • Implementation Guide No. 2016-1. ID 83707. The financial statements are presented for the fiscal year The Idaho State Building Authority was created by Idaho ended June 30, 2017, except for the Idaho Fish and Wildlife Code Section 67-6403 to finance and construct facilities, Foundation, the Idaho State Bar, and the Idaho Dairy such as office buildings and parking garages, to be used and Products Commission (nonmajor special revenue funds); leased by the State. The Authority relies on the State’s the Petroleum Clean Water Trust Fund, The Housing leasing agreements, resulting in a significant financial Company (THC), the Idaho Individual High Risk benefit/burden relationship. The Authority provides Reinsurance Pool, and the Idaho Small Employer Health services to the State of Idaho and some community colleges. Reinsurance Program (discretely presented component The Authority is blended as a nonmajor special revenue units); and the State of Idaho Public Employees’ Deferred fund. The Authority’s financial statements may be obtained Compensation Plan (pension trust fund), whose statements from the following address: Idaho State Building Authority, are for the fiscal year ended December 31, 2016. The Idaho 950 W. Bannock St, Suite 490, Boise, ID 83702. Potato Commission (nonmajor special revenue fund) has a fiscal year that ended August 31, 2016. Discretely Presented Component Units A. Reporting Entity Discretely presented component units are reported in a separate column on the government-wide statements to For financial reporting purposes, the State of Idaho’s emphasize that they are legally separate from the primary reporting entity includes the primary government and its government. Information regarding the State’s discretely component units. The primary government includes all presented component units and contact information to funds, departments, agencies, boards, commissions, obtain their financial reports follow. colleges and universities, and authorities that are considered an integral part of the State. Component units are legally
State of Idaho 39 Comprehensive Annual Financial Report State of Idaho Notes to the Financial Statements For the Fiscal Year Ended June 30, 2017
The Idaho Housing and Finance Association fund includes Section 41-4711. The Pool and the Program, are intended the Association and its component unit, The Housing to promote the availability of health insurance coverage, Company, which was established to support the function regardless of health or claims experience. The Pool and and activities of the Association. The Association was Program provide a safety net to carriers in the form of a risk created by Idaho Code Section 67-6202 for the purpose of pool and reinsurance mechanism to facilitate the guaranteed building and rehabilitating residential housing for persons issue of standardized state-approved health benefit plans. of low income. The Association is authorized to enter into The Pool and the Program operate subject to the supervision agreements that include issuing bonds for the Idaho and control of the same ten-member board, a majority of Transportation Department to facilitate transportation which is appointed by the director of the Department of projects, thereby creating a financial benefit/burden Insurance. The Pool is partially funded through state relationship. The Governor appoints the Association board premium tax revenue, creating a financial burden for the members. (https://www.idahohousing.com/investors/) State. Financial statements may be obtained from the following address: Idaho Individual High Risk Reinsurance The College and University Foundation fund includes the Pool, Idaho Small Employer Health Reinsurance Program, foundations of Boise State University (BSU), Eastern Idaho 3449 East Copper Point Drive, Meridian, ID 83642. Technical College (EITC), Idaho State University (ISU), Lewis-Clark State College (LCSC), and the University of The Idaho Bond Bank Authority was created by Idaho Code Idaho (UI). The foundations were established for the Section 67-8703 authorizing the Authority to issue bonds purpose of soliciting donations in support of the growth and to make loans to municipalities for infrastructure. The development of the colleges’ and universities’ programs and Authority can obtain better credit ratings, better interest activities. Gifts and contributions are held, protected, rates, and lower underwriting costs than municipalities can managed, and invested for the exclusive benefit of the achieve individually. The Authority is administered by a respective colleges and universities. five-member board, of which two members are appointed
by the Governor and three are elected officials. The Boise State University Foundation, Inc. Authority can obligate sales tax revenue as a source of http://giving.boisestate.edu/ payment or security for bonds issued, which imposes a potential direct financial burden on the State. (http:// Eastern Idaho Technical College Foundation, Inc. sto.idaho.gov/Debt-Management/Idaho-Bond-Bank- http://www.eitcfoundation.org/ Authority-IBBA)
Idaho State University Foundation, Inc. The Idaho Health Insurance Exchange was created by http://idahostatefoundation.or g/mission/financial- Idaho Code Section 41-6104 with the purpose to establish statements/ a state-created, market-driven, health insurance exchange that will facilitate the selection and purchase of individual Lewis-Clark State College Foundation, Inc. and employer health benefit plans. The Exchange is http://www.lcsc.edu/giving/ financially self-supporting and does not request financial
support from the State. The Exchange is administered by University of Idaho Foundation, Inc. a 19-member board with 17 total voting members. Of the http://www .uidaho.edu/uidahofoundation/financial- 17 voting members, 14 are appointed by and serve at the highlights pleasure of the Governor. The Director of the Department of Insurance shall review and approve all bylaws for the The Idaho Petroleum Clean Water Trust Fund was created regulation and conduct of business of the Exchange. by Idaho Code Section 41-4905 to provide pollution Financial statements may be obtained from the following liability insurance for eligible owners and operators of address: Your Health Idaho, P.O. Box 943, Boise ID 83701. petroleum storage tanks. The Governor appoints the members of the board and the State approves, and may Related Organizations modify, the Fund's plan of operation. The Legislature sets The State Insurance Fund, created by Idaho Code the fees charged for enrollment in the Fund and imposes a Section 72-901, and the Idaho Health Facilities Authority, transfer fee on petroleum products. Thus, the State has the created by Idaho Code Section 39-1444, are related ability to impose its will on the Fund. Financial statements organizations for which the State is not financially may be obtained from the following address: Idaho accountable although the State appoints a voting majority Petroleum Clean Water Trust Fund, P.O. Box 83720, Boise, of the organizations’ boards. The financial reports of these ID 83720-0044. organizations are excluded from the State’s financial The Health Reinsurance fund includes the Idaho Individual statements. High Risk Reinsurance Pool created, by Idaho Code Section 41-5502, and the Idaho Small Employer Health Reinsurance Program created by Idaho Code
State of Idaho 40 Comprehensive Annual Financial Report State of Idaho Notes to the Financial Statements For the Fiscal Year Ended June 30, 2017
B. Government-Wide and Fund Financial Statements column. The nonmajor funds are displayed individually in combining statements. Government-Wide Statements The State reports the following major governmental funds: The Statement of Net Position and Statement of Activities report information on nonfiduciary activities of the primary The General Fund is the State’s primary operating fund. government and its component units. Primary government It accounts for services that include general government, activities distinguish between governmental and business- public safety and correction, health and human services, type activities. Governmental activities generally are education, economic development, and natural resources. financed through taxes, intergovernmental revenues, and The General Fund includes all financial resources of the other non-exchange transactions. Business-type activities general government except those accounted for in another are financed in whole or in part by fees charged to external fund. parties for goods or services. Internal service funds are The Health and Welfare special revenue fund accounts included with governmental activities in the government- for resources primarily from federal grants that are used wide statements and are included with the proprietary funds for public assistance, medical care, foster care, and other in the fund statements. relief for eligible citizens of Idaho. The Statement of Net Position presents the State’s The Transportation special revenue fund accounts for nonfiduciary assets, deferred outflows of resources, resources primarily from federal grants, fuel taxes, and liabilities, and deferred inflows of resources with assets plus registration fees that are used for administration, deferred outflows of resources minus liabilities and construction, and maintenance of the state highway and deferred inflows of resources reported as net position. aviation systems. The Statement of Activities demonstrates the degree to The Land Endowments permanent fund manages and which the direct expenses of governmental functions, invests the revenues generated from the sale or lease of business-type activities, and component units are offset by lands granted from the federal government under the program revenues. Direct expenses are those that are clearly Idaho Admission Act. identifiable with a specific governmental function, business-type activity, or component unit. Revenues are The State reports the following major proprietary funds: broken out by program and general designations. Program The College and University fund accounts for resources revenues include charges to customers who purchase, use, used by the State’s system of higher education. or directly benefit from goods or services provided by a given function, activity, or component unit. Program The Unemployment Compensation fund accounts for revenues also include grants and contributions that are resources used to provide unemployment benefits to restricted to meeting the operational or capital requirements eligible unemployed workers. of a particular program. Program revenues display the The Loan fund accounts for loans to make improvements extent to which programs are self-funded. The difference to irrigation, wastewater, and drinking water systems. between direct expenses and program revenue displays the net cost of the function to be financed from the State’s Additionally the State reports the following fund types: general revenues. Taxes and other revenue sources that are Governmental Fund Types not attributable to specific programs are shown as general revenues. Special revenue funds account for specific revenue sources that are restricted or committed to expenditures State agencies share the cost of some centralized services. for specified purposes other than debt service or capital These administrative overhead charges are reported as projects. direct program expenses of each of the various functions. Certain indirect costs are paid by the general government The capital projects fund accounts for financial resources function and are not allocated to the other governmental that are restricted, committed, or assigned to finance functions. construction of transportation infrastructure. Fund Statements Permanent funds account for resources that are restricted to the extent that only earnings, and not principal, may Separate fund financial statements are presented for the be used for purposes that support certain state programs. governmental, proprietary, and fiduciary funds. The emphasis in the fund statements is on major funds. Major Proprietary Fund Types governmental and business-type funds are reported as Enterprise funds account for governmental operations separate columns in the fund statements. The remaining that function in a manner similar to private business governmental and business-type funds are considered to be enterprises. The intent is that the cost of providing goods nonmajor funds and are consolidated in a nonmajor funds
State of Idaho 41 Comprehensive Annual Financial Report State of Idaho Notes to the Financial Statements For the Fiscal Year Ended June 30, 2017
or services to the general public on a continuing basis be statements. Differences that make a reconciliation financed or recovered primarily through user charges. necessary include the two differing measurement focuses and bases of accounting between the statements and the Internal service funds account for a variety of inclusion of internal service funds with governmental independent operations that provide goods or services to activities on the government-wide statements. other state agencies or governmental units on a cost- reimbursement basis. Internal service fund activities of The proprietary fund statements include a reconciliation the State include health, disability, property, liability, and between the fund statements and the government-wide other types of insurance; data processing services; and statements for internal service fund activity that is included other general services such as facilities rentals. in the enterprise fund statements but eliminated in the government-wide statements. Fiduciary Fund Types Pension (and other employee benefits) trust funds C. Measurement Focus, Basis of Accounting, and account for resources held in trust for the members and Financial Statement Presentation beneficiaries of the State’s defined benefit pension plans, defined contribution plans, deferred The government-wide statements are prepared using the compensation plan, and other employee benefits. economic resources measurement focus and the accrual Complete financial statements of the State of Idaho basis of accounting, as are the proprietary and fiduciary Public Employees’ Deferred Compensation Plan may fund financial statements. Revenues are recorded when be obtained by writing to the Idaho State Controller’s earned, and expenses are recorded when a liability is Office, Attn: Brandon Woolf, P.O. Box 83720, Boise, incurred, regardless of the timing of cash flows. Grants and ID 83720-0011. similar items are recognized as revenues as soon as all eligibility requirements imposed by the provider have been Investment trust funds account for external participants’ met. The Agency fund reports only assets and liabilities investments with the State’s Local Government using the accrual basis of accounting; they have no Investment Pool and Diversified Bond Fund. measurement focus. The private-purpose trust fund accounts for resources Reimbursements are eliminated in the government-wide held in trust by the Idaho College Savings Program; the Statement of Activities to reduce the grossing-up effect of principal and interest benefit individuals. Complete internal transactions. Reimbursements are repayments financial statements may be obtained by writing to IDeal from funds responsible for particular expenditures or – Idaho College Savings Program, P.O. Box 219944, expenses to the funds that initially paid for them. Kansas City, MO 64121. Reimbursements include payments for maintenance and The Agency fund accounts for residual idle cash and construction projects, federal grant pass-throughs from one investments held by the State on behalf of other state agency to another, insurance premiums, technical governmental entities and administered by the State services, and the allocation of central human resource costs Treasurer’s Office. The fund also accounts for resources to all agencies. collected or held by the State, acting in a custodial Governmental fund statements are reported using the capacity, for distribution to other governmental units or current financial resources measurement focus and the designated beneficiaries. These resources include modified accrual basis of accounting. Revenues are deposits of securities by banks and insurance recognized as they become susceptible to accrual, generally companies. when they are both measurable and available. Revenues Classification of Revenues and Expenses of Proprietary are considered to be available when they are collected Funds within the current period or soon enough thereafter to pay liabilities of the current period. For this purpose, the State Operating and nonoperating revenues and expenses are generally considers revenues to be available if they are presented separately on the operating statements. collected within 60 days of the end of the fiscal period. Operating transactions generally occur if they directly result Significant revenue sources susceptible to accrual include from the provision of goods or services to customers or are sales tax, individual and corporate taxes, motor fuel taxes, otherwise directly related to the principal and usual activity and federal grants. Licenses, permits, fees, and other of the fund. All other revenues and expenses are reported miscellaneous revenues, which are derived from an as nonoperating. underlying transaction, are recognized when received since Reconciling Government-Wide Statements to the Fund they are normally only measurable at that time. Statements Expenditures generally are recorded when a liability is incurred, as under accrual accounting. However, The governmental fund statements include a reconciliation between the fund statements and the government-wide
State of Idaho 42 Comprehensive Annual Financial Report State of Idaho Notes to the Financial Statements For the Fiscal Year Ended June 30, 2017
expenditures related to debt service, compensated absences, disaggregated on the financial statements. See Note 5 for and claims and judgments are recorded when paid. more information on noncurrent receivables.
The State reports only enterprise funds as business-type Internal Balances activities. The business-type activities follow all current Interfund receivables and payables consist of unpaid GASB pronouncements. balances for goods and services provided by one fund to THC and the foundations of BSU, EITC, ISU, and Fish and another and for certain statutorily required transfers due at Wildlife Foundation issue financial statements in year-end. Interfund goods and services provided are accordance with generally accepted accounting principles reported as revenues in seller funds and expenditures or for not-for-profit organizations. The Idaho Petroleum expenses in purchaser funds. These balances are generally Clean Water Trust Fund issues statutory basis financial short-term receivables and payables. See Note 4 for statements. The financial statements and note disclosures interfund schedules and any receivables not expected to be of THC, these foundations, and the Idaho Petroleum Clean collected within one year. Interfund receivable and payable Water Trust Fund have been reformatted to comply with balances and activity have been eliminated from the GASB requirements. government-wide Statement of Net Position, except for the residual amounts due between governmental and business- type activities, which are shown as Internal Balances. D. Financial Statement Elements Inventories and Prepaid Items Assets Inventory consists of materials and supplies that will be consumed within a year. Governmental and proprietary Cash and Cash Equivalents fund-type inventories of supplies and materials are valued Cash and Cash Equivalents consist of bank accounts; petty at cost, which approximates market value, generally using cash; cash in transit; money market accounts; FDIC insured the first-in, first-out method. Prepaid expenses represent nonnegotiable certificates of deposit; and short-term, amounts paid in the current period for services that will highly-liquid investments with a maturity of three months benefit future periods. Inventory and prepaid expenses are or less from the date of acquisition. accounted for using the consumption method.
Pooled Cash and Investments Other Assets Cash balances of most funds are deposited with the State Other assets include interest receivable, and other Treasurer’s Office (STO). Balances not required to meet miscellaneous items. immediate needs are pooled in an internal investment pool. Idaho Code Sections 67-2725 through 67-2749 and Restricted Assets Sections 67-1210, 67-1210A, and 67-1210B govern STO Assets are reported as restricted when constraints on asset deposit and investment policies for the pooled balances. use are imposed by constitutional provisions, enabling See Note 2 for more information. legislation, or external parties; and the constraints change the nature or normal understanding of the availability of the Investments asset. See Note 2 for more information. The State reports most investments at fair value based on published market prices and quotations from investment Capital Assets, Net brokers. Investments held in lieu of surety deposits, which Capital assets include land, improvements to land, land use are not held for investment purposes, are carried at historical rights, buildings, improvements to buildings, machinery, cost in the State’s agency fund. Certain entities disclosed equipment, software, historical art and collections, capital in Note 2 report money market investments and other highly assets in progress, all infrastructure regardless of liquid investments with a remaining maturity of one year acquisition date, and other tangible or intangible assets used or less at the time of purchase using amortized cost. See in operations. Tangible assets with a value of $5,000 or Note 2 for more information. more and intangible assets with a value of $200,000 or more, and a useful life of more than one year are capitalized. The Receivables, Net costs of normal repairs and maintenance that do not add to Receivables in the General Fund consist primarily of the asset’s functionality or materially extend an asset’s income and sales taxes. Special revenue fund receivables useful life are not capitalized. Interest expense related to consist primarily of federal health, education, and capital asset construction is capitalized for enterprise funds. transportation grants, fuel taxes, and vendor receipts. Proprietary fund receivables consist mainly of loans, Capital assets are reported at cost or estimated historical unemployment assessments, and student tuition and fees. cost, if actual cost is not available. In cases where historical Fiduciary fund receivables consist primarily of investments cost is not available, assets are valued using comparable sold in the pension trust funds. The receivables are assets indexed forward or backward with the Consumer Price Index. Donated capital assets are reported at their
State of Idaho 43 Comprehensive Annual Financial Report State of Idaho Notes to the Financial Statements For the Fiscal Year Ended June 30, 2017
acquisition value at the date of donation. Endowment land Deferred outflows of resources consist of costs related to originally granted to the State by the federal government is debt defeasance and decreases in the amortized value of reported at one dollar per acre. hedging derivative instruments to be recognized in a future period. At the time that the instrument is terminated, the Capital assets are depreciated or amortized with the amount will be reported as a decrease of investment income. exception of roads, rights-of-way, land, capital assets in Deferred outflows of resources also consist of pension progress, historical art and collections, and certain contributions made subsequent to the actuarially- intangible assets with an indefinite useful life. Depreciation determined pension liability measurement date and the and amortization are recorded as depreciation expense. For State’s proportionate share of the total pension-related all depreciable major asset classes, depreciation and deferred outflows of resources amortization are calculated on a straight-line basis over their estimated useful lives, as follows: See Notes 7 and 8 for more information. Liabilities Assets Years Payables Buildings and Improvements to Buildings 30 - 50 Payables in the General Fund consist primarily of sales Improvements Other Than Buildings 5 - 50 taxes due to local governments and vendor obligations. Machinery, Equipment, and Other 3 - 40 Payables in the special revenue funds relate primarily to Infrastructure – Bridges 75 vendor obligations, fuel taxes to be distributed to local governments, and Medicaid. Medicaid Payable includes Infrastructure – Other 30 - 50 the amount the State expects to pay within 60 days of fiscal Roads are not depreciated but rather are accounted for under year end. The remaining amount, estimated Medicaid the modified approach. The modified approach recognizes claims expected to be presented within the next year, is that this class of infrastructure will be indefinitely reported as Claims and Judgments within the Long-Term maintained at a certain condition level and as such does not Liabilities due within one year on the government-wide have a limited lifespan. Costs to maintain the roads at the Statement of Net Position. Proprietary fund payables set condition levels are expensed rather than capitalized, consist mostly of payroll liabilities and vendor obligations. unless the road’s service potential is increased or additions The pension trust fund payable is comprised primarily of are made. The Idaho Transportation Department has the investments purchased by the Public Employee Retirement System of Idaho. responsibility for determining and assessing the condition levels, maintaining the inventory of roads, and making Unearned Revenue annual estimates of costs to maintain the roads. Further Unearned revenue is recorded when cash is received prior information regarding infrastructure can be found in the to being earned. Required Supplementary Information. Amounts Held in Trust for Others Historical art and collections include historical artifacts, Amounts held in trust for others consist of cash or other documents, rare books, paintings, portraits, state capitol- assets held for an individual or entity until certain conditions related artifacts, furnishings, films, statues, and of an agreement are met, at which time the asset is returned monuments. Some of the State’s historical art and to the owner. Occasionally the owner may default on the collections have not been capitalized because they are conditions; at that time, the asset held in trust becomes the preserved and protected for public display, education, or property of the State and revenue is recorded. research. The proceeds from the sales of collection items are used to acquire other items for the collection. Historical Other Accrued Liabilities art and collections already capitalized at June 30, 1999 Other accrued liabilities primarily consist of interest have remained capitalized even if they meet the conditions payable and other miscellaneous liabilities. for exemption from capitalization. Long-Term Liabilities Intangible assets acquired in fiscal years ending after Government-wide and proprietary financial statements June 30, 1980, and not previously capitalized, are report long-term obligations as liabilities, with the portion retroactively reported as of July 1, 2009. Some intangible payable within 12 months designated separately from the assets with indefinite useful lives as of July 1, 2009, and portion payable in more than 12 months. Long-term some internally generated intangible assets created prior to liabilities include the following: or in progress as of July 1, 2009, were retroactively reported Bonds and Notes Payable consists of bonds and notes if appropriate historical costs were determinable. issued for the construction or acquisition of facilities See Note 6 for more information on capital assets. Deferred Outflows of Resources
State of Idaho 44 Comprehensive Annual Financial Report State of Idaho Notes to the Financial Statements For the Fiscal Year Ended June 30, 2017
and for funding various projects. Bond premiums and a policy regarding the preferred first usage of unrestricted discounts are deferred and amortized over the life of the or restricted net position. Expense allocation decisions loan. See Note 13 for more information. are made on a program-by-program basis when both restricted and unrestricted net positions are available. Capital Leases Payable consists of lease contracts that transfer substantially all of the benefits and risks of Unrestricted Net Position consists of net position that ownership of property to the State. See Note 11 for does not meet the definition of the two preceding more information. categories. Unrestricted net position may have constraints or designations placed upon them by Compensated Absences Payable includes vacation and management, which can be unilaterally removed. compensatory time earned by employees but not paid. See Note 13 for more information. Fund Balance Policy Claim Liabilities includes amounts for probable Fund balance is the difference between assets and liabilities claims that have been incurred and the amount of the on the governmental fund financial statements. The loss that has been reasonably estimated. See Notes 10 Legislature approves appropriations for State agencies and and 13 for more information. in so doing specifies the funding sources and the order in which restricted, committed, assigned, or unassigned fund Other Long-Term Liabilities consists of payables on balances are spent. Fund balances are classified in the behalf of the State and its agencies for various legal following five categories: proceedings and claims, a net pension liability, net other postemployment benefits obligations, and other Nonspendable fund balances consist of amounts that miscellaneous liabilities. See Notes 8, 9, and 13 for cannot be spent because they are in nonspendable form, more information. such as inventories, prepaid items, and long-term receivables; or they are legally or contractually required Deferred Inflows of Resources to be maintained intact, such as the corpus of the Deferred inflows of resources consists of unavailable permanent fund. revenue, which is revenue that has been earned but is not Restricted fund balances consist of amounts that are available within 60 days, government mandated constrained by either external parties or imposed by law nonexchange transactions, the State’s proportionate share through constitutional provisions or enabling legislation of the total pension-related deferred inflows of resources, and can only be used for specific stated purposes. and increases in the fair value of hedging derivative instruments to be recognized in a future period. At the time Committed fund balances consist of amounts that are that the instrument is terminated, the amount will be constrained by statutes enacted by the Legislature and reported as an increase of investment income. See Notes 7 approved by the Governor. The committed amounts and 8 for more information. cannot be used for any other purposes unless subsequent legislation changes or removes the specified purposes. The legislation that constrains the use of the resources is E. Net Position / Fund Balance separate from the authorization to raise the underlying Net Position revenue. Net position is the difference between assets and deferred Assigned fund balances consist of amounts that are outflows of resources minus liabilities and deferred inflows constrained by the Legislature’s or agency director’s of resources on the government-wide, proprietary, and intent to be used for specific purposes and are neither fiduciary fund financial statements. restricted nor committed. Net position is displayed in the following three categories: Unassigned fund balance is the residual classification for the General Fund. In other governmental funds, if Net Investment in Capital Assets consists of capital assets expenditures incurred for specific purposes exceeded the net of accumulated depreciation, deferred outflows of amounts restricted, committed, or assigned to those resources, deferred inflows of resources, and reduced by purposes, it may be necessary to report a negative outstanding related debt. unassigned fund balance. Restricted Net Position results when third parties, See Note 14 for more information. constitutional provisions, or enabling legislation impose constraints on net position use. The State does not have
State of Idaho 45 Comprehensive Annual Financial Report State of Idaho Notes to the Financial Statements For the Fiscal Year Ended June 30, 2017
NOTE 2. DEPOSITS, INVESTMENTS, AND RESTRICTED ASSETS
A. Deposits Cash and cash equivalents are deposited with various System of Idaho accounts, and the Idaho Public Employees’ financial institutions. Legal provisions regarding deposits Deferred Compensation Plan. In accordance with Idaho are found throughout Idaho Code Title 67. The State Code Sections 67-1210 and 67-1210A, the STO invests the Treasurer’s Office (STO) acts as the State’s bank, receiving pooled cash not needed to meet immediate obligations in and disbursing all moneys except for the following: the various types of investments. The pool balances are State Bar, the Potato Commission, the Dairy Products available on demand to the participants. Interest received Commission, the Wheat Commission, some of the on the pooled cash and investments is paid into the General endowment fund accounts, the Idaho Fish and Wildlife Fund, unless Idaho statute requires allocation of interest to Foundation, the Idaho State Building Authority, some of the specific funds. The weighted average maturity of the pooled colleges’ and universities’ accounts, the Idaho Housing and cash and investments held by the STO was 1.8 years. Finance Association, the college and university Custodial credit risk is the risk that in the event of a financial foundations, the Idaho Individual High Risk Reinsurance institution failure, the State’s deposits may not be returned. Pool, the Idaho Small Employer Health Reinsurance The State does not have a formal policy to address custodial Program, the Idaho Bond Bank Authority, the Idaho Health credit risk. Insurance Exchange, some of the Public Employee Retirement
Custodial Credit Risk at June 30, 2017 (dollars in thousands)
Governmental and Business-Type Fiduciary Component Activities Funds Units Bank Value of Deposits $ 212,243 $ 25,472 $ 174,482 Uninsured and Uncollateralized Deposits 88,253 4,044 7,838 Uninsured Deposits Collateralized with Securities Held by the Pledging Financial Institution 65,232 4,563 Uninsured Deposits Collateralized with Securities Held by the Pledging Financial Institution's Trust Department or Agent, but not in the State's Name
State of Idaho 46 Comprehensive Annual Financial Report State of Idaho Notes to the Financial Statements For the Fiscal Year Ended June 30, 2017
B. Investments • Tax and revenue anticipation instruments of the State or Idaho taxing districts General Investment Policies • Time deposit and savings accounts in state depositories, The Idaho Uniform Prudent Investor Act (Idaho Code state and federal savings and loan associations, or state Sections 68-501 through 68-514) stipulates the standard to and federal credit unions located within the boundaries be followed by state investment personnel. The primary of Idaho focus of the Act is preservation of capital and avoidance of speculative transactions through exercise of reasonable • Revenue bonds of Idaho higher education institutions care, skill, and caution. The goal is to provide a reasonable • Money market funds whose portfolios consist of return while following specific objectives of various trusts. investments specified in this section and are The Act may be expanded, restricted, eliminated, or altered denominated in U.S. dollars by provisions of Idaho statute or a trust. Idaho Code Section 67-1210A authorizes the STO to enter The STO invests idle moneys in accordance with Idaho into the following additional types of transactions: Code Sections 67-1210, 67-1210A, and 67-2739. Unsettled trades payable consisting of $8.8 million in U.S. • Prime banker’s acceptances and prime commercial paper government, U.S. government agency, and U.S. • Sale and repurchase of call options on securities owned government agency mortgage-backed securities are subject by the STO or the Local Government Investment Pool to interest rate risk, credit risk, and concentration of credit risk. • Bonds, notes, and debentures of any U.S. corporation with at least an A rating, at the time of purchase, by a Some investments are made directly by an agency rather nationally recognized statistical rating organization such than by the STO. Only a few agencies are authorized to as Standard & Poor’s or Moody’s make such investments and then only for specific programs. Investments are valued as described in Note 1. The STO manages two external investment pools, the Local Government Investment Pool (LGIP) and the Diversified Internal participant funds of the investment pools generally Bond Fund (DBF). In order to earn a higher yield, Idaho receive income from investments generated by their governmental entities may voluntarily deposit moneys not participation in the external investment pools, with the needed to meet immediate operating obligations in these exception of the Unemployment Compensation enterprise pools. The STO must operate and invest the funds of both fund. The investment income from that fund is assigned to pools for the benefit of the participants. Separately issued the miscellaneous Special Revenue fund per Idaho Code financial reports for LGIP and DBF may be obtained from Section 72-1347A. the State Treasurer’s Office, P.O. Box 83720, Boise, Idaho Types of Investments 83720-0091. Idaho Code Section 67-1210 authorizes the STO and The Endowment Fund Investment Board (EFIB) manages agencies with investment authority to make direct investments of Idaho’s permanent fund, the Land investments in the following types of investments: Endowments fund. Idaho Code Section 57-720 gives the EFIB the authority to formulate investment policies of the • U.S. government obligations, which pledge the full faith permanent endowment fund and earnings reserve funds. and credit of the U.S. government Idaho Code Section 57-723 stipulates that the EFIB and its • General obligation or revenue bonds of the State or any investment managers are governed by the Idaho Uniform Idaho county, city, or taxing district Prudent Investor Act and the Idaho Constitution. In addition to the investment types mentioned previously, the EFIB has • Obligations issued under the Farm Credit Act of 1971; approved the following types of investments: obligations issued by the Federal National Mortgage Association and the Federal Home Loan Bank; and • Collateralized mortgage obligations obligations issued or guaranteed by other agencies or • Domestic and international equities instrumentalities of Idaho or of the United States, including the U.S. Small Business Administration • Non-investment grade bonds guaranteed portion of any approved loan by an Idaho • Exchange-traded funds banking corporation and by the STO • Financial index futures, options, and certain derivatives • Obligations issued by public corporations of the State as approved by the EFIB • Repurchase agreements covered by any legal investment The Retirement Board of the Public Employee Retirement for the State System of Idaho (PERSI) has established a Statement of Investment Policy in accordance with Idaho Code Sections
State of Idaho 47 Comprehensive Annual Financial Report State of Idaho Notes to the Financial Statements For the Fiscal Year Ended June 30, 2017
68-501 through 68-514 and Sections 59-1301 through approval by the Board or subcommittee appointed by the 59-1399. In addition to the investments mentioned above Board for the STO and the EFIB, the following types of investments are approved for PERSI funds: Fair Value of Investments • Derivative instruments, specifically, swaps and forward GASB Statement No. 72, Fair Value Measurement and foreign currency contracts by a few selected managers Application, defines the generally accepted accounting • Private equity real estate investments in open-end and principles required for fair value reporting. Fair value is the closed-end commingled real estate funds, direct real price that would be received to sell an asset or paid to estate, publicly traded real estate investment trusts transfer a liability in an orderly transaction between market (REITs), passive REIT index funds, and other public real participants at the measurement date. The following tables estate companies, private real estate companies, and real display the fair value of the state’s investments at June 30, estate operating venture entities 2017: • Alternative investments upon the recommendation of a qualified consultant after due diligence and with
Primary Government and Fiduciary Funds Fair Value of Investments at June 30, 2017 (Except Endowment Funds and PERSI) (dollars in thousands) Quoted Price in Active Significant Markets for Other Significant Identical Observable Unobservable Net Asset Assets Inputs inputs Total Fair Value Amortized Valuation Investment Type (Level 1) (Level 2) (Level 3) Value (NAV) Cost Not Rated Total Technique Debt Securities: Money Market Funds $ 12,760 $ 12,760 $ 11,094 $ 23,854 Market Certificates of Deposit $ 1,000 1,000 $ 101 1,101 Cost Certificates of Deposit 2,460 7,874 10,334 10,334 Market Repurchase Agreements 391,752 391,752 391,752 Cost Commercial Paper 49,818 49,818 49,818 Cost Commercial paper 210,503 210,503 210,503 Market U.S. Gov't Obligations 2,021,339 2,021,339 386,236 2,407,575 Market U.S. Gov't Agency Obligations 982,391 982,391 982,391 Market U.S. Gov't Agency Mortgage-Backed Securities* 449,136 449,136 449,136 Market U.S. Gov't Corporation Mortgage- Backed Securities* 2,156 2,156 2,156 Market Asset-Backed Securities* 151,295 151,295 151,295 Market Commercial Mortgages* 7,498 7,498 7,498 Market Corporate Obligations 927,105 927,105 927,105 Market Municipal and Public Entity Obligations 1,041 1,041 22,834 23,875 Market Bond Mutual Funds and Other Pooled Fixed-Income Securities 399,964 21,452 421,416 421,416 Market External Investment Pools 2,382 2,382 Cost External Investment Pools 89,366 89,366 12,256 101,622 Market Total Debt Securities 415,184 5,313,726 5,728,910 2,483 432,420 6,163,813 Other Investments: Equity Securities and Mutual Funds 296,159 296,159 296,159 Market Real Estate and Perpetual Trusts $ 6,108 6,108 Cost Real Estate and Perpetual Trusts 533 533 533 Market Commodities 375 375 375 Market Sallie Mae High-Yield Savings Account 12,377 12,377 Market
Total $ 711,343 $ 5,314,634 $ 0 $ 6,025,977 $ 6,108 $ 2,483 $ 444,797 $ 6,479,365 *Mortgage-backed securities are reported using weighted-average life to more accurately reflect the projected term of the security, considering interest rates and repayment factors.
State of Idaho 48 Comprehensive Annual Financial Report State of Idaho Notes to the Financial Statements For the Fiscal Year Ended June 30, 2017
Endowment Funds Fair Value Measurements at June 30, 2017 Investments and Derivative Instruments Measured at Fair Value at June 30, 2017 (dollars in thousands) Quoted Prices in Significant Other June 30, 2017 Active Markets for Observable (value before Identical Assets Inputs accruals) (Level 1) (Level 2) Investments by Fair Value Level
Cash and Cash Equivalents $ 50,656 $ 50,656 Debt Securities: Asset-Backed Securities 2,019 $ 2,019 Commercial Mortgage-Backed Securities 4,241 4,241 Corporate Bonds 104,811 104,811 Government Agencies 20,077 20,077 Government Bonds 148,000 148,000 Government Agency Mortgage-Backed Securities 114,348 114,348 Govt-Issued Commercial Mortgage-Backed 2,811 2,811 Index-Linked Government Bonds 71,803 71,803 Municipal/Provincial Bonds 4,154 4,154 Total Debt Securities 472,264 472,264 Equity Securities: Consumer Discretionary 159,459 159,459 Consumer Staples 98,423 98,423 Energy 68,489 68,489 Financials 229,483 229,483 Health Care 184,645 184,645 Industrials 161,065 161,065 Information Technology 284,660 284,660 Materials 75,439 75,439 Other 34,089 34,089 Telecommunication Services 22,057 22,057 Utilities 28,220 28,220 Equity ETFs 2,321 2,321 Total Equity Securities 1,348,350 1,348,350 Derivatives: Futures Contracts (106) (106) Preferred Stock Securities: Consumer Staples 126 126 Consumer Discretionary 1,789 1,789 Information Technology 1,617 1,617 Materials 9 9 Other 11 11 Total Preferred Stock Securities 3,552 3,552 Total Investments by Fair Value Level 1,874,717 $ 1,402,452 $ 472,264 Investments Measured at the Net Asset Value (NAV) Real Estate Investment Trust (private) 151,310 Total Investments Measured at Fair Value $ 2,026,027
rules where appropriate and applicable. NAV is based on The EFIB has two real estate funds, UBS TPI and DB RAR the fund's gross asset value less the value of any debt or II, reported at Net Asset Value (NAV) invested primarily in other outstanding liabilities, whether held directly or U.S. commercial real estate. The fair value of the investment indirectly through another entity or entities, anticipated in this type has been determined using the NAV per share distributions and similar items, as determined by the (or its equivalent) in accordance with accounting principles Advisor at its discretion. generally accepted in the United States, NCREIF Real Estate Information Standard, and market-based accounting
State of Idaho 49 Comprehensive Annual Financial Report State of Idaho Notes to the Financial Statements For the Fiscal Year Ended June 30, 2017
PERSI Fair Value Measurements at June 30, 2017 Investments and Derivative Instruments Measured at Fair Value at June 30, 2017 (dollars in thousands) Quoted Prices in Active Markets Significant Other Significant Fair Value at for Identical Observable Unobservable Valuation Investment Type June 30, 2017 Assets (Level 1) Inputs (Level 2) Inputs (Level 3) Technique Short Term Securities $ 76,283 $ 76,283 Market Fixed Income Securities: U.S. Government 2,631,946 $ 2,612,763 19,183 Market Asset backed-Securitized 391,213 390,509 $ 704 Market Corporate 941,363 941,363 Market Idaho Mortgages 693,022 693,022 Market Non-U.S. Government 143,214 143,214 Market Total Fixed Income Securities 4,800,758 2,612,763 2,187,291 704 Equities: Domestic 5,707,407 5,707,407 Market Developed Markets 2,682,981 2,682,981 Market Emerging Markets 1,341,745 1,341,745 Market Total Equities 9,732,133 9,732,133 Other Investments: Preferred Securities 90,033 73,826 2,874 13,333 Market Convertible or Exchangeable Securities 151 151 Market Futures 592 592 Market Mutual Funds-Defined Contribution Investment Options 69,106 69,106 Market Total investments by fair value level* $ 14,769,056 $ 12,488,420 $ 2,266,448 $ 14,188 * The Total Return Fund and Short Term Investment Portfolio are unitized Defined Contribution investment options included with the Equity and Fixed Income totals above.
Fair Value at Unfunded Redemption Investments measured at the net asset value (NAV) June 30, 2017 Commitments Frequency Redemption Notice Private Equity Partnerships: Growth Equity $ 28,560 $ 1,432 Corporate Finance/Buyout 727,544 425,921 Distressed Debt 34,393 25,292 Co/Direct Investment 63,271 20,823 Secondaries 19,303 61,103 Venture Capital 99,138 22,897 Private Real Estate: Open Ended Co-mingled Insurance Company Separate 60,296 Affordable Housing 51,030 Multifamily properties (Olympic) 153,518 Value added apartments 164,541 Office/Industrial properties 174,455 Industrial 39,916 Development properties 58,805 Collective Funds: REIT Index Collective Fund 2,970 Daily None TIPS Index Collective Fund 911 Daily None US Broad Equity Market Index Collective Fund 9,423 Daily None Emerging Equity Market Index Fund 972 Daily None US Large Cap Equity Market Index Collective Fund 24,465 Daily None US Bond Market Index Collective Fund 11,032 Daily None International Equity Index Collective Fund 6,487 Daily None US Small/Midcap Equity Index Collective Fund 15,297 Daily None Sick Leave Insurance Reserve Trust Fund: Russell 3000 Index Co-Mingled Fund 271,898 Daily Trade date less 2 days Government Credit Bond Index Co-Mingled Fund 127,507 Daily Trade date less 2 days MSCI ACWI Ex-US Strategy Co-mingled Fund 69,083 Bi-Monthly Trade date less 2 days Total investments measured at the NAV 2,214,815 Total investments measured at fair value $ 16,983,871
State of Idaho 50 Comprehensive Annual Financial Report State of Idaho Notes to the Financial Statements For the Fiscal Year Ended June 30, 2017
The PERSI has the following investments reported at Net professional advisory with expertise in appraisals) Asset Value (NAV): reviews every valuation quarterly and communicates its questions/findings to AEW before approval. The • Private Equity Partnerships are reported at the NAV and valuation of the Affordable Housing properties is include limited partnerships invested in the following calculated by a third party valuation and accounting strategies: Growth Equity, Corporate Finance/Buyout, specialist in the affordable housing industry once a year Distressed Debt, Co/Direct Investments, Secondaries, at December 31st. Development properties are initially and Venture Capital. Fair value is obtained by using a valued at their accumulated cost amounts until valuation provided by the General Partner, adjusting for completion, upon which an appraisal is done. Prudential interim cash flows and rolling forward to the is an open ended co-mingled insurance company measurement date of the Plan. A gatekeeper is used to separate account comprised primarily of real estate monitor values, cash flows, and provide due diligence investments either directly owned or through partnership for new investments. The fair values presented may differ interests and mortgage and other loans on income from actual amounts realized from these investments. On producing real estate. Fair value is generally determined average, distributions received through the liquidation through an appraisal process that is conducted by of underlying assets/investments can occur over the span independent appraisers within a reasonable amount of of 5-15 years. time following acquisition and no less frequently than • Private Real Estate are investments owned directly or annual thereafter. On average, distributions received with other partnership interests and are in several general through the liquidation of underlying assets/investments categories to include Affordable Housing, Multifamily can occur over the span of 5 15 years. properties, Value added apartments, Office/Industrial • Collective Trust Funds are eight trust funds offered as Properties, and Development Properties and are listed investment options in the Defined Contribution Plan, with investments measured at the NAV. Each property in reported at the Net Asset Value. The NAV is based on the the Portfolio is externally appraised at a minimum every value of the underlying investments. Collective Trusts year. Appraisals are completed by third-party MAI are regulated, but not registered investment vehicles. certified appraisers. For properties not subject to an external appraisal during a quarter, internal valuations • Co-Mingled Funds are the investment vehicle used for are completed by AEW (the Plan’s private real estate the Plan’s Sick Leave Insurance Reserve Trust Fund consultant) (or Pinnacle and reviewed by AEW), based where funds are pooled from numerous plans. They are on updated operational performance at the subject valued at net asset value of units held at the end of the property and any relevant sale comparable. A discounted period based upon the fair value of the underlying cash flow analysis is utilized to determine asset value. investments. Prior to finalizing the values, Altus (an independent
State of Idaho 51 Comprehensive Annual Financial Report State of Idaho Notes to the Financial Statements For the Fiscal Year Ended June 30, 2017
Component Unit Fair Value of Investments at June 30, 2017 (dollars in thousands) Quoted Prices in Active Markets Significant Significant for Other Un- Net Identical Observable observable Total Asset Assets Inputs inputs Fair Value Amortized Not Valuation Investment Type (Level 1) (Level 2) (Level 3) Value (NAV) Cost Rated Total Technique Debt Securities: Money Market Funds* $ 184,613 $184,613 $ 272 $ 184,885 Market Certificates of Deposit** $ 1,000 1,000 Market U.S. Gov't Obligations*** 12,891 $ 19,651 32,542 32,542 Market U.S. Gov't Agency Obligations 34,731 28,968 63,699 63,699 Market U.S. Gov't Agency Mortgage-Backed Securities 49,377 49,377 49,377 Market Corporate Obligations 39,198 34,088 73,286 73,286 Market Municipal and Public Entity Obligations 133 10 143 143 Market Bond Mutual Funds and Other Pooled Fixed- Income Securities 14,064 22,160 36,224 36,224 Market Total Debt Securities 335,007 104,877 439,884 272 1,000 441,156 Other Investments: Cash Equivalents included with Investments 119 119 119 Market Domestic Equities 67,204 67,204 67,204 Market Foreign Equities 1,877 1,510 3,387 3,387 Market Private Equities 8,146 $ 2,601 10,747 16,437 27,184 Market Investment Agreements 630 630 630 Market Corporate Obligations Without Maturity Dates 64 64 64 Market Preferred Securities Without Maturity Dates 149 149 149 Market Equity and Income Mutual Funds****** 8,571 25,315 33,886 304 34,190 Market Mutual Funds 179,318 179,318 179,318 Market International Equity Funds 30,249 7,124 37,373 37,373 Market Real Estate and Perpetual Trusts**** 4,750 2,974 3,074 10,798 $ 917 133 11,848 Market Commodities 1,380 1,380 1,380 Market Insurance Annuities 148 243 391 391 Market Commingled Funds 31,503 31,503 Market Hedge Funds 107 9,059 487 9,653 9,653 Market Land Held by Endowment***** 820 4,422 5,242 Market Total $ 628,129 $ 160,692 $ 6,162 $794,983 $ 49,032 $ 5,339 $ 1,437 $ 850,791 *Includes $0.3 million reported with pooled cash and investments. **Includes $1 million valued at cost and included with cash and cash equivalents ***Includes $1.8 million valued at cost. ****Includes $0.9 million valued at cost. *****Includes $4.4 million valued at cost. ******Includes $0.3 million valued at cost. values have been determined using the NAV per share. The The private equity shown at NAV above are invested in real fair value of the private equity limited partnerships have no estate, venture funds, and international funds. The fair readily ascertainable market prices. Similar to real estate,
State of Idaho 52 Comprehensive Annual Financial Report State of Idaho Notes to the Financial Statements For the Fiscal Year Ended June 30, 2017
costs closely approximate fair value of recent acquisitions. that were uninsured and held by the counterparty's trust Therefore, the fair value of private equity limited department or agent but not in the State's name. partnership investments are based on the valuations as • The Boise State University Foundation does not have a presented in the funds' December 31st audited financial formal policy that would limit its exposure to custodial statements. Generally, the companies within a fund are credit risk. The Foundation had various investments of valued by the general partner, taking into account many $123.0 million that were uninsured and held in the name factors such as the purchase price, estimated liquidation of the broker. value, significant events like initial public offerings, bankruptcies, additional rounds of financing, and other • The University of Idaho Foundation minimizes exposure relevant factors. The fair value may differ significantly to custodial credit risk by requiring that investments, to from the values that would have been used had a ready the extent possible, be clearly marked as to Foundation market for the investments existed. Although these ownership and further to the extent possible, be held in differences could be material to the individual values, the Foundation’s name. The Foundation had various private equity only represents 5.63 percent of total investments of $145.6 million that were held in the name investments. of the counterparty for benefit of the Foundation. The commingled funds shown at NAV above are held in an Interest Rate Risk of Debt Securities investment trust that invests in debt securities. The trust’s Investments in debt securities that are fixed for longer investment objective is to outperform the Barclays U.S. periods are likely to experience greater variability in fair Government/Credit Index. The trust may invest in out-of- values due to future changes in interest rates. The State has benchmark securities in order to provide value and not adopted a formal policy that addresses interest rate risk, diversification. except as follows: Custodial Credit Risk of Investments • The EFIB has adopted the policy that the fixed-income Custodial credit risk for investments is the risk that in the weighted average of the EFIB portfolio may not exceed event of the failure of a counterparty, the value of that of the Barclays Capital Aggregate Bond Index by investments or collateral securities that are in the possession more than one-half year. The separate Endowment of an outside party will not be recovered. The State does Funds Interest Rate Risk schedule quantifies the interest not have a formal policy to address custodial credit risk. rate risk of EFIB fixed-income securities. The following describes the policies and risks for those state • The PERSI manages interest rate risk using the effective entities that are exposed to custodial credit risk: duration methodology, which takes into account the • The Idaho Fish and Wildlife Foundation does not have a options on bonds and scales the risk of price changes on formal policy that would limit its exposure to custodial bonds depending upon the degree of change in rates and credit risk. The Foundation has $8.4 million in the slope of the yield curve. All of the PERSI fixed- investments that were uninsured and held in the name of income portfolios are managed in accordance with the counterparty. operational guidelines, which include an expected range of interest rate risk in the portfolio. Per the PERSI policy, • The Idaho Workers’ Compensation Law (Idaho Code these characteristics are established and monitored Title 72) requires sureties to maintain a security deposit within each portfolio, with variances reported by the with the STO in order to write workers’ compensation manager. The reporting of effective duration found in insurance or to be self insured. The amount of sureties the separate schedule following the PERSI investments that are held by the bank in the name of the insurance schedule quantifies the interest rate risk of the PERSI company and subject to custodial credit risk was $409.0 fixed-income assets. Some of the large durations are due million. to the use of options and forward foreign currency • The PERSI investment policy mitigates custodial credit contracts. risk by requiring that investments, to the extent possible, • The Idaho Housing and Finance Association has adopted be registered in the name of the PERSI and be delivered bond indentures, bond resolutions, and trust resolutions to a third-party custodian. Short-term investments are that provide investment maturities based upon the cash created through daily sweeps of excess cash. The PERSI requirements of the Association’s accounts, as had various short-term investments of $6.9 million held determined by authorized Association investment by various counterparties, not in the PERSI’s name. officers. The Association’s investment maturities are • The University of Idaho Retiree Benefits Trust does not presented as part of the Component Units Maturity of have a formal policy to to limit its exposure to custodial Debt Investments at June 30, 2017. credit risk. The Trust had $31.2 million in investments
State of Idaho 53 Comprehensive Annual Financial Report State of Idaho Notes to the Financial Statements For the Fiscal Year Ended June 30, 2017
Primary Government and Fiduciary Funds Investments and Maturities at June 30, 2017 (Except Endowment Funds, PERSI, Idaho College Savings Program, and Deferred Compensation Plan) (dollars in thousands) More Total Less than 6-10 11-15 16-20 21-25 26-30 than 30 Fair Investment Type 1 year 1-5 Years Years Years Years Years Years Years Value Debt Securities: Money Market Funds $ 3,423 $ 3,423 Certificates of Deposit** 2,044 $ 9,391 11,435 Repurchase Agreements 391,752 391,752 Commercial Paper 260,321 260,321 U.S. Gov't Obligations 2,002,830 309,185 $ 95,462 $ 98 2,407,575 U.S. Gov't Agency Obligations 616,837 350,871 12,498 $ 2,057 $ 29 $ 99 982,391 U.S. Gov't Agency Mortgage- Backed Securities* 2,321 132,071 314,173 571 449,136 U.S. Gov't Corporation Mortgage- Backed Securities* 2,158 2,158 Asset -Backed Securities* 66,711 84,583 151,294 Commercial Mortgages* 217 1,300 5,981 7,498 Corporate Obligations 335,961 507,597 83,498 47 927,103 Municipal and Public Entity Obligations 22,970 326 420 103 56 23,875 Bond Mutual Funds and Other Pooled Fixed-Income Securities 226,551 14,086 12,909 1,400 6,647 2,488 88 $ 30 264,199 External Investment Pools 104,004 104,004 Total Debt Securities $ 4,035,942 $1,411,568 $ 524,941 $ 4,178 $ 6,732 $ 2,587 $ 186 $ 30 $ 5,986,164 Other Investments: Equity Securities and Mutual Funds 77,281 Real Estate and Perpetual Trusts 6,645 Commodities 376 Total $ 6,070,466
*Mortgage-backed securities are reported using weighted-average life to more accurately reflect the projected term of the security, considering interest rates and repayment factors. **$0.1 million valued at cost
State of Idaho 54 Comprehensive Annual Financial Report State of Idaho Notes to the Financial Statements For the Fiscal Year Ended June 30, 2017
Endowment Funds Interest Rate Risk at June 30, 2017 (dollars in thousands) Modified Investment Type Fair Value Duration In Years Debt Securities: Asset Backed Securities $ 2,019 2.2 Commercial Mortgage-Backed 4,241 5.0 Corporate Bonds 104,811 7.4 Government Agencies 20,077 4.1 Government Bonds 148,000 6.3 Government Mortgage Backed Securities 114,348 4.5 Gov't-issued Comm. Mtg-Backed 2,811 2.4 Index Linked Government Bonds 71,803 7.8 Municipal/Provincial Bonds 4,154 10.1 Total Endowment Fund Debt Securities 472,264 Other Investments: Equity Investments 1,456,943 Money Market Funds 12,915 Real Estate Investment Trust (Private) 77,015 Total Other Endowment Fund Investments 1,546,873 Unsettled Trades: Receivable for Investments Sold (10,797) Payable for Investments Purchased 17,687 Total Endowment Fund Investments $ 2,026,027
PERSI Investments at June 30, 2017 (dollars in thousands) Investment Type Fair Value Domestic Fixed-Income $ 3,825,431 Commingled Domestic Fixed-Income 127,507 International Fixed-Income 10,766 Idaho Commercial Mortgages 664,998 Short-Term Domestic Investments 228,082 Real Estate 625,211 Domestic Equities 6,200,681 Commingled Domestic Equity 271,898 International Equities 3,226,921 Commingled International Equity 69,083 Private Equity 932,895 Mutual Funds 831,098 Total PERSI Investments $ 17,014,571
State of Idaho 55 Comprehensive Annual Financial Report State of Idaho Notes to the Financial Statements For the Fiscal Year Ended June 30, 2017
PERSI Effective Duration of Fixed Income Assets by Security Type at June 30, 2017 (dollars in thousands) Domestic Securities International Securities Effective Effective Duration in Duration Total Fair Investment Type Fair Value Years Fair Value in Years Value Asset -Backed Securities $ 25,748 1.56 $ 51 0.74 $ 25,799 Asset -Backed Securities 44 * 115 * 159 Mortgages 30,719 2.42 30,719 Mortgages 739 * 739 Commercial Paper 29,709 0.41 29,709 Corporate Bonds 1,084,707 7.45 1,084,707 Corporate Bonds 455 * 455 Fixed-Income Derivatives 122 312.96 13 (503.94) 135 Fixed-Income Derivatives 47 * 47 Government Agencies 76,142 8.20 76,142 Government Bonds 1,080,808 7.20 11,465 6.42 1,092,273 Government Mortgage-Backed Securities 158,092 1.95 158,092 Government Mortgage-Backed Securities 75 * 75 Pooled Investments 16,593 0.08 16,593 Pooled Investments - SLIRF Domestic Fixed Income Fund 127,507 * 127,507 Private Placements 137,154 4.68 137,154 Private Placements 55,940 * 55,940
U.S. Treasury Inflation-Protected Securities 1,528,519 8.78 1,528,519 Idaho Mortgages 693,022 * 693,022 Total PERSI Fixed Income Securities $ 5,046,142 $ 11,644 $ 5,057,786
*Duration calculations for some securities are not available.
Idaho College Savings Program Investments at June 30, 2017 (dollars in thousands)
Average Maturity Investment Type Fair Value In Years Money Market Funds $ 20,431 Less than 1 Bond Funds 103,919 8.4 Inflation-Linked Bond Fund 6,231 2.6 International Bond Funds 47,067 9.2 Equity Funds 131,116 International Equity Funds* 87,758 Sallie Mae High-Yield Savings Account 12,378 Total Idaho College Savings Program Investments $ 408,900
*Investments may be subject to foreign currency risk.
State of Idaho 56 Comprehensive Annual Financial Report State of Idaho Notes to the Financial Statements For the Fiscal Year Ended June 30, 2017
Deferred Compensation Plan Investments at December 31, 2016 (dollars in thousands) Average Maturity Investment Type Fair Value In Years Fixed Income: Empower $ 34 Idaho Retiree Fixed Fund** 118,508 11.30 Nationwide Life Fixed Fund** 74,271 11.30 Total Fixed Income 192,813 Variable Income***: American Century Heritage Fund 37,234 Fidelity 27,568 The Income Fund of America 17,320 6.30 Nationwide Investor Destinations Moderately Aggressive Fund 13,362 Neuberger Berman 12,564 State Street Equity 11,130 Nationwide Investor Destinations Moderate Fund 8,744 2.69 Dodge & Cox Stock Fund 10,183 Nationwide Investor Destinations Aggressive Fund 8,464 Dreyfus 7,247 Capital World 6,912 * Dreyfus Bond Market Index Fund 5,682 8.19 EuroPacific Growth Fund 5,294 * Metropolitan West Total Return Bond Fund - Class M 5,458 7.52 JPMorgan 6,322 Van Kampen 4,713 Dreyfus Small cap Stock Index Fund 5,381 Templeton Foreign Fund 4,595 * Nationwide Destinations 2025 Fund 2,973 Nationwide Destinations 2030 Fund 2,521 Charles Schwab 2,156 Nationwide Destinations 2020 Fund 1,768 Nationwide Destinations 2035 Fund 1,658 Nationwide Investor Destinations Moderately Conservative Fund 1,797 Legg Mason Partners 999 Nationwide Investor Destinations Conservative Fund 1,224 Nationwide Destinations 2015 Fund 743 Nationwide Destinations 2040 Fund 901 Nationwide Destinations 2045 Fund 564 0.95 Nationwide International Index Fund 236 Nationwide Destinations 2050 Fund 419 0.54 Nationwide Destinations 2055 Fund 26 0.41 Empower 27 Carrier Suspense 1 Investment Suspense (17) Total Variable Income 216,169 Annuity Payout Options: DCVAII 34 Nationwide Life 1,870 Total Annuity Payout Options 1,904 Life Insurance Contracts: Transamerica Premier 326 Total Deferred Compensation Plan Investments and Life Insurance Contracts $ 411,212 *Represents international mutual funds and are subject to foreign currency risk. **Funds have an average credit rating of A-. All other investments are unrated. ***Variable income investments categorized as a level 1 input. All others reported at contract value
State of Idaho 57 Comprehensive Annual Financial Report State of Idaho Notes to the Financial Statements For the Fiscal Year Ended June 30, 2017
Component Units Maturity of Debt Investments at June 30, 2017 (dollars in thousands) Less More Total than 1 1-5 6-10 11-15 16-20 21-25 26-30 than 30 Fair Investment Type Year Years Years Years Years Years Years Years Value Debt Securities: Money Market Funds* $ 184,885 $ 184,885 Certificates of Deposit** 1,000 1,000 U.S. Gov't Obligations*** 10,560 $ 20,432 $ 1,458 $ 10 $ 15 $ 41 $ 26 32,542 U.S. Gov't Agency Obligations 1,148 32,658 619 9,753 19,463 58 63,699 U.S. Gov't Mortgage-Backed Securities 6 41 18 500 34 48,778 49,377 Corporate Obligations 16,491 54,804 572 836 508 46 29 73,286 Municipal Obligations 31 41 8 11 32 20 143 Bond Mutual Funds 326 3,679 31,682 102 115 $ 271 49 36,224 Total Debt Securities $ 214,416 $ 111,645 $ 34,390 $ 11,209 $ 20,146 $ 119 $ 271 $ 48,960 $ 441,156 Other Investments: Cash Equivalents included with Investments 119 Domestic Equities 67,204 Foreign Equities 3,387 Private Equities 27,183 Investment Agreements 630 Corporate Obligations Without Maturity Dates 64 Preferred Securities Without Maturity Dates 149 Equity and Income Mutual Funds****** 34,190 Mutual Funds 179,319 International Equity Funds 37,373 Real Estate and Perpetual Trusts**** 11,848 Commodities 1,380 Insurance Annuities 391 Commingled Funds 31,503 Hedge Funds 9,653 Land Held by Endowment***** 5,242 Component Units Investments $ 850,791
*Includes $0.3 million reported with pooled cash and investments. **Includes $1 million reported at cost and with cash and cash equivalents ***Includes $1.8 million valued at cost. ****$0.9 million valued at cost. *****$4.4 million valued at cost. ******Includes $0.3 million valued at cost.
State of Idaho 58 Comprehensive Annual Financial Report State of Idaho Notes to the Financial Statements For the Fiscal Year Ended June 30, 2017
Credit Risk of Debt Securities with an absolute minimum of investment grade by Standard & Poor’s (S&P) or Moody’s. The risk that an issuer of debt securities or another counterparty to an investment transaction will not fulfill an • The PERSI has no strict limitations for credit risk obligation is commonly expressed in terms of the credit exposures. Each PERSI portfolio is managed in quality rating issued by a national rating organization. accordance with operational guidelines that outline Investments explicitly guaranteed by the U.S. government expected portfolio characteristics which usually, but not are not considered to have credit risk and do not require always, include credit quality and exposure levels. Per disclosure of credit quality ratings. Unless otherwise stated, the PERSI policy, these characteristics are established the ratings presented use the Moody’s scale. The State does and monitored within each portfolio, with variances not have a formal policy to address credit risk of debt reported by the manager. securities. The following Boards have formally adopted • The Idaho Housing and Finance Association policies policies that address credit quality ratings of debt securities: permit investments for each bond issue in accordance • The State Board of Education policy allows colleges and with the various bond indentures and bond resolutions universities to invest in corporate bonds and mortgage- adopted by the Association. Program account backed securities of A grade or better and commercial investments are restricted to those allowed by Idaho paper of prime or equivalent grade without prior Board Code Section 67-6215B or by federal regulations. The approval. Association has adopted resolutions as policy for authorized investments in the Affordable Housing • The EFIB investment policy states that investment grade Investment Trust and the Loan Guaranty Trust. The bonds must be rated BBB (or the equivalent) or better, Association has not adopted a formal policy related to commercial paper must be rated A1 (or the equivalent) the Association’s business operations investments. or better, and money market funds shall contain securities
Primary Government and Fiduciary Funds Credit Quality Ratings of Debt Securities at June 30, 2017 (Except Endowment Funds, PERSI, and Deferred Compensation Plan) (dollars in thousands) Investment Type Aaa Aa A Baa Ba B C A1-P1 NP Unrated Fair Value Money Market Funds* $ 8,773 $ 1 $ 22,472 $ 31,246 Certificates of Deposit** 29 $ 1,002 $ 953 9,451 11,435 Repurchase Agreements 391,752 391,752 Commercial Paper $ 210,503 49,818 260,321 U.S. Gov't Agency Obligations 335,141 645,560 1,690 982,391 U.S. Gov't Agency Mortgage-Backed Securities 446,491 614 2,031 449,136 Asset-Backed Securities 151,294 151,294 Commercial Mortgages 6,198 1,300 7,498 Corporate Obligations 34,667 259,079 624,964 $ 8,195 $ 148 51 927,104 Municipal and Public Entity Obligations 228 636 177 22,834 23,875 Bond Mutual Funds and Other Pooled Fixed-Income Securities 9,247 22,697 1,975 3,586 $ 610 220 $ 261 382,821 421,417 External Investment Pools 104,004 104,004 Total $992,068 $ 928,587 $ 629,418 $ 11,781 $ 610 $ 368 $ 261 $ 210,503 $ 953 $ 986,924 $ 3,761,473
*Includes $7.4 million reported with pooled cash and investments. Money market funds also include $0.9 million reported at cost and with cash and cash equivalents **Includes $0.1 million reported at cost
State of Idaho 59 Comprehensive Annual Financial Report State of Idaho Notes to the Financial Statements For the Fiscal Year Ended June 30, 2017
Endowment Funds Credit Quality Ratings of Debt Investments at June 30, 2017 (dollars in thousands) Not Fair Investment Type Aaa Aa A Baa Ba* Agy Rated Value Asset Backed Securities $ 794 $ 18 $ 1,207 $ 2,019
Commercial Mortgage-Backed 4,241 4,241 Corporate Bonds 2,869 $ 10,201 $ 38,511 49,150 $ 2,968 1,113 104,812 Government Agencies 15,611 1,120 546 916 $ 708 1,176 20,077 Government Bonds 143,438 249 1,953 2,113 248 148,001 Government Mortgage Backed Securities 110,188 4,160 114,348 Gov't-issued Comm. Mtg-Backed 1,004 1,807 2,811 Index Linked Government Bonds 71,803 71,803 Municipal/Provincial Bonds 381 2,093 1,335 67 277 4,153 Total $ 240,141 $ 13,663 $ 42,345 $ 52,264 $ 2,968 $ 112,951 $ 7,933 $472,265
*The Ba column includes bonds that are split rate and meet the minimum requirement of one of the two ratings agencies specified in the EFIB Statement of Investment Policy.
PERSI Credit Quality Ratings of Fixed-Income Securities at June 30, 2017 (dollars in thousands) Investment Type Domestic International S & P Rating Level Securities Securities Fair Value A-1+ $ 14,982 $ 14,982 A-1 29,708 29,708 AAA 102,016 $ 771 102,787 AA 340,065 340,065 A 399,703 3,744 403,447 BBB 517,799 1,679 519,478 BB 10,436 2,312 12,748 B 4,567 4,567 CCC 3,743 3,743 CC 1,631 1,631 D 1,140 1,140
Not Rated 174,736 3,138 177,874 Total $ 1,600,526 $ 11,644 $ 1,612,170
State of Idaho 60 Comprehensive Annual Financial Report State of Idaho Notes to the Financial Statements For the Fiscal Year Ended June 30, 2017
Component Units Credit Quality Ratings of Debt Securities at June 30, 2017 (dollars in thousands) Fair Investment Type Aaa Aa A Baa Ba B Caa C D Unrated Value Money Market Funds* $ 272 $ 184,613 $ 184,885 Certificates of Deposit** 1,000 1,000 U.S. Gov't Agency Obligations 52,804 $ 10,890 5 63,699 U.S. Gov't Agency Mortgage Backed Securities 49,377 49,377 Corporate Obligations 6,030 22,703 $28,582 $14,688 $ 280 $ 216 $ 5 $ 18 764 73,286 Municipal Obligations 10 8 25 37 18 8 3 34 143 Bond Mutual Funds 17,072 4,705 3,033 3,480 5,095 188 1 $ 4 31 2,614 36,223 Total $ 125,565 $ 38,306 $31,640 $18,205 $ 5,393 $ 412 $ 9 $ 4 $ 49 $ 189,030 $ 408,613
*Includes $0.3 million reported with cash and cash equivalents **Includes $1 million reported at cost and with cash and cash equivalents
• The STO investment policy limits the amount that can Concentration of Credit Risk be invested in any one issuer. The policy may be obtained from their website at http://sto.idaho.gov. Concentration of credit risk describes the heightened exposure to loss when a considerable number of • The Idaho Housing and Finance Association places no investments exist in a single issuer. The State has adopted limit on the amount the Association may invest in one a principle that governments should provide note disclosure issuer. when at least 5 percent of the total government investments • The Idaho Individual High Risk Reinsurance Pool’s are concentrated in any one issuer. Investments in policy provides that no more than 10 percent of the short- obligations explicitly guaranteed by the U.S. government, term fund balance may be invested in the securities of mutual funds, and other pooled investments are exempt any one issuer. The policy exempts the following types from disclosure. State statute places no limit on the amount of investments: obligations of the U.S. government or that may be invested in any one issuer. its agencies, repurchase agreements collateralized by • The State and the colleges and universities have not obligations of the U.S. government or its agencies, adopted a formal policy to address concentration of credit federally insured certificates of deposit, mutual funds, risk. and money market mutual funds.
Primary Government and Fiduciary Funds Concentration of Credit Risk at June 30, 2017 (dollars in thousands) Percent of Portfolio Portfolio Issuer Fair Value Investments Idaho State Bar: Bank of the Cascades* $ 101 5.1 Fannie Mae Notes 273 13.9 Federal Home Loan Bank 108 5.5
STO Pool: Federal Home Loan Mortgage Corp. 236,535 11.6 Federal National Mortgage Association 119,544 5.9 South Street Securities 203,000 10.0
Idaho State University: Federal Home Loan Mortgage Corporation 7,664 37.4 Federal National Mortgage Association 8,477 41.3
University of Idaho: Federal Home Loan Mortgage Corporation 4,417 5.7
*Valued at Cost
State of Idaho 61 Comprehensive Annual Financial Report State of Idaho Notes to the Financial Statements For the Fiscal Year Ended June 30, 2017
Component Unit Concentration of Credit Risk at June 30, 2017 (dollars in thousands)
Percent of Portfolio Component Unit Issuer Fair Value Investments Idaho Housing and Finance Federal Farm Credit Bank $ 17,070 6.3 Association: Government National Mortgage Association 47,907 17.6 Petroleum Clean Water Trust: Federal National Mortgage Association 7,332 21.9 Health Reinsurance: Federal Farm Credit Bond 1,999 12.4 Federal Home Loan Bank 10,247 63.7 Federal National Mortgage Association 1,999 12.4
Foreign Currency Denominated Investments Investments denominated in foreign currencies face a of currency exposure. Each portfolio is monitored for potential risk of loss in fair value from changes in currency currency exposure. Managers are required to report exchange rates. The following describes the policies related variances. to foreign currency risk for those state entities that have • The Lewis-Clark State College Foundation investment investments denominated in a foreign currency: policy permits investments in equities and debt • The EFIB investment policy statement permits investing securities denominated in foreign currencies. The up to 19 percent of the EFIB total investments in policy limits the investments in international equities international equities. No foreign fixed-income to no more than 17.5 percent of the Foundation’s total securities are permitted except currency. investment portfolio. • The PERSI investment policy provides individual • The University of Idaho Foundation investment policy manager guidelines, which outline at a minimum, a range limits the exposure to foreign investment holdings in the portfolio.
State of Idaho 62 Comprehensive Annual Financial Report State of Idaho Notes to the Financial Statements For the Fiscal Year Ended June 30, 2017
Endowment Foreign Currency Risk at June 30, 2017 (dollars in thousands) Fair Value in U.S Currency Investment Type Dollars Australian Dollar Equities $ 13,435 Brazil Equities 2,940 Canadian Dollar Equities 2,292 Danish Krone Equities 13,661 Euro Equities 76,415 Hong Kong Dollar Equities 35,609 Indonesian Rupiah Equities 1,625 Israeli Equities 2,697 Japanese Yen Equities 46,591 Mexican Peso Equities 3,760 Malaysia Equities 1,034 Norwegian Krone Equities 2,425 New Zeland Equities 69 Singapore Dollar Equities 1,317 South African Rand Equities 1,942 South Korean Won Equities 5,763 Swedish Krona Equities 8,252 Swiss Franc Equities 22,792 Thailand Thai Baht Equities 1,358 U.K. Pound Equities 53,173 Total $ 297,150
State of Idaho 63 Comprehensive Annual Financial Report State of Idaho Notes to the Financial Statements For the Fiscal Year Ended June 30, 2017
PERSI Foreign Currency Risk at June 30, 2017 (dollars in thousands) Investment Type Fair Value of Short-Term Fixed Currency in Currency Investments Equities Income U.S. Dollars Argentina Peso $ 41 $ 515 $ 556 Australian Dollar 87 $ 74,009 74,096 Brazilian Real 2,611 105,232 2,422 110,265 Canadian Dollar 155 12,754 942 13,851 Chilean Peso 58 8,232 8,290 Chinese Yuan (4,489) 551 (3,938) Colombian Peso 16 2,927 2,943 Czech Koruna 51 1,147 1,198 Danish Krone 455 110,434 110,889 Egyptian Pound 28 1,867 1,895 Euro 834 704,829 394 706,057 Hong Kong Dollar 478 427,271 427,749 Hungarian Forint 49 7,051 7,100 Indian Rupee 1,627 1,627 Indonesian Rupiah 1,685 22,184 23,869 Israeli Shekel 22 2,171 2,193 Japanese Yen (754) 383,395 1,057 383,698 Kenyan Shilling 1,844 1,844 Malaysian Ringgit 43 19,569 19,612 Mexican New Peso 166 42,249 3,749 46,164 Moroccan Dirham 22 1,774 1,796 New Taiwan Dollar (2,171) 161,617 159,446 New Zealand Dollar 2 1,224 1,226 Norwegian Krone 72 4,342 4,414 Philippine Peso 114 13,215 13,329 Polish Zloty 36 18,382 18,418 Romanian Leu 1,154 1,154 Russian New Ruble 173 17,339 1,811 19,323 South African Rand 80 37,535 37,615 Singapore Dollar 74 80,067 80,141 South Korean Won (76) 292,204 292,128 Sri Lanka Rupee 84 84 Swedish Krona 47 57,469 57,516 Swiss Franc 2,685 255,278 257,963 Thailand Baht 31 29,947 29,978 Turkish Lira 54 33,299 33,353 U.K. Pound 1,582 500,814 380 502,776 Total $ 5,972 $ 3,432,825 $ 11,821 $ 3,450,618
State of Idaho 64 Comprehensive Annual Financial Report State of Idaho Notes to the Financial Statements For the Fiscal Year Ended June 30, 2017
College and University Foundations Foreign Currency Risk at June 30, 2017 (dollars in thousands) Investment Fair Value in Currency Type U.S. Dollars Australian Dollar Equities $ 1,040 Brazilian Real Equities 21 Canadian Dollar Equities 531 Chiliean Peso Equities 5 Chinese Yuan Equities 90 Colombian Peso Equities 4 Czech Koruna Equities 1 Danish Krone Equities 575 Euro Equities 3,449 Hong Kong Dollar Equities 3,108 Hungarian Forint Equities 3 Indian Rupee Equities 32 Indonesian Rupiah Equities 7 Israeli Shekel Equities 7 Japanese Yen Equities 891 Malaysian Ringgit Equities 10 Mexican Peso Equities 20 New Zealand Dollar Equities 4 Norwegian Krone Equities 10 Peruvian Nuevo Sol Equities 1 Philippine Peso Equities 6 Polish Zloty Equities 7 Russian Ruble Equities 10 Singapore Dollar Equities 18 South African Rand Equities 20 South Korean Won Equities 60 Swedish Krona Equities 237 Swiss Franc Equities 1,847 Taiwan Dollar Equities 41 Thai Baht Equities 11 Turkish Lira Equities 8 U.K. Pound Equities 3,275 Other Equities 71 Total $ 15,420
Debt Investments with Terms That May Cause the Fair risk for long-term investments and the modified duration Value to Be Highly Sensitive To Interest Rate Changes method used by the EFIB and the PERSI. Mortgage-Backed Securities have a return based on the cash Treasury Inflation Protected Securities (TIPS) are fixed- flows from interest and principal payments on the income securities issued by the U.S. Treasury that pay a underlying mortgages. As a result, they are sensitive to fixed coupon rate plus an adjustment for subsequent prepayments, which are likely to occur in declining interest inflation. The Endowment Funds had investments in TIPS rate environments. To the extent possible, this prepayment with a fair value of $71.8 million, and the PERSI had risk is reflected in the interest rate risk of the portfolios by investments in TIPS with a fair value of $1.5 billion. using the weighted average method to calculate interest rate
State of Idaho 65 Comprehensive Annual Financial Report State of Idaho Notes to the Financial Statements For the Fiscal Year Ended June 30, 2017
IHFA is invested in pay-fixed, receive-variable interest rate obligations. The Association had repurchase agreements swaps. The Association pays fixed rate payments between of $9.2 million with Wells Fargo Bank. 3.730 percent and 5.548 percent and receives variable rate payments based on the Securities Industry and Financial C. Restricted Assets Markets Association (SIFMA) and the London Interbank Offered Rate (LIBOR) indices. A portion of cash and investments are classified as restricted assets for governmental activities, business-type activities, Repurchase Agreements and component units on the Statement of Net Position. The Repurchase agreements are purchases of securities with breakout of purpose and amount are as follows: simultaneous agreements to resell those same securities in the future at a higher price. The Idaho Housing and Finance Association invests excess cash overnight in repurchase agreements that are held in the Association’s account in the name of the bank and are collateralized by the U.S. government and agency
State of Idaho 66 Comprehensive Annual Financial Report State of Idaho Notes to the Financial Statements For the Fiscal Year Ended June 30, 2017
Primary Government and Component Units Restricted Assets at June 30, 2017 (dollars in thousands) Purpose Amount Governmental Activities: Restricted Cash: Bond Covenants $ 124 Debt Service 46,577 Donations for Various Projects 6,181 Group Insurance Reserves 36,933 Juvenile Corrections Social Security Benefits 885 Legislation and Donations 8,617 Matching Fund Contributions 15,790 Millennium Permanent Endowment Fund 509 Petroleum Violation Escrow 3,295 Pollution Clean Up 7,328 The Idaho State Bar Client Assistance Fund 934 Restricted Investments: Donations for Various Projects 5,837 Legal Settlements 2,805 Legislation and Donations 30,032 Millennium Permanent Endowment Fund 289,700 Pollution Clean Up 79,112 Total Governmental Activities $ 534,659
Business-Type Activities: Restricted Cash: Debt Service $ 7,371 Idaho Lottery Dividends Payout 49,374 Wastewater Facility Loan Program and Drinking Water Systems Loan Program 40,188 Restricted Investments: Wastewater Facility Loan Program and Drinking Water Systems Loan Program 117,177 Total Business-Type Activities $ 214,110 Component Units: Restricted Cash: Donations for the College and University Foundations $ 20,866 Bond Indentures and Escrow and Reserve Deposits 114,775 Restricted Investments: Donations for the College and University Foundations 304,881 Total Component Units $ 440,522
State of Idaho 67 Comprehensive Annual Financial Report State of Idaho Notes to the Financial Statements For the Fiscal Year Ended June 30, 2017
NOTE 3. DERIVATIVE INSTRUMENTS contract is determined to be an effective hedge and is Derivative instruments are often complex financial reported at fair value of negative $3.8 million on the arrangements used by governments to manage specific risks government-wide Statement of Net Position in deferred or to make investments. outflows of resources and in liabilities. The decrease in the Primary Government liability of the hedge for fiscal year 2017 was $1.9 million. The Authority contract has the following objectives and The Idaho State Building Authority entered into a pay-fixed terms: interest rate contract as a cash flow hedge. The interest rate
Notional Amount Counterparty Type Objective (in thousands) Effective Date Maturity Date Terms Credit Rating Pay-fixed interest Hedge of changes $ 28,755 12/1/2008 9/1/2025 Pay 4.3%; receive A-2/A- rate contract in cash flows on 67% of 1-month the 2008 Series A LIBOR rate bonds interest rate contract is in a liability position, the Authority The Authority is exposed to credit risk on the interest rate would be liable to the counterparty for a payment equal to contract that could potentially be in an asset position. the liability. The Authority is exposed to interest rate risk on the interest Component Units rate contract. As the one-month LIBOR Index rate decreases, the Authority’s net payment on the interest rate The Idaho Housing and Finance Association has entered contract increases. into multiple interest rate swap agreements to reduce the Association’s overall cost of borrowing long-term capital The Authority is exposed to basis risk on the interest rate and protect against the risk of rising interest rates. The fair contract because the variable-rate payments received by the value of the swaps was a negative $44.6 million and reported Authority on this hedging instrument are based on a rate or in other accrued liabilities on the Statement of Net Position. index other than interest rates the Authority pays on its The Association has determined that a substantial portion hedged variable-rate debt, which is currently remarketed of its interest rate swaps effectively hedge against changes every seven days. As of June 30, 2017, the interest rate on in variable interest rates. Changes in fair value for hedge the Authority’s hedged variable-rate debt was 0.65 percent swaps are reported on the Statement of Net Position as while 67 percent of the one-month LIBOR was deferred outflows of resources of $48 million. A portion of 0.46 percent. the interest rate swaps are considered non-effective for The Authority or its counterparty may terminate the interest hedging purposes and are reported in the Statement of rate contract if the other party fails to perform under the Revenues, Expenses, and Changes in Net Position at $0. terms of the contract. In addition, the Authority may The Association has the following interest rate swap terminate at any time. If at the time of termination the agreements:
Idaho Housing and Finance Association - Hedging Derivative Instruments Interest Rate Swap Agreements at June 30, 2017 (dollars in thousands) Terms Notional Change in Inception Termination Fixed Series Amount Fair Value Fair Value Date Date Rate Paid Variable Rate Received 2000 Series F $ 535 $ (17) $ 60 11/6/2008 7/1/2021 5.25% SIFMA+.20% (LIBOR < 3.5%)/68% LIBOR 2000 Series G 4,800 (493) 311 11/6/2008 7/1/2020 4.87% SIFMA+.20% (LIBOR < 3.5%)/68% LIBOR 2001 Series A 2,210 (138) 132 11/6/2008 7/1/2022 4.73% SIFMA+.20% (LIBOR < 3.5%)/68% LIBOR 2001 Series B 2,620 (188) 157 11/6/2008 7/1/2022 4.53% SIFMA+.20% (LIBOR < 3.5%)/68% LIBOR 2001 Series C 2,480 (172) 150 11/6/2008 1/1/2021 4.70% SIFMA+.20% (LIBOR < 3.5%)/68% LIBOR
State of Idaho 68 Comprehensive Annual Financial Report State of Idaho Notes to the Financial Statements For the Fiscal Year Ended June 30, 2017
Terms Notional Change in Inception Termination Fixed Series Amount Fair Value Fair Value Date Date Rate Paid Variable Rate Received 2001 Series D $4,660 $(462) $285 11/6/2008 1/1/2021 5.02% SIFMA+.20% (LIBOR < 3.5%)/68% LIBOR 2001 Series E 4,660 (436) 274 11/6/2008 1/1/2021 4.95% SIFMA+.20% (LIBOR < 3.5%)/68% LIBOR 2001 Series F 2,800 (213) 164 11/6/2008 1/1/2021 4.89% SIFMA+.20% (LIBOR < 3.5%)/68% LIBOR 2002 Series A 2,980 (257) 186 11/6/2008 7/1/2022 4.71% SIFMA+.20% (LIBOR < 3.5%)/68% LIBOR 2002 Series B 3,005 (255) 185 11/6/2008 7/1/2021 4.48% SIFMA+.20% (LIBOR < 3.5%)/68% LIBOR 2002 Series C 3,000 (246) 183 11/6/2008 1/1/2024 3.79% SIFMA+.20% (LIBOR < 3.5%)/68% LIBOR 2002 Series D 4,825 (470) 294 11/6/2008 1/1/2018 5.30% SIFMA+.20% (LIBOR < 3.5%)/68% LIBOR 2002 Series E 3,025 (233) 170 11/6/2008 1/1/2024 4.14% SIFMA+.20% (LIBOR < 3.5%)/68% LIBOR 2002 Series F 3,370 (280) 181 11/6/2008 1/1/2020 4.76% SIFMA+.20% (LIBOR < 3.5%)/68% LIBOR 2002 Series G 3,370 (319) 196 11/6/2008 7/1/2020 4.86% SIFMA+.20% (LIBOR < 3.5%)/68% LIBOR 2003 Series A 5,405 (703) 369 11/6/2008 1/1/2026 4.52% SIFMA+.20% (LIBOR < 3.5%)/68% LIBOR 2003 Series B 4,945 (457) 281 11/6/2008 7/1/2024 4.04% SIFMA+.20% 2003 Series C 2,900 (266) 165 11/6/2008 1/1/2025 3.78% SIFMA+.20% 2003 Series D 4,980 (695) 349 11/6/2008 7/1/2025 4.84% SIFMA+.20% 2003 Series E 4,980 (629) 250 11/6/2008 7/1/2025 4.53% SIFMA+.20% 2004 Series A 5,075 (543) 163 11/7/2008 1/1/2026 4.03% SIFMA+.20% (LIBOR < 3.5%)/68% LIBOR 2004 Series B 5,625 (729) 283 11/7/2008 1/1/2027 4.37% SIFMA+.20% (LIBOR < 3.5%)/68% LIBOR 2004 Series C 5,255 (621) 337 11/7/2008 7/1/2025 4.33% SIFMA+.20% (LIBOR < 3.5%)/68% LIBOR 2004 Series D 6,790 (785) 348 11/7/2008 1/1/2028 3.85% SIFMA+.20% (LIBOR < 3.5%)/68% LIBOR 2005 Series A 7,255 (872) 485 11/7/2008 1/1/2029 3.90% SIFMA+.20% (LIBOR < 3.5%)/68% LIBOR 2005 Series B 7,060 (868) 474 11/7/2008 7/1/2028 3.99% SIFMA+.20% (LIBOR < 3.5%)/68% LIBOR 2005 Series C 7,165 (787) 461 11/7/2008 7/1/2028 3.73% SIFMA+.20% (LIBOR < 3.5%)/68% LIBOR 2005 Series D 7,290 (858) 430 11/7/2008 7/1/2028 3.87% SIFMA+.20% (LIBOR < 4.0%)/68% LIBOR 2005 Series E 7,425 (908) 500 11/7/2008 1/1/2029 3.93% SIFMA+.20% (LIBOR < 4.0%)/68% LIBOR 2005 Series F 7,720 (1,024) 540 11/7/2008 1/1/2029 4.10% SIFMA+.20% (LIBOR < 4.0%)/68% LIBOR 2006 Series A 7,770 (1,036) 541 11/7/2008 1/1/2029 4.10% SIFMA+.20% (LIBOR < 4.0%)/68% LIBOR 2006 Series B 5,270 (590) 328 11/7/2008 7/1/2025 4.35% SIFMA+.20% (LIBOR < 4.0%)/68% LIBOR 2006 Series C 5,145 (567) 314 11/7/2008 1/1/2025 4.36% SIFMA+.20% (LIBOR < 4.0%)/68% LIBOR 2006 Series D 6,000 (697) 357 11/7/2008 1/1/2025 4.45% SIFMA+.20% (LIBOR < 4.0%)/68% LIBOR 2006 Series E 6,750 (887) 529 11/22/2013 1/1/2026 5.55% LIBOR + .80% 2006 Series F 6,875 (837) 520 11/22/2013 1/1/2026 5.32% LIBOR + .80% 2006 Series G 6,755 (783) 500 11/22/2013 7/1/2026 5.20% LIBOR + .80% 2007 Series A 7,250 (961) 569 11/22/2013 7/1/2026 5.37% LIBOR + .80% 2007 Series B 8,230 (1,036) 633 11/22/2013 1/1/2027 5.22% LIBOR + .80% 2007 Series C 8,785 (1,150) 680 11/22/2013 1/1/2027 5.31% LIBOR + .80% 2007 Series D 9,510 (1,031) 683 12/20/2012 1/1/2026 4.89% LIBOR+.71% 2007 Series E 4,061 12/20/2012 7/1/2025 4.94% LIBOR+.71% 2007 Series F 2,760 12/20/2012 1/1/2025 5.28% LIBOR+.71% 2007 Series G 21,965 (3,253) 1,870 12/20/2012 7/1/2028 5.39% LIBOR+.76% 2007 Series H 27,525 (4,195) 2,440 12/20/2012 7/1/2030 5.20% LIBOR+.76% 2007 Series I 2,055 12/20/2012 7/1/2028 5.14% LIBOR+.76% 2007 Series J 22,775 (3,084) 1,885 12/20/2012 7/1/2028 5.10% LIBOR+.76% 2007 Series K 19,760 (2,686) 1,687 12/20/2012 7/1/2030 4.93% LIBOR+.76% 2008 Series A 19,760 (2,864) 1,723 11/22/2013 7/1/2030 5.12% LIBOR + .80% 2008 Series B 17,035 (2,240) 1,411 11/22/2013 7/1/2029 4.98% LIBOR + .80% 2008 Series C 11,360 (1,318) 848 11/22/2013 7/1/2026 5.05% LIBOR + .80% 2008 Series D 4,260 (441) 305 11/22/2013 7/1/2026 4.77% LIBOR + .80% $360,990 $(44,580) $35,062
State of Idaho 69 Comprehensive Annual Financial Report State of Idaho Notes to the Financial Statements For the Fiscal Year Ended June 30, 2017
Idaho Housing and Finance Association - Investment Derivative Instruments Interest Rate Swap Agreements at June 30, 2017 (dollars in thousands) Terms Notional Fair Change in Inception Termination Fixed Rate Series Amount Value Fair Value Date Date Paid Variable Rate Received 2003 Series E $ 81 11/6/2008 7/1/2025 4.53% SIFMA+.20% 2004 Series A 147 11/7/2008 1/1/2026 4.03% SIFMA+.20% (LIBOR < 3.5%)/68% LIBOR 2004 Series B 96 11/7/2008 1/1/2027 4.37% SIFMA+.20% (LIBOR < 3.5%)/68% LIBOR 2004 Series D 95 11/7/2008 1/1/2028 3.85% SIFMA+.20% (LIBOR < 3.5%)/68% LIBOR 2005 Series D 52 11/7/2008 7/1/2028 3.87% SIFMA+.20% (LIBOR < 4.0%)/68% LIBOR $ 471
which requires that the value of the Deferred Outflow of The Association was not exposed to credit risk on any Resources at the date of reissuance be amortized to interest outstanding swaps due to their negative fair values. The expense. Association’s counterparty has a current rating of A. The deemed terminating event also created a deemed All but twenty-two of the Association’s swaps have a dual borrowing, the result of higher off-market contractual fixed basis: the SIFMA Index plus 20 basis points when the one- rates paid to the Association’s counterparty compared to the month LIBOR Index is less than either 3.5 percent or market rate required at the time of the defeasance and 4 percent (depending on the bond series) and 68 percent of reissuance. These borrowings are amortized and credited the LIBOR Index when the LIBOR Index is 3.5 percent or to interest expense over the life of the swap contracts. The greater. Four non-dual basis swaps have a basis of the requirements of the accounting standard result in a dual SIFMA Index plus 20 basis points, ten have a basis of presentation of the deferred outflows of resources at both LIBOR plus 80 basis points, five have a basis of LIBOR amortized and fair values and the presentation in the plus 76 basis points, and three have a basis of LIBOR plus deferred inflows of resources of an amount that reflects the 71 basis points. The Association is exposed to basis risk on change in the fair value of the modified contracts during the dual basis swaps when variable payments received are fiscal years. Interest rate swap contracts fair value defers based on the LIBOR Index and do not offset the variable- the fair value of effectively hedged swap contracts at June rate paid on bonds, which is based on the SIFMA Index. 30, 2017. The fair value of effectively hedged swap On June 30, 2017, the SIFMA Index was 91 basis points positions are fully matched and deferred with this offsetting and the one-month LIBOR Index was 1.22 percent. position. Rollover risk relates to a mismatch in the amortization of Interest rate swap contracts amortized value defers the the swaps with the amortization of the variable-rate bonds. amortizing value of an implicit borrowing position created The Association has structured its debt such that not all upon the refunding of variable rate debt associated with variable debt is matched by interest rate swaps and calls swap contracts. At the time of refunding, the swap certain variable-rate bonds independent of the expiration of contracts’ fair value became the historical cost basis, which the associated interest rate swap. This exposes the is amortized over the life of the swap contracts. The Association to the risk of incurring a higher interest expense amortized borrowing value is fully matched and deferred than it might otherwise incur. Swap notional amounts no with this offsetting position. longer associated with variable-rate debt are reported as investment derivatives. Since the current fair value of the swap contracts differs from the amortized value of the borrowing at June 30, 2017, The Association or Barclays Capital may terminate an the Association has elected to report the swap contracts’ interest rate swap if the other party fails to perform under current fair value to demonstrate the full economic liability the terms of the contract. If any of the swaps are terminated, to its counterparty. The difference between current fair and the associated variable-rate bonds would no longer carry amortized value is reported as a gain or loss in the Statement synthetic fixed interest rates and the Association would be of Revenues, Expenses, and Changes in Net Position. This exposed to changing interest rates and incurring interest rate effectively results in an historical cost position being risk. The risk may be offset by identifying a suitable reported at current fair value. The Association matches the counterparty willing to enter into identical swap contracts duration of its swap contracts with the variable debt at the termination date. maturity, and therefore, does not anticipate this difference During fiscal years 2016 and 2017, the Association ever to be realized as a loss. redeemed and reissued bonds. Though the terms of the swap The Association entered into 36 “To Be Announced” (TBA) contracts were not modified, the redemption and reissue did forward contracts in order to lock in the sales price for the create a deemed terminating event of the swap contracts,
State of Idaho 70 Comprehensive Annual Financial Report State of Idaho Notes to the Financial Statements For the Fiscal Year Ended June 30, 2017
securitization of qualified first mortgage single-family investors before the securities are ready for delivery. These loans. The Association periodically enters into forward contracts are considered investment derivatives and hedge contracts to sell Government National Mortgage the interest rate risk for loan commitments made to Association (GNMA) Mortgage Backed Securities to originating mortgage lenders.
Idaho Housing and Finance Association - Investment Derivative Instruments TBA Forward Contracts at June 30, 2017 (dollars in thousands) Notional Counterparty Contract Amount Fair Value Coupon Rate Credit Rating April 2017 $ 5,000 $ 22 3.00% Aaa April 2017 5,000 (6) 3.00% Aaa April 2017 5,000 (3) 3.50% Aaa April 2017 5,000 (20) 3.00% Aaa April 2017 5,000 (9) 3.50% Aaa May 2017 5,000 (6) 3.00% Aaa May 2017 5,000 (1) 3.00% Aaa May 2017 5,000 (20) 3.00% Aaa May 2017 5,000 (13) 3.00% Aaa May 2017 5,000 (21) 3.00% Aaa May 2017 5,000 (3) 3.00% Aaa May 2017 5,000 7 3.50% Aaa May 2017 5,000 5 3.00% Aaa May 2017 5,000 20 3.00% Aaa May 2017 5,000 25 3.50% Aaa May 2017 5,000 23 3.00% Aaa May 2017 5,000 11 3.00% Aaa May 2017 5,000 23 3.00% Aaa June 2017 5,000 22 3.50% Aaa June 2017 5,000 23 3.50% Aaa June 2017 5,000 24 3.00% Aaa June 2017 5,000 35 3.00% Aaa June 2017 5,000 49 3.00% Aaa June 2017 5,000 33 3.50% Aaa June 2017 5,000 46 3.00% Aaa June 2017 5,000 36 3.00% Aaa June 2017 5,000 20 3.50% Aaa June 2017 5,000 54 3.00% Aaa June 2017 5,000 54 3.00% Aaa June 2017 5,000 34 3.00% Aaa June 2017 5,000 40 3.00% Aaa June 2017 5,000 40 3.00% Aaa June 2017 5,000 32 3.00% Aaa June 2017 5,000 24 3.00% Aaa June 2017 5,000 22 3.00% Aaa June 2017 5,000 10 3.00% Aaa $ 180,000 $ 632
State of Idaho 71 Comprehensive Annual Financial Report State of Idaho Notes to the Financial Statements For the Fiscal Year Ended June 30, 2017
NOTE 4. INTRAENTITY TRANSACTIONS A. Interfund Balances Interfund balances consist of the following receivables and payables (dollars in thousands):
Interfund Payables Health Nonmajor College General and Trans- Govern- and Nonmajor Pension Fund Welfare portation mental University Enterprise Trust Total General Fund $ 50 $ 6 $ 45 $ 1,498 $ 6,190 $ 7,789 Health and Welfare 14 14 Transportation $ 7 15 22 Nonmajor Governmental 1 31 $ 390 416 449 1,287 College and University 1,149 1,412 87 795 3,443 Unemployment Compensation 124 124 Nonmajor Enterprise 159 26 185
Interfund Receivables Internal Service 62 493 32 160 58 805 Pension Trust $ 2,137 2,137 Total $ 1,343 $ 1,986 $ 674 $ 1,471 $ 1,556 $ 6,639 $ 2,137 $ 15,806
Interfund receivables and payables generally consist of 1) Interfund goods and services are provided or short-term receivables and payables for goods and services reimbursable expenditures occur. provided by one fund within the State to another and for 2) Transactions are recorded in the accounting system. certain statutorily required transfers due at year-end. Most balances result from the time lag between the dates that: 3) Payments between funds are made.
B. Interfund Transfers Interfund transfers for the fiscal year were as follows (dollars in thousands):
Transfers In Health Land Nonmajor College Unemploy- General and Endow- Govern- and ment Internal Fund Welfare ments mental University Comp. Loan Service Total General Fund $ 672,005 $ 3,727 $ 18,348 $ 337,224 $ 10 $ 1,738 $ 1,033,052 Health and Welfare $ 19,113 725 19,838 Transportation 17,714 17,714 Land Endowments 65,765 1,320 67,085 Nonmajor Governmental 85,995 118 100 $ 781 2,157 89,151 College and University 730 730
Transfers Out Transfers Unemployment Comp. 7,804 7,804 Loan 716 804 1,520 Nonmajor Enterprise 80,360 2,730 1,148 84,238 Total $252,679 $ 674,735 $ 3,727 $ 46,661 $ 338,644 $ 781 $ 2,167 $ 1,738 $ 1,321,132
Interfund transfers are primarily performed for two reasons: 1) Taxes, fees, penalties, earnings, and other revenues are 2) Revenues are transferred from the fund that is statutorily transferred from the agencies that initially collect them required to collect them to the fund that has budgetary (such as the Tax Commission) to the General Fund and authorization to spend them. other funds as dictated by state law.
State of Idaho 72 Comprehensive Annual Financial Report State of Idaho Notes to the Financial Statements For the Fiscal Year Ended June 30, 2017
During fiscal year 2017 the following nonroutine transfers were made: • $1.2 million from the Economic Recovery Reserve Fund to Idaho State University. • $2.5 million from the Economic Recovery Reserve Fund to the Department of Water Resources for the • $4.2 million from the Economic Recovery Reserve Planning and Technical Services Program. Fund to the Idaho State Historical Society. C. Significant Transactions with Related Parties • $5.0 million from the General Fund to the Department of Water Resources for the Planning and Technical The primary government had the following transactions Services Program. with the Idaho Housing and Finance Association (IHFA): • The Transportation fund has notes payable in the • $5.0 million from the General Fund to the Higher amount of $562.0 million to the IHFA for bonds issued Education Stabilization Fund. on their behalf for transportation infrastructure projects. • $2.7 million from the General Fund to the Broadband Infrastructure Improvement Grant Fund. The Housing Company, a component unit of the IHFA, owes the IHFA $11.0 million for notes payable secured by real • $2.0 million from the General Fund to the STEM property. Education Fund. Boise State University (BSU) leases a portion of the Alumni and Friends building from the BSU Foundation (BSUF); • $3.1 million from the Economic Recovery Reserve the remaining lease payments total $4.1 million. At the Fund to Department of Correction. expiration of the lease, title will transfer to the University. • $4.1 million from the Economic Recovery Reserve During fiscal year 2017 the college and university Fund to the Department of Health and Welfare. foundations distributed $50.1 million to the respective colleges and universities for support of academic and • $2.2 million from the Economic Recovery Reserve athletic programs. Fund to the Supreme Court. During fiscal year 2017 the State purchased workers compensation insurance coverage from the State Insurance • $4.9 million from the Catastrophic Health Care Cost Fund, a related party, in the amount of $12.6 million. Fund to the General Fund.
State of Idaho 73 Comprehensive Annual Financial Report State of Idaho Notes to the Financial Statements For the Fiscal Year Ended June 30, 2017
NOTE 5. NONCURRENT RECEIVABLES of allowances for doubtful accounts. The following tables The Accounts Receivable, Taxes Receivable, Due from disaggregate the noncurrent receivables balances for the Other Entities, Due from Primary Government, and Loans, primary government and component units. Notes, and Pledges Receivable line items on the government-wide Statement of Net Position contain Noncurrent interfund receivables are discussed in Note 4. aggregated current and noncurrent receivable balances net
Noncurrent Receivables - Primary Government (dollars in thousands) Governmental Activities Business-Type Activities General Nonmajor College and Fund Transportation Governmental University Loan Accounts Receivable $ 38 $ 7,148 Taxes Receivable 63,801 $ 36 11 Loans and Notes Receivable 762 197 2,699 $ 21,872 $ 355,470 Total Noncurrent Receivables 64,601 233 9,858 21,872 355,470 Less: Allowance for Doubtful Accounts Accounts Receivable (3,389) Taxes Receivable (330) Loans and Notes Receivable (2,863) Total Noncurrent Receivables, Net $ 64,271 $ 233 $ 6,469 $ 19,009 $ 355,470
Noncurrent Receivables - Component Units (dollars in thousands) Idaho Housing and College and University Idaho Bond Bank Finance Association Foundation Authority Due from Primary Government $ 569,334 $ 3,809 Pledges Receivable 14,144 Loans and Notes Receivable 535,356 133 $ 328,123 Total Noncurrent Receivables 1,104,690 18,086 328,123 Less: Allowance for Doubtful Accounts Due from Primary Government (265) Pledges Receivable (1,691) Loans and Notes Receivable (3,014) Total Noncurrent Receivables, Net $ 1,101,676 $ 16,130 $ 328,123
State of Idaho 74 Comprehensive Annual Financial Report State of Idaho Notes to the Financial Statements For the Fiscal Year Ended June 30, 2017
NOTE 6. CAPITAL ASSETS Capital asset activity for the fiscal year is as follows (dollars in thousands):
Primary Government Balances at July 1, 2016 Balances at As Restated* Increases Decreases June 30, 2017 Governmental Activities:
Capital Assets not Being Depreciated: Land and Land Use Rights $ 1,092,300 $ 8,930 $ (416) $ 1,100,814 Capital Assets in Progress 1,021,578 173,948 (110,005) 1,085,521 Infrastructure 2,691,875 40,500 (4,996) 2,727,379 Historical Art and Collections 122 122 Total Capital Assets not Being Depreciated 4,805,875 223,378 (115,417) 4,913,836
Capital Assets Being Depreciated: Buildings and Improvements 992,846 9,328 (390) 1,001,784 Improvements Other Than Buildings 117,159 12,049 (172) 129,036 Machinery, Equipment, and Other 674,364 124,276 (35,864) 762,776 Infrastructure 1,107,874 12 (21) 1,107,865 Total Capital Assets Being Depreciated 2,892,243 145,665 (36,447) 3,001,461
Less Accumulated Depreciation for: Buildings and Improvements (410,210) (22,378) 242 (432,346) Improvements Other Than Buildings (49,596) (5,368) 76 (54,888) Machinery, Equipment, and Other (424,211) (68,423) 23,011 (469,623) Infrastructure (267,941) (15,249) 9 (283,181) Total Accumulated Depreciation (1,151,958) (111,418) 23,338 (1,240,038) Total Capital Assets Being Depreciated, Net 1,740,285 34,247 (13,109) 1,761,423 Governmental Activities Capital Assets, Net $ 6,546,160 $ 257,625 $ (128,526) $ 6,675,259
* Beginning balances were restated due to prior period adjustments.
Depreciation expense was charged to functions of governmental activities as follows (dollars in thousands):
Governmental Activities: General Government $ 14,479 Public Safety and Correction 12,828 Health and Human Services 28,827 Education 2,017 Economic Development 39,437 Natural Resources 12,651 In addition, depreciation on capital assets held by the State's internal service funds is charged to the various functions based on their usage of the assets 1,179 Total Accumulated Depreciation Increase for Governmental Activities $ 111,418
State of Idaho 75 Comprehensive Annual Financial Report State of Idaho Notes to the Financial Statements For the Fiscal Year Ended June 30, 2017
Balances at July 1, 2016 Balances at Business-Type Activities: As Restated* Increases Decreases June 30, 2017
Capital Assets not Being Depreciated: Land and Land Use Rights $ 132,361 $ 443 $ (1,580) $ 131,224 Capital Assets in Progress 45,325 12,816 (45,241) 12,901 Historical Art and Collections 2,396 15 (20) 2,392 Total Capital Assets not Being Depreciated 180,082 13,274 (46,841) 146,517
Capital Assets Being Depreciated: Buildings and Improvements 1,467,549 78,042 (5,063) 1,540,529 Improvements Other Than Buildings 74,058 3,894 (37) 77,915 Machinery, Equipment, and Other 469,654 24,465 (30,896) 463,223 Total Capital Assets Being Depreciated 2,011,261 106,401 (35,996) 2,081,667
Less Accumulated Depreciation for: Buildings and Improvements (583,637) (40,639) 1,270 (623,006) Improvements Other Than Buildings (44,824) (2,498) 124 (47,198) Machinery, Equipment, and Other (363,402) (26,750) 29,103 (361,049) Total Accumulated Depreciation (991,863) (69,887) 30,497 (1,031,253) Total Capital Assets Being Depreciated, Net 1,019,398 36,514 (5,499) 1,050,414 Business-Type Activities Capital Assets, Net $ 1,199,480 $ 49,788 $ (52,340) $ 1,196,931
* Beginning balances were restated due to prior period adjustments.
Interest incurred during construction is capitalized in enterprise funds. The total cost of interest incurred during the fiscal year was $18.5 million, of that $1.2 million was capitalized.
Balances at July 1, 2016 Balances at Component Units: As Restated* Increases Decreases June 30, 2017
Capital Assets not Being Depreciated: Land $ 7,153 $ 612 $ (42) $ 7,723 Capital Assets in Progress 14,656 9,234 (23,374) 516 Intangible Assets 12 12 Total Capital Assets not Being Depreciated 21,821 9,846 (23,416) 8,251
Capital Assets Being Depreciated: Buildings and Improvements 78,110 22,725 (1,281) 99,554 Improvements Other Than Buildings 528 5 533 Machinery, Equipment, and Other 43,659 9,964 (363) 53,260 Total Capital Assets Being Depreciated 122,297 32,694 (1,644) 153,347
Less Accumulated Depreciation for: Buildings and Improvements (39,409) (3,219) 1,071 (41,557) Improvements Other Than Buildings (161) (18) (179) Machinery, Equipment, and Other (19,262) (10,369) 352 (29,279) Total Accumulated Depreciation (58,832) (13,606) 1,423 (71,015) Total Capital Assets Being Depreciated, Net 63,465 19,088 (221) 82,332 Component Unit Activities Capital Assets, Net $ 85,286 $ 28,934 $ (23,637) $ 90,583
* Beginning balances were restated due to prior period adjustments.
State of Idaho 76 Comprehensive Annual Financial Report State of Idaho Notes to the Financial Statements For the Fiscal Year Ended June 30, 2017
NOTE 7. DEFERRED OUTFLOWS OF RESOURCES AND DEFERRED INFLOWS OF RESOURCES The Deferred Outflows of Resources and Deferred Inflows The following tables disaggregate the deferrals. of Resources line items on the government-wide Statement See Note 3 for further details regarding derivative-related of Net Position and governmental funds Balance Sheet deferrals and Note 8 for pension-related deferrals. contain aggregated types of deferrals.
A. Deferred Outflows of Resources – Government-Wide (dollars in thousands)
Primary Government Governmental Business-Type Activities Activities Component Units Debt Defeasance $ 4,190 $ 9,171 Hedging Derivatives Interest Rate Swap Contracts - Amortized $ 33,670 Interest Rate Swap Contracts - Fair Value 3,756 14,326 Pension-Related Contributions Subsequent to Measurement Date 75,354 14,891 Proportionate Share 132,427 24,174 Total Deferred Outflows of Resources $ 215,727 $ 48,236 $ 47,996
B. Deferred Inflows of Resources – Government-Wide (dollars in thousands)
Primary Government Governmental Business-Type Activities Activities Component Units Debt Defeasance $ 15 Hedging Derivatives Interest Rate Swap Contracts - Fair Value $ 1,484 Imposed Nonexchange Revenue $ 2,473 Nonexchange Transactions 283 Pension-Related Proportionate Share 52,113 10,099 Total Deferred Inflows of Resources $ 54,586 $ 10,397 $ 1,484
C. Deferred Inflows of Resources – Governmental Funds (dollars in thousands)
Governmental Funds Health and Nonmajor General Welfare Transportation Governmental Imposed Nonexchange Revenue $ 2,473 Unavailable Revenue $ 190,000 $ 53,575 $ 10,164 21,858 Total $ 190,000 $ 53,575 $ 10,164 $ 24,331
State of Idaho 77 Comprehensive Annual Financial Report State of Idaho Notes to the Financial Statements For the Fiscal Year Ended June 30, 2017
NOTE 8. PENSION PLANS A. Summary of Plans Administered by the Public Actuarial Assumptions Employee Retirement System of Idaho The last actuarial valuation was performed as of General June 30, 2016, for the Base Plan and FRF; and as of June 30, 2017, for the JRF. The Public Employee Retirement System of Idaho (PERSI) administers the PERSI Base Plan, the Judges’ Retirement The entry age normal cost method and the following Fund (JRF), the Firefighters’ Retirement Fund (FRF), and actuarial assumptions applied to all periods included in the two defined contribution retirement plans. A retirement measurement: board appointed by the Governor and confirmed by the State Senate manages the PERSI, which includes selecting the Base Plan JRF funding agents, establishing funding policy, and setting Inflation 3.25% 3.25% contribution rates. The PERSI issues a publicly available Salary Increases 4.25-10.00% 3.75% financial report that includes financial statements and required supplementary information. (http:// Salary Inflation 3.75% 3.75% www .persi.idaho.gov/investments/ Investment Rate of Return 7.10% 7.10% annual_financial_report.cfm). The PERSI also provides a (Net of pension plan investment expense) ‘Schedule of Employer Allocations and Collective Pension Cost of Living Adjustments 1.00% 1.00% or Amounts’ for the Base Plan and the FRF. 3.75% (http://www.persi.idaho.gov/employers/GASB.cfm) Mortality Rates Summary of Significant Accounting Policies Base Plan actuarial assumptions were based on an The PERSI basic financial statements are prepared using experience study performed for the period July 1, 2009 the economic resource measurement focus and accrual basis through June 30, 2013; the study reviewed all economic of accounting. Employee and employer contributions are and demographic assumptions other than mortality. JRF recognized as additions to net position when due and actuarial assumptions were based on the results of an receivable; investment income is recognized when earned; experience study for the period July 1, 2009 through and benefit payments, refunds, and other expenses are July 1, 2013. Mortality and all economic assumptions for recorded when the benefits are due and payable in the Base Plan were studied in 2016 for the period from accordance with the plans’ terms. July 1, 2009 through June 30, 2013. Mortality and all Investments are presented at fair value. Purchases and sales economic assumptions for the JRF were studied in 2014 for are recorded at the trade date. The fair value of investments the period July 1, 2009 through June 30, 2013. is based on published market prices and quotations from Mortality rates were based on the RP 2000 combined table major investment brokers when available. Mortgages have for healthy males or females as appropriate with the been valued on the basis of their future principal and interest following offsets: payments discounted at prevailing interest rates for similar instruments of matching duration. The fair value of real • Set back three years for teachers (Base Plan) estate investments is based on industry practice. For recent • No offset for male fire and police (Base Plan) acquisitions, cost closely approximates fair value. The fair value of longer-term real estate investments has been • Forward one year for female fire and police (Base Plan) estimated based on the PERSI’s consultant assessments • Set back one year for all general employees and all and/or independent appraisals. Short-term investments are beneficiaries (Base Plan) reported at fair value when published market prices and quotations are available, or at cost plus accrued interest, • Set back one year for males and females (JRF) which approximates fair value. The fair values of private Long-term Expected Rate of Return equity limited partnership investments by their nature have no readily ascertainable market prices. Similar to real The long-term expected rate of return on pension plan estate, cost closely approximates fair value for recent investments was determined using the building block acquisitions. Thereafter, the fair values of limited approach and a forward-looking model in which best partnership funds are based on the valuations as presented estimate ranges of expected future real rates of return by the general partner, approved by the funds’ advisory (expected returns, net of pension plan investment expense committee, and reviewed by consultants. Investments of and inflation) are developed for each major asset class. the PERSI Base Plan, JRF, and FRF are pooled for These ranges are combined to produce the long-term investment purposes. expected rate of return by weighing the expected future real
State of Idaho 78 Comprehensive Annual Financial Report State of Idaho Notes to the Financial Statements For the Fiscal Year Ended June 30, 2017
rates of return by the target asset allocation percentage and allocation. The best-estimate range for the long-term by adding expected inflation. expected rate of return is determined by adding expected inflation to expected long-term real returns and reflecting The PERSI used Callan Associates capital market expected volatility and correlation. Long-term expected assumptions as of January 1, 2016, for the Base Plan and rates of return on investments are shown below: as of January 1, 2016, for the JRF in analyzing asset
Base Plan Long-Term Expected Rate of Return Long-Term Expected Target Real Rate Asset Class Index Allocation of Return* Core Fixed Income Barclays Aggregate 30.00% 0.80 % Broad U.S. Equities Russell 3000 55.00% 6.35 % Developed Foreign Equities MSCI ACWI ex USA 15.00% 7.30 % *Arithmetic Return
Actuarial Assumptions Assumed Inflation - Mean 3.25 % Assumed Inflation - Standard Deviation 2.00 % Portfolio Arithmetic Mean Return 8.08 % Portfolio Standard Deviation 12.59 % Portfolio Long-Term Expected Geometric Rate of Return 7.50 % Assumed Investment Expenses 0.40 % Long-Term Expected Geometric Rate of Return, Net of Investment Expenses 7.10%
JRF Long-Term Expected Rate of Return Long-Term Expected Target Real Rate Asset Class Index Allocation of Return* Core Fixed Income Barclays Aggregate 30.00% 0.80 % Broad U.S. Equities Wilshire 5000 / Russell 3000 55.00% 6.35 % Developed Foreign Equities MSCI EAFE 15.00% 7.30 % *Arithmetic Return
Actuarial Assumptions Assumed Inflation - Mean 3.25 % Assumed Inflation - Standard Deviation 2.00 % Portfolio Arithmetic Mean Return 8.08 % Portfolio Standard Deviation 12.59 % Portfolio Long-Term Expected Geometric Rate of Return 7.50 % Assumed Investment Expenses 0.40 % Long-Term Expected Geometric Rate of Return, Net of Investment Expenses 7.10%
projected future benefit payments of current plan members. Discount Rate Therefore, the long-term expected rate of return on pension The actuary used a discount rate of 7.1 percent to measure plan investments was applied to all periods of projected the total pension liability. The projection of cash flows used benefit payments to determine the total pension liability. to determine the discount rate assumed that contributions The long-term expected rate of return was determined net from plan members will be made at the current contribution of pension plan investment expense but without reduction rate. Based on these assumptions, the Base Plan's and JRF’s for pension plan administrative expense. net positions were projected to be available to make all
State of Idaho 79 Comprehensive Annual Financial Report State of Idaho Notes to the Financial Statements For the Fiscal Year Ended June 30, 2017
1. PERSI Base Plan Plan amortizes any net pension liability based on a level percentage of payroll. The maximum amortization period Plan Description permitted under Idaho Code Section 59-1322 is 25 years. Organization and Purpose Contributions from members and employers, in addition to The PERSI Base Plan is a cost-sharing, multiple-employer earnings from investments, fund the PERSI Base Plan defined benefit retirement plan. The Base Plan is governed benefits. Member and employer contributions are by Idaho Code Title 59 Chapter 13. percentages of member compensation. As defined by state law, the member contribution rate is a percentage of the Membership employer contribution rate. Employer contribution rates State agencies, school districts, cities, counties, highway are recommended by periodic actuarial valuations and are districts, water and sewer districts, and other political subject to the approval of the PERSI Retirement Board and subdivisions contribute to the PERSI Base Plan. limitations set forth in state statute. Contributions are based Participation is mandatory for state employees who on actuarial assumptions, benefit formulas, and employee normally work 20 or more hours a week for 5 or more groups of the PERSI. Costs of administering the plans are consecutive months. The number of participating employer financed through the contributions and investment earnings units were 783 and 775 for the fiscal years ending of the System. June 30, 2017 and 2016, respectively. Contribution rates for the year: Benefits The annual service retirement allowance for each month of Employee Group Employer Employee credited service is 2 percent (2.3 percent for police/ General 11.32% 6.79% firefighters) of the average monthly salary for the highest Police and Fire 11.66% 8.36% consecutive 42 months. In addition, benefits are provided for disability or death, and to survivors of eligible members Employer contributions required and paid were or beneficiaries. Members are eligible for retirement $90.5 million and $84.6 million for the fiscal years ended benefits upon attainment of the age specified for their June 30, 2017 and 2016, respectively. employment classification or a combination of age plus service. Although enrollees in the College and University Optional Retirement Plan no longer belong to the PERSI, the colleges The benefit payments are calculated using a benefit formula and universities are required to contribute to the PERSI adopted by the Idaho Legislature. The PERSI Base Plan is Base Plan through July 1, 2025. The contribution rate for required to provide a 1 percent minimum cost of living the year was 1.49 percent for colleges and universities. increase per year on the condition the Consumer Price Index increases 1 percent or more. The PERSI Retirement Board Vesting has the authority to provide higher cost of living increases After five years of credited service (five months for elected to a maximum of the Consumer Price Index movement or or appointed officials), members become fully vested in 6 percent, whichever is less; however, any amount above retirement benefits earned to date. Upon termination of the 1 percent minimum is subject to approval by the employment, accumulated member contributions plus Legislature. interest are refundable. The interest was compounded Funding Policy monthly per annum and accrued at 2.39 percent from July 1, 2016 through December 31, 2016, and at Funding and Contributions 1.29 percent from January 1, 2017 through June 30, 2017. Funding policy for the PERSI Base Plan is determined by Withdrawal of such accumulated contributions results in the Board as defined by Idaho law. The Board may make forfeiture of the member’s accrued benefit; however, state periodic changes to employer and employee contributions law does include provisions for reinstatement of forfeited based upon actuarially-determined rates that are adequate service upon repayment of the accumulated contributions to accumulate sufficient assets to pay benefits when due. plus interest. Actuarially-determined rates are expressed as percentages Net Pension Liability, Pension Expense, and Deferrals of annual covered payroll. At June 30, 2017, the total net pension liability amount for Level percentages of payroll normal costs are determined all employers that contributed to the Base Plan was using the entry age normal cost method. Under this method, $2.0 billion. At June 30, 2017, the State recognized a the actuarial present value of the projected benefits of each $517.3 million liability (25.5 percent proportion of the individual included in the actuarial valuation is allocated as collective net pension liability), measured at June 30, 2016, a level percentage of each year’s earnings of the individual a 0.3 percent decrease from its proportion measured at between entry age and assumed exit age. The PERSI Base
State of Idaho 80 Comprehensive Annual Financial Report State of Idaho Notes to the Financial Statements For the Fiscal Year Ended June 30, 2017
June 30, 2015. Employer proportionate shares were following deferred outflows of resources and deferred determined utilizing a single-period measure of inflows of resources: contributions as of June 30, 2016. The State also recognized a $91.0 million pension expense and the
PERSI Base Plan as of June 30, 2017 (dollars in thousands) Deferred Outflows Deferred Inflows of Resources* of Resources* Difference between expected & actual experience $ 51,587 Changes of assumptions $ 11,509 Changes in proportion 10,168 10,036 Net difference between projected & actual investment earnings 134,247 Contributions subsequent to the measurement date 90,452 Total $ 246,376 $ 61,623
*For FY17, the total deferred outflows and total deferred inflows in this table do not tie to the pension deferred outflows and deferred inflows in Note 7. This is primarily due to timing differences between the information for this table that comes from the PERSI, and the information in Note 7 that, in part, comes from the Dairy Products Commission, the Potato Commission, and the State Bar. Those entities report on a different year-end cycle than the PERSI and the State.
Amounts reported as deferred outflows of resources and The Judges’ Retirement Fund (JRF) is a single-employer deferred inflows of resources will be recognized as pension defined benefit retirement plan, which provides retirement expense (revenue) as follows (dollars in thousands): benefits for Idaho Supreme Court justices, court of appeals judges, and district court judges. The JRF is managed by Amortized Deferrals the PERSI and is governed in accordance with Idaho Code Fiscal Year Expense (Revenue) Title 1 Chapter 20. 2018 $ 657 Membership and Vesting 2019 657 Members become fully vested in their retirement benefits 2020 60,196 after four years of credited service. If a member terminates 2021 32,789 from the retirement plan prior to four years of service, the 2022 0 member’s contributions plus 6.5 percent per annum will be Total $ 94,299 returned. Members are eligible for retirement benefits upon meeting one of the following criteria: Discount Rate Sensitivity • Attainment of age 65 and a minimum of 4 years of service The following presents the net pension liability of the State calculated using the expected discount rate of 7.1 percent • Attainment of age 60 and a minimum of 10 years of and discount rates based upon a 1 percent discount rate service decrease and a 1 percent discount rate increase (dollars in • Attainment of age 55 and a minimum of 15 years of thousands): service
Current • After 20 years of service 1% Decrease Discount Rate 1% Increase (6.1%) (7.1%) (8.1%) The JRF has 101 retired members or beneficiaries collecting benefits, 1 terminated members entitled to, but not yet $ 1,015,591 $ 517,724 $ 103,693 receiving benefits, and 50 active members.
2. Judges’ Retirement Fund Benefits Plan Description The benefit structure is based on each member’s years of service and compensation. In addition, benefits are Organization and Purpose provided for disability or death, and to survivors of eligible members. The benefit payments for the JRF are calculated using a benefit formula adopted by the Idaho Legislature,
State of Idaho 81 Comprehensive Annual Financial Report State of Idaho Notes to the Financial Statements For the Fiscal Year Ended June 30, 2017
effective July 1, 2000. Members serving prior to Department contributions are a percentage of member July 1, 2000 and who were receiving benefits from the compensation as defined by state law. The JRF policy judges' retirement fund before July 1, 2000, for such service, provides for Department and member contributions at and members who assumed office on or after July 1, 2012, 55.3 percent and 10.2 percent, respectively, of annual and attained both the age of 55 years and a minimum service covered payroll. The payroll for members covered by the of 15 years, are paid under Option A. Other members JRF was approximately $6.2 million for the fiscal year. serving on or after July 1, 2000, who meet one of the Investments remaining eligibility requirements referenced earlier, may choose between two benefit payment options, A or B. Both Policies and Procedures options are based upon current annual compensation of the The Board utilizes and directs individual fund managers to highest office in which the member served, with benefits provide whatever investment management and custodial for Option A accumulating as follows: functions the Board has determined best achieves the For the first 10 years of service, benefits are credited System’s investment objectives. Each fund manager is at 5 percent per year of the member’s compensation. generally granted full discretion in making investment For the remaining years of service, benefits are credited decisions within asset allocation policy, portfolio at 2.5 percent per year of the member’s compensation. investment policy, specific investment guidelines, and other special restrictions set by contract with the Board. The In addition to the above benefits, Option B includes: Board monitors overall investment performance and Benefits credited at 12.5 percent per year for senior periodically evaluates the performance of each fund judges with five years of service. manager. The Board is empowered in its sole discretion to limit, control, and designate the types and amounts of The maximum benefit is 75 percent of compensation. investments. Additionally, members who begin service on or after July 1, 2012 are eligible to receive annual inflationary Rate of Return adjustments to calculated benefits in accordance with Idaho For the year ended June 30, 2017, the annual money- Code Section 59-1355. After four years of credited service, weighted rate of return on pension plan investments, net of any member retiring by reason of disability will be entitled pension plan investment expenses, was 12.31 percent. The to benefits calculated using Option A. Upon the death of money-weighted rate of return expresses investment retired or sitting members who assumed office prior to performance, net of investment expense, adjusted for the July 1, 2012, surviving spouses will be entitled to benefits changing amount actually invested. equal to 50 percent of the member’s calculated benefit. Surviving spouses of members who assumed office on or Net Pension Liability, Pension Expense, and Deferrals after July 1, 2012 are entitled to benefits equal to 30 percent Net Pension Liability of the member’s calculated benefit. Net pension liability components as of the measurement Summary of Significant Accounting Policies date of June 30, 2017 (dollars in thousands): Generally speaking, significant accounting policies, actuarial assumptions, and discount rate information are the Total Pension Liability $ 103,557 same as detailed for the PERSI. This information can be Plan Fiduciary Net Position (82,936) found at the beginning of this note. Net Pension Liability $ 20,621 Contribution Requirements Plan Fiduciary Net Position as a Percentage of The JRF’s benefits are funded by contributions from Total Pension Liability 80.09% members and the Judicial Department and earnings from Covered Payroll $ 6,162 investments. Costs of administering the JRF are financed through the contributions and investment earnings of the Net Pension Liability as a Percentage of Covered Payroll 334.63% JRF. Members and the Department contribute to the JRF during the members’ first 20 years of employment. Member and
State of Idaho 82 Comprehensive Annual Financial Report State of Idaho Notes to the Financial Statements For the Fiscal Year Ended June 30, 2017
Changes in net pension liability for the fiscal year ended June 30, 2017 (dollars in thousands):
Increase (Decrease) Total Pension Plan Fiduciary Net Pension Liability Net Position Liability (a) (b) (a) - (b) Beginning Balances $ 99,229 $ 75,449 $ 23,780 Changes for the Year Service Cost 3,179 3,179 Interest 7,056 7,056 Benefit Changes Economic/Demographic Gains (Losses) 266 266 Assumptions Changes Benefit Payments, Including Refunds (6,173) (6,173) Contributions - Employer 3,947 (3,947) Contributions - Employee 630 (630) Net Investment Income 9,157 (9,157) Transfer In Administrative Expense (74) 74 Net Changes 4,328 7,487 (3,159) Ending Balances $ 103,557 $ 82,936 $ 20,621
Pension Expense and Deferrals The State recognized a $4.6 million pension expense and the following deferrals for the fiscal year ended June 30, 2017 (dollars in thousands):
Deferred Outflows of Deferred Inflows of Resources Resources Difference between expected & actual experience $ 160 $ 329 Changes of assumptions Net difference between projected & actual investment earnings 782 Contributions subsequent to the measurement date Total $ 942 $ 329
Amounts reported as deferred outflows of resources and Discount Rate Sensitivity deferred inflows of resources will be recognized as pension The following presents the net pension liability of the JRF expense (revenue) as follows (dollars in thousands): calculated using the discount rate of 7.1 percent, as well as what the employer’s liability would be if it were calculated Year Expense (Revenue) using a discount rate that is 1 percent lower or 1 percent 2018 $ 514 higher than the current rate as of June 30, 2017 (dollars in 2019 790 thousands): 2020 80 2021 (772) 1% Decrease Current Discount 1% Increase 2022 0 (6.1%) Rate (7.1%) (8.1%) $ 612 $ 30,986 $ 20,621 $ 11,743
State of Idaho 83 Comprehensive Annual Financial Report State of Idaho Notes to the Financial Statements For the Fiscal Year Ended June 30, 2017
3. Firefighters’ Retirement Fund B. Other State-Sponsored Retirement Plans Plan Description 1. College and University Optional Retirement Plan The FRF is a closed cost-sharing multiple-employer Plan Description defined benefit retirement plan. The FRF is governed by Organization and Purpose Idaho Code Title 72 Chapter 14. The FRF is administered by the PERSI, which is part of the primary government. Effective July 1, 1990, the State Legislature authorized the However, the State does not employ firefighters Idaho State Board of Education to establish the Optional participating in the FRF; therefore, no employer costs are Retirement Plan (ORP), a defined contribution plan for disclosed. Twenty-two employer units, all consisting of college and university faculty and exempt employees. The local fire departments, participated in the FRF. The ORP is governed by Idaho Code Sections 33-107A and significant accounting policies are the same as detailed for 33-107B and administered by the Idaho State Board of the PERSI. Complete FRF disclosures may be found in Education. Vendor options include Teachers’ Insurance the PERSI financial statements. and Annuity Association (TIAA) and Variable Annuity Life Insurance Company (VALIC). TIAA and VALIC may 4. Defined Contribution Retirement Plans be reached at (888) 842 7782 and (888) 478-7020, Plan Description respectively. Organization and Purpose Membership The defined contribution retirement plans include the Faculty and exempt employees hired July 1, 1990, or 401(k) and the 414(k). The plans are governed by Idaho thereafter, automatically enroll in the ORP and select their Code Title 59 Chapter 13. The 414(k) plan was established vendor option. Faculty and exempt employees hired before for gain-sharing allocations from the PERSI Base Plan. The July 1, 1990, had a one-time opportunity to enroll in the gain-sharing amount (if any) is based on funding levels in ORP. the PERSI Base Plan and is subject to board approval. Funding Policy Membership Contributions and Vesting The 401(k) plan is open to all active PERSI Base Plan The employee contribution requirement for the ORP is members. Eligibility for the 414(k) gain sharing requires based on a percentage of total payroll. Employer 12 months of active PERSI membership as defined in Idaho contributions are determined by the State. The contribution statutes and PERSI rules. The plans have 783 employer requirement and amount paid for the fiscal year was units eligible to have participating employees. $52.4 million, which consisted of $29.9 million from the Summary of Significant Accounting Policies colleges and universities and $22.5 million from employees. The assets of the 401(k) and the 414(k) plans are commingled for investment and recordkeeping purposes. Participants are immediately fully vested in the ORP. The other significant accounting policies are the same as Retirement benefits are available either as a lump sum or for the PERSI. any portion thereof upon attaining 55 years of age. Funding Policy 2. Department of Labor Retirement Plan Contributions Plan Description Employees in the 401(k) plan can make tax-deferred Organization and Purpose contributions up to 100 percent of their gross salary, less This stand-alone, defined benefit, insured retirement plan deductions, and subject to the IRS annual contribution limit; provides retirement benefits for certain employees (and employees are immediately vested. Participants direct their their beneficiaries) of the Idaho Department of Labor hired investment mix with limited restrictions and may elect to prior to October 1, 1980, excluding anyone hired after age change their salary deferrals. Additionally, the 401(k) plan 65. The Plan is governed by Idaho Code Section 72-1335 is open to voluntary employer matching contributions at and U.S. Department of Labor Rules and Regulations. The rates determined by the employers. Employers Labor Retirement Plan is administered by the Idaho (participants) in the plans contributed $5.5 ($48.3) million, Department of Labor, which may be reached at $4.8 ($45.3) million, and $5.2 ($42.9) million during fiscal (208) 332-3570. years 2017, 2016, and 2015, respectively.
State of Idaho 84 Comprehensive Annual Financial Report State of Idaho Notes to the Financial Statements For the Fiscal Year Ended June 30, 2017
Membership As of September 30, 2016, the present value of future retirement benefits is $91.5 million. The actuary assumed As of September 30, 2016, the number of Idaho Department a 5 percent average rate of return in determining the of Labor members and actual benefit recipients are as actuarial present value of accumulated plan benefits. Net follows: position available for benefits (at fair value) is $177.3 million. Retirees and Beneficiaries 305 Inactive Participants 2 Funding Policy Current Active Employees 6 Contributions Total 313 Since September 30, 1997, plan assets have exceeded the actuarial present value of future benefit payments for all Benefits members. In accordance with plan requirements, Retirement benefit payments are calculated using a benefit employees continued to contribute 7 percent of payroll even formula established in the Plan. This monthly benefit is though contributions were not actuarially needed to finance payable for life, through an annuity purchased for each future benefits. However, in August 1999, the U.S. retired employee from Prudential Insurance Company, with Department of Labor approved a plan change to allow the 120 payments guaranteed to the annuitant or their survivor. plan actuary to determine the employee contribution rate. Upon the purchase of an annuity, Prudential assumes the Employee contributions have since been suspended through risk for the insured benefit and has guaranteed to pay September 30, 2017, consistent with recent actuarial benefits in the event the trust funds are depleted. The Plan valuations. The current valuation certified that the total provides that the contributions paid by the employer to contribution rate should remain at zero through Prudential are in complete discharge of the employer’s September 30, 2018. Total employer contribution for financial obligation under the Plan. At September 30, 2016, federal fiscal year 2017 was zero. the last actuarial valuation date, no unfunded liability existed. The normal service retirement allowance is the average annual salary for the highest three consecutive years times 2 percent for each year of credited service.
State of Idaho 85 Comprehensive Annual Financial Report State of Idaho Notes to the Financial Statements For the Fiscal Year Ended June 30, 2017
NOTE 9. POSTEMPLOYMENT BENEFITS OTHER THAN PENSIONS A. Summary of Plans of the employer’s individual plan, and actuarial methods and assumptions used. For fiscal year 2017, the Sick Leave The Department of Administration administers Insurance Reserve Fund (SLIRF), which is administered by postemployment benefits for healthcare, disability, and life the PERSI is reported under GASB Statement No. 74. insurance for retired or disabled employees of State agencies, public health districts, community colleges, and The University of Idaho administers a single-employer other political subdivisions that participate in the plans. The defined benefit plan which provides medical, dental, and Retiree Healthcare and Long-Term Disability plans are life insurance. The benefits may be amended by the reported as agent multiple-employer defined benefit plans. University or the State Board of Education. The University The Retiree Life Insurance plan is a single-employer issues a publicly available financial report which includes defined benefit plan. Idaho Code Sections 67 5760 to financial statements and required supplementary 67-5768 and 72-1335 establish the benefits and contribution information for these benefits. The report may be obtained obligations. The plans do not issue publicly available by writing to Office of the General Counsel, University of financial reports. The most recent actuarial valuation is as Idaho, 875 Perimeter Drive, MS 3158, Moscow, ID of July 1, 2016. No assets have been set aside to pay future 83844-3158. The plan obligations are actuarially benefits; these benefits are funded on a pay-as-you-go basis. determined. The most recent actuarial valuation is as of The costs of administering the plans are financed by a July 1, 2015. The University established a trust to fund the surcharge to employers on all active employees of $0.09 medical and dental portions of these benefits. The trust per person per month for fiscal year 2017. This rate is statements are for the fiscal year ended December 31, 2016. reviewed annually. The cost of administering the medical and dental portions of the plan is included in medical claim costs; the life Each of the employers participating in the plans are required insurance portion is financed by a 10 percent surcharge. by GASB Statement No. 45 to disclose additional information regarding funding policy, the employer’s The number of participating employers and the classes of annual Other Post-Employment Benefits (OPEB) cost and employees covered by the above plans are as follows: contributions made, the funded status and funding progress
Classes of Employees and Number of Participating Employers Long-Term Disability Plan Retiree Retiree Life University Healthcare Life Insurance of Idaho Plan Healthcare Insurance Income Plan Plan Active Employees 9,301 19,520 19,520 5,610 1,938 Retired/Disabled Employees 681 141 389 64 1,488 681 Terminated, Vested Employees 110 Number of Participating Employers 25 25 25 25 1 1
Plan Descriptions and Funding Policy eligible dependents. Retirees eligible for medical health insurance pay the majority of the premium cost; however, Retiree Healthcare Plan the retiree plan costs are subsidized by the active employee A retired officer or employee of a state agency, department, plan. The benefit is at least $1,860 per retiree per year. In institution, or other political subdivision, including an fiscal year 2017, retired plan members contributed elected official, who receives monthly retirement benefits 73.7 percent of the total premium cost, and employers were from the Public Employee Retirement System of Idaho charged $16.14 per active employee per month towards the (PERSI) may elect to purchase retiree health insurance retiree premium cost, or 26.3 percent of the total cost of the coverage for themselves and eligible dependents. retiree plan. Employees must enroll within 60 days of the date that the Long-Term Disability Plan active employee policy ends. Additionally, the employee must be receiving monthly PERSI benefits at the time of Disabled employees are defined as persons unable to retirement and must have 10 or more years (20,800 or more perform each of the substantial and material duties of the hours) of credited service. An officer or employee must job for which they were hired and unable to earn more than have been an active employee on or before June 30, 2009, 70 percent of their monthly salary for the first 30 months and must retire directly from state service. Coverage is not of disability. If after 30 months the employee is unable to available to Medicare-eligible retirees or their Medicare- perform any job for which they are reasonably qualified by
State of Idaho 86 Comprehensive Annual Financial Report State of Idaho Notes to the Financial Statements For the Fiscal Year Ended June 30, 2017
experience, education, or training, and unable to earn more insurance and dependent life coverage is not included in the than 60 percent of their monthly salary, the employee is actuarial estimate as this is considered an insured benefit. considered totally disabled. To qualify for long-term Retiree Life Insurance Plan disability benefits, the waiting period of the longer of 26 continuous weeks of total disability or exhaustion of Boise State University, Eastern Idaho Technical College, accrued sick leave must be met. Idaho State University, and Lewis-Clark State College provide basic life insurance to certified retired employees. For up to 30 months following the date of disability an In general, the employee must have completed at least employee may continue healthcare coverage under this 30 years of credited service or the sum of his/her age and plan. Each employer pays 100 percent of the employer’s years of credited service must total at least 80 to qualify for share of medical and dental premiums while the employee this benefit. Eligible retirees receive basic life insurance remains disabled. The employee is required to pay the coverage equal to 100 percent of their annual salary at normal active employee contribution for the plan and rate retirement. category in which the employee is enrolled. In fiscal year 2017, employers were charged $10.53 per active employee The Judicial Department provides basic life insurance for per month. life to all retired Idaho Supreme Court justices, State Court of Appeals judges, district court judges, magistrate judges, The plan provides long-term disability income benefits to and court administrators. Eligible retirees receive life active employees who become disabled, generally up to a insurance coverage equal to 100 percent of the annual salary maximum age of 70. The gross benefit equals 60 percent of the position from which they retire. of monthly pre-disability salary or $4,000, whichever is less. The benefit does not increase with inflation and may The Department of Labor provides basic life insurance to be offset by other disability benefits from Social Security, all certified retired employees of the Department. Eligible Workers’ Compensation, or PERSI. The State is self- retirees receive insurance equal to 50 percent of their annual insured for employees who became disabled prior to salary at retirement, not to exceed $5,000. July 1, 2003; the State pays 100 percent of the cost of this These participating agencies pay 100 percent of the cost of benefit. The amount of the contribution is based on active basic life insurance for eligible retirees. The following chart claims and the number of insured individuals. shows contribution rates for the fiscal year as percentages Principal Life Insurance Company insures employees of payroll: disabled on or after July 1, 2003, and the obligation for the payment of income benefits has been effectively Retiree Life Insurance Contribution Rates transferred. The employer pays 100 percent of the cost of Age 70 the premiums; the contribution rate for the period was Under Age 65 - and All 0.264 percent of payroll. The employers’ actual Age 65 69 Over Ages contribution was $2.6 million in fiscal year 2017. This Colleges and portion of the long-term disability income benefit is not Universities 1.177% 0.894% 0.600% included in the actuarial estimate as this is considered an Judicial insured benefit. Department 1.170% 0.870% 0.593% Department The plan also provides basic life insurance and dependent of Labor 0.593% life insurance to disabled employees, generally up to a maximum age of 70. The life insurance benefit amount is University of Idaho Plan generally 100 percent of annual salary, but not less than $20,000. In addition, the plan provides a $2,000 life The University of Idaho plan provides medical and dental insurance benefit for spouses and a $1,000 life insurance benefits to eligible retirees, disabled employees, spouses, benefit for dependent children. These benefits do not and survivors; life insurance is provided only to retirees. In increase with inflation. The State is self-insured for general, the employee must have completed at least 30 years employees who became disabled prior to July 1, 2012; the of credited service or the sum of his/her age and years of employer pays 100 percent of the cost. The contribution is credited service must total at least 80 to qualify for these actuarially determined based on actual claims experience. benefits. The University pays a portion of the coverage for retirees and disabled employees; the retiree or disabled Principal Life Insurance Company insures employees employee pays the remainder. Spouses and survivors are disabled on or after July 1, 2012, and the obligation for the required to pay 100 percent of the cost for the medical and payment of basic life and dependent life coverage benefits dental benefits. has been effectively transferred. The employer pays 100 percent of the premiums. This portion of the basic life Employees hired after January 1, 2002 are eligible to participate in the University’s health insurance plan;
State of Idaho 87 Comprehensive Annual Financial Report State of Idaho Notes to the Financial Statements For the Fiscal Year Ended June 30, 2017
however, the employee pays the entire cost of the premiums. Summary of Significant Accounting Policies The University determines the defined contribution costs The financial statements of the OPEB plans are reported that will be borne by the retiree plan participants. The using the accrual basis of accounting. Contributions are University solely bears the risk for adverse financial recorded when earned and expenses, including benefits and performance, subject to a cap of $200 thousand per retiree refunds paid, are recorded when a liability is incurred, per year, after which the University is reinsured. Retiree regardless of the timing of cash flows. Investments are health plan performance is reviewed annually and premium reported at fair value. rates are then adjusted by the University as necessary. The financial position of each of the State’s OPEB plans is as follows:
Statement of Plan Net Position (dollars in thousands) Retiree Long-Term Disability Plan Healthcare Plan Healthcare Life Insurance Income ASSETS Pooled Cash and Investments $ 239 Investments, at Fair Value Fixed Income Securities Equity Securities Total Assets $ 239 $ 0 $ 0 $ 0 LIABILITIES Unearned Revenue $ 239 Total Liabilities $ 239 $ 0 $ 0 $ 0
Annual OPEB Cost The Annual OPEB Cost (AOC) is actuarially determined cost, the amount of contributions made, the increase based on the annual required contribution (ARC) of the (decrease) in the net OPEB obligation (NOO), and the NOO employer. The following table illustrates the annual OPEB (funding excess) for the current year:
Annual OPEB Cost and Net OPEB Obligation (dollars in thousands) Long-Term Disability Plan Retiree Retiree Life University Healthcare Insurance of Idaho Plan Healthcare Life Insurance Income Plan Plan Annual Required Contribution $ 5,054 $ 355 $ 680 $ 523 $ 4,587 $ 2,711 Interest on NOO 898 14 10 15 678 (136) Adjustment to ARC (1,893) (29) (22) (31) (1,429) 164 Total Annual OPEB Cost 4,059 340 668 507 3,836 2,739 Contributions Made (2,020) (1,375) (561) (343) (701) (3,157) Increase (Decrease) in NOO 2,039 (1,035) 107 164 3,135 (418) NOO (Funding Excess) – Beginning of Year 27,177 396 316 450 20,545 (2,259) NOO (Funding Excess) – End of Year $ 29,216 $ (639) $ 423 $ 614 $ 23,680 $ (2,677)
State of Idaho 88 Comprehensive Annual Financial Report State of Idaho Notes to the Financial Statements For the Fiscal Year Ended June 30, 2017
Annual OPEB Cost Comparison The following table compares the annual OPEB cost, the percentage of annual OPEB cost contributed, and the NOO (funding excess) for the current and prior two years.
Annual OPEB Cost and Net OPEB Obligation Comparison (dollars in thousands) Long-Term Disability Plan Retiree Retiree Life University Healthcare Life Insurance of Idaho Plan Healthcare Insurance Income Plan Plan Annual OPEB Cost 2015 $ 2,827 $ 1,129 $ 985 $ 575 $ 3,337 $ 3,215 2016 2,602 1,171 1,016 589 3,468 2,750 2017 4,059 340 668 507 3,836 2,739
Percentage of AOC Contributed 2015 74.4% 138.9% 82.8% 80.9% 19.1% 100.6% 2016 124.5% 117.4% 66.9% 71.5% 19.1% 100.0% 2017 49.8% 403.8% 84.1% 67.7% 18.3% 115.3%
NOO (Funding Excess) – End of Year 2015 $ 27,814 $ 600 $ (20) $ 282 $ 17,738 $ (2,258) 2016 27,177 396 316 450 20,545 (2,259) 2017 29,216 (639) 423 614 23,680 (2,677)
Funded Status and Funding Progress The following table illustrates the funded status and the funding progress for the State as an employer:
Funded Status and Funding Progress (dollars in thousands) Long-Term Disability Plan Retiree Retiree Life Healthcare Life Insurance University of Plan Healthcare Insurance Income Plan Idaho Plan Actuarial Valuation Date 7/1/2016 7/1/2016 7/1/2016 7/1/2016 7/1/2016 7/1/2015 1 Actuarial Value of Assets $ 0 $ 0 $ 0 $ 0 $ 0 $ 30,528 2 Actuarial Accrued Liability (AAL) 32,470 3,713 3,091 2,372 56,160 58,201 3 Unfunded AAL (UAAL) (2) - (1) $ 32,470 $ 3,713 $ 3,091 $ 2,372 $ 56,160 27,673 4 Funded Ratios (1) : (2) 0% 0% 0% 0% 0% 52.45% 5 Annual Covered Payroll $ 1,002,118 $ 1,002,118 $ 1,002,118 $ 1,002,118 $ 310,210 $ 150,995 6 UAAL as a Percentage of Covered Payroll (3) : (5) 3.24% 0.37% 0.31% 0.24% 18.10% 18.33%
Actuarial Methods and Assumptions trend information about whether the actuarial value of plan Actuarial valuations involve estimates of the value of assets is increasing or decreasing over time relative to the reported amounts and assumptions about the probability of actuarial accrued liability for benefits. Calculations are events far into the future. Actuarially determined amounts based on the types of benefits provided under the terms of are subject to continual revision as actual results are the plan at the time of each valuation and on the pattern of compared to past expectations and new estimates are made sharing costs between the employer and plan members. about the future. The Schedule of Funding Progress, presented as required supplementary information following The projection of benefits for financial reporting purposes the notes to the financial statements, contains multiyear does not incorporate the potential effects of legal funding
State of Idaho 89 Comprehensive Annual Financial Report State of Idaho Notes to the Financial Statements For the Fiscal Year Ended June 30, 2017
limitations on the pattern of cost sharing between the designed to reduce short-term volatility in actuarial accrued employer and plan members in the future. Actuarial liabilities and the actuarial value of assets. The following calculations reflect a long-term perspective and actuarial table presents the significant methods and assumptions for methods and assumptions used include techniques that are all plans:
Significant Methods and Actuarial Assumptions Long-Term Disability Plan Retiree Retiree Life University Healthcare Life Insurance of Idaho Plan Healthcare Insurance Income Plan Plan Actuarial Cost Method Projected Projected Unit Projected Projected Unit Projected Entry Age Credit Unit Credit Unit Credit Credit Unit Credit Normal Amortization Method Level Level Level Percentage of Percentage Level Level Percentage Payroll of Payroll Dollar Dollar of Payroll Level Dollar Amortization Period 30 years, 5 years, 5 years, 30 years, 30 years, 10 years, Open Open Open Open Open Open Asset Valuation Method Fair Market N/A N/A N/A N/A N/A Value Assumptions: Inflation Rate 2.50% 2.50% 2.50% 2.50% 2.50% N/A Investment Return 3.30% 3.30% 3.30% 3.30% 3.30% 6.00% * OPEB Increases N/A N/A N/A N/A N/A N/A Projected Salary Increases 3.00% 3.00% 3.00% 3.00% 3.00% 3.00% Healthcare Cost Initial Trend Rate 3.80% 3.80% N/A N/A N/A 8.25% Healthcare Cost Ultimate Trend Rate 4.20% 4.20% N/A N/A N/A 5.75% * The discount rate is based upon the University's historical and long-term expected investment return.
B. Sick Leave Insurance Reserve Trust Funds All State government employers are statutorily required to contribute to a sick leave account administered by the The PERSI administers the Sick Leave Insurance Reserve PERSI. Employer's contributions are a percentage of Fund (SLIRF), cost sharing, multiple-employer defined payroll collected each pay cycle and are held in trust for benefit OPEB plan that provides healthcare benefits. The future benefits. The State is responsible for any unfunded SLIRF is classified as a trust fund. For State and school benefit obligations through contribution rate adjustments. employers, unused sick leave benefits are subject to the guidance of Governmental Accounting Standard Board The number of participating employers and membership in (GASB) Statement No. 74, Financial Reporting for the State SLIRF as of the June 30, 2016 valuation is as Postemployment Benefit Plans Other Than Pension Plans. follows: The SLIRF is made up of two trust funds administered by the PERSI - a trust for payment of school district employee Active 22,269 benefits and a trust for payment of State employee benefits. The SLIRF trust for payment of State employee benefits is Retirees and Beneficiaries 4,145 governed by Idaho Code Sections 67-5333 and 59-1365. Total 26,414 The SLIRF is a fund that exists for the payment of unused sick leave benefits in the form of insurance premiums for Number of Participating Employers 13 State and school district employees who separate from service by reason of retirement. The assets of the trust are State employees are limited to the number of allowable commingled for investment purposes. hours of sick leave they may use as part of the unused sick leave program as follows:
State of Idaho 90 Comprehensive Annual Financial Report State of Idaho Notes to the Financial Statements For the Fiscal Year Ended June 30, 2017
Maximum Allowable Members may use one-half of sick leave hours accrued up Credited Hours of Service Sick Leave Hours to the allowable maximum multiplied by their rate of 0-10,400 (0-5 years) 420 compensation at retirement. 10,401-20,800 (5-10 years) 480 The rate for State agency contributions was 0.65 percent of 20,801-31,200 (10-15 years) 540 covered salary at June 30, 2017. Contribution percentages are based on the number of days of paid sick leave earned 31,201+ (15 years or more) 600 during the contract year.
Net OPEB Asset and OPEB Expense The components of the State net OPEB asset of the participating State employers as of the measurement date of June 30, 2017 (dollars in thousands):
Total OPEB Liability $ 91,368 Plan Fiduciary Net Position 186,498
Employers' Net OPEB Liability (Asset) $ (95,130)
Plan Fiduciary Net Position as a Percentage of Total OPEB Liability 204%
Changes in the State net OPEB liability for the fiscal year ended June 30, 2017 (dollars in thousands)
Increase (Decrease) Total OPEB Plan Fiduciary Net OPEB Liability Net Position Liability (a) (b) (a) - (b) Beginning Balances(1) $ 86,112 $ 172,119 $ (86,007) Changes for the Year Service Cost 4,044 4,044 Interest 6,223 6,223 Benefit Changes Economic/Demographic Gains (Losses) Assumptions Changes Benefit Payments, Including Refunds (5,011) (5,011) Contributions - Employer 7,137 (7,137) Net Investment Income 12,294 (12,294) Transfer In Administrative Expense (41) 41 Net Changes 5,256 14,379 (9,123) Ending Balances $ 91,368 $ 186,498 $ (95,130)
(1) The Beginning of the Year Fiduciary Net Position (FNP) shown does not match the actual market value of assets as of July 1, 2016. The Beginning of Year FNP is a calculated value, such that the investment gain/loss for the year is zero. This is done only for the first year of GASB Statement No. 74/75 implementation in order to conform to Q&A 4.505 of the GASBS Statement No. 75 Implementation Guide Exposure Draft.
The State OPEB asset is calculated using a discount rate of far into the future. Amounts determined regarding the State 7.1 percent, which is the expected rate of return on net OPEB asset are subject to continual revision as actual investments reduced by investment expenses. The State net results are compared with the past expectations and new OPEB asset was determined by an actuarial valuation as of estimates are made about the future. July 1, 2016, rolled forward to July 1, 2017. Actuarial The PERSI Board's adopted asset allocation policy for the valuation involves estimates of the reported amounts and SLIRF as of June 30, 2017 was 30 percent Fixed Income, assumptions about the probability of occurrence of events
State of Idaho 91 Comprehensive Annual Financial Report State of Idaho Notes to the Financial Statements For the Fiscal Year Ended June 30, 2017
55 percent US/Global Equity, and 15 percent International For the year ended June 30, 2017, the annual money- Equity. weighted rate of return on SLIRF investments, net of investment expense was 13.3 percent. The money- Actuarial Assumptions weighted rate of return expresses investment performance, net of investment expense, adjusted for the changing Inflation 3.25 percent amounts actually invested. Salary Increases 3.75 percent Salary Inflation 3.75 percent Even though history provides a valuable perspective for Investment Rate of Return (Net of setting the investment return assumption, the PERSI relies investment expense) 7.10 percent primarily on an approach which builds upon the latest capital market assumptions. The assumptions and the PERSI's formal policy for asset allocation are shown below. The long-term expected rate of return on State OPEB plan The formal asset allocation policy is somewhat more investments was determined using the building block conservative than the current allocation of the PERSI's approach and a forward-looking model in which best assets. estimates ranges of expected future real rates of return (expected returns, net of SLIRF investment expense and The best-estimate range for the long-term expected rate of inflation) are developed for each major asset class. These return is determined by adding expected inflation to ranges are combined to produce the long-term expected rate expected long-term real returns and reflecting expected of return by weighing the expected future real rates of return volatility and correlation. by the target asset allocation percentage and by adding expected inflation. Capital market assumptions is a follows:
OPEB Expected Rate of Return Actuarial Assumptions Assumed Inflation - Mean 3.25% Assumed Inflation - Standard Deviation 2.00% Portfolio Arithmetic Mean Return 8.08% Portfolio Long-Term Expected Geometric Rate of Return 7.50% Assumed Investment Expenses 0.40% Long-Term Expected Geometric Rate of Return, Net of Investment Expenses 7.10%
Discount Rate Sensitivity of the net OPEB liability (asset) to changes in the discount rate The discount rate used to measure the total OPEB liability was 7.10 percent. The projection of cash flows used to The following presents the State net OPEB liability (asset) determine the discount rate assumed that contributions from calculated using the discount rate of 7.10 percent as well as plan members will be made at the current contribution rate. what the employers' liability (asset) would be if it were Based on these assumptions, the OPEB plan's net position calculated using a discount rate that is 1-percentage point was projected to be available to make all projected future lower or 1-percentage point higher than the current rate (in benefit payments of current plan members. Therefore, the thousands): long-term expected rate of return on OPEB plan investments was applied to all periods of projected benefit Current payments to determine the total liability. The long-term 1% Decrease Discount Rate 1% Increase expected rate of return was determined net of investment (6.1%) (7.1%) (8.1%) expense but without reduction for OPEB plan $ (91,360) $ (95,130) $ (99,535) administrative expense.
State of Idaho 92 Comprehensive Annual Financial Report State of Idaho Notes to the Financial Statements For the Fiscal Year Ended June 30, 2017
NOTE 10. RISK MANAGEMENT The State maintains a combination of commercial and self- commercially insured for up to $250,000, energy systems insurance to cover the risk of losses to which it may be are commercially insured for up to $50,000, employee exposed. This is accomplished through the Group bond/crime is commercially insured for up to $175,000, and Insurance and Risk Management internal service funds and cyber liability is commercially insured for up to $1,000,000, various outside entity insurance providers. per occurrence annually. Physical damages to covered vehicles and inland marine are self-insured for actual cash The Group Insurance fund is used to account for and finance value. The State purchases commercial insurance for life, health, and disability insurance programs which are claims not self-insured by the above coverages and for other experience rated and fully insured. However, when the identified risks of loss, including workers’ compensation claims exceed 100 percent of the annual premium paid to insurance. the insurer, the State is responsible for up to an additional 10 percent of the annual premiums for medical, 10 percent Estimated liabilities for Risk Management include claims for dental, and is not responsible for any claims exceeding that have been incurred but not reported; incremental claim premium payments for life and disability coverage. The adjustment expenses related to specific claims; claim insurance carrier assumes the risk of loss for claims above adjustment costs, both allocated and unallocated; and any the contractual ceilings. Policy claim liabilities are anticipated subrogation receipts. The State records its Risk composed of the amounts required to fund any additional Management premium liability using discounted amounts payments of life, health, and disability premiums. The provided by actuaries. The discounted liabilities take into liabilities include an estimate for claims that have been account anticipated investment income. At fiscal year-end incurred but not reported and are net of any contractual $12.0 million of unpaid claim liabilities for Risk adjustments and coordination of benefits. The fiscal year Management are recorded at the present value of 2017 refund reflects a favorable claims experience. $11.1 million, using a 3.5 percent discount interest rate. Additionally, the State does not have any unpaid claim All state entities may participate in the Group Insurance and liabilities at fiscal year-end; the State experienced less-than- Risk Management programs. Payments made to the Group expected claims in the amount of $2.3 million. The State Insurance fund are based on actuarial estimates of the maintains program and premium stabilization balances; amounts needed to pay for negotiated coverage and these amounts are included with the restricted net position projected claims experience. Claim settlements have not in the Group Insurance fund. exceeded insurance coverage for each of the past three fiscal The Risk Management fund manages property and general years. Liabilities are reported when the occurrence of loss liability risk. The Fund also finances and accounts for other is probable and the amount of the loss can be reasonably risks not covered by Group Insurance and various outside estimated. Payments are made to the Risk Management entity insurance providers. General liability claims are self- fund based on actuarial estimates, loss experience, insured up to the Idaho Tort Claims Act maximum of exposure, and asset value covered. $500,000 for each occurrence. Property damage claims are Changes in policy claim liabilities are as follows (dollars in thousands):
Current Year Claims and Claims Beginning Changes in (Payments) Fiscal Year Balance Estimate Refunds Ending Balance Group Insurance 2016 $ (2,995) $ (3,135) $ 4,382 $ (1,748) 2017 $ (1,748) $ (20,122) $ 19,533 $ (2,337)
Risk Management 2016 $ 11,304 $ 6,255 $ (6,755) $ 10,804 2017 $ 10,804 $ 5,490 $ (5,156) $ 11,138
State of Idaho 93 Comprehensive Annual Financial Report State of Idaho Notes to the Financial Statements For the Fiscal Year Ended June 30, 2017
NOTE 11. LEASES when paid or incurred. The total operating lease A. State as Lessee expenditures/expenses for fiscal year 2017 were $29.2 The State leases land, buildings, vehicles, and office million for the primary government. Operating leases equipment. Although the lease terms vary, most leases are contain various renewal options, as well as some purchase subject to annual appropriations from the Legislature to options. continue the lease obligations. If a legislative appropriation Capital Leases is reasonably assured, leases are considered noncancelable for financial reporting purposes. Any escalation clauses, The State has entered into capital leases that are, in sublease rentals, and contingent rentals are considered substance, a purchase. At the date of acquisition the assets immaterial to the future minimum lease payments and are valued on the balance sheet at the present value of the current rental expenditures. future minimum lease payments. Capital lease assets and obligations are recorded in the respective funds as capital Operating Leases assets and long-term obligations. Interest expense for Operating leases do not qualify for capitalization. capital leases is not capitalized. Amortization of assets Therefore, the lease agreements are not reflected as assets acquired under capital lease is included with depreciation in the State’s balance sheet. Operating lease payments are expense. recorded as expenditures or expenses of the related funds Assets under capital lease are as follows (dollars in thousands):
Governmental Business-Type Total Primary Asset Class Activities Activities Government Land $ 20 $ 20 Buildings and Improvements 22,560 $ 5,000 27,560 Machinery, Equipment, and Other 752 87 839 Accumulated Depreciation (3,831) (274) (4,105) Total Assets under Capital Leases $ 19,501 $ 4,813 $ 24,314
Future minimum lease commitments for noncancelable operating and capital leases are as follows (dollars in thousands):
Operating Leases Capital Leases Primary Governmental Business-Type Total Primary Fiscal Year Government Activities Activities Government 2018 $ 28,273 $ 2,567 $ 629 $ 3,196 2019 17,439 2,524 583 3,107 2020 12,342 2,535 583 3,118 2021 10,071 2,544 563 3,107 2022 6,214 2,567 562 3,129 2023-2027 6,565 13,189 1,640 14,829 2028-2032 1,186 5,471 5,471 2033-2037 976 Total Payments $ 83,066 31,397 4,560 35,957
Executory Costs (8,579) (8,579) Imputed Interest (6,397) (412) (6,809) Total Present Value of Minimum Lease Payments $ 16,421 $ 4,148 $ 20,569
State of Idaho 94 Comprehensive Annual Financial Report State of Idaho Notes to the Financial Statements For the Fiscal Year Ended June 30, 2017
B. State as Lessor Capital Leases Operating Leases The Boise State University Foundation, a component unit, leases a building to Boise State University. In July 2015, The State leased the following assets under operating leases the university entered into a $5.0 million ten-year (dollars in thousands): agreement with the Foundation to occupy and lease a portion of the Alumni and Friends Center. At the end of the Primary lease agreement, title will transfer to the University. Asset Class Government Land $ 1,531 Buildings and Improvements 21,262 Improvements Other Than Buildings 814 Machinery, Equipment, and Other Accumulated Depreciation (4,735) Total Assets Held for Lease $ 18,872
Future minimum rentals for operating leases and future minimum lease payments receivable for capital leases are as follows (dollars in thousands):
Operating Capital Leases Leases Primary Component Fiscal Year Government Unit 2018 $ 5,311 $ 609 2019 4,953 563 2020 4,465 563 2021 4,331 563 2022 4,176 562 2023-2027 19,314 1,640 2028-2032 12,234 2033-2037 3,483 Total Rentals and Receivables $ 58,267 $ 4,500
Net Investment in Direct Financing Lease:
Minimum Lease Payments Receivable $ 4,500 Unearned Income (407) Net Investment in Direct Financing Lease $ 4,093
State of Idaho 95 Comprehensive Annual Financial Report State of Idaho Notes to the Financial Statements For the Fiscal Year Ended June 30, 2017
NOTE 12. SHORT-TERM DEBT Primary Government The Idaho Housing and Finance Association utilizes short- term borrowing in the form of commercial paper to provide Idaho Code Section 63-3201 authorizes the State Treasurer, funds to purchase single-family mortgage loans on an upon approval by the State Board of Examiners, to borrow interim basis and to finance multi-family construction money in anticipation of current year tax receipts. The State loans. As of June 30, 2017, the Association has commercial uses external tax anticipation notes to cover the shortfall paper outstanding, maturing within 30 to 180 days from between General Fund revenues and disbursements during date of issue, with a weighted average interest rate of the year. General Fund revenues are received in relatively 1.91 percent. uneven amounts throughout the fiscal year due to various factors affecting the timing of receipts; such factors include The Idaho Small Employer Health Reinsurance Program the collection of individual income taxes in April, large sales has a $0.5 million line-of-credit commitment from a local tax receipts in January as a result of holiday shopping, and bank. Interest on the advances is payable monthly at prime quarterly collections of corporate income tax. During fiscal rate plus 0.5 percent per annum and was 4.25 percent as of year 2017, the State anticipated that 44.5 percent of General December 31, 2016. The line is not secured and matures Fund revenues would be received in the first six months; on January 1, 2018. The Program had another line-of-credit however, disbursements during the same period were during 2016 for $0.8 million from a local bank that matured expected to account for 63.4 percent of total expenditures, on November 11, 2016 and was not secured. Interest on the mainly due to public school aid and Health and Welfare advances on this line-of credit were payable monthly at expenditures. The notes sold on the open market were prime rate plus .5 percent per annum and the rate was 4.25 issued on July 1, 2016 and were redeemed on percent upon the maturity date of November 1, 2016. June 30, 2017. Component Units Short-term debt activity included the following (dollars in thousands):
Balances at Redeemed/ Balances at July 1, 2016 Issued/Draws Repayments June 30, 2017 Primary Government Governmental Activities: External Tax Anticipation Notes $ 0 $ 500,000 $ (500,000) $ 0 Component Units Commercial Paper $ 50,000 $ 714,035 $ (714,035) $ 50,000 Line of Credit $ 96 $ 393 $ (324) $ 165
State of Idaho 96 Comprehensive Annual Financial Report State of Idaho Notes to the Financial Statements For the Fiscal Year Ended June 30, 2017
NOTE 13. BONDS, NOTES, AND OTHER LONG-TERM LIABILITIES A. Compensated Absences Primary Government Component Units Idaho’s compensated absences policy permits employees to The Idaho Housing and Finance Association is authorized accumulate earned but unused vacation, compensatory to issue and sell revenue bonds under provisions of Idaho time, and sick leave benefits. Employees earn vacation Code Sections 67–6201 through 67 6226. The Association based on hours worked and years of service; compensatory issued bonds to finance various single and multi-family time earned is based on hours worked in excess of 40 hours housing developments and the construction of highway per week. Upon termination of employment, an employee transportation projects. The bonds are either special or is paid for unused vacation time and administrative leave. general obligations of the Association and do not constitute All employees covered by the Fair Labor Standards Act are a debt of the State or any of its political subdivisions. The paid compensatory balances at termination. bonds have been issued in a variable-rate mode. The bulk of the bonds are re-marketed on a weekly basis at the A liability is accrued in the government-wide, proprietary, prevailing interest rates. The multi-family housing bonds and fiduciary fund financial statements for all vacation pay are limited obligations of the Association and are secured and compensatory time when incurred. The liability is by the respective mortgages on each development as well based on the pay rate in effect at the balance sheet date. The as a lien on all revenues as defined in each respective bond State assumes a first-in, first-out flow for compensated indenture. The transportation bonds are secured by absence balances. principal and interest payments from the Idaho Transportation Department. B. Revenue Bonds The State’s college and university foundations have a Primary Government number of bonds outstanding for the purpose of funding construction projects. Foundation bonds are secured by The Idaho State Building Authority is authorized by Idaho various revenue sources including leases, donations, Code Title 67 Chapter 64 to issue bonds to finance pledges, and other funds. The college and university construction, restoration, or acquisitions of facilities for foundations issued $9.9 million in bonds between 2002 and lease to state agencies per prior legislative approval. Bonds 2015. The total principal and interest payments remaining are direct obligations of the Authority. The Authority has on the bonds are $4.9 million, payable through 2025. surety bonds in amounts up to the reserve requirements for Annual principal and interest payments on the bonds are all outstanding bonds except the Series 2008A bonds, for expected to require 100 percent of the revenues. For the which the Authority has funded debt service reserve. No current year, principal and interest payments and total amounts were outstanding at June 30, 2017 under these pledged revenues were $1.0 million and $1.0 million, surety bonds. respectively. The State’s colleges and universities have a number of The Idaho Bond Bank Authority is authorized to issue and outstanding bonds for the primary purpose of funding sell revenue bonds under provisions of the Idaho various construction projects. University bonds are secured Constitution Article VIII Section 2A and Idaho Code by student fees, the sale of goods and services, grants, Sections 67-8701 through 67-8729. The bonds are used by contributions, and certain other revenues. The colleges and the Authority to make loans to Idaho municipalities in order universities issued $673.9 million in bonds between 2004 to finance the construction of public water and/or sewer and 2017. Annual principal and interest payments on the improvements. The bonds are limited obligations of the bonds are expected to require 10 percent of the revenues. Authority and do not constitute a debt of the State or any The total principal and interest payments remaining on the of its political subdivisions. bonds are $705.9 million, payable through 2045. For the current year, principal and interest payments and total pledged revenues were $37.9 million and $379.5 million, respectively.
State of Idaho 97 Comprehensive Annual Financial Report State of Idaho Notes to the Financial Statements For the Fiscal Year Ended June 30, 2017
Revenue bond debt service requirements to maturity are as follows (dollars in thousands):
Primary Government Governmental Activities Business-Type Activities Fiscal Year Nonmajor Special Revenue College and University Total Ending June 30 Principal Interest Principal Interest Principal Interest 2018 $ 9,339 $ 4,439 $ 18,309 $ 19,635 $ 27,648 $ 24,074 2019 9,710 4,167 19,670 19,072 29,380 23,239 2020 10,155 3,857 19,145 18,538 29,300 22,395 2021 10,937 3,502 19,505 17,876 30,442 21,378 2022 11,047 3,122 19,555 17,766 30,602 20,888 2023-2027 43,645 10,633 81,720 72,368 125,365 83,001 2028-2032 10,430 7,346 88,045 52,556 98,475 59,902 2033-2037 15,315 4,407 102,850 30,838 118,165 35,245 2038-2042 12,226 1,141 59,595 10,749 71,821 11,890 2043-2047 16,255 1,894 16,255 1,894 Total $ 132,804 $ 42,614 $ 444,649 $ 261,292 $ 577,453 $ 303,906 Interest Rate 0.5% to 5.98% 0.67% to 6.52%
Component Units
Idaho Housing and Finance College and University Fiscal Year Association Foundations** Idaho Bond Bank Authority Total Ending June 30 Principal Interest Principal Interest Principal Interest Principal Interest 2018 $ 258,950 $ 34,209 $ 886 $ 102 $ 19,490 $ 13,651 $ 279,326 $ 47,962 2019 50,537 33,310 483 80 21,370 12,842 72,390 46,232 2020 52,341 31,418 494 69 17,945 12,145 70,780 43,632 2021 53,952 29,358 506 57 17,890 11,410 72,348 40,825 2022 55,778 26,884 518 44 18,555 10,621 74,851 37,549 2023-2027 282,047 99,356 1,583 57 91,835 40,542 375,465 139,955 2028-2032 242,545 30,017 70,080 22,435 312,625 52,452 2033-2037 70,450 6,054 46,175 9,551 116,625 15,605 2038-2042 9,021 270 18,675 2,260 27,696 2,530 2043-2047 3,105 249 3,105 249 Total $ 1,075,621 $ 290,876 $ 4,470 $ 409 $ 325,120 $ 135,706 $ 1,405,211 $ 426,991
Interest Rate 0.0% to 5.9% *2.38% to 5.35% 1.25% to 6.25% *Interest for the ISU Foundation is re-marketed at the Weekly Rate. **BSU Foundation netted deferred financing costs of $145 against their debt service requirements; however, the costs are not included in changes in Long-Term Liabilities schedule on page 102.
C. Advance and Current Refundings Primary Government into a trust sufficient to pay all future debt service payments In prior years, the Idaho State Building Authority defeased on those bonds. The related liability was appropriately bonds by placing governmental securities into irrevocable removed from the financial statements in the year of trusts sufficient to provide for all future debt service defeasance. payments on those bonds. The related liability was In prior years, Idaho State University defeased 2004B and appropriately removed from the financial statements in the 2007 series bonds by issuing series 2016 bonds. The related year of defeasance. liability was appropriately removed from the financial In prior years, Boise State University defeased bonds by statements in the year of defeasance. placing part of the proceeds of the general revenue bond
State of Idaho 98 Comprehensive Annual Financial Report State of Idaho Notes to the Financial Statements For the Fiscal Year Ended June 30, 2017
Component Units requirements of $4.8 million and an economic gain of $4.0 million. The Idaho Bond Bank Authority advance refunded bonds by issuing new bonds of $22.0 million and placed the In July 2016, the Idaho Housing and Finance Association proceeds into irrevocable trusts sufficient to provide for all issued bonds, in the amount of $177.9 million, as a future debt service payments on defeased bonds. The restructuring of older issuances to provide an adequate asset related liability was appropriately removed from the base to meet indenture parity requirements. There were no financial statements in the year of defeasance. The economic savings achieved by the restructuring. refunding resulted in a reduction of debt service The outstanding debt payable for each defeased debt issue is as follows (dollars in thousands)
Issuer Debt Issue Amount Defeased Remaining Liability Idaho State Building Authority 2003 Series B Bonds $ 4,765 $ 4,765 Boise State University 2009 Series A Bonds 25,195 25,195 Idaho Bond Bank Authority 2008 Series C Bonds 18,825 18,825 2008 Series A Bonds 8,730 8,730 2008 Series E Bonds 19,490 19,490 2009 Series A Bonds 39,525 39,525 2009 Series B Bonds 5,395 5,395 Idaho Housing and Finance Association 2006 Series A Bonds 97,665 7,266 2008 Series A Bonds 84,505 45,082
D. Notes Payable Primary Government The State’s colleges and universities refinanced various The Idaho Transportation Department financed the notes payable by issuing new notes payable. The notes are improvement of various roads and related infrastructure secured by student fees revenues. Lewis-Clark State within the State through borrowings from the Idaho College issued $4.7 million in notes payable in 2013. Housing and Finance Association in the amount of Amounts were originally due to be paid off in 2018, but $797.2 million. The notes are related to GARVEE bonds were fully paid off in 2017. issued by the Association and will be repaid by grant Component Units revenues received by the Department from the Federal Highway Administration and by matching state funds. The Idaho Housing and Finance Association issued notes Annual principal and interest payments on the notes are payable for the construction and purchase of affordable expected to require 19.8 percent of the revenues. The total multi-family housing complexes. The notes are secured by principal and interest payments remaining on the notes are the deeds of trust on the buildings and equipment or an $761.7 million, payable through 2032. For the current year, assignment or pledge of purchase rights for security principal and interest payments and total pledged revenues purposes. were $58.2 million and $294.5 million, respectively. The The BSU Foundation issued a $2.0 million note payable to amount of the balance owing does not equal the amount of a large healthcare organization. The proceeds were the receivable recorded by the Association due to the timing invested, and the investment earnings will generate of principal and interest payments. scholarships for health science students. The Idaho State Building Authority issued a $1.7 million The ISU Foundation redeemed 2001 multi-mode variable note payable during 2009. The note is payable from and rate bonds in 2016 and were replaced with a note payable secured by a pledge of lease revenues, other funds, and to a commercial lender in the amount of $5.0 million. The reserves held. Foundation also has a notes payable to establish tele- The Department of Administration purchased operating and pharmacies in neighboring communities, expanding health capital equipment through the issuance of a note payable center operations to serve students, faculty, and for $3.8 million in 2004 with a remaining principal balance administrators. of $2.0 million.
State of Idaho 99 Comprehensive Annual Financial Report State of Idaho Notes to the Financial Statements For the Fiscal Year Ended June 30, 2017
Note debt service requirements to maturity are as follows (dollars in thousands):
Primary Government Governmental Activities Transportation Nonmajor Special Revenue Internal Service Total Fiscal Year Ending June 30 Principal Interest Principal Interest Principal Interest Principal Interest 2018 $ 31,061 $ 26,423 $ 164 $ 13 $ 289 $ 101 $ 31,514 $ 26,537 2019 32,559 24,922 164 2 320 85 33,043 25,009 2020 34,107 23,359 11 2 353 67 34,471 23,428 2021 35,761 21,694 11 1 388 48 36,160 21,743 2022 37,547 19,905 7 425 27 37,979 19,932 2023-2027 217,904 69,252 228 5 218,132 69,257 2028-2032 173,032 14,201 173,032 14,201 Total $ 561,971 $ 199,756 $ 357 $ 18 $ 2,003 $ 333 $ 564,331 $ 200,107 Interest Rate 2.43% to 4.73% 3.45% to 6.75% 5.34%
Business-Type Activities College and University Nonmajor Enterprise Funds Total Fiscal Year Ending June 30 Principal Interest Principal Interest Principal Interest 2018 $ 13 $ 1 $ 34 $ 3 $ 47 $ 4 2019 24 1 24 1 2020 2 2 Total $ 13 $ 1 $ 60 $ 4 $ 73 $ 5 Interest Rate 3.25% to 5% 6%
Component Units Idaho Housing and Finance Association* College and University Foundations Total Fiscal Year Ending June 30 Principal Interest Principal Interest Principal Interest 2018 $ 21,624 $ 1,693 $ 540 $ 193 $ 22,164 $ 1,886 2019 6,508 1,502 543 172 7,051 1,674 2020 6,242 1,300 539 151 6,781 1,451 2021 6,248 1,111 530 130 6,778 1,241 2022 18,178 577 2,532 110 20,710 687 2023-2027 6,538 2,214 2,066 155 8,604 2,369 2028-2032 3,250 1,092 3,250 1,092 2033-2037 1,831 501 1,831 501 2038-2042 804 291 804 291 2043-2047 630 317 630 317 2048-2052 248 121 248 121 2053-2057 1,303 45 1,303 45 Total $ 73,404 $ 10,764 $ 6,750 $ 911 $ 80,154 $ 11,675 Interest Rate 0.00% to 9.13% 1.00% to 6.00% *IHFA netted unamortized debt issuance costs of $544 against their debt service requirements; however, the costs are not included in changes in Long-Term Liabilities schedule on page 102.
State of Idaho 100 Comprehensive Annual Financial Report State of Idaho Notes to the Financial Statements For the Fiscal Year Ended June 30, 2017
E. Claims and Judgments land’s value has not been established and has development limitations which may reduce property Primary Government values. Claims and judgments are payable on behalf of the State In August 2002, the federal government, Idaho, and its agencies for various legal proceedings and claims. Washington, and tribal officials signed a memorandum In general, the State records liabilities for material claims of agreement to create the Coeur d’Alene Basin and judgments when they are considered probable and Commission, which will direct cleanup of the estimable. The State recorded the following claims and Coeur d’Alene Basin in Idaho. The EPA issued a Record judgments: of Decision (ROD) in September 2002. The State and federal government signed the Coeur d’Alene Basin The Department of Health and Welfare estimates Superfund contract on October 2, 2003. The original Medicaid claims incurred in fiscal year 2017 but not estimate of the remediation cost was $310.0 million. In reported at year end in the amount of $43.9 million. 2012, an amended ROD was released with a revised The Idaho Transportation Department experienced estimated cleanup costs of $635.0 million. The State has contractor claims for reimbursement of additional not agreed to match any additional cost. Idaho’s match expenses incurred for the performance of construction is 10 percent or $31.0 million, which was measured using contract requirements. The State recorded a liability of the expected cash flow technique. The State has $2.7 million. expended $3.1 million toward the required match, leaving a liability of $27.9 million. Washington State The Department of Environmental Quality entered into will match the remainder of the liability. Work began in a contract with the Environmental Protection Agency 2003 and will take 30 years to complete. Environmental (EPA) in April 1995 for the purpose of environmental liability estimates are subject to amendment due to remediation within the Bunker Hill Superfund Site. changes in prices, technology, laws, regulations, and Federal Superfund law requires the State to match other factors. The State does not anticipate any recovery 10 percent of federal funds spent on actual remediation from other parties for the Coeur d’Alene Basin project. work and to meet all costs of future site operation and maintenance costs. The December 2012 amended Component Units remediation cost estimate was $143.0 million, which was The component units recorded the following claims and measured using the expected cash flow technique. The judgments: State’s share was $14.3 million. The State has expended $16.5 million toward the required match leaving an The Idaho Housing and Finance Association had an overpayment of the match liability of $2.2 million. The estimated arbitrage rebate liability of $0.1 million. overpayment can be used to meet match requirements in The Petroleum Clean Water Trust Fund had policy claim the Coeur d’Alene Basin Superfund site. The contract liabilities of $4.2 million for unpaid losses and loss work was completed during fiscal year 2008. The State adjustments. has taken ownership of 1,400 acres of remediated and unremediated land with approximately 400 additional The Idaho Individual High-Risk Reinsurance Pool and acres yet to be transferred from the EPA to the State. The the Idaho Small Employer Reinsurance Program had policy claim liabilities of $0.1 million for unpaid claims.
State of Idaho 101 Comprehensive Annual Financial Report State of Idaho Notes to the Financial Statements For the Fiscal Year Ended June 30, 2017
F. Changes in Long-Term Liabilities The changes in long-term liabilities are summarized as follows (dollars in thousands):
Balances at July 1, 2016 As Balances at June Amounts Due Long-Term Liabilities Restated Increases Decreases 30, 2017 Within One Year Primary Government Governmental Activities: Revenue Bonds $ 141,793 $ (8,989) $ 132,804 $ 9,339 (Premiums)/Discounts/Other 4,723 (683) 4,040 Notes Payable 595,116 (30,785) 564,331 31,514 Total Bonds and Notes Payable 741,632 (40,457) 701,175 40,853 Capital Leases 17,462 $ 19 (1,056) 16,425 1,079 Compensated Absences 54,058 56,228 (55,114) 55,172 55,172 Policy Claim Liabilities 10,804 25,023 (24,689) 11,138 3,000 Claims and Judgments 169,115 47,118 (143,421) 72,812 47,288 Net Pension Liability 306,439 149,197 (3,160) 452,475 Net OPEB Obligation 25,917 4,454 (2,405) 27,966 Other Long-Term Obligations 5,633 (1,877) 3,756 Total Governmental Activity $ 1,331,060 $ 282,039 $ (272,179) $ 1,340,919 $ 147,392
Business-Type Activities: Revenue Bonds $ 439,761 $ 67,860 $ (62,972) $ 444,649 $ 18,309 (Premiums)/Discounts 22,811 9,895 (3,261) 29,445 433 Notes Payable 2,157 66 (2,150) 73 47 Total Bonds and Notes Payable 464,729 77,821 (68,383) 474,167 18,789 Capital Leases 4,995 (847) 4,148 487 Compensated Absences 21,373 22,629 (21,332) 22,670 22,670 Net Pension Liability 56,602 28,797 85,399 Net OPEB Obligation 22,973 4,555 (1,563) 25,965 Other Long-Term Obligations 928 (143) 785 Total Business-Type Activity $ 571,600 $ 133,802 $ (92,268) $ 613,134 $ 41,946
Component Units: Revenue Bonds $ 1,578,652 $ 175,276 $ (348,862) $ 1,405,066 $ 279,326 (Premiums)/Discounts 54,286 72 (2,885) 51,473 2,878 Notes Payable 34,154 58,688 (13,232) 79,610 22,164 Total Bonds and Notes Payable 1,667,092 234,036 (364,979) 1,536,149 304,368 Compensated Absences 47 233 (227) 53 53 Policy Claim Liabilities 4,576 2,209 (2,431) 4,354 1,433 Claims and Judgments 306 (187) 119 Total Component Unit Activity $ 1,672,021 $ 236,478 $ (367,824) $ 1,540,675 $ 305,854
Internal service funds predominantly serve the funds. Primarily, the same funds that have been used in governmental funds. Accordingly, $2.0 million of notes prior years will be used to liquidate the following other payable, $1.0 million of compensated absences, governmental activity long-term liabilities: policy claim $11.1 million of policy claim liabilities, $7.0 million of net liabilities will be liquidated through the State’s Group pension liability, and $0.3 million of net OPEB obligations Insurance and Risk Management funds; claims and were included in the governmental activities for internal judgments will be liquidated by the Health and Welfare and service fund liabilities. Transportation special revenue funds and nonmajor special revenue funds; the net pension obligation will be liquidated In the past, the compensated absences liability attributable by the General Fund; the net OPEB obligation will be to governmental activities has been liquidated by the liquidated by the General Fund, Health and Welfare and General Fund, special revenue funds, and internal service
State of Idaho 102 Comprehensive Annual Financial Report State of Idaho Notes to the Financial Statements For the Fiscal Year Ended June 30, 2017
Transportation special revenue funds, nonmajor special debt are outstanding with an aggregate principal amount revenue funds, and internal service funds. payable of $56.5 million. G. Conduit Debt Component Unit Primary Government The Idaho Housing and Finance Association has outstanding bonds to provide financial assistance to entities The Idaho Water Resource Board has outstanding revenue for the construction of facilities deemed to be in the public bonds for the promotion, construction, rehabilitation, and interest. The bonds are secured by the financed property repair of water projects. The bonds are secured by the and are payable solely from payments received on the financed property and are payable solely from revenue of underlying investments. Upon repayment of the bonds, the projects. Upon payment of the bonds, ownership of the ownership of the constructed facilities transfers to the acquired facilities transfers to the entity served by the bond individuals served by the bond issuance. The Association issuance. Such bonds do not constitute a debt or obligation is not obligated in any manner for repayment of these bonds. of the State or any political subdivision, agency thereof, or Accordingly, the bonds are not reported as Association of the Board except to the extent of the revenues pledged liabilities. Forty one series of bonds that meet the under the indenture. Accordingly, these bonds are not description of conduit debt obligations are outstanding with reported in the accompanying financial statements. Seven an aggregate principal amount payable of $268.8 million. series of Water Resource bonds that qualified as conduit
State of Idaho 103 Comprehensive Annual Financial Report State of Idaho Notes to the Financial Statements For the Fiscal Year Ended June 30, 2017
NOTE 14. EQUITY A. Restatement of Beginning Fund Balances and Net The government-wide Statement of Net Position reported Position restricted net position of $3.4 billion for governmental activities, $1.5 billion for business-type activities, and The beginning net position of the general fund increased by $845.6 million for component units. These amounts $16.5 million due to a change in the estimation to calculate include $535.7 million of net position restricted by enabling the liability balance in the unclaimed property fund. legislation for governmental activities and $841.1 million The beginning net position of the nonmajor governmental of net position restricted by enabling legislation for fund decreased by $3.3 million due to an error in accounting business-type activities. for unearned revenue and increased $8.5 million due to the inclusion of the Idaho Fish and Wildlife Foundation. C. Governmental Fund Balances – Restricted, The beginning net position of the Loan fund increased by Committed, and Assigned $2.9 million due to underreporting of a note receivable and The governmental funds report a hierarchy of fund balance increased by $2.5 million due to adjustments of capital classifications based primarily on the extent to which the assets. State is bound to honor limitations on the use of the funds’ The government-wide Statement of Activities includes the resources. When a fund has more than one revenue stream, above restatements in the Governmental and Business-Type equity is classified according to the materiality of any Activities columns. In addition, Governmental Activities limitations on the fund. beginning net position decreased by $17.5 million due to Restricted fund balances represent those amounts that are adjustments to infrastructure and construction-in-progress, legally restricted for specific purposes due to limitations decreased by $4.7 million due to adjustments of capital imposed by external parties, such as creditors and grantors, assets in a prior year, increased by $13.3 million due to the or imposed through constitutional provisions or enabling inclusion of the Idaho Fish and Wildlife Foundation, legislation. increased by $0.3 million due to an overstatement of leases payable, decreased by $0.2 million due to an adjustment to Committed fund balances represent amounts that can only notes payable related to GARVEE, increased by $1.0 be used for a specific purpose imposed by formal action of million due to an error in the net pension liability reported the Legislature and signed by the Governor. in a prior year, increased by $1.1 million due to an error in Assigned fund balances represent amounts the government deferred outflows and inflows of resources in a prior year, intends to use for a specific purpose but are neither restricted increased by $68.2 million due to underreporting the SLIRF nor committed. asset in a prior year, and increased by $9.6 million due to the implementation of GASB Statement No. 74. The beginning net position of the Bond Bank Authority increased by $5.1 million to increase loans and notes receivable and the net position as of the beginning of the fiscal year.
B. Net Position Restricted by Enabling Legislation Net position is reported as restricted when constraints are placed on net position use by external parties such as creditors, grantors, contributors, or other governments; or by state law through constitutional provisions or enabling legislation. Enabling legislation authorizes the State to assess, levy, charge, or otherwise mandate payment of resources and requires that those resources be used only for the purposes stipulated in the legislation.
State of Idaho 104 Comprehensive Annual Financial Report State of Idaho Notes to the Financial Statements For the Fiscal Year Ended June 30, 2017
The following schedule presents the nature and purpose of these fund balances at June 30, 2017:
Restricted, Committed, and Assigned Governmental Fund Balances (dollars in thousands) Funds Restricted Committed Assigned Total General Economic Development $ 292 $ 57,463 $ 9,572 $ 67,327 Education 21,966 117,845 978 140,789 Environmental Quality 24,671 24,671 Fire Suppression 55,827 55,827 General Government Administrative Costs 1,254 23,988 25,242 Health and Human Services 11,112 1,057 12,169 Millennium Endowment Fund 302,283 302,283 Municipal Revenue Sharing 19,196 19,196 Natural Resources 2,251 2,251 Opportunity College Scholarships 19,574 19,574 Public Safety 885 9,088 9,973 School Building Maintenance and Repair 22,537 22,537 State Building Construction and Maintenance 45,729 45,729 Transportation Projects 16,354 16,354 Veterans Recognition 17,418 17,418 Other Purposes 3,821 1 12,857 16,679 Total $ 349,697 $ 332,704 $ 115,618 $ 798,019 Health and Welfare Health and Human Services $ 38 $ 38 Total $ 0 $ 38 $ 0 $ 38 Transportation and Transportation Infrastructure GARVEE Debt Service $ 41,873 $ 41,873 Transportation Programs 324,724 $ 3,249 327,973 Total $ 366,597 $ 3,249 $ 0 $ 369,846 Land Endowments Endowment Fund Beneficiaries $ 646,087 $ 646,087 Total $ 646,087 $ 0 $ 0 $ 646,087
Nonmajor Special Revenue Agricultural Programs $ 56,575 $ 56,575 Corrections 5,552 $ 1,658 7,210 Courts 2,155 3,260 5,415 Economic Development 19,106 19,106 Education 491 5,837 6,328 Employment Administration and Training Programs 13,949 13,762 27,711 Environmental Quality 92,402 27,983 $ 1,655 122,040 Professional Licensing and Monitoring 91,260 91,260 Public Recreation 5,037 38,746 43,783 Public Safety 7,357 14,930 22,287 State Building Debt Service 7,458 7,458 State Land Management 17,997 17,997 Tourism and Promotion 9,990 9,990 Wildlife Management 66,829 66,829 Workers Compensation 25,011 25,011 Other Purposes 3,782 680 4,462 Total $ 424,951 $ 106,856 $ 1,655 $ 533,462
State of Idaho 105 Comprehensive Annual Financial Report State of Idaho Notes to the Financial Statements For the Fiscal Year Ended June 30, 2017
D. Budget Stabilization and Minimum Fund Balance General Fund, should General Fund moneys be insufficient to meet General Fund appropriations for that The Legislature has the authority to set aside resources same fiscal year. Such transfers are limited to the amount through the appropriation process for use in an emergency of the insufficiency or one-half of 1 percent, whichever or when budgetary imbalances occur. The State has the is less. As of June 30, 2017, the fund balance was following budget stabilization arrangements: $323.9 million. • The Higher Education Budget Stabilization Fund can • The Public Education Stabilization Fund may be used to only be used for the maintenance, use, and support of the offset declining distributions from the public school colleges and universities subject to appropriation by the earnings reserve, declining endowment distributions, Legislature. Idaho Code Section 33 3726 requires and shortfalls in discretionary funding as spelled out in interest earnings from the College and University Fund Idaho Code Section 33-1018. According to Idaho Code and other amounts provided for by law to be transferred Sections 33 1018A and 33 1018B, the fund may also be into the Higher Education Budget Stabilization Fund. As used to cover any proportional share of the public of June 30, 2017, the fund balance was $8.9 million. schools’ General Fund budgetary holdbacks, for state • The Budget Stabilization Fund was created to cover matching funds for the School District Building Fund, General Fund revenue shortfalls, expenses incurred or for other purposes as stated in appropriation bills. Any because of a major disaster declared by the Governor, or accumulated balance greater than 8.34 percent of the to provide any appropriated one-time tax relief payments current year’s appropriation must be transferred to the to the citizens of Idaho. Idaho Code Section 57 814 Bond Levy Equalization Fund per Idaho Code Section requires that receipts to the General Fund for the fiscal 33 907. Additions to the Public Education Stabilization year just ending that have exceeded the previous fiscal Fund are from interest, transfers, and appropriations. year’s receipts by more than 4 percent be transferred to Idaho Code Section 33 905 requires any excess balance the Budget Stabilization Fund. The transfers should not over the amount needed for school building maintenance be more than 1 percent of actual General Fund receipts and discretionary spending be transferred to the Public for the fiscal year just ended. A concurrent resolution by Education Stabilization Fund. As of June 30, 2017, the the majority of the Legislature can require the State fund balance was $85.0 million. Controller to reduce the transfer. Idaho Code requires • Idaho Code Section 26 31 110 requires that the the transfer of 50 percent of any excess cash balance from Mortgage Recovery Fund, part of the Regulatory the General Fund to the Budget Stabilization fund at the nonmajor special revenue fund, maintain a minimum close of the current fiscal year. Appropriations from the balance of $1.5 million. The Mortgage Recovery Fund Budget Stabilization Fund are limited to 50 percent after account, as defined in Idaho Code Section 26 31 109, is the fund balance has reached the 10 percent of General used to reimburse persons who have been awarded Fund receipts. Idaho Code Section 57 814A authorizes damages resulting from violations of the Idaho the Board of Examiners to transfer unencumbered Residential Mortgage Practices Act. moneys from the Budget Stabilization Fund to the
State of Idaho 106 Comprehensive Annual Financial Report State of Idaho Notes to the Financial Statements For the Fiscal Year Ended June 30, 2017
NOTE 15. DONOR-RESTRICTED ENDOWMENTS Primary Government The Land Endowments fund has a nonexpendable Foundation, and University of Idaho Foundation are permanent corpus and an earnings reserve account; the managed in accordance with Idaho Code Title 33 earnings reserve is used to receive earnings and to pay Chapter 50 and rules adopted by their boards as specified beneficiaries and expenses. The Endowment Fund below. Investment Board (EFIB) invests the revenues generated The Boise State University Foundation receives certain gift from the management and/or sale of endowment lands. The assets that are to be held in perpetuity for the benefit of the Board of Land Commissioners (Land Board) and the EFIB University. The endowments had net appreciation of $9.3 spend the net appreciation and other revenues in accordance million during the fiscal year for expenditure. Accumulated with Idaho Code Title 57 Chapter 7 and Title 67 Chapter earnings are reported in net position restricted for 16. For the fiscal year ended June 30, 2017, net appreciation permanent trust-expendable. The Foundation has set a on investments of the donor-restricted endowments “total return” spending policy that specifies 4 percent of the available for expenditure for the Land Endowments fund three-year rolling average of the ending market value of was $42.3 million, which is included in net position each individual account be made available for expenditure restricted for permanent trust-expendable. The Land Board toward the established purpose. has set the current distribution policy for the endowments at 5 percent of the three-year rolling average permanent The Eastern Idaho Technical College Foundation receives fund balances. The EFIB may adjust the distributions certain gift assets that are to be held in perpetuity for the depending on the amount in the earnings reserve accounts, benefit of scholarships at the College. The endowments transfers to the permanent funds, and other factors. had net appreciation of $0.1 million during the fiscal year for expenditure. Accumulated earnings are reported in net The Idaho Fish and Wildlife Foundation receives certain position restricted for permanent trust-expendable. The gift assets that are to be held in perpetuity for the benefit of Foundation determines the amount to be paid out as the Foundation. The Foundation board of directors spends scholarships to the College on an annual basis. the net appreciation in accordance with Idaho Code Title 68 Chapter 12. The endowments did not have any net The Idaho State University Foundation receives certain gift appreciation during the fiscal year available for assets that are to be held in perpetuity for the benefit of the expenditure. Accumulated earnings are reported in net University. The endowments had net appreciation of $3.5 position restricted for permanent trust - nonexpendable. million during the fiscal year. Accumulated earnings are The Foundation board of directors must approve spending reported in net position restricted for permanent trust- of investment income. Limits are set by individual expendable. Donor-imposed restrictions requiring earnings agreements for each endowment fund established. to be contributed back to the corpus are not formally complied with by the Foundation. The Foundation The Department of Parks and Recreation has a $1.3 million addresses this indirectly through the strategy established donor-restricted endowment for the preservation, through its investment and spending policies. The operation, and management of the Ritter Island Unit of the Foundation has a policy of appropriating for annual Thousand Springs Complex. The Department of Parks and distribution 4 percent of its endowment fund’s average fair Recreation also has a $2.8 million donor-restricted value over the prior 12 quarters through the calendar year- endowment for the management of the Trail of the Coeur end proceeding the current fiscal year. d’Alenes. Only earnings from investments may be expended by the Idaho Parks and Recreation Board, The Lewis-Clark State College Foundation receives certain although no less than 3 percent of the total value of the gift assets that are to be held in perpetuity for the benefit of endowment shall be designated as earnings, even if such the College. The endowments had a net appreciation of designation temporarily reduces the principal. The Board $0.8 million during the fiscal year for expenditures. maintains sole discretion in determining the amount of Accumulated earnings are reported in net position restricted earnings to be distributed to the Department of Parks and for permanent trust-expendable. The Foundation Recreation and to be deposited to increase the principal of established a spending rate of 4 percent of the five-year the endowment. For the fiscal year ended, net appreciation rolling average of the market value of each endowment available for expenditure was $1.0 million, which is account as of December 31 for each fiscal year. This amount reported in net position restricted for other purposes. may be reduced if an account has insufficient accumulated earnings to cover the payout. Component Units The University of Idaho Foundation receives certain gift Endowments for the Boise State University Foundation, assets that are to be held in perpetuity for the benefit of the Eastern Idaho Technical College Foundation, Idaho State University. The endowments had net appreciation of $22.9 University Foundation, Lewis-Clark State College
State of Idaho 107 Comprehensive Annual Financial Report State of Idaho Notes to the Financial Statements For the Fiscal Year Ended June 30, 2017
million during the fiscal year for expenditure. Unrealized fiscal year 2017, the spending rate was set at 4.4 percent of appreciation (depreciation) is included in net position the three-year rolling average of the endowment’s monthly restricted for permanent trust-expendable. The Foundation fair market value. Board of Directors establishes an annual spending rate. For
State of Idaho 108 Comprehensive Annual Financial Report State of Idaho Notes to the Financial Statements For the Fiscal Year Ended June 30, 2017
NOTE 16. LITIGATION, CONTINGENCIES, COMMITMENTS, AND ENCUMBRANCES A. Litigation and Contingencies B. Commitments
Primary Government Primary Government The State is a defendant in numerous legal proceedings The Idaho Transportation Department (ITD) has a total of pertaining to matters incidental to the performance of $235.2 million in outstanding commitments for governmental operations. Such litigation includes, but is infrastructure and $33.2 million for other capital asset- not limited to: claims asserted against the State arising from related construction projects underway at year-end. In alleged torts, alleged breaches of contracts, condemnation addition, the ITD has a commitment to repay the Idaho proceedings, and other alleged violations of state and Housing and Finance Association principal and interest federal laws. The State is unable to estimate the ultimate related to Grant Anticipation Revenue Vehicle (GARVEE) outcome or liability, if any, in respect to the various bonds for construction costs to improve and enhance the proceedings. However, the State believes that any ultimate State’s highway infrastructure. To date, the ITD has liability resulting from these suits will not have a material borrowed $797.2 million against the total; of that amount, effect on the financial condition of the State. $235.2 million has been repaid, resulting in a $562.0 million liability being recorded. Details can be Idaho Code Section 33-5303 requires the State to guarantee found in Note 13. the bonds of any school district qualified by the State Treasurer. If the State is required to make the bond payment The Department of Administration has a total of of any school district, the State will redirect distributions $37.1 million in outstanding commitments for capital asset- normally made to the school district to reimburse the State. related construction projects underway at year-end. As of June 30, 2017, the principal amount of qualified The colleges and universities estimate costs of school district bonds outstanding was $1.3 billion, and the $95.5 million to complete a variety of capital asset-related interest amount outstanding was $474.8 million. construction projects underway at year-end. Idaho Code Section 67-8716 requires the State to guarantee The Department of Parks and Recreation has a total of $7.8 the bonds of any municipality qualified by the State million in outstanding commitments for capital asset- Treasurer. If the State is required to make the bond payment related construction projects underway at year-end. of any municipality, the State will redirect distributions normally made to the municipality to reimburse the State. The Department of Labor has a total of $5.7 million in As of June 30, 2017, the Idaho Bond Bank Authority had a outstanding commitments for capital asset-related principal amount of qualified municipal bonds outstanding construction projects underway at year-end. of $325.1 million, and the interest amount outstanding was The Department of Environmental Quality administers two $135.7 million. Five water and sewer districts and one fire revolving loan funds. The funds provide financing sources district do not have distributions to intercept in the event for the construction of publicly owned wastewater and they are unable to make the bond payments. If the State is drinking water treatment facilities. The Clean Water Loan required to pay the obligation, the State will pursue legal fund had loan commitments of $70.0 million and the action to recover the amount paid. The total principal Drinking Water Loan fund had commitments of outstanding for these districts is $14.3 million, payable $32.5 million. These loan commitments will be funded through 2029. either from new capitalization grants, generally 80 percent The State receives significant financial assistance from the federal funds and 20 percent state matching dollars, or from federal government in the form of grants. The receipt of accumulated repayments and investment revenues, which federal grants is generally conditioned upon compliance are perpetually appropriated for this purpose. with terms and conditions of the grant agreements and is The Department of Correction has a contract with Corizon, subject to financial and compliance audits. Questioned Inc. to provide medical services for inmates. The estimated costs as a result of these audits may be disallowed after cost for fiscal years 2018 and 2019 is $94.1 million. review by federal agencies. The State’s opinion is that these Additionally, the Department has a contract with questioned costs, if any, will not have a significant effect Management and Training Corporation to operate a 432- on the financial position of the State. bed substance abuse treatment prison facility. The Revenue from federal grants includes amounts for the Department has committed to pay monthly per diems based recovery of overhead and other costs. The State may be on offender count. The estimated cost for fiscal years 2018 required to make refunds of federal reimbursements as a through 2021 is $29.7 million. result of audits. The State’s opinion is that these refunds, The Judicial Branch estimates costs of $5.6 million to if any, will not have a significant effect on the financial complete a variety of capital asset-related construction position of the State. projects underway at year-end, with a new technical system
State of Idaho 109 Comprehensive Annual Financial Report State of Idaho Notes to the Financial Statements For the Fiscal Year Ended June 30, 2017
for court management making up a significant portion of The Idaho State Tax Commission entered into a Software this amount. maintenance and Configuration Assistance Agreement to maintain the Commission’s GENTAX application. The The Dairy Products Commission annually commits to agreement is effective through June 30, 2020, with a participate in a national unified marketing plan for dairy remaining cost of $8.2 million. products. The Commission’s 2017 commitment to nutrition, product, and ingredient manufacturing research The Idaho State Historical Society holds a contract with the and marketing activities is $6.4 million. Nassal Company in the amount of $6.5 million for exhibitions, fabrication, and installation. The contract is The State Lottery maintains a contract with INTRALOT, effective through June 30, 2018. Inc. through February 18, 2017 to pay 1.98 percent of total net sales and a $3,466 monthly fee for a wireless tablet- Component Unit reporting system to be used by Lottery’s regional sales The Idaho Housing and Finance Association has representatives. A new contract for an additional 10 years commitments to purchase $716.5 million of single-family has been negotiated, with specifics to be detailed at a later mortgages. The Association has commitments to sell or date. The State Lottery also has purchased prize annuities secure $320.7 million of single-family mortgages. in the name of the individual winners, but is still liable in the event the insurance companies default on payments. The The University of Idaho Foundation has $19.8 million in amount of payments for the year ended June 30, 2017 is outstanding commitments for investments. $11.3 million. The Idaho State University Foundation has $12.5 million The Public Employee Retirement System of Idaho has a in outstanding commitments for investments. total of $612.6 million and €39.4 million in outstanding commitments for investments to private equity partnerships. C. Encumbrances Encumbrances within the restricted, committed, and assigned fund balances of the governmental funds are as follows (dollars in thousands):
Nonmajor General Fund Health and Welfare Transportation Governmental Encumbrances $ 30,082 $ 4,747 $ 27,728 $ 20,289
State of Idaho 110 Comprehensive Annual Financial Report State of Idaho Notes to the Financial Statements For the Fiscal Year Ended June 30, 2017
NOTE 17. TAX ABATEMENTS liability in any one year, a new jobs tax credit from $1,500- $3,000 for new jobs paying $24.04 per hour or more, and As of June 30, 2017, the State of Idaho provides tax a 2.5 percent real property improvement corporate income incentives under four programs which meet the definition tax credit up to $125,000 in any one year along with a 25 of tax abatements as provided in GASB Statement No. 77: percent rebate on sales tax paid on construction materials Tax Reimbursement Incentives (TRI), Idaho Business for the new facilities. Advantage, Broadband Income Tax credit, and Sales Tax Rebates. A company must meet the following requirements to qualify for the Idaho Business Advantage incentive: Tax Reimbursement Incentives (TRI) • The business must invest $500,000 in new facilities. Pursuant to Idaho Code Section 67-4737, the tax • The business must create at least 10 new jobs paying reimbursement incentive program is designed to accelerate on average $40,000/year ($19.23/hour) plus benefits. the growth of new business opportunities, encourage the • The average wage of any additional new employee creation of high-paying jobs, and diversify the state’s and during project period must be $15.50/hour plus local community’s economy. The Tax Reimbursement benefits. Incentive is a performance-based economic development • Project period ends when the facilities put into service, tool that provides a refundable tax credit up to 30 percent but no later than December 31, 2020. for up to 15 years on new Business Entity income tax, sales tax, and payroll taxes paid as a result of the Meaningful In the event that any person to whom a tax credit allowed Project. The TRI will perpetually generate the revenues by Idaho Code Sections 63-4403, 63-4404 or 63-4405, fails needed to fund the incentive. to meet the tax incentive criteria, the full amount of the credit shall be subject to recapture by the commission. This credit is available to both existing and new companies, in any industry, seeking expansion in the state. The tax credit Broadband Income Tax Credit percentage and project term are negotiable based upon the quantity and quality of jobs created, state/regional Pursuant to Idaho Code Section 63-3029I, businesses that economic impact, and return on taxpayer investment for purchase qualified broadband equipment and infrastructure Idaho, among others. for the benefit of end users in Idaho may earn a 3 percent income tax credit up to $750,000. A company must complete an in-depth application and meet the following requirements to qualify for the Tax “Qualified broadband equipment” means equipment that Reimbursement Incentive: qualifies for the credit for capital investment permitted by Idaho Code Section 63-3029B and is capable of transmitting • Create 20 new jobs in rural communities (city signals at a rate of at least 200,000 bits per second to a population of 25,000 or less) or 50 in urban centers. subscriber and at least 125,000 bits per second from a • New jobs must be full time (30 hours or more) and pay subscriber. A taxpayer must apply to and obtain from the an average wage of equal to or greater than the average Idaho Public Utilities Commission an order confirming that county wage. the installed equipment is qualified broadband equipment. • Demonstrate a meaningful community match. • Confirm the company’s stability and the projects’ Each taxpayer must retain and make available, on request, potential to be a significant economic impact in the records for each item of property included in the community and Idaho. computation of the broadband equipment investment credit • Prove that the incentive is a critical factor in the claimed on an income tax return subject to examination. company’s decision to expand in Idaho. The records must include all of the following: • The order from the Idaho Public Utilities Commission Idaho Business Advantage confirming that the installed equipment is qualified broadband equipment. Pursuant to Idaho Code Sections 63-4402 through 63-4409, • A description of the property. the Idaho Business Advantage offers businesses that invest • The asset number assigned to the item of property, if a minimum of $500,000 in new facilities and create at least applicable. 10 new jobs averaging $40,000 annually with benefits, may • The acquisition date and date placed in service. qualify for a variety of incentives. • The basis of the property. The following incentives are available through this • The retirement, disposition, or date transferred out of program: an enhanced investment tax credit of 3.75 percent Idaho, or date no longer used in Idaho, if applicable. up to $750,000 or 62.5 percent of corporate income tax
State of Idaho 111 Comprehensive Annual Financial Report State of Idaho Notes to the Financial Statements For the Fiscal Year Ended June 30, 2017
In the event that qualified broadband equipment upon which expenditure on approved transportation improvements, the credit allowed by this section has been used ceases to with the state tax commission. The claim shall: qualify for the credit allowed by Idaho Code Section 63-3029B, or is subject to recapture of that credit, the • Identify the location and boundaries of the retail recapture of credit under this section shall be in the same complex. proportion and subject to the same provisions as the amount • Identify the qualified retailers making retail sales of credit required to be recaptured under Idaho Code Section within the complex. 63-3029B. • Include verification that the developer has met the expenditure requirements of a minimum of $4.0 Sales Tax Rebate million. • Include certification from the Idaho Transportation Pursuant to Idaho Code Section 63-3641, a developer of a Department or political subdivision of the amount retail complex shall receive a rebate of sales taxes collected expended on the approved transportation and remitted to the State Tax Commission by qualified improvements related to the retail complex. retailers within the retail complex to reimburse the • Contain such additional information as the State Tax developer for project expenses incurred for the installation Commission may require by rule. of approved transportation improvements. An “approved transportation improvement” means a Upon approval by the State Tax Commission, the developer highway project whose cost is in excess of $6.0 million for is entitled to receive a rebate of 60 percent of all sales and the installation of an interchange from an interstate highway use taxes imposed by this chapter and remitted to the State or expended on the improvement of an existing highway. Tax Commission after the date of approval by qualified To qualify as an approved highway improvement, the retailers in the retail complex. Once a total of thirty-five developer of a retail complex must enter into an agreement million dollars ($35,000,000) has been paid in as a rebate with the Idaho Transportation Board and/or political on a particular approved transportation improvement, no subdivision. additional rebates shall be paid in regard to that approved transportation improvement. An approved highway improvement shall include those costs directly associated with the highway project but shall The following table displays the total amount of taxes not include any improvement not within the right-of-way abated per program for the year ended June 30, 2017: of the proposed public highway improvement, improvements not specifically authorized in the agreement Amount of Taxes Abated entered into, or developer financed improvements required (In Actual by state or local agencies as part of the permitting and Tax Abatement Program Dollars) development process not within the public highway right- of-way. Idaho Business Advantage $ 718,947 To obtain the rebate provided by Idaho Code Section Broadband Income Tax Credit 2,713,844 63-3641, the developer of a retail complex shall file a Sales Tax Rebate 9,181,700 written claim within two (2) years of the developer's last
State of Idaho 112 Comprehensive Annual Financial Report State of Idaho Notes to the Financial Statements For the Fiscal Year Ended June 30, 2017
NOTE 18. SUBSEQUENT EVENTS Subsequent to June 30, 2017, the following events occurred: On June 30, 2017, the Idaho Bond Bank Authority's balance for Series 2004A bonds was $1.8 million. On August 31, Primary Government 2017, the City of McCall paid off its 2004A loan from the On July 3, 2017, the Office of the State Treasurer issued tax Idaho Bond Bank Authority and on September 1, 2017, the anticipation notes in the amount of $485.8 million. The City of Driggs paid off its 2004A loan with the Idaho Bond notes were issued to finance the State’s daily operations in Bank Authority. Consequently, as of September 1, 2017, the anticipation of certain tax revenues of the State to be Idaho Bond Bank Authority's Series 2004A bonds are collected during the fourth quarter of the 2017 fiscal year. outstanding in the amount of $0.2 million. The notes mature on June 29, 2018. On June 30, 2017, the Idaho Bond Bank Authority's balance Component Units for Series 2008B bonds was $5.9 million. On August 31, 2017, the City of McCall defeased its 2008B loan from the On July 3, 2017, the Idaho Housing and Finance Association Idaho Bond Bank Authority. As of September 1. 2017, the issued 2017 Series A Single-Family Mortgage Bonds in the Idaho Bond Bank Authority Series 2008B bonds are fully amount of $92.7 million. Proceeds of the 2017 Series A defeased. Bonds are used to pay and redeem the following bonds previously issued by the Issuer: the 2012 Series A Bonds On October 19, 2017, Idaho Transportation Department in (2006 Indenture) in part in a principal amount equal to $34.7 conjunction with Idaho Housing and Finance Association million, the 2013 Series A-1 Bonds (2006 Indenture) in part and Citigroup completed a GARVEE bond refunding in a principal amount equal to $40.0 million, the 2013 Series (refinance). This refunding was completed as an advance A-2 Bonds (2006 Indenture) in part in a principal amount refunding meaning that it was completed prior to the call equal to $3.6 million, the 2009 Series C Bonds (2009 dates of the bonds selected. In summary, the following Indenture) in part in a principal amount equal to $6.0 occurred: refunded Series 2008 in a par amount of $14.0 million, and the 2009 Series 1-A Bonds (2009 Indenture) million; refunded Series 2009 in a par amount of $87.1 in part in a principal amount equal to $8.4 million. In million; refunding Series 2017 was sold with a par amount connection with such refunding, the Issuer and Barclays of $91.3 million with a 5 percent coupon resulting in a Bank PLC (the "Interest Rate Contract Provider") have premium of $17.8 million and in total cost of interest of agreed to allocate and transfer the interest rate contracts 2.24 percent. Total present value savings resulting from this related to such refunded variable rate bonds to the 2017 transaction is $13.1 million after all costs have been Series A Bonds. Bonds are intended as a restructuring to covered. Total cost of issuance for this series was $0.8 provide a better match of loan prepayment speeds and swap million. Interest savings for Fiscal Year 2018 will be $1.5 contract fixed rates and maturation dates. No economic million with additional interest savings each year until the savings are intended to be achieved by this restructuring. series is paid off. Total savings resulted from the reduction of interest rate. On August 30, 2017, the Idaho Bond Bank Authority issued 2017 Series C Revenue Bonds in the amount of $14.1 million.
State of Idaho 113 Comprehensive Annual Financial Report
Required Supplementary Information
Boise River State of Idaho Required Supplementary Information Budgetary Comparison Schedule General Fund and Major Special Revenue Funds For the Fiscal Year Ended June 30, 2017 (dollars in thousands) General
Actual Amounts Variance Original Budgetary with Final Budget Final Budget Basis Budget REVENUES Sales Tax $ 1,638,852 $ 1,638,852 $ 1,638,852 Individual and Corporate Taxes 2,277,878 2,277,878 2,277,878 Other Taxes 60,398 60,398 60,398 Licenses, Permits, and Fees 25,154 25,154 25,154 Sale of Goods and Services 23,493 23,493 23,493 Grants and Contributions 16,357 16,357 16,357 Investment Income 27,851 27,851 27,851 Tobacco Settlement 22,964 22,964 22,964 Other Income 28,720 28,720 28,720 Total Revenues $ 4,121,667 $ 4,121,667 4,121,667 EXPENDITURES General Government $ 917,115 $ 921,890 864,399 $ 57,491 Public Safety and Correction 356,532 356,469 342,232 14,237 Health and Human Services 26,808 26,808 25,576 1,232 Education 2,236,969 2,238,236 2,136,645 101,591 Economic Development 131,210 144,867 103,027 41,840 Natural Resources 42,436 42,519 56,785 (14,266) Total Expenditures $ 3,711,070 $ 3,730,789 3,528,664 $ 202,125
Revenues Over (Under) Expenditures 593,003 OTHER FINANCING SOURCES (USES) Sale of Capital Assets 2,655 Transfers In 252,679 Transfers Out (1,033,052) Total Other Financing Sources (Uses) (777,718) Revenues and Other Financing Sources Over (Under) (184,715) Expenditures and Other Financing Uses Reconciling Items Changes Affected by Accrued Revenues (400,442) Changes Affected by Accrued Expenditures 746,274 Fund Balances - Beginning of Year, as Restated 1,315,057 Fund Balances - End of Year $ 1,476,174
The accompanying note is an integral part of the financial statements. State of Idaho 116 Comprehensive Annual Financial Report Health and Welfare Transportation
Actual Actual Amounts Variance Amounts Variance Original Budgetary with Final Original Final Budgetary with Final Budget Final Budget Basis Budget Budget Budget Basis Budget
$ 26,619 $ 26,619 $ 26,619 $ 332,601 $ 332,601 $ 332,601 20,242 20,242 20,242 179,191 179,191 179,191 239,652 239,652 239,652 6,583 6,583 6,583 1,667,716 1,667,716 1,667,716 271,745 271,745 271,745 243 243 243 1,195 1,195 1,195
13,727 13,727 13,727 1,123 1,123 1,123 $ 1,968,199 $ 1,968,199 1,968,199 $ 792,438 $ 792,438 792,438
$ 3,527 $ 3,527 3,527 2,778,881 2,772,079 2,629,160 $ 142,919
$ 1,102,360 $ 1,117,198 731,583 $ 385,615
$ 2,782,408 $ 2,775,606 2,632,687 $ 142,919 $ 1,102,360 $ 1,117,198 731,583 $ 385,615
(664,488) 60,855
117 16,462 674,735 (19,838) (17,714) 655,014 (1,252) (9,474) 59,603
93,203 (7,475) (97,844) (11,885) (4,536) 350,111 $ (18,651) $ 390,354
State of Idaho 117 Comprehensive Annual Financial Report State of Idaho Required Supplementary Information For the Fiscal Year Ended June 30, 2017
NOTE TO BUDGETARY REPORTING
Budgetary Process and Control Limitations exist regarding the extent to which management may modify an appropriation. Legislative approval is Budgets are adopted in accordance with Idaho Code Title 67 required for the transfer of appropriations from one fund to Chapter 35. In September of each year, state agencies another. The following adjustments may be made, with the submit requests for appropriations to the Governor's Office, appropriate approval: Division of Financial Management (DFM), so an executive budget may be prepared. The budget is generally prepared Idaho Code Section 67-3511(1) allows agencies to by agency, fund, program, and object and includes transfer spending authority between objects within a information on the past year, current year estimates, and fund and program, with the exception of personnel costs. requested appropriations for the next fiscal year. Legal level Appropriations for personnel costs may be transferred of budgetary control is maintained at the same level of detail to other objects, but appropriations for other costs may as appropriated. Appropriated funds include the General not be transferred to personnel. Per Idaho Code Section Fund, special revenue funds, the capital projects fund, 67-3511(3), appropriations for capital outlay may not be enterprise funds, internal service funds, earnings of the used for any other purpose, but appropriations for other permanent fund, and pension trust funds. The appropriated objects may be transferred to capital outlay. The SBE funds are either appropriated annually or on a continuous must approve object transfers. basis. For those funds appropriated on a continuous basis, appropriation equals expenditures which can be made to the Idaho Code Section 67-3511(2) allows agencies to extent of available cash. Unexpended appropriation transfer spending authority from one program to another balances generally lapse at fiscal year-end unless within an agency, provided the transfer is not more than reappropriated by the Legislature. Appropriations are 10 percent cumulative change from the appropriated subject to the provisions of Idaho Code Title 67 Chapter 36. amount for any program affected by the transfer. The DFM and the SBE must approve these transfers. The The Governor's budget recommendations are presented to Legislature must approve transfers above 10 percent the Legislature within the first five days of each regular cumulative change. legislative session, which begins in January. The Joint Finance and Appropriations Committee reviews the Should any change occur that is not within the described Governor’s recommended budget, makes amendments, and limitations, legal compliance is not achieved. prepares the annual appropriation bills for submission to The General Fund’s natural resources function had a both houses of the Legislature. A simple majority vote by negative variance stemming from fire suppression both houses of the Legislature is required to pass the deficiency warrants. This deficit is allowed by statute and appropriation bills. The Governor has line item veto power will be funded with future appropriations. All other over appropriation bills. Approval by two-thirds of both appropriated budgets of the State were within their houses is required to override a governor’s veto. The authorized spending levels. appropriation bills become the State's authorized operating budget upon the Governor's signature, or become law Budgetary Basis of Accounting without the Governor’s signature within five days after The State’s legal budget is prepared using cash basis being presented to him, per Idaho Constitution Article IV records. Revenues are generally recognized when cash is Sections 10 and 11. received. Expenditures are recorded when the related cash Agencies may request additional appropriations for the disbursement occurs. Encumbrances are allowed for current year, which may be granted under authority of the budgetary control purposes. Fund balances are restricted Legislature. If expenditures are expected to exceed or committed for obligations incurred for goods or services available cash, the State Board of Examiners (SBE) may that have not been received. Encumbrances may be carried authorize reduction of a portion of the General Fund over to the next fiscal year with the approval of the DFM. appropriation. The Governor may issue an executive order The Budgetary Comparison Schedule is prepared on the for temporary reduction of spending authority, which is budgetary basis and includes this variation from generally recorded in the accounting system as a negative accepted accounting principles (GAAP). The original supplemental appropriation. The Governor may call budget amount represents the original appropriation, prior extraordinary sessions as provided by Article IV Section 9 year reappropriations, and continuous appropriations. The of the Idaho Constitution. final budget amount includes the original budget plus
State of Idaho 118 Comprehensive Annual Financial Report State of Idaho Required Supplementary Information For the Fiscal Year Ended June 30, 2017
supplemental (positive or negative) appropriations, reflects budgeted revenues as being equal to actual Governor’s holdbacks, Board of Examiners reductions, revenues. The State issues a separate Legal Basis Financial object transfers, actual transfers, and receipts to the Report, which demonstrates legal compliance with the appropriation. The reconciliation at the bottom of the budget. A copy of this report may be viewed online at Budgetary Comparison Schedule shows the difference www.sco.idaho.gov. Look under “Accounting” and then between the budgetary basis and GAAP. “Financial Reports and Public Information.”
The State does not adopt a revenue budget. For financial reporting purposes, the Budgetary Comparison Schedule
INFRASTRUCTURE – MODIFIED APPROACH REPORTING
Under GASB Statement No. 34, Basic Financial Statements 0.0-5.0 scale.index, with 0.0 being extremely rough —and Management’s Discussion and Analysis—for State and 5.0 being smooth. and Local Governments, governments are allowed an Rutting Depth is a primary indicator of pavement alternative to depreciation for their infrastructure assets, distress caused by fatigue in the roadway wheelpath. referred to as the modified approach. Using the modified The ITD annually collects longitudinal profiles and approach, governments report maintenance and rutting depths of all pavement management sections preservation expenses and do not report depreciation statewide. expense on qualifying assets. In order to use the modified approach, the State must manage the infrastructure assets The ITD uses a Class II-type profilometer to measure using an asset management system and maintain those IRI and rutting depth. A Profiler Van mounted with a assets at established condition levels. The asset profilometer, laser sensors, and personal computers management system must meet all of the following travels at normal posted speeds and collects and stores requirements: road-profile information at one-tenth of a foot • Maintain an up-to-date inventory of eligible intervals. infrastructure assets Pavement Distress (Cracking) is the final important • Perform condition assessments of eligible assets and indicator of pavement condition. The Profiler Van used summarize the results using a measurement scale to collect roughness and rutting information also • Annually estimate the cost to maintain and preserve the collects video of the entire state highway system each assets at the condition level established year. The video equipment records images of both the • Document the condition level at which the assets are forward facing view and a downward facing view so being preserved and maintained that pavement distress is easily seen. The pavement management engineer then uses this video or actual The State of Idaho has chosen to use the modified approach field observations to determine the type, extent, and in reporting the roadway network, which consists of severity of cracking within each pavement approximately 12,274 lane miles. management section. A cracking index (CI) is Measurement Scale calculated for each section. The CI rating is very similar to the RI with 5.0 corresponding to a section The Idaho Transportation Department (ITD) determines the with little or no cracking and 0.0 representing a section condition of the State’s roadway surfaces by use of the with severe cracking. Pavement Management System. The roadway surface condition is determined using three pavement-condition Pavement surface condition assessment is dependent upon data elements: International Roughness Index, rutting functional classification and is divided into two functional depth, and pavement distress, collected as follows: class categories: interstates and arterials, and collectors. The surface condition is measured by Roughness Index The International Roughness Index (IRI) is a primary (RI), Rutting Depth, and Crack Index (CI). Each category indicator of pavement serviceability or the ability of a has its own thresholds, which differ slightly depending on pavement to meet the demands and expectations of the assigned functional class. The measurement ranges for motorists. Idaho has adopted a roughness index (RI) each of these conditions is shown in the following chart: to correlate the measured IRI of the road surface to a
State of Idaho 119 Comprehensive Annual Financial Report State of Idaho Required Supplementary Information For the Fiscal Year Ended June 30, 2017
Condition: Roughness Index Condition: Rutting Condition: Cracking Index Functional Class Functional Class Functional Class Pavement Interstate and Collectors Pavement Interstate and Collectors Pavement Interstate and Collectors Condition Arterials Condition Arterials Condition Arterials Good RI > 3.0 RI > 3.0 Good 0.00”h- 0.24”h 0.00”h- 0.49”h Good CI > 3.0 CI > 3.0 Fair Fair 0.25”h- 0.49”h 0.50”h- 0.99”h Fair Poor Poor 0.50”h- 0.74”h 1.00”h- 1.49”h Poor Very Poor RI < 2.0 RI < 1.5 Very Poor Very Poor CI < 2.0 CI < 1.5
Established Condition Level maintained at 15.4 percent. Infrastructure preservation and restoration is a priority for the State. As a result of this The ITD has established the condition level that no more focus, the ITD has provided all available funds to meet these than 30 percent of pavement shall be in poor or very poor goals. condition. In calendar year 2016 the assessed level was Assessed Condition Ratings of State Roadways
Most Recent Five Complete Condition Assessments Percent of Total Lane Miles per Pavement Condition
2016 2015 2014 2013 2012 Good 7,080 57.7 % 7,301 59.5 % 7,507 61.2 % 7,239 59.2 % 7,614 62.3 % Fair 3,304 26.9 % 2,992 24.4 % 3,016 24.5 % 3,240 26.5 % 2,946 24.1 % Poor 1,688 13.8 % 1,736 14.1 % 1,480 12.1 % 1,544 12.6 % 1,479 12.1 % Very Poor 202 1.6 % 242 2.0 % 266 2.2 % 213 1.7 % 183 1.5 % Total Lane Miles 12,274 100% 12,271 100% 12,269 100% 12,236 100% 12,222 100%
Estimated and Actual Costs to Maintain The information below reflects the State’s estimate of spending necessary to preserve and maintain the roads at, or above, the established condition level, and the actual amount spent during the past six fiscal years (dollars in thousands).
FY2018 FY2017 FY2016 FY2015 FY2014 FY2013 FY2012 Estimated $ 100,691 $ 112,537 $ 111,475 $ 90,905 $ 122,831 $ 104,612 $ 110,125 Actual $ 0 $ 128,776 $ 73,499 $ 89,972 $ 107,718 $ 125,839 $ 161,290
State of Idaho 120 Comprehensive Annual Financial Report State of Idaho Required Supplementary Information For the Fiscal Year Ended June 30, 2017
PENSION PERSI Base Plan
Schedule of Net Pension Liability Proportionate Share (dollars in thousands) 2017 2016 2015 Proportion of Net Pension Liability (NPL) 25.5% 25.8% 25.5% Proportionate Share of NPL $ 517,254 $ 339,548 $ 187,540 Covered Payroll $ 799,046 $ 743,772 $ 722,235 Proportionate Share of NPL as a Percentage of Covered Payroll 64.7% 45.7% 26.0% Plan Fiduciary Net Position $ 13,884,164 $ 13,956,663 $ 13,833,143 Plan Total Pension Liability $ 15,911,317 $ 15,273,500 $ 14,569,300 Plan Fiduciary Net Position as a Percentage of Plan Total Pension Liability 87.3% 91.4% 94.9%
Schedule of Contributions (dollars in thousands) (b) Contributions (c) Contributions (a) in Relation to Contribution as a Percentage Actuarially Actuarially Deficiency (d) of Covered Fiscal Year Determined Determined (Excess) Covered Payroll Ended June 30 Contribution Contribution (a) - (b) Payroll (b) : (d) 2015 $ 81,757 $ 81,757 $ 0 $ 722,235 11.32% 2016 $ 84,195 $ 84,195 $ 0 $ 743,772 11.32% 2017 $ 90,452 $ 90,452 $ 0 $ 799,046 11.32%
Schedules above intended to show information for 10 years. Information for additional years will be displayed as they become available.
State of Idaho 121 Comprehensive Annual Financial Report State of Idaho Required Supplementary Information For the Fiscal Year Ended June 30, 2017
Judges’ Retirement Fund
Schedule of Changes in Employer's Net Pension Liability (dollars in thousands) 2017 2016 2015 Total Pension Liability Service Cost $ 3,179 $ 3,111 $ 3,251 Interest 7,056 6,889 6,590 Benefit Changes Economic/Demographic Gains (Losses) 266 (1,648) 285 Assumption Changes Benefit Payments, Including Refunds (6,173) (5,975) (5,577) Net Change in Total Pension Liability 4,328 2,377 4,549 Total Pension Liability - Beginning 99,229 96,852 92,303 Total Pension Liability - Ending (a) 103,557 99,229 96,852 Plan Net Position Contributions - Employer 3,947 3,371 3,596 Contributions - Employee 630 624 629 Net Investment Income 9,157 1,094 2,052 Transfer In Benefit Payments, Including Refunds (6,173) (5,975) (5,577) Administrative Expense (74) (133) (96) Net Change in Plan Net Position 7,487 (1,019) 604 Plan Fiduciary Net Position - Beginning 75,449 76,468 75,864 Plan Fiduciary Net Position - Ending (b) 82,936 75,449 76,468
Net Pension Liability - Ending (a) - (b) $ 20,621 $ 23,780 $ 20,384 Plan Fiduciary Net Position as a Percentage of the Total Pension Liability 80.09% 76.04% 78.95% Covered Payroll $ 6,162 $ 6,097 $ 6,149 Net Pension Liability as a Percentage of Covered Payroll 334.63% 390.03% 331.50%
Schedule intended to show information for 10 years. Information for additional years will be displayed as it becomes available.
State of Idaho 122 Comprehensive Annual Financial Report State of Idaho Required Supplementary Information For the Fiscal Year Ended June 30, 2017
Schedule of Employee Contributions (dollars in thousands) (b) Contributions (c) (a) in Relation to Contribution Contributions as Actuarially Actuarially Deficiency a Percentage of Fiscal Year Determined Determined (Excess) (d) Covered Payroll Ended June 30 Contribution Contribution (a) - (b) Covered Payroll (b) : (d) 2007 $ 2,817 $ 1,892 $ 925 $ 5,669 33.37% 2008 $ 3,401 $ 1,896 $ 1,505 $ 5,723 33.13% 2009 $ 4,156 $ 2,007 $ 2,149 $ 5,960 33.67% 2010 $ 3,735 $ 2,023 $ 1,712 $ 5,645 35.84% 2011 $ 3,286 $ 2,028 $ 1,258 $ 5,700 35.58% 2012 $ 2,979 $ 1,973 $ 1,006 $ 5,847 33.74% 2013 $ 2,939 $ 2,662 $ 277 $ 5,868 45.36% 2014 $ 2,949 $ 2,717 $ 232 $ 5,634 48.23% 2015 $ 3,493 $ 3,595 $ (102) $ 6,149 58.46% 2016 $ 3,463 $ 3,370 $ 93 $ 6,097 55.27% 2017 $ 3,604 $ 3,947 $ (343) $ 6,162 64.05%
Schedule of Investment Returns 2017 2016 2015 2014 2013 Annual Money Weighted Rate of Return, Net of Investment Expense 12.3% 1.5% 2.7% 16.9% 8.8%
Schedule intended to show information for 10 years. Information for additional years will be displayed as it becomes available. Note to the Judges’ Retirement Fund Schedules:
Assumptions Used to Calculate Actuarially Determined Contributions Valuation Date June 30, 2017 Actuarial Cost Method Entry Age Normal Amortization Method Level Percent of Payroll - Open Amortization Period 25 Years Actuarial Assumptions: Investment Rate of Return - Gross 7.50% Projected Salary Increases, Including Inflation 3.75% Post-retirement Cost of Living Allowance Increases 1.00% or 3.75% Implied Price Inflation Rate 3.25%
State of Idaho 123 Comprehensive Annual Financial Report State of Idaho Required Supplementary Information For the Fiscal Year Ended June 30, 2017
OTHER POSTEMPLOYMENT BENEFITS
Schedule of Funding Progress (dollars in thousands):
(f) (b) (c) UAAL as a (a) Actuarial Unfunded (d) (e) Percentage Actuarial Actuarial Accrued AAL Funded Annual of Covered Valuation Value of Liability (UAAL) Ratios Covered Payroll OPEB Plan Date Assets (AAL) (b) - (a) (a) : (b) Payroll (c) : (e) Retiree Healthcare 7/1/2013 $ 0 $ 15,208 $ 15,208 0.0% $ 862,810 1.8% 7/1/2014 $ 0 $ 23,260 $ 23,260 0.0% $ 907,637 2.6% 7/1/2015 $ 0 $ 23,312 $ 23,312 0.0% $ 944,555 2.5% 7/1/2016 $ 0 $ 32,470 $ 32,470 0.0% $ 1,002,118 3.2% Long-Term Disability Healthcare 7/1/2013 $ 0 $ 6,921 $ 6,921 0.0% $ 862,810 0.8% 7/1/2014 $ 0 $ 7,958 $ 7,958 0.0% $ 907,637 0.9% 7/1/2015 $ 0 $ 7,645 $ 7,645 0.0% $ 944,555 0.8% 7/1/2016 $ 0 $ 3,713 $ 3,713 0.0% $ 1,002,118 0.4%
Life Insurance 7/1/2013 $ 0 $ 5,400 $ 5,400 0.0% $ 862,810 0.6% 7/1/2014 $ 0 $ 4,408 $ 4,408 0.0% $ 907,637 0.5% 7/1/2015 $ 0 $ 3,720 $ 3,720 0.0% $ 944,555 0.4% 7/1/2016 $ 0 $ 3,091 $ 3,091 0.0% $ 1,002,118 0.3% Income 7/1/2013 $ 0 $ 3,622 $ 3,622 0.0% $ 862,810 0.4% 7/1/2014 $ 0 $ 3,088 $ 3,088 0.0% $ 907,637 0.3% 7/1/2015 $ 0 $ 2,690 $ 2,690 0.0% $ 944,555 0.3% 7/1/2016 $ 0 $ 2,372 $ 2,372 0.0% $ 1,002,118 0.2%
Retiree Life Insurance 7/1/2013 $ 0 $ 42,353 $ 42,353 0.0% $ 271,768 15.6% 7/1/2014 $ 0 $ 36,444 $ 36,444 0.0% $ 285,407 12.8% 7/1/2015 $ 0 $ 50,672 $ 50,672 0.0% $ 296,982 17.1% 7/1/2016 $ 0 $ 56,160 $ 56,160 0.0% $ 310,210 18.1%
University of Idaho* 7/1/2013 $ 28,271 $ 61,476 $ 33,205 46.0% $ 132,777 25.0% 7/1/2014 $ 29,768 $ 62,465 $ 32,697 47.7% $ 140,728 23.2% 7/1/2015 $ 30,528 $ 58,201 $ 27,673 52.5% $ 150,995 18.3%
*The University of Idaho's most recent valuation date is July 1, 2015
Schedule of Employer Contributions (dollars in thousands):
Annual Actual Required Contributions Fiscal Year Contribution Actual as Percentage OPEB Plan Ended (ARC) Contributions of ARC Retiree Life Insurance 6/30/2014 $ 3,432 $ 582 16.96% 6/30/2015 $ 3,827 $ 637 16.64% 6/30/2016 $ 3,999 $ 661 16.53% 6/30/2017 $ 4,587 $ 701 15.28%
University of Idaho 6/30/2014 $ 3,368 $ 3,178 94.36% 6/30/2015 $ 3,177 $ 3,233 101.76% 6/30/2016 $ 2,711 $ 2,751 101.48% 6/30/2017 $ 2,711 $ 3,157 116.45%
State of Idaho 124 Comprehensive Annual Financial Report State of Idaho Required Supplementary Information For the Fiscal Year Ended June 30, 2017
Sick Leave Insurance Reserve Fund
Schedule of Changes in Employer's Net OPEB Liability (dollars in thousands) 2017 Total OPEB Liability Service Cost $ 4,044 Interest 6,223 Benefit Changes Economic/Demographic Gains (Losses) Assumption Changes Actual Benefit Payments (5,011) Other Changes Net Change in Total OPEB Liability 5,256 Total OPEB Liability - Beginning 86,112 Total OPEB Liability - Ending (a) 91,368
Plan Net Position Contributions - Employer 7,137 Contributions - Employee 0 Net Investment Income 12,294 Transfer In Actual Benefit Payments (5,011) Administrative Expense (41) Other Changes Net Change in Plan Net Position 14,379
Plan Fiduciary Net Position - Beginning 172,119 Plan Fiduciary Net Position - Ending (b) 186,498
Net OPEB Liability/(Asset) - Ending (a) - (b) $ (95,130)
Plan Fiduciary Net Position as a Percentage of the Total OPEB Liability 204.12 %
Covered Payroll $ 1,097,953
Net OPEB Liability/(Asset) as a Percentage of Covered Payroll (8.66)%
Schedule of Employee Contributions (dollars in thousands) (b) Contributions (c) (a) in Relation to Contribution Contributions as Actuarially Actuarially Deficiency (d) a Percentage of Fiscal Year Determined Determined (Excess) Covered Covered Payroll Ended June 30 Contribution Contribution (a) - (b) Payroll (b) : (d) 2017 $ 4,282 $ 7,137 $ (2,855) $ 1,097,953 0.65%
Schedules above intended to show information for 10 years. Information for additional years will be displayed as it becomes available.
State of Idaho 125 Comprehensive Annual Financial Report State of Idaho Required Supplementary Information For the Fiscal Year Ended June 30, 2017
Schedule of Investment Returns 2017 Annual Money Weighted Rate of Return, Net of Investment Expense 13.3%
Schedule above intended to show information for 10 years. Information for additional years will be displayed as it becomes available.
Assumptions Used to Calculate Actuarially Determined Contributions Valuation Date June 30, 2017 Actuarial Cost Method Entry Age Normal Amortization Method Level Percent of Payroll - Open Amortization Period 25 Years Actuarial Assumptions: Investment Rate of Return* 7.10% Projected Salary Increases, Including Inflation 3.75% Implied Price Inflation Rate 3.25%
*Net of investment expense of 0.40%
*
State of Idaho 126 Comprehensive Annual Financial Report Combining Financial Statements
Hiawatha Trail
State of Idaho NONMAJOR GOVERNMENTAL FUNDS include nonmajor special revenue funds. The following provides a brief description of the nonmajor governmental funds.
NONMAJOR SPECIAL REVENUE FUNDS account The Federal Fund accounts for a portion of the for specific revenues that are restricted or committed to financial position and operations associated with expenditures for specified purposes other than debt service federal grants received by the State. Some federal or capital projects. grants are included in other funds of the State.
The Agriculture and Natural Resources Fund The Miscellaneous Fund accounts for the financial accounts for the financial position and operations position and operations associated with general associated with the maintenance, preservation, and government services. The major sources of funding regulation of the State’s parks, water, air, and are provided by the sale of goods and services, agricultural resources. The major sources of funding miscellaneous taxes and fees, and other revenues. are dedicated user fees, taxes, and federal grants. The Building Authority accounts for the financial The Regulatory Fund accounts for the financial position and operations associated with the position and operations associated with various construction and financing of facilities, such as office professional licensing and monitoring functions. The buildings and parking garages to be used by the State. major sources of funding are taxes and license fees. The major sources of funding are the sale of goods and services and bonds issued. The Building Authority is The Fish and Game Fund accounts for the financial a blended component unit. position and operations associated with enforcing and administering the fish and game laws in Idaho and perpetuating and managing the State’s wildlife resources. The major sources of funding are dedicated user fees and federal grants.
State of Idaho 129 Comprehensive Annual Financial Report State of Idaho Combining Balance Sheet Nonmajor Governmental Funds June 30, 2017 (dollars in thousands) Special Revenue
Agriculture and Natural Fish and Resources Regulatory Game ASSETS Cash and Cash Equivalents $ 6,977 $ 1,032 $ 1,102 Pooled Cash and Investments 97,365 70,810 22,824 Investments 41,572 21,019 12,465 Accounts Receivable, Net 3,300 2,876 1,316 Taxes Receivable, Net 3,749 Interfund Receivables 17 379 Due from Other Entities 2,314 6,879 Inventories and Prepaid Items 2,739 580 9,505 Loans, Notes, and Pledges Receivable, Net 3,381 10 Other Assets 764 408 185 Restricted Assets: Cash and Cash Equivalents 12,478 1,058 5,939 Investments 81,917 30,032 Total Assets $ 256,556 $ 97,800 $ 90,636 LIABILITIES AND FUND BALANCES Liabilities Accounts Payable $ 3,532 $ 373 $ 3,222 Payroll and Related Liabilities 1,969 998 1,624 Interfund Payables 142 40 146 Due to Other Entities 2 Unearned Revenue 4,266 1,155 375 Amounts Held in Trust for Others 1,011 91 5 Other Accrued Liabilities 1,021 656 1,317 Total Liabilities 11,943 3,313 6,689 DEFERRED INFLOWS OF RESOURCES Deferred Inflows 1,529 2,647 315 Fund Balances Nonspendable: Permanent Trusts 7,298 Inventories and Prepaid Items 2,739 580 9,505 Noncurrent Receivables Restricted 171,961 91,260 66,829 Committed 66,729 Assigned 1,655 Total Fund Balances 243,084 91,840 83,632 Total Liabilities, Deferred Inflows of Resources, and Fund Balances $ 256,556 $ 97,800 $ 90,636
State of Idaho 130 Comprehensive Annual Financial Report Building Federal Miscellaneous Authority Total
$ 2,467 $ 11,578 $ 1,142 $ 90,616 282,757 18,421 302 93,779 212 13,189 20,893 1,892 5,641 166 725 1,287 49,595 58,788 983 4,030 17,837 3,391 95 1,434 1 2,887
15,479 545 4,704 40,203 111,949 $ 67,672 $ 130,852 $ 7,474 $ 650,990
$ 34,280 $ 1,680 $ 16 $ 43,103 2,681 1,801 9,073 1,039 104 1,471 2 3,769 53 9,618 1,107 539 155 3,688 42,308 3,793 16 68,062
7,911 11,929 24,331
7,298 983 4,030 17,837
16,470 70,973 7,458 424,951 40,127 106,856 1,655 17,453 115,130 7,458 558,597 $ 67,672 $ 130,852 $ 7,474 $ 650,990
State of Idaho 131 Comprehensive Annual Financial Report State of Idaho Combining Statement of Revenues, Expenditures, and Changes in Fund Balances Nonmajor Governmental Funds For the Fiscal Year Ended June 30, 2017 (dollars in thousands) Special Revenue
Agriculture and Natural Fish and Resources Regulatory Game REVENUES Sales Tax $ 4,800 Individual and Corporate Taxes 15 $ 9 Other Taxes 39,445 $ 83,812 Licenses, Permits, and Fees 46,558 61,356 43,085 Sale of Goods and Services 4,493 1,589 1,018 Grants and Contributions 25,763 61 52,871 Investment Income 6,924 (274) 3,167 Other Income 3,163 578 1,382 Total Revenues 131,161 147,122 101,532 EXPENDITURES Current: General Government 3,621 Public Safety and Correction 2,828 Education Economic Development 48,057 46,623 100 Natural Resources 65,555 815 87,313 Capital Outlay 5,664 1,370 10,470 Intergovernmental Revenue Sharing 15,104 Debt Service: Principal Retirement 2 529 Interest and Other Charges 143 Total Expenditures 134,380 55,259 98,555 Revenues Over (Under) Expenditures (3,219) 91,863 2,977 OTHER FINANCING SOURCES (USES) Capital Lease Acquisitions 19 Sale of Capital Assets 206 98 2,929 Transfers In 19,471 3 412 Transfers Out (2,169) (85,877) (138) Total Other Financing Sources (Uses) 17,508 (85,757) 3,203 Net Changes in Fund Balances 14,289 6,106 6,180 Fund Balances - Beginning of Year, as Restated 228,795 85,734 77,452 Fund Balances - End of Year $ 243,084 $ 91,840 $ 83,632
State of Idaho 132 Comprehensive Annual Financial Report Building Federal Miscellaneous Authority Total
$ 1,745 $ 6,545 24 $ 115 28,788 152,160 28,292 179,291 87 14,353 $ 14,743 36,283 429,758 1,063 509,516 49 4,091 46 14,003 143 11,161 16,427 430,152 89,493 14,789 914,249
57,654 6,553 395 68,223 7,424 52,798 63,050 241,906 4,660 246,566 68,828 28,756 192,364 10,221 163,904 4,836 6,520 28,860 36,586 9,399 61,089
18 8,614 9,163 2 5,837 5,982 427,475 108,686 14,846 839,201 2,677 (19,193) (57) 75,048
19 54 243 3,530 26,775 46,661 (933) (34) (89,151) (879) 26,984 (38,941) 1,798 7,791 (57) 36,107 15,655 107,339 7,515 522,490 $ 17,453 $ 115,130 $ 7,458 $ 558,597
State of Idaho 133 Comprehensive Annual Financial Report State of Idaho Combining Schedule of Revenues, Expenditures, and Changes in Fund Balance Budget and Actual Nonmajor Governmental Funds For the Fiscal Year Ended June 30, 2017 (dollars in thousands) Special Revenue Agricultural and Natural Resources
Actual Amounts Variance Original Budgetary with Final Budget Final Budget Basis Budget REVENUES Sales Tax $ 4,800 $ 4,800 $ 4,800 Other Taxes 39,615 39,615 39,615 Licenses, Permits, and Fees 46,811 46,811 46,811 Sale of Goods and Services 4,479 4,479 4,479 Grants and Contributions 25,975 25,975 25,975 Investment Income 549 549 549 Other Income 3,012 3,012 3,012 Total Revenues $ 125,241 $ 125,241 125,241 EXPENDITURES General Government Public Safety and Correction Health and Human Services Education Economic Development $ 55,331 $ 55,782 49,591 $ 6,191 Natural Resources 120,802 120,954 86,060 34,894 Total Expenditures $ 176,133 $ 176,736 135,651 $ 41,085
Revenues Over (Under) Expenditures (10,410) OTHER FINANCING SOURCES (USES) Capital Lease Acquisitions Sale of Capital Assets 206 Transfers In 19,471 Transfers Out (2,169) Total Other Financing Sources (Uses) 17,508 Revenues and Other Financing Sources Over (Under) 7,098 Expenditures and Other Financing Uses Reconciling Items Changes Affected by Accrued Revenues 5,920 Changes Affected by Accrued Expenditures 1,271 Fund Balances - Beginning of Year, as Restated 228,795 Fund Balances - End of Year $ 243,084
State of Idaho 134 Comprehensive Annual Financial Report continued Special Revenue Regulatory Fish and Game
Actual Actual Amounts Variance Amounts Variance Original Budgetary with Final Original Budgetary with Final Budget Final Budget Basis Budget Budget Final Budget Basis Budget
$ 88,345 $ 88,345 $ 88,345 59,027 59,027 59,027 $ 43,085 $ 43,085 $ 43,085 1,537 1,537 1,537 1,018 1,018 1,018 60 60 60 50,546 50,546 50,546 56 56 56 943 943 943 567 567 567 1,439 1,439 1,439 $ 149,592 $ 149,592 149,592 $ 97,031 $ 97,031 97,031
$ 3,623 $ 3,623 3,623 3,540 3,540 2,993 $ 547
52,998 53,281 48,804 4,477 $ 216 $ 216 100 $ 116 1,594 1,594 864 730 111,920 112,890 99,191 13,699 $ 61,755 $ 62,038 56,284 $ 5,754 $ 112,136 $ 113,106 99,291 $ 13,815
93,308 (2,260)
19 98 2,929 3 412 (85,877) (138) (85,757) 3,203 7,551 943
(2,470) 4,501 1,025 736 85,734 77,452 $ 91,840 $ 83,632
State of Idaho 135 Comprehensive Annual Financial Report State of Idaho Combining Schedule of Revenues, Expenditures, and Changes in Fund Balance Budget and Actual Nonmajor Governmental Funds For the Fiscal Year Ended June 30, 2017 (dollars in thousands) Special Revenue Federal
Actual Amounts Variance Original Budgetary with Final Budget Final Budget Basis Budget REVENUES Sales Tax Other Taxes $ 115 $ 115 $ 115 Licenses, Permits, and Fees Sale of Goods and Services 76 76 76 Grants and Contributions 433,894 433,894 433,894 Investment Income 113 113 113 Other Income 169 169 169 Total Revenues $ 434,367 $ 434,367 434,367 EXPENDITURES General Government $ 92,127 $ 96,527 70,594 $ 25,933 Public Safety and Correction 15,494 16,347 10,177 6,170 Health and Human Services Education 320,855 320,855 266,760 54,095 Economic Development 113,706 114,056 82,008 32,048 Natural Resources 23,085 23,085 14,176 8,909 Total Expenditures $ 565,267 $ 570,870 443,715 $ 127,155
Revenues Over (Under) Expenditures (9,348) OTHER FINANCING SOURCES (USES) Capital Lease Acquisitions Sale of Capital Assets 54 Transfers In Transfers Out (933) Total Other Financing Sources (Uses) (879) Revenues and Other Financing Sources Over (Under) (10,227) Expenditures and Other Financing Uses Reconciling Items Changes Affected by Accrued Revenues (4,215) Changes Affected by Accrued Expenditures 16,240 Fund Balances - Beginning of Year 15,655 Fund Balances - End of Year $ 17,453
State of Idaho 136 Comprehensive Annual Financial Report continued Special Revenue Miscellaneous Building Authority
Actual Actual Amounts Variance Amounts Variance Original Budgetary with Final Original Budgetary with Final Budget Final Budget Basis Budget Budget Final Budget Basis Budget
$ 1,792 $ 1,792 $ 1,792 25,825 25,825 25,825 28,170 28,170 28,170 9,656 9,656 9,656 $ 14,743 $ 14,743 $ 14,743 1,131 1,131 1,131 445 445 445 46 46 46 10,884 10,884 10,884 $ 77,903 $ 77,903 77,903 $ 14,789 $ 14,789 14,789
$ 7,025 $ 7,035 6,717 $ 318 $ 14,846 $ 14,846 14,846 73,326 73,807 64,256 9,551
6,795 6,795 5,079 1,716 54,748 54,755 35,309 19,446 36 36 36 $ 141,930 $ 142,428 111,361 $ 31,067 $ 14,846 $ 14,846 14,846
(33,458) (57)
243 26,775 (34) 26,984 (6,474) (57)
11,590 2,675 107,339 7,515 $ 115,130 $ 7,458
State of Idaho 137 Comprehensive Annual Financial Report State of Idaho Combining Schedule of Revenues, Expenditures, and Changes in Fund Balance Budget and Actual Nonmajor Governmental Funds For the Fiscal Year Ended June 30, 2017 (dollars in thousands)
Total
Actual Amounts Variance Original Budgetary with Final Budget Final Budget Basis Budget REVENUES Sales Tax $ 6,592 $ 6,592 $ 6,592 Other Taxes 153,900 153,900 153,900 Licenses, Permits, and Fees 177,093 177,093 177,093 Sale of Goods and Services 31,509 31,509 31,509 Grants and Contributions 511,606 511,606 511,606 Investment Income 2,152 2,152 2,152 Other Income 16,071 16,071 16,071 Total Revenues $ 898,923 $ 898,923 898,923 EXPENDITURES General Government 117,621 122,031 95,780 26,251 Public Safety and Correction 92,360 93,694 77,426 16,268 Health and Human Services Education 327,650 327,650 271,839 55,811 Economic Development 276,999 278,090 215,812 62,278 Natural Resources 257,437 258,559 200,291 58,268 Total Expenditures $ 1,072,067 $ 1,080,024 861,148 $ 218,876
Revenues Over (Under) Expenditures 37,775 OTHER FINANCING SOURCES (USES) Capital Lease Acquisitions 19 Sale of Capital Assets 3,530 Transfers In 46,661 Transfers Out (89,151) Total Other Financing Sources (Uses) (38,941) Revenues and Other Financing Sources Over (Under) (1,166) Expenditures and Other Financing Uses Reconciling Items Changes Affected by Accrued Revenues 15,326 Changes Affected by Accrued Expenditures 21,947 Fund Balances - Beginning of Year 522,490 Fund Balances - End of Year $ 558,597
State of Idaho 138 Comprehensive Annual Financial Report
State of Idaho Combining Schedule of Revenues, Expenditures, and Changes in Fund Balance Budget and Actual Major Permanent Fund For the Fiscal Year Ended June 30, 2017 dollars in thousands) Land Endowments
Actual Amounts Variance Original Budgetary with Final Budget Final Budget Basis Budget REVENUES Sale of Goods and Services $ 72,613 $ 72,613 $ 72,613 Investment Income 234,327 234,327 234,327 Total Revenues $ 306,940 $ 306,940 306,940 EXPENDITURES Natural Resources $ 48,796 $ 48,797 44,240 $ 4,557 Total Expenditures $ 48,796 $ 48,797 44,240 $ 4,557
Revenues Over (Under) Expenditures 262,700 OTHER FINANCING SOURCES (USES) Sale of Capital Assets 50,734 Transfers In 3,727 Transfers Out (67,085) Total Other Financing Sources (Uses) (12,624) Revenues and Other Financing Sources Over (Under) 250,076 Expenditures and Other Financing Uses Reconciling Items Changes Affected by Accrued Revenues (354) Changes Affected by Accrued Expenditures 103 Fund Balances - Beginning of Year 1,862,667 Fund Balances - End of Year $ 2,112,492
State of Idaho 140 Comprehensive Annual Financial Report State of Idaho NONMAJOR ENTERPRISE FUNDS account for those funds that provide goods or services to the general public and finance their operations primarily through user charges. The following provide brief descriptions of the nonmajor enterprise funds.
The State Lottery Fund accounts for the financial position The Correctional Industries Fund accounts for the and operations associated with lottery games. Established financial position and operations associated with by the Legislature in 1988, the State Lottery’s purpose is to employment for inmates of the Department of Correction. adopt rules and regulations governing the establishment and Correctional Industries manufactures and sells a variety of operation of lottery games, to oversee lottery operations, items including license plates, furniture, highway signs, and to maximize the net income of the lottery for the benefit printing services, and other products and services. of the State. Annually, on July 1, the State Lottery’s surplus net income is distributed as follows: 3/8 of its net income to the permanent building account, 3/8 of its net income to the school district building account, and 1/4 of its net income to the bond levy equalization fund as dictated by Idaho Code Section 67-7434.
The State Liquor Fund accounts for the financial position and operations associated with the distribution, sale, and consumption of alcoholic beverages. Per Idaho Code Section 23-404, after deducting administrative and operating costs for the Liquor Division, distributions are made to cities, counties, the General Fund, and various other funds of the State.
State of Idaho 141 Comprehensive Annual Financial Report State of Idaho Combining Statement of Net Position Nonmajor Enterprise Funds June 30, 2017 (dollars in thousands) Correctional State Lottery State Liquor Industries Total ASSETS Current Assets Cash and Cash Equivalents $ 2,503 $ 2,503 Pooled Cash and Investments $ 16,728 $ 7,002 23,730 Accounts Receivable, Net 1,143 136 461 1,740 Interfund Receivables 185 185 Inventories and Prepaid Items 481 18,370 1,180 20,031 Other Current Assets 200 29 229 Total Current Assets 4,127 35,434 8,857 48,418 Noncurrent Assets Restricted Cash and Cash Equivalents 49,374 49,374 Other Noncurrent Assets 7 1 8 Capital Assets, Net 437 9,129 2,557 12,123 Total Noncurrent Assets 49,811 9,136 2,558 61,505 Total Assets 53,938 44,570 11,415 109,923 DEFERRED OUTFLOWS OF RESOURCES Deferred Outflows 633 2,145 474 3,252 Total Assets and Deferred Outflows of Resources $ 54,571 $ 46,715 $ 11,889 $ 113,175 LIABILITIES Current Liabilities Accounts Payable $ 1,278 $ 10,817 $ 212 $ 12,307 Payroll and Related Liabilities 124 340 52 516 Interfund Payables 6,531 108 6,639 Due to Other Entities 7,310 7,310 Other Accrued Liabilities 2,503 2,503 Compensated Absences Payable 143 508 83 734 Bonds, Notes, and Capital Leases Payable 51 51 Total Current Liabilities 4,099 25,506 455 30,060 Noncurrent Liabilities Bonds, Notes, and Capital Leases Payable 64 64 Other Long-Term Obligations 1,359 4,935 1,075 7,369 Total Noncurrent Liabilities 1,423 4,935 1,075 7,433 Total Liabilities 5,522 30,441 1,530 37,493 DEFERRED INFLOWS OF RESOURCES Deferred Inflows 185 521 122 828 NET POSITION Net Investment in Capital Assets 322 9,128 2,556 12,006 Restricted for: Other Purposes 48,542 6,625 7,681 62,848 Total Net Position 48,864 15,753 10,237 74,854 Total Liabilities, Deferred Inflows of Resources, and Net Position $ 54,571 $ 46,715 $ 11,889 $ 113,175
State of Idaho 142 Comprehensive Annual Financial Report State of Idaho Combining Statement of Revenues, Expenses, and Changes in Fund Net Position Nonmajor Enterprise Funds For the Fiscal Year Ended June 30, 2017 (dollars in thousands) Correctional State Lottery State Liquor Industries Total OPERATING REVENUES Licenses, Permits, and Fees Sale of Goods and Services $ 240,604 $ 199,719 $ 9,122 $ 449,445 Other Income 45 (27) 758 776 Total Operating Revenues 240,649 199,692 9,880 450,221 OPERATING EXPENSES Personnel Costs 2,956 12,300 2,050 17,306 Services and Supplies 28,666 109,291 5,099 143,056 Benefits, Awards, and Premiums 160,305 160,305 Depreciation 126 706 364 1,196 Other Expenses 253 5,786 1,589 7,628 Total Operating Expenses 192,306 128,083 9,102 329,491 Operating Income (Loss) 48,343 71,609 778 120,730 NONOPERATING REVENUES (EXPENSES) Investment Income 2 86 31 119 Interest Expense (8) (8) Intergovernmental Distributions (34,709) (34,709) Gain (Loss) on Sale of Capital Assets 35 35 Other Nonoperating Revenues (Expenses) Total Nonoperating Revenues (Expenses) 29 (34,623) 31 (34,563) Income (Loss) Before Transfers 48,372 36,986 809 86,167 Transfers Out (49,500) (34,738) (84,238) Change in Net Position (1,128) 2,248 809 1,929 Total Net Position - Beginning of Year 49,992 13,505 9,428 72,925 Total Net Position - End of Year $ 48,864 $ 15,753 $ 10,237 $ 74,854
State of Idaho 143 Comprehensive Annual Financial Report State of Idaho Combining Statement of Cash Flows Nonmajor Enterprise Funds For the Fiscal Year Ended June 30, 2017 (dollars in thousands) State State Correctional Lottery Liquor Industries Total CASH FLOWS FROM OPERATING ACTIVITIES Receipts from Customers $ 240,775 $ 199,660 $ 5,285 $ 445,720 Receipts from Interfund Services 1 4,500 4,501 Payments to Employees (3,066) (12,616) (2,090) (17,772) Payments to Suppliers (29,247) (115,849) (6,434) (151,530) Payments for Interfund Services (1,027) 30 (997) Payments for Benefits, Awards, and Claims (161,567) (161,567) Other Payments (152) (44) (196) Net Cash Provided (Used) by Operating Activities 46,895 70,017 1,247 118,159 CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES Intergovernmental Distributions (34,529) (34,529) Transfers Out (49,500) (34,531) (84,031) Net Cash Provided (Used) by Noncapital Financing Activities (49,500) (69,060) (118,560) CASH FLOWS FROM CAPITAL AND RELATED FINANCING Proceeds from Bonds and Notes 66 66 Principal Payments (46) (46) Interest Payments (8) (8) Proceeds from Disposition of Capital Assets 35 35 Acquisition and Construction of Capital Assets (177) (458) 24 (611) Net Cash Provided (Used) by Capital and Related Financing Activities (130) (458) 24 (564) CASH FLOWS FROM INVESTING ACTIVITIES Receipt of Interest and Dividends 2 50 50 102 Other Investing Activities Net Cash Provided (Used) by Investing Activities 2 50 50 102 Net Increase (Decrease) in Cash, Cash Equivalents, and Pooled Cash (2,733) 549 1,321 (863) Beginning Cash, Cash Equivalents, and Pooled Cash 54,610 16,179 5,681 76,470 Ending Cash, Cash Equivalents, and Pooled Cash $ 51,877 $ 16,728 $ 7,002 $ 75,607 Reconciliation of Operating Income (Loss) to Net Cash Provided (Used) by Operating Activities Operating Income (Loss) $ 48,343 $ 71,609 $ 778 $ 120,730 Adjustments to Reconcile Operating Income to Net Cash Provided (Used) by Depreciation and Amortization 126 706 364 1,196 Net Changes in Assets and Liabilities: Accounts Receivable/Interfund Receivables 125 (5) (69) 51 Inventories and Prepaid Items (967) 255 (712) Other Assets (404) (47) (40) (491) Accounts Payable/Interfund Payables (1,279) (955) (1) (2,235) Compensated Absences (7) 3 (4) Other Accrued Liabilities 1,345 269 1,614 Net Changes in Deferred Outflows/Inflows of Resources (16) (1,662) (312) (1,990) Net Cash Provided (Used) by Operating Activities $ 46,895 $ 70,017 $ 1,247 $ 118,159 Noncash Transactions (dollars in thousands): State Lottery issued bonds and notes for $66. State Liquor recorded an interfund payable of $207 due on July 1 2017.
State of Idaho 144 Comprehensive Annual Financial Report State of Idaho INERNAL SERVICE FUNDS account for those funds which provide goods or services to state agencies and governmental units on a cost-reimbursement basis. The following provide brief descriptions of operations included in the internal service funds.
The Group Insurance Fund, created by Idaho Code The General Services Fund, created by Idaho Code Section 67-5771, accounts for health insurance for all state Sections 67-5703, 67-5744, and 67-3516, accounts for employees and optional coverage for dependents and statewide auditing, human resources, treasury, surplus retirees. The fund also provides life insurance and short property redistribution and sale, copying, purchasing, mail, and long-term disability coverage. and voice and data communication services.
The Risk Management Fund, created by Idaho Code The Data Processing Services Fund, created by Idaho Section 67-5776, accounts for insurance coverage and loss Code Section 67-1021, accounts for data processing prevention to all state agencies. Coverage is provided using services provided by the Office of the State Controller to a combination of self-insurance and insurance purchased the various state agencies. from commercial carriers.
State of Idaho 145 Comprehensive Annual Financial Report State of Idaho Combining Statement of Net Position Internal Service Funds June 30, 2017 (dollars in thousands)
Group Risk General Data Processing Insurance Management Services Services Total ASSETS Current Assets Pooled Cash and Investments $ 23,316 $ 2,062 $ 10,232 $ 2,864 $ 38,474 Accounts Receivable, Net 121 121 Interfund Receivables 14 266 525 805 Inventories and Prepaid Items 2,441 1,576 4,017 Other Current Assets 2,787 48 42 12 2,889 Total Current Assets 26,103 2,124 13,102 4,977 46,306 Noncurrent Assets Restricted Cash and Cash Equivalents 36,933 36,933 Investments 41,068 7,996 49,064 Other Noncurrent Assets 2 3 7 2 14 Capital Assets, Net 1 8 13,245 919 14,173 Total Noncurrent Assets 78,004 8,007 13,252 921 100,184 Total Assets 104,107 10,131 26,354 5,898 146,490 DEFERRED OUTFLOWS OF RESOURCES Deferred Outflows 105 112 2,139 1,012 3,368 Total Assets and Deferred Outflows of Resources $ 104,212 $ 10,243 $ 28,493 $ 6,910 $ 149,858 LIABILITIES Current Liabilities Accounts Payable $ 251 $ 7 $ 595 $ 12 $ 865 Payroll and Related Liabilities 13 16 331 137 497 Interfund Payables unearned Revenue 17,769 83 452 18,304 Other Accrued Liabilities 3 105 108 Compensated Absences Payable 28 34 629 268 959 Bonds, Notes, and Capital Leases Payable 289 289 Policy Claim Liabilities 3,000 3,000 Total Current Liabilities 18,064 3,057 2,032 869 24,022 Noncurrent Liabilities Bonds, Notes, and Capital Leases Payable 1,714 1,714 Policy Claim Liabilities 8,138 8,138 Other Long-Term Obligations 224 229 4,485 2,294 7,232 Total Noncurrent Liabilities 224 8,367 6,199 2,294 17,084 Total Liabilities 18,288 11,424 8,231 3,163 41,106 DEFERRED INFLOWS OF RESOURCES Deferred Inflows 26 27 513 261 827 NET POSITION Net Investment in Capital Assets 2 8 11,730 919 12,659 Restricted for: Claims and Judgments 36,933 36,933 Other Purposes 48,963 (1,216) 4,052 2,567 54,366 Unrestricted 3,967 3,967 Total Net Position 85,898 (1,208) 19,749 3,486 107,925 Total Liabilities, Deferred Inflows of Resources, and Net Position $ 104,212 $ 10,243 $ 28,493 $ 6,910 $ 149,858
State of Idaho 146 Comprehensive Annual Financial Report State of Idaho Combining Statement of Revenues, Expenses, and Changes in Fund Net Position Internal Service Funds For the Fiscal Year Ended June 30, 2017 (dollars in thousands)
Group Risk General Data Processing Insurance Management Services Services Total OPERATING REVENUES Sale of Goods and Services $ 290,440 $ 8,897 $ 25,949 $ 6,573 $ 331,859 Grants and Contributions 151 151 Other Income 717 84 (416) 10 395 Total Operating Revenues 291,157 8,981 25,684 6,583 332,405 OPERATING EXPENSES Personnel Costs 451 527 9,415 4,456 14,849 Services and Supplies 386 4,198 11,471 2,517 18,572 Benefits, Awards, and Premiums 272,761 5,490 278,251 Depreciation 1 964 214 1,179 Other Expenses 432 79 4,818 41 5,370 Total Operating Expenses 274,030 10,295 26,668 7,228 318,221 Operating Income (Loss) 17,127 (1,314) (984) (645) 14,184 NONOPERATING REVENUES (EXPENSES) Investment Income 781 (13) 68 13 849 Interest Expense (93) (93) Gain (Loss) on Sale of Capital Assets (7) (7) Other Nonoperating Revenues (Expenses) (6) (6) Total Nonoperating Revenues (Expenses) 781 (13) (31) 6 743 Income (Loss) Before Transfers 17,908 (1,327) (1,015) (639) 14,927 Capital Contributions Transfers In 1,738 1,738 Transfers Out Change in Net Position 17,908 (1,327) 723 (639) 16,665 Total Net Position - Beginning of Year 67,990 119 19,026 4,125 91,260 Total Net Position - End of Year $ 85,898 $ (1,208) $ 19,749 $ 3,486 $ 107,925
State of Idaho 147 Comprehensive Annual Financial Report State of Idaho Combining Statement of Cash Flows Internal Service Funds For the Fiscal Year Ended June 30, 2017 (dollars in thousands)
Data Group Risk General Processing Insurance Management Services Services Total CASH FLOWS FROM OPERATING ACTIVITIES Receipts from Customers $ 18,525 $ 244 $ 1,818 $ 20,587 Receipts from Interfund Services 270,901 8,740 23,599 $ 6,690 309,930 Receipts from Grants and Contributions 151 151 Payments to Employees (452) (554) (9,676) (4,589) (15,271) Payments to Suppliers (1,882) (4,236) (15,434) (1,818) (23,370) Payments for Interfund Services (28) (65) (1,535) (40) (1,668) Payments for Benefits, Awards, and Claims (272,761) (5,156) (277,917) Other Receipts 29 26 55 Other Payments (532) (4) (95) (5) (636) Net Cash Provided (Used) by Operating Activities 13,771 (1,002) (1,172) 264 11,861 CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES Transfers In 1,738 1,738 Interest Payments (1) (1) Net Cash Provided (Used) by Noncapital Financing Activities 1,737 1,737 CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES Principal Payments (261) (261) Interest Payments (107) (107) Proceeds from Disposition of Capital Assets 1 1 Acquisition and Construction of Capital Assets (7) (464) (441) (912) Net Cash Provided (Used) by Capital and Related Financing 1 (7) (832) (441) (1,279) CASH FLOWS FROM INVESTING ACTIVITIES Receipt of Interest and Dividends 1,173 179 98 7 1,457 Purchase of Investments (17,554) (144) (17,698) Redemption of Investments 483 483 Other Investing Activities 1 (5) (4) Net Cash Provided (Used) by Investing Activities (15,897) 35 93 7 (15,762) Net Increase (Decrease) in Cash, Cash Equivalents, and Pooled Cash (2,125) (974) (174) (170) (3,443) Beginning Cash, Cash Equivalents, and Pooled Cash 62,374 3,036 10,406 3,034 78,850 Ending Cash, Cash Equivalents, and Pooled Cash $ 60,249 $ 2,062 $ 10,232 $ 2,864 $ 75,407 Reconciliation of Operating Income (Loss) to Net Cash Operating Income (Loss) $ 17,127 $ (1,314) $ (984) $ (645) $ 14,184 Adjustments to Reconcile Operating Income to Net Cash Provided Depreciation and Amortization 1 964 214 1,179 Net Changes in Assets and Liabilities: Accounts Receivable/Interfund Receivables (1) 37 (10) 26 Inventories and Prepaid Items (571) 715 144 Other Assets (588) (57) (3) (648) Accounts Payable/Interfund Payables (1,515) 5 (185) 11 (1,684) Unearned Revenue (1,251) (122) 113 (1,260) Compensated Absences 7 (6) 40 1 42 Policy Claim Liabilities 334 334 Other Accrued Liabilities (9) (21) (294) (132) (456) Net Cash Provided (Used) by Operating Activities $ 13,771 $ (1,002) $ (1,172) $ 264 $ 11,861 Noncash Transactions (dollars in thousands): Investments decreased in fair value by $621 for Group Insurance and by $195 for Risk Management. Disposal of capital assets at a loss of $7 in Data Processing Services.
State of Idaho 148 Comprehensive Annual Financial Report State of Idaho
FIDUCIARY FUNDS report assets held in a trustee or agency capacity for others and therefore cannot be used to support the State's own programs. The following provide brief descriptions of the State's fiduciary funds.
PENSION AND OTHER EMPLOYEE BENEFIT The University of Idaho Health Benefit Trust Fund TRUST FUNDS account for resources that are required to provides medical, mental health, dental, and vision be held in trust for the members and beneficiaries of defined benefits to active and retired University of Idaho benefit pension plans, defined contribution plans, deferred employees. compensation plans, and other postemployment benefit plans. The State’s pension trust funds include the following: INVESTMENT TRUST FUNDS account for assets invested by the State on behalf of other governmental The PERSI Base Plan and the Firefighters’ entities. The following provide brief descriptions of the Retirement Fund are cost-sharing, multiple employer State’s investment trust funds: defined benefit retirement plans that provide benefits based on member’s years of service, age, and highest The Local Government Investment Pool is an average salary. In addition, benefits are provided for external investment pool sponsored by the State disability, for death, and to eligible members’ Treasurer’s Office for Local Government Investment beneficiaries. Pool participants. The purpose of the Pool is to provide a safe liquid vehicle for investing monies not needed The Judges’ Retirement Fund is a single-employer to meet immediate operating obligations and to obtain defined benefit plan that provides retirement benefits the best interest rate available at the time of investment. to retired justices, judges, and eligible administrative directors. The Fund also provides allowances to The Diversified Bond Fund is an external investment surviving spouses. pool sponsored by the State Treasurer’s Office for Diversified Bond Fund participants. The purpose of The Deferred Compensation Plan is an IRS Section the Fund is to provide an investment vehicle with a 457(b) tax-advantaged trust fund that accounts for the reasonable level of current income and potential capital resources contributed by individuals to fund their appreciation as measured on a long-term basis. retirement. AGENCY FUNDS account for resources held by the State The 414(k) Plan and the 401(k) Plan are defined in a purely custodial capacity. The following provides a contribution retirement plans that consist of gain brief description of the State’s agency fund: sharing allocations, voluntary employee contributions, rollover contributions, and some employer matching The Custodial Fund accounts for residual idle cash contributions. and investments held by the State on behalf of other governmental entities and administered by the State The Sick Leave Insurance Reserve-State Fund and Treasurer’s Office. The fund also accounts for the the Sick Leave Insurance Reserve-Schools Fund receipts and disbursements of monies collected by the provide payment of health insurance premiums on State and distributed to entities or individuals. This behalf of retired employees based on accumulated includes deposits of securities by banks and insurance unused sick leave at the time of retirement. companies doing business in the State.
The University of Idaho Retiree Benefit Trust Fund provides medical and dental benefits to eligible University of Idaho retirees, disabled employees, spouses, and survivors. Employees hired prior to January 1, 2002, are eligible to participate in this plan.
State of Idaho 149 Comprehensive Annual Financial Report State of Idaho Combining Statement of Fiduciary Net Position Pension and Other Employee Benefit Trust Funds June 30, 2017 (dollars in thousands)
Deferred Defined PERSI Firefighters' Judges' Compensation Contribution Base Plan Retirement Retirement 457(b) 414(k) ASSETS Cash and Cash Equivalents $ 563 $ 14 $ 38 Pooled Cash and Investments 2,108 52 $ 292 Investments: Pooled Short Term 220,071 5,413 1,192 Fixed Income Investments 3,724,413 91,602 20,181 $ 192,813 Marketable Securities 9,152,890 225,117 49,595 Mutual Funds and Private Equities 905,712 22,276 4,908 216,170 57,532 Mortgages and Real Estate 1,252,613 30,808 6,787 Other Investments 2,229 Receivables: Investments Sold 70,967 1,736 384 2,852 Contributions 3,473 62 136 13 Interest and Dividends 47,099 1,152 255 147 Interfund Receivables 14 Other Receivables Other Assets 68,432 Capital Assets, Net 11,982 Total Assets 15,460,337 378,232 83,594 414,200 57,730 LIABILITIES Accounts Payable 376 9 Interfund Payables 2,072 51 1 Unearned Revenue Investments Purchased 110,752 2,724 600 Policy Claim Liabilities Other Accrued Liabilities 11,191 270 58 12 Total Liabilities 124,391 3,054 658 13 NET POSITION Held in Trust for: Employee Pension Benefits 15,335,946 375,178 82,936 414,200 57,717 Postemployment Healthcare Benefits Trust Beneficiaries Total Net Position $ 15,335,946 $ 375,178 $ 82,936 $ 414,200 $ 57,717
State of Idaho 150 Comprehensive Annual Financial Report Defined Contribution Sick Leave Insurance Sick Leave Insurance U of I U of I 401(k) Reserve-State Reserve-Schools Retiree Benefits Trust Health Benefits Trust Total
$ 425 $ 941 $ 220 $ 2,201 $ 21 $ 33 2,506
1,406 228,082 55,134 72,373 17,373 3,350 4,177,239 130,150 210,831 9,768,583 773,567 12,933 1,993,098 1,290,208 2,229
75,939 744 4,428 1,908 14 50,575 811 1,312 2,137 405 405 399 951 69,782 11,982 778,050 186,515 285,500 31,247 3,989 17,679,394
528 913 13 2,137
114,076 2,128 2,128 206 17 28 11,782 219 17 28 2,656 131,036
777,831 17,043,808 186,498 285,472 31,247 503,217 1,333 1,333 $ 777,831 $ 186,498 $ 285,472 $ 31,247 $ 1,333 $ 17,548,358
State of Idaho 151 Comprehensive Annual Financial Report State of Idaho Combining Statement of Changes in Fiduciary Net Position Pension and Other Employee Benefit Trust Funds For the Fiscal Year Ended June 30, 2017 (dollars in thousands)
Deferred Define PERSI Base Firefighters' Judges' Compensation Contribution Plan Retirement Retirement 457(b) 414(k) ADDITIONS Contributions: Member $ 237,033 $ 4 $ 630 $ 14,218 Employer 356,367 7,453 3,945 Transfers In from Other Plans 10,265 Total Contributions 593,400 7,457 4,575 24,483 Investment Income: Net Increase (Decrease) in Fair Value of Investments 1,411,349 34,527 7,613 17,787 $ 5,758 Interest, Dividends, and Other 330,011 8,074 1,781 7,168 47 Less Investment Expense: Investment Activity Expense (45,467) (1,112) (240) (149) Net Investment Income 1,695,893 41,489 9,154 24,955 5,656 Miscellaneous Income 29 5 Total Additions 2,289,322 48,946 13,734 49,438 5,656 DEDUCTIONS Benefits and Refunds Paid to Plan Members 865,273 19,294 6,173 3,329 Administrative Expense 8,810 43 74 149 10 Participant Withdrawals 20,735 Total Deductions 874,083 19,337 6,247 20,884 3,339 Change in Net Position Held in Trust for: Employee Pension Benefits 1,415,239 29,609 7,487 28,554 2,317 Employee Postemployment Healthcare Benefits Trust Beneficiaries Net Position - Beginning of Year 13,920,707 345,569 75,449 385,646 55,400 Net Position - End of Year $ 15,335,946 $ 375,178 $ 82,936 $ 414,200 $ 57,717
State of Idaho 152 Comprehensive Annual Financial Report Defined U of I Contribution Sick Leave Insurance Sick Leave Insurance Retiree Benefits U of I 401(k) Reserve-State Reserve-Schools Trust Health Benefits Trust Total
$ 48,333 $ 5,259 $ 305,477 5,476 $ 7,137 $ 14,763 $ 249 19,690 415,080 14,837 25,102 68,646 7,137 14,763 249 24,949 745,659
69,443 21,591 33,106 1,876 48 1,603,098 15,434 362,515
(1,648) (75) (115) (48,806) 83,229 21,516 32,991 1,876 48 1,916,807 2 36 151,875 28,653 47,756 2,125 24,997 2,662,502
38,822 5,011 13,155 21,655 972,712 116 41 63 75 3,627 13,008 20,735 38,938 5,052 13,218 75 25,282 1,006,455
112,937 1,596,143 23,601 34,538 2,050 60,189 (285) (285) 664,894 162,897 250,934 29,197 1,618 15,892,311 $ 777,831 $ 186,498 $ 285,472 $ 31,247 $ 1,333 $ 17,548,358
State of Idaho 153 Comprehensive Annual Financial Report State of Idaho Combining Statement of Fiduciary Net Position Investment Trust Funds June 30, 2017 (dollars in thousands)
Local Government Diversified Investment Pool Bond Fund Total ASSETS Cash and Equivalents $ 5,723 $ 5,723 Investments: Pooled Short Term 395,838 $ 712 396,550 Fixed Income Investments 1,693,195 134,141 1,827,336 Mortgages and Real Estate 56,481 56,481 Receivables: Interest and Dividends 4,762 946 5,708 Total Assets 2,099,518 192,280 2,291,798 LIABILITIES Accounts Payable 19 5 24 Other Accrued Liabilities 1,567 328 1,895 Total Liabilities 1,586 333 1,919 NET POSITION Held in Trust for: External Investment Pool Participants 2,097,932 191,947 2,289,879 Total Net Position $ 2,097,932 $ 191,947 $ 2,289,879
State of Idaho 154 Comprehensive Annual Financial Report State of Idaho Combining Statement of Changes in Fiduciary Net Position Investment Trust Funds For the Fiscal Year Ended June 30, 2017 (dollars in thousands)
Local Government Diversified Investment Pool Bond Fund Total ADDITIONS Contributions Participant Deposits $ 4,410,772 $ 41,333 $ 4,452,105 Total Contributions 4,410,772 41,333 4,452,105 Investment Income: Net Increase (Decrease) in Fair Value of Investments 1,517 (17,911) (16,394) Interest, Dividends, and Other 10,611 5,211 15,822 Less Investment Expense: Investment Activity Expense (216) (89) (305) Net Investment Income 11,912 (12,789) (877) Total Additions 4,422,684 28,544 4,451,228 DEDUCTIONS Earnings Distribution 13,464 3,335 16,799 Participant Withdrawals 4,116,931 2,684 4,119,615 Total Deductions 4,130,395 6,019 4,136,414 Change in Net Position Held in Trust for: External Investment Pool Participants 292,289 22,525 314,814 Total Net Position - Beginning of Year 1,805,643 169,422 1,975,065 Total Net Position - End of Year $ 2,097,932 $ 191,947 $ 2,289,879
State of Idaho 155 Comprehensive Annual Financial Report State of Idaho Combining Statement of Assets and Liabilities Agency Fund June 30, 2017 (dollars in thousands) Custodial ASSETS Cash and Cash Equivalents $ 23,112 Pooled Cash and Investments 25,840 Investments: Fixed Income Investments 409,070 Receivables: Interest and Dividends 158 Interfund Receivables Due from Other Entities Total Assets $ 458,180 LIABILITIES Accounts Payable $ 161 Due to Other Entities 238 Amounts Held in Trust to Others 457,123 Other Accrued Liabilities 658 Total Liabilities $ 458,180
State of Idaho 156 Comprehensive Annual Financial Report State of Idaho Combining Statement of Changes in Assets and Liabilities Agency Fund For the Fiscal Year Ended June 30, 2017 (dollars in thousands) Balances Balances June 30, 2016 Additions Deductions June 30, 2017 CUSTODIAL Assets Cash and Cash Equivalents $ 24,190 $ 23,112 $ 24,190 $ 23,112 Pooled Cash and Investments 28,794 59,329 62,283 25,840 Investments: Fixed Income Investments 376,632 409,070 376,632 409,070 Receivables: Interest and Dividends 89 217 148 158 Interfund Receivables 8 8 Due from Other Entities 128 128 Total Assets $ 429,705 $ 491,864 $ 463,389 $ 458,180 Liabilities Accounts Payable $ 14 $ 161 $ 14 $ 161 Due to Other Entities 133 7,497 7,392 238 Amounts Held for Others 428,857 482,581 454,315 457,123 Other Accrued Liabilities 701 4,179 4,222 658 Total Liabilities $ 429,705 $ 494,418 $ 465,943 $ 458,180
State of Idaho 157 Comprehensive Annual Financial Report Statistical Section
Kellogg State of Idaho
INDEX TO THE STATISTICAL SECTION
Financial Trends - These schedules assist the reader in understanding the State’s financial performance and well being over time. Schedule 1 - Net Position by Component...... 160 Schedule 2 - Changes in Net Position...... 162 Schedule 3 - Fund Balances - Governmental Funds...... 164 Schedule 4 - Changes in Fund Balances - Governmental Funds...... 166
Revenue Capacity Information - These schedules assist the reader in evaluating the State’s capacity to raise revenue to cover expenditures.
Schedule 5 - Revenue Base...... 168 Schedule 6 - Revenue Rates...... 170 Schedule 7 - Revenue Payers by Industry/Category...... 172
Debt Capacity Information - These schedules assist the reader in evaluating the State’s outstanding debt, the capacity to repay that debt, and the ability to issue additional debt in the future.
Schedule 8 - Outstanding Debt Ratios...... 174 Schedule 9 - Other Long-Term Liabilities...... 175 Schedule 10 - Pledged Revenue Coverage ...... 176
Demographic and Economic Information - These schedules provide the reader with trend information on the size and economic health of the State.
Schedule 11 - Demographic and Economic Indicators...... 178 Schedule 12 - Principal Employers...... 180 Schedule 13 - Education Enrollment ...... 180
Operating Information - These schedules assist the reader in evaluating the size and productivity of the state government.
Schedule 14 - State Employees by Function...... 181 Schedule 15 - Operating Indicators by Function ...... 182 Schedule 16 - Capital Assets by Function...... 184
Miscellaneous Statistics - This information may provide the reader with more insight into the State’s financial and demographic status.
Schedule 17 - Assets, Liabilities, and Fund Balances - General Fund Accounts...... 186 Schedule 18 - Revenues, Expenditures, and Changes in Fund Balances - General Fund Accounts ...... 188 Schedule 19 - Miscellaneous Statistics...... 190
Sources: Unless otherwise noted, the information in the following schedules is derived from the State’s Comprehensive Annual Financial Report.
Note: The schedules presented in the Statistical Section are not audited, and component unit data is not included.
State of Idaho 159 Comprehensive Annual Financial Report State of Idaho
Schedule 1 - Net Position by Component Fiscal Years 2008-2017 (accrual basis of accounting, dollars in thousands) 2008 2009 2010 2011 2012 2013 (as restated) (as restated) (as restated) (as restated) (as restated) (as restated) Governmental Activities Net Investment in Capital Assets $ 4,442,210 $ 4,713,557 $ 4,883,824 $ 5,115,567 $ 5,218,008 $ 5,325,732 Restricted1 1,949,355 1,572,581 1,783,407 2,086,004 2,134,426 2,291,548 Unrestricted2 1,050,556 760,614 576,666 444,322 529,948 748,869 Total Governmental Activities Net Position $ 7,442,121 $ 7,046,752 $ 7,243,897 $ 7,645,893 $ 7,882,382 $ 8,366,149
Business-Type Activities Net Investment in Capital Assets $ 517,436 $ 559,719 $ 607,694 $ 656,020 $ 695,405 $ 736,734 Restricted3 829,237 640,587 604,851 769,555 901,322 986,730 Unrestricted4 190,658 198,575 193,029 194,366 251,804 261,432 Total Business-Type Activities Net Position $ 1,537,331 $ 1,398,881 $ 1,405,574 $ 1,619,941 $ 1,848,531 $ 1,984,896
Primary Government Net Investment in Capital Assets $ 4,959,646 $ 5,273,276 $ 5,491,518 $ 5,771,587 $ 5,913,413 $ 6,062,466 Restricted 2,778,592 2,213,168 2,388,258 2,855,559 3,035,748 3,278,278 Unrestricted 1,241,214 959,189 769,695 638,688 781,752 1,010,301 Total Primary Government Net Position $ 8,979,452 $ 8,445,633 $ 8,649,471 $ 9,265,834 $ 9,730,913 $ 10,351,045 1In fiscal year (FY) 2008 net position increased mainly due to increased operating grants for health care assistance, education, and infrastructure. In FY2009 net position decreased primarily because of the national recession and the decrease in fair market value of investments, primarily related to the Land Endowment fund. In FY2010 and FY2011 net position increased primarily due to the increase in federal grant revenue from the American Recovery and Reinvestment Act. In FY2012 net position increased due to lower Medicaid and rehabilitation service costs. In FY2013-2017 net position increased primarily due to the increase in fair market value of investments, primarily related to the Land Endowment fund. 2Large fluctuations in governmental activities unrestricted net position balances occurred primarily as income tax and sales tax revenues increased and decreased due to significant changes in economic conditions. 3Increases and decreases of business-type activities restricted net position were primarily due to increases in unemployment compensation assessment collections and/or decreases in unemployment claims related to changes in economic conditions. 4FY2012 and FY2015 net position increased primarily due to increased student tuition and fees for the colleges and universities.
State of Idaho 160 Comprehensive Annual Financial Report 2014 2015 2016 2017 (as restated) (as restated) (as restated)
$ 5,447,960 $ 5,638,703 $ 5,777,987 $ 5,963,951 2,619,433 2,885,392 3,043,809 3,397,251 737,576 893,542 947,045 1,146,468 $ 8,804,969 $ 9,417,637 $ 9,768,841 $ 10,507,670
$ 746,473 $ 749,873 $ 758,031 $ 764,323 1,130,154 1,222,537 1,353,036 1,450,042 226,545 291,420 303,825 317,738 $ 2,103,172 $ 2,263,830 $ 2,414,892 $ 2,532,103
$ 6,194,433 $ 6,388,576 $ 6,536,018 $ 6,728,274 3,749,587 4,107,929 4,396,845 4,847,293 964,121 1,184,962 1,250,870 1,464,206 $ 10,908,141 $ 11,681,467 $ 12,183,733 $ 13,039,773
State of Idaho 161 Comprehensive Annual Financial Report State of Idaho Schedule 2 - Changes in Net Position Fiscal Years 2008-2017 (accrual basis of accounting, dollars in thousands) 2008 2009 2010 2011 2012 2013 (as restated) (as restated) (as restated) (as restated) (as restated) (as restated) Governmental Activities: Expenses General Government1,2 $ 463,125 $ 450,875 $ 548,757 $ 426,506 $ 413,832 $ 440,769 Public Safety and Correction1 324,843 326,125 320,423 296,034 335,493 352,409 Health and Human Services3 1,818,932 2,115,148 2,092,319 2,577,700 2,396,437 2,545,283 Education1 1,796,160 1,850,258 1,830,608 1,777,026 1,712,567 1,707,233 Economic Development9 756,677 743,811 799,054 829,130 820,530 806,801 Natural Resources 243,925 241,108 241,508 241,203 264,080 244,032 Interest Expense 45,530 46,767 45,782 50,773 50,372 49,961 Total Expenses 5,449,192 5,774,092 5,878,451 6,198,372 5,993,311 6,146,488 Program Revenues Charges for Services: General Government10 119,443 93,376 79,833 109,387 97,411 104,973 Economic Development 258,576 256,184 239,107 248,199 266,320 252,221 Natural Resources 150,752 133,138 127,037 133,317 159,633 151,126 Other Activities4 128,367 138,276 76,575 163,505 118,255 127,082 Operating Grants and Contributions5 1,955,236 2,034,795 2,935,393 3,160,919 2,664,743 2,828,808 Capital Grants and Contributions 906 8,892 4,660 6,058 2,568 10,492 Total Program Revenues 2,613,280 2,664,661 3,462,605 3,821,385 3,308,930 3,474,702 Total Governmental Activities Net Program Expense (2,835,912) (3,109,431) (2,415,846) (2,376,987) (2,684,381) (2,671,786) General Revenues and Other Changes in Net Position Taxes: Sales Tax6 1,334,032 1,177,106 1,127,013 1,165,095 1,213,623 1,315,002 Individual and Corporate Taxes6 1,599,881 1,320,968 1,242,032 1,296,558 1,390,226 1,533,850 Fuel Tax 228,786 214,113 221,142 231,732 216,249 237,647 Other Taxes 185,874 186,489 186,130 227,075 240,757 220,507 Tobacco Settlement 28,631 31,094 26,120 24,576 21,103 24,912 Grants Not Restricted to Specific Programs Unrestricted Investment Earnings 51,537 36,139 16,800 18,516 17,365 19,142 Transfers (264,027) (251,847) (206,246) (184,569) (178,453) (195,507) Total General Revenues and Other Changes in Net Position 3,164,714 2,714,062 2,612,991 2,778,983 2,920,870 3,155,553 Total Governmental Activities Change in Net Position $ 328,802 $ (395,369) $ 197,145 $ 401,996 $ 236,489 $ 483,767 Business-Type Activities: Expenses College and University $ 875,586 $ 896,993 $ 898,012 $ 923,760 $ 969,419 $ 989,412 Unemployment Compensation6 171,918 338,600 666,808 482,087 358,283 251,016 Loan 2,267 5,910 9,624 14,571 7,112 6,480 State Lottery 102,065 105,780 110,204 112,003 134,055 150,599 State Liquor 112,476 117,185 118,022 117,039 123,656 134,117 Correctional Industries 7,574 8,323 6,553 6,727 8,030 7,560 Total Expenses 1,271,886 1,472,791 1,809,223 1,656,187 1,600,555 1,539,184 Revenues Charges for Services: College and University 337,699 339,989 368,504 405,450 436,208 445,649 Unemployment Compensation7 126,575 130,879 255,278 337,479 351,781 314,630 State Lottery11 137,664 140,316 147,931 147,849 176,547 198,169 Other Activities11 152,428 156,483 156,407 160,749 175,435 180,645 Operating Grants and Contributions8 244,954 293,673 637,456 606,597 485,777 383,575 Capital Grants and Contributions 29,478 21,154 44,094 27,861 24,944 38,364 Total Revenues 1,028,798 1,082,494 1,609,670 1,685,985 1,650,692 1,561,032 Total Business-Type Activities Net Program Revenue (Expense) (243,088) (390,297) (199,553) 29,798 50,137 21,848 General Revenues and Other Changes in Net Position Special Item (80,990) Transfers 264,027 251,847 206,246 184,569 178,453 195,507 Total General Revenues and Other Changes in Net Position 264,027 251,847 206,246 184,569 178,453 114,517 Total Business-Type Activities Change in Net Position $ 20,939 $ (138,450) $ 6,693 $ 214,367 $ 228,590 $ 136,365 Total Primary Government Change in Net Position $ 349,741 $ (533,819) $ 203,838 $ 616,363 $ 465,079 $ 620,132 1In fiscal year (FY) 2011 most expenses decreased due to effects of the national recession. 2In FY2013 expenses increased primarily due to an increase in lease payments to the Idaho State Building Authority. In FY2014 prior period adjustments were made due to the implementation of GASB Statements No. 68 & 71 in FY2015. 3In FY2011-2016 expenses for health and human services fluctuated due to changes in medical assistance payments related to Medicaid and rehabilitation services payments. 4In FY2010 and FY2011 fluctuations in other activities revenue were caused by a change in the way revenue is recorded. In FY2012 Department of Health & Welfare grant revenue decreased due to a reduction in American Recovery and Reinvestment Act funding. 5In FY2010-2012 amounts shifted primarily because of changes in the American Recovery and Reinvestment Act stimulus funding. In FY2013 revenues from operating grants and contributions increased primarily due to an increase in the fair market value of Endowment Fund Investment Board investments and interest income. In FY2016 operating grant revenue decreased primarily due to decreased federal highway funds, slippages in the fair market value of Endowment Fund Investment Board investments, and decreased health and human services grant revenue due to the timing of federal reimbursements for expenses.
State of Idaho 162 Comprehensive Annual Financial Report 2014 2015 2016 2017 (as restated) (as restated) (as restated)
$ 848,508 $ 548,518 $ 505,318 $ 507,700 364,998 387,694 402,437 410,975 2,595,727 2,751,283 2,697,385 2,668,755 1,756,231 1,845,144 1,956,032 2,089,048 810,023 761,384 866,345 862,427 236,614 269,706 287,853 295,879 51,600 46,860 45,271 15,879 6,663,701 6,610,589 6,760,641 6,850,663
90,314 227,915 178,132 144,390 271,894 287,525 333,616 325,848 175,271 256,344 217,958 222,815 161,452 181,054 197,393 177,098 2,941,720 2,851,144 2,676,844 2,869,284 5,317 2,832 11,021 12,425 3,645,968 3,806,814 3,614,964 3,751,860 (3,017,733) (2,803,775) (3,145,677) (3,098,803)
1,400,547 1,444,781 1,580,542 1,636,125 1,739,957 1,686,455 1,518,740 1,848,281 262,479 243,826 357,858 331,399 213,434 220,442 229,430 231,294 27,450 24,183 25,297 22,964
14,374 10,452 18,735 14,869 (201,688) (213,696) (233,721) (247,300) 3,456,553 3,416,443 3,496,881 3,837,632 $ 438,820 $ 612,668 $ 351,204 $ 738,829
$ 1,054,726 $ 1,015,707 $ 1,063,222 $ 1,106,464 142,524 110,597 108,187 108,022 7,565 9,604 7,537 8,119 163,295 165,445 185,115 192,314 141,467 143,469 153,901 162,792 8,755 8,155 8,960 9,102 1,518,332 1,452,977 1,526,922 1,586,813
459,380 489,740 491,169 489,375 258,072 203,794 189,219 189,816 209,642 210,940 236,819 240,686 185,082 196,043 218,024 219,337 305,150 282,646 291,830 293,977 17,594 16,776 17,200 23,533 1,434,920 1,399,939 1,444,261 1,456,724 (83,412) (53,038) (82,661) (130,089)
201,688 213,696 233,723 247,300 201,688 213,696 233,723 247,300 $ 118,276 $ 160,658 $ 151,062 $ 117,211 $ 557,096 $ 773,326 $ 502,266 $ 856,040 6Increases and decreases are due to the degradation and improvement of economic conditions and the changes in employment and personal income levels. 7In FY2010-2012 unemployment compensation revenues increased due to increased assessment collections for unemployment benefits. In FY2013-2014 unemployment compensation revenues decreased due to a lower employer contribution rate. 8In FY2010 operating grants and contributions grew because of increased federal grant revenue for unemployment benefits. 9In FY2016 economic development expenses rose primarily due to an increased number of state and local highway infrastructure improvements. 10In FY2015 the increase was due, in part, to a building transfer from the Idaho State Building Authority to the Idaho Department of Administration and due to the state receiving significant revenue from court settlements. In FY2016 the decrease in general government program revenues are due, in part, to falling revenue from charges for services. 11In FY2016 nonmajor enterprise funds net position improved primarily in consequence of increased lottery ticket and liquor sales.
State of Idaho 163 Comprehensive Annual Financial Report State of Idaho Schedule 3 - Fund Balances - Governmental Funds Fiscal Years 2008-2017 (modified accrual basis of accounting, dollars in thousands) 2008 2009 2010 2011 2012 2013 (as restated) (as restated) (as restated) (as restated) (as restated) (as restated) General Fund Nonspendable $ 7,922 $ 8,837 $ 9,292 Restricted1 $ 85,636 $ 98,801 $ 130,261 169,753 184,437 219,270 Committed2 369,896 213,835 154,168 162,583 185,098 195,479 Assigned7 40,949 35,221 45,936 55,778 57,271 63,806 Unassigned3 704,776 426,885 320,487 269,251 251,023 412,738 Total General Fund 1,201,257 774,742 650,852 665,287 686,666 900,585
All Other Governmental Funds Nonspendable4 1,128,417 923,217 1,043,787 1,097,816 1,135,746 1,255,497 Restricted5 511,179 451,637 462,036 709,985 735,879 742,849 Committed 77,621 83,527 86,434 78,794 85,124 77,505 Assigned 1,012 1,298 1,320 1,651 2,238 2,689 Unassigned6 (57,026) (4,262) Total All Other Governmental Funds 1,718,229 1,459,679 1,593,577 1,831,220 1,958,987 2,074,278 Total Fund Balances - Governmental Funds $ 2,919,486 $ 2,234,421 $ 2,244,429 $ 2,496,507 $ 2,645,653 $ 2,974,863
Note: GASB Statement No. 54 was implemented in fiscal year 2011. The standard required the reclassification of fund balances. Prior years have been restated.
1Increases and decreases in the General Fund restricted fund balance in each fiscal year occurred primarily due to changes in sales tax revenue caused by prevailing economic conditions. 2Fluctuations in the General Fund committed fund balance in each fiscal year resulted primarily from changes in personal and corporate income tax revenue. Significant variances occurred in response to prevailing economic conditions. 3Increases and decreases in the General Fund unassigned fund balance resulted from surging and weakening economic conditions. 4Large changes in the Governmental Funds nonspendable fund balance occurred primarily because of significant variances in Land Endowment fund fair market value. 5In FY2011 the fund balance increased largely due to receiving American Recovery and Reinvestment Act funds for the Idaho Transportation Department. In FY2016 the fund balance increased primarily due to mandated increases to personal and commercial vehicle registration fees and in the motor fuels tax rate as a result of House Bill 312 passing in 2015. 6In FY2011 and FY2013-2017 the Department of Health and Welfare reported a negative unassigned fund balance due to increased expenditures for health and human services. 7In FY2016 the assigned fund balance increased primarily due to significant amount of funds that were allocated to the Fire Suppression - Deficiency fund.
State of Idaho 164 Comprehensive Annual Financial Report 2014 2015 2016 2017 (as restated) (as restated) (as restated)
$ 12,012 $ 10,294 $ 10,580 $ 11,307 252,627 274,121 298,798 349,697 263,443 339,169 337,231 332,704 53,086 51,357 111,168 115,618 387,161 489,495 557,280 666,848 968,329 1,164,436 1,315,057 1,476,174
1,443,868 1,503,337 1,435,060 1,519,909 851,410 1,027,465 1,208,118 1,437,635 76,970 87,298 99,202 110,143 5,271 2,201 1,949 1,655 (6,533) (18,822) (13,597) (26,550) 2,370,986 2,601,479 2,730,732 3,042,792 $ 3,339,315 $ 3,765,915 $ 4,045,789 $ 4,518,966
State of Idaho 165 Comprehensive Annual Financial Report State of Idaho Schedule 4 - Changes in Fund Balances - Governmental Funds Fiscal Years 2008-2017 (modified accrual basis of accounting, dollars in thousands) 2008 2009 2010 2011 2012 2013 (as restated) (as restated) (as restated) (as restated) (as restated) (as restated) Revenues Sales Tax1 $ 1,333,018 $ 1,174,802 $ 1,122,384 $ 1,163,526 $ 1,214,491 $ 1,318,383 Individual and Corporate Taxes2 1,587,694 1,325,996 1,228,463 1,288,869 1,389,291 1,531,975 Other Taxes10 414,671 398,639 409,924 459,162 456,720 458,291 Licenses, Permits, and Fees 279,156 277,354 275,018 296,827 310,828 317,854 Sale of Goods and Services 231,885 232,526 137,947 168,369 198,438 237,268 Grants and Contributions3 1,962,931 2,251,714 2,808,307 2,850,294 2,638,570 2,695,371 Investment Income4 63,406 (123,820) 191,596 302,488 51,264 217,357 Tobacco Settlement 28,504 30,965 25,990 24,445 24,922 24,912 Other Income 61,530 61,943 78,565 65,361 101,828 69,185 Total Revenues 5,962,795 5,630,119 6,278,194 6,619,341 6,386,352 6,870,596
Expenditures General Government5 177,312 186,119 208,784 172,779 157,283 168,253 Public Safety and Correction 300,106 305,141 284,457 284,208 302,809 324,717 Health and Human Services6 1,775,609 2,096,507 2,111,265 2,346,165 2,329,848 2,544,890 Education5,7 1,777,690 1,843,401 1,810,276 1,768,616 1,687,084 1,685,252 Economic Development 390,424 406,694 416,776 418,866 392,242 420,668 Natural Resources 217,214 212,398 214,291 213,912 215,354 210,376 Capital Outlay5,8 545,059 634,187 677,097 574,305 501,522 497,087 Intergovernmental Revenue Sharing 452,089 436,866 459,716 448,249 453,799 471,269 Debt Service: Principal 92,377 55,645 33,222 45,871 47,954 49,679 Interest 45,365 49,368 46,648 51,689 50,804 49,100 Total Expenditures 5,773,245 6,226,326 6,262,532 6,324,660 6,138,699 6,421,291 Revenues Over (Under) Expenditures 189,550 (596,207) 15,662 294,681 247,653 449,305
Other Financing Sources (Uses) Bonds and Notes Issued11 187,603 152,641 163,562 125,862 146,219 61,347 Issuance of Refunding Bonds 10,945 Premium/(Discount) on Bonds Issued 7,219 1,304 Payment to Refunded Bond Escrow Agent9 (88,044) (11,441) Capital Lease Acquisitions 1,039 22 23,745 2,603 178 Sale of Capital Assets12 11,590 11,947 13,436 14,462 16,871 15,414 Transfers In 731,774 700,654 630,563 678,794 815,041 858,585 Transfers Out (996,176) (954,122) (836,960) (864,324) (995,813) (1,056,427) Total Other Financing Sources (Uses) (64,170) (88,858) (5,654) (42,603) (98,507) (120,095) Net Changes in Fund Balances $ 125,380 $ (685,065) $ 10,008 $ 252,078 $ 149,146 $ 329,210 Debt Service as a Percentage of Noncapital Expenditures 2.5 1.8 1.3 1.7 1.7 1.6 1Sales tax revenue changed in response to fluctuating levels of employment and personal income. 2Individual and corporate income tax revenues increased and decreased due to the relative strengthening and weakening of the economy. 3In FY2009-2011 grants and contributions increased primarily due to American Recovery and Reinvestment Act funds for health, transportation, and education. 4Investment income increased and decreased primarily due to changes in the fair values of investments in the Land Endowment fund. 5In FY2011 and FY2012 decreases in expenditures were necessary to balance the State's budget. 6In FY2008-2013 health and human services expenditures increased and decreased due to changes in medical assistance payments related to Medicaid and rehabilitation services. 7In FY2008-2009 education expenditures increased because of an increased public school distribution for facilities improvements, salaries, and operating expenses. In FY2014 expenditures from federal grants increased.
State of Idaho 166 Comprehensive Annual Financial Report 2014 2015 2016 2017 (as restated) (as restated) (as restated)
$ 1,379,105 $ 1,462,022 $ 1,579,729 $ 1,637,840 1,497,935 1,684,680 1,696,834 1,854,375 470,226 469,780 587,439 562,787 325,172 354,894 390,258 405,663 260,489 288,388 272,024 250,403 2,658,143 2,706,506 2,678,121 2,703,724 324,835 78,412 34,552 296,547 27,450 24,183 25,297 22,964 61,016 151,062 88,132 54,122 7,004,371 7,219,927 7,352,386 7,788,425
197,639 195,667 203,783 208,067 338,865 359,132 369,982 383,070 2,561,572 2,573,782 2,622,307 2,672,573 1,733,263 1,821,633 1,938,123 2,064,432 418,525 414,307 425,407 445,357 223,017 237,478 248,671 256,845 468,817 485,276 441,430 443,857 488,585 505,017 547,772 580,565
52,334 48,362 38,946 40,564 48,926 48,458 47,409 44,397 6,531,543 6,689,112 6,883,830 7,139,727 472,828 530,815 468,556 648,698
65,457 53,935 12,270 0
9 90 7 19 30,382 57,988 47,642 73,498 855,318 872,222 902,365 977,802 (1,059,542) (1,088,450) (1,150,966) (1,226,840) (108,376) (104,215) (188,682) (175,521) $ 364,452 $ 426,600 $ 279,874 $ 473,177
1.6 1.5 1.3 1.2 8In FY2008-2010 capital outlay expenditures increased mainly due to transportation infrastructure and state building expenses. 9In FY2012 and FY2013 the Idaho State Building Authority defeased bond debt to achieve better interest rates. 10In FY2016 other taxes increased mainly due to an increase in the motor fuels tax rate as a result of the passage of House Bill 312 in 2015. The additional funds are to be used exclusively for the maintenance of bridges and roads and replacement projects at the state and local levels. 11In FY2016 the decrease in bonds and notes issued is primarily due to a large decrease in issued GARVEE bonds revenue. 12In FY2017 the increase in sale of capital assets is primarily due to the sale of state owned commercial properties.
State of Idaho 167 Comprehensive Annual Financial Report State of Idaho Schedule 5 - Revenue Base Fiscal/Calendar Years 2008-2017 (dollars in thousands)
Taxable Sales by Industry1 Fiscal Year 2008 2009 2010 2011 2012 2013 Commercial Farms2 $ 11,680 $ 10,055 $ 9,005 $ 10,847 $ 14,204 $ 11,733 Agricultural/Forestry, Fishing, and Other 127,115 111,834 101,936 94,138 100,206 106,731 Mining 74,440 54,148 43,224 43,947 47,130 52,671 Construction 583,884 486,661 427,769 409,010 489,893 434,218 Manufacturing 1,050,425 813,738 755,948 996,988 819,403 807,950 Transportation and Public Utilities 390,536 361,449 361,995 700,557 546,466 705,692 Wholesale Trade 1,870,820 1,679,196 1,632,262 1,641,485 1,765,478 2,033,097 Retail Trade 14,963,180 13,418,803 13,360,965 12,752,289 13,221,360 14,568,624 Information3 Finance, Insurance, and Real Estate 155,363 143,608 136,907 133,522 136,687 142,282 Services 2,409,065 2,161,247 2,213,003 2,099,385 2,101,112 2,225,229 State and Local Government 817,606 703,459 680,446 657,345 646,121 751,309 Unclassified Unpermitted4 Total Taxable Sales $ 22,454,114 $ 19,944,198 $ 19,723,460 $ 19,539,513 $ 19,888,060 $ 21,839,536 Direct Sales Tax Rate 6.0% 6.0% 6.0% 6.0% 6.0% 6.0% Personal Income by Industry5 Calendar Year 2008 2009 2010 2011 2012 2013 Farm Earnings $ 1,768,795 $ 1,125,822 $ 1,528,413 $ 2,145,772 $ 2,146,805 $ 2,386,810 Agricultural/Forestry, Fishing, and Other 361,175 356,567 403,585 407,297 430,944 476,023 Mining 449,030 445,591 508,866 565,479 548,155 519,183 Construction/Utilities 3,138,586 2,497,428 2,326,366 2,261,879 2,356,481 2,739,135 Manufacturing 3,847,964 3,426,751 3,454,938 3,587,066 3,792,789 4,327,760 Transportation 1,028,175 991,801 1,012,226 1,084,299 1,160,687 1,204,530 Wholesale Trade 1,654,084 1,552,914 1,571,982 1,640,576 1,713,123 1,850,694 Retail Trade 2,951,183 3,082,629 3,038,630 2,944,788 3,105,609 3,328,951 Finance, Insurance, and Real Estate 2,084,115 2,073,890 1,853,055 2,026,753 2,042,013 2,209,247 Services 11,723,782 11,702,900 11,830,196 12,017,388 12,319,936 12,932,144 Federal, Civilian 1,031,211 1,073,648 1,115,347 1,113,990 1,131,574 1,109,619 Military 504,056 535,821 531,786 501,530 498,682 483,601 State and Local Government 4,943,146 5,035,938 5,072,487 5,000,095 5,121,295 5,245,253 Other6 15,194,950 14,964,249 15,594,280 17,447,927 19,002,254 18,768,201 Total Personal Income $ 50,680,252 $ 48,865,949 $ 49,842,157 $ 52,744,839 $ 55,370,347 $ 57,581,151 Total Direct Personal Income Tax Rate 7.6% 7.6% 7.6% 7.6% 7.3% 7.3% Corporate Income by Category7 Calendar Year 2008 2009 2010 2011 2012 2013 Corporations $ (759,563) $ (1,025,574) $ (28,603) $ 49,806 $ 502,747 $ 316,558 Sub-S Corporations (35,677) 41,005 43,487 24,196 106,971 49,630 Partnerships (125,039) (126,283) (115,646) (287,303) (352,035) (127,839) Fiduciary 22,495 (5,038) 6,843 (28,687) 61,134 (14,541) Total Corporate Income $ (897,784) $ (1,115,890) $ (93,919) $ (241,988) $ 318,817 $ 223,808 Direct Corporate Income Tax Rate 7.6% 7.6% 7.6% 7.6% 7.4% 7.4% Vehicle Fuel Sales by Category (in thousands of gallons) Fiscal Year 2008 2009 2010 2011 2012 2013 Diesel $ 282,617 $ 237,206 $ 236,002 $ 239,708 $ 242,617 $ 250,299 Gasoline 636,125 584,872 632,004 633,337 629,252 631,697 Propane 53 107 32 79 23 61 Natural Gas8 33 97 Aviation 2,461 1,864 1,814 1,797 1,811 1,720 Jet 36,217 29,697 23,347 23,225 25,903 28,995 Total Fuel Sales $ 957,473 $ 853,746 $ 893,199 $ 898,146 $ 899,639 $ 912,869 Total Direct Fuel Tax Rate (per gallon of fuel) $ 0.242 $ 0.243 $ 0.245 $ 0.245 $ 0.244 $ 0.244 Sources: Taxable sales, corporate income, and vehicle fuel sales--Idaho State Tax Commission; Personal income--U.S. Bureau of Economic Analysis and the Idaho State Tax Commission. 1In 2016, the Tax Commission changed from using U.S. Standard Industrial Classification System (SIC) codes to using North American Industry Classification System (NAICS) codes. The change provides industry groupings that are more meaningful and useful for economic analysis. Some industry categories shown have significant variances due to the change in classification codes. 2Under the NAICS, commercial farming is combined with agriculture/forestry, fishing, and other. 3The information sector includes the publishing industries, the motion picture and sound recording industries, the broadcasting industries, and data processing, hosting, and related services. 4Taxable sales by individuals and businesses without a sales and use tax permit.
State of Idaho 168 Comprehensive Annual Financial Report 2014 2015 2016 2017 $ 11,756 $ 16,197 112,719 124,776 $ 82,925 $ 74,482 55,851 53,947 59,177 44,035 422,849 490,734 464,888 242,718 844,024 924,586 1,101,280 884,684 543,205 555,498 166,992 49,072 2,281,830 2,573,395 2,995,810 3,000,366 15,057,644 16,080,503 14,000,015 14,576,989 518,717 507,973 157,134 183,317 608,493 653,214 2,367,364 2,584,259 4,975,587 5,094,919 811,377 868,951 861,772 953,088 148,683 62,257 14,739 231 $ 22,665,753 $ 24,456,163 $ 25,999,078 $ 26,144,028 6.0% 6.0% 6.0% 6.0%
2014 2015 2016 2017 $ 2,497,882 $ 2,264,778 $ 2,034,084 $ 2,318,387 498,985 509,216 492,064 502,315 476,745 462,692 431,511 393,687 3,050,678 3,290,015 3,624,333 3,818,181 4,802,958 4,772,273 4,866,979 5,095,488 1,281,342 1,368,260 1,426,157 1,483,415 1,937,904 2,081,589 2,115,177 2,134,421 3,517,797 3,746,110 3,867,861 3,954,853 2,227,084 2,510,059 2,753,717 2,829,473 13,555,074 14,418,952 15,418,791 15,994,741 1,121,828 1,180,193 1,226,783 1,279,596 472,081 444,895 456,279 472,860 5,264,501 5,692,058 5,879,936 5,915,548 20,039,591 21,468,196 21,840,038 22,448,691 $ 60,744,450 $ 64,209,286 $ 66,433,710 $ 68,641,656 7.3% 7.3% NA NA
2014 2015 2016 2017 $ 124,853 $ 1,145,583 NA NA 54,694 125,936 NA NA (29,224) 2,769 NA NA (10,847) (3,278) NA NA $ 139,476 $ 1,271,010 NA NA 7.4% 7.4% 7.4% 7.4%
2014 2015 2016 2017 $ 255,171 $ 267,381 $ 273,136 $ 291,576 643,806 691,065 712,309 706,415 151 115 221 (21) 1,392 2,916 2,312 1,698 1,678 1,592 1,696 1,495 27,389 15,537 19,818 33,496 $ 929,587 $ 978,606 $ 1,009,492 $ 1,034,659 $ 0.244 $ 0.247 $ 0.314 $ 0.311 5Personal income data for calendar years 2008-2017 are estimates. The U.S. Bureau of Economic Analysis revised personal income amounts for all calendar years shown to reflect revisions to the national income and product accounts and to incorporate newly available state-level source data. 6Other personal income includes dividends, interest, rental income, residence adjustment, government transfers to individuals, and deductions for social insurance. 7The large increase in corporate income in 2015 is primarily due to more corporate entities reporting positive taxable income rather than losses as a result of an improving economy. Corporate income data is currently not available for calendar years 2016 and 2017. 8The natural gas distributors reported no vehicle fuel sales for fiscal years (FY) 2007-2011. FY14 through FY16 saw a shift towards using/producing cleaner fuel types.
State of Idaho 169 Comprehensive Annual Financial Report State of Idaho Schedule 6 - Revenue Rates Fiscal/Calendar Years 2008-2017 Personal Income Tax Rates1 Calendar Year 2008 2009 2010 2011 2012 2013
Tax Rate 1.6% 1.6% 1.6% 1.6% 1.6% 1.6% Income Levels (S, MFS)2 $0-1,271 $0-1,320 $0-1,315 $0-1,337 $0-1,379 $0-1,408 Income Levels (MFJ, HoH, QW)2 $0-2,544 $0-2,642 $0-2,632 $0-2,675 $0-2,759 $0-2,817 Tax Rate 3.6% 3.6% 3.6% 3.6% 3.6% 3.6% Income Levels (S, MFS) $1,272-2,543 $1,321-2,641 $1,316-2,631 $1,338-2,675 $1,380-2,759 $1,409-2,817 Income Levels (MFJ, HoH, QW) $2,545-5,088 $2,643-5,284 $2,633-5,264 $2,676-5,351 $2,760-5,519 $2,818-5,635 Tax Rate 4.1% 4.1% 4.1% 4.1% 4.1% 4.1% Income Levels (S, MFS) $2,544-3,815 $2,642-3,962 $2,632-3,947 $2,676-4,013 $2,760-4,139 $2,818-4,226 Income Levels (MFJ, HoH, QW) $5,089-7,632 $5,285-7,926 $5,265-7,896 $5,352-8,027 $5,520-8,279 $5,636-8,453 Tax Rate 5.1% 5.1% 5.1% 5.1% 5.1% 5.1% Income Levels (S, MFS) $3,816-5,087 $3,963-5,283 $3,948-5,263 $4,014-5,351 $4,140-5,519 $4,227-5,635 Income Levels (MFJ, HoH, QW) $7,633-10,176 $7,927-10,568 $7,897-10,528 $8,028-10,703 $8,280-11,039 $8,454-11,271 Tax Rate 6.1% 6.1% 6.1% 6.1% 6.1% 6.1% Income Levels (S, MFS) $5,088-6,359 $5,284-6,603 $5,264-6,579 $5,352-6,689 $5,520-6,899 $5,636-7,044 Income Levels (MFJ, HoH, QW) $10,177-12,720 $10,569-13,208 $10,529-13,160 $10,704-13,379 $11,040-13,799 $11,272-14,089 Tax Rate 7.1% 7.1% 7.1% 7.1% 7.1% 7.1% Income Levels (S, MFS) $6,360-9,539 $6,604-9,906 $6,580-9,869 $6,690-10,034 $6,900-10,349 $7,045-10,567 Income Levels (MFJ, HoH, QW) $12,721-19,080 $13,209-19,814 $13,161-19,740 $13,380-20,069 $13,800-20,699 $14,090-21,135 Tax Rate 7.4% 7.4% 7.4% 7.4% 7.4% 7.4% Income Levels (S, MFS) $9,540-25,440 $9,907-26,417 $9,870-26,319 $10,035-26,759 $10,350+ $10,568+ Income Levels (MFJ, HoH, QW) $19,081-50,882 $19,815-52,836 $19,741-52,640 $20,070-53,519 $20,700+ $21,136+ Tax Rate3 7.8% 7.8% 7.8% 7.8% Income Levels (S, MFS) $25,441 + $26,418 + $26,320+ $26,760+ Income Levels (MFJ, HoH, QW) $50,883 + $52,837 + $52,641+ $53,520+
Total Direct Rate4 7.6% 7.6% 7.6% 7.6% 7.3% 7.3%
Vehicle Fuel Tax Rates per Gallon Fiscal Year 2008 2009 2010 2011 2012 2013 Diesel $0.250 $0.250 $0.250 $0.250 $0.250 $0.250 Gasoline 0.250 0.250 0.250 0.250 0.250 0.250 Propane 0.181 0.181 0.181 0.181 0.181 0.181 Natural Gas 0.197 0.197 0.197 0.197 0.197 0.197 Aviation 0.055 0.070 0.070 0.070 0.070 0.070 Jet 0.045 0.060 0.060 0.060 0.060 0.060
Total Direct Rate (per gallon of fuel ) $0.242 $0.243 $0.245 $0.245 $0.244 $0.244 Source: Idaho State Tax Commission. Note: The Idaho State Legislature can raise the income and vehicle fuel tax rates by legislation, no vote of the populace is required per Idaho Constitution Art. VII Section 16, and Idaho Code Sections 63-3024 and 63-2402. 1Idaho's personal income tax brackets are adjusted each year for inflation. 2Income categories are as follows: S = Single, MFS = Married Filing Separately, MFJ = Married Filing Jointly, HoH = Head of Household, QW = Qualifying Widower. 3Fiscal year 2012 legislative action reduced the top personal income tax rate from 7.8% to 7.4%. 4Personal Income data is currently not available for calendar years 2016 and 2017.
State of Idaho 170 Comprehensive Annual Financial Report 2014 2015 2016 2017
1.6% 1.6% 1.6% 1.6% $0-1,428 $0-1,451 $0-1,453 $0-1,471 $0-2,857 $0-2,903 $0-2,907 $0-2,943 3.6% 3.6% 3.6% 3.6% $1,429-2,857 $1,452-2,903 $1,454-2,907 $1,472-2,944 $2,858-5,715 $2,904-5,807 $2,908-5,815 $2,944-5,889 4.1% 4.1% 4.1% 4.1% $2,858-4,286 $2,904-4,355 $2,908-4,361 $2,945-4,416 $5,716-8,573 $5,808-8,711 $5,816-8,723 $5,890-8,833 5.1% 5.1% 5.1% 5.1% $4,287-5,715 $4,356-5,807 $4,362-5,815 $4,417-5,889 $8,574-11,431 $8,712-11,615 $8,724-11,631 $8,834-11,779 6.1% 6.1% 6.1% 6.1% $5,716-7,144 $5,808-7,259 $5,816-7,269 $5,890-7,361 $11,432-14,289 $11,616-14,519 $11,632-14,539 $11,780-14,723 7.1% 7.1% 7.1% 7.1% $7,145-10,717 $7,260-10,889 $7,270-10,904 $7,362-11,042 $14,290-21,435 $14,520-21,779 $14,540-21,809 $14,724-22,085 7.4% 7.4% 7.4% 7.4% $10,718+ $10,890+ $10,905+ $11,043+ $21,436+ $21,780+ $21,810+ $22,086+
7.3% 7.3% NA NA
2014 2015 2016 2017 $0.250 $0.250 $0.320 $0.320 0.250 0.250 0.320 0.320 0.181 0.181 0.232 0.232 0.197 0.197 0.349 0.349 0.070 0.070 0.070 0.070 0.060 0.060 0.060 0.060
$0.244 $0.247 $0.314 $0.311
State of Idaho 171 Comprehensive Annual Financial Report State of Idaho Schedule 7 - Revenue Payers by Industry/Category Historical Comparison and Most Current Fiscal/Calendar Year (dollars in thousands) Sales Tax1,4 As of June 30, 2008 As June 30, 2017 Number of Percent Tax Percent Number of Percent Tax Percent Filers of Total Liability of Total Filers of Total Liability of Total Farm Earnings5 413 0.7 $ 644 0 Agricultural/Forestry, Fishing, and Other 1,051 1.7 7,090 0.5 1,254 1.8 $ 4,911 0.3 Mining 163 0.3 4,096 0.3 162 0.2 3,157 0.2 Construction 4,442 7.2 32,137 2.4 3,563 5.1 32,430 2.0 Manufacturing 4,970 8.1 58,814 4.5 6,531 9.4 65,391 4.0 Transportation & Public Utilities 1,234 2.0 22,387 1.7 547 0.8 13,267 0.8 Wholesale trade 3,190 5.2 110,830 8.4 4,460 6.4 183,714 11.1 Retail trade 24,969 40.6 890,760 67.7 17,273 24.7 886,047 54.1 Information 1,516 2.2 32,772 2.0 Finance, Insurance, and Real Estate 787 1.3 9,081 0.7 2,327 3.3 40,687 2.5 Services 19,581 31.8 140,661 10.7 22,846 32.7 313,005 19.1 State and Local Government 683 1.1 40,868 3.1 378 0.5 57,197 3.5 Unclassified 8,983 12.9 5,881 0.4 Unpermitted6 10 0 124 0 Total 61,483 100.0 $ 1,317,368 100.0 69,850 100.0 $ 1,638,583 100.0
Personal Income Tax As of December 31, 2006 As of December 31, 2015 Number of Percent Tax Percent Number of Percent Tax Percent Income Level Filers of Total Liability of Total Filers of Total Liability of Total Under $50,000 558,407 85.4 $ 434,181 29.3 646,802 82.6 $ 426,537 25.7 $50,000 - $99,999 66,908 10.2 351,160 23.7 90,710 11.6 425,587 25.5 $100,000 - $249,999 21,448 3.3 254,155 17.1 36,467 4.7 371,903 22.3 $250,000 - $999,999 6,173 0.9 218,960 14.8 8,000 1.0 248,784 14.9 $1,000,000 and higher 974 0.2 224,310 15.1 1,019 0.1 193,441 11.6 Total 653,910 100.0 $ 1,482,766 100.0 782,998 100.0 $ 1,666,252 100.0
Corporate Income Tax As December 31, 2006 As December 31, 2015 Number of Percent Tax Percent Number of Percent Tax Percent Filers of Total Liability2 of Total Filers of Total Liability of Total Corporations 10,380 14.9 $ 43,223 70.1 15,492 16.5 $ 169,539 86.9 Sub-S Corporations 26,549 38.1 8,161 13.2 33,363 35.5 10,622 5.4 Partnerships 23,774 34.1 3,156 5.1 34,128 36.3 5,032 2.6 Fiduciary 8,981 12.9 7,136 11.6 11,036 11.7 10,009 5.1 Total 69,684 100.0 $ 61,676 100.0 94,019 100.0 $ 195,202 100.0
Vehicle Fuel Tax As of June 30, 2008 As of June 30, 2017 Number of Percent Tax Percent Number of Percent Tax Percent Filers3 of Total Liability of Total Filers3 of Total Liability of Total Diesel 112 42.9 $ 70,637 30.5 97 41.3 $ 93,327 29.0 Gasoline 100 38.3 159,031 68.7 95 40.4 226,193 70.2 Propane 25 9.6 42 0 13 5.5 (5) 0 Natural Gas 1 0.4 5 0 6 2.6 548 0.2 Aviation 7 2.7 135 0.1 7 3.0 105 0 Jet 16 6.1 1,630 0.7 17 7.2 2,010 0.6 Total 261 100.0 $ 231,480 100.0 235 100.0 $ 322,178 100.0 Source: Idaho State Tax Commission. Note: Due to confidentiality issues, the names of the ten largest revenue payers are not available. The categories presented are intended to provide alternative information regarding the sources of the State's revenue. The most current period for personal and corporate income tax information is calendar year 2015. 1In 2017, the Idaho State Tax Commission provided the sales tax liability data for July 1, 2016 to June 30, 2017. 2The corporate tax liability amounts for tax years 2006 through 2010 are revised due to updated data provided by the Idaho State Tax Commission. 3The total number of filers for vehicle fuel tax may contain the same filers counted more than once as some filers distribute more than one type of fuel. 4In 2016, the Tax Commission changed from using U.S. Standard Industrial Classification System (SIC) codes to using North American Industry Classification System (NAICS) codes. The change provides industry groupings that are more meaningful and useful for economic analysis. Some industry categories shown have significant variances due to the change in classification codes. 5Under the NAICS, commercial farming is combined with agriculture/forestry, fishing, and other. 6Taxable sales by individuals and businesses without a sales and use tax permit.
State of Idaho 172 Comprehensive Annual Financial Report `
State of Idaho 173 Comprehensive Annual Financial Report State of Idaho Schedule 8 - Outstanding Debt Ratios Fiscal Years 2008-2017 (dollars in thousands, except per capita amount) 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 (as restated) (as restated) (as restated) (as restated) (as restated) (as restated) Governmental Activities Revenue Bonds $ 306,159 $ 281,322 $ 257,088 $ 233,246 $ 207,106 $ 197,624 $ 170,640 $ 150,379 $ 146,516 $ 136,844 Capital Leases1 11,997 11,475 33,229 32,761 28,967 27,394 25,862 24,319 17,462 16,425 Notes Payable2 98,186 220,163 375,344 480,064 524,813 554,892 595,362 621,767 595,116 564,331 Total Governmental Activities $ 416,342 $ 512,960 $ 665,661 $ 746,071 $ 760,886 $ 779,910 $ 791,864 $ 796,465 $ 759,094 $ 717,600 Business-Type Activities Revenue Bonds3 $ 443,016 $ 449,410 $ 473,667 $ 457,631 $ 457,113 $ 464,334 $ 445,651 $ 477,546 $ 462,572 $ 474,094 Capital Leases4 4,056 3,279 2,845 2,353 2,316 1,663 1,158 780 4,995 4,148 Notes Payable5 20,155 50,195 216,183 214,144 204,745 156,449 105,919 55,117 2,157 73 Total Business- Type Activities $ 467,227 $ 502,884 $ 692,695 $ 674,128 $ 664,174 $ 622,446 $ 552,728 $ 533,443 $ 469,724 $ 478,315 Total Primary Government $ 883,569 $ 1,015,844 $ 1,358,356 $ 1,420,199 $ 1,425,060 $ 1,402,356 $ 1,344,592 $ 1,329,908 $ 1,228,818 $ 1,195,915 Debt as a Percentage of Personal Income6 1.8% 2.1% 2.7% 2.7% 2.6% 2.4% 2.2% 2.1% 1.8% 1.7%
Amount of Debt Per Capita6 $ 577.2 $ 655.2 $ 863.9 $ 897.0 $ 893.1 $ 869.0 $ 822.4 $ 801.6 $ 730.1 $ 700.3
Note: The Idaho Constitution Article VIII Section 1 amended in 1998 specifies that the Legislature shall not create any debts or liabilities, except in extreme emergencies, unless authorized by law and then approved by the people at a general election. This does not apply to liabilities incurred for ordinary operating expenses, nor debts or liabilities that are repaid by the end of the fiscal year. The debts or liabilities of independent public bodies corporate and politic created by law and which have no power to levy taxes or obligate the General Fund of the State are not debts or liabilities of the State of Idaho. Details regarding the State's debt can be found in Note 13 to the financial statements.
1 In FY2010 the increase in capital leases is mainly attributable to new leases for land and buildings at the Department of Correction and the Department of Fish and Game. 2 From FY2008-FY2015 the Idaho Transportation Department issued notes payable to the Idaho Housing and Finance Association for road and infrastructure improvements. 3 For FY2008-FY2010 the colleges and universities issued revenue bonds for various projects. 4 In FY2016 the increase in capital leases is primarily due to Boise State University entering into two new capital lease agreements with the Boise State University Foundation. 5 In FY2009 and FY2010 the increases in notes payable are mainly attributable to unemployment compensation loan funds received from the federal government. Changes in notes payable from FY2012-FY2017 resulted from repayment of loans from the Idaho Housing and Financing Association. 6 These ratios are calculated using personal income and population for the current calendar year. See Schedule 11 for personal income and population data.
State of Idaho 174 Comprehensive Annual Financial Report State of Idaho Schedule 9 - Other Long-Term Liabilities Fiscal Years 2008-2017 (dollars in thousands) 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 (as restated) (as restated) (as restated) (as restated) (as restated) (as restated) (as restated) (as restated) (as restated) Governmental Activities Compensated Absences $ 56,599 $ 54,893 $ 51,996 $ 61,095 $ 62,775 $ 56,470 $ 49,466 $ 49,874 $ 54,058 $ 55,172 Policy Claim Liabilities 20,164 19,753 16,956 13,869 15,450 17,963 14,305 11,304 10,804 11,138 Claims and Judgments1, 2 141,777 113,115 79,970 180,773 178,173 96,324 69,495 170,841 169,115 72,812 Net Pension Obligation3, 6 2,375 2,711 11,140 12,508 13,596 13,989 14,271 Net Pension Liability4 176,577 306,439 452,475 Net OPEB Obligation 20,018 20,373 22,169 23,851 24,720 24,520 24,491 25,458 25,917 27,966
Other Long-Term Liabilities 6,114 5,468 5,633 3,756 Total Governmental Activities $ 240,933 $ 210,845 $ 182,231 $ 292,096 $ 294,714 $ 209,266 $ 178,142 $ 439,522 $ 571,966 $ 623,319 Business-Type Activities Compensated Absences $ 20,067 $ 20,814 $ 20,882 $ 21,041 $ 22,648 $ 22,239 $ 20,844 $ 21,640 $ 21,373 $ 22,670 Claims and Judgments2 445 528 1 Net Pension Liability4 31,898 56,602 85,399 Net OPEB Obligation 7,858 9,233 11,267 13,707 15,513 17,143 18,847 20,982 22,973 25,965
Voluntary Termination Benefits5 894
Other Long-Term Liabilities 124 416 633 968 1309 1,139 928 785 Total Business-Type Activities $ 28,370 $ 30,575 $ 33,168 $ 35,164 $ 38,794 $ 40,350 $ 41,000 $ 75,659 $ 101,876 $ 134,819
Total Primary Government $ 269,303 $ 241,420 $ 215,399 $ 327,260 $ 333,508 $ 249,616 $ 219,142 $ 515,181 $ 673,842 $ 758,138
Note: Details regarding the liabilities listed above can be found in Note 13 to the financial statements.
1 In fiscal year (FY) 2008 the Department of Health and Welfare changed its method of reporting Medicaid claims to include an estimate for incurred but not reported claims from providers. The changes between FY2008 and FY2011 are due to fluctuations in payment cycles caused by budget shortfalls and migrating to a new payment system. 2 Claims and judgments include arbitrage liabilities for FY2008-FY2015. Decrease to claims and judgments resulted from a decrease in Medicaid claims, and between FY2016 and FY2017 there was a timing difference of Medicaid payments. In FY2015 there was an increase due to a change in calculation method by the Department of Health and Welfare. 3 In FY2010 the increase in the net pension obligation is mainly attributable to a restatement of the Idaho Judges' Retirement Fund due to a new actuarial valuation. 4 Net pension liability was not required to be reported prior to FY2015. 5 In FY2010 the University of Idaho established a voluntary Exit Incentive Program for eligible employees to leave University employment with an economic incentive. 6 Due to the implementation of GASB Statement No. 68 in FY2015, the net pension obligation was removed and a net pension liability recorded.
State of Idaho 175 Comprehensive Annual Financial Report State of Idaho Schedule 10 - Pledged Revenue Coverage Fiscal Years 2008-2017 (dollars in thousands) 2008 2009 2010 2011 2012 2013
Governmental Activities Notes Payable - Idaho Transportation Department1 Revenue: Federal Highway Grants2 $ 300,680 $ 234,667 $ 355,288 $ 399,049 $ 334,747 $ 292,619 State Funds 3,349 2,439 3,255 3,509 3,829 4,033 Available Revenue $ 304,029 $ 237,106 $ 358,543 $ 402,558 $ 338,576 $ 296,652 Debt Service: Principal $ 20,240 $ 30,589 $ 8,176 $ 20,936 $ 19,957 $ 21,975 Interest $ 8,245 $ 11,787 $ 19,074 $ 25,862 $ 26,836 $ 28,188 Coverage 10.7 5.6 13.2 8.6 7.2 5.9 Business-Type Activities Revenue Bonds - Colleges and Universities Revenue: Student Fees Pledged $ 179,630 $ 197,711 $ 212,768 $ 236,690 $ 257,850 $ 268,014 Sale of Goods and Services Pledged 85,348 84,327 91,258 84,978 90,136 93,356 Other Income Pledged3 31,174 25,337 22,641 36,803 35,990 35,828 Less: Operating Expenses (58,259) (59,487) (61,226) (61,342) (65,802) (69,901) Net Available Revenue $ 237,893 $ 247,888 $ 265,441 $ 297,129 $ 318,174 $ 327,297 Debt Service: Principal $ 15,610 $ 9,755 $ 13,190 $ 15,085 $ 14,090 $ 16,585 Interest $ 20,793 $ 19,473 $ 20,339 $ 20,243 $ 21,524 $ 19,440 Coverage 6.5 8.5 7.9 8.4 8.9 9.1 Revenue Bonds - Idaho Water Resources Board6,7 Revenue: Sale of Goods and Services $ 816 $ 886 $ 983 $ 990 $ 1,059 $ 993 Less: Operating Expenses (117) (149) (117) (124) (136) (161) Net Available Revenue $ 699 $ 737 $ 866 $ 866 $ 923 $ 832 Debt Service: Principal $ 305 $ 325 $ 340 $ 360 $ 380 $ 400 Interest $ 294 $ 277 $ 259 $ 240 $ 220 $ 198 Coverage 1.2 1.2 1.4 1.4 1.5 1.4 Notes Payable - Colleges and Universities4 Revenue: Student Fees Pledged $ 148 $ 146 $ 142 $ 169 $ 1,001 $ 1,062 Housing Fees Pledged NA 417 445 430 429 441 Other Income Pledged 76 110 101 Less: Operating Expenses NA (297) (154) (107) (410) (402) Net Available Revenue $ 148 $ 266 $ 433 $ 568 $ 1,130 $ 1,202 Debt Service: Principal5 $ 106 $ 127 $ 114 $ 366 $ 334 $ 786 Interest $ 33 $ 63 $ 25 $ 176 $ 138 $ 171 Coverage 1.1 1.4 3.1 1.0 2.4 1.3
Note: Details regarding the State's outstanding bonds can be found in Note 13 to the financial statements. Operating expenses do not include interest or depreciation expense. Coverage equals net available revenue divided by debt service. 1 For fiscal years (FY) 2008-2015 the Idaho Transportation Department issued notes payable to the Idaho Housing and Finance Association to finance road and infrastructure improvements. 2 In FY2009 federal highway grants received by the Idaho Transportation Department decreased mainly due to the delay in awarding construction contracts, the delay of related federal awards reimbursements, and decreased construction costs. In FY2010 grants increased because of the delayed reimbursement of FY2009 federal construction awards. In FY2012 and FY2013 grants decreased due to the near-term completion of the American Recovery and Reinvestment Act stimulus program. 3 In FY2008 other pledged income increased mainly due to revenues pledged as collateral for all outstanding bond issuances by the University of Idaho. In FY2015 other pledged income increased due to an increase in student tuition and fees by the University of Idaho. 4 In FY2009 Lewis-Clark (LCSC) issued notes payable to purchase a residence hall; housing fees associated with the residence hall account for the increase in available revenue. In FY2012 and FY2013 LCSC issued notes payable to refinance Student Fee Refunding Revenue Bonds. The LCSC issued notes payable were paid in full in FY2017. 5 In FY2013-2014 the increase resulted from LCSC's principal only payments. 6 The Series 2006 Refunding Bonds were paid in full in FY2016. 7 The Idaho Water Resources Board revenue bonds were paid in full in FY2017.
State of Idaho 176 Comprehensive Annual Financial Report 2014 2015 2016 2017
$ 294,620 $ 324,598 $ 297,093 $ 294,499 4,329 4,598 4,540 $ 298,949 $ 329,196 $ 301,633 $ 294,499
$ 24,203 $ 27,180 $ 29,186 $ 30,365 $ 28,417 $ 30,740 $ 29,207 $ 27,810 5.7 5.7 5.2 5.1
$ 276,964 $ 295,818 $ 301,659 $ 305,823 89,031 94,327 88,135 88,847 38,158 45,505 45,051 49,951 (69,339) (66,212) (68,803) (65,110) $ 334,814 $ 369,438 $ 366,042 $ 379,511
$ 16,714 $ 17,704 $ 20,682 $ 18,002 $ 20,018 $ 18,836 $ 16,450 $ 19,852 9.1 10.1 9.9 10.0
$ 983 $ 1,261 $ 897 (123) (214) (292) $ 860 $ 1,047 $ 605 $ 0
$ 425 $ 450 $ 2,065 $ 175 $ 151 $ 125 1.4 1.7 0.3
$ 1,108 $ 1,085 $ 1,031 469 468 489 81 88 87 (442) (428) (480) $ 1,216 $ 1,213 $ 1,127 $ 0
$ 1,366 $ 900 $ 1,284 $ 118 $ 84 $ 60 0.8 1.2 0.8
State of Idaho 177 Comprehensive Annual Financial Report State of Idaho Schedule 11 - Demographic and Economic Indicators Calendar Years 2008-2017 2008 2009 2010 2011 2012 2013 Population Idaho (in thousands) 1,534 1,554 1,571 1,584 1,596 1,612 Change 1.9% 1.3% 1.1% 0.8% 0.7% 1.0% National (in thousands) 304,948 307,580 310,100 312,402 314,656 316,850 Change 0.9% 0.9% 0.8% 0.7% 0.7% 0.7% Total Personal Income 1 Idaho (in billions) $ 51 $ 49 $ 50 $ 53 $ 55 $ 58 Change 3.4% -3.6% 2.0% 5.8% 5.0% 4.0% National (in billions) $ 12,502 $ 12,095 $ 12,477 $ 13,255 $ 13,915 $ 14,074 Change 4.2% -3.3% 3.2% 6.2% 5.0% 1.1% Per Capita Personal Income Idaho $ 33,033 $ 31,437 $ 31,725 $ 33,295 $ 34,694 $ 35,719 Change 1.4% -4.8% 0.9% 4.9% 4.2% 3.0% National $ 40,998 $ 39,323 $ 40,235 $ 42,427 $ 44,222 $ 44,417 Change 3.3% -4.1% 2.3% 5.4% 4.2% 0.4% Median Age - Idaho 2 34.4 34.2 34.7 35.0 35.2 35.7 Educational Attainment 3 8th Grade or Less 5.0% 4.5% 4.2% 4.5% 4.1% 4.3% Some High School, No Diploma 7.1% 7.1% 7.5% 6.9% 6.1% 6.3% High School Diploma 27.7% 28.8% 28.6% 27.5% 27.7% 27.4% Some College, No Degree 27.6% 27.3% 27.0% 26.9% 27.6% 26.7% Associate, Bachelor or Graduate Degree 32.5% 32.2% 32.7% 34.2% 34.5% 35.3% Resident Civilian Labor Force and Employment in Idaho Civilian Labor Force 755,153 757,131 761,056 765,178 769,256 771,892 Employed 716,653 690,722 692,826 701,466 713,704 724,437 Unemployed 38,500 66,409 68,230 63,712 55,552 47,455 Unemployment Rate 5.1% 8.8% 9.0% 8.3% 7.2% 6.1% Nonfarm Wage and Salary Workers Employed in Idaho Goods Producing Industries Mining 2,751 2,139 2,294 2,623 2,779 2,629 Logging and Wood Products 7,975 5,867 5,732 6,120 6,408 7,034 Computer and Electronics 14,305 11,098 10,574 11,191 11,625 11,267 Construction 45,006 34,390 31,233 30,340 31,421 33,629 Manufacturing-Durable Goods 4 17,499 15,207 14,805 15,281 16,079 17,461 Manufacturing-Nondurable Goods 24,583 23,634 23,261 23,364 24,018 25,255 Total Goods Producing Industries 112,119 92,335 87,899 88,919 92,330 97,275 Non-Goods Producing Industries Trade 109,087 101,079 99,639 100,622 103,621 106,151 Service 308,419 297,037 297,434 303,908 309,025 317,181 State and Local Government 105,986 105,991 104,875 104,514 104,600 105,008 Federal Government 13,200 13,496 13,691 12,654 12,640 12,412 Total Non-Goods Producing Industries 536,692 517,603 515,639 521,698 529,886 540,752 Total Nonfarm Wage and Salary Employment 648,811 609,938 603,538 610,617 622,216 638,027
Sources: Idaho Division of Financial Management, Idaho Department of Labor, Idaho State Board of Education, U.S. Bureau of Economic Analysis, and U.S. Census Bureau.
Note: Amounts for calendar years 2014-2016 are estimates. Prior year amounts may change due to revisions by the U.S. Bureau of Economic Analysis and the U.S. Census Bureau. 1 Total personal income is comprised of earned income, dividends, interest, rents, and government transfer payments. 2 Median age data for Idaho is not currently available for calendar year 2016. 3 Educational attainment information is not currently available for calendar year 2016. 4 "Manufacturing-Durable Goods" amounts are net of "Logging and Wood Products" and "Computer and Electronics" amounts, which are presented separately in this schedule.
State of Idaho 178 Comprehensive Annual Financial Report 2014 2015 2016 2017
1,634 1,653 1,683 1,708 1.3% 1.2% 1.8% 1.5% 319,179 321,450 323,668 325,916 0.7% 0.7% 0.7% 0.7%
$ 61 $ 64 $ 66 $ 69 5.5% 5.7% 3.5% 4.0% $ 14,818 $ 15,553 $ 15,929 $ 16,425 5.3% 5.0% 2.4% 3.1% $ 37,184 $ 38,847 $ 39,469 $ 40,472 4.1% 4.5% 1.6% 2.5% $ 46,425 $ 48,383 $ 49,213 $ 50,395 4.5% 4.2% 1.7% 2.4% 35.9 35.8 36.1 NA
3.9% 3.7% 3.2% NA 6.0% 6.3% 6.4% NA 28.2% 27.5% 27.9% NA 27.6% 27.0% 25.3% NA 34.4% 35.6% 37.2% NA
780,872 797,049 814,571 821,934 742,989 763,402 783,434 794,920 37,883 33,647 31,137 27,014 4.9% 4.2% 3.8% 3.3%
2,519 2,451 2,466 2,275 7,049 7,331 7,694 7,809 11,425 11,900 12,132 12,073 35,877 38,259 41,737 44,665 17,584 18,258 18,813 19,581 25,528 26,118 27,108 28,226 99,982 104,317 109,950 114,629
108,410 111,718 114,099 115,928 327,896 337,236 348,728 362,469 105,844 106,639 108,224 109,562 12,337 12,583 12,839 12,949 554,487 568,176 583,890 600,908 654,469 672,493 693,840 715,537
State of Idaho 179 Comprehensive Annual Financial Report State of Idaho Schedule 12 - Principal Employers Current Year and Nine Years Ago As of June 30, 2008 As of June 30, 2017 Percent of Percent of Number of Total State Number of Total State Major Idaho Employers Employees Rank Employment Employees Rank Employment State of Idaho 1 29,000-29,500 1 4 20,000-20,500 1 2.5 Federal Government 12,500-13,000 2 1.7 13,000-13,500 2 1.7 St Luke's Health System 5,000-5,500 5 0.7 13,000-13,500 3 1.6 Wal-Mart Associates, Inc. 7,000-7,500 4 1.0 7,500-8,000 4 1.0 Micron Technology, Inc. 9,500-10,000 3 1.3 6,000-6,500 5 0.8 Brigham Young University -Idaho 3,000-3,500 10 0.4 5,000-5,500 6 0.7 St Alphonsus Regional Medical Center 2,500-3,000 13 0.3 4,500-5,000 7 0.6 West Ada School District #2 4,500-5,000 6 0.6 4,000-4,500 8 0.5 Battelle Energy Alliance 3,500-4,000 9 0.5 4,000-4,500 9 0.5 Boise Independent School District #1 3,500-4,000 8 0.5 3,500-4,000 10 0.5 Albertsons 4,500-5,000 7 0.6 3,500-4,000 11 0.5 Total 87,250 11.7 83,000 10.8
Source: Idaho Department of Labor, except state employee data, which comes from the Office of the Idaho State Controller.
Note: All figures are based on a calendar year average. Total number of employees is based on the sum of the mid-points in the ranges given. 1 Number of state employees includes only full-time personnel.
Schedule 13 - Education Enrollment Public School Enrollment Grades K-12 Academic Years 2007/2008-2016/2017 2007/08 2008/09 2009/10 2010/11 2011/12 2012/13 2013/14 2014/15 2015/16 2016/17 Elementary 150,094 151,902 154,368 153,298 154,691 156,742 160,412 161,071 162,131 163,519 Secondary 122,025 123,252 124,236 125,237 126,149 127,576 128,651 129,938 132,340 135,268 Total All Grades 272,119 275,154 278,604 278,535 280,840 284,318 289,063 291,009 294,471 298,787
Source: Idaho Department of Education
Public Higher Education Enrollment Student Headcount1 (Calendar Years 2008-2017) 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Boise State University 19,670 18,936 19,993 19,664 22,638 21,981 22,239 22,086 23,854 24,121 Idaho State University 12,644 13,493 12,595 12,587 13,860 13,351 13,455 13,032 12,928 12,505 University of Idaho 11,791 11,957 12,302 12,312 12,493 11,884 11,534 11,372 11,780 12,072 Lewis-Clark State College 3,334 3,521 3,822 3,761 3,830 3,585 3,616 3,635 3,909 3,733 Eastern Idaho Technical College 768 870 862 829 709 725 686 687 676 809 Total Colleges and Universities 48,207 48,777 49,574 49,153 53,530 51,526 51,530 50,812 53,147 53,240
Source: Idaho State Board of Education Note: Total headcount includes academic full-time, academic part-time, and vocational students. 1Figures are based on fall enrollment numbers for each year
State of Idaho 180 Comprehensive Annual Financial Report State of Idaho Schedule 14 - State Employees by Function Fiscal Years 2008-2017 Full-Time Employees 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 General Government Tax Commission 392 393 368 373 406 426 425 425 422 436 Department of Administration 138 142 139 141 137 136 137 136 128 132 All Other 1,144 1,161 1,133 1,098 1,058 1,091 1,127 1,139 1,132 1,171
Public Safety and Correction Department of Correction 1,560 1,586 1,543 1,529 1,517 1,550 1,544 1,879 1,928 1,897 Idaho State Police 469 485 465 452 458 479 480 488 490 518 Department of Juvenile Corrections 350 396 381 382 387 384 387 398 391 405 All Other 336 349 327 362 354 373 566 417 428 421
Health and Human Services Department of Health and Welfare 2,917 2,922 2,887 2,642 2,606 2,611 2,647 2,614 2,650 2,648
Education Colleges and Universities 6,063 6,124 6,242 6,093 6,436 6,548 6,721 6,842 6,984 7,396 All Other 456 468 469 473 361 371 376 362 384 401
Economic Development Idaho Transportation Department 1,726 1,758 1,772 1,742 1,714 1,683 1,642 1,581 1,516 1,479 Department of Labor1 440 436 506 532 514 547 547 539 497 477 Department of Agriculture 301 293 279 245 249 253 261 257 269 272 All Other 933 932 909 981 966 992 990 999 1,011 1,078
Natural Resources Department of Environmental Quality 356 365 340 328 331 332 328 322 329 337 Department of Fish and Game 502 513 504 535 545 534 534 533 530 528 Department of Lands 244 242 235 227 231 239 238 253 252 269 Department of Parks and Recreation 146 155 147 131 132 136 132 135 135 135 All Other 193 195 182 174 171 167 162 159 161 174 State Total 18,666 18,915 18,828 18,440 18,573 18,852 19,244 19,478 19,637 20,174
Part-Time and Temporary Employees1 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 General Government 405 334 385 362 388 342 349 323 440 420 Public Safety and Correction 223 192 159 174 202 178 203 206 162 173 Health and Human Services 620 400 286 256 229 257 243 253 255 263 Education 3,347 2,880 2,532 2,509 2,587 2,655 2,514 2,441 2,578 2,742 Economic Development 896 907 838 884 774 732 705 643 632 647 Natural Resources2 686 603 518 440 433 431 465 477 476 888 State Total 6,177 5,316 4,718 4,625 4,613 4,595 4,479 4,343 4,543 5,133
Source: Office of the Idaho State Controller.
1 Part-time and temporary employees are those working less than full-time, including board and commission members. 2 The increase in the hiring of part-time and temporary employees in fiscal year 2017 is primarily due to the Department of Lands receiving additional appropriation to add needed fire fighting positions in response to the 2015 fire season. Also, the Department of Fish and Game hired more seasonal workers during the peak visitation period to serve the more than five million annual visitors to the State Parks.
State of Idaho 181 Comprehensive Annual Financial Report State of Idaho Schedule 15 - Operating Indicators by Function Fiscal/Calendar Years 2008-2017 2008 2009 2010 2011 2012 2013 General Government Tax Commission Number of Returns Filed (in thousands) 2,292 2,220 2,226 2,260 2,316 2,350 Number of Returns Filed Electronically (in thousands) 436 457 492 543 568 587 Department of Administration Construction Projects Administered 529 443 431 399 345 293 Employees Covered by Benefit Plans 19,319 19,507 19,343 18,942 19,018 19,247 Public Safety and Correction Department of Correction 1 Incarcerated Offenders 7,338 7,283 7,504 7,578 8,097 8,221 Supervised Offenders 13,361 13,756 13,902 14,595 14,530 14,705 Idaho State Police Drug Related Arrests2 850 895 982 1,021 1,454 1,411 DUI Arrests2 1,654 1,977 2,441 2,003 1,845 1,659 All Other Arrests2 1,278 1,281 1,163 1,262 1,145 1,101 Department of Juvenile Corrections Number of Juveniles in the System 744 659 568 529 553 550 Rate of Recommitment to DJC Custody 11.7% 18.4% 17.0% 15.0% 12.0% 18.2% Health and Human Services Department of Health and Welfare 1 Medicaid Enrollees 184,465 191,989 209,126 227,991 238,165 247,151 Percent of Population 12.0% 12.4% 13.3% 14.4% 14.9% 15.3% Food Stamp Recipients 95,433 124,826 179,074 223,370 235,502 229,586 Percent of Population 6.2% 8.1% 11.4% 14.1% 14.8% 14.2% Education Colleges and Universities 1 Enrollment 48,207 48,777 49,574 49,153 53,530 51,526 Number of Certificates and Degrees Awarded 8,550 8,739 8,760 9,306 9,980 10,382 Economic Development Idaho Transportation Department Percent of Pavement Which is Deficient1 19% 20% 18% 16% 13% 14% Vehicles Weighed (in thousands) 2,700 2,400 2,400 2,400 2,314 2,281 Department of Labor Individuals Registered for Employment 6 222,606 284,205 334,896 331,449 301,338 277,111 Job Openings Received 77,012 46,967 47,956 69,323 57,189 80,283 Department of Agriculture Conduct Disease Tests on Animals3 303,184 367,698 362,905 676,604 100,454 110,944 Inspections of Dairy Farms 5,897 7,919 6,932 7,653 8,024 8,786 Natural Resources Department of Environmental Quality Air Quality Sites Monitored 31 42 41 43 39 40 Water Sites Monitored4 610 0 128 101 237 237 Department of Fish and Game Citations and Warnings Issued 5,411 5,435 4,799 4,053 4,175 3,480 Hatchery Fish Raised (in thousands)2 29,573 22,676 27,085 32,351 23,007 23,837 Hunting and Fishing Licenses Sold 2 536,681 571,179 548,949 523,698 573,714 566,460 Department of Lands 1 Forest Products Harvested (in million board feet) 225 190 212 273 287 290 Fires Responded to on IDL Land 247 352 183 249 187 322 Department of Parks and Recreation Park Visitation (in thousands) 1, 2, 5 4,203 4,460 4,389 4,783 4,638 4,777 Recreational Registrations (in thousands) 5 274 286 272 268 262 275 Sources: Idaho Division of Financial Management; Idaho State Tax Commission; Office of the Idaho State Controller; Idaho State Police; Idaho State Board of Education; and the Idaho Departments of Administration, Correction, Juvenile Corrections, Health and Welfare, Transportation, Labor, Agriculture, Environmental Quality, Fish and Game, Lands, and Parks and Recreation Note: Operating indicators for fiscal years (FY) 2016 and FY2017 are estimates unless otherwise noted below 1 Operating indicators for FY2016 are actual amounts, not estimates. 2 Operating indicators are reported on a calendar year basis. 3 In FY2011 and FY2012 the increase and decrease in disease testing on animals is attributed to brucellosis testing.
State of Idaho 182 Comprehensive Annual Financial Report 2014 2015 2016 2017
2,390 2,415 2,484 2,531 616 695 731 764
296 311 366 359 19,592 19,831 20,019 20,549
8,120 8,157 7,715 8,212 15,433 15,970 17,162 17,205
1,559 1,456 1,389 1,948 1,304 1,197 1,089 1,316 1,071 876 702 710
498 467 433 444 13.0% 14.0% 14.0% 15.0%
261,639 289,303 299,611 314,584 16.0% 17.5% 17.9% 18.4% 217,553 201,094 189,910 175,644 13.3% 12.1% 11.3% 10.3%
51,530 50,812 53,147 53,240 10,356 10,518 10,618 10,983
14% 14% 16% 15% 2,433 2,514 2,078 3,108
255,891 200,771 121,672 84,933 101,897 107,353 279,856 165,004
105,090 99,276 102,251 132,236 8,854 8,688 8,419 7,378
40 40 39 39 290 231 284 230
4,868 4,348 2,635 3,387 35,253 30,774 33,573 33,853 576,063 600,328 584,871 569,563
274 222 201 NA 351 321 168 NA
4,821 4,465 4,819 NA 270 277 288 NA 4In FY2009 the Department of Environmental Quality suspended surface water monitoring activities due to the FY2009 budget cuts. 5Park visitation is counted in visitor days. Recreational registrations include boats, snowmobiles, all-terrain vehicles, and Park N' Ski permits. 6In FY2016, the increase in job openings is due to an improving Idaho economy. A substantial decrease in unemployment has contributed to a decrease in the number of individuals registered for employment.
State of Idaho 183 Comprehensive Annual Financial Report State of Idaho Schedule 16 - Capital Assets by Function Fiscal Years 2008-2017 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 General Government Department of Administration Buildings (square footage in thousands)1 728 728 728 728 728 728 719 754 754 754 Public Safety and Correction Department of Correction Buildings 97 98 101 104 105 80 84 87 84 80 Vehicles 392 342 359 367 384 401 394 402 457 455 Idaho State Police Vehicles2 431 443 431 459 419 430 466 493 497 514 Machinery and Equipment 2 867 928 810 915 857 886 1,084 1,138 1,210 1,288 Department of Juvenile Corrections Buildings (square footage in thousands) 250 250 239 239 242 224 224 224 242 244 Vehicles 54 53 56 56 54 56 60 56 62 64 Health and Human Services Department of Health and Welfare Buildings (square footage in thousands)3 914 978 1,705 1,700 1,698 1,715 1,726 1,487 1,487 1,463 Vehicles 518 520 501 485 480 431 494 501 492 487 Education Colleges and Universities Buildings (square footage in thousands) 12,890 13,612 13,931 14,198 15,024 15,098 15,161 15,117 15,252 15,382 Economic Development Idaho Transportation Department Highway Lane Miles 4 11,930 11,944 11,989 11,998 12,222 12,222 12,236 12,269 12,271 12,274 Vehicles 5 801 837 848 823 841 823 766 748 680 705 Heavy Equipment 5 1,494 1,535 1,536 1,532 1,543 1,407 1,192 1,098 898 838 Department of Agriculture Scientific and Laboratory Equipment 6 165 176 165 153 160 152 156 100 106 112 Vehicles 201 195 196 177 195 203 223 206 210 237 Natural Resources Department of Environmental Quality Air Monitoring Instruments 124 166 167 171 196 185 185 156 148 158 Water Sampling/Quality Equipment 88 76 78 78 80 81 81 27 29 33 Department of Fish and Game Hatcheries 22 22 23 23 23 23 23 23 23 22 Vehicles 621 670 636 638 665 682 704 707 702 730 Boats 6 286 287 281 280 279 287 284 84 83 82 Wildlife Management Areas 33 33 32 32 32 32 32 32 32 31 Department of Lands Acres of Land (in thousands) 4 2,461 2,460 2,446 2,449 2,448 2,448 2,442 2,442 2,442 2,442 Vehicles 351 350 356 343 362 359 371 375 412 415 Department of Parks and Recreation State Parks 35 35 30 30 30 30 30 30 30 30 Acres of State Park Land (in thousands)7 61 61 60 60 60 60 60 60 60 60 Buildings 329 336 351 349 365 368 372 348 356 364 Vehicles 312 343 329 320 313 327 318 314 317 322
Sources: Office of the Idaho State Controller; Idaho Departments of Juvenile Corrections, Health and Welfare, Transportation, Environmental Quality, Fish and Game, Lands, and Parks and Recreation; and Idaho colleges and universities. Note: The Idaho State Tax Commission, the Department of Commerce, and the Department of Labor are not capital-asset intensive Note: In fiscal year (FY)2015 a change in methodology for calculating capital assets resulted in a variance from FY2014 1 In FY2015, a new 35,000 square foot parking garage was built in Boise to provide additional parking for state employees. 2 In FY2014-2017, Idaho State Police ordered more vehicles and related equipment than in prior years. 3 Beginning in FY2010, leased buildings are included. 4 Highway lane miles and acres of land for FY2017 are based on estimates. 5 Idaho Department of Transportation (ITD) vehicles and heavy equipment have been restated for FY2008-2013. During FY2014 ITD actively reduced the amount of heavy equipment. 6 For FY2015-2017, assets under $5,000 are not included in capital assets. 7 Includes land under water.
State of Idaho 184 Comprehensive Annual Financial Report
State of Idaho Schedule 17 - Assets, Liabilities, and Fund Balances General Fund Accounts June 30, 2017 (dollars in thousands)
State General Permanent Budget Income Account Building Stabilization Millennium Earnings ASSETS Cash and Cash Equivalents $ 2 Pooled Cash and Investments 124,396 $ 36,063 $ 333,360 $ 48,681 $ 117,068 Investments 16,495 133 Accounts Receivable, Net 489 21 12,500 Taxes Receivable, Net 341,794 3,186 359 Interfund Receivables 6,193 1,482 17 Inventories and Prepaid Items 2,737 51 107 585 Loans, Notes, and Pledges Receivable, Net Other Assets 1,495 82 1,372 320 489 Restricted Assets: Cash and Cash Equivalents 509 Investments 289,700 Total Assets $ 477,106 $ 57,380 $ 334,839 $ 351,710 $ 118,651 LIABILITIES AND FUND BALANCES Liabilities Accounts Payable $ 13,777 $ 2,106 $ 2,737 Payroll and Related Liabilities 11,037 $ 68 9 Interfund Payables 78 1,205 Due to Other Entities Unearned Revenue 129 9,307 Amounts Held in Trust for Others 1,571 Other Accrued Liabilities 373 2,157 11 $ 2 3 Total Liabilities 26,965 11,532 2,117 2 3,954 DEFERRED INFLOWS OF RESOURCES Deferred Inflows 132,222 68 12,582 2 Fund Balances Nonspendable: Inventories and Prepaid Items 2,737 51 107 585 Noncurrent Receivables Restricted 302,283 Committed 45,729 114,110 Assigned 7,547 1,387 111 Unassigned 307,635 331,228 36,732 Total Fund Balances 317,919 45,780 332,722 339,126 114,695 Total Liabilities, Deferred Inflows of Resources, and Fund Balances $ 477,106 $ 57,380 $ 334,839 $ 351,710 $ 118,651
State of Idaho 186 Comprehensive Annual Financial Report Income Tax Catastrophic Warrant Sales Tax Refunds Health Care Legislative Deficiency Miscellaneous Total
$ 1,451 $ 1,453 $ 51,484 $ 2,522 $ 10,788 $ 8,320 $ 58,651 187,140 978,473 20,407 37,035 13,804 1,472 28,286 21,127 48,800 531 415,797 97 7,789 7,422 355 11,257 4,862 4,862 1,084 4,842
254 1,434 2,197 1,314 291,014 $ 72,865 $ 51,322 $ 10,788 $ 8,320 $ 79,877 $ 220,147 $ 1,783,005
$ 84 $ 2,815 $ 4,990 $ 26,509 $ 89 220 954 12,377 60 1,343 $ 51,731 51,731 381 9,817 10,900 12,471 37 2,583 51,731 84 89 3,035 17,322 116,831
1,938 29,272 13,754 162 190,000
7,422 355 11,257 50 50 19,196 21,966 6,252 349,697 $ 10,788 162,077 332,704 8,231 55,882 42,460 115,618 (216) (8,531) 666,848 19,196 21,966 10,788 8,231 63,088 202,663 1,476,174
$ 72,865 $ 51,322 $ 10,788 $ 8,320 $ 79,877 $ 220,147 $ 1,783,005
State of Idaho 187 Comprehensive Annual Financial Report State of Idaho Schedule 18 - Revenues, Expenditures, and Changes in Fund Balances General Fund Accounts For the Fiscal Year Ended June 30, 2017 (dollars in thousands)
State General Permanent Budget Income Account Building Stabilization Millennium Earnings REVENUES Sales Tax $ 1,374,288 $ 5,000 Individual and Corporate Taxes 1,792,948 7,616 $ 392 Other Taxes 30,469 6,699 $ 45 4,280 Licenses, Permits, and Fees 12,952 1,055 Sale of Goods and Services 84 248 4,329 Grants and Contributions 53 $ 3 32 Investment Income 8,680 2,539 (759) 34,995 1,433 Tobacco Settlement 22,964 Other Income (220) 4 (600) (148) Total Revenues 3,219,254 22,106 (1,356) 58,004 11,373 EXPENDITURES Current: General Government 98,755 9,176 1,889 2,692 63 Public Safety and Correction 301,970 3,651 2,168 2,018 Health and Human Services 2,740 3,484 5,963 Education 143,613 526 1,625,626 Economic Development 25,517 1,844 872 Natural Resources 20,379 243 Capital Outlay 16,972 27,040 3,677 1,657 Intergovernmental Revenue Sharing 28,816 100 319 543 Debt Service: Principal Retirement 1,036 Interest and Other Charges 11,004 31 Total Expenditures 648,062 36,247 14,144 9,189 1,636,742 Revenues Over (Under) Expenditures 2,571,192 (14,141) (15,500) 48,815 (1,625,369) OTHER FINANCING SOURCES (USES) Sale of Capital Assets 2,530 (17) Transfers In 3,453,136 44,819 81,621 19,525 1,717,471 Transfers Out (5,978,827) (27,995) (19,840) (19,525) (103,617) Total Other Financing Sources (Uses) (2,523,161) 16,807 61,781 1,613,854 Net Change in Fund Balances 48,031 2,666 46,281 48,815 (11,515) Fund Balances - Beginning of Year, As Restated 269,888 43,114 286,441 290,311 126,210 Fund Balances - End of Year $ 317,919 $ 45,780 $ 332,722 $ 339,126 $ 114,695
State of Idaho 188 Comprehensive Annual Financial Report General Account Income Tax Catastrophic Warrant Transfer Sales Tax Refunds Health Care Legislative Deficiency Miscellaneous Eliminations Total
$ 244,655 $ 5,316 $ 2,036 $ 1,631,295 28,926 24,469 1,854,351 12,163 6,189 59,845 $ 78 $ 72 11,264 25,421 28 21,860 26,549 16,174 16,262 167 860 47,915 22,964 2,446 (5,432) 40,573 36,623 244,655 46,405 2,691 (5,332) 123,425 3,721,225
$ 10,641 8 16,620 139,844 6,479 316,286 12,403 106 24,696 48,101 1,817,866 199 19,731 48,163 26,655 8,359 55,636 26 50,535 99,907 235,960 389 1,794 267,921
1,036 11,035 235,960 389 12,403 10,667 26,862 151,725 2,782,390 8,695 46,016 (9,712) (10,667) (32,194) (28,300) 938,835
142 2,655 13,055 6,755 34,881 133,021 $ (5,251,605) 252,679 (46,746) (88,107) 5,251,605 (1,033,052) (46,746) 13,055 6,755 34,881 45,056 (777,718) 8,695 (730) 3,343 (3,912) 2,687 16,756 161,117 10,501 22,696 7,445 12,143 60,401 185,907 1,315,057 $ 19,196 $ 21,966 $ 10,788 $ 8,231 $ 63,088 $ 202,663 $ 1,476,174
State of Idaho 189 Comprehensive Annual Financial Report State of Idaho Schedule 19 - Miscellaneous Statistics State Facts Twenty Largest State Capital Boise Communities in Idaho Admitted to the Union July 3, 1890 2008 2017 Nickname The Gem State Boise 202,832 223,154 Motto Esto Perpetua (Let It Be Perpetual) Meridian 64,642 95,623 Population 1,708,000 Nampa 79,249 91,382 Highest Elevation Point Mt. Borah Idaho Falls 53,279 60,211 12,662 Feet Above Sea Level Pocatello 54,572 54,746 Lowest Elevation Point Snake River at Lewiston Caldwell 39,889 53,149 710 Feet Above Sea Level Coeur d'Alene 42,267 50,285 Number of Lakes More Than 2,000 Twin Falls 41,510 48,260 State Bird Mountain Bluebird Lewiston 31,794 32,872 State Dance Square Dance Post Falls 25,358 31,865 State Fish Cutthroat Trout Rexburg 27,575 28,222 State Flower Syringa Moscow 23,223 25,322 State Fossil Hagerman Horse Eagle 19,254 24,785 State Fruit Huckleberry Kuna 12,785 17,902 State Gem Stone Idaho Star Garnet Ammon 12,872 15,252 State Horse Appaloosa Chubbuck 11,550 14,644 State Insect Monarch Butterfly Hayden 12,640 14,344 State Raptor Peregrine Falcon Mountain Home 12,236 13,840 State Amphibian Idaho Giant Salamander Blackfoot 10,867 11,890 State Song "Here We Have Idaho" Garden City 11,562 11,602 State Tree Western White Pine
State Vegetable Potato Source: Idaho Fiscal Facts, 2008 & 2017
Source: Idaho Blue Book, 2017-2018 Idaho Fiscal Facts, 2017 Idaho Economic Forecast, Oct. 2017
Idaho Commodity Rankings Land Area and Use Commodity U.S. Rank U.S. % (in square miles) Potatoes 1 32 Water Area 880 Austrian Winter Peas 1 64 Federal Land 52,715 Barley 1 34 Total Non-Federal Land 30,842 Alfalfa Hay 2 8 Total Rural Land 79,379 Sugar beets 2 19 Agricultural Land 12,534 Peppermint 2 29 Range Land 34,258 Forest Land 32,587 Wrinkled Seed Peas 2 36 Hops 3 11
Land Area and Use amounts were converted from square Dry Edible Peas 4 3 acres to square miles at 640 acres to the mile. Lentils 4 5 Other Spring Wheat 5 6 Source: Idaho Blue Book, 2017-2018 Dry Edible Beans 6 9 Idaho Fiscal Facts, 2017 Canola 7 1 Winter Wheat 7 4 All Hay 10 10
Source: Idaho Fiscal Facts, 2017
State of Idaho 190 Comprehensive Annual Financial Report Balanced Rock
On the Back Cover Elephant’s Perch Offi ce of the State Controller 700 W. State Street P.O. Box 83720-0011 (208) 344-3150
www.sco.idaho.gov APPENDIX F Form of Continuing Disclosure Agreement
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CONTINUING DISCLOSURE AGREEMENT
IDAHO STATE BUILDING AUTHORITY STATE BUILDING REVENUE BONDS, SERIES 2018A (IDAHO STATE BOARD OF EDUCATION PROJECT) (FEDERALLY TAXABLE) (CUSIP Base Number 451443)
THIS CONTINUING DISCLOSURE AGREEMENT (the "Agreement") is executed and delivered by the Idaho State Building Authority (the “Issuer”) and ZB, National Association dba Zions Bank (the “Disclosure Agent”), as of the date set forth below in order for the Issuer to authorize and direct the Disclosure Agent, as the agent of the Issuer, to make certain information available to the public in compliance with Section (b)(5)(i) of Rule 15c2-12, as hereinafter defined. WITNESSETH: 1. Background. The Issuer has resolved to issue its State Building Revenue Bonds, Series 2018A (Idaho State Board of Education Project) (Federally Taxable) (the “Bonds”). The Bonds are issued pursuant to Resolution Number 2018-003 of the Issuer (the “Resolution”), which names Disclosure Agent as the trustee, together with the concurrent resolution of the Legislature, all as further described in the Official Statement prepared in connection with the issuance of the Bonds. The CUSIP number assigned to the final maturity of the Bonds is 451443 ___. 2. Appointment of Disclosure Agent. The Issuer hereby appoints the Disclosure Agent and any successor Disclosure Agent acting as such under the Resolution as its agent under this Agreement to disseminate the financial information and notices furnished by the Issuer hereunder in the manner and at the times as herein provided and to discharge the other duties assigned. 3. Information to be Furnished by the Issuer. The Issuer hereby covenants for the benefit of the registered and beneficial owners of the Bonds that, as long as any of the Bonds are outstanding under the Resolution, the Issuer will deliver the following information to the Disclosure Agent: a. Within 270 days after the end of the Issuer's fiscal year, the audited financial statements of the Issuer, together with the report thereon of the Issuer's independent auditors, beginning with fiscal year ending June 30, 2018. b. Within 270 days after the end of the fiscal year of the State of Idaho (the “State”), beginning with the fiscal year ending June 30, 2018, the audited financial statements of the State contained in the State’s most recent Comprehensive Annual Financial Report; provided, however, that if such report is unavailable 270 days after the end of the fiscal year, the earliest such report becomes available. c. Within 270 days after the end of the fiscal year of the Public Employee Retirement System of Idaho (“PERSI”), beginning with the fiscal year ending June 30, 2018, the audited financial statements of PERSI contained in PERSI’s most recent Comprehensive Annual Financial Report; provided, however, that if such report is unavailable 270 days after the end of the fiscal year, the earliest such report becomes available. d. Within 270 days after the end of the Issuer's fiscal year, beginning with the fiscal year ending June 30, 2018, the other financial, statistical and operating data for said fiscal year of the Issuer similar to the financial, statistical and operating data contained in the Issuer's Official Statement, specifically the tables and/or information contained under the following headings and subheadings of the Official Statement reflected on the referenced pages of the Official Statement: IDAHO STATE BUILDING AUTHORITY • Authority Projects – Table “Project and Financing Activities of the Authority” (p.3)
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STATE FINANCES • State Revenues, Expenditures and Fund Balance – Table “CAFR Schedule 18, Summarized Revenues, Expenditures and Changes in Fund Balances” (p.15) • State Reserve Funds – “Budget Stabilization Fund,” “Economic Recovery Reserve Fund,” “Public Education Stabilization Fund,” and “Higher Education Stabilization Fund” (all sections on p.16) PUBLIC EMPLOYEE RETIREMENT SYSTEM • Table “Analysis of Actuarial Gains or Losses” (p. 21) • Table “Contribution Rates” (p. 22) The requirement for Issuer to provide the financial, statistical and operating data listed in this Section 3.d. shall be satisfied by the provision of information, reports or statements containing the data required by Sections 3.a., 3.b. and 3.c., to the extent said data is set forth therein. In the event said data is not contained within the items provided pursuant to Sections 3.a., 3.b. and 3.c., Issuer shall provide the information as set forth in this Section 3.d. e. Any or all of the items listed above in Sections 3.a., 3.b., 3.c. or 3.d. may be incorporated by reference from other documents, including official statements of debt issues of the Issuer which have been previously submitted to the Repository or the SEC. If the document incorporated by reference is a final official statement, it must be available from the MSRB. The Issuer shall clearly identify each such document incorporated by reference. f. Within ten (10) business days after the occurrence of the event, written notice of any of the following events with respect to the Bonds: (1) Principal and interest payment delinquencies; (2) Nonpayment-related defaults, if material; (3) Unscheduled draws on debt service reserves reflecting financial difficulties; (4) Unscheduled draws on credit enhancements reflecting financial difficulties; (5) Substitution of credit or liquidity providers, or their failure to perform; (6) Adverse tax opinions, the issuance by the Internal Revenue Service of proposed or final determinations of taxability, Notices of Proposed Issue (IRS Form 5701-TEB) or other material notices or determinations with respect to the tax status of the security, or other material events affecting the tax status of the security; (7) Modifications to rights of security holders, if material; (8) Bond calls, if material, and tender offers; (9) Defeasances; (10) Release, substitution or sale of property securing repayment of the securities, if material; (11) Rating changes; (12) Bankruptcy, insolvency, receivership or similar event of the obligated person;1
1 For the purposes of the event identified in paragraph (12) above, the event is considered to occur when any of the following occur: The appointment of a receiver, fiscal agent or similar officer for an obligated person in a proceeding under the U.S. Bankruptcy Code or in any other proceeding under state or federal law in which a court or governmental authority has assumed jurisdiction over substantially all of the assets or business of the obligated person, or if such jurisdiction has been assumed by leaving the existing governing body and officials or officers in possession but subject to the supervision and orders of a court or governmental authority, or the entry of an order confirming a plan of reorganization, arrangement or liquidation by a court or governmental authority having supervision or jurisdiction over substantially all of the assets or business of the obligated person. F-2
(13) The consummation of a merger, consolidation, or acquisition involving an obligated person or the sale of all or substantially all of the assets of the obligated person, other than in the ordinary course of business, the entry into a definitive agreement to undertake such an action or the termination of a definitive agreement relating to any such actions, other than pursuant to its terms, if material; (14) Appointment of a successor or additional trustee or the change of name of a trustee, if material; and (15) In a timely manner, notice of a failure of the Issuer or the obligated person to provide the required annual financial information specified in Sections 3.a., 3.b., 3.c and 3.d. above, on or before the date specified therein in the form attached hereto as Exhibit A. g. The Disclosure Agent shall promptly advise the Issuer whenever, in the course of performing its duties under the Resolution, the Disclosure Agent identifies an occurrence listed above which may require the Issuer to provide a notice of the occurrence of any of the events listed in Section 3.f. above; provided that the failure of the Disclosure Agent so to advise the Issuer of such occurrence shall not constitute a breach by the Disclosure Agent of any of its duties and responsibilities hereunder or under the Resolution. The Disclosure Agent shall only send notice of such event listed in Section 3.f. above to the Repository if such written notice is provided to it by the Issuer, and in no event shall the Disclosure Agent be required to determine the materiality of such event. 4. Manner and Time by Which Information is to be Made Public by the Disclosure Agent. a. The information required to be delivered to the Disclosure Agent pursuant to Sections 3.a., 3.b., 3.c. and 3.d. hereof shall be referred to as the Continuous Disclosure Information (the "Continuous Disclosure Information"), and the notices required to be delivered to the Disclosure Agent pursuant to Section 3.f. hereof shall be referred to as the Event Information (the "Event Information"). b. After the receipt of any Continuous Disclosure Information or any Event Information, the Disclosure Agent will deliver the information as provided in the following Section 4.c. c. It shall be the Disclosure Agent's duty: (1) to deliver the Continuous Disclosure Information to the Repository once it is received from the Issuer not later than five (5) days after receipt thereof; (2) to deliver the Event Information to the Repository immediately upon receipt from the Issuer, and in any event not more than two business days following receipt from Issuer; (3) to determine the identity and address of the then existing Repository to which Continuous Disclosure Information and Event Information must be sent under rules and regulations promulgated by the MSRB or by the SEC. d. The Disclosure Agent shall have no duty or obligation to disclose to the Repository any information other than (i) Continuous Disclosure Information that the Disclosure Agent actually has received from the Issuer and (ii) Event Information about which the Disclosure Agent has received written notice from the Issuer. Any such disclosures shall be required to be made only as and when specified in this Agreement. The Disclosure Agent's duties and obligations are only those specifically set forth in this Agreement, and the Disclosure Agent shall have no implied duties or obligations. e. All Continuous Disclosure Information and Event Information, or other financial information and notices pursuant to this Agreement are to be provided to the Repository in electronic PDF format (word- searchable) as prescribed by the MSRB. All documents provided to the MSRB pursuant to this Agreement must be accompanied by identifying information as prescribed by the MSRB.
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5. Indemnification. a. The Disclosure Agent shall have no obligation to examine or review the Continuous Disclosure Information and shall have no liability or responsibility for the form of, or the accurateness or completeness of, the Continuous Disclosure Information or Event Information disseminated by the Disclosure Agent hereunder. The Disclosure Agent’s duties under this Agreement are ministerial in nature. The Continuous Disclosure Information shall contain a legend to such effect. The Disclosure Agent shall have the same rights, protections, and immunities hereunder as provided to it as a trustee under the Resolution. b. The Issuer hereby agrees to hold harmless and to indemnify the Disclosure Agent, its employees, officers, directors, agents and attorneys from and against any and all claims, damages, losses, liabilities, reasonable costs and expenses whatsoever (including attorneys' fees and expenses, whether incurred before trial, at trial, or on appeal, or in any bankruptcy or arbitration proceedings), which may be incurred by the Disclosure Agent by reason of or in connection with the disclosure of information in accordance with this Agreement, except to the extent such claims, damages, losses, liabilities, costs or expenses result directly from the willful or negligent conduct of the Disclosure Agent in the performance of its duties under this Agreement. This Section 5.b shall survive the termination of the Agreement, payment of the Bonds, and the removal or resignation of the Disclosure Agent. c. In no event shall Disclosure Agent be liable for special, indirect, or consequential losses or damages of any kind whatsoever (including but not limited to lost profits) even if Disclosure Agent has previously been advised of such losses and damages. 6. Compensation. The Issuer hereby agrees to compensate the Disclosure Agent for the services provided and the expenses (including legal fees and expenses) incurred pursuant to this Agreement in an amount to be agreed upon from time to time hereunder. Such compensation shall be in addition to any fees previously agreed upon with respect to the services of ZB, National Association dba Zions Bank, in its capacity as Trustee under the Resolution. 7. Enforcement. The obligations of the Issuer under this Agreement shall be for the benefit of the registered and beneficial holders of the Bonds. Any holder of the Bonds then outstanding, including any Beneficial Owner of the Bonds (as defined in the Resolution), may enforce specific performance of such obligations by any judicial proceeding available. However, any failure by the Issuer to perform in accordance with this Agreement shall not constitute a default under the Resolution. This Agreement shall inure solely to the benefit of the Issuer, the Disclosure Agent and the holders and beneficial owners from time to time of the Bonds and shall create no rights in any other person or entity. 8. Definitions. As used herein, the following terms shall have the following meanings: "MSRB" shall mean the Municipal Securities Rulemaking Board. “Obligated person” as defined in Rule 15c2-12 shall mean any person, including an issuer of municipal securities, who is either generally or through an enterprise, fund, or account of such person committed by contract or other arrangement to support payment of all, or part of the obligations on the municipal securities to be sold in the offering (other than providers of municipal bond insurance, letters of credit, or other liquidity facilities). “Official Statement” shall mean the final Official Statement of the Issuer dated ______, 2018. "Repository" shall mean MSRB through its Electronic Municipal Market Access system (“EMMA”) at http://emma.msrb.org, or such other nationally recognized municipal securities information repository recognized by the SEC from time to time pursuant to Rule 15c2-12. “Resolution” or “Supplemental Resolution” means those Resolutions of the Issuer pursuant to which the Bonds have been authorized and issued. "Rule 15c2-12" shall mean Rule 15c2-12, promulgated by the SEC under the Securities Exchange Act of 1934, as the same may be amended from time to time. F-4
"SEC" shall mean the Securities and Exchange Commission. 9. Amendments and Termination; Resignation of Disclosure Agent. This Agreement may be amended with the mutual agreement of the Issuer and the Disclosure Agent and without the consent of any registered or beneficial holders of the Bonds under the following conditions, as evidenced by receipt of an opinion of nationally recognized bond counsel delivered to the Disclosure Agent opining as to the following: a. the amendment is made in connection with a change in circumstances that arises from a change in legal requirements, change in law, or change in the identity, nature, or status of the obligated person or type of business conducted; b. this Agreement, as amended, would have complied with the requirements of Rule 15c2-12 at the time of the primary offering, after taking into account any amendments or interpretations of Rule 15c2- 12, as well as any change in circumstances; and c. the amendment does not materially impair the interests of holders of the Bonds, as determined by parties unaffiliated with the Issuer (such as the Disclosure Agent or nationally recognized bond counsel). Any party to this Agreement may terminate this Agreement by giving written notice of an intent to terminate to the other parties at least thirty (30) days prior to such termination, provided that no such termination shall relieve the obligation of the Issuer to comply with Rule 15c2-12(b)(5) either through a successor agent or otherwise. The Disclosure Agent may resign as Disclosure Agent by giving written notice of intent to resign to the Issuer at least ninety (90) days prior to resignation. The undertaking contained in this Agreement shall be in effect from and after the issuance and delivery of the Bonds and shall extend to the earlier of (i) the date all principal and interest on the Bonds shall have been paid in full pursuant to the terms of the Resolution; (ii) the date that the Issuer shall no longer constitute an "obligated person" within the meaning of Rule 15c2-12; or (iii) the date on which those portions of Rule 15c2-12 that require this written undertaking (a) are held to be invalid by a court of competent jurisdiction in a nonappealable action, (b) have been repealed retroactively, or (c) in the opinion of counsel who is an expert in federal securities laws, acceptable to the Issuer or the Disclosure Agent, otherwise, do not apply to the Bonds. The Issuer shall notify the Repository if this Agreement is terminated pursuant to (iii), above. 10. Successor Disclosure Agent. Upon the transfer of the duties created under the Resolution from the current Disclosure Agent to a successor Disclosure Agent, such successor Disclosure Agent shall succeed to the duties under this Agreement without any further action on the part of any party, and the then current Disclosure Agent shall have no further duties or obligations upon the transfer to a successor Disclosure Agent. Such Successor Disclosure Agent may terminate this Agreement or cause it to be amended as provided in paragraph 9. 11. Additional Information. Nothing in this Agreement shall be deemed to prevent the Issuer from disseminating any other information, using the means of dissemination set forth in this Agreement or any other means of communication, or including any other information in any Continuous Disclosure Information or notice of the occurrence of any Event Information, in addition to that which is required by this Agreement. If the Issuer chooses to include any information in any Continuous Disclosure Information or Event Information in addition to that which is specifically required by this Agreement, the Issuer shall have no obligation under this Agreement to update such information or include it in any future Continuous Disclosure Information or notice of occurrence of any Event Information. 12. Notices. All notices and communications required hereunder shall be in writing and shall be given to the parties at their addresses set forth below under their signatures or at such places as the parties to this Agreement may designate from time to time. Any notice or communication hereunder shall be deemed duly given if in writing and delivered either in person, by overnight mail, or by first class mail, postage prepaid.
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13. Counterparts. This Agreement may be executed in one or more counterparts, and each such instrument shall constitute an original counterpart of this Agreement. 14. Governing Law. This Agreement shall be governed by the laws of the State of Idaho.
IN WITNESS WHEREOF, the Issuer and the Disclosure Agent have caused this Agreement to be executed and delivered by a duly authorized officer of each of them, all as of this ______, 2018.
ISSUER: IDAHO STATE BUILDING AUTHORITY
By: Title:
Notice Address:
950 W. Bannock St., Suite 490 Boise, ID 83702
DISCLOSURE AGENT: ZB, NATIONAL ASSOCIATION DBA ZIONS BANK
By: Title:
Notice Address:
800 W. Main Street, Ste 700 Boise, Idaho 83702
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EXHIBIT A FORM OF NOTICE OF THE MUNICIPAL SECURITIES RULEMAKING BOARD OF FAILURE TO FILE ANNUAL REPORT Name of Issuer: Idaho State Building Authority Name of Bond Issue: State Building Revenue Bonds, Series 2018A
Date of Issuance: ______, 2018
NOTICE IS HEREBY GIVEN that the above referenced Issuer has not provided an Annual Report with respect to the above captioned Bonds as required by Section 3 of the Continuing Disclosure Agreement, between the Issuer and ZB, National Association dba Zions Bank, as Disclosure Agent, dated the Date of Issuance. [The Issuer anticipates the Annual Report will be filed on or about ______.] Dated:
ZB, NATIONAL ASSOCIATION DBA ZIONS BANK, as Disclosure Agent, on behalf of the Issuer
By: Title:
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[THIS PAGE INTENTIONALLY LEFT BLANK] APPENDIX G Form of Opinion of Bond Counsel
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SKINNER FAWCETT LLP LAW OFFICES
RICHARD A. SKINNER 515 SOUTH 6TH STREET CHARLES W. FAWCETT POST OFFICE BOX 700 DENNIS GIBALA BOISE, IDAHO 83701 HENRY C. RUDOLPH TELEPHONE (208) 345-2663 RYAN M. FAWCETT TELECOPIER (208) 345-2668 JOHN R. MCDEVITT E-MAIL: [email protected]
______, 2018
Board of Commissioners Idaho State Building Authority 950 W. Bannock Street, Suite 490 Boise, ID 83702
RE: Idaho State Building Authority State Building Revenue Bonds, Series 2018A (Idaho State Board of Education Project) (Federally Taxable)
We have acted as bond counsel in connection with the issuance by the Idaho State Building Authority (the “Authority”), pursuant to its Resolution dated March 8, 2018 (the “Resolution”), of $______aggregate principal amount of the Authority’s State Building Revenue Bonds, Series 2018A (Idaho State Board of Education Project) (Federally Taxable) (the “Bonds”). Terms used herein as capitalized terms have the meaning assigned to such terms in the Resolution.
The Bonds are being issued under the authority of the Constitution and statutes of the State of Idaho, particularly Title 67, Chapter 64, Idaho Code, as amended (the “Act”), and Senate Concurrent Resolution No. 105 of the First Regular Session of the Sixty-Fourth Idaho Legislature for the purpose of providing funds (i) to finance the costs of acquisition of certain real property and design, development and construction of certain facilities near the Idaho National Laboratory Research and Education Campus in Idaho Falls, Idaho to be known as the Idaho Cybercore Integration Center and the Idaho Collaborative Computing Center (collectively, the “Improvements”), to the real property and existing improvements (the “Land”) to be owned by State of Idaho (the “State”) (the “Land,” together with the Improvements, referred to herein as the “Facilities”), (ii) to pay the costs of issuance of the Bonds. The Bonds are being sold to Wells Fargo Bank, National Association pursuant to a Bond Purchase Agreement dated ______, 2018 (the “Bond Purchase Agreement”).
The Land has been leased by the State, by and through the Idaho State Board of Education (the “SBOE”) for a term of forty years, pursuant to the terms of a Ground Lease (the “Ground Lease”). The Authority has agreed to finance, together with other funds of Battelle Energy Alliance, LLC (“BEA”) that shall be deposited and spent according to that certain special fund agreement between the Authority and BEA (the “Special Fund Agreement”), the Improvements, pursuant to the Development Agreement between the SBOE and the Authority (the “Development Agreement”), and lease the Facilities to the State, by and through the SBOE (the “Lessee”), on an annually renewable basis, pursuant to the terms of a Facilities Lease (the “Facilities Lease”). The Lessee has subleased the Facilities to BEA pursuant to the terms of two separate subleases (collectively, the “Subleases”). The Authority has entered into a
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Nondisturbance and Attornment Agreement with BEA for the Subleases (“NDA”). Payments by the State under the Facilities Lease are expected to be made from the dedicated funds received from rent payments under the Subleases, after appropriation by the State for such purpose. The Bonds and the interest thereon are payable solely from, and are secured by a pledge of, Revenues derived by the Authority under the Facilities Lease and from sources provided under the Resolution. The Act provides that the Bonds shall not be or become an indebtedness or obligation, nor constitute the giving or loaning of the credit of, the State, or of any department, board, commission, agency, political subdivision, body corporate and politic, or instrumentality of or county within the State, nor shall such Bonds be payable out of any funds other than those of the Authority.
In such connection, we have reviewed the Resolution, an opinion of counsel to the Authority, an opinion of the Attorney General of the State, certificates of the Authority and other public bodies and officials, the Trustee and others, and such other documents, opinions and matters to the extent we deemed necessary to render the opinions set forth herein.
In such examination we have assumed the genuineness of all signatures, the authenticity of all documents submitted to us as originals, and the conformity to original documents of all documents submitted to us as certified or reproduced copies. As to various questions of fact material to such opinions we have relied upon certificates of officers of the Authority and upon the representations and warranties of the Authority set forth in the Resolution and the Purchase Agreement. Our opinion is limited to the matters expressly set forth herein, and we express no opinion concerning any other matters.
The opinions expressed herein are based on an analysis of existing laws, regulations, rulings and court decisions and cover certain matters not directly addressed by such authorities. Such opinions may be affected by actions taken or omitted or events occurring after the date hereof. Accordingly, this opinion is not intended to, and may not, be relied upon in connection with any such action, events or matters. Our engagement with respect to the Bonds has concluded with their issuance, and we disclaim any obligation to update this letter. We have not undertaken to determine, or to inform any person, whether any such actions are taken or omitted or events do occur or any other matters come to our attention after the date hereof. We disclaim any obligation to update this letter. We have assumed the genuineness of all documents and signatures presented to us (whether as originals or as copies) and the due and legal execution and delivery thereof by, and validity against, any parties other than the Authority. We have assumed, without undertaking to verify, the accuracy of the factual matters represented, warranted or certified in the documents and have relied upon the legal conclusions contained in the opinions referred to in the fourth paragraph hereof. We call attention to the fact that the rights and obligations under the Bonds, the Facilities Lease, the Ground Lease and the Resolution and their enforceability may be subject to bankruptcy, insolvency, reorganization, arrangement, fraudulent conveyance, moratorium and other laws relating to or affecting creditors' rights, to the application of equitable principles, to the exercise of judicial discretion in appropriate cases and to the limitations on legal remedies against the State. We express no opinion with respect to any indemnification, contribution, penalty, choice of law, choice of forum or waiver provisions contained in the foregoing documents, nor do we express any opinion with respect to the state or quality of title to or interest in any of the real or personal property described in or subject to the Resolution, the Ground Lease, Facilities Lease or the Bonds, or the accuracy or sufficiency of the
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description contained therein or, or the remedies available to enforce liens on, any such property. Finally, we undertake no responsibility for the accuracy, completeness or fairness of the Official Statement or other offering material relating to the Bonds and express no opinion with respect thereto.
Based upon the foregoing, it is our opinion as Bond Counsel that:
1. The Authority is an independent public body corporate and politic of the State, duly organized and existing under the Constitution and laws of the State now in force.
2. The Authority has the power under the Act to issue the Bonds and to adopt the Resolution and to execute and deliver the Ground Lease and Facilities Lease.
3. The Resolution has been duly and lawfully adopted and executed by the Authority and is in full force and effect and is valid and binding upon the Authority and enforceable in accordance with its terms except to the extent that the obligations of the Authority under the Resolution are subject to the exercise in the future by the State and its governmental bodies of the police power inherent in the sovereignty of the State and to the exercise by the United States of America of the power delegated to it by the Constitution.
4. The Ground Lease and the Facilities Lease have been duly and lawfully adopted and executed by the Authority and are in full force and effect and are valid and binding upon the Authority and enforceable against the Authority in accordance with their terms except to the extent that the obligations of the Authority under the Facilities Lease are subject to the exercise in the future by the State and its governmental bodies of the police power inherent in the sovereignty of the State and to the exercise by the United States of America of the power delegated to it by the Constitution.
5. The Resolution creates the valid pledge which it purports to create of the Revenues received pursuant to the Facilities Lease held or set aside under the Resolution, subject to the allocation thereof to the purposes and on the conditions permitted by the Resolution.
6. The Bonds have been duly and validly authorized and issued in accordance with the Act and the Resolution, and the Bonds are legally binding obligations of the Authority, enforceable in accordance with their terms and the terms of the Resolution, and are entitled to the benefits of the Resolution and the Act.
7. The Bonds have been issued for a purpose for which bonds may be issued under the Act and the Resolution, and all conditions prescribed in the Resolution as precedent to the issuance of the Bonds have been fulfilled.
8. Interest on the Bonds is not excluded from gross income for federal income tax purposes, however interest on the Bonds is exempt from all State income tax under present state income tax laws. As Bond Counsel, we are passing only upon those matters set forth in this opinion and are not passing upon the accuracy or completeness of any information furnished to any person in connection with any offer or sale of the Bonds, upon the authority or power of any other parties
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to the Ground Lease and Facilities Lease or related documents or upon any federal or State tax consequences arising from the receipt or accrual of interest on or the ownership of the Bonds except those specifically addressed in paragraphs 8 above. Respectfully submitted,
SKINNER FAWCETT LLP
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APPENDIX H Depository Trust Company Information
DTC, the world’s largest securities depository, is a limited–purpose trust company organized under the New York Banking Law, a “banking organization” within the meaning of the New York Banking Law, a member of the Federal Reserve System, a “clearing corporation” within the meaning of the New York Uniform Commercial Code, and a “clearing agency” registered pursuant to the provisions of Section 17A of the Securities Exchange Act of 1934. DTC holds and provides asset servicing for over 3.5 million issues of U.S. and non–U.S. equity issues, corporate and municipal debt issues, and money market instruments (from over 100 countries) that DTC’s participants (“Direct Participants”) deposit with DTC. DTC also facilitates the post–trade settlement among Direct Participants of sales and other securities transactions in deposited securities, through electronic computerized book– entry transfers and pledges between Direct Participants’ accounts. This eliminates the need for physical movement of securities certificates. Direct Participants include both U.S. and non–U.S. securities brokers and dealers, banks, trust companies, clearing corporations, and certain other organizations. DTC is a wholly–owned subsidiary of The Depository Trust & Clearing Corporation (“DTCC”). DTCC is the holding company for DTC, National Securities Clearing Corporation and Fixed Income Clearing Corporation, all of which are registered clearing agencies. DTCC is owned by the users of its regulated subsidiaries. Access to the DTC system is also available to others such as both U.S. and non–U.S. securities brokers and dealers, banks, trust companies, and clearing corporations that clear through or maintain a custodial relationship with a Direct Participant, either directly or indirectly (“Indirect Participants”). DTC has Standard & Poor’s highest rating: “AAA.” The DTC Rules applicable to its Participants are on file with the Securities and Exchange Commission. More information about DTC can be found at www.dtcc.com and www.dtc.org.
Purchases of Bonds under the DTC system must be made by or through Direct Participants, which will receive a credit for the Bonds on DTC’s records. The ownership interest of each actual purchaser of each Bond (“Beneficial Owner(s)”) is in turn to be recorded on the Direct and Indirect Participants’ records. Beneficial Owners will not receive written confirmation from DTC of their purchase. Beneficial Owners are, however, expected to receive written confirmations providing details of the transaction, as well as periodic statements of their holdings, from the Direct or Indirect Participant through which the Beneficial Owner entered into the transaction. Transfers of ownership interests in the Bonds are to be accomplished by entries made on the books of Direct and Indirect Participants acting on behalf of Beneficial Owners. Beneficial Owners will not receive certificates representing their ownership interests in the Bonds, except in the event that use of the book–entry system for the Bonds is discontinued.
To facilitate subsequent transfers, all Bonds deposited by Direct Participants with DTC are registered in the name of DTC’s partnership nominee, Cede & Co., or such other name as may be requested by an authorized representative of DTC. The deposit of the Bonds with DTC and their registration in the name of Cede & Co. or such other DTC nominee do not effect any change in Beneficial Ownership. DTC has no knowledge of the actual Beneficial Owners of the Bonds; DTC’s records reflect only the identity of the Direct Participants to whose accounts such Bonds are credited, which may or may not be the Beneficial Owners. The Direct and Indirect Participants will remain responsible for keeping account of their holdings on behalf of their customers.
Conveyance of notices and other communications by DTC to Direct Participants, by Direct Participants to Indirect Participants, and by Direct Participants and Indirect Participants to Beneficial Owners will be governed by arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time. Beneficial Owners of the Bonds may wish to take certain steps to augment transmission to them of notices of significant events with respect to the Bonds, such as redemptions, tenders, defaults, and proposed amendments to the bond documents. For example, Beneficial Owners of the Bonds may wish to ascertain that the nominee holding the Bonds for their benefit has agreed to obtain and transmit notices to Beneficial Owners. In the alternative, Beneficial Owners may wish to provide their names and addresses to the registrar and request that copies of notices be provided directly to them.
Redemption notices shall be sent to DTC. If less than all of the Bonds within an issue are being redeemed, DTC’s practice is to determine by lot the amount of the interest of each Direct Participant in such issue to be redeemed.
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Neither DTC nor Cede & Co. (nor any other DTC nominee) will consent or vote with respect to the Bonds unless authorized by a Direct Participant in accordance with DTC’s MMI Procedures. Under its usual procedures, DTC mails an Omnibus Proxy to the Authority as soon as possible after the record date. The Omnibus Proxy assigns Cede & Co.’s consenting or voting rights to those Direct Participants to whose accounts the Bonds are credited on the record date (identified in a listing attached to the Omnibus Proxy).
Redemption proceeds, distributions, and dividend payments on the Bonds will be made to Cede & Co., or such other nominee as may be requested by an authorized representative of DTC. DTC’s practice is to credit Direct Participants’ accounts upon DTC’s receipt of funds and corresponding detailed information from the Authority or the Trustee, as paying agent (the “Paying Agent”), on payable date in accordance with their respective holdings shown on DTC’s records. Payments by Participants to Beneficial Owners will be governed by standing instructions and customary practices, as is the case with securities held for the accounts of customers in bearer form or registered in “street name,” and will be the responsibility of such Participant and not of DTC, the Paying Agent, or the Authority, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of redemption proceeds, distributions, and dividend payments to Cede & Co. (or such other nominee as may be requested by an authorized representative of DTC) is the responsibility of the Authority or the Paying Agent, disbursement of such payments to Direct Participants will be the responsibility of DTC, and disbursement of such payments to the Beneficial Owners will be the responsibility of Direct and Indirect Participants.
DTC may discontinue providing its services as securities depository with respect to the Bonds at any time by giving reasonable notice to the Authority or the Paying Agent. Under such circumstances, in the event that a successor securities depository is not obtained, Bond certificates are required to be printed and delivered.
The Authority may decide to discontinue use of the system of book–entry transfers through DTC (or a successor securities depository). In that event, Bond certificates will be printed and delivered to DTC.
The information in this section concerning DTC and DTC’s book–entry system has been obtained from sources that the Authority believes to be reliable, but the Authority takes no responsibility for the accuracy thereof.
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IDAHO STATE BUILDING AUTHORITY • STATE BUILDING REVENUE BONDS, SERIES 2018A (IDAHO STATE BOARD OF EDUCATION PROJECT) (FEDERALLY TAXABLE)