Copy of AMBBA FY2024 Audited Financial Statements.pdf

ALASKA MUNICIPAL BOND BANK AUTHORITY

(a Component Unit of the State of Alaska)

Financial Statements

For the Year Ended June 30, 2024

Together with Independent Auditor’s Report Thereon

The report accompanying these financial statements was issued by BDO USA, P.C., a Virginia professional corporation, and the U.S. member of BDO International Limited, a UK company limited by guarantee.

Table of Contents

Page

Independent Auditor’s Report 1-3

Management’s Discussion and Analysis (Unaudited) 5-11

Financial Statements

Statement of Net Position and Governmental Funds Balance Sheets 12

Statement of Activities and Governmental Funds Statement of Revenues, Expenditures, and Changes in Fund Balances/Net Position 13

Notes to Financial Statements 14-32

Supplementary Information

Supplemental Schedule of Statutory Reserve Accounts – Assets, Liabilities, and Account Reserves 33

Continuing Disclosure Tables 34-40

BDO USA, P.C., a Virginia professional corporation, is the U.S. member of BDO International Limited, a UK company limited by guarantee, and forms part of the international BDO network of independent member firms.

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3601 C Street, Suite 600

Anchorage, AK 99503

Tel: 907-278-8878

Fax: 907-278-5779 www.bdo.com

Independent Auditor’s Report

Board of Directors Alaska Municipal Bond Bank Authority

Opinions

We have audited the financial statements of the governmental activities and each major fund of the Alaska Municipal Bond Bank Authority, a component unit of the State of Alaska, as of and for the year ended June 30, 2024, and the related notes to the financial statements, which collectively comprise the Authority’s basic financial statements as listed in the table of contents.

In our opinion, the accompanying financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities and each major fund of the Authority, as of June 30, 2024, and the respective changes in financial position for the year then ended in accordance with accounting principles generally accepted in the United States of America.

Basis for Opinions

We conducted our audit in accordance with auditing standards generally accepted in the United States of America (GAAS). Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Statements section of our report. We are required to be independent of the Authority and to meet our other ethical responsibilities, in accordance with the relevant ethical requirements relating to our audit. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions.

Responsibilities of Management for the Financial Statements

Management is responsible for the preparation and fair presentation of the financial statements in accordance with accounting principles generally accepted in the United States of America, and for 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.

In preparing the financial statements, management is required to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the Authority’s ability to continue as a going concern for twelve months beyond the financial statement date, including any currently known information that may raise substantial doubt shortly thereafter.

Auditor’s Responsibilities for the Audit of the Financial Statements

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinions. Reasonable assurance is a high level of assurance but is not absolute assurance and therefore is not a guarantee that an audit conducted in accordance with GAAS will always detect a material misstatement when it exists. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Misstatements are considered material if there is a substantial likelihood that, individually or in the aggregate, they would influence the judgment made by a reasonable user based on the financial statements.

In performing an audit in accordance with GAAS, we:

Exercise professional judgment and maintain professional skepticism throughout the audit.

Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, and design and perform audit procedures responsive to those risks. Such procedures include examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.

Obtain an understanding of internal control relevant to the audit 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 Authority’s internal control. Accordingly, no such opinion is expressed.

Evaluate the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluate the overall presentation of the financial statements.

Conclude whether, in our judgment, there are conditions or events, considered in the aggregate, that raise substantial doubt about the Authority’s ability to continue as a going concern for a reasonable period of time.

We are required to communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit, significant audit findings, and certain internal control-related matters that we identified during the audit.

Required Supplementary Information

Accounting principles generally accepted in the United States of America require that the management’s discussion and analysis be presented to supplement the basic financial statements.

Such information is the responsibility of management and, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management’s responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance.

Supplementary Information

Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the Authority’s basic financial statements. The supplemental schedule of statutory reserve accounts and continuing disclosure tables are presented for purposes of additional analysis and are not a required part of the basic financial statements. Such information is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the basic financial statements. The information has been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the supplemental schedule of statutory reserve accounts and continuing disclosure tables are fairly stated, in all material respects, in relation to the basic financial statements as a whole.

Anchorage, Alaska September 30, 2024

Management’s Discussion and Analysis

Year Ended June 30, 2024

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This Management's Discussion and Analysis (MD&A) is required by GASB Statement No. 34, a standard established by the Governmental Accounting Standards Board (GASB). This section is intended to make the financial statements more understandable to the average reader who is not familiar with traditional accounting terminology.

This financial report has two integral parts: this MD&A and the financial statements with the accompanying notes that follow. Together, they present the Alaska Municipal Bond Bank Authority’s (Bond Bank) financial performance during the fiscal year ended June 30, 2024.

Summarized prior fiscal year information is shown within this MD&A, as needed, for comparative purposes.

Required Financial Statements

GASB Statement No. 34 requires two types of financial statements: The Statement of Net Position and Governmental Fund Balance Sheets and the Statement of Activities and Governmental Fund Revenues, Expenditures and Changes in Fund Balances/Net Position. These statements report financial information about the Bond Bank's activities using accounting principles generally accepted in the United States of America. In addition to the basic financial statements, the Notes to Financial Statements provide information that is essential to a full understanding of the data provided in the basic financial statements.

Financial Highlights

During fiscal year 2024, the Bond Bank entered into one loan agreement to fund an approximate $36.8 million loan. The Bond Bank loan funded a construction project for a community. The Bond Bank issued approximately $35.1 million in bonds to generate approximately $36.8 million in funding. Bond Bank activity produced estimated gross savings of approximately $4.5 million to the authorized borrower.

In comparison, during fiscal year 2023, the Bond Bank entered into 7 loan agreements to fund approximately $107.2 million in loans. Bond Bank loans funded 7 construction projects for communities. The Bond Bank issued approximately $97.5 million in bonds to generate approximately $107.2 million in funding. Bond Bank activity produced estimated gross savings of approximately $13.5 million to the authorized borrowers.

Statement of Net Position

The Statement of Net Position reports assets, liabilities, and net position of the Bond Bank.

Assets

Assets represent 1) The value of the Bond Bank's investments and investment income receivable on the financial statement date, recorded at fair market value, and 2) Bond principal and interest payments receivable from borrowers. The investments generate income for the Bond Bank, used to meet reserve requirements and pay operating costs. Historically excess operating account earnings were transferred to the State of Alaska’s (State) general fund each year. Since 2010 and continuing through fiscal year 2025, the State’s enacted operating budget has appropriated any

Management’s Discussion and Analysis

Year Ended June 30, 2024

- 6 -excess earnings of the operating account to the Bond Bank’s reserve fund (HB 268, Sec. 49(f)).

Interest received on bonds purchased from borrowers is used to pay the Bond Bank's corresponding interest payments on the bonds that it has issued.

Liabilities

Liabilities represent claims against the fund for 1) goods and services provided before the financial statement date but not yet paid for at that date, and 2) interest and bond payments due to purchasers of the Bond Bank's bonds after the financial statement date.

Restricted and Unrestricted Net Position

Net position is comprised of two components. The restricted portion reflects monies maintained in separate trust accounts where their use is limited by applicable bond covenants for repayment of bonds. The unrestricted portion reflects monies that are available for any authorized purpose of the Bond Bank.

The following table shows the value of Bond Bank assets summarized as of June 30, 2024, and 2023, as well as liabilities and net position:

The Bond Bank's investments are all held in U.S. Government securities, including U.S. Treasuries and U.S. Government Agencies.

The decrease in bonds and bond interest receivable, as well as in bonds and bond interest payable, reflects the issuance of approximately $35.1 million in new bonds during the year, net of principal payments on bonds previously issued of approximately $73.5 million. Approximately $36.8 million of funding was generated for capital projects by an authorized borrower.

2024 2023 Dollars Percent Assets:

Cash, investments, related accrued interest and accounts receivable 69,643,389$ 67,611,318$ 2,032,071$ 3.01%

Bonds and bond interest receivable 985,617,749 1,024,720,205 (39,102,456) -3.82%

Total assets 1,055,261,138 1,092,331,523 (37,070,385) -3.39%

Liabilities:

Accounts payable and accrued liabilities 12,920,905 13,280,239 (359,334) -2.71% Bonds and bond interest payable 985,170,724 1,024,042,340 (38,871,616) -3.80%

Total liabilities 998,091,629 1,037,322,579 (39,230,950) -3.78%

Net Position:

Restricted 41,245,670 40,370,937 874,733 2.17% Unrestricted 15,923,839 14,638,007 1,285,832 8.78%

Total net position 57,169,509$ 55,008,944$ 2,160,565$ 3.93%

Changes from 2023 to 2024 As of June 30, Increase/(Decrease)

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Statement of Activities

The statement of activities shows how the Bond Bank’s net position changed during the most recent fiscal year.

Revenues Revenues include total return on investments and interest payments received from municipalities.

Earnings on investments include interest on fixed income marketable securities and the change in fair market value of those investments.

Expenses Expenses include interest payments made to bond holders who purchased the Bond Bank's bonds, payments made to the State of Alaska and other operating expenses. Operating expenses include expenses required to issue bonds during the current year, in-house expenses, and all external consultant fees. Expenses are subtracted from revenues.

The following is a condensed statement of the Bond Bank’s changes in net position for the years ended June 30, 2024, and 2023:

Interest income and expense on bonds receivable and payable are a function of the total amount of bonds outstanding, the age of the bonds and the interest rates at which they are issued. The increases in both of these line items of $0.6 million are consistent with the increase in bond receivable and payable balances respectively.

Investment earnings are a function of market conditions, and active management. The increase in net position is primarily attributable to total investment returns outpacing total operating expenses for the fiscal year. The Bond Bank’s total investment earnings increased approximately $2.6 million from the prior fiscal year. Total operating expenses remained within budgeted authority and were significantly less than total investment earnings over the fiscal year.

Revenues:

Interest income on bonds receivable 41,780,519$ 41,224,004$ 556,515$ 1.35% Investment earnings 2,663,198 83,418 2,579,780 3092.59% Other income - 6,338 (6,338) -100.00%

Total revenues 44,443,717 41,313,760 3,129,957 7.58%

Expenses:

Interest expense on bonds payable 41,766,543 41,203,667 562,876 1.37% Operating expenses 516,609 584,841 (68,232) -11.67%

Total expenses 42,283,152 41,788,508 494,644 1.18%

Change in net position 2,160,565 (474,748) 2,635,313 -555.10%

Net position, beginning of period 55,008,944 55,483,692 (474,748) -0.86%

Net position, end of period 57,169,509$ 55,008,944$ 2,160,565$ 3.93%

For the years ended June 30, Increase/(Decrease)

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Governmental Funds

The governmental funds include the General Fund, which accounts for the primary operations of the Bond Bank, and the Debt Service Fund, which accounts for the resources accumulated and payments made on the long-term debt of the Bond Bank. The primary difference between the governmental funds balance sheet and the statement of net position is the elimination of inter-fund payables and receivables. Bond proceeds are reported as an other financing source in the governmental funds statement of revenues, expenditures and changes in fund balances, and this contributes to the change in fund balance. In the statement of net position, however, issuing debt increases long-term liabilities and does not affect the statement of activities. Payments made to refunded bond escrow agent are reported as an other financing use in the governmental funds statement of revenues, expenditures and changes in fund balances, and this may contribute to the change in fund balance. In the statement of net position, however, refunding debt may decrease long-term liabilities and does not affect net position. Similarly, repayment of debt principal is recorded as an expenditure in the governmental funds statement of revenues, expenditures and changes in fund balances and reduces the liability in the statement of net position.

The following tables show governmental funds’ condensed balance sheets and statements of revenues, expenditures and changes in fund balances as of June 30, 2024, and 2023.

General Fund

Cash, investments, related accrued interest and accounts receivable 15,193,188$ 13,350,617$ 1,842,571$ 13.80%

Bonds and bond interest receivable 447,025 677,864 (230,839) -34.05% Interfund receivable 8,157,377 9,501,571 (1,344,194) -14.15%

Total assets 23,797,590 23,530,052 267,538 1.14%

Liabilities:

Accounts payable and accrued liabilities 150,093 116,833 33,260 28.47%

Fund Balance:

Restricted for debt service 5,349,516 5,349,516 - 0.00% Unassigned 18,297,981 18,063,703 234,278 1.30%

Total fund balance 23,647,497 23,413,219 234,278 1.00%

Total liabilities and fund balance 23,797,590$ 23,530,052$ 267,538$ 1.14%

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Debt Service Fund

General Fund

Cash, investments, related accrued interest and accounts receivable 54,450,201$ 54,260,701$ 189,500$ 0.35%

Bonds and bond interest receivable 985,170,724 1,024,042,341 (38,871,617) -3.80%

Total assets 1,039,620,925 1,078,303,042 (38,682,117) -3.59%

Liabilities:

Accrued liabilities 12,770,812 13,163,406 (392,594) -2.98% Interfund payables 8,157,377 9,501,571 (1,344,194) -14.15%

Total liabilities 20,928,189 22,664,977 (1,736,788) -7.66%

Fund Balance:

Restricted for debt service 1,018,692,736 1,055,638,065 (36,945,329) -3.50%

Total liabilities and fund balance 1,039,620,925$ 1,078,303,042$ (38,682,117)$ -3.59%

Changes from 2023 to 2024 As of June 30, Increase/(Decrease)

2024 2023 Dollars Percent Revenues:

Interest income on bonds receivable 13,976$ 29,961$ (15,985)$ -53.35% Investment earnings 581,105 7,012 574,093 8187.29% Other income - 6,338 (6,338) -100.00%

Total income 595,081 43,311 551,770 1273.97%

Expenditures:

Operating expenditures 516,609 584,841 (68,232) -11.67%

Deficiency of revenues over expenditures 78,472 (541,530) 620,002 -114.49%

Other financing sources - transfers 155,806 124,608 31,198 25.04%

Net change in fund balance 234,278 (416,922) 651,200 -156.19%

Fund balance, beginning of year 23,413,219 23,830,141 (416,922) -1.75%

Fund balance, end of year 23,647,497$ 23,413,219$ 234,278$ 1.00%

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Debt Service Fund

Long-term Debt At June 30, 2024, the Bond Bank had $978,330,000 of bonds outstanding, down 3.78% from $1,016,715,000, at June 30, 2023. This excludes conduit debt obligations of the Coastal Energy Loan Program. Payment of principal and interest on the Bond Bank’s Coastal Energy Bond is not secured by a pledge of any amounts held by or payable to the Bond Bank under the General Bond Resolution, including the Reserve Account, and is not in any way a debt or liability of the Bond Bank and accordingly, are not included in the basic financial statements. Please see note (8) to the financial statements.

As discussed in the previous section, the net decrease in 2024 long-term debt balances is due to the principal payments made during the fiscal year on bonds previously issued exceeding the increase in principal from new issuance activity of the Bond Bank.

AS 44.85.180(c) was originally enacted in 1975, limiting the Bond Bank outstanding bonds at any time to $150 million. This Statute has been periodically amended to raise the limit and modify the definition of authorized borrowers.

During fiscal year 2023, the legislature passed, and the Governor signed into law House Bill 127 (HB 127), which amended the Act to grant broader authority to the Bond Bank to issue bonds on behalf of the University of Alaska (University) and Regional Health Organizations, effective July 3, 2022. HB 127 permits the Bond Bank to issue bonds on behalf of the University for any University purpose, and the maximum authorized amount increased from $87.5 million to $500 million.

2024 2023 Dollars Percent Revenues:

Interest income on bonds receivable 41,766,543$ 41,194,043$ 572,500$ 1.39% Investment earnings 2,082,093 76,406 2,005,687 2625.04%

Total revenues 43,848,636 41,270,449 2,578,187 6.25%

Expenditures:

Interest payments 42,253,159 41,499,561 753,598 1.82% Principal payments 73,505,000 73,860,000 (355,000) -0.48%

Total expenditures 115,758,159 115,359,561 398,598 0.35%

Deficiency of revenues over expenditures (71,909,523) (74,089,112) 2,179,589 -2.94%

Other financing sources (uses):

Bonds issued 35,120,000 97,510,000 (62,390,000) -63.98% Transfers (155,806) (124,608) (31,198) 25.04%

Total other financing sources: 34,964,194 97,385,392 (62,421,198) -64.10%

Net change in fund balance (36,945,329) 23,296,280 (60,241,609) -258.59%

Fund balance, beginning of year 1,055,638,065 1,032,341,785 23,296,280 2.26%

Fund balance, end of year 1,018,692,736$ 1,055,638,065$ (36,945,329)$ -3.50%

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Additionally, HB 127 increased the maximum amount that Regional Health Organizations are permitted to borrow for a given project from 49% of the project costs to 100% of the project costs, and from a maximum authorized amount of $102.5 million to $250 million of the cost of a project. Total lending authority of the Bond Bank for Regional Health Organization bond issuances increased from $205 million to $500 million.

The total debt limit as of June 30, 2024, was $2.5 billion, comprised of $1.5 billion in authority for political subdivisions including joint action agencies and the Alaska Municipal League’s Joint Insurance Association, $500 million for the University of Alaska, and $500 million for Regional Health Organizations. Total Bond Bank bonds and notes outstanding as of June 30, 2024, was $978,330,000. The limit on additional bond issuance as of June 30, 2024, was approximately $1,521.7 million, of which $691.2 million of authority is available for the main political subdivision program, $424.5 million is available to the University of Alaska, and $406 million is available to Regional Health Organizations.

Outstanding long-term debt is comprised of the following bonds at year end:

Credit Ratings

As of June 30, 2024, the Bond Bank retained ratings of AA-/A/A1/AA- from S&P Global Ratings (S&P), Fitch Ratings (Fitch), Moody’s Investors Service, Inc. (Moody's), and Kroll Bond Rating Agency (KBRA) respectively. The outlook on the Moody’s rating is positive, and the S&P, Fitch, and Kroll rating outlooks are stable. The Bond Bank receives certain credit support from the State of Alaska, with ratings linked to the State's General Obligation debt rating.

Subsequent Events

On August 30, 2024, an underlying borrower, in conjunction with the Bond Bank, provided funds to the associated Bond Bank debt service account to optionally redeem certain maturities of the 2014 Series Three bonds, totaling $1,735,000. The associated maturities will be optionally redeemed on the upcoming redemption date of October 1, 2024.

Contacting the Bond Bank’s Financial Management

This financial report is designed to provide our customers, investors, and creditors with a general overview of the Bond Bank’s finances and to demonstrate the Bond Bank’s accountability of its assets. If you have any questions about this report or need additional financial information, contact the Executive Director of the Bond Bank at (907) 465-2893.

Changes from 2023 to 2024

2024 2023 Dollars Percent 978,330,000$ 1,016,715,000$ (38,385,000)$ -3.78%

ASSETS

Cash and cash equivalents 402,754$ 7,366,226$ 7,768,980$ -$ 7,768,980$ Investments, at fair value (note 4) 14,589,234 46,713,572 61,302,806 - 61,302,806 Accrued interest receivable:

Bonds receivable 747 6,840,724 6,841,471 - 6,841,471 Investment securities 165,208 370,403 535,611 - 535,611

Bonds receivable (note 5) 446,278 978,330,000 978,776,278 - 978,776,278 Accounts receivable 35,992 - 35,992 - 35,992 Interfund receivables 8,157,377 - 8,157,377 (8,157,377) -

Total assets 23,797,590$ 1,039,620,925$ 1,063,418,515$ (8,157,377) 1,055,261,138

LIABILITIES

Accounts payable 56,698$ -$ 56,698$ -$ 56,698$ Due to Primary Government 90,505 - 90,505 - 90,505 Principal and interest payments received in advance - 5,777,662 5,777,662 - 5,777,662 Arbitrage interest rebate payable 2,890 - 2,890 - 2,890 Accrued interest payable - - - 6,840,724 6,840,724 Interfund payables - 8,157,377 8,157,377 (8,157,377) - Bond proceeds held in reserve (note 6) - 6,993,150 6,993,150 - 6,993,150 Long-term liabilities (note 7):

Portion due or payable within one year:

General obligation bonds payable - - - 65,345,000 65,345,000

Portion due or payable after one year:

General obligation bonds payable - - - 912,985,000 912,985,000

Total liabilities 150,093 20,928,189 21,078,282 977,013,347 998,091,629

FUND BALANCES/NET POSITION

Fund balances:

Restricted for debt service (note 2) 5,349,516 1,018,692,736 1,024,042,252 (1,024,042,252) - Unassigned 18,297,981 - 18,297,981 (18,297,981) -

Total fund balances 23,647,497 1,018,692,736 1,042,340,233 (1,042,340,233) -

Total liabilities and fund balances 23,797,590$ 1,039,620,925$ 1,063,418,515$

Net position:

Restricted (note 2) 41,245,670 41,245,670 Unrestricted 15,923,839 15,923,839

Total net position 57,169,509$ 57,169,509$

June 30, 2024

General Fund Debt Service

Fund

ALASKA MUNICIPAL BOND BANK AUTHORITY

(a Component Unit of the State of Alaska)

Statement of Net Position and Governmental Funds Balance Sheets

Total Adjustments Statement of Net

Position

The accompanying notes to the financial statements are an integral part of these statements.

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Revenues:

Investment earnings 581,105$ 2,082,093$ 2,663,198$ -$ 2,663,198$ Interest income on bonds receivable 13,976 41,766,543 41,780,519 - 41,780,519

Total revenues 595,081 43,848,636 44,443,717 - 44,443,717

Expenditures / expenses:

Debt service:

Principal payments - 73,505,000 73,505,000 (73,505,000) - Interest payments / expense - 42,253,159 42,253,159 (486,616) 41,766,543

Current:

Professional services 265,349 - 265,349 - 265,349 Personal services 233,071 - 233,071 - 233,071 Administrative travel 18,189 - 18,189 - 18,189

Total expenditures / expenses 516,609 115,758,159 116,274,768 (73,991,616) 42,283,152

Excess (deficiency) of revenues over expenditures / expenses 78,472 (71,909,523) (71,831,051) 73,991,616 2,160,565

Other financing sources (uses):

General obligation bonds issued - 35,120,000 35,120,000 (35,120,000) - Transfers - internal activities 155,806 (155,806) - - -

Total other financing sources (uses) 155,806 34,964,194 35,120,000 (35,120,000) -

Net change in fund balance / net position 234,278 (36,945,329) (36,711,051) 38,871,616 2,160,565

Fund balances / net position:

Beginning of the year 23,413,219 1,055,638,065 1,079,051,284 (1,024,042,340) 55,008,944

End of the year 23,647,497$ 1,018,692,736$ 1,042,340,233$ (985,170,724)$ 57,169,509$

Changes in Fund Balances/Net Position

For the Year Ended June 30, 2024

ALASKA MUNICIPAL BOND BANK AUTHORITY

(a Component Unit of the State of Alaska)

Statement of Activities and Governmental Funds Statement of Revenues, Expenditures, and

Statement of ActivitiesGeneral Fund

Debt Service Fund Total Adjustments

The accompanying notes to the financial statements are an integral part of these statements.

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Notes to Financial Statements

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For the Year Ended June 30, 2024

(1) History/Reporting Entity

The Alaska Municipal Bond Bank Authority (Authority or Bond Bank) was created pursuant to Alaska Statute, Chapter 85, Title 44, as amended, (Act) as a public corporation and instrumentality of the State of Alaska (State), but with a legal existence independent of and separate from the State. The Authority is a discretely presented component unit of the State of Alaska for purposes of financial reporting. The Authority commenced operations in August 1975.

The Authority was created for the purpose of making monies available to authorized borrowers within the State to finance capital projects primarily through the issuance of bonds by the Authority. Bond proceeds are then used to purchase general obligation and revenue bonds from authorized borrowers.

The bonds are obligations of the Authority, payable only from revenues or funds of the Authority, and the State of Alaska is not obligated to pay principal or interest thereon, and neither the faith and credit nor the taxing power of the State is pledged to the bonds. The municipal bonds and municipal bond payments, investments thereof and proceeds of such investments, if any, and all funds and accounts established by the bond resolution to be held by the Trustee (with the exception of the Coastal Energy Loan Debt Service Program, which is administered by the Authority) are pledged and assigned for the payment of bonds.

Alaska Statue (AS) 44.85.180(c) was originally enacted in 1975, limiting Bond Bank outstanding bonds at any time to $150 million. This Statue has been periodically amended to raise the limit and modify the definition of authorized borrowers.

During fiscal year 2023, the legislature passed, and the Governor signed into law House Bill 127 (“HB 127”), which amended the Act to grant broader authority to the Bond Bank to issue bonds on behalf of the University of Alaska (“University”) and Regional Health Organizations, effective July 3, 2022. HB 127 permits the Bond Bank to issue bonds on behalf of the University for any University purpose, and the maximum authorized amount increased from $87.5 million to $500 million. Additionally, HB 127 increased the maximum amount that Regional Health Organizations are permitted to borrow for a given project from 49% of the project costs to 100% of the project costs, and from a maximum authorized amount of $102.5 million to $250 million of the cost of a project. Total lending authority of the Bond Bank for Regional Health Organization bond issuances increased from $205 million to $500 million.

The total debt limit as of June 30, 2024 was $2,500,000,000. The total debt limit is comprised of $1.5 billion in authority for political subdivisions, $500 million for the University of Alaska, and $500 million for Regional Health Organizations. Total Bond Bank bonds and notes outstanding as of June 30, 2024 was $978,330,000. The limit on additional bond issuance as of June 30, 2024 was approximately $1,521.7 million, of which $691.2 million of authority is available for the main political subdivision program, $424.5 million is available to the University of Alaska, and $406 million is available to Regional Health Organizations.

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(2) Summary of Significant Accounting Policies

The Governmental Accounting Standards Board (GASB) is the accepted standard-setting body for establishing governmental accounting and financial principles. The most significant of the Authority’s accounting policies are described below.

(a) Government-wide and Fund Financial Statements

The government-wide statement of net position and the statement of activities report information on all of the activities of the Authority. For the most part, the effect of interfund activity has been removed from these statements. The balance sheet and statement of revenues, expenditures and changes in fund balances are provided for governmental funds. Due to the single purpose nature of the activities of the Authority, the government-wide and fund financial statements have been presented together with an adjustments column reconciling the two statements.

(b) Measurement Focus, Basis of Accounting, and Financial Statement Presentation

The government-wide financial statements are reported using the economic resources measurement focus and the accrual basis of accounting. Revenues are recorded when earned and expenses are recorded when a liability is incurred, regardless of the timing of related cash flows. Governmental fund financial statements are reported using the current financial resources measurement focus and the modified accrual basis of accounting.

Revenues are recognized as soon as they are both measurable and available. Revenues are considered to be available when they are collectible within the current period or soon enough thereafter to pay liabilities of the current period. For this purpose, the government considers revenues to be available if they are collected within 180 days of the end of the current fiscal period. Expenditures generally are recorded when a liability is incurred, as under accrual accounting. However, debt service expenditures are recorded only when payment is due.

The Authority reports the following major governmental funds:

The General Fund is the Authority’s primary operating fund. It accounts for all financial resources of the Authority, except those required to be accounted for in another fund. The Authority adopts an annual budget for the operating account only which does not encompass entire operations of the General Fund, therefore, budgetary comparison information for the General Fund is not presented.

The Debt Service Fund accounts for the resources accumulated and payments made for principal and interest on long-term debt of the Authority. The Authority does not adopt a budget for the Debt Service Fund because it is not legally required to do so.

The purposes of each of these funds are described in the following paragraphs:

General Fund

The General Fund is comprised of a Custodian Account and an Operating Account. The Custodian Account is established to account for appropriations by the State of Alaska Legislature available to fund the Special Reserve Accounts. The Operating Account is

- 16 -established to account for the ordinary operations of the Authority. Monies are derived from the following sources: (a) amounts appropriated by the Legislature, (b) fees and charges collected, (c) income on investments of the Statutory Reserve Account in excess of required debt service reserves required by bond resolutions and (d) any other monies made available for purposes of the General Fund from any other source. Amounts in the Operating Account may be used to pay (a) administrative expenditures of the Authority,

(b) fees and expenditures of the Trustee and paying agents, (c) financing costs incurred with respect to issuance of bonds and (d) any expenditures in carrying out any other purpose then authorized by the Act. The excess revenues of the Operating Account are returned to the State of Alaska. The State of Alaska may appropriate the excess revenues to the Bond Bank Custodian Account to fund Reserve Accounts.

Debt Service Fund

Within the Debt Service Fund, separate Debt Service Programs have been established for each bond resolution to account for the portion of bond sale proceeds used to purchase obligations of the authorized borrowers and for the payment of interest and principal on all bonds of the Authority issued under its resolutions. Each program is comprised of an “interest account” and a “principal account”, both of which are maintained by a trustee.

The receipts of interest and principal from the authorized borrowers and the Statutory Reserve Account are deposited in these programs and are used to pay interest and principal on the Authority bonds. One additional Debt Service Program has been established to account for transactions not involving bond resolutions. This is the Coastal Energy Loan Debt Service Program. The Coastal Energy Loan Debt Service Program is not maintained by a trustee. Payments of interest and principal by municipalities having coastal energy loans are made directly to the federal government by the municipalities and are accounted for in the Coastal Energy Loan Debt Service Program.

Each Debt Service Fund Program contains a Statutory Reserve Account established to account for (a) money available to fund debt service reserves required by future bond sales under various bond resolutions (Custodian Account) and (b) debt service reserves which have already been established under various bond resolutions which are to be used in the case of deficiency in a Debt Service Program in accordance with its respective bond resolution (reserve accounts). Separate reserve accounts exist under each bond resolution as follows:

2005 General Bond Resolution – The reserve fund may be funded with transfers from the custodian account, surety policies, bond proceeds, or other funds available to the Bond Bank.

2016 Master Bond Resolution – The reserve fund may be funded with transfers from the custodian account, surety policies, bond proceeds, or other funds available to the Bond Bank.

At June 30, 2024, the 2005 General Bond Resolution, and 2016 Master Bond Resolution reserves must be the least of: (i) 10% of the initial principal amount of each Series of Bonds outstanding; (ii) the maximum annual principal and interest requirements on all bonds outstanding; (iii) 125% of the average annual debt service on all bonds then outstanding; or (iv) such lower amount as may be allowed by law. Amounts in excess

- 17 -of the debt service reserve requirement in any reserve are transferred to the Operating Account on a periodic basis.

(c) Adjustments

Certain adjustments are considered to be necessary to the governmental funds in order to present the Authority’s financial position and the results of its operations. These adjustments include the elimination of inter-fund payables and receivables. Bond proceeds are reported as other financing sources and payments to refunding escrow agents as other financing uses in governmental funds and thus contribute to the change in fund balance.

Accrued interest is not reported in the governmental funds but is reported as a liability in the statement of net position. Issuing debt increases long-term liabilities in the statement of net position and does not affect the statement of activities. Repayment of principal is an expenditure in the governmental funds and reduces the liability in the statement of net position.

(d) Restricted Assets and Net Position Restricted for Debt Service

Certain resources set aside for the repayment of the Authority’s bonds, net of certain proceeds from additional bonds issued, are classified as restricted on the statement of net position because they are maintained in separate trust accounts and their use is limited by applicable bond covenants. Cash and cash equivalents and investments include $41,245,670 of restricted assets. These assets were funded as follows:

Original State of Alaska appropriation 18,601,414$ 2008 appropriation of excess earnings 855,347 2009 appropriation of excess earnings 819,843 2010 appropriation of excess earnings 32,628 2011 appropriation of excess earnings 86,814 2012 appropriation for loan forgiveness 13,000,000

Total State of Alaska appropriated equity 33,396,046$

Net Position Restricted for Debt Service:

Appropriated amounts residing in reserve accounts 28,046,530$ Appropriated amounts residing in Custodial account, 5,349,516

Total State of Alaska appropriated equity 33,396,046

Bond Bank equity residing in reserve accounts 7,849,624

Total restricted for debt service 41,245,670

Total restricted net position 41,245,670$

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(e) Bond Receivables

Bond receivables are secured by the pledged revenues or are general obligations of the authorized borrowers. Interest rates correspond with the interest rates on the related bonds payable by the Authority. The bond receivables mature during the same period as the related bond payables. Bond receivables are recorded at the par amount of the bonds issued.

(f) Long-Term Obligations

In the government-wide financial statements, long-term debt and other long-term obligations are reported as liabilities in the statement of net position. Any premium or discount on bond issuance or refunding is not recorded by the Authority, as the premium or discount is recorded by the authorized borrowers associated with the issuance and amortized by them. Therefore, bonds payable are presented at par. Certain bond issue costs are paid by the authorized borrowers but when costs are paid by the Authority they are paid from the General Account and considered operating expenditures/expenses.

(g) Fund Equity

Generally, fund equity represents the difference between the current assets and current liabilities and is classified as fund balance. Bond Bank, in accordance with GASB Statement No. 54 provisions, which require classification of fund balance as nonspendable, restricted, committed, assigned or unassigned, had fund balances in restricted and unassigned categories.

Restricted Fund Balance – Restricted fund balance is that portion of fund equity that has constraints placed upon the use of the resources either by an external party or imposed by law.

Unassigned Fund Balance – this classification represents fund balance that has not been restricted, committed or assigned to specific purposes within the general fund.

The Authority does not have a policy for its use of unrestricted fund balance amounts, therefore, it considers that committed amounts are reduced first (if any), followed by assigned amounts (if any), and then unassigned amounts when expenditures are incurred for purposes for which amounts in any of those unrestricted fund balance classifications could be used.

In the government-wide financial statements, restrictions of net position are reported when constraints placed on net position are either externally imposed by creditors or laws or regulations of other governments or imposed by law through constitutional provisions or enabling legislation.

(h) Interfund Receivables, Payables and Transfers

Interfund balances represent cash collected or disbursed on behalf of another fund. Interfund transfers are transfers between funds that are required when revenue is generated in one fund and expenditures are paid from another fund.

- 19 -

(i) Interest Arbitrage Rebate

Bonds issued and funds segregated into reserves after August 15, 1986 are subject to Internal Revenue Service income tax regulations which require rebates to the U.S. Government of interest income earned on investments purchased with the proceeds from the bonds or any applicable reserves in excess of the allowable yield of the issue. Amounts owed are expensed when paid and refunds are recorded when received at the five year anniversary date of the bond issue or upon final repayment. The Bond Bank’s arbitrage rebate consultant will update all general obligation bond rebate analysis annually as of June 30.

The Bond Bank had an arbitrage rebate liability of $2,890 as of June 30, 2024.

(j) Income Taxes

The Authority is exempt from paying federal and state income taxes.

(3) Cash

The Authority considers all highly liquid investments purchased with an original maturity of three months or less at the date of purchase to be cash equivalents. Cash and cash equivalents at June 30, 2024 consist of money market accounts.

The bank balance of all of the Authority’s cash and cash equivalents are collateralized by securities held in the Authority’s name by its custodial agent.

(4) Investments

In accordance with the authoritative guidance on fair value measurements and disclosures, the Authority discloses the fair value of its investments in a hierarchy that ranks the inputs to valuation techniques used to measure the fair value. The hierarchy gives the highest ranking to valuations based upon unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest ranking to valuations based upon unobservable inputs that are significant to the valuation (Level 3 measurements). The guidance establishes three levels of the fair value hierarchy as follows:

Level 1 - Quoted prices in active markets for identical assets.

Level 2 - Inputs other than quoted prices that are observable for the assets, including quoted prices for similar investments based on interest rates, credit risk and like factors.

Level 3 - Unobservable inputs for the assets.

Investments are assigned a level based upon the observability of the inputs which are significant to the overall valuation. The inputs and methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities.

- 20 -

The aggregate fair value by input level, as of June 30, 2024 is as follows:

Debt Securities 6/30/2024 1 2 3 General Fund

U.S. Treasury securities 9,744,748$ 9,744,748$ -$ -$ 4,844,486 - 4,844,486 -

Total General Fund 14,589,234 9,744,748 4,844,486 -

Debt Service Fund U.S. Treasury securities 39,174,177 39,174,177 - -

7,539,395 - 7,539,395 -

Total Debt Service Fund 46,713,572 39,174,177 7,539,395 -

Total Investments 61,302,806$ 48,918,925$ 12,383,881$ -$

U.S. Government agencies securities

U.S. Government agencies securities

Level

U.S. Treasury securities are liquid and have quoted market prices. Fair value of U.S. Treasury securities is based on live trading feeds. U.S. Treasury securities are categorized in Level 1 of the fair value hierarchy. Government agency securities use market-based and observable inputs. As such, these securities are classified as Level 2 of the fair value hierarchy.

The fair value of debt security investments by contractual maturity as of June 30, 2024 is shown below.

Less than 1 Year 1-5 Years 6-10 Years More than 10 Years Total General Fund

U.S. Treasury securities 1,421,682$ 7,810,910$ 512,156$ -$ 9,744,748$ securities - 4,844,486 - - 4,844,486

Total General Fund 1,421,682 12,655,396 512,156 - 14,589,234

Debt Service Fund U.S. Treasury securities 7,452,215 29,887,392 1,834,570 - 39,174,177 securities - 3,567,775 3,971,620 - 7,539,395

Total Debt Service Fund 7,452,215 33,455,167 5,806,190 - 46,713,572

Total investments 8,873,897$ 46,110,563$ 6,318,346$ -$ 61,302,806$

U.S. Government agencies

U.S. Government agencies

Expected maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without penalty.

(a) Investment Policies

The Authority has distinct investment objectives and policies associated with funds held in the Custodian Account, Reserve Funds, and municipal debt payments received prior to scheduled debt service payment dates. The three classes of funds are listed below:

- 21 -

Custodian Account

The Custodian Account investment portfolio is designed with the objective of attaining the highest market rate of return subject to the required use of the Custodian Account for operations, funding transfers to the state, and funding reserves. The Custodian Account balance must maintain a minimum balance of $5 million, and be forecasted to maintain that $5 million balance for the subsequent twelve-month period, and an analysis of risk profile and historical benefit between the varying strategies must be undertaken before any shift in the investment strategy of the Account. Up to $1,000,000 shall be used for longer term, 5 to 10 year U.S. Treasury and Agency securities. The Custodian Account has to maintain sufficient liquidity to meet operating requirements, provide the prior fiscal year’s state dividend (if not otherwise appropriated back to the Bond Bank), and to allow transfers to reserves as needed for bond issuance activity. Long-term preservation of principal is the third objective of the Custodian Account’s investment program. Investments shall be undertaken in a manner that minimizes the probability of long-term loss.

o There are no arbitrage restrictions.

The bond resolutions limit investments to:

o 5% money market fund (no less than $350,000).

o 95% Government Agencies and U.S. Treasuries.

o The performance benchmark is 5% three month U.S. Treasury Bill, and 95% Barclays 1-5 year government bond index.

The following transactions are prohibited with the Custodian Account unless those transactions have the prior written consent of the Investment Committee:

o Short sale of securities (the sale and settlement of a security not currently owned by the Authority and a formal agreement to borrow the security to facilitate the settlement of the short sale);

o Purchases of futures, forwards or options for the purpose of speculating (currency futures, forwards and options are permitted only for hedging or to facilitate otherwise permissible transactions);

o Borrowing to leverage the return on investments. Extended settlement of securities purchases executed to facilitate or improve the efficiency of a transaction will not be considered borrowing, provided that sufficient cash equivalent securities or receivables are available to facilitate the extended settlement;

o Purchases of "private placement" or unrated corporate bonds.

Bond Reserve Funds

Preservation of principal is the foremost objective of the Bond Reserve Funds investment program. These funds shall be managed to ensure that the corpus is preserved. These funds will not be expended until the final maturity of the bond issue they secure, unless there is a failure to pay debt service by a borrower. As there is limited benefit in maximizing return it is the least important objective of the Bond Reserve Funds. It is

- 22 -anticipated that the Reserve Funds cumulative average return should…