July 22, 2009
For Immediate ReleaseFor More Information:
Rob Fix
Port Chief Financial Officer
360-676-2550
The 2008 Comprehensive Annual Financial Report (CAFR) released by the Port of Bellingham today shows changes from past years in the Port's overall assets and liabilities because of new accounting regulations. The full CAFR is available on the Port's website.
In December 2006, the Governmental Accounting Standards Board (GASB) adopted significant changes to governmental accounting practices. These changes focused on changing how governments nationwide addressed the financial accounting for known environmental liabilities. This change became effective for the Port's 2008 CAFR.
The Port of Bellingham acquired the Georgia Pacific Site in 2005, in exchange for agreeing to perform a specific environmental cleanup. Since 2005, this estimated cleanup expense, plus smaller cleanup expenses anticipated in other Port properties, has been shown in the CAFR as liabilities. The new accounting standards now require the Port treat those expenses differently and not subtract a portion of them from the value of Port net assets.
In the 2008 Port CAFR's Statement of Net Assets, the report shows that the net assets of the Port increased by $32M between 2007 and 2008. While it is typical for the net assets of the Port to change, this period change was much larger than normal because of the implementation of GASB 49, which reduced the liability related to the environmental remediation (Assets - Liabilities = Net Assets).
Previous to the implementation of GASB 49, the Port had a liability on its balance sheet for the estimated full amount of the environmental remediation of the GP site. The accounting rule change required that the Port estimate the future value of the asset after the environmental remediation activities are substantially complete. The estimated future ‘clean' (after remediation) value less the current ‘dirty' (before remediation) value is the amount that should be treated as a capital expenditure. Because the Port had the full remediation cost as a liability, this liability needed to be reduced by the amount that will be treated as a capital expenditure in the future.
The "unrestricted net assets," listed as $96 million in 2007, are listed as -$14 million in 2008 because the Port no longer includes the environmental liability in its ‘debt related to capital assets'. Per GASB if an entity is no longer able to capitalize the costs related to the debt, then the debt is not related to a capital asset. The Port has determined the amount of the environmental remediation to be capitalized and removed it from the liability. The remaining liability is not related to the capital asset because it cannot be capitalized.
The Port worked with its financial advisors and Washington State Auditors to ensure that its implementation of GASB 49 was done in accordance with the new standards. For more information about GASB 49 and how it impacts government financial statements, you can click on the following documents written by the Governmental Accounting Standards Board:
GASB 49 Questions and Answers
GASB 49 Description
